First National Bank of the Rockies is undergoing a change in lending practices to comply with federal regulations.

Photo by Matt Stensland

First National Bank of the Rockies is undergoing a change in lending practices to comply with federal regulations.

Regulators seek changes at First National Bank of the Rockies

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— The First National Bank of the Rockies is under extra federal oversight after bank regulators found several reasons to criticize the bank’s past lending practices.

Under the agreement with the Office of the Comptroller of the Currency, the primary government regulator, the bank has started to change its lending practices and keep more money in reserve.

The comptroller specifically noted that the bank was not assessing the risk of the loans properly and did not have enough money in reserve to cover loans if they defaulted.

The bank, based in Grand Junction, has local branches in Steamboat Springs, Hayden and Oak Creek. There also are branches in Craig, Meeker and Rangely.

Peter Waller, president and CEO of the bank, said the voluntary agreement and the change in practices have not and will not affect customers of the bank.

He said the bank already has started making changes in how things are handled and how it calculates the amount of money to keep in the reserve fund.

“We really kind of scraped the old way we were doing it off the table and started with a brand-new method,” he said. “I feel certain they’re going to acquiesce” to the new management practices, Waller said, referring to the Office of the Comptroller of the Currency.

In the agreement, the comptroller requires the bank to bring in outside experts to oversee many parts of the operation, including an independent credit management consultant.

Waller said banks are evaluated every year and that the bank was evaluated early in the cycle of bank evaluations in the recession. Because of that, the bank hadn’t adjusted to the national financial recession because it hadn’t yet affected Grand Junction.

“The Western Slope was very slow to enter into this economic malaise that has plagued the nation and came to the Front Range a full year before it got here,” he said.

Because the economy was stronger, the bank did not grade loans as harshly as the regulators would have liked.

He said he thinks the bank would have made many of the changes recommended by the comptroller once the situation changed on the Western Slope.

“I’m not making excuses, but there is kind of a logical explanation of how we got here, and we were on the front end of the exam cycle,” he said. “I think a lot of banks, as they get examined through the course of this year, find they’re going to be criticized for a lot of the same things we were criticized for.”

Waller said First National Bank of the Rockies is continuing to loan money, though the requests for loans have been slow. The bank will have slightly less capital available to create loans because money in the reserve fund is valued lower, he said, but the bank’s loan-to-deposit ratio still is at 60 percent. Waller said that’s better than many similar banks it is regularly compared to, where the average is an 85 percent ratio. That means that First National Bank of the Rockies has about 40 percent of its capital in cash or readily available securities that can be loaned out, compared with 15 percent at similar banks.

Waller said despite the criticism from federal regulators, there is no discussion of reducing the size of the bank or closing any branches.

The agreement with bank regulators contains several deadlines for different requirements, but there is no definite end to the additional government oversight. Waller said there is no way to estimate how long the agreement will stay in effect but that it could be a year or more.

The bank also dealt with the comptroller’s office in March 2008, when federal regulators made First National Bank of the Rockies liquidate its investments in A T Fund of Funds. The bank completed that voluntary agreement in November, according to a news release from Waller.

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