“In 2009, bank lending declined at the fastest rate since 1942,” Diane Swonk, chief economist of Chicago-based Mesirow Financial Holdings Inc., said in a recent interview. “All small banks are not lending now and Illinois has a high concentration of community banks because it’s easy to start up a bank here.”

Not Forest Park National Bank and Trust Co.

While its total loans declined a bit last year, this community bank in the western suburbs actually stepped up its real estate lending, especially for mortgages and home equity lines of credit. Real estate loans, comprising nearly 90 percent of the bank’s total loan portfolio, increased to $106.9 million from $103.5 million a year earlier. The bank intends to expand its lending further this year.

This doesn’t mean the bank was immune from the nationwide collapse of the real estate market. It had to more than double its provision for loan losses, to $1.6 million from $573,000, and its proportion of nonaccrual and past-due loans jumped to an above-average 6 percent.

“That is just the way business turned out last year,” Don Offermann, the bank’s senior vice president, said of the rise in real estate lending. “People in the community continued to come to us to serve their needs.”

Despite higher losses, on the whole the bank’s lending was prudent and profitable. Net interest income increased to $7.1 million in 2009 from $6.6 million in the prior year, according to the Federal Financial Institutions Examination Council’s Uniform Bank Performance Report.

The bank’s average assets climbed to $176.9 million from $170.6 million. However, its net income dropped, to $808,000 from $1.2 million.

Commercial loans slid to $12.9 million from $16.3 million, but the bank continued to serve existing customers.

Matt and Connie Brown have been borrowers from the bank since March 2004, roughly a year before they opened an ice cream shop, Brown Cow Ice Cream Parlor, near the bank.

“I talked to business people in town and many spoke highly of the bank,” said Matt Brown. “It also made physical sense since it is right across the street.”

The Browns converted their line of credit, used when they moved to a location closer to the bank in 2008, to fixed-rate term loans last March.

Radana Shanahan, who owns a Cajun restaurant called Shanahan’s on Madison Street, has also been a loyal customer of Forest Park National since 2005. She elaborated that her five- and her husband’s twenty-year relationships have been “very personal and friendly.”

Forest Park National withstood the banking crisis better than the big banking companies, without funds from the Treasury Department’s $700 billion Troubled Asset Relief Program. “We have pondered the idea but we never acted on applying for TARP money,” said Offermann. “We didn’t need to.”

Forest Park National says it plans to maintain its community-centric focus while expanding its business. Board Chairman and CEO Jerry Vainisi said the bank “definitely plans to expand,” depending on the economic recovery on the whole. If the name sounds familiar, Vainisi served as vice president and general manager of the Chicago Bears for four years from 1982.

The bank’s long-term goal is to expand beyond what it dubs its local market, the towns of Forest Park, River Forest and Oak Park, among others.

President and Chief Operating Officer Daniel Watts said the bank expects the loan portfolio to grow by 10 percent this year. “On the lending side, we expect more loan demand as the recovery picks up. We will be in a better position than our competitors, both private and public alike.”

The optimistic outlook follows structural changes the bank made in 2009, which its executives consider a bad year. “The organization had to spend a lot of time looking inward; trying to solve internal issues helped resolve a lot of issues,” said Watts.

The COO has additional stake in the community, as he owns one of the bars on Madison Street called O’Sullivan’s Public House. Conveniently for him, the bar is located just a block away from the Forest Park National’s main branch.

The community bank was established in 1943 and now employs 46 in its two locations. The main bank is on West Madison Street and the Roosevelt Branch is on West Roosevelt Road on the south side of the Eisenhower Expressway.

The bank, owned by the Vainisi family since 1999, provides a homey ambience to its clients, most of who reside or work in Forest Park.

“We are in an established market. And most Chicago banks focused on acquisition and development loans,” said Vainisi. “We weren’t active in that market, so the [negative] effect was not as great.”

The bank’s self-proclaimed strengths can be summed up as conservative yet flexible lending. “Our lending isn’t formula-driven,” said Watts, the COO. He added that the bank places emphasis on the character of the borrower and says it knows its clientele better than publicly-traded companies do.

Vainisi commented, “we have been a local community bank for 66 years and earned a reputation as a conservative and stable bank.”

The bank strives to maintain its loyal client base, in part by retaining its employees. A majority of its staff has worked in there for 20 to 30 years. “There is comfort in knowing that when you call, there is someone on the other line who knows your name,” said Watts.

Another example of the bank’s beyond-the-usual friendliness can be seen in how it engages its younger customers. Kids under the age of 14 can open the Money Beez account and receive a gift with their first encounter with the bank and a coupon to use at the Brown Cow ice cream shoppe.

The bank executives are confident that their service is better than that of bigger banks, in part because they take pains to explain to borrowers exactly what their obligations and risks are. “We send out clear warnings to our clients; because we care that they understand,” said Watts. “We are a community bank.”

Customers appreciate that. “[If] they tell me something is going to happen, I have no doubt that is what’s going to happen,” said Matt Brown.