Posted 1/14/2013 12:00 am
Updated 11 months ago
Regulatory-mandated changes have ushered in a blend of the old and the new at Little Rock’s One Bank & Trust, and the new CEO warns of “more bad news” to come.
Bank officials reached out to Johnelle Hunt whose suggestion provided a new addition to the board of directors for the $454.4 million-asset lender.
The ouster of Layton “Scooter” Stuart as chairman, president and CEO in September opened the door for more involvement by Hunt, the trucking heiress whose family owned a controlling stake in One Bank 20 years ago.
“She hasn’t made any decisions,” said Ken Shemin, a Rogers lawyer representing Johnelle Hunt. “She’s waiting and watching. She’s hopeful Scooter Stuart will be able to work out his problems with the regulators and put together a plan to move forward.”
One Bank has already gained a new top executive and an existing director was tapped as the new chairman of the board after third-quarter 2012 action against Stuart by the Office of the Comptroller of the Currency.
The results of a forensic audit ordered by the OCC could lead to still more change and possible legal action. The audit will examine the bank’s financial records back to Jan. 1, 2009.
In the meantime, Stuart still owns 99.9 percent of the bank through its holding company, OneFinancial Corp.
That position is supported by the wealth of Hunt, who co-founded J.B. Hunt Transportation Services Inc. with her late husband.
The Hunt family financed Stuart’s purchase of its One Bank ownership, and that multimillion-dollar debt is secured by the holding company stock.
Has his forced exodus triggered events that will transform Johnelle Hunt from creditor to One Bank stakeholder?
“She has a position with the bank from collateral possession at the holding company level,” said Paul Berry, chairman of the board and a One Bank director since 2001.
“It will have bearing on the future. Her continued interest in the bank is a positive.”
Gerald “Jerry” Pavlas, 63
• Grew up in Cleveland, attended Cleveland State University on a full-ride basketball scholarship and graduated with a bachelor’s degree in accounting.
One Bank & Trust, Little Rock
Total assets: $454 million
President & chief executive officer, October 2012-present
Southwest Securities Federal Savings Bank, Dallas
Total assets: $1.5 billion
CEO, October 2011-May 2012
Interim CEO, June 2011-September 2011
President, chief operating officer and director, March 2008-May 2012
Presidential Financial Corp., Alpharetta, Ga.
Private firm that specializes in providing working capital lines of credit
Chairman and CEO 2002-07
First State Bank of Texas, Denton
Total assets: $2.6 billion
President, COO and director, 1998-02
Hibernia Corp., New Orleans
Executive vice president, specialized commercial lending manager, 1995-98
EVP, chief credit officer, 1992-95
Senior vice president, credit risk management, 1990-92
Banc Texas Group, Dallas
EVP and chief credit officer, 1988-90
EVP and manager credit administration, 1985-88
SVP, manager special assets division, 1983-85
Huntington Bancshares, Cleveland
Total assets: $2 billion
Started his banking career and rose to vice president and special assets division manager, 1971-83
Board Sees Broad Expansion
The One Bank board of directors recently made two additions to its membership: James Schnoes, chief financial officer of FTJ Group LLC of Rogers and a former senior vice president at J.B. Hunt Transportation, and Bob Nash, a political journeyman who rose to prominence during the Clinton administration. They will serve in an advisory capacity pending approval by the OCC.
Expansion of the board continues following Stuart’s removal in September at the direction of the OCC.
“For a bank our size, we need seven or nine directors, preferably nine,” said Jerry Pavlas, who was hired as president and CEO of One Bank in October.
The board of directors was pared to four members after the OCC ordered the removal of Stuart and Tom Whitehead was placed on paid administrative leave from his duties as chief financial officer, executive vice president and director.
Rounding out the current board members with Pavlas and Berry are
Gary Rickenbach, executive vice president and chief loan officer, and Dr. James Pappas, who has served as a director for more than 25 years.
Pavlas expects One Bank’s capital to receive a healthy boost by March 31 courtesy of a sizable recovery from a $10.6 million lick registered in the third quarter last year.
“It could be about 50-60 percent,” he said of the anticipated recovery.
The $10.6 million write-off of bank-owned life insurance during the Sept. 30 reporting period was listed under the heading of “cumulative effect of changes in accounting principles and corrections of material accounting errors.”
Pavlas said One Bank’s profits would be battered a little more during the fourth quarter as order is restored to its financial statements.
“We’re going to get the balance sheet of the bank to be of very high integrity, so we have a lot of work to do to reflect where the bank is,” he said. “We have a few more adjustments in the accounting area.
“There will be more bad news from what’s happened in the past. It’s not so much financial though.”
Pavlas is alluding to possible civil litigation or criminal charges that might arise from the ongoing forensic audit of the bank books ordered by the OCC.
“We’re going through a forensic audit, so that has some other implications,” said Berry, the board chairman. “This is the first time I’ve been through this process.
“After the forensic audit is completed, a formal written report will be in our hands. Federal authorities will determine what those findings will warrant.”
Although the bank is operating under a renewed supervisory agreement, Berry said he believed things were on track to cure a laundry list of management and compliance shortcomings identified by federal regulators and return to business as usual.
The mood changed dramatically after an OCC review of One Bank’s financial records during the third quarter last year.
“We thought we were making progress,” Berry said. “I don’t know what happened, what the OCC learned to cause them to become so aroused. I can guess, but I don’t know.”
Berry was stunned when the OCC charged the board of directors with stripping Stuart of his positions with the bank and firing him from the company he owns.
“I have a long personal relationship with him,” Berry said. “This has been a painful process. None of us expected the events of Sept. 28.
“It was obvious we had to get a new leader to work effectively and attack the assignments given to us by the OCC.”
Pavlas was recommended as a candidate for CEO by One Bank’s regulatory lawyers in Washington, D.C.
The interview and vetting process went well, and the veteran banker was hired through a streamlined confirmation process on Oct. 25 after the OCC had no objection to his nomination.
Before accepting the offer, Pavlas visited with the bank staff at the downtown Little Rock headquarters and its branch network.
“I had to make sure that the foundation was here, the people,” he said. “I saw the pride and the self-sufficiency here. I made up my mind to do this.”
The board of directors didn’t want Pavlas to accept the job unless he could commit to the job beyond an interim basis.
“I like to fix things and build,” Pavlas said. “I’m here for the long term. The biggest thing I’m telling employees is they’re taking their bank back.
“I’m not a micromanager. When I got here, everything was coming to me, and that tells me how it was before I got here.
“The bank’s going to have to do what’s right for the bank. I know what it takes to get the bank to where it needs to be, to get it growing again.”
One Bank & Trust, Little Rock
Total Assets: $454.4 million
Capital: $26.7 million
Net Income: -$117,000 Staff: 86
Full-Service Locations: Nine in Little Rock and one in North Little Rock.
As of Sept. 30, 2012
|Total Assets||Net Income||Capital||Staff|
Source: Federal Deposit Insurance Corp. All dollars in thousands except as noted.