Feds to Community Bank: tamp down problem loans

Chairman confident loans are manageable, bank solidly profitable

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By Dan Haley

Editor and Publisher

Click here to see the order from bank regulators.

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."

  Community Bank Oak Park River Forest Consent Order 11/12/2010

Contact:
Email: dhaley@wjinc.com Twitter: @OPEditor

Reader Comments

14 Comments - Add Your Comment

Comment Policy

chet21 from Oak Park  

Posted: November 22nd, 2010 12:54 PM

Any one know where the bad loans are located? I'm guessing that most of them are NOT in the "community," but probably on out of state commercial real estate. This is what destroyed Corus/River Forest Bank and I'm guessing played a large role in the demise of Mike Kelly's bank. I won't call it greed to pursue higher returns with depositor money, but I won't call it either "conservative" or "community" banking/underwriting. Unfortunate (I'll miss them), but self-inflicted. Any one know more?

Ben S. from Chicago  

Posted: November 20th, 2010 6:31 AM

Put a fork in this bank. The FDIC has ramped up in the midwest and is adding close to 400 new agents. Why? To start closing banks like this one. At a very minimum you should keep your deposits below the FDIC insured limit. I am not a gambler, but I wouldn't be surprised if this one is closed by spring.

Joe  

Posted: November 17th, 2010 11:30 AM

Well David Williams, it really is all about you. Forget all the money they donate to community nonprofits, if you can't get your four quarters for laundry, that's where we draw a line in the sand! (note the sarcasm)

Dishwin Patel  

Posted: November 17th, 2010 10:26 AM

They have 34M in loans that are only paying the "principal"? And of that 34M, 20% can't even pay that? I guess the regulators are worried. Hey CBOPRF, where can I apply for a no-interest rate loan? I wonder if any of the loans are to "insiders" (relatives, friends, etc.)

David Williams  

Posted: November 17th, 2010 10:01 AM

Just because is says "community" in the name doesn't mean anything. I went in once for change for a dollar and they wouldn't give it to me because I didn't have an account with them. Guess what? After that I would never open one with them. That type of management decision is probably reflective in other areas, hence the need for FDIC supervision.

Adam Smith  

Posted: November 17th, 2010 9:57 AM

65 million in bad loans is a lot. I agree that if they made bad loans then they should fail.

Joe  

Posted: November 16th, 2010 10:28 AM

No bank has gone through this recession unaffected. Businesses all over the country are hurting, and Oak Park and River Forest haven%u2019t been immune to those problems, so of course Community Bank would feel the repercussions of this recession. Greed has nothing to do with it, it%u2019s simply the state of the economy. As for being a community bank, they%u2019ve given back tenfold and no bank has closer ties to the community than Community Bank.

Justin Timber  

Posted: November 15th, 2010 9:44 PM

Just because Community is in a name doesn't make the bank a Community Bank. I agree with Steve. Ron, I am sorry to say, but you obviously have spent too much time watching television if you want to blame Community Bank's downfall on Fannie and Freddie. You are absolving all the banks of their stupidity and greed in making bad loans when you blame Fannie, Freddie, and the Feds. Also, Marty Knoll, is no George Bailey. CBOPRF should fail, like any other business, if they made bad decisions.

Chamber Member from Oak Park  

Posted: November 15th, 2010 11:39 AM

Is Community Bank of Oak Park River Forest, the only true "community" bank, a member of the local chamber of commerce? If they are all about community can't think of an organization that promotes the community more...

Ron Murphy from Oak Park  

Posted: November 14th, 2010 12:10 PM

The hypocrisy here is all on the FEDERAL regulators side. They pushed these banks to go deep on Fannie and Freddie Mae knowing they were in trouble.CBOPRF serves our diverse,eclectic community and stands behind us both financially and with community involvement.I liken this to old man Potter calling in the regulators on the Bailey building and loan in "Its a wonderful life", and like the movie I am certain that the community will step up to help. Steve you better stay out of Martini's place.

Steve  

Posted: November 13th, 2010 9:45 PM

It is hypocritical that people support a community bank that made terrible loans, and then portray the larger banks that made terrible loans as villains. There is no difference between the two; one just has deeper pockets. The bank should fail if they cannot get their finances in order.

Janet from Oak Park  

Posted: November 12th, 2010 6:09 PM

The community will rally around this bank as we know how supportive it has been to all of us. Let us know how we can help!

Wendy from Oak Park  

Posted: November 12th, 2010 5:52 PM

Best bank, great employees and a true community member!

Bill from Oak Park   

Posted: November 12th, 2010 4:34 PM

This is a great bank with experienced people at the helm. They will make it through this rough patch and continue to be the wonderful asset our community depends on.

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