LITTLE ROCK — First Southern Bank of Batesville was closed by state regulators Friday before being taken over as part of an agreement between the Federal Deposit Insurance Corp. and a Missouri bank.
Southern Bank of Poplar Bluff, Mo., assumed all the Arkansas bank’s $155.8 million in deposits and $152.8 million of the bank’s $191.8 million in total assets. The rest of the bank’s assets will be held by the FDIC, according to a news release.
In an unrelated deal, Bank of the Ozarks announced Friday that it purchased Chestatee State Bank in Dawsonville, Ga., at a discount, acquiring the failed bank’s $240 million in assets and assuming about $240 million in deposits.
First Southern’s two branches will reopen as Southern Bank during normal business hours today, with First Southern depositors automatically becoming Southern Bank depositors.
Candace Franks, the Arkansas bank commissioner, said the state Bank Department’s takeover of First Southern was not a reflection of economic conditionsin Arkansas.
“This instance was not the result of poor-quality loans but the result of an imprudent business relationship between First Southern Bank and one individual,” she said.
Kevin Lewis, whose PA Alliance Trust was the majority owner of First Southern, was sued by another Arkansas bank for $7.7 million in defaulted loans secured by First Southern stock. The suit, brought by First State Bank of Lonoke, alleged that First Southern’s financial stability was “greatly in jeopardy.”
The FDIC said in the release that the deal will cost the agency $22.8 million and the acquisition was the “least costly resolution.”
Randy Dennis, president of DD&F Consulting Group in Little Rock, said one reason the FDIC might have retained some of the assets is if theywere “questionable.”
“It’s not unusual, if there’s questionable assets, that the FDIC would retain those as part of the acquisition,” he said.
When asked last week ifFirst Southern was in danger of closing by the end of that week, Chief Executive Woody Castleberry said, “No, that won’t happen that quickly, if ever.”
Castleberry could not be reached at his home or at the bank Friday evening.
Lewis and his businesses have been sued by two other banks in recent weeks regarding alleged defaulting on loans, and another bank foreclosed on his west Little Rock home.
Chestatee State Bank, purchased by Bank of the Ozarks, is one of the 154 banks that have failed this year in the nation, the most since the savings-and-loan crisis two decades ago. This was the fourth acquisition Little Rockbased Bank of the Ozarks has made this year.
Bank of the Ozarks reached an agreement with the FDIC to purchase the bank’s assets at a $34.8 million discount. The FDIC will also reimburse Bank of the Ozarks for 80 percent of the losses it may incur.
Earlier this year, Bank of the Ozarks bought Horizon Bank in Bradenton, Fla.; Unity National Bank of Cartersville, Ga.; and Woodlands Bank in Bluffton, S.C.
Dennis of DD&F Consulting said that expanding in Georgia has been a profitable strategy for Bank of the Ozarks.
“They’re very comfortable with that region,” Dennis said. “They buy these banks at good prices. If you look at their earnings, it’s been a very prudent strategy.”
Bank of the Ozarks has $3.2 billion in total assets. It has earned record net income levels for nine consecutive years through 2009.
Sheila Blair, executive vice president of Bank of the Ozarks, said the bank’s expansion plans are ongoing and Georgia banks have been a good fit.
“We found there were many similarities between our Georgia and Arkansas markets,” Blair said.
Other Arkansas banks buying failed banks this year include Home BancShares of Conway with six, Simmons First National of Pine Bluff with two and Arvest Bank with one.
Information for this article was contributed by David Smith of the Arkansas Democrat-Gazette and by Marcy Gordon of the Associated Press.
Business, Pages 29 on 12/18/2010