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S & L survivors beat bottom line.

New Ozark Institution Rises to Join 18 Profitable Thrifts

EVEN THE BANK REGUlators can't recall the last time a new savings and loan was chartered in Arkansas. That's what Larry Owen discovered when he and other investors began forming River Valley Savings Bank in Ozark more than 18 months ago.

The "de novo" institution was capitalized with $2.2 million and opened for business July 3. River Valley executives expect to report total assets of about $6 million for the quarter ending Sept. 30.

More importantly, the S&L will even show a small profit out of the chute, a nice accomplishment considering the high front-end cost of a start-up financial institution.

"We're tickled to death about that," says Owen, president of River Valley.

In fact, profitability once again has become the rule rather than the exception among the state's 19 remaining thrifts. All 18 in operation during 1992 ended the year in the black.

The roster of survivors reported combined 1992 profits of $27.7 million and total deposits of more than $4 billion.

But the number of S&Ls has dwindled considerably since 1980 when 76 institutions blanketed Arkansas. The number TABULAR DATA OMITTED had fallen to 36 at the end of the merger mania in 1986.

And by then, the newly created S&L giants like FirstSouth, Savers and First Federal of Arkansas were already in the twilight of solvency.

During the 1980s, the S&L designation became synonymous with insolvency as thrifts across the country crashed and burned -- primarily because of imprudent commercial real estate loans.

River Valley organizers opted to go with the savings bank moniker to avoid any unpleasant connotations from the savings and loan association label.

The same goes for eight of the 18 surviving savings and loans. Federal Savings Bank in Rogers, United Federal Savings Bank in Springdale, Security Savings Bank in Conway and Wynbanc Savings in Wynne.

Other S&L survivors like Heritage Bank in Little Rock, Superior Federal Bank in Fort Smith, Unico Bank in Trumann and First Financial Bank of El Dorado have even dropped the word "savings" from their institutional name.

Branching Out

River Valley has a shareholder base of 35 people, with no single investor owning more than a 10 percent block of stock. The organizers of the new S&L are:

Owen, former vice president of River Valley Bank & Trust; Mark Mizelle, a former state bank examiner from Conway; Alicia Dooly, a CPA and daughter of James Patterson, president and chief executive officer of River Valley Bank & Trust; G.C. Patterson, Dooly's grandfather, U.S. Marshall for western Arkansas and eastern Oklahoma and former head of the Arkansas Highway & Transportation Commission; Bill Harris, retired Wal-Mart Stores Inc. executive vice president; Jan Nielsen, Van Buren attorney; and Bill Carmack, executive of Carroll County Electric Cooperative.

The thrift initially was envisioned as a branch operation of River Valley Bank & Trust in Lavaca. Two branches of failed S&Ls were purchased from the Resolution Trust Corp., but no deposits or loans were part of the deal.

The bank tried to invoke the emergency override clause that would allow it to operate the former branches of the Barling branch of First America Federal Savings Bank of Fort Smith and the Ozark branch of First Federal of Arkansas in Little Rock.

However, the Arkansas State Bank Department said no, and River Valley filed an unsuccessful "friendly" lawsuit to test that decision in court.

A courtroom victory by River Valley would've created a loophole for banks to effectively branch into a new county by purchasing S&L assets instead of S&L deposits.

"We were willing to test it, and we understand that it was going to cause problems for the state branching law," Owen says. "But we just wanted to be in Franklin County. We told the people we were committed to coming to Ozark, so we had to go with a federal savings and loan charter."

Unlike the branching restrictions placed on banks, River Valley Savings can branch anywhere in Arkansas. But as a savings institution, the thrift must have at least 65 percent of its qualified loan portfolio devoted to housing-related loans or investments.

The S&L legacy of specializing in home loans persists to the point where even today some borrowers think that's the only type of loan that can be had at a thrift.

"We still get people who come and ask us if we make car loans," says Leon Brinkley, chairman and president of Unico Bank in Trumann.

Unico's story is different than the other thrifts doing business today. It was taken over by the RTC and recapitalized by new investors.

"It's a resurrection story, I suppose, and not really a survival story," Brinkley says. "This institution was bought from the RTC in June 1990."

Unico has operations in three Poinsett County cities (Harrisburg, Marked Tree and Trumann) and opened a new branch in Paragould on Sept. 30.

The S&L also has the distinction of making the highest return on deposits among its fellow thrifts -- 2.78 percent.

"It's no secret that you have to make loans to stay in business," Brinkley says. "You make sure you have an interest spread and then don't make bad loans. I've been in the commercial banking business for 13 years, so I'm almost running it identically to a bank."

His bank experience came from operating institutions in three Missouri towns within a 60-mile radius of St. Louis -- Irondale, Potosi and TerreDulac.

But the acquisition of Unico provided a homecoming of sorts for Brinkley, who grew up in the Monette-Paragould area of northeast Arkansas.

The same could be said of Holiday Inns Inc. founder Kemmons Wilson, who was born in Arkansas but grew up in Memphis, Tenn. Backed by his fortune, Federal Savings Bank began on Jan. 7, 1987, with the acquisition of West Memphis Federal Savings and Loan.

"We're the culmination of three insolvent thrifts," says Ted Gammill Jr., CEO of Federal Savings.

First Federal Savings & Loan in Rogers was added on Sept. 7, 1988. The main headquarters of First America Federal Savings Bank in Fort Smith along with a Fort Smith and Bentonville branch were bought on Dec. 7, 1990.

"We got branching rights into the state of Tennessee as a concession in the Rogers acquisition," Gammill says. "We ended up buying, oh, about $150 million in First America deposits for a whopping $5,000.

"The retention rate has been really good. We've only lost about 15 percent. Most of the employees that the customers saw day to day were retained, and that's where much of the loyalty is."

For a time, Federal Savings Bank enjoyed the distinction of having the lowest interest rate among credit card issuers in the nation.

The distinction of across-the-board profitability is now the norm for all Arkansas S&Ls. As the consolidation trend continues among banks, perhaps other thrifts and their branches will begin appearing to add to the competitive mix.
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Title Annotation:Arkansas' remaining 19 savings and loan institutions
Author:Waldon, George
Publication:Arkansas Business
Date:Oct 4, 1993
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