By Dan Haley
Oak Park's last remaining independent bank took a hit from regulators today, as state and federal officials ordered Community Bank of Oak Park River Forest to get more capital and tighten the belt on problematic loans.
Bank regulators placed Community Bank of Oak Park River Forest under a consent order which intensifies the watch over problem loans and requires the bank to add roughly a million dollars in capital — something the bank's chairman said can be done.
The order, issued by the Illinois Department of Financial and Professional Regulation Division of Banking and the Federal Deposit Insurance Corporation, sets limits on future lending to troubled borrowers, limits the bank's growth to modest levels in coming quarters, restricts dividend payouts and places new requirements on the bank's board and management.
A range of additional reporting requirements and strategic plans are also mandated by the consent order.
Sue Hofer, a spokeswoman for the state in the case, said the order was a cooperative effort with the federal government
"All of the bank's customers have the full backing of the FDIC," Hofer said.
She declined to comment further, or to say how the government came to focus on Community Bank.
Marty Noll, founder and chairman of the 14-year-old bank, said Friday that the bank has been working with regulators and that the consent order was not an unexpected outcome.
"First of all, the consent order was mutually agreed on," said Noll. "We sat in a room with regulators and negotiated it. Is it ideal or perfect? No. But it is agreed on and workable."
Noll described the bank as being "just a skosh" under the required eight percent capital ratio required and said there were multiple ways the bank could close that gap within the 90 day limit set by regulators.
"We need to raise the level just a little and we'd like to raise it just a little bit more than that," he said. He said the current shortfall was "no more than $1 million."
Noll said the bank could raise capital from its board of directors or could augment capital out of the bank's ongoing earnings. "This bank is a very good earner. For a little bank, it is a very good earner," he said.
Noll said that before taxes or money set aside for reserves, Community Bank generates between $450,000 and $500,000 per month.
Noll detailed the range of loan issues the bank is working through, emphasizing the long time relationships that all of the loans represent between borrowers and the bank.
"In every instance, these are people we know well," Noll said. "We have bet on these people through the life of the bank, and they have always performed as expected. Now with the shape the world is in, they are struggling some. But these are good people. Honest people of good character."
Noll said there were approximately $65 million in various loans at issue. Among them are $30 million in loans the bank has voluntarily restructured – reducing interest, extending terms – in order to meet the changed needs of borrowers. All of those loans are current.
Another $34 million in loans represents "non-accrual loans" that Noll said worry regulators. Eighty percent of those loans are current though all payments are being used to reduce principal rather than paying interest.
That leaves, says Noll, 20 percent of the $34 million in non-accrual loans, or about $7 million, that "are the real problems. Those are the ones we are most concerned about. They are the most troubled."
"We are so close to the capital level we need," Noll said. "I am completely confident we will fully acquire the capital we need."