CARLISLE, Iowa - From the moment the federal government's 70-person bank liquidation team descended on this tiny town last month, keeping the mission a secret was like hiding an elephant under a doily.

The purpose of the Federal Deposit Insurance Corp.'s invasion was to find a buyer for the troubled Hartford-Carlisle Savings Bank, a $114 million-asset company weighed down by $12 million of bad loans, just under half of them allegedly fraudulent. Ultimately, the FDIC succeeded. Iowa regulators closed the insolvent bank on Jan. 14 and it reopened the next day as Citizens Bank, a subsidiary of $1.2 billion-asset Spectrum Bancorp of Omaha.

But the logistics of a 70-person operation at a 15-employee bank made detection inevitable in Carlisle, a town of 3,600 people, eight churches, two bars, the country's only set of septuplets, and a General Mills muffin-mix factory. By the time Hartford-Carlisle was shuttered, depositors had drained millions from their accounts. More than 3% of its deposits were withdrawn on Jan. 13 alone, according to an FDIC official.

"You have to suspect something when you see so many strange people around the bank," said Don Bartholomew, a local developer.

FDIC employees did their best to lay low. When an agency official called Carlisle City Administrator Neil Ruddy on Jan. 10 about renting temporary office space in City Hall, for example, she identified herself as a representative of the fictitious Hester Co.

"They didn't disclose that it was the FDIC," Mr. Ruddy said. "I mean, they go out of their way to not create a panic." (FDIC officials ended up working from a branch that had been Hartford-Carlisle's only competition in town. The bank bought the branch from U.S. Bancorp last year and then closed it.)

Some FDIC employees stationed at Hartford-Carlisle's headquarters even ignored the call of nature. Though there were only a couple of restrooms there, agency officials waited until just 30 minutes before the bank was closed to have Jim's Johns deploy four portable toilets outside. "When you go in with that many people, you overtax the facilities, and problems erupt, if you'll pardon my vernacular," said William M. Mitchell, senior ombudsman specialist at the agency.

But news of the 105-year-old bank's troubles seeped out early. Holmes Foster, superintendent of the Iowa Division of Banking, said bidders meetings like the one hosted Jan. 12 by the FDIC invariably tip off institutional depositors and lenders. "After you have a bidding session with bankers all over the country, it's no longer a secret," he said.

Perhaps more significant was a Jan. 8 newspaper article citing the departure of the bank's co-owner and executive vice president, Dirk A. Thierer. Though the Des Moines Register quoted a bank employee as saying Mr. Thierer "left for personal reasons," local gossips claimed he was ousted by the FDIC, a theory later validated by Mr. Foster.

At church the next morning, a local clergyman told parishioners to diversify any funds they held at the bank. "I'm a country preacher, but I didn't just fall off a turnip truck," said the Rev. R.D. Streeter of Carlisle United Methodist Church.

But not everyone got the word. When the new Citizens Bank opened for business,a grim group of about 25 customers lined up beside the reporters and TV cameras to find out if their funds were among the estimated $15.9 million in uninsured deposits.

Glenn Thomas was among the lucky ones. Though he and his wife had more than $100,000 deposited at the bank, their money was safely spread across several personal and commercial accounts. Still, he declared independence. "I'm outta here," he said. "Gonna go to a big bank."

Some of the customers waiting in line were not so fortunate, and the tension was palpable. One man, startled by the flash of a camera, promised to toss a reporter from the premises. Two local police officers kept an eye on the crowd.

Though local residents' awareness of problems at Hartford-Carlisle Savings Bank peaked with the Jan. 6 ouster of Mr. Thierer, rumors actually began circulating last summer, when president and co-owner Steven L. Wilson - now chairman-elect of the Iowa Bankers Association - abruptly resigned.

Just three years earlier, Mr. Wilson and Mr. Thierer burst onto the local scene by buying the struggling bank and building handsome homes for themselves three doors apart in Carlisle's newest development, Randleman Ridge. The two reportedly met while working at Firstar Bank in Cedar Rapids.

Neither man returned phone calls seeking comment for this article. But in a 1996 interview with the Register, they promised to transform Hartford-Carlisle from a $30 million-asset underachiever into a local powerhouse. "This should be a minimum in size of $50 million in assets," said Mr. Wilson, a former bank examiner. "We're trying to make it as easy to do business here as it is in Des Moines," added Mr. Thierer.

The new owners swiftly made good on a vow to enhance bank services.

In addition to expanding hours at the Hartford (population 800) and Runnells (population 300) branches, they introduced free checking and installed new ATMs.

They also began an aggressive campaign to increase the bank's loan portfolio, which doubled to $20 million within their first six months.

In fact, by the time Iowa regulators closed the bank last month, the pair had increased the bank's assets to $114 million, a figure higher than the assessed value of all 1,500 commercial and residential properties in Carlisle combined.

Mr. Thierer and his wife also made social inroads, rapidly weaving themselves into the fabric of Carlisle. Diane Thierer rose to the helm of the local parent-teacher organization, founded a book club at the community library, re-energized a safe-home program for neighborhood children, and generally created goodwill with her neighbors.

"She is a very nice lady … young and aggressive, like her husband," said Bob Betzer, a former city councilman and retired auto mechanic. "And she's community-minded."

Mr. Thierer, too, drew local attention by financing the construction of a weightlifting facility at the local high school. He and Mr. Wilson even named their bank holding company Wildcat Inc., after the school's sports team. "He seemed like a real nice guy," said Carlisle Police Chief Ron Fox.

At some point, however, Mr. Thierer and Mr. Wilson reportedly had a clash that led to Mr. Wilson's departure. "Dirk and Steve had different philosophies on the direction the bank should be going," said Mr. Streeter, the minister.

Since then, Mr. Wilson has resumed his position as president and chief executive officer of $41 million-asset Keystone (Iowa) Savings Bank. In September he is to become chairman of the Iowa Bankers Association.

Mr. Thierer has kept a low profile since his ouster.

Both men continue to occupy their homes on Veteran's Memorial Drive, near two other former bank employees. "I don't think there'll be a block party with both Steve Wilson and Dirk Thierer there," one local resident remarked.

What happens next in the Hartford-Carlisle Savings Bank saga depends on whether the FDIC and the Federal Bureau of Investigation can prove the FDIC's allegation of fraud. Mr. Foster, the Iowa banking chief, said that so far he has seen evidence only of profoundly bad decision-making: The bank grew faster than its deposits would permit, and ended up borrowing too much money.

"Just very, very poor judgement," he said, "and a desire to be big, in Carlisle, Iowa."

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