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Loans Prompt Regulatory Restrictions for LANB

SANTA FE, N.M. — Los Alamos National Bank, which last spring was released from a regulatory agreement imposed by the federal Comptroller of the Currency in 2010, is now once again under regulatory restrictions.

But bank president Steve Wells said Wednesday that the new agreement, signed at the end of November, will not affect bank customers.

During the comptroller’s regularly scheduled annual examination of the bank in July, regulators “found unsafe or unsound banking practices relating to management and board supervision, credit underwriting, credit administration and deficiencies in internal controls,” the agreement says.

Wells said that regulators found seven bank-customer “relationships” that “in their eyes, we were not evaluating the risks properly.”

Wells declined to specify the nature of the “relationships” between the bank and the customers in question. But, he said, federal regulators “thought we were not being realistic about (certain) loans.”

“The Office of the Comptroller of the Currency said, ‘You need to take a more pessimistic view of these loans and where they’re going,’ ” Wells said.

He described the difference in viewpoint between the bank, the largest mortgage lender in the state, and federal regulators as “partly due to our desire to work with borrowers in this economic environment.”

As a community bank, Wells said, “we have a natural propensity” to do everything possible to help loan customers who may run into trouble.

“That’s reflective of a community bank that’s very active” in the local areas it serves, Wells said.

The agreement with the comptroller was mainly designed to get the attention of the bank’s board and managers, Wells added. “That’s the substance of the agreement.”

After the regulators’ visit, LANB, with a third party, conducted its own review of the bank’s loan portfolio and found no additional concerns beyond those the comptroller had singled out, Wells said.

As a result of the new agreement with the Comptroller of the Currency, the bank will have to make changes in its accounting and loan information procedures, as well as set up stricter oversight for loan modifications and other efforts to work with creditors.

In the previous agreement, reported early in 2010, federal regulators also had expressed concern about what LANB, in its press release, described as “deterioration in (the bank’s) loan portfolio.”

Wells said the bank is working on making the changes required under the new agreement and expects to comply with all of them by the end of the first quarter of this year.

Wells said the total value of the loans regulators had flagged as problematic was $5.5 million. While that’s not a trivial sum, Wells said, it’s a small fraction of the bank’s $1.2 billion in total loans.

“Ninety six percent of those are performing as they are supposed to,” Wells said.

Banktracker, a Web site maintained by the Investigative Reporting Workshop at the American University School of Communications, continues to show LANB as having a higher “troubled assets” ration than some other local banks.

In 2010, Banktracker listed LANB’s troubled asset ratio as 44.6. By early 2012, that ratio had dipped below 40, but rose again to slightly more than 40 in the last two quarters of the year.

The troubled asset ratio for banks nationally averages about 10, according the Web site.

The ratio is not a statistic kept by federal regulators, according to the Web site, and is calculated by dividing the total of loans past due or otherwise in trouble plus the value of the bank’s foreclosed property holdings by the amount of the bank’s capital and loan loss reserves.