February 13, 2014

Regulators lift cease and desist on Conway Bank

Nine years of heightened regulatory scrutiny has ended for a Conway Springs bank that does business in Wichita.

Nine years of heightened regulatory scrutiny has ended for a Conway Springs bank that does business in Wichita.

The Office of the Comptroller of the Currency, the regulator of nationally chartered banks, ended its cease and desist order against Conway Bank, which operates three branches including one at Kellogg and Main.

“It’s been a lot of hard work and effort by the board and the staff to make that happen,” Conway Bank CEO Joe Rottinghaus said Wednesday.

The OCC terminated the cease and desist order on Jan. 22. The order was issued on March 22, 2011, the same day a formal agreement that the OCC issued against Conway Bank in January 2005 was terminated.

The formal agreement – also considered an enforcement action but a less urgent one on the scale of regulatory actions – and the cease and desist focused on oversight and operation of Conway Bank’s lending and the quality of its assets.

“Both of those actions were geared toward asset quality,” Rottinghaus said. “Working through those quote, ‘problem assets’ coupled with the recent economic times, it took time to work through those.”

Rick LeCompte, a Wichita State University finance professor, said the OCC’s termination of the cease and desist “is kind of like a clean bill of health.” He added “it’s very unlikely” the OCC would have lifted the enforcement action unless the bank “cleared up a lot of issues.”

“To me, that’s positive news,” LeCompte said.

Since the bank’s agreement to comply with the first enforcement action in 2005, its assets have declined 42 percent – from $111 million in first quarter 2005 – to $64 million at the end of 2013. It also sold its east Wichita branch building to Central Star Credit Union this fall, though Rottinghaus said the bank retained the customers who used it.

He said the bank’s sharp decline in assets reflects a combination of eliminating problem assets as well as ending an earlier practice of buying extra deposits from deposit brokers.

“It made sense for the bank to size down,” Rottinghaus said. “Tough decisions were made but we’re looking for the long-term health of the bank. Shrinking the bank back to good, quality base loans meant some of that had to go away.”

According to the call report Conway Bank filed with regulators last month, it had $64.3 million in assets and recorded a $158,000 loss at the end of 2013.

Rottinghaus downplayed the loss and said the bank is expecting better performance going forward.

The amount of the loss, said WSU’s LeCompte, is a fraction of the bank’s assets. “That’s well within reason, given this environment,” he said.

Rottinghuas said that he is grateful to Conway Bank’s “good customer base that has stayed loyal to us” over the past nine years. “We appreciate that they have continued to value the relationship that we have with them.”

Moving forward, the bank will focus on agriculture and commercial and small business lending. It won’t be doing much in the way of construction and development lending – at least for now, he added.

It’s “a new chapter,” Rottinghaus said.

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