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NAB update

DENVER – The Native American Bank headquartered in Denver was in the news again June 12 when it was listed as one of a growing group of Colorado banks under federal scrutiny for questionable business practices, but it is well on its way to compliance, a bank official said.

Last year, the Comptroller of the Currency determined the NAB had “engaged in unsafe and unsound banking practices relating to its board and management oversight, credit underwriting, credit administration and management of liquidity,” as noted on its Web site.

Since that time, “We feel we’re making great progress in fulfilling the requirements of the agreement” undertaken with the Office of the Comptroller of the Currency, said David L. Gilman, NAB president and CEO. “We’re working with the OCC on a regular basis and we’re really quite a way down the road.”

The bank reported a net loss for the first quarter of 2008 at $730,000 compared to a net income of $116,000 in the first quarter of 2007 “primarily due to additional provisions for loan losses to improve the bank’s reserve position,” according to NAB’s Web site.

Provision for loan losses was approximately $1 million in the first quarter of 2008, an increase of $979,000 over the comparable period in 2007. Overall, net interest income, non-interest income, and operating expenses all increased during the same time period.

“Last August, the OCC and the bank entered into a formal agreement to correct certain deficiencies it uncovered early in 2008,” Gilman said, citing management oversight, liquidity management – “how the bank obtains its deposits and manages them” – credit administration, and loan portfolio, or the “quality of loans” in terms of the performance of borrowers and collateral.

And, as is the case with everything else in the business world today, “The economy has taken a toll,” he said.

It is “difficult to say” when NAB will receive a clean bill of health, he said. “It’s pretty much up to them (OCC) – it’s when they feel we have performed everything required.”

Among other provisions of the OCC-NAB agreement, the bank was to appoint a compliance committee to ensure the bank’s adherence to the agreement, to develop sound operating policies and procedures, and to provide internal monitoring controls.

NAB also agreed to follow a detailed three-year plan, and to various other controls, including conditions on any increase in its total loan commitments, a liquidity program and management, diversification of risk, a contingency funding plan, problem loan and external loan management, the elimination or modification of bank loan policy exceptions, and other measures.

OCC also required the bank to appoint a president and other officers within 45 days. Gilman became president in that time period, following an interim appointee who, in turn, succeeded J.D. Colbert, Chickasaw/Creek, who was ousted in a management shakeup.

The bank was created in 2001 by 20 tribal nations and Alaska Native Corporations to provide Native access to capital and financial services. More than 85 percent of the bank’s business is with Native customers and NAB is now owned by 26 tribal nations, tribal enterprises and Alaska Native Corporations.