Update: Broadway Bank is officially on the FDIC’s failed bank list, along with two other local banks.

Update II: Here’s the official press release; MB Financial Bank is assuming Broadway’s assets deposits.

Update III: Rich Miller points out that MB Financial was a bailout recipient.

ABC7 reports that the FDIC has arrived, though it’s not yet on the FDIC’s failed banks list (eight seven so far today). In a 2009 cover story, “Alexi’s Albatross,” Mick Dumke told the story of Alexi Giannoulias and his family’s bank, which was founded in 1979; the piece explains a lot about how it went from one of the most profitable banks in the country and the most profitable in the state to where it is today.

In 2002, the ratio of brokered deposits to total assets at Broadway was 53 percent, according to FDIC records; four years later, it had risen to 68 percent. The average for all federally insured banks nationwide was 4.5 percent. According to an explanation of hot money on AOL’s Daily Finance in July, “the 79 U.S. bank failures in the last two years had four times the brokered deposits of the average bank, and 33 percent of the failed banks had high brokered deposits and extremely fast growth.”

Later in the piece:

Meanwhile, Broadway continued its risky real estate lending practices. The bank went from $356 million in construction and development loans in 2006 to $443 million in September 2009; Yates says it now has a larger portion of its loan portfolio tied up in C & D projects than all but two of those 240 similarly sized banks. And the number of these loans going south has also increased. Less than 2 percent of the bank’s loans were at least 90 days past due in 2006; now nearly a quarter of them are, which is the second-worst rate in the nation for a bank of its size. Broadway’s gone from being among the country’s most profitable institutions to operating in the red. Last year it reported a $14 million loss, and it lost another $27 million in the first nine months of this year.

Analysts say that when banks engage in high-risk lending they’re supposed to sock away extra money to protect them against the likely losses. From 2002 through 2006, Broadway paid out between $11.3 and $15.4 million a year in cash dividends, according to FDIC reports. In 2007 and 2008, as its earnings went south, it paid out $47.8 million and $34.5 million. The Giannoulias family owns all the stock in the bank’s holding company.

Also in 2009, This American Life told the story of what happens when the FDIC takes over a bank, from the inside; the section on the Chicago condo is also fascinating.