Focus on People Built UHC Boss? Portfolio

Don Pitts never forgot the working man.

Even with a portfolio of at least 12 companies that employ 305 people and untold additional investments, Pitts is as apt to start his day picking up trash in front of Lokomotion Family Fun Center as he is to be evaluating million-dollar deals in United Bank’s loan committee.

He is the chairman of United Holding Co. in Springdale and president and chairman of United-Bilt Homes Inc. of Springdale and Shreveport, La.

Friends and competitors talk about the Goshen native with the kind of reverence usually reserved for deacons or quarterbacks. But the soft-spoken owner of financial services, construction, lumber, insurance, advertising and amusement park firms with combined revenues of more than $50 million won’t take credit for diddly squat. He’s as down to earth as green onions.

“[The executive team] is on the same level as everyone else who works here,” Pitts said. “If that means cleaning up a bathroom or unloading a truck, then we’re available.”

It’s that attitude, say executives at UHC, coupled with a possible acquisition or two that will help United Bank reach its asset goal of $500 million by 2012. The slogan used by the $124 million Springdale thrift, after all, is not, “It’s All About Me.”

Craig Young, UHC’s CEO and United-Bilt’s executive vice president, said “Don manages by walking around” and exemplifying the federally chartered savings and loan’s slogan, “It’s All About ‘U.'”

“That’s what Don is about,” Young said. “He will go down to the amusement division in Fayetteville [Lokomotion] and visit with customers. Most of them don’t even have any idea who he is. He wants to make sure that if your child has a birthday party at Lokomotion, that it’s something memorable for them.

“He wants a good job done down to the cake. We’re not just there to ring the cash register.”

Hayden McIlroy, the former chairman of McIlroy Bank & Trust Co. in Fayetteville (now part of Arvest Bank), said he has known Pitts for more than 40 years. McIlroy, who now primarily lives in Dallas where he is involved in venture capital and other investments, said Pitts, 65, has always been known for integrity.

“As far as I am concerned, there’s not anyone with more character than Don Pitts,” McIlroy said. “I find his integrity and honesty to be beyond reproach. Don’s under the radar screen a little bit because he tries to be, but he’s probably helped a lot of people others aren’t even aware of.”

With the growing popularity of Learjets among Northwest Arkansas’ executive set, the plane shared collectively by Pitts’ companies probably says as much about him as anything. It’s a 1974 Piper Aztec airplane that Greg Langham, the organizations’ chief information officer, can pilot to Shreveport in 1.5 hours or to Houston in three. A million-dollar Learjet can reach Houston from Springdale Municipal Airport in 72 minutes.

Young said the Piper aircraft “works just fine” for the United operation, and that when the group does trade up it will probably be for some kind of low-end 1980s model.

UB Competitive

Hank Breshears, UHC’s president, said Pitts’ commitment to customers packaged with a unique mortgage loan product is what’s behind the staggering success of UB Mortgage Co. Its secondary market loan production has grown from $23 million with a staff of four in 2001 to $57 million with a staff of 56 just through April 20 of 2004.

During last year’s low-interest-rate bonanza, UB Mortgage did $72 million worth of loans. That does include the opening of a Little Rock production office that now employs 36 mortgage lenders, but that 3,500-SF office didn’t even get cranked up until November.

In addition to its corporate culture, Breshears said, the United organization has another secret weapon. About the same time it opened the satellite mortgage origination facility, the firm introduced to Northwest Arkansas its UB 100 product — a 30-year, fixed-rate note that enables UB Mortgage to lend 100 percent of a home’s value without requiring mortgage insurance. Typically, secondary market lenders require the additional insurance for loans that are 80 percent or more of a home’s value, Breshears said.

But a nationally prominent financial company (that Breshears declined to name) has partnered with UB Mortgage to bring its product to Benton and Washington counties.

The net is that a $150,000 home financed on a 30-year, fixed-rate UB 100 note at 5.6 percent would see a monthly principal and interest payment of $861.12. The two largest national secondary market competitors that write mortgages for Northwest Arkansas banks were charging 5.877 percent and 7.375 percent in April. Including principal, interest and mortgage insurance, that would make the same customer’s monthly payments $1,024 or $1,036.

Breshears said as long as borrowers have a fair credit score, they can take advantage of what is “one of the best mortgage rates in the nation.”

“We have added a UB Mortgage office in Rogers with five people in it, and it’s adjacent to a lot where we’re going to build a United Bank location on Walnut Avenue,” Breshears said. “We’re also setting up to do in-house servicing of loans we sell on the secondary market which customers like. Our core lending has always been in mortgage lending, but we’ve started enough things lately that we’re going to spend some time now making sure they’re all running right. We want the business running but not running away.”

Breshears said United Bank, largely a Springdale community bank with two of its three existing branches and most of its business in that city, will maintain its Springdale focus. But in the next few years it will shop some potential acquisitions that could give it a more regional base. The organization has made some conservative bids in recent years, he said, and it will continue looking for deals that make cash and culture sense.

Roots of his Raising

Jim Lindsey is chairman of The Lindsey Cos., a diversified group of real estate-related sales, development and management firms. He’s also a University of Arkansas trustee. Lindsey said he has known Pitts for more than 30 years and it’s the banker’s business sense and genuineness that makes the United organization a winner.

“Don is a man of immense integrity and magnanimous goodwill, who is extremely wise and very hard working,” Lindsey said.

Pitts probably comes by his work ethic honestly. About 100 years ago, his grandfather, Lester Johnson, used to walk eight or 10 miles with his tools to town, stay all week building houses and then walk home on the weekend. Johnson built a lot of homes in Hot Spring, Madison and Washington counties, Pitts said.

Growing up on the Goshen farm his family homesteaded in the 1800s, Pitts showed cattle through the 4-H Club and upon graduation went to work for his cousin, Ottis Watson, managing his Watson’s Grocery Store in Fayetteville. Watson started building track homes, and Pitts’ brushes with building made him swap his apron for a tool belt.

Before long, Pitts went to work as a salesman in the Fort Smith offices of United-Bilt, a company founded in 1958 in Shreveport, La. His first year, Pitts sold 54 units and won salesman of the year. He was 21.

He helped open a Fayetteville office and later became district manager. Over the years, he acquired more and more stock in the company and by the early 1980s he was able to buy out the other partners. He left the corporate offices in Shreveport — where he also owns a lumber yard, lumber brokerage and other businesses — because it’s in the heart of lumber country (see chart).

United-Bilt delivers the biggest portion of the homes it builds on 18-wheelers and “stick builds” them onsite. They’re not typical prefabricated homes but units designed for uniform quality with everything from granite countertops to crown molding with a variety of sizes. The company has always been a construction and mortgage lender to its clients, traditionally using as collateral the piece of property its homes were built on.

Pitts said although banks didn’t cotton to making rural small-lot home loans back in the 1960s, the lending experience with United-Bilt made his segue into banking easy.

“Banks back then didn’t want to service a loan out in the county unless it was attached to a big farm,” Pitts said. “But we were already in the rural communities, and because we were out there building homes it was no problem servicing them. We became a conduit to the banks, and never really had any problems.

“I was recording a mortgage one time over in Madison County and I had gone to school with the circuit clerk. She said, ‘You’re going to get into trouble over here. These people can’t pay for these houses, and they’ll never pay you.’ But that hasn’t been the case.

“Rural Washington, Benton and Madison counties have been a great place to loan money.”

United-Bilt now has 16 sales offices and expects to open another in San Antonio, Texas, soon. Oklahoma City and Austin, Texas, are other likely targets for future United-Bilt operations, Young said.

Companywide, United-Bilt has built more than 30,000 homes in its history and Pitts said it now averages about 800 per year.

What Happens in Vegas …

Pitts said he was attending a national homebuilder’s show in Las Vegas in the early 1980s when a speaker from the bankers association made a prediction. Towering rates had made financing so difficult, the speaker thought the future was going to require that banks partner with builders to get construction loans done.

“I got to thinking if that’s where we were headed, that maybe I’d just buy a bank so we’d be set up for that,” Pitts said. “It never came to pass, but that’s how I got into banking. I came home and started looking for a small charter. This was before the savings and loan industry had all its problems, and I found a little institution in Ashdown.”

Pitts bought the Little River Savings & Loan and by 1986 changed its name to United Federal Savings Bank. In 1987, he bought what has become United Bank’s headquarters on Springdale’s Thompson Avenue from now defunct First Federal Bank of Little Rock and in 1989 relocated to there. The 1991 acquisition of American Savings & Loan on Emma Avenue, a thrift owned by the Tyson family, catapulted United into being a major player in town. Pitts said he’s always done a lot of banking and other personal business in Springdale.

The thrift and holding company occupy what’s become a 45,000-SF corporate facility on three acres. It’s a couple miles north of United-Bilt’s Fayetteville location on College Avenue which sits on 15 acres with Lokomotion. In 2002, United Bank made its first out-of-town foray with the opening of a 3,000-SF, $1.85 million branch on Fayetteville’s Joyce Boulevard.

Hillbilly Holler Corp., which does business as Lokomotion, is another story. A go-carts, bumper-boats, putt-putt golf, arcade, laser tag and party mecca, the facility was originally the home of the University of Arkansas’ live “Big Red” Razorbacks mascot and a maze of horseback riding trails. Pitts shook his head and said he didn’t really know how he wound up being a go-cart magnate, but he’s enjoyed driving the fast “pro-track” racers like everyone else.

Building Communities

Even when rates climbed to 18 percent in the early 1980s, Pitts never raised his rates at United-Bilt above 12. Bankers asked him what he planned to do to stay in business, and Pitts told them rates would come back down because the industry couldn’t survive if they didn’t.

“There were times when I wondered if we’d make it, but we rode out the storm,” Pitts said.

Pitts, who along with his wife Patty has five children, said he learned early on that there’s more to banking than just taking profits. The reason he enjoys what he does, Pitts said, is because through his diverse group of companies he gets to help build communities and help people reach “the American dream” of owning their own home.

One of his best stories is about getting his own first bank loan at the age of 12 from Herbert “Buck” Lewis, the father of John Lewis, who’s the well-known chairman and president of The Bank of Fayetteville N.A. The money, Pitts said, was “probably less than $500” and for some 4-H cows.

“My Daddy, Ray Pitts, signed for me but he made me sign the note, too,” Pitts said.

John Lewis said there will always be a place for community lenders like his bank and United Bank, which offer local boards and help for local small businesses.

“Don Pitts has been honest ever since he was 12 as far as I know,” Lewis said. “I admire him. He’s a first class gentleman and his influence pervades his organization. They target about the same segment we do, and we were established to help what ever income level needs us and United does the same.

“There are some banks that won’t make loans under a certain amount, but United’s not that way and we’re not.”

Summary: United Holding Co. and United-Bilt Homes’ Don Pitts built a diversified portfolio of companies by focusing on the little man.

Thrifty Survivors
Here’s a look at the seven thrifts remaining in Arkansas with dollar figures in thousands:

Bank — City — Assets 2003 — ROA % — Offices

First Community Bank — Jonesboro — $744,301 — 1.33% — 25
First Federal Bank of Arkansas FA — Harrison — $690,443 — 1.60% — 14
Heartland

Community Bank — Camden — $231,078 — 0.21% — 4
United Bank* — Springdale — $123,973 — 1.52% — 3
Benefit Bank* — Fort Smith — $99,866 — 1.52% — 1
Priority Bank* — Ozark — $37,157 — 3.05% — 1
Corning Savings & Loan Assoc. — Corning — $15,586 — 1.09% — 1
Totals — — $1,942,404 — — 49
Average — — $277,486

*Sub chapter “S” corporations.
Source: Federal Deposit Insurance Corp.