FDIC seizes Lincolnwood bank

June 5, 2009 (CHICAGO) It is the third bank to fail in the Chicago area this year.

The Bank of Lincolnwood in Lincolnwood will reopen on Saturday under a different name.

For customers, it's a name change. Their accounts are unaffected. Their services are all still there.

Six times this year in Illinois - three in Chicago, three downstate - banks have failed.

Transitions to the new owners have been, for the most part, seamless. But they're not without emotion, particularly when the bank has carried the name of the community it serves for 55 years.

The Bank of Lincolnwood closed for the day at 5 p.m. And within minutes top officials of the state's Division of Banking, and a team from the FDIC arrived to take over operations.

After losing $13 million in the first quarter, due largely to failed construction loans, the Bank of Lincolnwood name no longer exists. It has been sold to Republic Bank.

"Tomorrow morning, the bank will open at its normal hours, business as usual. The main difference that people will notice is probably a different sign that will say 'Republic Bank of Chicago.' Otherwise, it will be business as usual," said Richard Schmalzer, Federal Deposit Insurance Corporation.

Republic is taking over all the assets and most of the loans. Customer accounts remain unaffected.

"We've just come off the best quarter we've ever had in our 40 year history," said Bill Sperling, Republic Bank VP, CEO.

Earlier this year, Republic took over another community bank. It was the first bank failure of the year in the Chicago area. Lincolnwood is now the third, and experts say there will likely be more.

"Easily you could see another 30 banks in Illinois close in the coming two years. These are small banks, what we call community banks," said Prof. Rebel Cole, DePaul University finance expert.

The banking industry remains strong, Cole says, but there are banks with overextended loan portfolios that are vulnerable.

The banks employees were given the word on Friday evening, though many knew it was coming.

"It's sad to see it go because it's been an institution, and it also leaves the bigger questions, what's going to happen for the employees long term and to their kids?" Matthew Rosenthal, building tenant.

"I can't commit to all of them, but I would say the majority would have jobs," said Schmalzer.

When Republic Bank of Chicago took over the National Bank of Commerce in west suburban Berkeley in mid January, it wound up keeping about 80 percent of that bank's employees.

The state's top banking regulators say they remain confident that state-chartered banks will remain strong despite a volatile market, but they closed the book on the Bank of Lincolnwood saying it had been operating in an unsafe, unsound manner.

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