ANB Fails, Pulaski Bank Acquires Assets

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“It sucked.”

That was Dan Dykema’s succinct summation of his bank’s first quarter performance to the Business Journal on May 8.

The former chairman and CEO of ANB Bancshares Inc. followed by saying, “I’m kind of bullish on the second quarter.”

Whether he knew it or not, the bank had already failed. About 24 hours later, officials from the Federal Deposit Insurance Corp. entered ANB Financial’s headquarters in Rogers and took control of operations, per the Office of the Comptroller of the Currency.

Bullish statements were common from Dykema even in the face of $589.3 million in nonaccruing loans as of March 31 and losses of $120.4 million at the end of 2007. His classification of a June 25 public enforcement action from the OCC as “innocuous” was met with raised brows and lowered jaws by industry experts.

For the past year, it has been hard to tell if Dykema was playing a strategic media defense or was simply delusional.

At any rate, ANB is the first full-fledged casualty of the overbuilt – and some would say over-banked – Northwest Arkansas market.

What’s left now is to pick up the pieces – about 2.1 billion of them.

ANB was the fourth largest Arkansas-chartered bank, founded in 1994 by Dykema and other former employees of First National Bank of Bentonville. It was founded as Arkansas National Bank NA, but the name was changed to ANB Financial NA in 2005 to help with marketability outside the Natural State.

ANB earned a total of $100.9 million between 1994 and 2006, but lost $120.4 million in 2007 alone (according to the most recent data available from the bank’s call reports, which have been reposted twice since the end of the year).

Its total nonperforming loan portfolio ballooned 900 percent from $57.9 million as of March 31, 2007, to $589.3 million a year later.

Fortunately for many former employees of ANB, Iberiabank Corp. of Lafayette, La., coveted the Northwest Arkansas market and has already made a good start with the cleanup.

Through its Little Rock-chartered thrift, Pulaski Bank and Trust Co., Iberiabank Corp. will spend about $451 million acquiring most of ANB’s branch infrastructure and its insured deposits, though the final purchase price depends on the appraised value of the assets.

That transaction is fairly straightforward and the dust will settle quickly on the day-to-day retail operations as Pulaski Bank begins building relationships with its newest customers.

All the other stuff is still pretty messy as is what ultimately caused the failure: about $1.8 billion in loans, of which about $1.59 billion are tied to real estate.

(Click below to see an Arkansas Business on THV report on ANB.)


No More

The morning after the failure, the parking lot of the holding company’s Rogers headquarters was jam-packed with cars. Sunshine illuminated one of ANB’s billboards along Interstate 540; it read “No Nickels. No Dimes. No Nonsense.” and served as a mocking reminder for the bank’s 316 former employees. There obviously was some nonsense at the management level of ANB.

It may be a couple of years before total economic impact can be placed on ANB’s failure but it will probably creep into the $300 million range.

David Barr, spokesman for the FDIC, estimated the failure would cost the deposit insurance fund about $214 million, but he said that is “a moving target.”

Great Southern Bank of Springfield, Mo., charged off $35 million in stock loans and other loans it had with ANB on March 31. No word on what percent of GSB’s stock holding was in the bank.

Joe Turner, president and CEO of GSB wouldn’t speculate on being able to recoup any of that charge-off.

There was about $39.2 million in uninsured deposits at ANB, a figure the FDIC will try to cover if its accountants find the funds. One official with the FDIC said, on average and based on history, uninsured depositors will get back about 65 percent of their money.

According to ANB’s annual report filed with the Federal Reserve Bank of St. Louis, about 18 percent of its stock was dedicated to an employee stock ownership plan, so ex-employees that were banking their future wealth on the company will likely never see that money.

Most of the rest of the stock appears to have been held by GSB and many of the directors of the bank, but the Fed redacted parts of the report and a true count of the shares won’t be known until later.

And though there’s no evidence of it, there is the possibility the FDIC could find negligence or fraud. If that happens, it will sue the individuals involved and the market may see cases drag out for years to come.

“This was a good bank that got caught up in some unfortunate circumstances,” said one former employee who would talk only on the condition of anonymity.

“We always new we had issues but honestly, I thought we were going to work through it. It was a surprise to us,” said another former employee.

There has been a police presence at all locations since the closure.

One of the employees, who now works for Pulaski Bank, said there was a lot of activity the following week, but mostly with customers checking in and not necessarily trying to withdrawal funds.

Since ANB had three offices out West – St. George, Utah, Jackson, Wyo., and Idaho Falls, Idaho – bankers have been wondering where its past due loans were located.

One FDIC official told the Business Journal that “a lot” of the bank’s problem loans were “out West” and some were in Arizona.

That’s not surprising since employees at the St. George office boasted in the spring of 2006 that the office had $375 million in loan commitments and that they had seen its asset size “grow to over $150 million” just a year after it opened.

Kevin Mukri, a spokesman for the OCC, couldn’t speak about specifics on the ANB case, but said the agency continues to work with banks until the point of no return, so apparently some people at the OCC believed ANB might have had a fighting chance through 2007.

The Pulaski Deal

The FDIC’s Barr said four different banks bid on parts of ANB’s assets. The bids closed May 6, so banks had to perform their due diligence prior to that.

Daryl Byrd, president and CEO of Iberiabank, said he found out his bank had won the bid late in the day May 7.

The move was consistent with Iberiabank’s messages to the public since it entered Arkansas, he said.

Iberiabank purchased Pulaski Investment Corp. of Little Rock on Jan. 31, 2007 for about $130 million and Pocahontas Bancorp Inc. of Jonesboro for about $75 million on Feb. 1, 2007.

The transactions resulted in a 51.5 percent boost in IberiaBank’s total assets, which had been less than $3 billion as of Sept. 30, 2006, to almost $4.5 billion a year later.

Byrd admits the ANB transaction was a good buy. The bank paid a premium of 21.5 percent for Pulaski Bank’s deposits, and a 3.9 percent premium for the Pocahontas deposits. ANB’s went for 1.011 percent and Iberiabank will end up paying only 95 percent of the appraised value of the rest of the assets like buildings, fixtures, furniture and equipment.

Pulaski Bank has a 90-day option to purchase the premises and FF&E, so it still may not end up with all the branches, though Byrd and Arkansas market CEO Robert Head said they both like the distribution of the branches.

“Our goal was to be in Northwest Arkansas and have a decent branch structure, and we did that with this transaction,” Byrd said.

Byrd and Head personally surveyed every ANB branch and looked at traffic flow and thought about future expansion plans in the Benton and Washington county market.

Byrd wouldn’t elaborate on future plans, but did not rule out building more office or acquiring another bank.

But why enter a market that just had a bank failure?

“We think the underlying economy in Northwest Arkansas is terrific, it’s just a little overbuilt right now,” Byrd said. “In the interim there are plenty of consumers who need [banking services].”

“I think we’re just the right time for the party,” Head said, noting his new team won’t have to worry about a lot of loan baggage. “All we have to do is focus on attracting new customers.”

Though Head lived in Louisiana for some time, he’s a native of Jonesboro and is a graduate of the University of Arkansas.

Byrd said Head has already made inroads with commercial and industrial clients in Northwest Arkansas and that while they are waiting on the real estate market to turn around they will focus on those types of accounts.

“We think this will be positive to earnings in months, not quarters,” Byrd said.

The Receivership

One man’s trash is another man’s opportunity.

Robert Schoppe is the FDIC’s receiver in charge on the ground in Rogers and Dykema’s direct phone line now rings to Schoppe’s voicemail.

On the morning of May 15, Schoppe said things were going smoothly and that the FDIC was beginning to release some its 120 to 150 employees back to their home office locations.

Schoppe said that it will take about six months for the 25 to 30 FDIC people left at the end of May to work through the rest of the books and package and sell ANB’s loans.

Loans will be bundled in a way that is attractive to potential investors and be sold through one of two clearinghouses.

Schoppe said he hasn’t seen any evidence of fraud or cooked books, but that an investigative team always looks into things when a bank is closed.

(Arkansas Business editor Gwen Moritz and assistant editors Robert Bell and Katie Stockstill contributed to this report.)