Surprise! This Bank Refuses Fed Bailout

The way major financial institutions are feasting on taxpayer-backed bailouts, you'd think every bank in this country has on the feed bag.

Not true.

Just north of Chicago, dwelling in the People's Republic of Evanston, is First Bank & Trust -- a 13-year-old community lender that doesn't want any part of the U.S. government's $700 billion bank bailout or, for that matter, any subsequent rescue plans.
You see, First Bank & Trust won't do business that way.
Says Robert R. Yohanan, CEO and one of the bank's founders: "We don't need the money. More important, we don't want the government as a partner."

That refreshing approach makes First Bank & Trust a rarity in these dismal economic days.
First, it's a healthy institution that hasn't forsaken one of the main skills of successful banking: managing risk. For example a few years ago, First Bank & Trust shrewdly determined the home mortgage market was spinning out of control and greatly limited making real estate investments thus avoiding big trouble.Secondly, this bank isn't looking to game the system by profiting from the government-backed bailout.

Believe me, one of the yet untold stories of this massive taxpayer-funded rescue is how many healthy lenders are grabbing for the government gold because it's a source of cheap and ready capital. Recently, one bank industry analyst told me that viable banks are under pressure from theirinstitutional shareholders to take advantage of the bailout funding even if the lender doesn't need the cash cushion.

First Bank & Trust's management has a different approach. It would rather fund bank operations through traditional means, like customer deposits, while also making a profit on sound loans. Moreover, it cringes at the prospect of selling even a slice of itself to the government, which usually gets preferred stock from any lender participating in the bailout.

"Who knows what is to come? They seem to be writing laws as they go along." says CEO Yohanan, whom I spoke to while researching a story for Chicago magazine.

First Bank & Trust hasn't made a big deal out of the decision to go it alone. For the most part, the bank's marketing initiatives travel more along the lines of neighborhood pumpkin carving contests. And to the best of my knowledge, the only mention of its bailout stance was made in a letter to the editor printed in a free local newspaper, which is where I learned of the "No Bailout Here" decision.

Yes, some critics will claim that First Bank & Trust shouldn't be held up as some shining example of restraint and fair play. They'll note this is a very small, conservative bank that caters to a niche of area business owners or operators and is surrounded by a fairly affluent depositor base. In addition, it doesn't provide the sweep of services and loans like JP Morgan Chase, Bank of America or other mega-banks and doesn't bear their heavy community reinvestment burdens.

All that may be true. Still, I feel better knowing there's at least one bank out there not looking to score a free lunch.

Comments

[JohnnyTLG]

I wonder what their Capital Ratio is? With FASB 157, " Mark to Market", I wonder how long it will be until their current "Safe & Attractive" and sensible approach to lending, will come back and bite them in the bum. They'll be looking for some sort of help when that happens, unless the SEC changes the terms of FASB 157.

[Peter007]

I know a number of banks that don't want the money. My understanding is that they have to take it weather they want it or not.
There has always been a stigma attached to borrowing money from the Fed. By going to the Fed. the bank is announcing that they can get funding from no other place.
The Fed is REQUIRING most if not all banks to take money in order to remove the stigma. Also, They want the money lent out..

[WIpatriot]

My credit union is doing just fine, too.

[bolconsul]

EinChicago why such a well wisher? I doubt you had any money at this Bank. If you know Evanston and its Business community you would understand their approach. Robert Yohanan can hardly be written off as just and "exec". He is there constantly managing risk and keeping depositors happy.

[EinChicago]

I know Evanston very well; both the bank and the community (my wife grew up on Dexter and her family still primarily all live there or in Morton Grove.)

Gladly accepting a competitive disadvantage and bragging about it is a sign of shoddy leadership at best. Which is why we switched to harris after seeing that article for the bulk of our money and kept just enough at evantson to maintain the acocunts in "open" status while we see how this recklessness plays out.

[Spying]

There is hope in the free world! I am going to share this article with all my business associates, family and friends! Way to Go First Bank & Trust!!! The handouts MUST Stop!

[The Hedonistic Pleasureseeker]

The Lakota Nation just opened it's own bank! It's not connected with the Federal Reserve, and it's backed 100% by silver. Think about it . . .

[research]

Yet this bank SHOULD get money,

Not the Loser banks.

[EinChicago]

I heard about this and pulled my money out of First Bank. Seems like execs defending turf than good risk management.

[AContrario]

Well investment banking claimed to be expert in risk management, apparently they ain't good enough.

[Spying]

Did you open an account at Citibank, Wachovia, Washington Mutual, National City . . . shall I continue? Good risk management means strong loan quality and I looked it up . . First Bank & Trust has less than 1% problem loans. Stop defending these brutes of the industry and losers on Wall Street. Yesterday even Vikram Pandit stated that he felt bad over the fact that his bank was receiving government funding. What he should feel bad about is that through the bailout tax payers now own a portion of these banks, and the government will be deep inside these institutions. Bring Back the Ghost of Andrew Jackson to save us all!!!

[dadw5boys]

These brutes of the industry support the value of the U.S. Dolar without them you and all you got belongs to the Federal Reserve unless your debt free.