Milwaukee-based Legacy Bank has been ordered to raise capital and begin talks with other area banks about potential mergers or acquisitions.
The board of governors of the Federal Reserve System ordered the corrective action last week, giving the bank 60 days to take corrective action.
Jose Mantilla, Legacy Bank’s president, said the bank has been raising capital throughout 2010 and has raised a “significant” amount of funds. He declined to state the amount raised or the amount that Legacy Bank has been ordered to raise.
The order from the Federal Reserve states that Legacy Bank must “enter into and close a contract to be acquired by a despository institution holding company or combine with another insured despository institution, closing under which contract is conditioned only on the receipt of necessary regulatory approvals”.
“This is not a direct order to sell ourselves,” Mantilla said. “It is to have conversations over the next 60 days about merger possibilities.”
The bank has also been ordered to not make any capital distributions or pay dividends, per the letter from federal regulators. It is also forbidden from making new deposits or renewing deposits that have interest rates higher than prevailing effective rates on similar amounts.
Legacy Bank, however, remains open for business, Mantilla said.
“We’re still opening accounts and making loans and our deposits are still insured by the FDIC,” he said. “We’ve been here for 11 years and we’re planning to be open for another 11 years and more.”
