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Bonds build FSB earnings in recession.

When it comes to boosting the bottom line with income from municipal bonds, First Security Bank of Searcy is king among banks based in Arkansas.

"Everybody is always making a bigger deal of that than I think it is," said Reynie Rutledge, chairman and CEO of First Security Bank. "We've always had municipal bonds, and it's been that way since 1977.

"As loan demand picks up, we'll have less money in bond investments. Every bank balances its loans and deposits with investments."

Rutledge's aw-shucks insight notwithstanding, no Arkansas lender is as heavily into bond investments as First Security Bank.

The bank collected nearly $88.6 million on tax-exempt securities during 2012. That income figure was nearly double the combined total of seven of the largest Arkansas bank organizations: Bank of the Ozarks of Little Rock, the eight Simmons First banks, Arifest Bank of Fayetteville, Centennial Bank of Conway, Summit Bank of Arkadelphia and Liberty Bank of Arkansas in Jonesboro.

During 2008, income from tax-exempt securities totaled $11.2 million at First Security. As the recession hit loan demand, the bank moved heavier into municipal bonds and the like as a way to augment income.

"Our people work smart and do a good job," Rutledge said. "As the economy has slowed, our loan growth has slowed down."
Banking on Bonds

 2012 Bond Income *

First Security Bank $88,590

Bank of the Ozarks $15,807

Simmons First ** $7,400

Arvest Bank $6,714

Centennial Bank $6,154

Summit Bank $5,810

Liberty Bank $2,797

* Income on tax-exempt securities issued by states and
political subdivisions in the United States. ** Total of
eight Simmons First banks in Arkansas. Dollars in thousands.

Decatur Update

The Benton County expansion of Chambers Bank via Decatur State Bank is a temporary situation.

That's because the Danville lender took control of the $127 million-asset bank through a DPC (debt previously contracted) acquisition.

Chambers Bank took control of Decatur State Bank when its owners had to forfeit Peterson Holding Co. shares to make good on a loan gone bad. Peterson Holding owns DSB.

DPC shares may be held for a period of two years under the Bank Holding Company Act. Chambers could gain additional time from federal and state regulators to liquidate its position.

The Act makes provision for regulators to grant as many as three, one-year extensions. That raises the possible ownership ceiling to a maximum of five years.

The same temporary ownership situation applies to the $232 million-asset Grand Savings Bank of Grove, Okla., another Peterson Holding asset.

Chambers has collected 72,980 shares of the holding company, or 99.16 percent of its 73,600 outstanding shares.

The Peterson Holding stock was transferred from the Lloyd Peterson Revocable Trust, 69,966 shares; Blake Evans and Brook Evans Mountain, 1,147 shares each; Richard E. Wilmoth Revocable Trust, 520 shares; and Tom M. Edmiston/Lisa L. Edmiston, 200 shares.
Chambers Bank, Danville

Total Assets: $1 billion

Net Income: $9.1 million

Staff: 234 (as of Dec. 31)

19 Full-service Locations: Two each in Danville. Fort Smith,
Hot Springs Village and Springdale; and one each in Amity
(Clark County): Bentonville: Dardanelle and Havana
(Yell County) Elkins and Goshen (Washington County):
Fayetteville: Kirby (Pike County): Mansfield and
Waldron (Scott County): and Mena (Polk County).

Total Net Assets * Income *

2011 $711,426 -$5,477

2010 $742,657 -$17,795

2009 $764.264 $4,855

2008 $707,182 $4,836

2007 ** $758,450 $15,543

2006 ** $828,240 $18,664

* Thousands. ** Total for Chambers Bank of Danville and
Chambers Bank of North Arkansas in Fayetteville before
the separate charters were consolidated.

George Waldon
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Title Annotation:Banking
Author:Waldon, George
Publication:Arkansas Business
Geographic Code:1U7AR
Date:Mar 4, 2013
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