First reported 8/18/10 4:52 p.m.

First National Bank of Brookfield will sell its Naperville branch in order to consolidate its business at the flagship institution and “focus on our core customers in Brookfield,” bank CEO Jan Schultz said last week.

Lake Forest-based Wintrust Financial Corporation announced on Aug. 17 that its subsidiary, Wheaton Bank and Trust, was acquiring the First National Bank of Naperville, including $25 million in deposits, about $12 million in performing loans, the bank building and property and other assets.

Terms of the deal, which is expected to close in October or November, weren’t disclosed, but Schultz confirmed that Wintrust paid a premium for the deposits.

“I’ll say it’s definitely what we wanted to see and it reflects the value of the franchise,” Schultz said.

The deal comes on the heels of Wheaton Bank and Trust’s acquisition of the failed Wheatland Bank, which was also located in Naperville, in April. Wintrust’s president and CEO, Edward Wehmer, said the plan is to close the former Wheatland Bank facility in Naperville and move the operation to the First National Bank of Naperville location.

“We needed a better facility,” Wehmer said. “I know Jan and the Naperville branch is outside of their market. It’s perfect for us to have a base of operations.”

Schultz called the deal good for both banks.

“It’s a win-win,” Schultz said. “It makes us smaller, makes our capital ratio better and leaves our customers in Naperville with a quality organization.”

First National Bank of Brookfield opened a Naperville branch in 2003, and moved it to a new building in that town in 2004. At the time, the real estate market in the far west suburbs was booming and.

“The reason we opened the Naperville branch was we did so well in Brookfield we wanted to diversify,” Schultz said.

Starting in 2007, however, when the real estate market began to collapse, the bank encountered some trouble. A good deal of that trouble stemmed from a $15 million loan related to a 35-acre Naperville real estate development that went into default.

First National Bank of Naperville foreclosed on the property, taking ownership in January 2009. By that time, however, First National Bank of Brookfield had received unwelcome attention regarding its financial position in early 2008 and a federal sanction imposed in September of that year, when the Office of the comptroller of the Currency, which regulates national banks, ordered it to remedy “unsafe and unsound banking practices.”

Schultz said that First National Bank of Brookfield raised $5 million in capital in 2009 and began contemplating selling its Naperville branch. Hanging on to the 15,000-square-foot facility with $25 million in deposits just didn’t make sense, Schultz said.

“Our vision was to right-size the bank, improve our capital and focus on our core customers in Brookfield,” he said. “With the economy the way it is, we’re not looking to grow right now.”

Looking at the bank’s financial statements, obtained from the Federal Deposit Insurance Corporation (FDIC) Web site, 2010 has continued to be tough on First National Bank of Brookfield.

According to the FDIC, the bank lost $3 million in the first six months of the year. In 2009, the bank lost $6.4 million.

First National Bank of Brookfield still has $17.6 million in non-accruing loans. That, however, is an improvement over the institution’s Dec. 31, 2009 report, which listed $23.4 million of loans in non-accrual status. A non-accruing loan is one where the bank is receiving no payments for interest or principal.

“I’m not making excuses for the loans we made, but we’ve taken our losses like everyone else,” Schultz said.

Later this year or early next year, however, the bank is hoping to clear its books of a good portion of the 35-acre Naperville development site, a move that will also come with an injection of capital.

Schultz said that 25 acres of the land, on which a retirement community was supposed to have been built, is under contract. The contract, signed in June and slated for closing in late 2010 or early 2011, is for $9 million, Schultz said. The sale represents about one-third of the real estate owned by the bank, he added.

“Our losses, I think, are behind us,” Schultz said.