NAPLES — M&I Bank has won a $16.9 million judgment against Orion Bancorp Inc., headquartered in Naples.
Orion Bancorp was the parent of Orion Bank, a failed local bank shuttered by regulators in November.
In late December, M&I sued Orion Bancorp. in U.S. District Court in the Eastern District of Wisconsin, seeking to obtain a judgment for business loans that weren’t paid back.
An attorney for M&I Bank could not immediately be reached for comment.
According to the lawsuit, M&I, based in Wisconsin, gave Orion Bancorp a $50 million business line of credit in March 2008. The collateral put up for the loan included 550,000 shares of Orion Bancorp’s stock.
Originally, the loan was to mature on March 19, 2009. By summer 2008, Orion Bancorp had defaulted on its loan obligations, according to the lawsuit.
The loan agreement was revised and extended several times. On April 30, 2009, Orion Bancorp agreed to provide M&I with more collateral, including rights to a corporate jet, the lawsuit states.
M&I also had a first priority security interest in all of Orion Bancorp’s existing and future deposit, operating and other accounts, the lawsuit states.
On Aug. 30, 2009, M&I signed an agreement to postpone its right to foreclose on the loans and take possession of the pledged collateral until Jan. 31 of this year, as long as there were no more defaults by Orion Bancorp on its loan obligations.
When the bank was closed by regulators that triggered a new default, according to the lawsuit.
Allegations in the lawsuit included breach of contract and unjust enrichment.
M&I was owed $16,625,014 in principal and $318,889 in accrued interest as of Dec. 21, according to the lawsuit. As part of the judgment, Orion Bancorp must pay those amounts and all attorney fees and any other costs involved in the collection of the debt.
Like many banks locally and nationally, Orion Bank was hit hard by bad loans of its own. The bank lost $75 million in the third quarter of last year before regulators swooped in to shut it down.
Orion had more than $250 million in construction and commercial loans that were classified as non-performing, which means borrowers were behind on payments.
Jerry Williams, Orion’s ex-CEO, was ousted from the bank days before regulators closed it down. He’s accused of lying to regulators and making the bank appear in better shape than it was. No formal charges were brought.
IberiaBank, a publicly traded bank based in Louisiana, took over Orion’s deposits and branches, but not its private shares.
Orion Bank had no publicly owned stock. Shareholders were invested in the holding company, Orion Bancorp. There were 300 or more investors and it’s unclear how they will be affected by the judgment.
Alan J. Pratt, a CEO and director for Orion Bancorp., which remains an active Florida corporation, said he was unaware of the judgment and declined to comment.
Connect with Laura Layden at www.naplesnews.com/staff/laura_layden.