Newsday (Suffolk Edition) from Melville, New York • 3

Franklin National Is Bankrupt, International Group Takes Over No problem is expected for depositors but common stock is reported to be practically worthless Wall Street reaction and a history of the Franklin National, Page 37. What really went wrong; Page 55. NewwUy Photo by Naomi Laadon At a Franklin National Bank branch in Franklin Square, a terse handwritten sign tells only part of the story. Below, two unidentified men from the Federal Deposit Insurance Corp. carry boxes of papers into the bank's headquarters in Westbury.

By Avery Hunt Franklin National Bank, once the largest bank on Long Island and the 20th largest in the nation, was declared insolvent yesterday and its assets were taken over by the European-American Bank Trust Co. With its $1.7 billion in deposits, Franklin is the largest bank in U.S. history to go bankrupt. European-American planned to open all 104 of the former Franklin branches under its own name this morning for business with no interruption of services to its customers. Tire successor to Franklin is a nrivately held consortium of six major European banks with assets of $518,000,000.

The precisely timed takeover, whidi ended five months of efforts to keep Franklin afloat, started the moment Franklin closed its doors to business at 3 PM yesterday. The Controller of the Currency declared that Franklin was insolvent. The bank was then immediately put into receivership and its assets frozen. The Federal Deposit Insurance Corp. was named receiver.

Earlier yesterday morning, the details of the purchase of Franklins assets by European-American had been hammered out. With Franklin declared insolvent, the FDIC, was able to formally accept European-American 'a bid and to move for final judicial approval of the sale. At 4:30 PM, Judge Orrin G. Judd of the U.S. District Court in Brooklyn handed down a 10-page legal decision that ended with an order authorizing the sale.

Finally, the State Banking Board met in emergency session to give its approval to the takeover. At 5 PM, representatives of all the regulatory agencies involved held a press conference at the Federal Reserve headquarters in New York to announce the details of the agreement. Meanwhile, federal bank examiners had moved into the shuttered branch offices of Franklin National to check all assets and to literally count the cash. By morning, all former Franklin depositors had become European-American depositors, and their savings continue to be insured by the FDIC, of which European-American is a member. The new bank has no public stockholders, and therefore does not file disclosure information on its financial operations with the Securities and Exchange Commission.

European-American is chartered by New York State. Basically the terms of takeover are as follows: European-American assumes bank liabilities totaling $1,704 billion, mostly in Franklins deposits. Its bid for the purchase was $125,000,000. As receiver of Franklins assets, the FDIC also sold" European-American $1,579 billion of Franklins loans and securities. In essence then, the $125,000,000 reverts to the FDIC and European-American takes on exactly that much more of Franklins total liabilities.

No ca-h exchanged hands. European-American has 180 days in which to choose what liabilities and what assets it wants to assume. The FDIC, in turn, will purchase the rest of Franklins assets, which amount to $2,083 billion. It has also assumed Franklins $1.7 billion debt to the Federal Reserve Bank, which will be paid Continued on next page XtAvwlay Photo by (ieore Argvroptaa For Customers, Some Answers As a shopkeeper, should I accept checks drawn on Franklin accounts? The takeover of Franklin National Bank by the Bank Trust Co. has troubled Almost hopeless.

The stock is almost worthless. And any surplus of funds that remains after European-American many of Franklins customers. Here are some of the more frequently raised questions. I have a savings account at Franklin. Is my money safe? Yes, no matter what the amount.

I thought accounts were guaranteed only to a maximum of $20,000. That applies only in cases of bank failures. But Franklin was acquired by another bank, and the question of insurance never came into play. Can I continue to make withdrawals and deposits? Yes. Franklins normal banking functions are being carried out by European-American.

Are my higher-yielding four-year bank certificates affected by the takeover? No. European-American assumes responsibility for the certificates. Can I continue using Franklin checks? Yes. Member banks of the Federal Reserve System will honor the Franklin checks until European-American can replace them with its own liquidation of assets will go first to holders of debentures (certificates of debt), then to holders of preferred stock and, finally, to common stockholders. Federal Judge Orrin G.

Judd ruled yesterday that stockholders have no right to challenge either the determination of insolvency or the sale of assets. Im an employe of Franklin. Do I still have a job? Unless you are a high-salaried executive, you have little to worry about. European-Americans chairman said the bank needs the present employes, particularly the branch managers. But Frank Wille, head of the FDIC, said he could not say the same for high-level executives.

And banking sources say that European-American has been in touch with selected senior officials for the past week. What changes will be made in the bank's operations? None are contemplated for the immediate future. The branches will adhere to the usual banking hours, and Franklins former routine should continue, at least until the transition is completed. If you accepted them before, theres no reason to refuse them now. Should I cut up my Franklin Master Charge credit card and toss it away? That might help you hold down your spending, but the credit card operation is also being carried on by European-American.

Can I stop payment on my Franklin personal loan? Not if you want to stay out of trouble. European-American has 180 days to decide whidi of Franklins assets it will assume and which it will pass on to the Federal Deposit Insurance Corp. The bank is almost certain to retain all consumer loans. But either way, youll have to keep paying. I suppose that applies to my business loan, too? That is oorrect Can I gain access to my safe-deposit box? Yes.

I own some shares of Franklin common stock. Whats my situation?.