Truman Bank is ordered to take action

Written on December 19, 2008

The Federal Reserve is telling troubled Truman Bank to strengthen its management and clean up its bad loans.

The Fed announced Wednesday an agreement with the Clayton-based bank, requiring it to hire a consultant to review its management’s effectiveness. The bank also must improve the way it manages commercial real estate and other loans, and quickly write the bad loans off its books.

Meanwhile, it’s forbidden to pay dividends to its owners without Fed permission, and it must correct "violations of laws and regulations" noted in its latest examination by federal regulators. The agreement didn’t specify the violations.

Truman had $511 million in assets as of September, ranking it small by banking standards. It was the 20th largest bank in the St. Louis region, holding less than 1 percent of the region’s bank deposits.

The bank lost $8.5 million through nine months of this year. As of September, 5.8 percent of its loans were at least 90 days delinquent. The average for similar banks is 1.7 percent, according to reports from federal regulators. However, Truman’s capital remained well above federal requirements, indicating no immediate danger that the bank might fail.

A bank spokeswoman said that the problems stemmed mainly from real estate lending, and that the bank expected to turn a profit next year.

Longtime St. Louis bank executive Shaun Hayes is Truman’s second-largest shareholder and has been advising the bank easy pay day loans. "They’ll be in full compliance by the end of the first quarter," he said.

Hayes was co-founder of Allegiant Bank, which was sold to National City Bank of Cleveland in 2004. Hayes ran National City’s St. Louis operations until June.

Truman isn’t Hayes only turn-around effort. He invested $3 million in problem-prone Sun Security Bank, which is based in Reynolds County and has two branches in St. Charles County. Sun Security is facing two orders from the FDIC, commanding the bank to improve its management and stop violating consumer protection laws. As of September, 23 percent of its loans were delinquent, according to regulators’ reports, though its capital levels were above federal requirements.

jgallagher@post-dispatch.com | 314-340-8390

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