Chicago-based Federal Savings Bank wouldn’t comment Tuesday on a report that New York prosecutors have subpoenaed records related to $16 million in loans the institution made to former Donald Trump campaign manager Paul Manafort.
The Wall Street Journal, citing an unnamed person familiar with the matter, reported Monday that the Manhattan district attorney has demanded the records from the bank, whose chief executive, Steve Calk, was an economic adviser to Trump’s presidential campaign. Manafort is under scrutiny from a special prosecutor and members of Congress for his dealings with Russian interests, part of the wider investigation into ties between Russia and members of Trump’s campaign and administration.
Both Calk and the Manhattan district attorney’s office declined to comment on the Journal’s report.
Federal Savings Bank made about $6.5 million in loans in January to Manafort and his wife for a Brooklyn property, documents show. That came about a month after Federal Savings lent $9.5 million to Summerbreeze, a limited liability company connected to Manafort, according to 377 Union, a website run by two New York lawyers that is named for the address of the Manafort property in Brooklyn.
The combined $16 million in loans to one borrower represents nearly a quarter of the small bank’s loan portfolio and approaches the level at which regulators would start to think about imposing limits on lending to one customer.
Federal Savings had $273 million in assets at the end of March, mostly loans. It also had almost $72 million in equity capital.
Loans representing 22 percent of capital would get regulators’ attention, one bank analyst said.
“At a larger bank, I’d be very surprised to see loans to one borrower represent about 25 percent of capital,” said Terry McEvoy, a bank analyst for Stephens. “At the community bank level, it may be more common but would likely be discussed with regulators frequently.”
Lending limits help protect the safety of banks by diversifying the type of loans and pool of borrowers. The limits help prevent banks from lending too much to one person or related people.
The bank’s chief regulator is the U.S. Office of the Comptroller of the Currency.
According to its website, a bank’s total outstanding loans and extensions of credit to one borrower may not exceed 15 percent of the bank’s capital and surplus, plus an additional 10 percent of the bank’s capital and surplus, if the amount that exceeds that 15 percent general limit “is fully secured by readily marketable collateral.”
Calk, the bank’s CEO, has said the loans in question were “grossly overcollaterized.” The Office of the Comptroller of the Currency couldn’t be reached Tuesday for comment.
Federal Savings Bank earned $24 million last year and earned more than $4 million in the first quarter of this year.
About 1.1 percent of its loans are seriously delinquent, compared with about 1 percent for the typical bank in Illinois.
Despite scrutiny over the Manafort loans, Calk recently was named a Midwest regional finalist in the 2017 Ernst & Young Entrepreneur of the Year award.
In August, Calk was named one of 13 economic advisers for the Trump campaign. Manafort left the campaign later that month amid concerns over his role with a pro-Russian political party in Ukraine.
Federal Savings was born out of Generations Bank, a Kansas thrift bought by Calk and his brother John Calk in 2011. That bank, which had about $40 million in assets, was undercapitalized, facing regulatory restrictions and posting losses for five straight years, according to a 2012 story in ABA Banking Journal, an American Bankers Association publication.
Now headquartered on Chicago’s Near West Side, successor institution Federal Savings in 2012 said it was getting $18 million in tax breaks over 10 years from the state through the Economic Development for a Growing Economy, or EDGE, program as well as up to $4 million in training money from the city of Chicago.
The bank had 842 full-time workers as of the end of March. Steve Calk has said about 10 percent of the bank’s employees are veterans like him.
Federal Savings has three branches or loan production offices in Illinois: at its headquarters and in Lake Forest and Naperville, according to its website.