Start-ups, IPOs, mergers dominate state banking.

In Arkansas banking circles, 1997 could be remembered as the year of the de novo. Six new banks started business around the state.

Pinnacle Bank of Little Rock, Alliance Bank of Hot Springs, River Valley Bank of Russellville, First Community Bank of Batesville, The Capital Bank of Little Rock and Community First Bank of Harrison opened shop in 1997. Five of the start-ups had links with the old Worthen Banking Corp. network.

Pinnacle Bank set up quarters in a former Worthen branch in the Riverdale area of Little Rock. Alliance (David Bartlett), River Valley (James Biggers) and First Community (Dale Cole) were all started by former Worthen executives based in their respective cities. Several former Worthen bank board directors helped organize Community First Bank.

Investors opened their wallets to the tune of $25.5 million to initially capitalize the various new banks. Interest in Pinnacle Bank stock was so strong that additional shares worth $2.5 million were sold, pushing its overall capitalization to $7.3 million.

The two-pronged attraction of owning stock in a local bank with the prospects of a long-term investment home run were the prime draws for new bank organizers.

Opportunity prompted by bank consolidation was a prime catalyst in the start-ups. Surging valuations on successful banks certainly didn't discourage investor interest, either.

Trio of IPOs

Two financial companies joined the family of Arkansas-based public companies with initial public offerings, and a third began the regulatory process to launch an IPO.

Officials at Newport Federal Savings Bank filed securities paperwork to offer $3.7 million of stock under the banner of North Arkansas Bancshares Inc. The $34.2 million asset thrift, with only two branches, would be the smallest public financial company in Arkansas.

HCB Bancshares Inc., the parent company of Camden-based Heartland [TABULAR DATA OMITTED] Community Bank, sold $26.4 million of stock and began trading May 1 on the Nasdaq Stock Exchange.

That was followed by a $20.8 million offering from Bank of the Ozarks Inc. in Little Rock. Bank of the Ozarks struck a $3.1 million deal to acquire Heartland's Little Rock operations.

The transaction is expected to close in the first quarter of 1998 and will enable Bank of the Ozarks to offer full banking services in Pulaski County in conjunction with its new headquarters under construction in west Little Rock.

The company also is entering the Fort Smith market with a regional headquarters that will oversee its western operations in the state. Bank of the Ozarks zipped from $17.38 to $26 per share during 1997. The stock blipped down to $25 of late, positioning its overall gain at 44 percent.

HCB Bancshares of Camden moved from $12.50 to $14.25 per share. The stock dipped slightly to $13.88 near year's end, putting its 1997 gain at 11 percent.

Among Arkansas-based financial stocks, Pocahontas Federal Savings & Loan Association set the pace, jumping from $16.25 to $37.13. Profit-taking sliced it back to $36.50, leaving an impressive 125 percent leap.

Texarkana First Financial Corp. reached as high as $27.13 before settling at about $25.50. That was still good for a 52-week gain of 77 percent.

First Commercial Corp. of Little Rock ran from $34.88 to $58.63 before leveling out at $57.38, good for a 65 percent gain. First Federal Bancshares of Arkansas Inc. in Harrison covered a range of $15.75-$24.38. The stock nudged back to $23.75, tallying a 51 percent gain.

Simmons First National Corp. of Pine Bluff exploded from $25.50 to $41.50, a nice 63 percent surge. First United Bancshares Inc. of El Dorado moved from $31.50 to $49.25. However, shares dropped back to $41, resulting in a 30 percent climb.

First Commercial was forced by regulators to sell off two banks in conjunction with its $127 million stock swap for Wallace Fowler's Southwest Bancshares Inc.

Buying and Selling

First Commercial retained operations in Jonesboro, Wynne, Trumann and Harrisburg while selling Russellville and Searcy operations to Simmons First National for $53 million.

In October, First Commercial announced a stock swap, valued at $56 million, to purchase KW Bancshares Inc. The holding company, controlled by Holiday Inns Inc. founder Kemmons Wilson, owns Federal Savings Bank of Rogers.

The move expands First Commercial's presence in Rogers, West Memphis and Little Rock and gives the largest Arkansas-based banking concern its first entry into the Fort Smith market.

First Commercial also will add to its White County market with the purchase of Charter Bancshares Inc., a stock swap valued at $12.3 million when announced. The deal follows the purchase of Searcy's First Central Corp., a stock swap valued at $62 million when announced in February.

NationsBank of Charlotte, N.C., completed its assimilation of the Boatmen's/Worthen's franchise in August. The banking giant converted its Arkansas banking operations to branches of the Charlotte home office and cut the number of statewide branches to 61.

In December, NationsBank agreed to sell Fort Smith-based Superior Federal Bank, the state's largest savings and loan association, for an undisclosed sum to an investor group led by Keefe Bruyette and Woods Inc. of New York City. Superior recorded assets of $1.3 billion and total deposits of $981 million at the end of the third quarter 1997. The transaction is expected to be completed in the second quarter or 1998, pending regulatory approval.

Two out-of-state banking interests increased their presence in the state, while a third became a takeover target itself.

Mercantile Bancorporation Inc. of St. Louis negotiated a $120 million stock swap for Horizon Bancorp Inc. of Arkadelphia. The deal will expand Mercantile's $1.3 billion asset base in Arkansas by more than a third.

In the fall, National Commerce Bancorporation of Memphis announced deals to buy the holding companies that own Bank of West Memphis and Citizens Bank of Marion. Combined, the two Crittenden County banks have about $164 million in assets.

After making overtures toward Bank of Fayetteville, Deposit Guaranty Corp. of Jackson, Miss., put itself up for bid to ward off an unfriendly takeover from Union Planters Corp. First American Corp. of Nashville, Tenn., made a whopping winning bid of $2.5 billion that pushed up the stock values of large regional bank stocks.

Outlook

The wave of start-ups has subsided for the moment, but bank watchers look to northwest and northeast Arkansas for possible deals to emerge.

The rising value of bank stocks keeps sales prices escalating. More eye-popping stock swaps could surface, though the pace of acquisitions has slowed.

The surging value of financial stocks in general has wooed even small institutions such as Newport Federal Savings Bank to make an IPO move. That opens the possibilities for a similar launch to practically every lender in the state.