FDIC closes Broadway Bank, Amcore, five others

FDIC closes Broadway Bank, Amcore, five others
Sat 24 Apr 2010

By Becky Yerak

Broadway Bank, the family-run lender that helped launch U.S. Senate candidate Alexi Giannoulias' political career, was one of seven Chicago-area institutions seized by the U.S. government Friday and sold to healthier companies.

The failure of Broadway, which was unable to raise the $85 million it needed to remain independent, will cost the Federal Deposit Insurance Corp. $394.3 million.
Giannoulias worked for his father at Chicago-based Broadway before entering politics, and the bank's struggles in recent years with real estate loans gone bad have weighed on Giannoulias' Democratic bid for Barack Obama's old Senate seat.

During Giannoulias' successful run for state treasurer in 2006, he used his banking experience as one of his chief qualifications. But in the Senate race, he has tried to distance himself from the bank's troubles.

"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," Chief Executive Demetris Giannoulias said in a statement. "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."

The Tribune reported earlier this month that the $1.15 billion-asset bank, founded in 1979, loaned a pair of Chicago crime figures about $20 million during a 14-month period when Giannoulias was a senior loan officer.

Giannoulias' Republican opponent, Mark Kirk, has hammered on the bank issue, prompting Giannoulias to accuse Kirk of negative campaigning. "He has essentially campaigned on one thing and one thing only -- Broadway Bank," Giannoulias said.

But even fellow Democrats have taken shots at Giannoulias and Broadway. Asked recently whether the bank's problems would affect Giannoulias' Senate race, Democratic House Speaker Michael Madigan joked: "I'm glad I don't have any deposits there."

Broadway has only four branches, including its 5960 N. Broadway headquarters.

The one-day record for Illinois bank failures was March 16, 1989, when 10 were seized by regulators.

In 2009, 21 Illinois banks failed. Year to date before today, three Illinois banks have failed.

Other banks to fail Friday were Rockford-based Amcore Financial, Chicago-based Lincoln Park Savings Bank, Chicago-based New Century Bank, and Citizens Bank & Trust Co. of Chicago. Additionally, the FDIC seized Wheatland Bank of Naperville and Peotone Banke and Trust Co.

Amcore was the largest to fail. Its assets and deposits will be acquired by Canadian-owned Harris Bank, which in November 2005 stated that it wanted to double its number of U.S. Harris branches to 400 by 2010.

Harris, which currently has about 280 branches in three states, will add another 52 with the purchase of $3.8 billion-asset Amcore Bank in a deal that includes financial assistance from the FDIC. The FDIC is funded through insurance premiums paid by banks.

Harris will be integrating Amcore at a time when Harris' customer satisfaction ratings from J.D. Power have slipped from among the highest in the Midwest to below average, according to numbers released Thursday.

In 2009, the largest Chicago failures were $7 billion-asset Corus Bank in September and $4.7 billion-asset Park National Bank in October.

Amcore's failure will cost the insurance fund $220 million.

Publicly traded Amcore, whose capital raising efforts were rejected by regulators, dominates the Rockford market and holds 35 percent of deposits there.

Still, the deal will do little to boost Harris' market share in Chicago, where it's a distant third in market share behind Chase and Bank of America. Amcore's Chicago-area market share is 0.3 percent.

Harris Chief Executive Ellen Costello said Harris has long wanted to enter Rockford, which is growing fast despite being hit hard by the recession. Harris also has wanted to enter Madison. Amcore has 14 branches in Madison and 24 in the Chicago area.

Also, Harris currently has 600 ATMs, and Amcore gives it another 308.

Lake Forest-based Wintrust, MB Financial, Republic Bank also bought failed banks on Friday.

They're the first FDIC-assisted deals in this economic cycle for both Wintrust and Harris.

The standard deposit insurance at FDIC-insured banks is $250,000 per depositor.