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Special Report: Native American Bank layoffs follow enforcement action

WASHINGTON - Native American Bank in Denver has dramatically reduced its work force, Indian Country Today has learned.

John Beirise, president and chief executive officer of the national bank capitalized by tribal investments, could not be reached directly and did not respond to a voice-message left on Aug. 8. Tracie Davis, the bank treasurer, took a more detailed request for confirmation or denial of the reduction in force that included a question as to any connection between the layoffs, and an enforcement action taken against the bank by the Office of the Comptroller of the Currency. The bank had not responded to either request by midday Aug. 9.

Davis said the former director in the bank's trust division was no longer with the bank. Two previous telephone calls had confirmed that two known staff members, one in the trust division, were also no longer employed by the bank.

A first report called for by the enforcement action was due to the OCC on June 30.

The Office of the Comptroller of the Currency, headquartered in Washington, regulates national banks. Like other financial institution regulatory agencies, the OCC tends not to dwell primarily on bank earnings, but on the safety and soundness of bank practices, policies and internal controls.

"We took an enforcement action against this bank in April," said Dean Debuck, OCC spokesman. "We don't comment. We just provide the document."

The document shows that the OCC is demanding Native American Bank maintain capital levels of 12 percent of risk-weighted assets, and 10 percent of total adjusted assets. In brief, bank capital is the cash value invested in the bank by shareholders - established levels must be maintained because it is the bank's disposable cash, cash it can draw on quickly if it must, in contrast to cash that may be obligated, such as cash on loan to it from depositors and so on call for withdrawal on demand.

In recent years, regulators have considered 10 to 12 percent capitalization levels safe and sound, as reflected in federal banking regulations. The OCC action of April 15 explicitly states that its prescription of capitalization levels means Native American Bank "may not be deemed to be 'well-capitalized'" under the governing federal regulations.

The enforcement action also orders the appointment of a compliance committee, whose members (at least three) must not be bank officers. The compliance committee, reporting to the OCC, is to monitor and coordinate bank adherence to a host of other provisions in the enforcement action. Among these:

- "Any changes to the bank's capital program" must be approved by the OCC.

- A dividend policy must be in place that permits declaration of a dividend (a payout to shareholders, usually from profits) only once the bank "is in compliance with its approved capital program," also in compliance with pertinent federal regulations - and then only "with the prior written approval" of the OCC.

- Adherence by the bank to its board-adopted "written strategic plan" of September 2002.

- Thirty days written notice to the OCC "of its intent to significantly deviate from the strategic plan."

- "The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the plan developed pursuant to this Article."

- "The Board shall immediately take all necessary steps to ensure that Bank management corrects each violation of law, rule or regulation cited in the ROE [of March 31, 2002] and in any subsequent Report of Examination."

The first compliance committee report was due to the OCC on June 30. By the very end of July or start of August, Native American Bank began to reduce its staff.

Layoffs, obviously, are not thought good in a universal sense; but under some circumstances, they may be considered necessary medicine.

According to public reporting documents, Native American Bank showed a net loss of $596,000 for the first quarter of 2003, ending March 31. (Second quarter figures have been reported to bank regulatory agencies, but they were not yet publicly available at this writing.) For all of fiscal year 2002 through March 2003, the bank's total capital fell by $2,924,000 - $2.9 million of $8.8 million total capitalization, a so-called capital burn rate of about 33 percent.

For the first quarter of 2003, the bank showed $569,000 in salary expense.

Its first quarter '03 reports showed another $380,000 in other non-interest expense, but did not appear to itemize that overall figure. It showed the numeral 0 for all but one of 26 categories in question, which do, however, designate percentile thresholds; any number beneath a stated threshold would not have to be reported. The OCC declined to comment on whether or not it is out of the ordinary for the "Report on Income - Explanations" section of a Call Report (as these forms are known within the banking industry) to show an almost unrelieved column of zeroes. The same reporting form for the final quarter of 2002, when other non-interest expense at the bank was much higher, at $1.5 million, than in the following quarter, showed $542,000 in other professional fees, typically a category for consulting fees (though whether or not that is so in this case could not be ascertained).

Native American Bank showed a sharp increase in deposits in the first quarter of 2003, bringing total assets to $33.2 million after they had remained stable at around $26 million through fiscal year 2002. At this writing, no public information has been forthcoming as to whether or not the OCC considered that spike in deposits in its decision to move forward with an enforcement action.