Heartland, Onebanc End 1Q in the Red

Two Little Rock lenders continue to battle through losses in search of a return to sustained profitability: Heartland Bank and One Bank & Trust.

What’s on the books and looming in the wings at the two struggling lenders?

Heartland Bank charged off $5.7 million in bad loans and recorded nonaccrual loans of $28.9 million and $7 million in loans 30-89 days past due during the first quarter.

Heartland reported $5.6 million in loan loss reserves and equity capital of $18.2 million as of March 31.

The $205 million-asset lender has ridden a rocky road for earnings for the last six quarters.

Heartland lost nearly $2.4 million in the first quarter.

At One Bank, nonaccrual loans totaled $5.5 million, a $2.3 million increase since Dec. 31. Loans 30-89 days past due stood at nearly $4.3 million.

As of March 31, the $298 million-asset lender carried a loan loss reserve of $3.1 million and total equity capital of $10.4 million.

Quarterly operational losses have dominated One Bank’s performance since Layton "Scooter" Stuart was swept out as CEO in September 2012 and Jerry Pavlas was ushered in to clean up the bank.

During the past five years, One Bank’s ability to turn a profit lending money has dwindled, but the size of its payroll hasn’t changed.

In the first quarter of 2012, the bank recorded net interest income of $3.8 million.

For the recent three months ending March 31, One Bank reported net interest income of $2 million.

Five years ago under Stuart, salary and benefits during the first quarter totaled more than $1.7 million when the headcount of staffers was 96.

Under Pavlas, the roster of employees stood at 72 during the first-quarter census in 2017.

Despite a 25 percent cut in staffing during the past five years, the tally of salary and employee benefits remains at more than $1.7 million.

Heartland and One Bank are both operating under regulatory agreements.

Improving their eroding capital is among the checklist items.

Time is growing short for One Bank to raise new capital or attract a buyer to solve its balance sheet woes.

Change has visited or is on the way at three other lenders striving to operate in the black.

Pinnacle Bank of Rogers merged with Central Bank of Little Rock, and Farmers Bank of Hamburg was acquired by Southern Bancorp of Arkadelphia in a $4.5 million transaction.

Community State Bank of Bradley, the smallest lender in Arkansas, is poised for an ownership change. The bank can’t generate adequate dividends to service the debt of its parent company, Allcorp Inc.

Allcorp is nearly 10 months into a trip to bankruptcy court. The biggest Allcorp debt is more than $1.2 million, the balance of a $2.1 million loan used to finance the purchase of the bank in September 2010.

The creditor: Heartland Bank.

Top Performers
Four of the leading banks in Arkansas were recognized recently as top-performing lenders. The measuring stick used by the Independent Community Bankers of America: three-year average return on assets.

El Dorado’s First Financial Bank ranked No. 6 among lenders with assets of between $300 million and $1 billion with a 3.15 percent ROA during 2014-2016.

Among lenders with assets of more than $1 billion, Little Rock’s Bank of the Ozarks ranked No. 14 at 2.09 percent, Searcy’s First Security Bank ranked No. 16 at 2.08 percent, and Conway’s Centennial Bank ranked No. 22 at 1.83 percent.

ICBA represents more than 5,800 community banks with $4.7 trillion in assets and 52,000 locations staffed by 760,000 nationwide.

First-Quarter Performance
Ranked by return on average equity. Dollars in thousands.

*Formerly Forrest City Bank
Source: Federal Deposit Insurance Corp.