Business World

Illinois state regulators Friday shut down a bank owned by a group of Alton-area businesspeople less than three months after it was warned to change its ways over "unsafe and unsound" practices.

Meridian Bank, which was based in Eldred and had a branch in Alton, will go into receivership with the Federal Deposit Insurance Corp. All deposits have been transferred to National Bank, of Hillsboro, Ill., and Meridian’s five branches will re-open as National Bank branches today or Tuesday.

"The depositors of Meridian should look at this simply as the merger of two banks," said FDIC spokesman David Barr. "For them it will be business as usual, just with a new bank."

The FDIC brokered the takeover by National, which assumed all $36.9 million in Meridian’s deposits and bought about $7.55 million of Meridian’s assets, including buildings. Another roughly $31.6 million in assets, which likely includes loans and securities, will be absorbed by the FDIC, which will continue to collect payments on the loans and eventually sell them off, Barr said.

In July, Meridian reached an agreement with Illinois regulators in which it promised to stop "engaging in hazardous lending and lax collection practices." It also agreed to take steps to improve its balance sheet and oversight and install new management. It’s unclear how many steps in the 24-page agreement were reached before deadlines that set for mid-September and mid-October.

Barr said the decision to shutter Meridian was made by Illinois regulators. The state Division of Financial and Professional Regulation issued no public statement and a spokeswoman did not return messages Friday night.

In 2004, Meridian — then known as First Bank of Eldred — was bought by several Alton-area businesspeople, among them developer Clay Winfield and physician Dr. Timothy Kaiser. Winfield and Kaiser sit on the board of YTB International, a controversial online travel company based in Wood River. In 2006 the bank made a $2.5 million interest-only loan to YTB to expand its headquarters, a project being performed by a construction company owned by Winfield. In July, after the state stepped in, that loan was changed to more traditional terms.

In all, Meridian had $27.3 million in loans outstanding as of June 30. It’s unclear how many of them the state was concerned about, or which ones. Attempts to reach Winfield were unsuccessful and messages left at Meridian Friday evening were not returned.

Meridian had been expanding since its takeover by the Alton investors. In 2006, it bought branches in Carlyle and Altamont, Ill, for $23 million. And last year, it bought the deposits of National Bank’s branch in Carlyle.

Now those deposits are going back to National Bank. And Meridian is no more.

Regulators also shuttered Main Street Bank, based in Northville, Mich., on Friday. So far, 15 banks have failed in 2008.

More information for depositors is available at www.fdic.gov, or by calling 1-877-894-4713.

tlogan@post-dispatch.com | 314-340-8291

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