Gilman bank agrees to be acquired by Edgar County bank

GILMAN, Aug 21, 2009 (The News-Gazette - McClatchy-Tribune Information Services via COMTEX) -- CBNC | Quote | Chart | News | PowerRating -- First National Bank of Gilman has agreed to be acquired by Edgar County Bank & Trust, the banks announced Thursday.

The move is expected to put the Gilman bank on stronger footing. The bank, which had recently suffered losses and seen its capital dwindle, was one of several area banks in which the Campbell family held an interest.

Several of the family's other banks -- including First National Bank in Danville and John Warner Bank in Clinton -- were put into receivership in July and subsequently taken over by other banks. The Gilman bank, however, was not put into receivership.

With the acquisition, Edgar County Bank & Trust stands to pick up offices in the Iroquois County communities of Gilman and Watseka. It already has several offices in Edgar and Champaign counties, with the Champaign office known as Prospect Bank.

Terms of the transaction have not been disclosed. W. Eric Volkmann, president of Edgar County Bank & Trust, said the banks had been working on the deal "a couple months," with the definitive agreement reached Wednesday evening.

Volkmann said his bank was "fortunate to have the resources and capital" to acquire the Gilman bank when some banks are struggling.

"We are also very pleased that management at both facilities (Gilman and Watseka) has agreed to stay on, helping to make this a seamless transition," he said.

A statement from Dale Warmbir, president of the Gilman bank, said his staff looks forward to becoming part of "the Edgar County Bank & Trust family."

"Our employees have stood steadfast in these trying times, and now we have stability and a future," he stated.

Volkmann said he expects an expedited approval process from regulators and hopes to close on the deal as early as October. He said the acquisition would secure up to 20 jobs at the Gilman and Watseka offices.

Before becoming president of Edgar County Bank & Trust, Volkmann lived in both the Champaign-Urbana and Kankakee areas. He said his bank already has customers in the Iroquois County area so it seemed "natural" to expand services to that region.

He said the acquisition also makes sense for his bank because the Gilman bank has a relatively low loan-to-deposit ratio while Prospect Bank in Champaign has been bringing in loans at a faster pace than deposits.

The additional deposits in Gilman will "allow growth in the Champaign market for Prospect Bank," Volkmann said.

Edgar County Bank & Trust had $247.3 million in assets as of June 30, while First National Bank of Gilman had $43.1 million in assets, according to the bank's respective call reports.

The Edgar County bank -- which has offices in Paris, Kansas, Brocton, Ashmore and Champaign -- recently reported $1.43 million in net income for the six months that ended June 30.

In contrast, the Gilman bank posted a net loss of $1.89 million, largely as the result of a $1.8 million realized loss on available-for-sale securities.

The call report also showed the Gilman bank was undercapitalized as of June 30. For a bank to be "adequately capitalized," the Federal Deposit Insurance Corp. requires a Tier 1 leverage ratio of at least 4 percent, a Tier 1 risk-based capital ratio of at least 4 percent; and a total risk-based capital ratio of at least 8 percent. But the Gilman bank's respective ratios were 2.3 percent, 3.01 percent and 3.9 percent.

In the most recent bank ratings from BauerFinancial, the Gilman bank was given a 1-star ("troubled") rating. By contrast, Edgar County Bank & Trust received a 4-star ("excellent") rating, the second-highest rating accorded by BauerFinancial. Those ratings were based on March 31, 2009, data.

First National Bank of Gilman dates its history back to 1869. According to the bank's Web site, Lyle Campbell and James Forrest bought outstanding stock in the bank in 1980 and formed a holding company called Iroquois Bancorp. In 1991, Campbell sold his interest to sons Douglas L. Campbell and Craig L. Campbell. The bank opened a branch in Watseka in 1999.

Edgar County Bank & Trust has served Paris and surrounding communities since 1873.

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