Pikes Peak National Bank will operate under the close scrutiny of federal regulators for at least the next three years as it battles a rising tide of delinquent loans.
The Colorado Springs-based bank, which has three branches, has been under a consent order issued by the U.S. Office of the Comptroller of the Currency since April 21 and has taken a number of steps to comply with regulators’ demands.
It hasn’t met at least one: the hiring of a senior lending officer, and may fail to recruit new board members, as regulators have asked it to.
The bank, one of the more troubled in the region, has had run-ins with federal regulators before.
In February 2009, it signed a “formal agreement” with the OCC stipulating, among other items, that the bank appoint a compliance committee with three directors, submit monthly written progress reports, and not extend credit or loans exceeding $100,000 without sufficient collateral and strict documentation.
While working to comply with those requirements, the bank has seen its financial picture erode further.
Its equity has declined from $8.16 million in the first quarter of 2009 to $7.75 million in the first quarter of this year. That wasn’t the worst of it. In the same time period, delinquent loans as a percentage of all loans jumped from 6.72 percent to 18.6 percent, or about $9.5 million.
Under the recent OCC consent order, the bank was required to stop paying dividends, to establish a compliance committee, and to develop a strategic three-year plan with “projections for the bank’s overall risk profile, earnings performance, growth expectations … liability structure, (and) capital and liquidity adequacy.”
The bank was required to “take the necessary steps” to hire a senior lending officer by May. As of this week, that position had not been filled.
Also, the deadline for several other key stipulations arrived Wednesday. The bank was supposed to have achieved and maintained a minimum capital ratio of 10 percent. It also was required to move ahead with adding two independent directors who must be approved by the OCC. The bank’s three-year plan must be submitted by July.
If the bank fails to satisfy regulators, it will have 30 days to develop a plan to sell, merge or liquidate the bank.
President Robin Roberts said it won’t come down to that.
“We are working every day on the consent orders,” Roberts said, adding that the bank had raised its key Tier 1 capital ratio to 9.8 percent as of last week, with earnings and infusions from its holding company, Pikes Peak National Co. She said the bank would have the required capital by its deadline.
However, it’s still looking for two directors.
“In this environment, it’s difficult to find directors,” she said, alluding to the fact that directors shy away from troubled institutions to avoid liability.
Roberts attributed the bank’s difficulties partly to the economy and to the bank’s nonperforming commercial real estate loans.
“We loan to businesses — and businesses in this economy are suffering,” she said.
“The owners of this bank are committed to keeping the required capital levels and to making the changes required in the consent order. We will do everything we need to, to be in compliance with it,” Roberts added.
The bank’s market share will depend on it.
At the end of the first quarter, the bank’s deposits were $76 million, down from $80.12 million a year ago.