Chicago/Dallas FHLBank Merger Dead

The troubled Chicago Federal Home Loan Bank is formulating a plan to continue to operate on a "stand-alone" basis now that merger discussions with the Dallas FHLBank have ended, and its president and chief executive, Mike Thomas, is stepping down as of April 11. The merger talks blew hot and cold over the past seven months as the Chicago FHLBank's financials continued to deteriorate. The Chicago bank recently said it expects to report a loss in the first quarter. "After extensive analysis and due diligence of the feasibility of combining the banks' business operations, the FHLB Chicago was unable to reach an agreement to merge with the Dallas Bank that would have maximized value to FHLB Chicago members," chairman David Kuhl said in a letter to the Chicago bank's members. Executive vice president Matthew Feldman will serve as acting president while a search is conducted to replace Mr. Thomas, who will receive a $1.1 million lump sum severance payment. Mr. Thomas was hired in August 2004 after a federal supervisor halted the growth of the bank's mortgage purchase program. Meanwhile, the Chicago bank is working on several initiatives, including a "new capital plan to stabilize the capital base and to restructure the balance sheet to improve long-term profitability," Mr. Kuhl said.