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Penick's problem.

Penick's Problem

After numerous phone calls and missed meetings, Twin City Bank's Vice Chairman Ed Penick Jr. was finally available for an interview in his Little Rock office. Unfortunately, Penick didn't want to talk about himself, his future plans and the speculation surrounding it.

And that's the problem.

A lifetime banker who joined TCB in 1968, Penick, 47, has worked diligently for the past two decades to help build the bank from a sleepy $13.5 million in assets to the $545-million powerhouse it is today.

Until this summer, Penick seemed the anointed successor to follow TCB's CEO Terry Renaud, 61. In the TCB 1989 year-end bank statement mast-head, Penick's name was positioned symbolically above all the other bank officers - and directly beneath Renaud's.

But a one and a-half page press release this June changed all that.

The release announced a new marketing effort that included - almost hidden at the bottom of the page - the surprising news Penick's title was changing from president to the amorphous "vice chairman of the board," a newly created position with unclear responsibilities.

Then when Twin City Bank EVP Bob Birch got the nod from the board of directors last month to serve as interim COO until an ailing Terry Renaud returns to work, little doubt remained Penick is on his way out the door.

Some say Penick is soon to go broke from financial strains caused by a lawsuit settlement reached in October 1987 over the Iver Johnson Arms collapse. No bank can afford a bankrupt president on its hands, they reason, and Penick will be out of the bank before Jan. 1.

However, observers close to the arms deal say Penick can financially weather the settlement, and they instead point to a power shift within the bank's upper ranks.

A "no comment" response from Renaud last week did little but confirm Penick's questionable status.

Asked about the situation, Renaud took a long pause and said he couldn't say anything beyond the June press release, although he willingly affirmed his esteem for Penick.

"I have only the highest regard for Ed Penick Jr.," Renaud says. "I consider him and his family among the finest people that I've met."

And that's what most in the banking community say about Penick. Great contributor to the community, tireless worker, solid banker; promoter of the bank with an excellent family banking background; devoted family man and public servant.

Maybe that's not enough to be president of a bank in 1990.

Significantly, if Penick steps down it will be the end of an era of banking dominance by the Penick family in central Arkansas. For nearly half a century, a Penick has held a top-ranked position in management at either Worthen Bank or TCB.

Looking For Work

Word is out among the Little Rock banking community that Penick has talked to others about a new job, is considering leading a group to purchase banks outside central Arkansas and might even switch out of banking into an industry management position.

"I have all the respect in the world for him and understand that he's looking at some situations," says Mickey Cissell, a Little Rock banking consultant.

The title change may have been precipitated this past May, when Worthen and TCB were in the preliminary stages of a possible merger. If it had succeeded, personnel cuts would have sliced deep into upper-level management as well as back shop workers. Jockeying for position in the ranks of TCB's management may have shaken Penick's president's title loose.

Bank publicity departments are paid to avoid stirring popular perceptions of unrest that might make depositors take their money and run. Nowhere is this more evident than in the perfunctory press release accompanying a bank executive's departure.

Executives either leave over "philosophical differences" (ex-Worthen Bank President Tom Prince leaving in the summer of 1989), or yet undefined new horizons (ex-CEO M. David Howell leaving OneBank in the spring of 1989), or some such euphemism. Top management never publicly leaves because of bad blood, power struggles or other forms of corporate backbiting.

It Began In 1982...

Unlike the bland TCB June press release announcing his title change, Penick's troubling connection to the Iver Johnson Arms plant bankruptcy in Jacksonville has been repeatedly emphasized in the daily press, fueling speculation about his possible financial demise.

The deal began in 1982 when high-flying accountant Lynn Lloyd persuaded Penick and six other investors (Larry Wallace, John Flake, Tommy Hodges, Walter Gleason, Ralph Anderson and Gary Corpier) to purchase the Middlesex, N.J., arms plant from its owner, Louis Imperato.

The price of the 119-year-old firm has frequently been reported in the press as $7 million. But one of the initial investors confirmed last week the purchase was just $2.5 million, and $500,000 of that was cash.

Flake, Wallace, Penick and others soon wanted out of the project for various reasons and Lloyd bought their stock back and, they thought, indemnified their liability.

They assumed that would be the end of it.

Another investor, Frank Lyon Jr., began pouring money into it (estimates run between $6 million and $15 million), but the ailing company went bankrupt as soon as Lyon pulled out in 1986. Lloyd also went under about the same time listing debts of $22 million.

To their surprise after Lloyd's bankruptcy filing, Penick, Wallace, Flake and other original stockholders discovered they were still liable to repay the original purchase note.

Imperato filed suit to collect the money from the investor group and by October 1987, a settlement was reached, somewhere in the neighborhood of $2 million.

Penick and the others can't reveal the size of the settlement without breaking the agreement, but an examination of bankruptcy documents, court filings and conversations places the total amount now owed at somewhere around $700,000 to $800,000.

Although burdensome for Penick, his share of the payout shouldn't bankrupt him.

A president's salary for a bank the size of TCB averages around $150,000, plus pension plans and other benefits. It seems plenty of income to handle the Imperato debt service.

However, if any of the remaining three investors should go bankrupt, the other two would have to pick up the slack on the note payment.

The Iver Johnson settlement hurts, but the loss of the president's title, the years he spent building TCB and the seeming sure shot Penick had at fulfilling the family's legacy of banking greatness probably hurts worse.

Within a decade after signing on as a management trainee at TCB, Penick stepped into the president's role in 1977. The third generation of one of the state's foremost banking families, Penick was following the path of his grandfather, father and uncle.

It is a remarkable banking family tree.

Ed Penick Jr.'s grandfather, James H. Penick, married Mary Worthen, the daughter of Worthen Bank's cofounder, and started work at Worthen Bank beginning in 1919. By 1940, Penick's grandfather was elected president of the bank and launched four decades of Penick dominance.

Both his sons, Ed Penick, and James Penick Jr., succeeded him as president.

Ed Penick was promoted to Worthen's presidency in 1961 and became chairman of the holding company in 1974. Next came James Penick Jr. who was president of Worthen from 1974-1981.

"My father was a terrific man," says Ed Penick, 69. Penick left Worthen in 1987 and is now a consulting lawyer at the Eichenbaum law firm.

In a postdepression era still reeling from mistrust of banks, Penick says his father taught him that a banker's job was one of community service to help build business confidence and trust in bankers.

"The banker is the keeper of the excess capital of the community," Ed Penick says of his father's philosophy. "He can set the tone of the type of community better than any other person."

His sons were believers from a look at each of the Penick resumes which include award after award from civic clubs (Chamber of Commerce, Jaycees, Little Rock Boy's Club, etc.) and banking organizations (Arkansas Bankers Association, Federal Reserve Branch director, etc.).

"Who's going to build this town if you don't?" the elder Penick would ask his sons when they questioned the merits of community service, Ed Penick says. "He just believed in the basics."

But in the 1990s, banking is moving into a new era as regulators increasingly call the shots behind the scenes, Penick says. Modern day bankers are more numbers crunches than community leaders.

Penick's theory appears supported by a quick glance at CEOs at some of the largest banks in town and a lending climate still recovering from S&L abuses and a credit cautious Federal Reserve.

At First Commercial, Barnett Grace whose expertise is in financial acumen, not glad-handing leadership, is taking control of the chairmanship from Bill Bowen this January.

At Worthen, Chairman Curt Bradbury was an investment banker at Stephens before coming over in 1985 to help rebuild the post-Bevill Bresler Shulmann institution.

At OneBank, a conservative William Scholl has replaced the flamboyant M.D. Howell who led the bank into a $2.3 million loss in the first quarter of 1990.

At TCB, Birch's reputation as a tough loan officer has paid off. If Renaud doesn't return, the board of directors would probably look outside the bank for a successor - unless Birch convinces them he can handle the job.

The End Of An Era

For Ed Penick Jr., the question may not only be different styles, but also the end of the Penick family's banking dynasty in central Arkansas.

Until his father became Chairman Emeritus at Worthen in 1985 and eventually left in 1987, a Penick had been in Worthen's top management slot since 1941. Across the river, Ed Penick Jr. had been president of TCB for the past 13 years.

Both of Ed Penick Jr.'s two younger brothers are in banking, but neither has climbed as high as he has.

George Penick is a VP at Worthen, but is far from the top of the management pecking order, buried amongst 27 vice presidents. His other brother, Charles Penick, is president and CEO of TCB's $61-million-in-assets First National Bank of Conway County in Morrilton.

Neither can be called a banking force in central Arkansas.

For years, TCB and Worthen were closely associated by the friendship between Ed Penick and Frank Lyon Sr. - owner of TCB. Lyon was elected to the Worthen board in the early 1950s and TCB was nicknamed "Worthen North."

But with the breakup of the Lyon empire over the past few years and the apparent packaging of TCB for sale to the right bidder, the corporate decision as to who gets the top slot at TCB may depend more and more on hard-nosed banking skills than community public relations.

"Nice guys are a dime a dozen," says one banker.

And family dynasties don't last forever.

PHOTO : LOOKING FOR A SUCCESSOR: When Ed Penick Jr.'s title was changed in June from president of $545-million Twin City Bank to the newly created "vice chairman's" position, speculation first arose he was on the way out.

PHOTO : LOOKING FOR POSSIBILITIES: Ed Penick Jr. is searching for a new position since apparently losing his chance at succeeding CEO Terry Renaud, 61.

PHOTO : A BANKING DYNASTY: Ed Penick retired from Worthen Bank in 1987 ending a string of Penick family dominance that began in 1941.
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Title Annotation:includes related article; Ed Penick Jr., vice chairman of Twin City Bank
Author:Walker, Wythe, Jr.
Publication:Arkansas Business
Date:Dec 17, 1990
Previous Article:Image is everything for state, movie biz.
Next Article:"Arkansas Nickel" attracts cameras.

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