Poor Town, Rich Bank

How did a lender get so wealthy--and then go bust--in an Appalachian hamlet?

Rimmed by steep ridges and mountain shanties, the hamlet of Keystone, W. Va. (pop. 627), looks like a movie set left over from Coal Miner's Daughter. Main Street, all four blocks of it, has not a single traffic light. Yet the local bank in recent years has boasted one of the highest profit margins in the U.S., and reached $1 billion in assets in 1998. You might wonder how such a bank could thrive in one of the poorest counties in the U.S. And you'd be in good company, because bank examiners and the FBI wondered too.

On Oct. 15, federal...

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