Metropolitan Capital’s Failure in Chicago Tied to Loan

The first FDIC-insured bank failure of 2026 slipped by with little fanfare late Friday, but court records suggest a long-simmering real estate loan exposure may have played a key role.

Illinois regulators seized Chicago-based Metropolitan Capital Bank & Trust, which held about $261 million in assets, and appointed the Federal Deposit Insurance Corporation as receiver, Bisnow reported. FDIC transferred all deposits and most assets to Detroit-based First Independence Bank, which plans to reopen Metropolitan’s lone River North branch at 9 East Ontario Street under its own banner. It was the largest bank failure in Illinois since 2017.

Regulators have not publicly identified the cause of the collapse, and FDIC has yet to release a post-seizure analysis. But a review by the outlet of court filings and enforcement actions points to a problematic commercial real estate loan tied to the largest default in the federal government’s skilled nursing facility lending program.

Metropolitan held a $4.5 million loan originated in 2014 to entities controlled by Chicago real estate investor, Rabbi Zvi Feiner. The debt helped restructure obligations across 13 Rosewood Care Centers facilities in the Midwest and sat junior to a $146 million HUD-insured mortgage. That senior loan ultimately defaulted, and the Department of Justice later charged Feiner with running a Ponzi scheme.

As Rosewood’s finances deteriorated, Metropolitan modified its loan five times between 2014 and 2017, extending repayment terms without demanding additional collateral, court records show. In the fifth modification, the bank accepted collateral already pledged elsewhere. An Illinois appellate court ruled in 2020 that while Feiner made material misrepresentations, Metropolitan failed to conduct basic due diligence and was left with no enforceable claim.

The $4.5 million exposure loomed large for a bank of Metropolitan’s size and drew regulatory scrutiny. In 2019, regulators imposed a consent order citing “unsafe and unsound conditions,” an impaired capital position and substandard lending practices, according to the publication. The order required management changes, higher capital levels and tighter controls.

Metropolitan Capital was founded in 2005 by Michael Rose, former executive director of the Illinois Housing Development Authority. Rose departed the bank last July to become managing partner at Affinitas Capital.

— Eric Weilbacher