Gold Banc Corp. in Leawood, Kan., said Wednesday that it will close its money-losing mortgage subsidiary - and that the Internet is partly to blame.

It also claims it was snookered into paying too much for the mortgage unit in July of last year and is seeking a nearly 50% refund from the sellers.

Gold Banc Mortgage has lost $1.5 million this year, including $1 million in the third quarter alone, the $2.7 billion-asset banking company said.

Rising interest rates and "increased consumer confidence in shopping for rates using the Internet" were behind the unit's trouble, said Michael W. Gullion, Gold Banc's chairman and chief executive officer, in a prepared statement.

Gold Banc acquired Regional Investment Co. of Kansas City or $13.2 million and renamed it Gold Banc Mortgage. In June, Gold Banc filed a complaint with the American Arbitration Association against Bradley D. Ives, the former president of Regional Holding Co., and two of his top aides, David W. Murrilland and Robert E. McGannon, claiming that the executives overvalued the company. (The purchase agreement required binding arbitration rather than a lawsuit to settle any disputes.)

Gold was seeking a refund of as much as $6.5 million. It accused the three men of failing to disclose "a material adverse change" in its financial condition, according to an Aug. 14 Securities and Exchange Commission filing. The filing did not say what that change was.

Mr. Ives, Mr. Murrilland, and Mr. McGannon are no longer employed by Gold and could not be reached for comment. But they have filed counterclaims seeking payment of promissory notes issued by Gold at the purchase, in addition to unspecified compensatory and punitive damages.

Gold Banc purchased Regional, a full-service mortgage banking firm with 17 offices in nine states, to add services, increase cross-selling opportunities, and boost fee income. The day the purchase agreement was announced Mr. Gullion said in a press release that "Regional's full-service mortgage banking capability complements Gold Banc's core community banking franchise and provides a host of new operating synergies."

That optimism faded. Gold's stock was trading at $4.75 midday Wednesday, well below its 52-week high of $12.

The company now plans to shift its mortgage origination business to its banks in Kansas, Oklahoma, Missouri, and Florida, Mr. Gullion said. "Providing mortgage loans in the communities where our banks are located not only meets customers' demands but allows Gold Banc to actively participate in the development of these communities," he said.

Gold Banc's president, Malcolm M. Aslin, said in an interview that Gold Banc Mortgage will be closed within a month. Fifty employees will be laid off, he said, and the banking company will take a related $17.7 million charge in the fourth quarter.

The company announced two other initiatives Wednesday aimed at reducing expenses and boosting its bottom line.

It said that it had recently sold off $84 million in securities and reinvested the proceeds in higher yielding securities. The company will take a $2.1 million pretax loss on the sale but said it expects the reinvestment will generate $1.1 million in annual pretax income.

Gold also said that it will consolidate its three Oklahoma banks under the name Gold Bank. The consolidation, to be completed in November, will cost the company $750,000 in the short term but generate $1 million per year in pretax savings, Mr. Gullion said.


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