Acquisitions, Retirements Recast Pocahontas Bancorp

Arkansas Business, August 13, 2001 by George Waldon

THE LEADERSHIP changes in motion at Pocahontas Bancorp amount to a friendly changing of the guard.

In the process, Dwayne Powell will become the youngest chief executive officer of an Arkansas public company. The 36-year-old native of Mammoth Spring will take over as president and CEO of Pocahontas Bancorp on Oct. 1.

His advancement coincides with the completion of the financial holding company's first big acquisition and the relocation of its namesake corporate headquarters to Jonesboro.

Thrown in for good measure are the renaming of the venerable Pocahontas Federal Savings & Loan Association to First Community Bank and the stock trading at a new 52-week high.

With one purchase complete and another in the works, the sleepy S&L is in the process of becoming a vibrant traveler on the acquisition trail.

"We're looking to grow the bank in size and profitability over the next three years," Powell said.

In terms of specific goals, that translates into amassing $1 billion in assets and achieving a 15 percent return on equity.

In May, Pocahontas Bancorp bought Walden/Smith Financial Group Inc. of Jonesboro in a $27.4. million deal, representing a sales multiple of 1.74 times book value.

The purchase will expand the company's business profile to include more commercial, real estate and agriculture lending.

The acquisition is projected to add about $1 million to the bottom line of Pocahontas Bancorp in the first year, based on the financial performance of in 2000.

Powell sees plenty of opportunity to fuel more growth by acquiring financial institutions in Arkansas and elsewhere. Pocahontas Bancorp is in the process of buying Southern Mortgage Corp. of Tulsa.

This year's activity didn't go unnoticed by investors either.

Tontine Management LLC leaped into the ownership picture of Pocahontas Bancorp in a big way this year. The New York City concern assembled more than 350,000 shares.

That represents 7.9 percent of the outstanding shares, making it the largest beneficial owner of Pocahontas Bancorp stock outside the company.

"This seems to be the best way to invest in the consolidation of the remaining Arkansas franchises," said Jeff Gendell, managing partner of Tontine. "We're not hostile investors."

The stock price hit a 52-week high of $9.35 on Aug. 6 after ranging as low as $6.31 during that time. Shares recently have traded around $9.20, still shy of the $10 mark when Pocahontas Bancorp made the full conversion to a public company in 1998.

Pocahontas Bancorp made its first move to accelerate growth that year when it doubled the size of its northeast Arkansas branch network in two buys.

The company bought three branches in Walnut Ridge, Hardy and Lake City from NationsBank of Charlotte, N.C., in January 1998 and followed that in September with a three-branch deal with total deposits of $32 million in Brinkley, Carlisle and England from Superior Federal Bank of Fort Smith.

Early Retirements

In the swirl of the new developments, Powell is surprised by the turn of events that led to his rapid rise to the top.

The first was Skip Martin opting to step down as president and CEO in favor of early retirement in 1999. The Martin family had been involved with Pocahontas Federal almost since its founding 66 years ago.

"It wasn't a big surprise to those of us who were around him," Powell said of Martin's exodus. "I think he was tired of all the regulatory hassle of running a bank."

After Martin's early retirement, James Edington was promoted from executive vice president to president and chief executive officer of Pocahontas Bancorp in April 1999.

Edington joined Pocahontas Federal in 1983 and held various executive posts, including compliance officer, security officer, secretary and treasurer.

"Randolph County has always been home to him, and he had no desire to move," Powell said of Edington's decision to stay put while the company sets up a new home in Jonesboro.

Martin's early retirement sliced into. the company's profit in 1999 by $2.7. million when the decision was made to fully fund a trust that will pay him $150,000 annually.

Edington's early retirement accounted for the bulk of a $2.1 million dent in this year's profits, a tally that also included the cost of moving the corporate HQ to Jonesboro.

"We wanted to get all of those out of the way and expensed, so we wouldn't have to deal with them any more," Powell said.

The one-two moves of Martin and Edington cleared the rungs for his advancement to the top of the corporate ladder at Pocahontas Bancorp. Their tandem announcements to retire at age 50 slashed the timetable for Powell's long-term aspirations to be where he's at.

"I never saw that I would have the opportunity because when I joined [the company] Skip and James were in their 40s," Powell said.

The certified public accountant joined the company as chief financial officer in October 1996. Before that, he was an audit manager for Deloitte & Touche LLP, primarily serving financial institution clients.

Among those clients was Pocahontas Federal.

"I didn't have the foresight to say I would be the head of Pocahontas Federal," Powell said. "I enjoyed working with banks and saw there was management opportunities out there."