Chicago : Broadway Bank fails, MB Financial is the buyer; Harris buys Amcore

(Crain's) — Banking regulators seized seven Chicago-area banks late Friday, including Rockford-based Amcore Bank and Chicago’s Broadway Bank, owned by the family of Democratic U.S. Senate candidate Alexi Giannoulias.

Buyers of the seven failed lenders included Harris N.A., which obtained the biggest prize in Amcore, with $3.8 billion in assets and $3.4 billion in deposits housed in 52 branches in Illinois and Wisconsin, including 24 in suburban Chicago.

Acquiring the $1.1 billion in deposits and $1.2 billion in assets of Broadway Bank was Chicago-based MB Financial Inc. MB Financial also obtained the $486 million in assets and $492 million in deposits of Chicago’s New Century Bank, which was also closed by state regulators.

Four other Chicago-area lenders — Lincoln Park Savings Bank, Citizens Bank & Trust of Chicago, Wheatland Bank of Naperville and Peotone Bank — also failed Friday evening.

For Harris, the Amcore purchase is its first foray into buying failed banks in the two years since banks began suffering casualties in the financial crisis.

Harris is acquiring 52 branches of Amcore, which will open as Harris branches on Saturday. It also agreed to purchase the vast majority of Amcore's $3.8 billion in assets, with the FDIC agreeing to share losses on $2 billion of those.

Harris has held discussions with Amcore periodically over the years before getting the chance to get the franchise for virtually nothing.

"This fits us strategically," Harris CEO Ellen Costello said in an interview Friday night.

She said Harris will continue looking for opportunities in Illinois, Wisconsin and Indiana as more banks fail. "We're easily able to take this on and others as well," she said.

Broadway Bank ran aground after suffering heavy losses on commercial real estate loans and was unable to raise $85 million needed to keep it solvent.

Alexi Giannoulias was the bank's chief lender and vice-president from 2002 to 2006. He has come under fire recently for working for the bank when it loaned money to several organized crime figures, and his family has been criticized for taking $70 million in dividends in 2007 and 2008 just as loans were staring to sour.

In a statement, Broadway CEO Demetris Giannoulias, older brother of Alexi, said, "This is a difficult day for bank employees, for my family, for this community and for all those who built businesses and protected their savings with the help of this bank. . . .We fought to carry out the vision my father had when he founded Broadway Bank 30 years ago, but our bank — like many businesses — has struggled during these challenging times."

Among the other failures:

• Privately held Republic Bank of Chicago took over the deposits and assets of tiny Citizens Bank & Trust of Chicago, a Northwest Side lender.
• Acquiring Lincoln Park Savings Bank is Northbrook Bank & Trust Co., with $899 million in assets. It will take on $200 million in Lincoln Park Savings' assets and $172 million in deposits, housed in four branches.
• A unit of Lake Forest-based Wintrust Financial Corp. acquired Wheatland Bank of Naperville and its $437 million in assets and $439 million in deposits.
• And Itasca-based First Midwest Bank acquired Peotone Bank, taking on $130 million in assets and $127 million in deposits.

The depth of Broadway Bank's loan problems was underscored by the FDIC's estimates of the losses its insurance fund will incur from each of the failures. Despite the fact that Broadway is less than one-third the size of Amcore, the FDIC estimated its failure would cost the fund $394 million, while Amcore's would cost $220 million.

MB Financial paid no premium for Broadway's deposits, and the FDIC agreed to share in losses on virtually all of the bank's loans. The same was true of New Century, which, like Broadway, focused almost exclusively on commercial real estate lending.

New Century CEO Faye Pantazelos, who founded the institution in 1999, had said earlier in the week she was considering resigning before regulators closed it down. But sources said she was at the bank on Friday. Ms. Pantazelos didn't respond to requests for comment.