The Federal Deposit Insurance Corp. has begun seeking bidders for ShoreBank in case the ailing South Side lender fails to raise capital on its own, sources familiar with the FDIC process say.
The FDIC is simultaneously seeking a healthy bidder for troubled midsize lender Midwest Bank, part of Melrose Park-based Midwest Banc, and is allowing bidders for that more desirable franchise to link bids to ShoreBank, sources say.
"ShoreBank is expeditiously engaged in its capital-raising efforts," bank spokesman Brian Berg said. "ShoreBank is committed to fulfilling its role as the leading community development bank and taking the appropriate measures to position itself and its communities for the long term."
Regulators have ordered ShoreBank and Midwest to raise capital.
ShoreBank's capital deficiency worsened in the first quarter, and it now needs to raise at least $179 million to meet targets set in March by regulators. ShoreBank initially was effectively ordered to raise $158.7 million, but newly released first-quarter financial results reflect a bigger capital hole. It has been trying to raise more than $200 million.
It's hoping to receive nearly $75 million from the U.S. Treasury Department but must first raise private capital. It has received tentative commitments for $70 million from private investors, a source says.
Midwest has been hurt by both the downturn in the real estate market as well as investments, once considered safe, in such government-sponsored enterprises as Fannie Mae.
Midwest has about two dozen branches and has made strides in cutting costs under Chief Executive Roberto Herencia, who joined Midwest a year ago.
The standard deposit insurance at FDIC-insured banks is $250,000 per depositor.