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Jesse Bernard Johnston III Photo by The Associated Press file

Federal regulators put more restrictions on Pikes Peak National Bank last month and ordered its management and owners to halt “unsafe and unsound banking practices” or be forced to sell or liquidate the longtime west side financial institution.

Pikes Peak National already had been operating under a February 2009 agreement with the U.S. Comptroller of the Currency’s Office; that agreement required it to come up with a program to improve its credit risk management and administration, better document collateral and credit information on all loans, adopt stronger policies on real estate appraisals, hire a consultant to review its loan portfolio and appoint a board committee to monitor compliance with the agreement.

Deposits at Pikes Peak National and all other banks nationwide are insured up to $250,000 by the Federal Deposit Insurance Corp.

The latest agreement, called a consent order, meaning Pikes Peak National didn’t fight the cease-and-desist proceedings against it, also requires the bank to add two more members to its five-person board of directors and hire a senior lending officer, all subject to the office’s approval. The order also restricts the bank’s lending and dividend payments and requires it to come up with about $500,000 in additional capital reserves and develop a three-year turnaround plan.

The plan, which must be completed by late July and approved by the office, must “establish objectives and projections for the bank’s overall risk profile, earnings performance, growth expectations, balance sheet mix, off-balance sheet activities, liability structure, capital and liquidity adequacy” and other items, according to the agreement. If the bank fails to complete the plan or add the additional reserves, it could be forced to sell, merge or liquidate within a month.

“Because economic conditions have not improved to the point that our business customers have been able to rebound from the recession, we continue to work with our loan customers to the extent that we can,” the bank said in a statement released Friday. “The shareholders and management of the bank are committed to maintaining the financial strength of the bank and to meeting the requirements of the consent order while continuing to be a partner in the success of our customers to make it through this economic downturn.”

Three other banks in the area, Peoples National Bank of Colorado Springs, Park State Bank of Woodland Park and Rocky Mountain Bank & Trust of Florence, are operating under similar agreements with federal regulators.

Pikes Peak National, which is owned by Earl Georgeson of Colorado Springs, had assets totaling $84 million and deposits totaling $76.1 million as of March 31, according to a report the bank filed recently with the FDIC. Nearly 19 percent of the bank’s $49 million in loans were delinquent as of March 31, the highest of the 10 banks based in the Colorado Springs area and among the highest of any bank in the state.—Contact the writer at 636-0234.

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