Two more banks consent to regulatory orders

Two more area banks – Hillcrest Bank in Overland Park and Union Bank in Kansas City – have consented to regulatory orders to address problems.

In each case, the order said state and federal regulators have “reason to believe that the bank engaged in unsafe and unsound banking practices.”

The banks consented to the orders without admitting or denying regulators’ claims.
Both documents were made public by the FDIC on Friday.

The Kansas City area now has 18 banks and savings banks operating under regulatory orders.

The list shrank by one when Arvest Bank recently acquired the area offices of Los Padres Bank in California, which had operated here at Harrington Bank.

Hillcrest Bank’s order cites the $1.9 billion bank for loan concentrations and loan problems. It also requires an extensive management evaluation that took five pages to detail.

In April, the bank promoted President Jeff Wheeler to CEO, succeeding Tom Davies, who became its chairman emeritus. The bank also brought the head of its Texas operations, Brian Schneider, to Overland Park as the new president.

Wheeler said this morning that the management were not related to regulatory concerns. Nor have regulators raised concerns about the existing management, he said.

The order also sets higher-than-normal capital requirements that are significantly higher than Hillcrest’s capital at the end of September.

Wheeler said the bank would need to raise additional capital and has submitted plans to regulators detailing how it will meet the requirements.

"We've got shareholders who are squarely behind this insititution," Wheeler said.

He said current owners are weighing the possibility of bringing in new investors, but there are no current plans to seek a sale of the bank.

Hillcrest is noteworthy for historically focusing on real estate loans. It also regularly lends outside the Kansas City area and at one time had loans in 42 states.

Hillcrest lost $16.9 million in third quarter, reflecting a large amount of loan that were charged off as losses. Losses for the first nine months of the year reached $42.5 million.

The bank still reports about 12 percent of its loans as being non-current.

The order also cites Hillcrest Bank for an excessive reliance on wholesale funding, which includes brokered deposits that accounted for 28 percent of all deposits at the bank at the end of September.

Separately, Union Bank, with $665 million in assets, consented to its order on Sept. 30. It cites the bank’s loan problems and loan concentrations.

And though the order sets new capital requirements, Union already meets those higher requirements according to Sept. 30 financial statements available from the FDIC.

President Jeff Jernigan said the bank continues to meet those requirements and expects to be able to in the future.

Union Bank reported a $447,000 profit in the third quarter, which reduced its losses for the year to $470,000 through the end of September.