Price Stalls Deal on Ownership Change at Delta Trust

Official comment remains elusive, but insiders report that negotiations over an ownership shift at Delta Trust Banking Corp. have stalled over the usual issue:

The parties couldn’t agree on a price.

French Hill, chairman and chief executive of the $441.8 million-asset lender, has adopted a silent stance regarding the latest proposed deal. Other insiders have spoken to Arkansas Business only on the condition of anonymity, but even their take on behind-the-scenes activity has been inconsistent.

Some described the deal as a catalyst for a changing of the guard while others downplayed it as merely an internal redistribution of ownership. Some shareholders were privy to discussions while others weren’t.

“I can’t talk because of a confidentiality agreement,” said one shareholder.

“I’m as curious to know what’s going on as you are,” said another.

An unreturned phone call was the more common response to queries about a reshuffling of ownership at the Little Rock bank holding company. Arkansas Business first reported on April 1 that the family of Stephen LaFrance Sr. was attempting to assemble a larger block of stock in Delta Trust.

That report was followed on April 8 with the names of some would-be investors — Merritt Dyke, Walter “Skip” Ebel III and Jeff Fox — and details of a new management scenario that would replace Hill as chairman with Philip Tappan and Hill as CEO with Delta Trust’s current president, Chris Roberts.

Two days later, Hill addressed the topic in general terms at the company’s annual shareholders meeting at the Historic Arkansas Museum in downtown Little Rock.

“He described it as a very positive thing, and that whatever happened would be good for the company,” said a third shareholder who was present at the meeting.

The LaFrance family is portrayed as a driving force in the stock talks. The LaFrance family made its biggest splash in the pool of investors in 2009 when Stephen LaFrance Sr. bought 4,931 shares of Delta Trust.

That $1.4 million investment was part of a stock offering that helped boost the bank’s capital by more than $7 million.

“If you want to be aggressive and you want to gain market share, you have to have more capital,” a long-time Delta Trust shareholder said.

“We have shareholders in-terested in expanding their holdings. I don’t know what will happen, but Delta’s goal is to grow and build a bigger bank.”

The 2009 capital effort set the stage for the best three years since the company was formed in 1999. Annual profits and dividends established successive high-water marks during 2010-12.

Delta Trust ranked No. 20 among the best performing Arkansas banks during 2012 in terms of return on equity. Net income topped $4.3 million, and stockholders shared in the biggest dividend payout to date: $1.05 million.

At last count, the LaFrance family held a combined 8.15 percent stake in Delta Trust.

The additional shares are divided among Stephen LaFrance Jr., 0.81 percent; Jason LaFrance, 0.67 percent; and their LAF Brothers LLC, 0.86 percent.

The roster of Delta Trust shareholders numbers more than 200.

Leading Shareholders, Delta Trust Banking Corp.

Thomas Pugh Jr.* 10.54%
Robert LaRoche 6.34%
Stephen LaFrance Sr.** 5.81%
Claude M. Ballard Trust 4.23%
Morin “Monty” Scott 4.11%
Michael Montgomery 3.03%
Winthrop Rockefeller# 2.86%
Gerald Johnston 2.83%
French Hill## 2.78%
Thomas McLarty III 1.73%

* Pugh family owns 12.58 percent.  
** LaFrance family owns 8.15 percent.
# Rockefeller family owns 3.46%.
## Has warrants for an additional 8.59%.

In the Beginning

When Delta Trust Banking Corp. was established in 1999, stock was marketed in a private placement offering at $225 per share. In 2009, the price was $290 per share.

That’s not much appreciation over a decade and reflects the performance struggles endured as the bank sought to expand from its rural, agri-based roots.

The venture is built on the foundation of SouthEast Arkansas Bank in Parkdale (Ashley County), a lender that had $58 million in assets in 1999.

The founding families (Pugh, de Yampert and Currie) still maintain a stake in the bank, chartered back in 1910.

Among the 2009 crop of new shareholders was Chris Roberts, who had joined Delta Trust & Bank as president that year after resigning as president of Centennial Bank’s Little Rock operations on March 17.

Following his arrival and the boost in capital, Delta Trust recorded its three best years for loan income, which coincided with its three best years of profitability.

“Chris brought us a lot of help for sure, and we’ve added some loan officers for more capacity,” said a longtime Delta Trust shareholder.

Roberts rose to prominence as the chief executive officer who guided another south Arkansas bank charter on a three-year run to a lucrative payday.

He was an original investor in Centennial Bank, established on the charter of Pine State Bank of Kingsland (Cleveland County), purchased in December 2004 for $2.7 million. Like SouthEast Arkansas Bank, the renamed Pine State operations were moved to Little Rock.

In January 2008, Centennial had total assets of about $228 million (about the same size as Delta Trust at the time) when it was sold for more than $23.9 million to Home BancShares Inc. of Conway.

Delta’s branch expansion beyond Little Rock and southeast Arkansas extended to northwest Arkansas 11 years ago.

A branch in Bella Vista remains from a 2001 deal with the Federal Deposit Insurance Corp. for assets formerly part of Sinclair National Bank at Gravette.

A Fayetteville branch was opened in 2009, and Delta intends to convert its loan production office in Conway to a full service branch. The loan production office opened in 2011.

The $1 billion-asset mark is a fiscal target of interest for Delta Trust to gain efficiencies and position itself as a dynamic, ongoing concern. The path to achieving that critical mass is still being charted.

“These days, there are a lot of conversations,” said a long-time Delta Trust shareholder. “People are looking to buy, and people are looking to sell. We’ve been approached, and we’ve approached others.

“We feel like we’d like to be bigger. Whether we partner with someone or expand our shareholder base remains to be seen.”


Delta Trust

  • Total Assets: $441.8 million
  • Net Income:  $1.08 million
  • Staff: 115
  • Full-Service Locations: Little Rock, three; Bella Vista, Eudora, Fayetteville, Hamburg, Parkdale and Wilmot, one each

As of March 31, 2013

   
  Total Assets Net Income Cash Dividend
       
2012 $431.9 million $4,370,000 $1.05 million
2011 $381.7 million $3,699,000 $826,000
2010 $372.4 million $2,929,000 $659,000
2009 $294.5 million $552,000
2008 $242.8 million $848,000
2007 $216.2 million $1,006,000 $181,000
2006 $217.3 million $954,000 $164,000
2005 $211.6 million $573,000
2004 $197.1 million $136000
2003 $183.5 million -$219,000
2002 $163.5 million -$345,000
2001 $124.6 million $10,000