Cabot Bank Buy Foreshadows Public Move

by George Waldon  on Monday, Aug. 18, 2003 12:00 am  

A new Arkansas public company is in the formation stages thanks to the $43 million purchase of Community Financial Group Inc. of Cabot.

The pending acquisition, split 80-20 between Home Bancshares Inc. of Conway and TCBancorp of North Little Rock, is viewed as a forerunner to a series of mergers.

Those would-be deals represent the building blocks for amassing one of the largest bank franchises in the state. The names include:

• Liberty Bancshares Inc. of Jonesboro, which topped $600 million in total assets earlier this year by buying MSB Shares Inc. of Jonesboro.

• Century Bancshares Inc. of Texarkana, Texas, holding company of the $388 million-asset Century Bank.

• Russellville Bancshares Inc. of Russellville, holding company of the $379 million-asset First Arkansas Valley Bank.

Leading shareholders at the banking concerns represent a trio of entrepreneurial friends: Johnny Allison at both Home Bancshares and TCBancorp, Wallace Fowler at Liberty and Truman Arnold at Century. Their banking interests converge at Russellville Bancshares, where they are the three largest shareholders.

Bank watchers believe it's only a matter of time before Allison, Arnold and Fowler combine their banks under one holding company. They already meet together on a quarterly basis to exchange ideas and share information.

"That has been discussed, and we all talk about it," Fowler said. "Will we join hands later? I couldn't think of anyone I'd rather be in business with than Johnny Allison and Truman Arnold."

Their various bank holding companies have combined total assets of more than $2.8 billion. Viewed as a single entity, it would represent the second largest Arkansas-based franchise.

Jim Walton's Arvest Bank Group Inc. of Bentonville is the biggest and getting bigger.

Arvest, with total assets of more than $4.6 billion, is in the process of buying Superior Financial Corp. of Fort Smith in a $21 million cash deal. Superior has total assets of more than $1.3 billion.

Walton remains content to keep his banking venture private. But Allison has made no bones about his interest in building a bank and taking it public.

"Growing this organization has been a lot of fun," he said. "We're not public, but we're trying to act like a public company."

Home Bancshares-TCBancorp is taking a bigger step toward an initial public stock offering by acquiring First Financial Group. The deal to buy the holding company of Community Bank of Cabot would expand the number of stockholders well beyond 500.

Once a company tops 500 shareholders, it has 30 months to start filing the same regulatory paperwork with the Securities and Exchange Commission that a public company would.

The added reporting requirements cost $300,000 or more each year. This extra expense often pushes a company to take the plunge and go public.

For Home Bancshares-TCBancorp, the 30-month clock officially doesn't start ticking until the Community Financial Group transaction closes.

That is expected to happen no later than December. Community Financial investors will gain a 24 percent stake in the merged interests of the three holding companies.

"Creating a community bank umbrella will enable us to continue growing through acquisition," Allison said. "I think there's a lot of opportunities out there."

Local people making local decisions and providing local service is a common denominator with the Allison-Arnold-Fowler banks as well as other Arkansas lenders who baled hay when out-of-state bankers came to town.

Allison said the market indicators remain strong for community banking.

"We opened 1,021 accounts in Faulkner County during July," he said. "The line is just straight up for growth. There doesn't seem to be any leveling off. It tells me the consumer wants community banking."

The corporate model is reminiscent of Little Rock's First Commercial Corp., where Allison, Arnold and Fowler all served together on the board of directors.

Allison wouldn't be surprised to see their banking interests eventually combined under one bank holding company.

"It would be more likely that somewhere down the line that we would because we get along so well and have such trust and confidence in each other," he said. "But if you've ever traded with Wallace Fowler and Truman Arnold, you know they're not just going to do a deal because they like you."

Fowler agrees that friendship is a separate issue to negotiating a sales price.

"I make the statement that I'll be interested in going public when our stockholders can get the value for their franchise and I'm fully guaranteed that the decisions locally will be made locally," he said.

"When's it going to happen? It's tough to say with all the growth at the different organizations. But it makes sense to have all our interests under one holding company umbrella."

Northeast and Southwest

MidSouth Bank will adopt the Liberty Bank of Arkansas name when the two banks formally merge on Sept. 26.

Liberty Bancshares raised more than $29 million in a stock offering ($126 per share) that closed at the end of July. The venture is well-capitalized and has no debt.

"We're at 491 stockholders," Fowler said. "That's getting close to the magic number of 500 that we don't want."

To quarter its growing operations, Liberty is developing a new 54,000-SF headquarters at the southwest corner Stadium Boulevard and Highland Drive in Jonesboro that should be completed in November.

A portion of the space will be devoted to building its own data processing operations. That work has been handled by Home Bancshare's First State Bank in Conway.

"That's no reflection on them," Fowler said. "We've just grown to the point where it makes sense to do it ourselves."

Truman Arnold is in no danger of breaking the 500 shareholder mark any time soon. Century Bancshares only has a dozen or so investors.

The company is founded on the ruins of what was First National Bank of New Boston, Texas. When Arnold's group acquired it in 1997, the $72 million-asset bank was on the brink of insolvency.

The $4 million purchase of the troubled lender amounted to about 60 percent of book value. Unlike Allison and Fowler, who have used several stock offerings to help sustain growth, Arnold has used earnings to build Century Bank's capital base.

"We are building a good community bank," Arnold said. "If the worst thing that happens is that we stay separate and keep making money, we can live with that.

"We don't have any specific plans to merge. But we keep the option open."

He believes that a merger involving Allison and/or Fowler is likely to occur during the next three to five years, with one "if" that will have to be addressed.

"The big 'if' is if your earnings are there to support it," Arnold said. "There's obviously mutual respect.

"We're all three from outside banking and are retail-oriented. We get together to share ideas and compare notes and have a lot of fun doing that.

"We [at Century Bank] went to a seven-day banking model about a year ago. I started in the convenience store business [building the Roadrunner chain], and everybody was afraid we were going to 24-7."

The response from customers has encouraged Century Bank to keep its lobbies and drive-through operations open 1-5 p.m. on Sundays.

"It's a retail pitch, and we're trying to be retail-oriented," Arnold said. "The banking market isn't a growing market. You have to take a piece of the pie somewhere, and it comes through service."

Allison, Fowler and Arnold all want a bigger piece of the Arkansas banking market, whether they carve it out separately or together.

First State Bank, Conway

Category — 2002 — 2001 — 2000 — 1999 — 1998*

Total Assets (thousands) — $349,415 — $311,611 — $215,743 — $152,402 — $28,850
Net Income (thousands) — $3,287 — $1,420 — $742 — -$1,364 — -$178

*Formed with the acquisition of the Bank of Holly Grove.

Seven locations in Conway and one each in Greenbrier, Vilonia, Mayflower and Holly Grove (Monroe County).

First State's parent company, Home Bancshares, is in the process of acquiring an 80 percent stake in Community Bank of Cabot, which has four locations in Cabot, two in Jacksonville and one each in Sherwood, Beebe and Ward.

Leading Shareholders of Home Bancshares Inc., Conway
(Holding Company for First State Bank)

Shareholder — Stake — Shares — Value**

John Allison?, Chairman, First State Bank — 29.89% — 555,312 — $20,961,707
Robert "Bunny" Adcock, State Bank Commissioner — 13.68% — 254,082 — $9,593,715
Alex Lieblong, President, Lieblong & Associates, Little Rock — 2.84% — 52,748 — $19,916,778
Dale Bruns, President, Bruns Management Inc., Conway — 1.45% — 26,931 — $1,016,877

**Based on assigned valuation of 1.5 times book as of Dec. 31, 2002.

?Includes his wife, Jennifer's, 5 percent stake.

Century Bank, New Boston, Texas

Category — 2002 — 2001 — 2000 — 1999 — 1998*

Total Assets (thousands) — $369,288 — $288,503 — $255,855 — $181,358
Net Income (thousands) — $2,079 — $17 — -$466 — $969 — $862

*Formed after purchase and renaming of First National Bank of New Boston, Texas. Six locations in Texarkana, Texas, three in Texarkana, Ark., and two in New Boston.

Leading Shareholders Century Bancshares Inc., New Boston, Texas(Holding Company for Century Bank)

Shareholder — Stake — Shares — Value**

Truman Arnold?, Chairman, Truman Arnold Cos. — 53.08% — 570,415 — $21,285,514
Cary Patterson, Lawyer, Texarkana, Texas — 17.48% — 187,784 — $7,009,623
Dr. Frederick Joyce, Texarkana, Texas — 10.37% — 111,638 — $4,130,384
Ronny Looney, Treasurer, Century Bancshares — 8.28% — 88,989 — $3,320,347
Greg Arnold, President, Truman Arnold Cos. — 5.00% — 53,694 — $2,005,040
James Day, Vice President, Century Bancshares — 4.73% — 50,795 — $1,896,768

**Based on assigned valuation of 1.5 times book as of Dec. 31, 2002.

?Owned jointly with his wife, Anita.

Liberty Bank of Arkansas, Jonesboro

Category — 2002 — 2001 — 2000*

Total Assets (thousands) — $276,624 — $156,569 — $22,209
Net Income (thousands) — $2,029 — -$2,386 — $107

*Liberty was launched as Bank of Jonesboro with the charter purchase of The Planters National Bank of Hughes (St. Francis County).

Three locations in Jonesboro. This year, Liberty acquired Midsouth Bank of Jonesboro, which has six locations in Jonesboro, two in Monette and one in Bay (Craighead County)

Leading Shareholders of Liberty Bancshares Inc., Jonesboro
(Holding Company for Liberty Bank of Arkansas)

Shareholder — Stake — Shares — Value**

Wallace/Jama Fowler, Chairman, Liberty Bancshares; Secretary, Fowler Foods — 18.20% — 63,710 — $9,509,136
Fowler Foods, Jonesboro — 3.01% — 10,570 — $1,572.664
Dr. William C. Young, Jonesboro surgeon — 2.86% — 10,043 — $1,494,292
Chris Fowler, President, Fowler Foods — 2.06% — 7,234 — $1,076,308
Wayne Baker, Co-owner, Baker Enterprises, Jonesboro — 1.43% — 5,022 — $747,145
Mark Fowler, President, Liberty Bancshares — 1.04% — 3,652 — $543,379
Dick Darouse, President, Town & Country Insurance Agency, Jonesboro — 1.00% — 3,512 — $522,480

**Based on assigned valuation of 1.5 times book as of Dec. 31, 2002.

Arkansas Valley Bank, Russellville

Category — 2002 — 2001* — 2000 — 1999 — 1998

Total Assets (thousands) — $367,059 — $306,448 — $272,687 — $232,562 — $181,599
Net Income (thousands) — $4,514 — $1,193 — $2,734 — $2,349 — $1,423

*The Allison-Arnold-Fowler group entered the ownership picture.

Four locations in Russellville, two each in Searcy and Dardanelle and one each in Atkins and Pottsville.

Leading Shareholders of Russellville Bancshares Inc.
(Holding Company for First Arkansas Valley Bank)

Shareholder — Stake — Shares — Value**

Wallace Fowler, Chairman, Fowler Foods, Jonesboro — 21.75% — 31,245 — $11,392,976
Home Bancshares Inc., Conway — 21.68% — 31,141 — $11,356,309
Truman Arnold, Chief Executive Officer, Truman Arnold Cos., Texarkana, Texas — 14.76% — 21,210 — $7,731,509
Roy Reaves?, Chief Executive Officer, First Arkansas Valley Bank — 6.37% — 9,154 — $3,336,701

**Based on assigned valuation of 1.5 times book as of Dec. 31, 2002.

?Owned jointly with his wife, Charlanne.

Twin City Bank, North Little Rock

Category — 2002 — 2001 — 2000 — 1999*

Total Assets (thousands) — $243,635 — $144,636 — $59,877 — $47,100
Net Income (thousands) — $800 — $147 — -$1,299 — -$124

*Formed with the charter purchase of First Western Bank & Trust of Rogers.

Five locations in Little Rock, four in North Little Rock and one in Sherwood. Twin City's parent company, TCBancorp, is in the process of acquiring a 20 percent stake in Community Bank of Cabot, which has four locations in Cabot, two in Jacksonville and one each in Sherwood, Beebe and Ward.

Leading Investors of TCBancorp Inc., North Little Rock
(Holding Company for Twin City Bank)

Shareholder — Stake — Shares — Value**

Home Bancshares Inc., Conway — 31.96% — 449,601 — $17,773,187
Conservative Development Corp., North Little Rock — 10.39% — 146,601 — $5,767,617
Herren Hickingbotham, Principal, Hickingbotham Investments, Little Rock — 6.46% — 90,909 — $3,586,025
Todd Hickingbotham, Principal, Hickingbotham Investments — 6.46% — 90,909 — $3,586,025
Rick Ashley, President, Conservative Development — 5.87% — 81,893 — $3,258,509
John W. Allison, Chairman, TCBancorp — 4.00% — 56,290 — $2,220,449
Frank Hickingbotham, President, Hickingbotham Investments — 2.58% — 36,307 — $1,432,190
Robert Birch, President, TCBancorp — 1.07% — 15,057 — $593,970

**Based on assigned valuation of 1.5 times book as of Dec. 31, 2002.



Please read our comments policy before commenting.