WASHINGTON - When Iowa regulators closed $114 million-asset Hartford-Carlisle Savings Bank on Jan. 14, uninsured depositors were not the only ones to suffer collateral damage.

Bankers' Bank, a $173 million-asset institution based in Madison, Wis., stands to lose a $2 million promissory note it issued in September to Hartford-Carlisle's holding company, Wildcat Inc.

Bankers' Bank is by no means the only financial institution to suffer from Hartford-Carlisle's failure. According to an internal FDIC document, Hartford-Carlisle held $600,000 in unsecured Fed funds purchased from a Well Fargo & Co. subsidiary bank. The document called it "unlikely" that giant will be repaid.

Moreover, because of an Iowa law that requires banks and thrifts to make good on uninsured government deposits held by their failed peers, approximately 400 Iowa banks and thrifts will have to jointly repay about $8.4 million in deposits held by Hartford-Carlisle - an average of $21,000 apiece.

In addition, uninsured deposits totaled $14.4 million, including $2.7 million held by individuals. Local governments and school districts held the balance.

Bankers' Bank chairman Helge S. Christensen is not optimistic about collecting. "I'll tell you, when a bank fails and it is the major asset of the company that owns it, the prognosis for collection is not good," he said.

Bankers' Bank, which has sued to recover the funds, had some protection on the one-year, 7.75% note.

Dirk A. Thierer - the former Hartford-Carlisle president and co-owner who was ousted Jan. 6 by the Federal Deposit Insurance Corp. - guaranteed the loan.

Bankers' Bank also held the Thierer family's 72% stake in Wildcat as collateral.

But if Bankers' Bank cannot collect on the note, Mr. Christensen said, the privately held company is prepared to absorb any loss. "We're a well-capitalized bank, and we have adequate loan-loss reserves to cover it," he said. "We're coming off our best year ever."

Nevertheless, Hartford-Carlisle's failure has already affected 19-year-old Bankers' Bank. The one-office institution recently laid off one of its two senior lenders, partly in response to the employee's involvement with the $2 million note. The bank also has become the focus of unwanted media attention.

"News stories that could potentially be viewed in an unfavorable light because of an association with miscreants don't help us a lot," Mr. Christensen said. "That's another fire that I have to keep extinguished."

Anita Liskey, a spokeswoman for Norwest Bank Iowa, said that as a matter of policy the Wells Fargo unit would not comment on any of its customer relationships.

- Scott Barancik

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