From elsewhere on chicagotribune.com
Broadway Bank ordered to raise more capital
By Becky Yerak
Tribune staff reporter
Struggling lender Broadway Bank, owned by the family of U.S. Senate
candidate Alexi Giannoulias, has been ordered by U.S. and state banking
regulators to raise capital, restrict dividends, review its investment
policies, identify conflicts of interest and hire an outside firm to
assess the bank’s top management.
The consent order was signed Jan. 26 and is being enforced by the
Illinois Department of Financial and Professional Regulation and the
Federal Deposit Insurance Corp.
On Monday the Tribune reported that Giannoulias, current state
treasurer, is entering into the final days of the campaign for the
Democratic U.S. Senate nomination with a significant advantage over
rivals Cheryle Jackson and David Hoffman. Despite Hoffman’s attempts to
criticize Giannoulias over loans at Broadway Bank and a $150 million
loss in a state college savings fund, the state treasurer has seen
little erosion in job approval and favorability ratings.
In a letter to workers Wednesday, Broadway executive Kaushik Pancholi
said accounting rules have forced Broadway to write down the value of
many of its loans and real estate assets. He also said the current
economy and struggles by Broadway customers have hurt the bank.
"Additionally, we purchased certain investments that were rated
triple-A by rating agencies when purchased, but have lose significant
value over the past year," he said. "All of these factors together have
caused a significant drop in our capital levels."
Giannoulias said Wednesday he has not been involved in bank operations for nearly four years.
"In the midst of a deep recession brought on by bad decisions in
Washington and lax oversight on Wall Street, hundreds of community
banks are struggling, and Broadway Bank is no exception," he said in a
statement.
On Dec. 2, the Tribune reported online that Broadway was one of nearly
40 Chicago-area banks as of Sept. 30 that had seriously delinquent
loans and foreclosed real estate on their books that exceed or come
close to their levels of loan reserves plus core capital.
A Texas ratio tallies up a bank’s severely past-due loans and
foreclosed real estate and compares them with the levels of a bank’s
core capital, typically shareholders’ equity, and the money set aside
for potential loan losses. A score of at least 80 percent is considered
a cause for concern. A Texas ratio puts a bank’s asset problems in the
context of its capital and reserve levels, so it’s considered a good
predictor of difficulties.
To lower it, banks need to lower their levels of souring loans, sell
the real estate they repossessed, raise capital or set aside more
reserves for potential loan losses.
Broadway’s was the 12th highest among local banks, at 187 percent, according to Loan Workout Advisers.