Regulators have ordered Foster Bankshares in Rolling Meadows, Ill., to refrain from paying shareholders and some creditors until the company proves that it can cover its operating expenses.
The holding company of the $444 million-asset Foster Bank has pledged to serve as a source of strength for the bank, according to an agreement released Thursday by the Federal Reserve.
According to the Federal Deposit Insurance Corp., Foster Bank lost more than $16 million last year and another $3 million in the first half of this year, largely due to high levels of troubled loans. Its total risk-based capital at June 30 was 9.62%, down more than 300 basis points from a year earlier.
Within 60 days of the agreement, which Foster signed on Sept. 5, the company promises to detail in writing its expected use of cash to pay debt and cover operating expenses. Foster also said it would project its use of cash each at least one month before the beginning of each quarter starting next year.
The agreement bars the company from paying dividends or redeeming equity or debt without the Fed's permission.
