State bank regulator seeks to simplify property deals

Jun. 17--The Kansas bank commissioner is trying to make it easier for state-chartered banks to deal with distressed commercial properties and get them off their books.

Tom Thull, the chief regulator of Kansas-chartered banks, has issued a special order allowing banks that participate in a loan on a piece of property to exchange their share of interest in the loan for ownership in a corporate entity, such as a limited liability company, created to manage, market and ultimately dispose of that property.

Sometimes the management and marketing of a property is complicated when there are multiple banks involved in the loan that the property is connected to.

Thull said in one instance there were as many as 69 banks involved in a loan on a multimillion-dollar project in Kansas.

"It just makes it easier for one single entity to manage the process," Thull said Wednesday.

Previously, Kansas law did not allow this exchange of interest for ownership.

And the commissioner's office was receiving a lot of requests from state-chartered banks to do this in order to streamline and make more efficient the process of selling properties that secured real estate loans that went bad.

Nationally chartered banks have been able to do it for some time. But Thull said creating parity between state and nationally chartered banks wasn't the goal of the order.

"There's some advantage to using that particular type of entity to handle the management and ultimate resolution of these participations," Thull said.

Doug Wareham, senior vice president for government relations at the Kansas Bankers Association, said the state's largest banking trade group would "have to study the order and get feedback from bankers... if there's anything we need to be concerned about."

But Tom Page, chief executive of Emprise Bank, one of the largest state-chartered banks in Kansas, said "this makes a lot of sense to me."

"It creates a flexibility there," Page said. "There are certain kinds of property out there, something may happen to a property that a bank might not want to take on its own books, because of some environmental liability or other liability."

Reach Jerry Siebenmark at 316-268-6576 or jsiebenmark@wichitaeagle.com.

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