Though it is weighed down by bad construction loans and short on capital, Baytree National Bank and Trust Co. in Lake Forest, Ill., is engineering a rescue.
The $211 million-asset bank has a deal to sell itself to EB Financial Group Inc. of Hinsdale, Ill., according to a Nov. 10 filing with the Federal Reserve. EB would become a bank holding company by acquiring all of Baytree's stock.
The deal price was not disclosed.
EB is headed by Michael Flynn, a former vice president at the $2.8 billion-asset American Chartered Bank in Schaumburg, Ill., according to a Nov. 19 report in Crain's Chicago Business. He would invest at least $12.25 million to help recapitalize Baytree.
At Sept. 30, Baytree was significantly undercapitalized, with a leverage ratio of 1.99% and a total risk-based capital ratio of 5.05%, data from the Federal Deposit Insurance Corp. showed.
In an April consent order, the Office of the Comptroller of the Currency had given it until June 30 to get a leverage ratio of at least 8% and a total risk-based capital ratio of at least 12%, levels above the typical minimums needed to qualify as well capitalized. The order also required the bank to submit a plan for selling itself should it fail to achieve those ratios.
Losses on construction loans have eroded Baytree's capital. Noncurrent loans rose to 14.47% of its total loans at Sept. 30, from 12.07% at June 30, the FDIC data indicated. The bank posted a $5 million loss for the third quarter, compared with a $4 million loss a year earlier.
Baytree declined to comment and EB could not be reached.