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NewsMarch 11, 1993

Despite last year's failure of the First Exchange Bank, banks in the Cape Girardeau area as a group are healthy when compared to others in the region and nation, says Dennis Blase, a supervisory officer with the Federal Reserve Bank of St. Louis. "Consistently, Cape compares well," he said...

Despite last year's failure of the First Exchange Bank, banks in the Cape Girardeau area as a group are healthy when compared to others in the region and nation, says Dennis Blase, a supervisory officer with the Federal Reserve Bank of St. Louis.

"Consistently, Cape compares well," he said.

Blase was in Cape Girardeau Wednesday to discuss local banking conditions at an economic forum hosted by the bank. The forum at the Drury Lodge was one of 19 to be held throughout the Federal Reserve multi-state district during 1993.

Also on board was James B. Bullard, an economist with the Federal Reserve Bank who talked about local economic conditions.

The Federal Reserve Bank defines the Cape Girardeau area as Cape Girardeau County and the contiguous counties. It includes 21 banks. The Eighth Federal Reserve District served by the bank includes parts of Missouri, Kentucky, Tennessee, Indiana, Illinois and Mississippi and all of Arkansas.

The Federal Reserve Bank rates banks according to their earnings, their asset quality and their capital protection. "In each one of the three groups you are doing well," Blase said.

"...In most cases you are rated better than the Eighth District or (banks) nationally."

Speaking of the district, he says, "We've done much better than the nation as a whole."

Of the 1,200 banks in the district, 157 are rated less than satisfactory. "That is pretty good," Blase said.

Bank failures peaked during the 1980s and have dwindled over the past few years, Blase said. In the past 11 years, 38 failures have occurred in the this district compared to 1,457 nationwide.

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As a percentage, "We've done much better than the nation as a whole," Blase said.

The Cape Girardeau area ratings don't take into account the failure of the First Exchange bank last May. The figures cover banks in operation on Sept. 30, when First Exchange no longer existed.

"If we had been (rating the banks) at the end of 1991, it definitely would have been very down," he said.

Blase, who was interviewed prior to the forum, expected the First Exchange bank to be a topic of conversation.

The First Exchange Corp. of Cape Girardeau and its subsidiary banks failed on May 7, 1992. At the time, its $356.4 million in assets constituted the largest banking failure in state history.

Four of the bank's officers were indicted by a federal grand jury on Feb. 26. Two of the four, Don and Patricia Chilton, committed suicide the same day.

Blase said little more can be disclosed about the failure at this time because of pending legal action. But he said banks usually fail for two reasons: "It's almost always asset quality, and something to do with insider abuse."

He said Congress currently is considering legislation that would provide more controls on the latter problem.

In the case of First Exchange Bank, "There were a lot of situations in which the information being given to the examiner was not accurate," Blase said.

"There were a lot of things that were hidden."

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