On the morning that Oak Park-based Park National Bank received $50 million in federal tax credits in order to build low-income housing on the West Side, the Federal Deposit Insurance Corporation ended up taking over the bank’s parent company by the end of the business day.
The irony was played out at a West Side press conference last Friday morning, attended by U.S. Treasury Secretary Timothy Geithner, U.S. Rep. Danny Davis (7th), and U.S. Senator Roland Burris. Also present were officials from the Village of Oak Park and Mike Kelly, chairman of Park National, whose parent company, First Bank of Oak Park Corporation (FBOP Corp), is now owned by U.S. Bancorp.
The confab was part congratulatory and part bottom-of-the-ninth swing to save the bank from being taken over by the feds. That move occurred nonetheless at the close of the business day last Friday.
Daniel Watts, a vice president of the bank, said Park National had raised the new capital reportedly required by the FDIC but needed one more week in order to complete the documentation necessary to complete the deal. The FDIC, though, did not allow for the several days needed to close on those re-capitalization deals.
According to Watts, the issues that Park National is facing are the result of one problem: its ownership of $885 million in now worthless preferred stock in Freddie Mac and Fannie Mae, government-sponsored mortgage programs that were taken over last year by the Federal Housing Finance Agency.
After the press conference, Watts said about the federal tax credits, “We’re very honored to be a grantee. I think it does underscore the work we’ve done in the past, but also the work that has to be done going forward.”
A bank built on outreach
The news of Park National’s demise rocked both the Austin and Oak Park communities last week and the fallout was still being felt this week. Moreover, an outpouring of support for the bank’s owner, Mike Kelly, has been overwhelming. The longtime River Forest resident is known for his philanthropy, and for his refusal to seek any publicly for his good deeds. That reach extended beyond Oak Park, surrounding suburbs and Austin, but to the greater West Side.
Saturday morning, Park National and the rest of Kelly’s banks – 153 branches total across four states – all opened as units of U.S. Bank. Troubles for FBOP Corp. began last fall when the U.S. government seized Fannie Mae and Freddie Mac, two federally sponsored mortgage companies. That seizure forced hundreds of banks to write down the value of their preferred shares in these companies to just about nothing. FBOP’s loss was $855 million. Hope for a federal bailout was lost when, despite initial approval for funds from TARP – the U.S. Treasury’s Troubled Asset Relief Program – FBOP was put off because guidelines weren’t in place for small, privately-held banks. Changes were made to TARP in February, but they instead rendered FBOP ineligible.
Since then, there’s been a nonstop search for private investors and continuous industry speculation on Kelly’s willingness to step back from control of the company he’s been building for 28 years. In 1981, he and a group of investors picked up the ailing Oak Park National Bank on Madison Street at Austin Boulevard. He soon bought out his partners and embarked on what would become his signature approach of solely steering the company. At fire-sale prices, he collected small to midsize banks and turned them around.
Meanwhile, Kelly spearheaded many causes over the years, quietly and behind the scenes. This is a story, however, that hasn’t been told because Kelly didn’t want it told. But in the aftermath of his bank’s takeover, a lot of people are eager to help tell it.
“He’s my hero,” said Mary Anne Brown, executive director of Hephzibah Children’s Association in Oak Park. “I’m sick about this. He’s not replaceable.”
Agnes Stempniak, former executive director of the Oak Park Regional Housing Center, said Kelly and Park National were “always significant supporters of the Housing Center.” In addition to a “very generous” donation each year, a bank staff member would serve on their board. In fact, Park National executives served on the boards of non-profits across Oak Park and the West Side as a matter of routine.
She walked away with donation of $2,000.
Similar tales of generosity are told about Kelly, who often discouraged friends and colleagues from tooting his horn. In one of his last duties as owner of FBOP, Kelly sent a letter to staff members last Friday afternoon, he said:
“I regret that we were not able to get a deal done that would save the banks and avoid the disruption that the bank closures will cause in your lives. I know that these closures will have a lasting impact on you, your family and our communities. That said: I am so proud of organizations that you helped grow, and I will always be grateful for the work that you have done.”