After a dozen years as a subsidiary of a holding company about 200 miles away, Midwest Bank of Western Illinois, formerly National Bank of Monmouth, is now regaining its independence.
An investment group led by its management has struck a deal to buy it from Midwest Banc Holdings Inc. of Melrose Park, Ill., which acquired it in 1993.
Christopher J. Gavin, the president and chief executive officer of the $280 million-asset bank, said the deal makes sense for both sides.
James J. Giancola, the new CEO of the $2.3 billion-asset holding company, has said he intends to concentrate on the Chicago area. Mr. Gavin said selling the bank would let the company do just that.
Meanwhile, Midwest Bank of Western Illinois would benefit because it would be free to set its own strategy, he said.
"Once we all got on the same page, we realized maybe this would be the best thing for both parties," Mr. Gavin said.
Some families that sold their stakes in the bank in 1993 are among the investors buying it back, he said. His group intends to retain the bank's current name and has filed an application to create a holding company, to be named Western Illinois Bancshares.
The sale is expected to close in the fourth quarter.
Mr. Giancola was the president and CEO of CNB Bancshares Inc. of Evansville, Ind., in 1999, when Fifth Third Bancorp of Cincinnati bought it. He then became the president of Fifth Third's Indiana operations.
He joined Midwest Banc Holdings last October and stepped into a turnaround situation. Since then the company has paid off Federal Home Loan bank advances and some high-yielding trust-preferred securities, hired a new chief investment officer, and made other changes aimed at boosting profitability, rebuilding its loan portfolio, and getting out from under regulatory orders.
The western Illinois bank, which is mostly an agricultural lender, does not fit the company's growth strategy, Mr. Giancola said Wednesday in Chicago at Howe Barnes Investments Inc.'s 10th annual community bank conference. The Chicago market is robust enough that Midwest need not pursue business much beyond a 50-mile radius of the city, he said.
Discussing the sale in a follow-up interview, he joked, "I grew up in the Bronx. What's an ag loan?"
No deal price was disclosed, but Midwest said it expects to post a net gain of $9 million on the sale and would use the proceeds to help further restructure its investment portfolio.
Mr. Giancola said he plans to use the money from the sale to boost the bank's capital ratios. In his presentation, he said the Tier I capital of the bank will rise from 13% to 15.3%. The money will be invested in municipal bonds and mortgage-backed securities, he said.
