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Non-Current Loans/Charges Offs Bring Bank Down---First Bank To Fail In 2014

The three former branches of DuPage National Bank, West Chicago, Illinois, were closed by the Office of the Comptroller of the Currency with the Federal Deposit Insurance Company (FDIC) as receiver. The FDIC entered into a purchase and assumption agreement with Republic Bank of Chicago, Oak Brook, Illinois, to assume all of the deposits of DuPage National Bank.

The bank was founded August 29, 1891 and survived the 1930's Great Depression. It had one office in Hinsdale and two in West Chicago with 26 full time employees September 31, 2013. In 2007, the bank had 34 full time employees. The latest FDIC records available; Tier 1 risk based capital ratio: 5.17%.

Year-end 2011 Tier 1 risk based capital ratio: -13.52% with a negative net capital equity of $2,394,000.

May 7, 2009 Comptroller of Currency issued a warning regarding the operation of the bank. At the time Thomas J. McCracken was chairman of the board and Kevin McCracken, interim president. Kevin J. McCracken is the son of Thomas J. McCracken, who was chairman of Oak Bank in Chicago and DuPage National Bank in Hinsdale and West Chicago.

October, 2012, DuPage National Bank President Kevin J. McCracken and officers of the bank were sued for $4.2 million for allegedly promoting a Ponzi scheme, basically not telling the truth and assisting in the placement by Bradley Schiller, operator of Koplin Trading Loan, LLC.

Schiller was also sued by the US Commodity Future Trading Commission:

A complaint for fraud and other charges was brought by the United States Attorney's Office August, 28, 2013 and on October 18, 2013 entered a plea of guilty. He is to be sentenced February 5, 2014 before the Honorable Elaine E. Bucklo, Northern District of Illinois.

Crain's Chicago Business Reports:
"The bank's demise occurred despite a 2012 deal by majority owners the McCracken family to infuse it with capital after they sold their minority stake in the parent of Chicago-based Oak Bank and raised $8 million. That lender remains extremely well-capitalized."

The infusion of capital brought the bank out of its $2.4 million negative equity, but the non-current loans were still too high, charge offs too high, and profits remained negative.

(in millions, unless otherwise)

Net Equity
2006 $7.6
2007 $7.5
2008 $7.5
2009 $6.5
2010 $2.8
2011 -$2.4
2012 $3.1
9/31 $1.5

2006 $347,000
2007 -$33,000
2008 -$1.6
2009 -$2.4
2010 -$3.7
2011 -$5.2
2012 -$2.5
9/31 -$1.5

Non-Current Loans
2006 0
2007 $1.3
2008 $3.4
2009 $5.1
2010 $11.2
2011 $7.1
2012 $7.2
9/31 $4.7

Charge Offs
2006 0
2007 0
2008 $345,000 ($168,000 construction/land, $127,000 multifamily, $41,000
1-4 family, $9,000 individuals)
2009 $1.2 ($603,000 commercial, $437,000 nonfarm/non-res., $119,000 multi-family, $50,000 individuals, $25,000 1-4 family.
2010 $352,000 ( $362, 000 construction/land, $105,000 nonfarm/non-res., -$10,000 individuals)
2011 $2.5 ($1.6 nonfarm/non-res., $523,000 1-4 family, $359,000 multifamily, $20,000 commercial/industrial, $7,000 individuals
2012 $1.0 ($979,000 nonfarm/non-res., $108,000 multifamily, $28,000 construction/land, -$44,000 1-4 family, -$11,000 automobile)
9/31 $1.8 ( $909,000 construction/land, $799,000,000 nonfarm-nonres., $45,000 1-4 family, $37,000 multifamily, $3,000 commercial, $10,000 other consumer loans, $2,000 individuals, -$8,000 automobiles).

(Note: The FDIC charge off numbers were not totaled corrected by the bank in their report, such as 9/31 was $914,000 but the numbers added up to $1.8. There were other years with these addition errors. Editor).

Construction and Land, 1-4 family multiple residential, Multiple Family
Residential, Non-Farm Non-Residential loans.

The bank "...was first founded on August 29, 1891 as the Bank of Newton and Smiley. The founders, Captain D.C. Newton and C.E. Smiley, both veterans of the Civil War, safeguarded their townsman's money, arranged for the payment of bills and in general, performed the functions of modern day bankers.

"In 1903, The Bank of Newton and Smiley was purchased by a partnership consisting of James M. Dayton, Henry J. Stark, both of Sycamore and David A. Syme, who was originally from Scotland. The new institution was known as the Bank of West Chicago and had for its officers Henry J. Stark, President, Grant A. Dayton, Vice President and Cashier and Paul G. Brown, Assistant Cashier. This brought to the banking business in West Chicago the first of the Dayton Family, three generations of which were to play an important part in the affairs of the bank from 1903 to 1967.

"In 1908, the banking laws of the State of Illinois made it necessary to incorporate, so the State Trust and Savings Bank was incorporated with Capital Stock of $50,000 and a charter was issued to it on April 15, 1908. The bank commenced business with deposits of $200,000. David A. Syme was President, Grant A. Dayton (West Chicago's first mayor), Vice President and Cashier and Paul Brown, Assistant Cashier. Ten years later, in 1918, the bank moved from the "Stone Bank" to the present building and the bank moved in with deposits of $347,000.

"The ownership stayed the same until 1962, when Wayland Dayton sold the bank to its present owners, and on December 31, 1962, we became a nationally chartered bank known as The First National Bank of West Chicago.

"To facilitate continued growth as a full service bank in West Chicago and its surrounding areas, The First National Bank of West Chicago became DuPage National Bank on January 1, 1982. The doors to our third location in West Chicago opened on December 20th of that same year on the southwest side of our community."

As of September 30, 2013, DuPage National Bank had approximately $61.7 million in total assets and $59.6 million in total deposits. Republic Bank of Chicago will pay the FDIC a premium of 1.20 percent to assume all of the deposits of DuPage National Bank. In addition to assuming all of the deposits of the DuPage National Bank, Republic Bank of Chicago agreed to purchase essentially all of the failed bank's assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $1.6 million.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.