Bad Debt Triggers Chambers Bank Deal

by George Waldon  on Monday, Feb. 4, 2013 12:00 am  

On Nov. 16, control of Grand Savings Bank and  Decatur State Bank shifted from the Peterson family to Chambers Bank of Danville. The DPC (debt previously contracted) acquisition involved about $20 million of debt held by Chambers Bank and secured by an 81 percent stake in the banks’ parent company, Peterson Holding Co. (Photo by Wayne DePriest)

The mid-November purchase of Peterson Holding Co. by Chambers Bank of Danville wasn’t your typical transaction.

No money changed hands, and the deal amounted to an asset forfeited in lieu of foreclosure. In bank regulatory parlance, the change of ownership was accomplished through a DPC (debt previously contracted) acquisition.

The Peterson family relinquished a controlling stake in the $359 million-asset parent company of Decatur State Bank and Grand Savings Bank of Grove, Okla., which secured a loan held by Chambers Bank.

The Peterson debt totaled about $20 million. Collateral on the Chambers loan included 81 percent of Peterson Holding Co. shares and all of the stock in Decatur State Bank and Grand Savings.

Though not specified, the bulk of the holding company stock came from the Lloyd E. Peterson Revocable Trust. The trust owned 78 percent of Peterson Holding Co. shares.

The stock transfer boosted total assets under control of Chambers Bancshares Inc. by 51 percent. Decatur State Bank and Grand Savings Bank retained their names in the aftermath.

The change of ownership expanded Chambers banking operations in Benton County from a lone office in Bentonville to include Decatur State Bank offices in Decatur, Gentry and Siloam Springs.

Peterson Holding listed total equity of $26.8 million in its Sept. 30 quarterly report, its last filing. Most of that ($23.6 million) was on the books at Grand Savings.

Decatur State Bank’s capital once totaled as much as $23.4 million at June 30, 2010. The slow decline in capital turned into a free fall during 2010 before hitting $3.2 million at Sept. 30, 2012.

In connection with the fiscal down spiral of Decatur State Bank, a former director and vice president was effectively banned from banking.

Aaron Holcombe, who managed Decatur State Bank’s Siloam Springs operations, entered into a consent order with the Federal Deposit Insurance Corp.

The order, entered on Dec. 21 and released on Jan. 25, prohibits Holcombe from further participation in banking, and he accepted a civil fine of $7,500 without admitting or denying any of the charges.

The FDIC alleged that Holcombe engaged in unsafe or unsound banking practices and/or breaches of fiduciary duty that resulted in financial loss.

Holcombe, who served as a director for 12 of the 17 years he worked at Decatur State Bank, joined Arvest Bank in August 2011 and left in August 2012.

Equity capital at Decatur State Bank rose back to $4.5 million at year-end after Chambers Bank entered the equation, and the bank finished 2012 with a $333,000 profit and total assets of $122 million.

Shifting most of the cost of salaries and benefits for Decatur State Bank staffers to Chambers Bank helped the cause.

Chambers Bank also concluded 2012 on an upbeat note. Fourth-quarter profits of $8.2 million flowed into its coffers, replenishing its capital to $80.1 million.

 

 

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