On June 1, the FDIC OIG published a report containing findings from its review of a state-chartered bank in Chicago that, as previously covered by InfoBytes, was closed by the Illinois Department of Financial and Professional Regulation in January and placed into FDIC receivership. The OIG determined that the bank’s failure resulted from what it characterized as the board’s and management’s failure to adequately oversee a “high-risk lending strategy” concentrated in unsecured loans and loans secured by privately held stock or interests in limited liability companies, coupled with inadequate controls to mitigate associated credit risks. Between 2018 and 2025, the FDIC downgraded the bank’s composite rating from “2” to “5,” issued a consent order and two memoranda of understanding, and repeatedly identified deficiencies in asset quality, credit administration, and concentration risk. The OIG asserted that management routinely applied “overly optimistic” risk scoring practices and allegedly did not adequately reserve for losses, and that the FDIC directed the bank in September 2025 to charge off $12.6 million of a $15 million loan, causing it to become significantly undercapitalized.

The report also states that the FDIC designated the bank’s chairman and CEO as a dominant official in April 2025, but notes that the OIG believed this designation could have been applied as early as 2022, contending that “consistent application of the dominant official designation by FDIC examiners is critical to effective supervision.” Ultimately, the OIG concluded that the estimated $19.6 million loss to the Deposit Insurance Fund — approximately 8 percent of the bank’s $232 million in total assets — did not present unusual circumstances warranting an in-depth review.