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Feds tell bank to raise capital


Customers should see few changes



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August 25, 2010 | 09:16 AM
For months, First Banking Center has been in the process of raising capital from private investors to improve its financial position following its losses during the rough economic times.

The Federal Reserve has stated the bank is "significantly undercapitalized" and corrective action must be taken. The bank and the Federal Reserve had entered into an agreement in October 2009 requiring the bank's directors submit plans to improve the institution's financial position.

Bank CEO Brant Chappell said Tuesday the institution has "been dealing with this for months."

FBC's financial problems include a loss of $21.9 million during the second quarter of 2010. He said the problems are a result of customer real estate loans "going sour" during the area and country's poor economic climate.

"That eats away at your capital," he said. "The economy hasn't improved."

As of June 30, FBC had just more than $821 million in assets.

"We are actively pursuing the capital and I believe we will get it done," Chappell said.

According to the Federal Reserve, the bank has three options, including raising capital through the sale of shares or contributions to surplus to be adequately capitalized by law, find another banking institution to purchase it or take other measures to become adequately capitalized. FBC is pursuing the first option.

Although the bank was given 60 days to remedy the problem, Chappell said his bank needs to show improvement in that amount of time. He said he believes the bank will have the capital in place before the end of the year.

"We don't want to just get adequate capital, we want to go beyond that," Chappell said. "We want to raise enough capital so we can go out and grow. We don't want to just get by."

Chappell said he sees this as an opportunity to enhance FBC's position.

"We want to be ready to take advantage when the economy improves," Chappell said.

Despite the concerns some may have, Chappell said customers of the banks shouldn't notice changes while the institution pursues private investors.

"This won't affect our customers," Chappell said. The bank still is taking deposits and giving loans. No matter what happens, customer's funds are protected by the Federal Deposit Insurance Corp., up to $250,000. However, the bank has been restricted from paying dividends or accepting deposits at more than prevailing interest rates.

If the institution can't improve its situation in a timely fashion, Chappell said the "regulators would step in and provide another directive."

First Banking Center has 16 branches, all in Southern Wisconsin, including several in the Walworth County area. The bank has three locations in Burlington, two in Lake Geneva, and one each in Genoa City, Lyons and Pell Lake.

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