FDIC seizes 9 banks operated by FBOP- U.S. Bancorp purchases assets of Park National, others, which will open as usual Saturday

FDIC seizes 9 banks operated by FBOP- U.S. Bancorp purchases assets of Park National, others, which will open as usual Saturday
By Becky Yerak
Copyright © 2009, Chicago Tribune
October 31, 2009
http://www.chicagotribune.com/business/chi-sat-fbop-seized-oct31,0,4621065.story


River Forest resident Michael Kelly built a banking empire over three decades, making himself wealthy. On Friday night, it all came tumbling down in spectacular fashion, as the government seized the nine banks run by Kelly's FBOP Corp.

U.S. Bancorp of Minneapolis, through a loss-sharing deal with the Federal Deposit Insurance Corp,. will assume all the deposits and most of the assets of the nine failed banks, including Park National Bank of Chicago.

The timing was awkward. The government shut down $4.8 billion-asset Park National on the same day that its community development arm, Park National Bank Initiatives, received $50 million from Treasury Secretary Timothy Geithner in Chicago on Friday. That money is intended to stimulate investment in low-income communities for such projects as charter schools, health clinics and stores.

The 31 branches of Park National will reopen Saturday under the ownership of U.S. Bancorp. The failure of the FBOP banks is expected to cost the FDIC about $2.5 billion.

Oak Park-based FBOP is privately held by Kelly, who built the company by making bank deals nationwide. About $12 billion of FBOP's assets are in California banks. It also owns institutions in Arizona and Texas.

FBOP has total banking assets of $19.4 billion, which made it the third-biggest bank owner headquartered in Illinois, after HSBC North America Holdings Inc. and Northern Trust Corp.

It also is the biggest Illinois institution whose banks have required government intervention since Continental Illinois in 1984. Park National and Community Bank of Lemont are the 18th and 19th Illinois banks to be seized this year.

FBOP was built from scratch by Kelly, an aggressive but intensely private entrepreneur. He bought First Bank of Oak Park in 1981 and then made a career of swooping in on ailing banks in Chicago and the Sun Belt, buying them cheap and improving their results dramatically.

Until recently, Kelly was viewed as a brilliant operator. But he had an abrupt reversal of fortune last year when the government takeover of Fannie Mae and Freddie Mac exposed the holding company's large concentration of Fannie and Freddie preferred stock. The company unsuccessfully applied for about $500 million in federal TARP funds.

In Chicago, where FBOP also owns Community Bank of Lemont, it is a lesser player. It has 33 total offices and local market share of 1.24 percent, ranking 14th.

U.S. Bank, with $265 billion in assets, has 57 offices in the Chicago area and market share of 0.85 percent, ranking 19th. Combined, they will rank 11th in the Chicago area.

In an Oct. 21 earnings conference call, U.S. Bancorp told analysts that ideally it likes to be a top-three player in the 168 markets in which it does business. It has achieved that status in more than half of those markets.

The Park National shutdown occurred after several Illinois congressmen, including Reps. Bobby Rush and Danny Davis, and U.S. Sen. Roland Burris called the FDIC asking it to delay closing the bank for at least a week, said Marilyn Katz, a bank spokeswoman.

"At 10 this morning they were praising them and giving them $50 million, and at 10 this evening they'll be putting the padlock on the door," Rush said Friday. "There is something wrong with this picture: Wall Street wins and Main Street loses."

Davis, also a Democrat from Chicago, said Park National's fate was a "shame."

"It looks as though the FDIC is just not satisfied that the bank has the $600 million in new private equity that would take care of its capitalization needs," said Davis, who thought FBOP had lined up needed capital. "We've been engaged in it all day, and the last call I made was to the White House, but I don't know the extent to which they can get involved.

"It's like the hand that giveth, in a sense, also taketh away," he said.

Park National Bank Initiatives is redeveloping 200 acres in Pullman and has provided zero-interest loans for Christ the King Jesuit College Prep and Chicago Jesuit Academy. In West Garfield Park, it's a partner with Bethel New Life and Thrivent Financial to offer banking products to low-income consumers. It has also partnered with Neighborhood Housing Services of Chicago.

Tribune reporter Michael Oneal contributed to this report. byerak@tribune.com