A group of investors has applied to the Federal Reserve System to form a holding company to purchase the stock of First National Bank of Brookfield, 9136 Washington Ave., from an unnamed creditor, who plans to foreclose on a $10 million debt owed by the bank.
In December the group, known as Brookfield Financial Holdings Inc., applied to the Federal Reserve System to become a bank holding company in order to acquire 100 percent of the voting stock of 1st Brookfield Inc., which owns First National Bank of Brookfield, from the creditor.
The public portion of the application was obtained by the Landmark through a Freedom of Information request to the Federal Reserve. It does not reveal the names of the investors seeking to acquire the bank, except for the president of Brookfield Financial Holdings, who is listed as Jeremy Levy.
In addition, the application indicates that some of the investors in Brookfield Financial Holdings Inc. “may also be investors holding shares of 1st Brookfield.”
According to someone familiar with the proposed transaction, the bank’s future does not rest on the proposed transaction taking place.
The bank, said the source, is “adequately capitalized,” and would continue to operate normally, even if the creditor moves ahead with the foreclosure action. The source called it “a non-event, except for the shareholders.”
According to the application, First National Bank of Brookfield is $17.5 million in debt. Approximately $10 million of that debt is owed to an unnamed “senior creditor.” That debt is secured by 100 percent of the stock of the bank.
Another $7.4 million in debt is owed to junior creditors who, according to the application, have no “realistic chance of economic recovery” of that debt.
The application states the senior creditor has accepted an offer from Brookfield Financial Holdings to purchase the bank’s stock for $2 million in cash. In addition, the application states that Brookfield Financial Holdings has commitments from investors for another $6 million which will be used to recapitalize the bank and prevent its failure.
The application, which is still being reviewed by the Federal Reserve, does not indicate a time frame for when the senior creditor might foreclose on the stock or when the transaction might take place.
At the time of acquisition, according to the application, Brookfield Financial Holdings would make “some changes in the directors of the bank,” but that many senior officers of the bank would remain.
The current directors of the First National Bank of Brookfield, according to the most recent annual report on file with the Federal Reserve in Chicago, include the Chairman Jan Schultz and Margaret Schultz, both of LaGrange Park; John DiGiovanni, the bank’s retired president, also of LaGrange Park; John S. Gable, of Chicago, Michael W. Colbert, of Scottsdale, Arizona; and Joseph Mondschean, of Oak Brook.
In addition, the holding company plans to hire “certain management officials” for a three-year period and that a chief credit officer would be added to the management of the bank.
Following the acquisition, the bank would operate normally and “continue to offer its full range of products and services.”
First National Bank of Brookfield has faced scrutiny since 2008, when the real estate market crashed, leaving the bank holding more than $25 million in loans that were not being paid back.
In September of that year, the Office of the Comptroller of the Currency, an arm of the U.S Treasury Department, took action by entering into a “formal agreement” with First National Bank of Brookfield to remedy “unsafe and unsound banking practices.”
On Dec. 9, 2010, the Comptroller of the Currency issued a consent order, requiring the bank to provide it with, among other things, a three-year capital plan and to maintain minimum ratios of capital to debt.
According to Brookfield Financial Holding’s application to the Federal Reserve System, the bank has raised capital in recent years and the bank’s condition has improved during that time.
However, without an injection of more capital the bank “will be unable at any time in the near future to meet the capital ratios required in the consent order” and “the current debt position of [the bank] has served as a significant impediment to the bank’s ability to raise additional capital.”
Jan Schultz, First National Bank of Brookfield’s chairman, did not respond to phone and email messages from the Landmark.