Bank of Eureka Springs Forms Holding Company

On March 26, Eureka Bancshares Inc. was officially approved as a holding company for the 89-year-old Bank of Eureka Springs. The holding company was formed in May 2000, but it had to be approved by the Federal Reserve Bank in St. Louis and the state banking department.

The holding company can buy and sell its own stock, will be able to diversify business operations in ways that a traditional bank can’t and will allow John Cross to efficiently pass the family business down to his four children.

The Bank of Eureka Springs is one of the last family-owned pioneer banks in Arkansas. It survived the Great Depression, which forced several banks in Eureka Springs to close.

The bank was founded in 1912. John Cross’ grandfather, Claude Albert Fuller, bought controlling interest in the bank in 1929 and was president until his death in 1968, when John Cross took over.

John Cross, 66, began serving on the bank’s board of directors in 1956 and has been involved with the bank in one capacity or another ever since. During that time, the bank’s total deposits have grown from $1.2 million to about $80 million.

Although John Cross is president, he said his son, Charles Cross, the bank’s executive vice president, is now in charge of things.

“He’s the future. I’m the past,” John Cross said.

Diversification

Federal regulators discourage banks from getting involved in other businesses such as real estate, but, as a holding company, Eureka Bancshares can form its own real estate company.

Over the years, the bank purchased land near its downtown office to use for expansion. But now, it appears that expansion will take place at an eight-acre location on U.S. Highway 62 and at branch locations instead.

“We are already landlords down here, renting out two gift shops, a restaurant, a house and a parking lot,” John Cross said.

The Gramm-Leach-Bliley Act of 1999 repealed most of the 1933 Glass-Steagall Act and the 1956 Bank Holding Company Act, which separated commercial and investment banking from insurance. Glass-Steagall, a product of the Great Depression and the 1929 stock market collapse, was designed to fragment America’s financial institutions to prevent another domino collapse.

Congress decided in 1999 that competition between financial sectors is even better.

So in addition to possibly going into the real estate business, through two planned “financial centers,” Eureka Bancshares will be able to expand the product offerings it already has, including investment and brokerage services, asset management, real estate development and insurance services.

Construction

The eight-acre lot on Highway 62 was previously home to the Gem of the Ozarks, a country music show building. The Crosses hope construction will begin before the end of the year on the new financial center and an adjacent business park at the site. They hope to have the new bank open by the fall of 2002.

Specific plans haven’t been drawn up, but Charles Cross said the new bank location will likely be more than 5,000 SF in size — three times larger than a nearby 1,800-SF branch bank.

In addition, Eureka Bancshares also plans to build a financial center at Holiday Island, seven miles north of Eureka Springs.

Stock Exchange

John Cross owns the majority (536 shares) of the 4,000 shares in the holding company. Currently, the shares are worth about $2,200 each, he said. Eureka Bancshares has about 30 shareholders and $8.7 million in capital.

The folksy John Cross said it’s difficult to think about the day when he retires.

“You know what the old Chinaman told me years ago?” he asked. “He who rides a tiger cannot dismount.”