The battle of press releases between First American Bank and Community Bank of Oak Park River Forest continued this week with a response from First American, which is attempting a hostile takeover of the local bank.
First American, one of the top stockholders in Community Bank, has accused the bank’s leadership of self-dealing through a stock sale of discounted shares to Community Bank employees and their friends, but that’s not what spurred them to begin considering taking over the bank, they said.
Community Bank has denied the allegations and suggested that stockholders not agree to the buyout, which would enable First American to assume majority ownership of the bank.
First American Bank Chairman and CEO Thomas Wells said in an email response to Community Bank’s public comment on the takeover, “We first became concerned about OPRF’s ability in November 2010 and later in April, 2011 when their subsidiary bank entered into two separate consent orders with their regulators alleging unsafe and unsound banking practices.”
“The first order required them to restore, among other things, ‘management effectiveness’,” Wells said. “When we learned from the annual 2010 audit that OPRF had defaulted on the 10 percent dividends on their $5 million preferred stock issue and on the interest on $1.5 million of 8.5 percent senior debt, our concern heightened.”
Those concerns grew when the bank posted losses of $4.6 million in 2010 and $7.3 million in 2011, according to Wells. Community Bank posted a profit of $1.6 million in 2012 and losses of $2.9 million the following year, Wells said.
Preferred stock and capital notes associated with Community Bank were in default from 2010 to 2014, a problem that could only be resolved through the sale of new stock in the bank. Those stocks were “offered only to insiders and ‘friends’ at $70/share, 55.7 percent of book value,” Wells said.
Community Bank said in an Oct. 17 press release that First American Bank’s offer to pay stockholders $134.32 per share in the buyout is “subject to certain downward adjustments” and “substantially understates the company’s current fair market value.”
The offer also “does not include a control premium that would normally be paid for acquisition of control of a company, and is not in the best interests of the stockholders,” Community Bank told stockholders.
Community Bank also denied the accusations of self-dealing in its Oct. 17 news release, noting, “The granting of stock options is a standard practice at many community banks and are an important way to attract, retain and motivate high-quality employees. FABC also fails to note the company has sought and received stockholder approval for each stock option plan.”
Community Bank stated in its press release that First American Bank provided data processing services for the bank until 2011, paying them about $5.5 million between that date and 1996.
“Immediately after Community Bank terminated FABC’s data processing relationship, FABC began to demand the company repurchase its shares. In addition, beginning with the company’s 2012 annual meeting of stockholders and continuing at each meeting thereafter, FABC has voted against every director candidate nominated by the board, and it has voted against every other proposal made by management at such stockholders’ meetings,” Community Bank said in the news release.
They believe First American’s goal is to “either acquire the Company at an artificially low price or, in the event it is unable to acquire the Company at such a price, force the Company to repurchase its minority interest in the Company at a premium.”
Wells said that while First American Bank was disappointed with the loss of the data processing contract, it had nothing to do with their questioning Community Bank “on their financial performance at subsequent shareholder meetings.”
“Nor did we ever demand repurchase of our shares,” Wells said.
CONTACT: tim@oakpark.com