The Bank of Maine has been designated as being in a troubled condition by national regulators who say they found unsafe and unsound banking practices and regulatory violations by the bank.

The Gardiner and Portland-based bank’s leader, however, said Friday that the problems cited in a formal agreement between the bank and the Comptroller of the Currency of the United States of America are “ancient history.”

Although the bank’s recovery from its past troubles continues, it is in better shape than it has been in many years, said John W. Everets, chairman of the Bank of Maine. The bank, previously called Gardiner Savings Institution and then Savings Bank of Maine, changed its name last year.

An enforcement action that resulted in a formal agreement between the bank and the Comptroller of the Currency was released Aug. 17. It states that the regulatory organization found “unsafe and unsound banking practices and regulatory violations relating to asset quality, credit administration, management and the bank’s compliance program.”

In the agreement, the bank promises to take steps to correct the violations, including reducing risk, forming a new strategic plan, reviewing its mortgage banking to ensure appropriate controls are in place, and ensuring competent management is in place to ensure compliance with the agreement.

Everets said the bank has addressed the issues raised in the report and is now performing “very, very strongly” with its new loan portfolio, although it is still working on its previous portfolio of older legacy loans. He said the issues all date to at least a year ago.

“It’s ancient history at this point,” Everets said Friday. The issues cited in the agreement are “reflective of a period of time from a year ago, a snapshot of the bank a year ago. That has all been fixed. It is no longer the same bank, by any stretch of the imagination.”

An official for the Washington, D.C.-based Comptroller of the Currency said Friday the organization does not comment on its sanctions against banks, beyond releasing the enforcement action orders to the public.

The Comptroller of the Currency charters, regulates and supervises all national banks and federal savings associations. It was established in 1863 as an independent bureau of the U.S. Department of the Treasury.

Its agreement directs the Bank of Maine to correct regulatory violations cited in a September of 2011 report of examination, but does not say what the specific violations were.

Everets said the problems that are the focus of the formal agreement were lingering issues and have since been addressed.

Regulatory scrutiny

In 2010 the bank was ordered, through a cease and desist order, to make changes by the Office of Thrift Supervision, another regulatory organization that has since been absorbed into the Comptroller of the Currency.

One of those requirements was that the bank boost its capital holdings or face liquidation. Everets said they have done that, injecting $60 million of new investment into the bank. In early 2011 the cease-and-desist order was removed and the bank was freed from the additional regulatory scrutiny.

But now it is back under scrutiny, although Everets and a comptroller official said the current formal agreement is generally a lesser sanction than a cease-and-desist order.

“We inherited a bank that needed a great deal of help,” Everets said. “When we came in, in May of 2010, the loan portfolio was in difficult shape, it needed a lot of work due to the ravages of the recession and ravages of some aggressive lending.

“Over the last two years, we’ve transformed to a bank with very few problems, and very few (loan) delinquencies. Our branches are growing, we’re offering new products, and we have thousands of new customers. The employees of the bank have worked extremely hard. The bank is now much stronger.”

The bank has about 330 employees, he said.

Everets said he anticipates, in 12 to 18 months, the Comptroller of the Currency will examine the state of the bank again and perhaps remove the formal agreement oversight. Everets said when the Office of Thrift Technology was absorbed by the Comptroller of the Currency, the bank became subject to a new regulator.

“Both those organizations do things differently,” he said. “So we had to go from one sort of regulatory supervision to another, all while we fixed the bank. It was like changing the tires on a bus, going 60 miles an hour.”

He said the regulatory environment for banks is very aggressive, nationwide.

Everets said the bank recently surpassed its goal of lending $600 million in financing to customers since January 2011 and has completely rebuilt its information technology department and centralized it in a property at the Libby Hill Business Park in Gardiner. It has more than $20 million in new deposits in its Portland branch that opened about a year ago and plans to open new branch in Falmouth in September.

The bank was founded in 1834 with a single office in Gardiner, and now has 32 branches in Maine.

Everets said the bank is here to stay.

“Our constituents, the customers and communities we serve, and the charities we contribute to, can all rest assured we’ll be here another 178 years, at least,” he said.

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