FIRST EXCHANGE CONTINUING TO LOWER `INSIDER' LOANS, SAYS CEO

First Exchange Corp. is continuing to reduce loans to its own bank officers, directors and principal shareholders, said the president of First Exchange.

The action, mandated by the Federal Deposit Insurance Corporation in September, has resulted in a cooperative effort on the part of all First Exchange banks, said Lee Whitler, the president and chief executive officer of First Exchange Corp., headquartered in Cape Girardeau.

At the end of 1990, the bank company's financial statement revealed that so-called "insider" loans totaled $43.8 million, which was reported by First Exchange to be 9.2 percent of its $476 million in assets.

That total was down from the $58 million in insider loans reported by the bank company in 1989.

"We have continued to make concentrated efforts to reduce these loans in 1991," said Whitler. "We don't have 1991 totals at this time, but they will be available shortly after Jan. 31."

Whitler said the company's banks were required to request forms from directors concerning their loans each year. Insider loans are legal, but they must be disclosed and they must be made at the same rate and with the same credit terms as those given to other borrowers.

"These loan forms must be completed and returned within 30 days of Dec. 31," said Whitler. "When all the forms are in, we will know how much we have reduced the insider loans in 1991."

Whitler said the banks were also continuing to abide with other terms of a cease and desist order issued by the FDIC in September.

The federal regulators ordered each of the bank company's five subsidiary banks to stop making new loans to insiders. Bank officers and directors own about 43 percent of First Exchange's stock, which is not publicly traded, says the 1990 annual statement.

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, which include two banks in St. Louis First Exchange Bank of North St. Louis County and First Exchange Bank of St. Louis, which together have seven St. Louis branches.

Other facilities are in Cape Girardeau, Jackson, and Fredericktown.

In addition to halting insider loans, First Exchange was ordered to halt dividends, clean up its bad loans, and boost its capital. Banking regulators have ordered First Exchange banks to boost capital to 7 percent.

"We're cooperating with all of these requests," said Whitler, who replaced Donald Chilton of Webster Groves as corporation president when Chilton resigned in July 30 following a rise in troubled loans.

A recent article appearing in the St. Louis Business Journal reported that First Exchange Corp. lost $225,000 in the first six months of this year, and problem loans had more than doubled, from $3.3 million at the end of 1990, to $7.3 million as of June 1991. The article said the information was provided by Sheshunoff Information Services Inc. of Austin, Texas.

"We have been identifying our problem loans," said Whitler. "We feel that we have been doing a better job. The important thing here is that we are continuing to abide with the FDIC orders.

"What we are doing must meet with the approval of the FDIC," he said. "If we weren't doing our jobs, we would hear from them. The good news is that we haven't heard from them.

"Our goals are to provide quality banking services now and in the future," Whitler said.

In another management change within the company, Bob Frahn has replaced David Hoffman as president of the North St. Louis County bank. Bill Stanfield has resigned at Exchange Bank of Cape Girardeau, but remains with the company until a replacement is named.