(Crain's) — The Federal Reserve Bank of Chicago has entered into a written agreement with First Chicago Bank & Trust requiring the commercial lender to boost capital, only months after the California private-equity firm that owns the bank injected $43 million into it.
The March 8 agreement, which was reached jointly with the Fed and the Illinois Division of Banking and released Monday, also bars the bank or holding company from paying dividends or interest on subordinated debt or trust-preferred securities without prior approval from the regulators.
The $1.2-billion-asset Chicago bank also is ordered to reduce its concentrations of commercial real estate loans and stop accepting brokered deposits.
The agreement is the latest setback for First Chicago Bank & Trust, which is run by well-known Chicago banker J. Mikesell “Mike” Thomas and owned by Castle Creek Capital LLC, a California private-equity firm managed by First Chicago vets John Eggemeyer and William Ruh.
The bank posted a net loss of $93 million in 2009, $44 million of which was due to the writeoff of goodwill associated with Castle Creek’s purchase in 2006 of Chicago’s Labe Bank and Bloomingdale Bank & Trust to form what was later named First Chicago.
Following Castle Creek’s $43-million capital injection last fall, the bank has enough to qualify as well-capitalized. But the bank’s holding company, First Chicago Bancorp, was undercapitalized as of Dec. 31, signaling the need for Castle Creek to raise more equity.
The written agreement orders the holding company to submit a plan within 60 days “to maintain sufficient capital at Bancorp.” Among the items the plan must address is “the source and timing of additional funds to fulfill the consolidated organization’s and the bank’s future capital requirements.”
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