Regulators, banks in fast turnaround after ANB failure
Posted on Sunday, July 6, 2008
When ANB Financial of Rogers was shut down in May, IberiaBank Corp. of Lafayette, La., and its Arkansas subsidiary, Pulaski Bank & Trust, had only hours to prepare for the purchase of $ 213 million in deposits from the failed institution.
IberiaBank made a $ 2 million bid for the deposits on Tuesday, May 6, and the Federal Deposit Insurance Corp. told the bank at 2 p.m. the next day that the offer was accepted, said Robert Head, chief executive officer of Pulaski Bank.
Head and Jerry Vascocu, Pulaski Bank’s market president in central Arkansas, spoke recently about Pulaski Bank’s process of taking over a portion of ANB’s business and their company’s plans in Northwest Arkansas. ANB, only the second bank in Arkansas to be closed by regulators since 2001, had about $ 2 billion in assets when it was closed May 9. It was the fourth-largest bank in Arkansas.
The FDIC’s notification that the offer was accepted left IberiaBank only two days to plan for everything from finding a contractor to make dozens of Pulaski Bank & Trust signs to bringing in people to interview ANB’s former workers, some of whom were hired.
Pulaski eventually found a contractor, one of its customers in northeast Arkansas, to make temporary signs that were used to cover ANB’s interior and exterior signs at the eight branches Pulaski took over, Head said.
The Office of the Comptroller of the Currency closed ANB at 5 p.m. on Friday, May 9, and the FDIC was made receiver of ANB’s assets except for about $ 236 million that IberiaBank acquired. By 5: 15 p. m., the FDIC locked the branches’ doors for the evening. The FDIC and Pulaski Bank employees each counted the money on hand, Head said.
Soon after the FDIC told ANB’s approximately 230 employees that the company was being shut down, 10 Pulaski Bank employees began the job interviews, Vascocu said.
“It was quite an ordeal, because our contract said we had to open the branches on Monday [May 12 ],” Head said. “We wanted to make sure everyone had the best opportunity [of being hired ] because unfortunately a lot of them were going to lose their jobs. We were still hiring people on Monday, but the end result was that we found a lot of talent.” Eventually, Pulaski Bank hired about 70 of the workers. The FDIC hired about 80 —through an employment agency — to help it liquidate ANB’s assets over the next several months. There were 84 former ANB employees who were not hired.
“There were four nights that I don’t think I got any sleep,” Head said of the experience. “The first day I didn’t sleep because I was worried about the potential outcomes. Would people be lined up at our doors [when the bank reopened on Monday ]?
“ But when I went to the biggest branch that [Monday ] morning, there was just a steady flow of traffic, but there was no big crowd there. People wanted to know if they could get their money, if they could write a check. A lot wanted to know about their loans.” IberiaBank chose not to acquire any of ANB’s loans, about a third of which were past due. If it had, the entire transition process would have been much more difficult, Head said.
“This was the first time any of us had ever dealt with the FDIC in such a circumstance,” Head said. “But we found them very responsive. Contrary to what I was led to believe, there was no bureaucracy. If something came up and a decision had to be made, the man there made the decision.” Robert Schoppe, the FDIC’s receiver-in-charge for the deal, said the weekend process to prepare for Pulaski Bank’s new branch openings on May 12 was orderly and without incident. But it also was one of the most intense tasks the agency has handled in years.
About 200 FDIC employees in Dallas and at all of ANB’s branches in Northwest Arkansas, Idaho, Utah and Wyoming worked through the weekend, Schoppe said. That was probably 25 more workers than the FDIC needed in September to close NetBank, an Alpharetta, Ga., online bank that had no brick-and-mortar offices, he said.
The FDIC is limited in how much time it has to complete such a conversion, normally from about 5 p.m. on Friday until 9 a.m. on Monday, Schoppe said. Since ANB was the second-largest U. S. bank failure this decade, the FDIC had to assign more people to the transition, he added.
The FDIC’s proprietary software program allowed it to group ANB’s depositors primarily by address or federal identification number. After sorting the accounts, the FDIC had to check each of them to determine which ones exceeded the $ 100, 000 insured limit.
That’s one thing that took many hours through the weekend to decide, Schoppe said.
ANB had about $ 39. 2 million in 647 accounts that exceeded the insured limit. When the FDIC begins to sell ANB’s assets, insured depositers have the first claim to funds after administrative costs are paid.
After that, the amounts in the 647 accounts that exceeded the insured limit are second in priority to be paid.
Customers with deposits exceeding the insured limit are not guaranteed to get that excess money back in a failure, although much and possibly all of it often is returned.
Some of the FDIC’s workers were at the bank until 1 a.m. or 2 a.m. on Saturday, May 10. Everyone worked at least 12 hours both Saturday and Sunday deciphering the information, Schoppe said.
“It’s quite a project, I can assure you,” Schoppe said.
Pulaski Bank has a 90-day option on the eight branches it now has in Northwest Arkansas, but it expects that it will retain all of them, Head said. Pulaski Bank never used ANB’s ninth branch, the headquarters office in Rogers.
Pulaski Bank has no advantage over other financial institutions in acquiring some of ANB’s loans from the FDIC, Head said. But it has benefited from some former ANB customers asking Pulaski Bank about refinancing their loans.
Pulaski Bank had a goal of expanding into Northwest Arkansas for some time, Head said. It just never expected that the expansion would happen as it did.
After starting with eight offices, Pulaski Bank does not plan to add more branches soon.
“ANB’s branches are all relatively new,” Head said. “They used pretty good judgment, in our opinion, and the branches are really right where they need to be [to serve the market ].” Even customers in central Arkansas have indicated they are glad the bank has moved into Northwest Arkansas offices, Vascocu said.
“It’s good for people traveling up there for ballgames,” Vascocu said, referring to the University of Arkansas Razorbacks sporting events. “It’s been very well received.” Pulaski Bank still is trying to find someone to be market president in Northwest Arkansas who will hire other executives, Head said.
Many of ANB’s former employees lost much of their retirement money that was invested in the company’s employee stock ownership plan after ANB failed.
“The real losers in this were the employees who lost all of their money in the [stock ownership plan ],” Head said. “I’ve talked to employees who lost $ 1 million. It’s very sad.”
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online
