LaSalle National Bank, Chicago`s fifth largest, has failed to meet minimum federal requirements to provide loans to Chicago neighborhoods, banking regulators have concluded.
The decision may add a question mark to the most important bank deal pending in Chicago, a buyout of Talman Home Federal Savings & Loan Association by LaSalle`s Dutch parent, ABN AMRO Bank.
A spokeswoman for LaSalle disputed bank regulators` negative ”needs to improve” assessment under the Community Reinvestment Act, which requires banks to ”help meet the credit needs” of their community, particularly low- and moderate-income areas.
Spokeswoman Julie Wright said the problems that regulators identified were related to record-keeping and not the $5.8 billion bank`s lending performance. However, she refused to provide a copy of the assessment, which the bank is not required to make public until mid-February.
Other records show that the 66 mortgages LaSalle granted in 1990 included no loans to blacks, Hispanics or Asians and none to low- or moderate-income borrowers.
Wright said those totals did not indicate discrimination by the bank or a lack of commitment to modest-income neighborhoods.
”We do a small number of residential mortgages, but we are not a residential mortgage lender. We are a business lender,” Wright said.
Wright said the bank has committed $10 million in lines of credit and loans to community groups developing modest-income neighborhoods.
LaSalle committed another $10 million to the Community Investment Corp., a consortium of banks that makes loans to improve housing in lower-income areas, she said.
Federal regulators are required to consider a banking company`s performance under the Community Reinvestment Act, and the negative rating will weigh against Federal Reserve approval of ABN AMRO`s purchase of Talman.
However, Talman is technically insolvent on the basis of tangible net worth, the standard adopted by Congress for savings and loans, and ABN AMRO`s offer to recapitalize Talman would remain attractive to regulators.
Banking attorney John Duncan of Jones, Day, Reavis & Pogue said the negative rating poses ”a serious problem” for the deal, but the Fed could approve it anyway.
”The Fed could say the policies toward resolving potentially troubled situations outweigh the problems,” Duncan said.
Talman, a $5.1 billion institution, plays a key role in the Chicago housing market, where it is the second-largest mortgage lender. Talman granted more than 2,200 mortgages in 1990.
Questions raised by the Fed already have delayed the purchase from a planned Jan. 2 closing, but representatives of Talman and ABN AMRO said they still expect the deal to be approved.
Spokeswomen for the Fed and ABN AMRO refused to discuss the reasons for the delay in approval.
LaSalle`s unsatisfactory Community Reinvestment Act rating comes after Harris Trust & Savings Bank, Chicago`s third-largest bank, received the same negative ”needs to improve” rating last summer.
Harris` corporate parent subsequently dropped purchase plans for a suburban bank when the Fed raised questions about that deal.
Separately, Talman announced fourth-quarter profits of $45.2 million, or $4.66 a share, up from $728,000, or 8 cents a share, in the 1990 period. Annual earnings were $75.4 million, or $7.77 a share, against $13.2 million, or $1.36 a share, in 1990.
ABN AMRO has agreed to pay Talman shareholders 5 percent interest on the $100 million price it had agreed to give them on the projected Jan. 2 closing, Talman said Monday in a statement.
