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Exporting Arkansas banks; Worthen, First Commercial, three others expand outside state's borders.

ARKANSAS' FIVE HOLDing companies with banks outside the state remain cautious about testing the regional market despite recent purchases.

Since the first out-of-state acquisition in 1987, Arkansas bank holding companies have acquired 12 banks in Texas, Oklahoma and Tennessee. Just this year, First Commercial Corp. and Worthen Banking Corp. have acquired five of them -- all in Texas.

With its acquisition of The Union of Arkansas Corp., Worthen made its first move outside Arkansas. Worthen now owns the eighth largest bank in Austin -- Worthen National Bank of Texas.

First Commercial has acquired four east Texas banks this year, including Stone Fort National Bank in Nacogdoches, Texas Commerce Bank in Longview, Lufkin National Bank in Lufkin and Tyler Bank and Trust in Tyler.

First Commercial paid Texas Commerce Corp., a subsidiary of Chemical Banking Corp., $7.75 million for the banks in Nacogdoches and Longview.

"It doesn't appear that either |Worthen or First Commercial~ is aggressive about wanting to get into major metropolitan areas," says Frank Anderson, an analyst with Stephens Inc. "Because, if they do that, they have the strongest banks in the country to compete with. I don't think anybody wants to aggressively go against the biggest and better banks."

First Commercial has made a small inroad into Memphis, Tenn., the largest market any Arkansas holding company has entered. In Memphis, FCC owns First Commercial Bank, with assets of $102 million, and First City National Bank, with assets of $35 million.
Arkansas' Largest Bank Holding Companies
Ranked by Assets (figures in millions of dollars)
Bank Holding Co. Assets Deposits
Worthen Banking Corp. (Little Rock) $3,419 $2,984
First Commercial Corp. (Little Rock) 2,927 2,386
Arvest Bank Group Inc. (Bentonville) 1,684 1,470
TCBankshares Inc. (North Little Rock) 1,094 1,005
First United Bancshares (El Dorado) 892 771
State First Financial Corp. (Texarkana) 724 656
Simmons First National Corp. (Pine Bluff) 690 583
Source: Morgan Keegan & Co. Inc.

Anderson says First Commercial's move into Texas is probably the beginning of a niche of banks in northeastern Texas.

"We've got a pretty good start in Texas," says Joe Hatcher, a First Commercial spokesman. "I would expect there could be other ones there, but probably in some other states around, as well."

Lynn Wright, First Commercial's chief financial officer, says the bottom line in his company's decision to acquire the banks in Texas is that they "are beneficial for our shareholders."

Anderson acknowledges that Austin is an attractive market for Worthen. He expects Worthen to try to acquire other banks in the Austin market to make it worthwhile.

The Austin bank has $74 million in deposits, considerably smaller than NCNB Texas, the largest bank in Texas' capital city, with $1.6 billion in deposits.

Staying Put

Curt Bradbury, Worthen chairman, says the holding company is in Austin to stay.

"I've been to Austin, visited with the chamber of commerce and been interviewed by the papers," Bradbury says. "I've basically told the public that we're looking for ways to make our presence there more meaningful. We prefer not to be just a $115 million |assets~ bank in Austin. We've got people working on that."

Bradbury says Worthen will not use the Austin bank to transfer its credit card operations because the legal environment in Texas is not conducive to that.

Worthen's credit cards are channeled through its Fayetteville bank, and he says that will continue. But Worthen plans to broaden its credit cards by focusing on its existing customers.

"As it relates to trying to solicit 8 percent balances from other parts of the country, I will say categorically no. We absolutely do not intend to do that," Bradbury says.

In addition to First Commercial and Worthen, the bank holding companies that own banks outside Arkansas are:

* Arvest Bank Group Inc. of Bentonville, which owns one-half interest -- with First Commercial -- in Security National Bank of Norman, Okla. Arvest also owns State Bank and Trust in Tulsa, Okla.

* First Bank Corp. of Fort Smith, which owns National Bank of Sallisaw in Sallisaw, Okla.

* State First Financial Corp of Texarkana, which owns Atlanta National Bank in Atlanta, Texas, and American National Bank of Texarkana, Texas.

Officials at First Commercial and Worthen acknowledge that they continually look for opportunities to expand, both in Arkansas or across its borders.

Two primary criteria for acquiring a bank are that it be profitable and has an owner willing to sell. Finding banks to fit that mold, however, is not easy. First Commercial and Worthen have looked at scores of possible transactions outside Arkansas but have completed only eight so far.

Executives at both Little Rock banking companies agreed that most out-of-state acquisitions will be in bordering states.

"We're looking for good banks," Hatcher says. "There are undoubtedly good banks in Arkansas, but not everybody who has a good bank wants to sell it. We don't do a hostile takeover. If we discover a good bank some place outside Arkansas, we take a look at that."

Bradbury says Worthen's "primary strategic objective" remains in Arkansas, but he adds that it's sensible for Worthen to look at other markets in bordering states.

Two Giants in Arkansas

While Arkansas companies are expanding outside the state, there has always been concern that a large regional or national bank holding company would make a major move into the state.

Two nearby banking giants have already moved into Arkansas.

Boatmen's Bancshares Inc. of St. Louis owns Superior Federal Bank in Fort Smith, a savings and loan institution. Superior Federal has branches in Little Rock, Benton, Harrison, Hot Springs, Morrilton and Siloam Springs.

Union Planters Banking Corp. of Memphis owns North Arkansas Bancshares Inc. of Jonesboro. North Arkansas Bancshares owns Mercantile Bank in Jonesboro, The Bank of Rector, Mercantile Bank in Hardy, Mercantile Bank in Mammoth Spring, Searcy County Bank in Marshall, First State Bank of Newport and Bank of Weiner, which was acquired last month.

Additionally, Citizens Holding Co. of Muskogee, Okla., owns Citizens Bank of Northwest Arkansas in Fayetteville.

Peter Tuz, an analyst with Morgan Keegan & Co. Inc. in Memphis, says in a recent research report that Memphis banks First Tennessee National Corp. and National Commerce Bancshares "view Arkansas as a natural market extension."

The growth outside Arkansas helps First Commercial and Worthen expand their franchises, possibly making them a better target for acquisition by one of the banking giants.

"There are certain areas of the country that are hot to begin with -- Texas, California, Florida, Ohio," Anderson says. "So there are certain states that you need to be in if you are going to be a national player.

"I guess the feeling is that when the first full phase of consolidation goes through and then they come back to do the fill-in operations, a Worthen or a First Commercial would be more valuable if it were a regional franchise. But I'm not saying anything like that would happen overnight."

Bradbury says he hasn't noticed any aggressive moves by regional or national banking companies to move into Arkansas. He acknowledges that it could happen at some time but determining when "is the $64 question."

"That is not something I come to work every day and think about," Bradbury says. "What I think about is how to build this company and how to continue to be an acquirer. Now if somebody finds that attractive and wants to pay three times book value for it, then that's fine."

Conservative Buyer

Boatmen's has been considered a conservative buyer of banks, paying 1.5 times book value in a market where two times book value has been a common price.

But Anderson says Boatmen's recently paid a liberal 2.2 times book value for a bank in Amarillo, Texas.

"I don't think Worthen is trying to fight anything," Anderson says. "I think they realize if they build a franchise and someone wants to pay the shareholders a lot of money, they're not going to fight it.

"I get the impression, and this is only as an observer, that First Commercial does not want to be taken over. I think they would rather be doing the acquiring. But, let's face it, in the banking industry today, consolidation is going to be the driving force of the '90s."

Arkansas' usury law probably has prevented some larger banking companies from entering the state.

"If you look at the health of the banks and how well they've done, you really don't get a true picture of how onerous that usury law is," Anderson says. "As a result of that law, most of the banks have moved their credit cards out of the state. How many jobs did that cost? Those are losses you don't see.

"Deposit costs here have to be less. Salary levels within the banks have to be less. To maintain the type of profitability it takes to draw capital into these banks for growth and expansion, costs have to be kept down because of the usury law."
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Title Annotation:Worthen Banking Corp.; First Commercial Corp.
Author:Smith, David (American novelist)
Publication:Arkansas Business
Article Type:Industry Overview
Date:Aug 2, 1993
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