First American State Bank’s Response to Recent Regulatory Action

First American State Bank’s Response to Recent Regulatory Action

On August 20, 2010, First American State Bank, and its parent company First American Bancorp, entered into a Written Agreement with the Federal Reserve Bank of Kansas City and the State of Colorado Division of Banking. 

Like many community banks, First American State Bank has been working closely with both State and Federal regulators since the economic downturn began more than two years ago. Our objective is to ensure that the bank continues to meet all of its regulatory obligations, while also supporting our loyal customer base of business owners, real estate investors, and consumers as they weather the financial storm. This agreement merely describes the commitments that the bank has made to augment our capital base, strengthen our balance sheet, and periodically provide regulatory agencies with additional information for them to assess our progress. 

Below are answers to commonly asked questions about the Written Agreement.


Q&A:

What created into this situation?
 
Almost all individuals and businesses have felt the impact of the current recession, beginning more than two years ago, and many have not yet felt any relief from the economic downturn. As a provider of loans and banking services to businesses, real estate investors, and consumers, the bank has experienced some of the same impacts that the recession has had on its customers.  In particular, the bank’s concentration in commercial real estate lending has magnified that impact.  The severity of this economic downturn has proven that even those businesses, real estate investors, and consumers who accepted moderate amounts of risk prior to the downturn, are now experiencing greater difficulty than they have in past recessions.  Our bank is no different.       

 
How will this Written Agreement affect First American State Bank?

First American State Bank is considered to be “well capitalized,” has ample liquidity, and is holding more loan loss reserves today than in any time in the bank’s 15 year history.  Both the regulatory authorities and the bank have one common goal - to ensure the right steps are being taken now to allow the bank to weather the downturn and prepare for better economic times to come.  The Written Agreement simply formalizes those steps.    


What restrictions does this agreement place on First American State Bank?

No restrictions whatsoever.  This agreement does not limit our ability to conduct business with our depositing customers in any way.  There is no change to the FDIC deposit insurance coverage available to our depositors, and there will be no changes to the products and services that we offer.



What is First American State Bank doing to remedy this situation? How long will it take?

Since the downturn began more than two years ago, the bank has been taking steps to augment its capital position. We’ve made significant progress toward strengthening liquidity and resolving problem loans as they have arisen.  Continuing to do so will put the bank in the best possible position to benefit when the economy enters the recovery stage in the business cycle.  The timing of the recovery is uncertain at this point.  The Board of Directors has provided valuable leadership during this time, and Members of our Board of Directors, existing shareholders, and new investors have provided financial support allowing the bank to augment capital during this period.  Regardless of the length and depth of the downturn, the bank is taking all necessary steps to ensure that we thrive when economic recovery finally emerges.    


How does First American State Bank compare to other banks?

Making comparisons to other banks can be very difficult, as banks vary greatly in size, complexity and composition of their loan portfolios.  However, we do know that many local community banks with which we compete have faced similar challenges over the past two years.  Many have entered Written Agreements previously, and are making steady progress, just as we are.  Each bank has a different set of challenges, so comparisons based upon publicly available data can be somewhat misleading.