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Bank competition builds.

Jonesboro's $700 Million Market Becomes the Hot Spot for Expansion-Minded Lenders

SLOWLY BUT SURELY, the focus of bank-hungry buyers is shifting from northwest Arkansas to a $700 million pie in Jonesboro. The city's deposit base is garnering more attention from a growing list of regional players.

First Commercial Corp. of Little Rock, First Tennessee National Corp. of Memphis and Boatmen's Bancshares of St. Louis are cited as the three leading candidates to enter the market through acquisition. Worthen Banking Corp. of Little Rock already has a branch office in Jonesboro but is planning a significantly larger presence in the city of about 50,000 people, which is served by nine financial institutions.

The potential buyout candidates would likely include all of Jonesboro's financial institutions except Mercantile Bank and Simmons First Bank, which are already part of large holding companies.

Adding another dimension to the boardroom intrigue is the aggressive marketing of First Bank of Arkansas, led by millionaire businessman Wallace Fowler.

The success of this upstart entrant was touted recently in advertisements showing its total assets had grown from $43 million in December to more than $100 million. During this period of rapid expansion, the bank even managed to generate a $139,000 profit for the first six months of 1993.

Along the way, Fowler has stepped on the toes of competitors -- especially Mercantile Bank.

Union Planters Corp. of Memphis, which bought Mercantile Bank and five other Arkansas banks from Fowler, is still looking for expansion possibilities in the area, too. The Bank of Weiner (Poinsett County) is Union Planters' latest acquisition target.

"I'm not aware of what the competition is doing, but we continue talking with banks across northeast Arkansas," says G.L. Lieblong, chairman and chief executive officer of Mercantile Bank.

Neither Barnett Grace nor Curt Bradbury, who hold the triumvirate posts of chairman, president and CEO at First Commercial Corp. and Worthen Banking Corp., respectively, were unavailable for comment. But it's no secret that both are on the acquisition trail in northeast Arkansas.

Worthen already has a small presence in Jonesboro after its 1991 purchase of an Independence Federal Savings Bank branch. A Worthen buyout of Citizens Bank is all but labeled a done deal because of the cross-ownership of stock by Herbert McAdams II.

A logical progression would be a Worthen purchase of Security Bank in Paragould and Farmers & Merchants Bank in Reyno, where Worthen executives Frank Oldham Jr. and Marlin Jackson are stockholders and sit on the board of directors.

First Commercial has yet to enter the Jonesboro market, but it does have buys pending for two banks elsewhere in northeast Arkansas -- Farmers Bank & Trust in Blytheville and Piggott State Bank. State banking law now permits branch expansion between contiguous counties, and before the decade is over new laws will allow any Arkansas bank to branch into Craighead or any other county.

Also, the door is wide open for Worthen and First Commercial to pursue in-state deals of most any magnitude now that the Arkansas General Assembly approved raising the bank deposit cap. A single bank or bank holding company can now hold 25 percent of the state's bank deposits, up from 15 percent. That increased margin has created a plethora of possibilities for expansion-minded bankers.

That's Competition

Simmons First National Corp. of Pine Bluff was the first outside bank holding company to enter Jonesboro with its 1984 purchase of First Bank & Trust.

When Simmons came to Jonesboro, there were four banks and two local savings and loan associations. The number of banks has now doubled.

It only seems like there's a bank on every street corner in Jonesboro, but the exaggeration appears true when considering the Indian Mall area on Caraway Road. Within one block of the mall are six existing branches and one main office, with another main office and branch bank under construction.

Mercantile Bank has a branch inside Indian Mall with another on the mall's parking lot within a few feet of a Citizens Bank branch. Across Wilkins Street north of the mall, Mercantile has a third branch location.

South of the mall on Caraway, Home Federal Savings & Loan has a branch. East of the mall across Caraway Road, Simmons First Bank has its main office.

Nearby, First Bank of Arkansas is building a new main office on Highland Drive next door to a Citizens branch (a former United Federal Savings & Loan location). MidSouth Bank is building a new branch across the street.

"That's competition," Lieblong says.

The undisputed aggressor is Fowler, chairman and founder of First Bank of Arkansas. He has increased the competitiveness and is making everyone work harder.

In the battle for deposits and loans, Fowler has introduced retailing tactics, which he used to make his millions as a Taco Bell and Kentucky Fried Chicken restaurant franchiser.

To maintain the bank's fastpaced growth, Fowler will need to infuse additional capital from his own resources or through a stock offering.

In response to First Bank, Simmons First recently started a $5 million "red-tag sale." The bank has committed to loan that much money at 6.75 percent, generally for consumer loans but also for 12-month business loans.

Donald Stone, chairman and CEO of the bank, promises other surprises, too.

"We're trying to figure out how to have a blue-light special," Stone says with a chuckle. "You can look at the rate sheets for deposits and see that the competition is pretty wild.

"Competition for deposits is intense because we also have seven brokerage houses in town. We can't agree on bank holidays, bank hours or interest rates. We're the most disagreeable bunch of guys except when it comes to the community."

The competitive disagreements of the Jonesboro banking community have even spilled into the courtroom. Union Planters has sued Fowler for alleged improper dealings in the months leading up to his sale of Mercantile, the largest bank in Jonesboro.

A non-compete agreement signed by Fowler was a part of the Union Planters buyout of North Arkansas Bancshares (NAB), but that contract had no sooner expired than Fowler decided to jump back into banking.

His tactic of wooing away top executives from competing banks, especially Mercantile, is an additional sore spot. Fowler, who couldn't be reached for comment, also controls First State Bank of Trumann and First Bank of Arkansas in Russellville through Southwest Bancshares Inc.

The lead bank for NAB is Mercantile, founded in 1932. Other members of the family include First State Bank of Newport, Searcy County Bank in Marshall, Mercantile Bank of Mammoth Spring, Mercantile Bank of Hardy and The Bank of Rector.

Before Fowler ascended into prominence at Mercantile, the bank was led by three generations of the Frierson family. That ended in January 1985, when Charles Frierson III left the bank after a long-running feud with regulators. The mantle of power shifted to Fowler when the Friersons divested themselves from Mercantile.

Their exodus marked the end of an era of community leadership for Jonesboro. In the 1950s and 1960s, civic direction was often shaped by the Friersons at Mercantile Bank and McAdams at Citizens Bank.


The Frierson family has re-entered the Jonesboro banking scene by branching in from Monette with MidSouth Bank. Among the bank's executives are Carolyn Frierson, chairman, and Terry Frierson, executive vice president.

Chartered in 1936, the bank was formerly known as Monette State Bank. It, too, has shown respectable gains by holding more than a 9 percent share of market deposits.

More Players

Established in 1919, Citizens Bank of Jonesboro is most closely identified with its CEO, McAdams. The man in charge of the bank's day-to-day operations is its president, Danny Williams.
Deposit Market Share of Craighead County Lenders

(By Percentage)

Institution 6-90 6-91 6-92

Mercantile Bank 34.30 31.90 31.79
Citizens Bank 25.72 24.07 28.28
MidSouth Bank 4.71 7.00 9.80
Simmons First Bank 7.80 8.35 9.39
Home Federal Savings & Loan 7.72 8.63 9.35
Arkansas Bank 5.39 5.83 6.83
Pocahontas Federal Savings & Loan 1.30 1.53 1.88
First Bank of Arkansas 1.27 1.18 1.30
Worthen National Bank of Arkansas -- 0.92 1.23
United Federal Savings & Loan(*) 10.63 10.27 --
Independence Federal Savings & Loan(*) 0.98 -- --

* -- Liquidated by federal regulators.

Williams, who came to the bank more than three years ago from One National Bank in Hot Springs, has to contend with an all-too-familiar supposition about the future of Citizens these days. The multimillion-dollar question is not if, but when Worthen Banking Corp. will announce a deal to buy the bank.

McAdams has already concluded a $100 million stock swap that made his family the largest ownership block at Worthen in exchange for The Union of Arkansas Corp.

With that background, why would McAdams sell Citizens to any other banking interest?

"It is my understanding at this time that Citizens Banks will remain an independent community bank," Williams says. "There are no plans for the bank to be acquired by a different bank. From my understanding, we are not for sale."

Williams hastens to add that status could change because banks, like any other business property, can typically be had if the price is right.

The Arkansas Bank has climbed through the pack to become Jonesboro's third largest financial institution. The catalyst for the recent growth spurt was the liquidation of the city's largest thrift, United Federal Savings & Loan.

Like so many other thrifts, bad real estate loans plunged United Federal's net worth into the red and shot Chairman Alan Patteson and CEO Dan Pierce out of the saddle. The Norfork Inn project near Mountain Home was perhaps the final nail in the coffin because the $1 million loss in 1989 sent United Federal and First Federal Savings & Loan of Paragould into what regulators viewed as an irretrievable dive.

"Those of us who knew Dan and Alan though they were capable of bringing United Federal out of it," says Dan Trevathan, president of Jonesboro's Home Federal Savings & Loan. "But the regulators thought otherwise."

Total deposits at Arkansas Bank more than doubled after it bought former United Federal assets that included branch locations in Jonesboro, Paragould and Piggott.

The Rainwater family, whose interests include agribusiness and Holiday Inn motels, controls the bank. Sloan Rainwater is chairman and CEO of Arkansas Bank.

The bank was previously known as the Bank of Northeast Arkansas. Its charter dates back to 1904 as the Bank of Nettleton, which had the distinction of surviving the Great Depression intact.

The Rainwater family has significant holdings in neighboring Lawrence and Mississippi countries, as well. Sloan Rainwater Jr. is chairman and CEO of The Arkansas Bank in Walnut Ridge and chairman of The Planters Bank in Osceola.

The Walnut Ridge bank was formed out of The Lawrence County Bank in Portia when the headquarters was moved to Walnut Ridge in February 1990. The move coincided with the Rainwaters' buying the deposits of Citizens National Bank of Walnut Ridge after it was shut down by the State Banking Department.

Home Federal Savings & Loan, the only Jonesboro-based thrift to survive the 1980s, was on the brink of a similar fate. In May 1990, Dr. Glen Dickson came in and recapitalized the S&L one step ahead of the regulators.

Bob Gibson, the son-in-law of Home Federal founder Joe Martin, had majority control of the thrift until Dickson entered the picture.

Martin's brother, Lanny, is the founder of another Jonesboro lender -- Pocahontas Federal Savings & Loan. The thrift's chairman, Joe Martin, carries his uncle's name.

Pocahontas Federal is a stable and conservative operation with a small branch operation in Jonesboro and a 2 percent market share. It is considered a force among the state's remaining thrifts in northeast Arkansas.

Home Federal has a respectable 9 percent share of the market's deposits. The thrifts has done well following the demise of United Federal, which once held a 10 percent share of deposits.

"In terms of refinancing, mortgages and consumer lending, we've got more business than we can say grace over," says Home Federal's Trevathan. "We're going to be a community bank and serve the market from that approach with mortgage lending and consumer lending. We're probably the leading mortgage lender."

Community development in Jonesboro in anchored by a strong industrial base, locally owned utilities, a strong medical community and Arkansas State University.

The bank competition is building in this Delta oasis.
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Title Annotation:Jonesboro, Arkansas
Author:Waldon, George
Publication:Arkansas Business
Article Type:Industry Overview
Date:Aug 30, 1993
Previous Article:North Little Rock industry profiles.
Next Article:Arkansas' business schools meet the challenge.

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