Chicago-Area Lender First Midwest Buys Shut-Down Bank, Third in 10 Months
First Midwest Bancorp, a Chicago- area lender with about 100 branches, acquired a failed Illinois bank as regulators shut down U.S. financial firms amid losses stemming from real estate-linked investments.
Palos Bank & Trust Co., based in Palos Heights, Illinois, was shut by state regulators and the Federal Deposit Insurance Corp. was named receiver, according to a statement on the FDIC website. First Midwest acquired five former Palos Bank branches, with $467.8 million in deposits and about $493 million in assets, the FDIC said.
“You have the weaker institutions that are unable to work out problems with their customers,” Walter J. Mix III, a managing director at Emeryville, California-based LECG LLC and a former California Department of Financial Institutions commissioner, said before yesterday’s announcement. “The issue is: Underlying assets held by these banks are not recovering.”
Bank failures in 2010 will surpass last year’s total of 140, FDIC Chairman Sheila Bair said last month in a Bloomberg Television interview. Palos Bank was the 110th U.S. lender closed this year. The FDIC included 775 banks with $431 billion in assets on the confidential list of problem lenders as of March 31, an increase from 702 banks with $402.8 billion at the end of the fourth quarter.
“Enforcement actions tend to lag economic conditions,” said Chip MacDonald, a partner at Jones Day in Atlanta who specializes in bank deals. “It doesn’t seem to have hit a peak, which could give you some confidence we’re heading in the right direction.”
Deposit-Insurance Fund
The FDIC estimated the Palos Bank transaction will drain $72 million from its deposit-insurance fund. First Midwest agreed to pay the FDIC a 1 percent premium for Palos Bank’s deposits.
First Midwest has purchased three failed banks since the 2008 credit crisis, including Peotone Bank & Trust Co. of Peotone, Illinois, in April; and First DuPage Bank of Westmont, Illinois, last October. In 2008, First Midwest sold $193 million in preferred shares to the U.S. government under the Troubled Asset Relief Program.
First Midwest declined 17 cents to $10.89 in regular New York trading earlier yesterday. It has risen 5.3 percent in the past year.
To contact the reporter on this story: Laura Keeley in New York at lkeeley@bloomberg.net.
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