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Small banks excel.

Peoples Bank of Paragould Leads State With 50 Percent Return on Average Equity

BANKS IN SOME OF ARKANsas' smaller towns outperform the state's largest banks by at least one yardstick.

Comparatively small Peoples Bank of Paragould, with only $24.6 million in assets, had the state's highest return on average equity last year, 50.69 percent.

Peoples Bank, the smallest and youngest bank on the list, also had last year's highest return on assets in the state, 6.52 percent. The bank, led by Charles Luter, was founded in 1991 following the sale of the failed First Federal Savings & Loan of Paragould.

Only two banks in Arkansas' largest metropolitan area, Central Bank & Trust of Little Rock and National Bank of Arkansas in North Little Rock, qualify for Arkansas Business' list of the top 26 banks in the state ranked by ROE.

Central Bank & Trust is No. 2 on the list with an ROE of 40.44 percent. National Bank of Arkansas' 31 percent ROE is third.

Return on equity is calculated by dividing common stock equity (net worth) into net income. It is not a common gauge for Arkansas banks because the stock of most banks is held by a few individuals, often family members and directors on the bank's board.

Only four bank holding companies in Arkansas have publicly traded stock: Worthen Banking Corp., First Commercial Corp., Simmons First National Corp. and First United Bancshares Inc.

The lead banks for the four publicly traded banking companies recorded ROEs above 15 percent last year.

First Commercial Bank in Little Rock had an ROE of 21.11 percent. Simmons First National Bank in Pine Bluff had an ROE of 17.53 percent. Little Rock's Worthen National Bank of Arkansas had a 17.32 percent ROE, and First National Bank of El Dorado had an ROE of 15.58 percent.

"The benchmarks are 1 percent for return on assets and 15 percent for return on equity," says Frank Anderson, an analyst with Stephens Inc. "With the lack of loan growth, to hit 15 percent is pretty hard to do. But the banks in Arkansas continue to do so."

Two Banks Publicly Owned

Two of the 26 banks ranked by ROE are owned by publicly traded banking companies. Worthen owns No. 13 Worthen National Bank of Harrison, which has an ROE of 23.28 percent. First Commercial owns No. 23 Morrilton Security Bank, which has an ROE of 21.97 percent.

First Security Bank of Searcy, ranked No. 6 on the ROE list, is the only bank in the state that ranks among the top 25 banks in assets, return on assets and ROE. First Security is No. 21 with $219.8 million in assets and No. 10 with an ROA of 2.09 percent.

Ozark Bankshares Inc. of Ozark owns two of the 26 banks on the list: No. 9 Newton County Bank of Jasper, which has an ROE of 23.87 percent, and No. 19 Arkansas Valley Bank of Dardanelle, which has an ROE of 22.69 percent. Ozark Bankshares, which also includes Bank of Ozark, has assets of about $175 million.

"We are exceeding our goals at all three of our institutions this year," says Mark Ross, president of Ozark Bankshares.

Before Ozark Bankshares became a multibank holding company in the mid-'80s, its majority owners were also majority owners of Newton County Bank and Arkansas Valley Bank, Ross says.

In 1986, through a stock swap, Ozark Bankshares acquired controlling interest in Newton County Bank and Arkansas Valley Bank, Ross says.

Last year, Carl G. Holt retired as chairman and sold his ownership interest in Ozark Bankshares. George Gleason II replaced Holt and remains as chief executive officer.

"Currently, we are experiencing favorable interest rate spreads," Ross says. "And I think you'll find it true with most banks that the interest rate spreads have been favorable in a declining rate environment.

"That trend will reverse itself, I think, if interest rates hold steady or increase."
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Article Details
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Title Annotation:Arkansas Business Rankings
Author:Smith, David (American novelist)
Publication:Arkansas Business
Article Type:Directory
Date:Aug 16, 1993
Previous Article:A legal precedent?
Next Article:Arkansas State Chamber/Associated Industries.

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