Idaho First Bank received good news at its McCall headquarters this week as regulators lifted a consent order placed on the bank in 2010. Now it plans to expand into Boise.
Idaho First was struggling during the recession under the weight of bad loans. As the value of its loans plummeted, the bank no longer met a legal requirement that it hold equity equivalent to 10 percent of its risk-weighted assets to protect against unexpected losses. As a result, the bank became one of five Idaho-based banks to face regulatory orders to improve their capital position.
Idaho First has reached only 8 percent, but regulators decided the bank had made enough progress to merit a lighter hand. The bank received permission to continue operating under an informal agreement with the Federal Deposit Insurance Corp. and the Idaho Department of Finance.
Among other things, the consent order prohibited Idaho First from expanding its products, markets or branches. Lifting the order means the bank can breath easier, President and CEO Greg Lovell said.
"We will continue to operate in a safe and sound manner," Lovell said. "(Removing the order) doesn't really affect what we do so much as it takes off one more layer of oversight that maybe turns down the intensity of the magnifying glass."
Lovell said Idaho First crawled out of the recession with its customers, many of whom rely on the tourism industry that tanked during the recession.
"As the economy of McCall and Boise improved, we as a community bank reflected those improvements," Lovell said. "Just like we reflected the deterioration of the economy in 2008 and 2009."
The bank has been profitable for eight consecutive quarters and improved its capital by about $6 million, including combined investments of about $3.5 million from bank directors.
Some borrowers walked away from their loans, but the bank reduced other problem loans by renegotiating with customers, Lovell said.
"When customers had problems, we worked to restructure their credit and reduce their rates," Lovell said. "We have a limited market area, so we have to work with those customers."
The bank immediately started the process of buying an old branch once operated by Farmer's and Merchants State Bank in Boise. That will be the bank's first branch. Lovell had to wait for regulators to lift the order before Idaho First could acquire the branch. The bank already had a loan production officer in Boise.
The lifted order is a positive sign for Idaho community banks, said Gavin Gee, director of the Idaho Department of Finance, which regulates state-chartered banks.
"Of all the orders, my favorite to sign is to terminate a consent order," Gee said.
Syringa Bank, Panhandle State Bank and Idaho Banking Co. remain under regulatory orders. So does the nationally chartered Farmer's National Bank.
Gee said one of those banks will likely have its orders lifted soon. He declined to say which.
Zach Kyle: 377-6464
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