Southern Illinois bank fails; reopens as Banterra branch

Northwestern Financial Review, Jan 15, 2001 by Olmsted, Monte

Found to be undercapitalized with less than 2 percent tangible equity capital, National State Bank in Metropolis, Ill., was closed on Dec. 14 by the Office of the Comptroller of the Currency. The failed bank in extreme southern Illinois marks the seventh FDICinsured institution to be closed in 2000.

The downfall of the $92 million National State Bank was attributed to the bank's credit card processing operation for merchants, which suffered high losses, according to an OCC release. The bank held deposits of $71 million.

Marion, Ill.-based Banterra Bank purchased $23.7 million of the failed bank's assets and assumed its $67 million in insured deposits. The Metropolis bank was reopened as a branch of Banterra Bank, a $669 million institution led by chairman, president and CEO Everett Knight.

Banterra Bank paid the FDIC $2 million to purchase a portion of the failed bank's assets and deposits. It is estimated at the time of closing that National State Bank had 9,680 insured deposit accounts. The FDIC is retaining $68 million in assets for later disposition.

The FDIC is in the process of valuing the assets of the failed bank and is not yet able to estimate the loss to the Bank Insurance Fund.

Scott Clarke, assistant commissioner of Illinois Office of Banks and Real Estate in Springfield, said his office along with the OCC approved Banterra Bank's acquisition of the failed bank's deposits.

"The Marion bank opened the branch on the next business day, so there was no real loss of bank time," Clarke said.

David Husker, vice president of Banterra Corp. in Eldorado, Ill., said the bank plans to keep the more than 30 employees at the former National State Bank, but some resignations occurred. A branch manager has yet to be named. He added that the purchase of the Metropolis should be a good fit.

"It falls right into our market territory," Husker said.

Located near Paducah, Ky., Metropolis is a town of about 6,700 and has two independent banks, the $136 million Community National Bank, and The City National Bank of Metropolis, which has $126 million in assets.

National State Bank of Metropolis is the seventh FDIC-insured financial institution to fail this year. The others and their asset sizes are:

* Jan. 14: Hartford-Carlisle Savings Bank in Carlisle, Iowa; $114 million

* March 10: Mutual Federal Savings Bank of Atlanta, Ga.; $34 million

* June 2: Monument National Bank in Ridgecrest, Calif; $10 million

* July 14: Town & Country Bank of Almelund in Almelund, Minn.; $30 million

* Sept. 29: The Bank of Falkner in Falkner, Miss.; $89 million

* Oct. 13: Bank of Honolulu in Honolulu, Hawaii; $67 million.