FirstMerit takes over Midwest Bank and Trust

 

FirstMerit, based in Akron, OH is the new owner of the Melrose Park based Midwest Bank and Trust. They beat out several other local banks, buying the assets, deposits and branches of the failed Midwest.

As late as 5:30 p.m. on Fri., May 14 the Midwest Bank and Trust at 2130 W. North Ave. stated that the bank had not been seized by federal regulators.  On Saturday morning, they opened as a FirstMerit location, along with 22 other locations.

A local resident, learning Friday about the bank's failure, rushed to the North Ave. location. "They were able to show me a list of all my assets and show how much was covered by insurance," he explained.  "Everything was covered so I felt much better."

FDIC covers each person up to $250,000. "Person" refers to the name on an account.  If an instrument such as a savings account with a $250,000 balance has Suzy Jones' name on it.  That is covered.  If she also has another account or certificate of deposit with $250,000, that is also covered provided there is one or more other names on that account.

A $3.2 billion-asset lender, Midwest had a Thursday deadline to come up with an additional $200 million in capital to save the bank from seizure. Midwest's erosion was not a sudden one.  It took a steep slide when $80 million in preferred shares of Fannie Mae and Freddie Mac were wiped out in 2008. Even the $85 million Troubled Asset Relief Program (TARP ) funding and a new CEO Roberto Herenica, former Banco Popular North America CEO, could not stop their financial problems.

The deal that FirstMerit cut with the Federal Deposit Insurance Corporation (FDIC) includes sharing of $2.3 billion in Midwest's asset losses and paying a 0.4% premium on deposits.  On the flip side, FirstMerit can share with the FDIC in future gains via a "value instrument," which is indicative of the competition to purchase Midwest.  FDIC insurance will be covering approximately $216 million in losses.

Midwest is the eleventh failed bank in Chicago so far in 2010.

 

For more information:  Chicago Business; Chicago Tribune; Chicago Business