Did creditors representing $9.5 million worth of debt convince U.S. Bankruptcy Court Judge Ben Barry that Acme Holding Co. is a lost cause?
A ruling in their favor could result in the second auction of an Arkansas bank in three years.
That was the fate of Little Rock’s Metropolitan National Bank after its Rogers Bancshares parent company entered bankruptcy court in 2013.
Acme’s biggest asset is its ownership of Allied Bank of Mulberry (Crawford County). Both Acme and the $111 million-asset bank are controlled by the Lex Golden family of Little Rock.
The Goldens made their case that Allied is on the road to restarting dividend payments that will enable Acme to service its secured debt and repay some of its unsecured debt.
Their reorganization plan calls for a restructuring and write-down of debt, but that was greeted coldly by a trio of large creditors led by Chambers Bank of Danville.
Acme listed total assets of $12.2 million and liabilities of $11.4 million in its Chapter 11 bankruptcy petition.
“What ended the dividends?” Alex Golden, chairman, president and CEO of Allied Bank was asked during the April 2-3 hearing in Fayetteville.
“Allied’s condition as dictated by regulators,” he said.
Regaining the good graces of state and federal bank regulators is a requirement under the terms of the bank’s ongoing supervisory agreement. The uncertainty of when regulators might deem Allied fiscally fit to declare dividends is a weighty point.
Faced with foreclosure, the Goldens took Acme Holding into Chapter 11 bankruptcy a year ago. Some of Acme’s leading creditors believe Chapter 7 liquidation is in order and asked Judge Barry for a ruling.
Projections in Acme’s March 29 amended disclosure statement and plan of reorganization indicate Allied’s classified assets total will fall to $14.9 million by March 31, $12.5 million by June 30, $2.7 million by Sept. 30 and zero by Dec. 31.
“That’s pretty optimistic based on history,” said Douglas Southard of Southard Financial in Memphis, an expert witness for the creditors. “That’s pretty optimistic based on the first two months of the year.”
Wiping out all of Allied’s nonaccrual loans and other real estate owned without adding any new problem assets by year’s end would represent a monumental achievement.
“We’ll be filing our March 31 call report very soon, and it will be positive,” Alex Golden testified.
He indicated the first-quarter results would reflect a quarterly profit, albeit a very small one, about $30,000. According to March 29 projections, Allied’s 2015 profitability hinges on moving $829,000 from loan loss reserves to income.
If allowed, this accounting move would enable the bank to end the year with a projected profit of $667,000. Without it, Allied would record a projected loss of $162,000 and mark its fifth consecutive year in the red.
During the April 2-3 bankruptcy hearing, Alex Golden pointed out that regulators required Allied to book two noncash losses that severely scarred its balance sheet.
The first was a $2.9 million write-off of goodwill from the September 2001 Bank of Mansfield purchase. Acme bought the $38 million-asset Sebastian County bank through the $6.8 million acquisition of its holding company, Mansfield Bankstock Inc.
Allied also was required to write off energy stock carried with a valuation of $2.2 million. The illiquid, private company shares, once collateral that secured delinquent loans, were forfeited by borrowers.
“One-time items made our income statement look awful,” Alex Golden said.
Creditors also delved into some of the Golden family’s financial benefits from Allied Bank during the hearing.
Alex Golden receives an annual salary of $240,000 as chairman, president and CEO of the bank. His father, Lex, receives an annual salary of $120,000 as special assets manager.
Neither receives financial compensation in their leadership roles with Acme Holding.
Allied pays monthly rent of $5,000 for space in part of a building owned by Lex Golden’s wife. The 5701 Kavanaugh Blvd. location, owned by Ellen Golden, Direct Importer of French Antiques LLC, is the bank’s remaining operational presence in Little Rock.
The building, which also bears a 1916 N. Fillmore St. address, additionally houses Ellen Golden’s antique business.
Allied’s two other branches in Little Rock, conventional full-service locations at 1022 W. Capitol Ave. and 4900 Kavanaugh Blvd., were closed last year and are now part of the bank’s OREO portfolio.