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.

The aftermath of the proposed transaction is expected to add another empty building to downtown Rison's aging inventory as operations are consolidated with Fordyce Bank & Trust's modern Rison Financial Center on Highway 35.

The sale will pare the local banking scene from three to two - not just in Rison but in all of Cleveland County. Centennial Bank operates an $8.6 million-deposit branch in Rison, the county seat of about 1,300 residents.

Shareholders in Decatur State Bank were positioned to sell the $136.8 million-asset operation to Mathias Bancshares Inc. of Springdale, also for zero consideration.

However, a $700,000 loss in the second quarter by DSB required its parent company, Peterson Holding Co., to inject $1.1 million to expand the bank's nearly depleted capital to $2.9 million.

The move amounts to the Peterson family paying Mathias $1.1 million to take over ownership. When the deal closes, Mathias will rebuild the bank's capital with a $13 million infusion.

Banding Together

While some community bankers are looking for a merger partner as an exit strategy, others are digging in to hold their ground.

Nine bankers in southeast Arkansas have formed a loose alliance to explore mutually beneficial deals.

The group comprises banks in Drew, Ashley, Bradley, Desha and Chicot counties: Union Bank & Trust and Commercial Bank & Trust of Monticello, First National Bank of Crossett, Warren Bank & Trust, McGehee Bank, First State Bank of Warren, Merchants & Farmers Bank of Dumas, First National Bank of McGehee and Eudora Bank.

"We think we have a lot of opportunities by banding together," said Dave Dickson, president of Monticello's Union Bank & Trust.  "Maybe one day banking will be an enjoyable career again. There's so much being put on us now. It's a challenge."

Dickson and his colleagues began holding monthly meetings about a year ago to discuss pooling their buying power to realize savings on insurance, office equipment and data processing. The group looked hard at trying to find a way to consolidate their health insurance plans, but the variables at nine different lenders and the unknown effects of national health care reform led them to table that item for now.

Dickson is confident the group will be able to find ways to collectively wring earnings from reduced expenditures by attracting better bids from vendors or sharing regulatory compliance costs.

 

 

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