BANKS FOR SALE?: REPORT: EXCHANGE BANKS ON BLOCK

A local First Exchange Bank officer has declined comment concerning a copyrighted article in the latest issue of the St. Louis Business Journal that reports that the Federal Deposit Insurance Corp. is trying to sell First Exchange Corp.'s banks.

"Our chief executive officer is not available this weekend," said David Prough, president of Exchange Bank of Cape Girardeau. "He's the official spokesman for the corporation."

Prough was speaking of Joshua Cox, who was named CEO of the Exchange Bank Corp. in January.

Business writer Rob Donaldson reported the "banks for sale" story in a copyrighted article that appears in the April 13-19 edition of the business journal.

In his report, Donaldson said the FDIC, the agency that insures bank deposits, is trying to sell First Exchange's banks. The story credits an anonymous source.

The report added that the FDIC held a meeting April 1 in St. Louis with an estimated 35 potential bidders for the bank's assets. The FDIC has refused comment concerning the bank.

The first hint of a bank sale came in the March 29 issue of the St. Louis Post-Dispatch in an article that discussed the bank's problems. "Cox's biggest job now is to find someone to inject capital into First Exchange Corp.," noted the article. "That, he (Cox) said, could mean a change in ownership."

The Cape Girardeau-based bank holding company is a medium-sized bank company that owns five banks, three of them in Southeast Missouri Jackson Exchange Bank and Trust Co., First Exchange Bank of Cape Girardeau, and the First Exchange Bank of Madison County in Fredericktown. First Exchange also owns two St. Louis banks First Exchange Bank of St. Louis at St. Louis, and First Exchange Bank of North St. Louis County at Florissant.

Reports filed with the FDIC on the five banks show a combined loss of $33.8 million for 1991.

The business journal article said three of the five First Exchange banks maintained positive net worths; those three were in Cape Girardeau, Jackson and Fredricktown.

The corporation has experienced a number of problem loans, especially loans to bank "insiders" people who have ties to the bank. The insider loans are legal, but they must be disclosed and made at the same rate and credit terms as those given to other borrowers.

At the end of 1990, the bank company's financial statement revealed that insider loans totaled $43.8 million, which was reported by First Exchange to be 9.2 percent of its $476 million in assets. Bank officials say they have made concentrated efforts to reduce the insider loan debts.

Four of the five banks have reported few insider loans, but First Exchange Bank of North St. Louis County had $14 million in such loans still on its book, an unusually high total, according to the FDIC.

The FDIC issued a cease and desist order against Exchange Bank Corp. in September. Federal regulators ordered each of the bank company's five subsidiary banks to stop making new loans to insiders. The Fed's orders in September did not mention specific problem loans or whether any of the loans made to insiders were "troubled."

The FDIC action was one of several taken by the Federal Reserve Board and the Missouri Division of Finance in the cease and desist order against the company and its subsidiaries.

In addition to halting insider loans, First Exchange was ordered to halt dividends, clean up its bad loans and boost its capital.