Boom-bust cycle rattles Idaho bank

KETCHUM, Idaho – Federal banking officials in late April closed down a bank that had seven offices in resort areas of both Idaho and Wyoming, saying the bank was in unsound condition.

Reports from Jackson, Wyo., and Ketchum, Idaho, differ slightly on the cause of the First Bank of Idaho’s distress. However, they agree that loans made in Idaho’s Teton Valley – the area around Driggs and Victor, across the pass and from Jackson Hole – were at least a significant part of the problem.

“There were difficult loans across the board, but the Teton Valley was definitely a major problem for this bank,” Everett Covington, chief executive of the First Bank of Idaho, said. He told theIdaho Mountain Express that real estate sales in Victor and Driggs were nearly nonexistent, and foreclosure proceedings had begun on many properties.

The story was much larger than simply one bank’s troubles, said the paper, which is based in Ketchum.

“The bank’s story is entwined with a booming national economy and people investing in vacation homes all over the West. It’s the story of how a banking system became engulfed by a speculative market in which eye-popping growth ultimately could not be sustained,” said the newspaper.

“The phenomenon transformed small towns into bustling boomtowns. It made savers look silly and speculative spenders look like geniuses. Lasting more than a decade, it looked like it might never end,” theExpress continued.

“It went far, it went fast. Then, like a car hitting the proverbial brick wall, it stopped.”

That brick wall was met April 24, when 50 federal agents arrived at the bank’s headquarters in Ketchum. Formed there in 1997, the bank had three offices in the Wood River Valley plus another four offices in both Jackson Hole and Teton Valley.

Indications of trouble had been previously reported. The bank’s capital-to-loan ratio had fallen below 10 percent at the end of 2008 due to defaulted loans or loans nearing default. On April 6, First Bank officials had been given until June 30 by the U.S. Treasury Department’s Office of Thrift Supervision to raise sufficient capital to increase the capital-to-loan ratio to 12 percent.

But the news of the agreement had the opposite effect. Worried about the security of their money, customers withdrew deposits. The April 15 tax deadline also resulted in a large volume of drafts, as people wrote checks to the IRS to cover their taxes. Wilson McElhinny, chairman of the board for the First Bank of Idaho, estimated that $15 million in deposits had been removed.

Then, because of the federal restrictions imposed in the April 6 agreement, the bank was unable to seek brokered deposits to build its cash reserves. Plus, other banks continued to close their lines of credit to the Idaho-based bank. “Things just kept getting worse,” Covington said.

The U.S. Treasury Department’s Office of Thrift Supervision said the bank was in “unsound condition and unable to continue operating due to severe liquidity strains, deteriorating asset quality, negative earnings and declining capital with no realistic prospects for raising capital quickly enough to ensure that it can repay all of its liabilities, including deposits.”

After closing the bank, the Treasury Department transferred the bank to the Federal Deposit Insurance Corp., which then sold the deposits and some assets to Minnesota-based U.S. Bank. U.S. Bank, with 24 hours to make a decision, agreed to spend $1.47 million to buy $268 million in deposits. Those accounts will remain insured by the FDIC. The FDIC will handle $113 million in brokered deposits.

Lovins shows off his renewable home

OLD SNOWMASS – You would not find the house of Amory Lovins inArchitectural Digest. It has no cavernous great room, no massive brick fireplaces, no massive plate-glass windows.

But Lovins, a physicist by training and energy activist since the 1970s, has a house that is marvelous in a different way. The house, built on a small acreage, efficiently uses energy, almost none of it obtained by burning fossil fuels.

The remodeled house, in addition to photovoltaic solar collectors, now has solar thermal panels. The hot water is delivered not only to showers, but also to pipes within the floor, for radiant heating. Lovins told theAspen Times that he hopes the new heat source allows him to retire his two wood-burning stoves, currently the only traditional source of heat in the house.

New Solatubes allow a dark hallway to be lit with sunshine. A new data collection system allows Lovins to adjust the home’s systems when needed.

Lovins last week was named one ofTime magazine’s 100

most influential thinkers, cultural figures, and others. Also named to the list was Daniel Nocera, a solar researcher from the Massachusetts Institute of Technology. Nocera has spoken to energy groups in both Aspen and Telluride in recent years.

Merger of two Idaho towns dropped

KETCHUM, Idaho – An effort to merge the towns of Ketchum and Sun Valley has been abandoned. Two councilmen, one from each community, had issued a call several months ago for a November referendum on the consolidation, which they said is needed to save taxpayer money. The two communities exist side-by-side, although Ketchum is by far the larger of the two.

Charles Conn, the councilman from Ketchum, admitted to mistakes. The proposal for a November election came too soon, he said, and didn’t allow people to get comfortable with the idea instead.

As well, significant opposition arose in Sun Valley. A group called Save Sun Valley called a meeting that drew 200 people to rally against the merger. Speakers claimed a difference in culture between the two towns and also argued that Sun Valley would lose out financially.

Sun Valley – the town, but not the ski area – would have lost its name. Under Idaho law, the smaller municipality is subsumed in a merger. Ketchum is the older and larger town.

“We’re better off with a small, flexible, responsive government,” said Wayne Willich, mayor of Sun Valley.

But there was some support even in Sun Valley, as suggested by a 3-2 vote. Conn said the idea will inevitably return, because of the operating efficiencies that would result.

Sunlight scraps base-area project

GLENWOOD SPRINGS – A proposal for a major real estate development at the base of Sunlight Mountain has been formally withdrawn. There were doubts about the size of the project, making it appear that development approvals might not have been awarded by Garfield County. The development was also being reviewed even as the market for new mountain real estate was crumbling.

The proposal called for 830 housing units and 110,000 square feet of commercial space. A planning commission last winter recommended the project be denied, and the proponent withdrew the application in April.

“We just felt it wasn’t in our best interests to move forward,” said Tom Jankovsky, the ski area manager. “Definitely, money is part of it,” he added in an interview withThe Aspen Times.

The development proposal had been triggered by sale of the ski area. The sale of the ski area, however, was contingent upon approval of the real estate development. Jankovsky said the ski area infrastructure badly needs investment – everything but the snow cats, he said.

Swine flu makes Park City appearance

PARK CITY, Utah – One person in the Park City area has been confirmed to have H1N1, the strain of flu now making the global rounds. However, there are probably 10 people with the virus, thePark Record reported Monday.

None of the flu victims has needed hospitalization. However, there was enough concern that all schools were closed for several days, reportsThe Park Record. Restaurateurs reported major losses as people stayed home. There also was a run on hand-sanitizer at local stores and city officials set up a hotline.

A confirmed case of swine flu was also reported in Colorado’s Eagle County. The individual, a male in his teens, was recovering at home. Becky Larson, the epidemiologist, says the severity of the influenza is more important than the number of confirmed cases. “That’s how we base our planning,” she told theVail Daily. “If you follow basic steps to prevent the spread of illness, there is no reason not to go about your daily business,” said Larson.

Basalt creates own stimulus package

BASALT – Basalt is spending $45,000 in a homegrown stimulus project. Town officials say the program will yield $450,000 in sales for local shops, restaurants and service providers through the summer.

A “rewards card” is the basis of the program. The card gets a stamp for any purchase of more than $10 at participating venues. Once the card is up to $300 in purchases, it can be redeemed for a $30 gift certificate, explainsThe Aspen Times. “You don’t have to be a Milton Friedman to figure this out,” said Bill Kane, the town manager.

– Allen Best

Breckenridge tackles the bark beetle

BRECKENRIDGE — The chainsaws will be busy around Breckenridge this summer as efforts continue to thin forests and remove trees killed by bark beetle. Local officials tell theSummit DailyNews that they hope to create buffers around homes and businesses in the event of wildfire.

– Allen Best



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