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TierOne Corp. in Lincoln, Neb., got a new chief executive and struck a deal to sell nearly half its branches, but remains under the gun to raise a relatively large amount of capital.
February 11 -
Midwest Banc Holdings Inc. has won one round in its battle for recapitalization. The $3.5 billion-asset company in Melrose Park, Ill., announced Friday that it persuaded 82% of its Series A preferred shareholders to convert to common shareholders.
January 22
The future of two large community banks in the Midwest is in jeopardy after regulatory orders that require the banks to raise capital quickly or find a buyer.
This week regulators issued prompt-corrective-action directives against the thrift unit of TierOne Corp. in Lincoln, Neb., and the bank unit of Midwest Banc Holdings Inc. in Melrose Park, Ill. Federal law requires regulators to impose increasingly severe sanctions as a depository institution's capital declines. Plenty of institutions have failed after receiving a PCA directive, including another Midwestern bank, the $7 billion-asset Corus Bank, which failed Sept. 11 after failing to comply with a PCA order issued in late July 2009.
"A PCA is the final warning preceding failure," said Justin A. Barr, managing principal of Loan Workout Advisors, which is based in Chicago. "It is the final 'or else.' "
Late Tuesday the $2.9 billion-asset TierOne announced that the Office of Thrift Supervision had rejected its recapitalization plan and given TierOne's thrift until April 30 to enter into a binding merger agreement, and until May 31 to seal the deal or raise enough capital to reach adequately capitalized levels. While regulators do not specify how much a company subject to a PCA order must raise, analysts have estimated TierOne needs at least $130 million in fresh capital.
In a press release, TierOne said it may not meet the OTS deadlines. The company also said Michael J. Falbo, appointed chairman and chief executive in late January, has resigned. Charles W. Hoskins, the company's lead director, was appointed chairman, and James A. Laphen, the president and chief operating officer, was appointed CEO. Four other board members resigned.
On Wednesday, the Federal Reserve Board gave the bank unit of the $3.4 billion-asset Midwest 45 days to sell enough stock to become adequately capitalized or find a buyer. Analysts have estimated Midwest's capital needs at $200 million.
Since July, the company has been trying to recapitalize and has persuaded preferred shareholders to convert to common equity. It also persuaded the Treasury Department to convert its $85 million investment into mandatorily convertible preferred stock that will become common equity should it find at least $125 million in additional capital.
In a comment via e-mail, Roberto R. Herencia, Midwest's chief executive, said he remained optimistic.
"These circumstances are challenging, but our faith in this institution, its employees and the communities we serve is undiminished," he said.
