UPDATE 2-Small Arkansas bank fails, taken over by Iberiabank

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By John Poirier

WASHINGTON, May 9 (Reuters) - ANB Financial, a small Arkansas bank and its deposits were taken over by Pulaski Bank and Trust, a unit of Iberiabank Corp (IBKC.O: Quote, Profile, Research, Stock Buzz) on Friday, the Federal Deposit Insurance Corp said.

ANB is the third FDIC-insured institution to fail in 2008. U.S. bank regulators are bracing for an increase in bank failures this year because of the widening U.S. economic fallout from subprime mortgage foreclosures and falling residential real estate prices.

The bank failed because it extended construction and development loans with poor underwriting standards into other states including Utah, Wyoming and Idaho, a source familiar with ANB's failure said.

It also could not keep up with high short-term interest rates offered on deposits, the source said.

As of Jan. 31, 2008, ANB Financial had about $2.1 billion in assets and $1.8 billion in total deposits, the agency said.

ANB's failure was smaller than NetBank, which had $2.5 billion in assets and was taken over by Dutch banking group ING Groep NV (ING.AS: Quote, Profile, Research, Stock Buzz) in September 2007.

ANB Financial's nine offices will reopen Monday as branches of Pulaski, and depositors will automatically become depositors of Pulaski, the FDIC said in a statement.