Small Banks in Arkansas Feel Consolidation Pressures

by George Waldon  on Monday, Aug. 6, 2012 12:00 am  

Dave Dickson, president of Union Bank & Trust in Monticello, helped organize an alliance of nine community banks in southeast Arkansas. The lending competitors are working together to find ways to reduce costs and boost earnings during these trying times.

Lenders of all sizes continue enduring balance sheet pressures wrought by increased regulatory requirements that followed the 2008 financial meltdown.

Small community banks are especially hard hit by the added costs of doing business and more stringent lending requirements that ensued.

"Banks that have total assets of $150 million and below are really feeling the stress," said Bill Holmes, president of the Arkansas Bankers Association.

About 50 lenders, mostly in southern and eastern Arkansas, hover at or below that $150 million threshold. Two, Decatur State Bank and the Bank of Rison, already are in the process of selling in deals that exemplify signs of the times in different ways.

The sale of Decatur State Bank is a distressed transaction prompted by severe loan losses, while the Bank of Rison deal reflects a small-town bank with dim prospects.

More consolidation is expected in the days ahead as shareholders at small banks contend with compressed earnings and grapple with an uncertain future.

Tommy May, chairman and CEO of Pine Bluff's Simmons First National Corp., said the company had talked with representatives from about 10 different Arkansas community banks during the past three years regarding a possible merger.

He described those discussions as ranging from casual conversations to more serious overtures.

No deals have resulted. "We've had some bankers approach us expressing an interest in maybe becoming a part of our institution," May said. "The expectations of the seller are probably still a little bit higher than the reality of what the buyer is willing to pay.

"Things have just changed. The timing of this isn't good relative to their value. A whole lot of families invested money in banks over many years and were difference-makers in communities.

"Now what do they do with their investment?"

Stockholders in the Bank of Rison, the smallest bank in Arkansas, are willing to sell their $27.9 million-asset operation at a zero premium. The deal struck with Fordyce Bank & Trust is a one-for-one exchange of cash for the shareholders' equity in the 80-year-old bank.

What started as a $5.4 million sale has fallen to less than $4.2 million after Bank of Rison posted a loss of nearly $1.4 million in the second quarter. The loss is the result of the bank boosting its loan loss reserves by nearly $1.5 million.



Please read our comments policy before commenting.