Commercial Real Estate Loans Doomed Amcore

Dec. 30–The failure of Amcore Bank is expected to cost the Federal Deposit Insurance Corp.'s deposit insurance fund $154.5 million.

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A new report into one of Illinois' biggest bank failures in recent years also found that the Rockford-based lender was doomed mostly by bad commercial real estate loans. But the audit, done by the U.S. Treasury Department's Office of Inspector General, also determined that regulators from the U.S. Office of the Comptroller of the Currency were slow to address Amcore's problems and didn't take forceful action "until it was too late to avert Amcore's failure." The 25-page report, published Wednesday, also mentioned that the OCC's examination records were incomplete, with key e-mails missing.

Amcore held more than a third of deposits in the Rockford area, which has been hit hard by the economic downturn. It had more than $3 billion in assets when it failed in April 2010. It was taken over by BMO Harris Bank.

Growth in Amcore's loan portfolio came mostly from "riskier" construction and land development loans in Illinois and Wisconsin, the audit said. That portfolio grew from about $280 million in 2004 to more than $800 million in 2007.

"The risk associated with these high concentrations in commercial real estate loans exposed the bank to significant losses during the economic downturn that began in 2007," the report said.

An OCC credit expert began raising concerns about Amcore's rapid loan growth as early as July 2006. In 2005, the bank, the report said, had "hired a chief credit officer with relatively little credit experience." The OCC credit expert's supervisors, however, "did not promptly address these concerns."

Initially, Amcore's failure was projected to cost the FDIC more than $220 million. But as of Oct. 31, the cost has been revised down to $154.5 million. The FDIC's operations are funded by the industry.

To read the full report, click here.

byerak@tribune.com

Twitter: @beckyyerak

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