U.S. Treasury buys Little Rock-based Onebanc shares at auction, opens door for bank sale

One Bank & Trust also known as Onebanc remains in the hands of the U.S. Treasury Department after the government entity purchased 344,577 shares of Onebanc at the auction held Monday (May 8) in Washington D.C.

The stock represents a 99% stake in the struggling $300 million bank. The shares were seized by the U.S. marshals in late 2015 because of the outstanding debt held by holding company OneFinancial. The shares have been held in escrow since that time.

“The sale is another positive development for the Bank and no customers or vendors should be concerned by this latest step in the legal process. Nothing about the sale of this stock affects Onebanc’s daily operations, employment or services to our customers or community,” said Onebanc CEO Jerry Pavlas.

This sale was necessary because of fraudulent acts by former bank management in relation to the Treasury’s TARP funding to the bank in 2009 which totaled $17.3 million. Fraud was detected in connection with how some of the TARP funds were used by former bank leader Layton Stuart who diverted $1.5 million of the proceeds for his own personal use. The full $17.3 million is still owed to the U.S. Treasury for the TARP funding but Stuart’s estate was sued by the Treasury in 2015 recovering $3.8 million related to a $4 million False Claims action.

Pavlas said the stock sale was conducted in full cooperation with the U.S. Treasury Department and bank regulators to provide absolute certainty to the federal government’s legal standing as the majority owner of the bank. The action also resolves the issue of ownership and releases Little Rock-based Onebank from the burdens of holding company liabilities.

This move was also necessary to clear the way for the Treasury to find a new buyer for the bank. At least four Arkansas banks have expressed interest in Onebank – Arvest, Home Bancshares, Bank of England and First Financial Bank of El Dorado. Private equity firm EJF Capital of Arlington, Va., was also interested in the bank.

Onebanc execs said they are grateful to the U.S. Treasury and U.S. Department of Justice and regulators for the support in the complex issues relating to the bank’s ownership and divestiture from the holding company where the fraud was perpetrated.

The Treasury’s outright ownership of Onebanc clears the way for it sell to the highest bidder. The bank does need to shore up its capital levels and any of the mentioned suitors can do that.

Tim Yeager, Arkansas Banker’s Chair at the University of Arkansas, said bank’s capital levels are low with just over $12 million in equity capital at the end of 2017. The bank has been ordered to keep total capital at least 12% of its risk-based assets, a threshold it’s well below.

Yeager and his colleague John Dominick, a UA bank professor and industry consultant, said bank does offer any of the suitors a base of local deposits and some high profile branch locations in the Little Rock market. The banking professors say the Treasury will not hold the shares long term and expect the bank will be sold in the next few months.