A former regulator who in February was appointed president of First National Bank of Keystone, W.Va., said he was forced out six weeks later after recommending operational changes.

Owen Carney -- a securitization expert and 28-year veteran of the Office of the Comptroller of the Currency -- said in an interview Friday that he was hired in late 1998 as a consultant to the bank, which the government shut down last week amid fraud charges.

As president of the $1.1 billion-asset, three-branch institution, Mr. Carney succeeded Billie J. Cherry, whom the OCC had pressured to step down.

Mr. Carney began to suggest ways to improve the bank's asset quality and reduce liquidity pressure. One idea was to replace the bank's multiple loan servicers with a single, sophisticated firm. He argued that doing so could simplify paperwork and, more important, improve the performance of the underlying loans.

Mr. Carney also recommended financing the loans on the bank's books, and he was looking to hire a company to perform a full management audit.

His ideas met with little enthusiasm. On the eve of the annual shareholders meeting in March, he said, he was told that there were not enough votes to elect him to the board of directors, and therefore he could not remain president. He said he was offered alternative positions but resigned instead.

Mr. Carney contended in retrospect that acceptance of any one of his ideas might have unraveled the fraud that the OCC now alleges took place at First National. According to regulators, $515 million of loans that the bank listed as income-producing assets had already been securitized and sold.

"I was forced out," he said. "Near as I can tell, it was because I asked too many questions."

Residents of Keystone and McDowell County remain divided about the bank and its principals, including Ms. Cherry who remained chairwoman after resigning the presidency -- and senior vice president Terry L. Church. These two execs reportedly own significant but undisclosed shares of the bank.

Both women worked there for decades, and Ms. Church in particular was said to have a loyal following at a company where most employees were also shareholders. Ms. Church was also executor of the estate of the late J. Knox McConnell, a colorful figure who was chairman for years and who left a significant chunk of the bank's stock to his heirs.

The two women also have substantial property and commercial holdings in the county, a fact that has earned them respect from some quarters and resentment in others. For example, sources said Ms. Cherry owns the three-story, block-long warehouse that stores documents on 150,000 loans for the bank. She also is mayor of Keystone, which has just 627 residents.

Mack Oliver, Keystone's city manager, defended Ms. Cherry, to whom he reports. The real conspiracy, he said, is the government's decision to shut the bank down.

"They come in here like a Gestapo and take over the bank," he said. "I think they just come in and took over, and it's political. Some big bank's going to buy it. I think this whole thing is a fraud in itself."

A county resident who asked not to be named described the town's loyalty to the two women as eerie. "It is a cult up there," she said. "It's absolutely weird. Ms. Cherry and Ms. Church own everything, everything."

Neither of them returned phone calls last week. Nor did Mr. Carney's successor, Gary Ellis.

One point residents agree on is that Keystone and McDowell County will suffer if the bank is liquidated rather than sold to and reopened by another institution.

The bank employed 87 people in the county, a hilly area where some homes sell for as little as a couple of thousand dollars and 25% of the population lives below the poverty line.

According to Mr. Oliver, the bank was responsible for about half the revenue generated by Keystone's business-and-occupation tax, and a similar percentage in the other two towns where First National had branches.

"The city is evidently going to have to reduce their work force," he said. "This is the biggest thing to happen in this area since the shutdown of the coal mine 20 years ago."

As a result, a great deal rides on the Federal Deposit Insurance Corp.'s ability to find a qualified bidder for what is left of the bank. The FDIC said 17 potential bidders showed up at a briefing Friday morning. The agency took bid offers Friday afternoon; an announcement on the result was expected Friday after press time.

The 65 FDIC employees on-site at First National were ready for the worst. Absent a sale, they were prepared to print depositor checks and stuff them in envelopes Friday night, then begin passing them out to account holders starting Saturday morning.

For an update on this story, check with www.americanbanker.com.

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