Alpine Banks of Colorado- ALPIB

Guess who's back again with another super illiquid, ridiculously high-priced bank stock? Oh, did you think I had run out of them? Naw. Never gonna happen.

Alpine Banks of Colorado is the holding company for Alpine Bank, a $3.9 billion institution founded in 1973. The bank has 40 branches sprawling across the Centennial State from Durango in the southwest to the Denver metro area. Alpine is now the ninth largest bank in Colorado by market share and occupies the number one position in many of its localities. Alpine's employees are large shareholders of its Class A voting stock. The company recently took steps to allow its non-voting Class B stock to trade over-the-counter.

I've had a lot of success in accumulating shares of banks that are newly tradable. Typically, trading volume is very low for some time and the valuation is extremely attractive. (Early sellers are often highly motivated, sometimes having waited years to achieve liquidity.) Eventually, the bank's results begin to show up in databases and newsfeeds and another cohort of investors begins to buy in. Once the early supply of shares is exhausted, it's off to the races.

Favorable new listing and liquidity setup aside, I think Alpine Banks is a particularly attractive firm. The bank's geography is stellar. Colorado is in the midst of a decades-long population boom which makes attracting deposits and making loans all the easier.

Alpine also enjoys an extremely low-cost deposit base thanks to its focus on business and commercial customers. In the quarter ended December 31, 2019, Alpine's cost of funding was only 11 basis points.

On the lending side, Alpine has a large commercial real estate operation in addition to its more traditional lending activities. The bank is also looking to expand into the commercial & industrial market. Alpine's asset quality has exceeded its peers since 2015. As of September 30, 2019, Alpine's balance sheet was in stellar condition with non-performing assets to total assets of only 0.16%.

Alpine also has a wealth management division with rapidly increasing assets under management. The bank's has improved its operating efficiency in recent years and the efficiency ratio has reached the low 60s, an impressive figure for a bank with a far-flung branch network.

The bank's strong net interest margin and good efficiency have allowed Alpine to operate very profitably. For the year just ended, the bank produced a return on assets of 1.54% and a return on equity of 18.2%.

Alpine is strongly capitalized, with a Tier 1 capital ratio of 13.1% and a common equity ratio of 10.8%. Given Alpine's focus on slightly riskier loans, it makes sense for the bank to run a fairly conservative capital structure. Alpine's loan book has performed quite well, but it makes sense to prepare for any storms ahead.

At the last trading price of $4,950 (not a typo) Alpine trades for 8.9x earnings and a price/tangible book value ratio of 1.65. Alpine's good geography, stellar deposit base, strong loan book, efficient operations and strong growth outlook make it a bank worth examining.

For those wanting to investigate, Alpine is very communicative and publishes shareholder letters and quarterly presentations. Have fun!

Alluvial Capital Management, LLC holds shares of Alpine Banks of Colorado for clients. Alluvial Capital Management, LLC may hold any securities mentioned on this blog and may buy or sell these securities at any time. For a full accounting of Alluvial’s and Alluvial personnel’s holdings in any securities mentioned, contact Alluvial Capital Management, LLC at