U.S. auction of One Bank draws state feelers

At least four Arkansas banks have shown interest in bidding for One Bank & Trust of Little Rock, according to an order in the federal government’s lawsuit against OneFinancial Corp., the bank’s holding company.

On April 7, an order in the case was filed indicating the federal government plans to sell at auction the stock it seized in OneFinancial and has held in escrow since Nov. 3, 2015. There is no indication from the order when the sale will occur, but Jerry Pavlas, One Bank’s chief executive officer, said it likely will happen next month.

The U.S. Treasury Department was awarded a default judgment against OneFinancial in 2015 and placed in escrow the holding company’s stock. OneFinancial essentially owned 100 percent of One Bank. The Treasury Department received a $47.9 million default judgment against OneFinancial.

A sale is part of a process that One Bank wanted the government to pursue to gain legal title to One Bank, Pavlas said.

“[The Treasury Department] has to have legal title so [the Treasury] can transfer it when we do a recapitalization,” Pavlas said.

Recapitalization is restructuring a company’s debt and equity mixture, often with the aim of making a company’s capital structure more stable or optimal.

The Treasury Department is not forcing the sale of One Bank, Pavlas said.

“We’re working with them to achieve a recapitalization,” Pavlas said. “This is the final steps in what we’ve been working on for the last 4½ years.”

One Bank received several sanctions from federal regulators, the last one coming in September 2012 when regulators demanded the resignation of Layton Stuart, chairman, chief executive officer and owner of the bank. Stuart died several months later in March 2013.

Pavlas was hired in October 2012 to lead the bank.

The banks that were given notice about the auction were

Bank of England, First Financial Banc Corp. of El Dorado, Home BancShares of Conway and Arvest Bank of Fayetteville.

That doesn’t necessarily mean any of the institutions will make a bid for OneFinancial Corp.

EJF Capital LLC, an investment firm in Arlington, Va., also was notified of the auction. If a bank sale doesn’t work out, One Bank also is considering a combination of EJF, other institutional investors and private investors to buy One Bank, Pavlas said.

One Bank, which celebrates its 60th anniversary later this year, is a clean bank now, said Paul Berry, a bank director for years.

“We have fixed everything in the bank over the last 4½ years,” Berry said. “We’ve got a good clean airplane. Now we need somebody to put some jet

fuel in it. You call that capital.”

The bank has been overhauled, Pavlas said.

“Every system, every policy, every procedure [has been rebuilt],” Pavlas saidF.E“BORUuArRcYo2r0e14 deposits have stay$e6d2in7.p5la2ce for the 4½ years since I’ve been here.”

One Bank, however, has been unprofitable for three of the past five years. Since 2012, it has lost $13.1 million. It lost $5.8 million last year and $6.7 million in 2013.

It also has a one-star rating from Bauer Financial Corp. of Coral Gables, Fla., almost the lowest rating Bauer gives. Bauer, which has analyzed the financial condition of the nation’s banking industry since 1983, considers banks with a three-star or higher rating to be in at least adequate financial condition. No-star banks are facing “considerable challenges,” Bauer said.

One Bank’s book value is $11 million to $12 million, Pavlas said.