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The Los Alamos National Bank is once again under regulatory restrictions by the Office of the Comptroller of the Currency, the federal agency that regulates the federal banking system.
The bank had just came out of a similar regulatory agreement this spring, which was entered in 2010.
“The Comptroller has found unsafe or unsound banking practices relating to management and board supervision, credit underwriting, credit administration and deficiencies in internal controls,” according to the agreement
According to bank President Steve Wells, the OCC was concerned that LANB overextended itself on $5.5 million in loans that were spread out amongst seven customers. The bank extended the loans into 2012. The OCC’s opinion was that the bank should have called in the loans in 2011. Wells said the bank has about $1.2 billion in total loans.
“They have requested us to recognize our risks in the time that it should be recognized and we don’t disagree with that,” Wells said. “We understand the intricacies of the regulations and that we weren’t in alignment.”
Wells also noted that the OCC “is one of the toughest regulators out there” and that part of the problem was the two entities have two different viewpoints when it comes to community banking.
“As a community bank, I believe we should be doing everything in our powers to work with those borrowers who are experiencing difficulties,” Wells said. “When we deem a loan a loss, it becomes a legal process. We felt like we could work with those borrowers and improve the situation, but the regulators did not agree with us.”
However, Wells also said the OCC’s job is to protect the federal banking system and that LANB is doing everything it can to get back in line with the OCC’s regulations.
“We are, I hope, nearly at the end of a very difficult economic period and the OCC is very concerned about the strength of the banking industry.” Wells said. “How they insure that strength is making sure you stay within the lines and we are committed to staying within those lines.”
According to Wells, LANB is making progress complying with the OCC.
“We are already 50 percent in compliance with the agreement,” Wells said. “We are putting plans and processes in place that have been prescribed by the OCC, and we are also putting in plans that will demonstrate how we will not let those risk rating situations take place.
Wells said that though everything should be in place by the first quarter of 2013, that doesn’t quite mean LANB is out of the woods.
“That doesn’t mean the agreement will be over,” Wells continued. “My guess is that they will certainly come back for their annual examination to see that we are not just putting these processes in place but that those processes are effective.”
Wells said that customers — present as well as future customers — should not experience a negative financial impact in the wake of the agreement.
“I don’t think this has any impact on our customers,” Wells said. “... I don’t think this changes our underwriting or credit standards. I don’t think that was ever in question in this agreement.
“The way we make money is that we make loans. We have lots of liquidity that we would love to put to work to make this economy better. ... We’re committed to doing our part on the lending side as the market needs it. But right now, the demand is not there because the consumer confidence is not there.”
Currently, LANB has $1.6 billion in assets and $160 million in capital. According to Wells, LANB is also the largest independently-owned community bank in the state.
Wells also noted that the agreement with the OCC has nothing to do with LANB’s current foreclosure proceedings against the Hilltop House Hotel.
“The Hilltop does not have anything to do with this agreement,” Wells said.