Bad loans resulting in “significant” losses and thus the deterioration of the capital of a Chicago bank led it to become the first to fail in 2026, the federal deposit insurance agency said Monday.
The office of inspector general (OIG) for the Federal Deposit Insurance Corp. (FDIC), indicated in a report that the failure of Metropolitan Capital Bank and Trust (Metro Capital) of Chicago Jan. 30 was linked to a “continued decline in asset quality within its loan portfolio.”
“Historically, Metro Capital engaged in a high-risk business strategy with high concentration levels in risky assets (e.g., unsecured and Private Interest Collateral (PIC) loans) without applying sufficient Board and management oversight and the appropriate controls and credit risk management practices to address the inherent risks associated with this portfolio,” the OIG wrote.
“Bank management routinely applied unreasonable risk scoring practices over the PIC loan portfolio and failed to adequately reserve for losses for its high-risk lending strategy,” the agency said.
The agency noted that the estimated loss to the FDIC’s Deposit Insurance Fund (DIF) of Metro Capital’s failure was $19.6 million – about 8% of the bank’s total assets of more than $232 million.
The OIG asserted that the 8% loss rate was smaller than the average losses to the DIF of other failures over the past five years, which was 23%. “Therefore, we did not find this loss to be of sufficient magnitude or significance to warrant an in-depth review,” the OIG wrote.
Overall, the OIG said, the FDIC’s supervision “identified and effectively addressed the issues that led to the bank’s failure or the loss to the DIF.”
“Since 2018, the FDIC’s supervision identified several concerns at Metro Capital and took several formal and informal actions intended to resolve the issues in a timely manner,” the agency added.
Failed Bank Review – Metropolitan Capital Bank & Trust, Chicago, IL
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