Hillcrest Bank, Union Bank consent to regulatory orders

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

The banks did not deny or admit regulators' claims. Documents were made public by the Federal Deposit Insurance Corp. on Friday.

The Kansas City area 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 as 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 Jeff Wheeler from president to chief executive officer, succeeding Tom Davies, who became chairman emeritus.

The bank also brought the head of its Texas operations, Brian Schneider, to Overland Park as the new president.

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

The order also sets higher-than-normal capital requirements.

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

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

He said current owners were weighing the possibility of bringing in new investors, but there were no 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 the third quarter, reflecting a large amount of loans that were charged off as losses.

Losses for the first nine months of the year reached $42.5 million.

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

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

Although the order contains new capital requirements, Union already meets the higher requirements, according to Sept. 30 financial statements available from the FDIC.

President Jeff Jernigan said the bank continued to meet those requirements and expected 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.

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The latest financial reports on 124 banks and savings banks with offices in the Kansas City area are available online at Economy. KansasCity.com. Look for "tools" along the left side to search 2009 results.

To reach Mark Davis, call 816-234-4372 or send e-mail to mdavis@kcstar.com.

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