Local bank whose CEO met with Obama must raise capital

By Becky Yerak
Posted Sep. 30, 2010 at 11:04 a.m.

A Chicago-area bank whose chief executive met with President Obama last December to discuss small-banking matters has been ordered by the nation’s thrift regulator to maintain certain capital levels, among other things.

Matt Gambs, who in 2008 joined Schaumburg-based Diamond Bank as its new chief executive, said that earlier this week members of its board of directors, including existing investors, pumped $1 million in fresh capital into the closely held lender, which also has a branch near the intersection of Clark and North in Chicago.

He said the thrift, founded in Chicago in 1886, now exceeds the capital thresholds set by regulators in the order.

“We’re dealing with loans that were made years ago,” Gambs said. “There’s nothing in the order that we can’t overcome.

“I won’t kid you – it has been more challenging than I thought,” he said. “I didn’t know the world would change the way it did.”

The bank’s chairman is David Hokin. Diamond’s Web site says it’s the sponsor of the 2010 and 2011 Chicago Blackhawks conventions. Its current client spotlight on its Web site is O’Hare Towing Service.

As of June 30, 5.8 percent of Diamond’s loans were seriously delinquent, up from 3 percent a year ago.

Its Texas ratio was less than 50 percent as of June 30, according to Loan Workout Advisers and MDI. A Texas ratio The Texas ratio tallies up a bank’s severely past-due loans and foreclosed real estate and compares them with the bank’s core capital, typically shareholders’ equity, and money set aside for potential loan losses. When the result exceeds 100, the bank has serious troubles.

The cease-and-desist order, issued Sept. 24 by the U.S. Office of Thrift Supervision, gave the lender until Sept. 30 to raise the capital.

Gambs was among a group of community bankers who met with Obama in December. Gambs was the first to speak.

Obama asked Gambs about his borrowers. “I said, ‘I loan to everyone from manufacturers to designers, and Maria Pinto is an example,’” Gambs said in December of the local designer — a favorite of first lady Michelle Obama.

Gambs was seated between Obama adviser Valerie Jarrett and Deloris Sims of Milwaukee-based Legacy Bank.

Obama “asked me about capital and whether that was holding me back from doing more, and I told him I felt we could do more if we had fewer concerns about that,” Gambs said in December. “A lot of the conversation was about how I accept we’re in a regulated industry, but you’re always looking over your shoulder.”

Click here for links to the OTS orders against $278.4 million-asset Diamond Bank and its Chicago-based parent, Diamond Bancorp Inc., as well as a link to Diamond’s latest financial results.


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