A troubled Chicago-area community bank that just received a large capital infusion from its owners is now negotiating to restructure its loan with Cole Taylor Bank as it aims to rebuild its capital reserves.

Crain's Chicago Business reported Monday that the $507 million-asset Leaders Bank of Oak Brook, Ill., has reached a tentative deal with its lender in which Cole Taylor would convert $7.5 million of subordinated debt into preferred shares. The move would help the undercapitalized Leaders boost its Tier 1 risk-based capital-to-assets ratio, which as of Sept. 30 had fallen to 2.46% from nearly 9% a year earlier.

Leaders' chief executive, John Gleason, also told Crain's that the bank's owners are in talks with Cole Taylor about renegotiating the terms of a $16.25 million loan to the bank's holding company, Leaders Group Inc.

Leaders has been battered of late by defaults on commercial real estate loans. Total losses of more nearly $46 million since the start of 2010 have depleted much of its capital and forced its owners to pony up $25 million last month in an effort to stave off its collapse, according to Crain's.

Cole Taylor, meanwhile, has needed to beef up its own capital reserves of late, in part because loans it made to other community banks soured. The bank's parent, Taylor Capital Group Inc. of Rosemont, Ill., completed a $35 million rights offering last month and is seeking shareholder approval to convert $37 million of preferred stock into common stock.

Leaders was founded in 2000 by the family of leveraged-buyout mogul Donald Kelly. Kelly's son Patrick is the chairman of the bank's board and another son, Thomas, is a director.

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