Local banks reposition amid financial
turmoil
Park National, First Suburban tackle varied challenges
By BOB SKOLNIK
L. NICOLE TROTTIE, Publisher
October 16, 2008
Local banks have not escaped unscathed from the worldwide financial and credit crisis, but local
bankers say that their banks remain strong and well capitalized.
Michael Kelly’s Oak Park-based FBOP, parent company of Park National Bank, has had to write
off hundreds of millions of dollars worth of investments in the preferred stock of Fannie Mae and
Freddie Mac after the federal takeover of the mortgage giants last month. Crain’s Chicago
Business estimated that FBOP owned $650 to $800 million worth of the preferred stock of
Fannie and Freddie.
FBOP chief financial officer Michael Dunning confirmed that the bank wrote down its holding of
Fannie and Freddie preferred stock but would not disclose the exact amount of the writedown.
“Park National Bank did have some exposure to Fannie and Freddie like many banks had,”
Dunning said. “We recognized a loss on these securities during the third quarter. However the
bank continues to be well capitalized and earnings are strong.”
Although some banks have become reluctant to make loans during the financial turmoil, Park
National, according to Dunning, continues to make loans. “We’re actively originating credits,”
Dunning said.
In a letter to bank customers, the president of First Suburban National Bank, Joe Hogan assures
customers that First Suburban has no stake in Fannie Mae or Freddie Mac. “First Suburban
has no holdings of either of these companies’ stock,” Hogan said.
First Suburban has had to write off a large portion of the three loan relationships, which had a
significant effect on their profitability and capital over the past 8 months. However, the bank is
taking action to collect on loans and work with borrowers. “In these situations, I feel that the
bank is adequately secured by the collateral related to each loan,” said Hogan who says the
bank still has reserve for loan losses which totals $1,852,033 as of August 30. “While we are
still considered well-capitalized, we have implemented a plan to raise additional capital for our
immediate needs and long term growth,” Hogan said.
There is one bright side for area banks in the current financial turmoil. As many frightened
investors sell their stocks and mutual funds and look for a safe alternative for their money, they
are often turning to federally insured bank accounts. Bank deposits are now federally insured
for as much as $250,000, up from $100,000, as a result of the federal legislation passed this
month.
