CHICAGO - The Federal Home Loan Bank of Chicago, creator of the FHLBs secondary mortgage market program, announced it has terminated negotiations with the FHLB of Dallas on a rare combination of two FHLBs.
After extensive analysis and due diligence of the feasibility of combining the banks’ business operations, FHLB Chicago was unable to reach an agreement to merge with the Dallas Bank that would have maximized value to FHLB Chicago members, said officials of the Chicago Bank, which manages $89 billion of assets.
The Chicago Bank also said that Mike Thomas, its CEO, is leaving his post next Monday and the bank has formed a search committee to hire a successor.
The moves come as the Chicago Bank, weighed down by a $33-billion portfolio of mortgages it bought from other FHLBs under its secondary market Mortgage Partnership Finance program, is in the midst of a supervisory agreement with its federal regulator, the Federal Housing Finance Board. Even though the mortgages are highly rated, their value has been weighed down by the underpinnings of the overall market.
Under a rare cease and desist order, the Chicago Bank has agreed not to redeem or repurchase any capital stock from its credit union or bank members without the consent of the regulator, in order to conserve capital. The order also limits the growth of the secondary market program to 10% a year and for the regulator to approve any quarterly dividends by the Chicago Bank.
The Chicago Bank has 830 members, including 75 credit unions.
