The Top 10 Business Stories of 2008

by Arkansas Business Staff  on Monday, Dec. 22, 2008 12:00 am  

John Glasgow, CFO of CDI Contractors, disappeared on Jan. 28. Dillard's owned a half-interest in CDI and was embroiled in a bookkeeping dispute with CDI management when Glasgow, of Little Rock, vanished.

But when the Office of the Comptroller of the Currency shut down ANB Financial of Bentonville on May 9, bank failures had not yet become a staple of the weekend business section. ANB was only the third bank failure of 2008 and the first in Arkansas since regulators shut down Sinclair National Bank of Gravette on Friday, Sept. 7, 2001 (news that was dwarfed by the 9/11 terrorist attacks the following Tuesday).

Larger and much higher profile failures would follow – including IndyMac Bank of Pasadena, Calif., and the bank and thrift charters of Washington Mutual Inc. of Seattle.

While IndyMac and WaMu symbolized the subprime mortgage lending crisis that paralyzed the U.S. economy in 2008, ANB would become the poster child for regulatory failure.

Its woes were not associated with the exotic mortgages that characterized the housing bubble; instead, ANB had used high-cost brokered deposits to fund breathtaking asset growth: 27 percent in 2004, 53 percent in 2005, 70 percent in 2006 and 18 percent in 2007. And its $1.95 billion in assets were, in a pattern familiar to students of the S&L crisis two decades earlier, mostly commercial real estate loans on properties far from home. 

ANB Financial, founded in 1994 as Arkansas National Bank, originally told the Federal Deposit Insurance Corp. that it lost $59 million in 2007, a figure that was revised to $81 million and ultimately to $120.4 million just days before the FDIC swooped in as receiver. It had $589.3 million in non-accruing loans as of March 31.

Pulaski Bank & Trust of Little Rock, a thrift owned by IberiaBank Corp. of Lafayette, La., paid a little over $2 million to purchase $212.9 million of ANB's insured, non-brokered deposits and also bought eight of ANB's nine branches, quickly establishing a presence in northwest Arkansas. But ANB's failure was still expected to cost the FDIC's bank insurance fund $214 million. The owners of nearly $40 million in uninsured deposits were expected to receive only about 60 cents on the dollar.

In November, the U.S. Treasury Department's Inspector General issued a 60-page postmortem of the ANB debacle. The report concluded that the Office of the Comptroller of the Currency, the primary regulator of national bank charters, waited years to intervene even though ANB was a textbook example of risky growth. (According to the Inspector General, four of eight red flags in the standard OCC Examiner's Guide "clearly existed when OCC conducted the 2006 examination." And "OCC identified most of ANB's problems in 2005; however, it took no forceful action until 2007.")

In a conference call in October, according to the Inspector General's report, the OCC instructed its 1,500 examiners to take enforcement actions earlier, "while problems are still manageable." However, examiners working in Arkansas seemed to get that message months sooner. Formal agreements between the OCC and Legacy National Bank of Springdale and Metropolitan National Bank of Little Rock were revealed in June, and the FDIC cracked down on Parkway Bank of Rogers in August.

5.) UCA's Horrible Year
One man's effort to raise his pay now appears likely to affect every public institution of higher learning in Arkansas.

The year 2008 started out well for the University of Central Arkansas in Conway. Bequests were announced, events were hosted and ground was broken for an $18 million business college building.

But the second half of the year began with controversy that evolved into scandal that evolved into revelations of serious financial problems that evolved into serious belt-tightening. That string of woes was compounded by the totally unrelated murder of two students on campus in October.

Next year has to be better, right? Not necessarily. At the rate the revelations have been coming, we can't promise that this little article isn't already obsolete as you read it.



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