Arkansas banks find gold in FDIC fire sales

Although only one financial concern in the Natural State has landed on the FDIC’s “failed banks” list in more than two years, Arkansas financial institutions have emerged as major players in keeping America’s banking system afloat.

Of the 139 Federal Deposit Insurance Corp.-insured institutions to crash in the past year, Arkansas banks have snapped up 10 failing lenders in six states with assets of more than $3.1 billion and customer deposits worth another $2.8 billion.

And Arkansas banking executives seem intent on doing more shopping in Florida and other states as the Federal Deposit Insurance Corp.’s fire sale continues unabated – where shuttered banks and saving and loans can be purchased as cheap as ten cents on the dollar.

Simmons Chairman and CEO J. Thomas May said the Pine Bluff bank would continue to look for acquisition opportunities over the next several quarters following the recent purchase of Olathe, Kan.-based Security Savings Bank at a discount price of only $46.5 million.

“This acquisition is the second of several that we anticipate making over the next two to three years, which is the reason we raised $70.5 million in additional capital…" May said. Simmons entered a loss-share deal with the FDIC on Oct. 15 to purchase Security Savings at a cost of only 10.9% of the Kansas banks’ total assets of $428 million.

Home Bancshares CEO Johnny Allison said that his bank is also well-positioned after acquiring several Florida banks during a third quarter shopping spree.

"The FDIC acquisitions of Coastal Community Bank, Bayside Savings Bank and Wakulla Bank are strong opportunistic acquisitions for our company allowing us to expand our footprint into the Florida Panhandle,” Allison said after the bank reported robust third quarter earnings last week. “We continue to uphold our status as a ‘well-capitalized’ financial institution positioned to take advantage of FDIC deals as they become reasonably opportunistic.”

In particular, Arkansas banks seem to have found a feeding frenzy for failing financial firms in Florida, where 27 banks have gone out of business so far in 2010. Together, Conway-based Home Bancshares and Bank of the Ozarks have assumed the assets of six failing banks, or nearly one-fourth of the FDIC financial failures in the Sunshine State.

But Little Rock-based Pulaski Bank and Bentonville’s Arvest Bank were the first financial concerns with Arkansas ties to make deals with the FDIC receiver in 2008 and 2009, respectively.

Pulaski Bank acquired the assets of ANB Financial from the FDIC’s failed bank list on May 12, 2008, following the collapse of the Northwest Arkansas bank that had about $2.1 billion in assets and $1.8 billion in total deposits. Pulaski Bank was acquired in February 2007 by Lafayette, La.-based IberiaBank.

Then after a quiet period of nearly 19 months, privately-held Arvest acquired SolutionsBank of Overland Park, which at the time held $511 million in assets and $421 million in deposits. However, Arvest did not pay a premium for the Kansas bank, negotiating a loss-share deal with the federal receiver to acquire the Kansas City area bank for approximately $411.3 million of SolutionsBank’s assets.

Like its Arkansas rivals, Louisiana-based IberiaBank has also found gold in Florida. The Pulaski Bank parent completed deals with the FDIC in November of 2009 to assume all the assets and deposits of Orion Bank in Naples, Fla. and Century Bank of Sarasota, Fla.

The FDIC insures deposits at the nation’s 7,830 banks and savings and loans. On Friday, Oct. 22, the FDIC was appointed receiver for seven banks across the nation, including two each in Florida and Georgia.

First Arizona Savings of Scottsdale, Ariz., was the last bank closed by the federal Office of Thrift Supervision on Friday, but the FDIC has been unable to find a buyer and customers of the failed lender stand to lose $5.8 million in uninsured deposits.

Besides its failed banked list, the FDIC creates reports on "problem or troubled banks" but does not make that information available to the public. In the second quarter, the number of institutions on the FDIC’s "Problem List" rose from 775 to 829. However, agency chairwoman Sheila C. Bair downplayed the results and cited some of the best quarterly profits for the banking sector in almost three years.

"Without question, the industry still faces challenges. Earnings remain low by historical standards, and the numbers of unprofitable institutions, problem banks and failures remain high," Bair said. "But the banking sector is gaining strength. Earnings have grown, and most asset quality indicators are moving in the right direction."

Still, the number of "problem" institutions is the highest since March 31, 1993, when there were 928 banks at risk of failure. And the total assets of those same financial institutions declined from $431 billion to $403 billion in the second quarter, moving a number of unnamed banks across the nation nearer to collapse.

The FDIC would not comment on whether any Arkansas banks are on that problem bank list.