After Moving into Illinois Over Trade Group Protest, Texas Thrift

A Texas thrift that ruffled feathers when it branched into Illinois last year has put a "for sale" sign on its Chicago-area office.

Beal Bank SSB, a $1.3 billion-asset savings bank based in Dallas, announced that its hard-fought branch in Winnetka, an exclusive North Shore community, no longer fits in the company's business plan.

Illinois state regulators had given Beal permission to open the branch even though the thrift holds only a Texas state charter. That prompted a suit by the Community Bankers Association of Illinois, which asserted the thrift was not qualified to branch into Illinois because it does not hold a federal or Illinois charter. The matter is still pending in Cook County Circuit Court.

David Farmer, president of Beal, said the decision to put its Winnetka branch up for sale was not related to the lawsuit. He said the thrift plans to sell its branch by the end of the third quarter because the Chicago-area market is too expensive.

Beal attracted depositors by offering higher interest rates than its competitors, a strategy that Mr. Farmer said paid off.

"If you pay a high enough rate, you can attract deposits," he said, "but we found that we did not need as many deposits based on the current loan market."

Although Beal does not keep track of each branch's individual finances, Mr. Farmer said the Winnetka branch was profitable. However, he said the bank has not originated any loans out of its Illinois facility.

The North Shore market was attractive to the Texas bankers because of its high concentration of older, wealthy residents. One of Beal's competitors, Harris Bank Winnetka, described the local banking market as very competitive.

"It's pretty tough to build market share when there are nine banks in a town of 15,000 people," said Robert N. Burchmore, a senior vice president at Harris.

Even so, since Beal first advertised the sale of its branch last week, the savings bank has received more than a half-dozen calls from parties interested in acquiring the branch.

Mr. Farmer said several of the prospective buyers already serve the Chicago-area market.

Beal Bank's decision to find a buyer for its Illinois branch came as good news to Community Bankers Association.

"If they in fact are pulling out, we would be pleased," said Joe Ambrose, the trade group's attorney in Springfield, Ill. Mr. Ambrose said the association's goal was to persuade the state to enforce its branching laws strictly.

Mr. Farmer, however, said that even if Beal Bank leaves Illinois, state regulators may still allow an out-of-state thrift to set up shop.

"I don't believe our leaving represents a victory for the Community Bankers," he said.

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