Simmons First National Not Alone In Bank Branch Assessment

The $53.6 million Chapter 11 acquisition of Metropolitan National Bank will pose some assimilation questions for executives at Simmons First National Corp. of Pine Bluff, particularly in the overlapping footprints in northwest and central Arkansas.

But Simmons isn’t the only bank that is assessing current branch locations, and some of the branches it decides to drop may be readily scooped up by other lenders.

Branches with $15 million or less in deposits are likely to draw special attention. Metropolitan has a dozen locations in northwest Arkansas and 15 in central Arkansas below that threshold. Simmons, through two of its eight separate bank charters, has six sub-$15 million deposit branches in northwest Arkansas and eight in central Arkansas. (See slideshow above.)

For many lenders, $15 million in deposits is a measuring stick for the viability of a bank branch, while others think even that is too low.

“If you get below $15 million in deposits, it gets pretty tough,” said Reynie Rutledge, chairman and CEO of First Security Bank.

Branch evaluation is an ongoing process, and deposits are but one item for review.

“We’re looking on a fairly continuous basis,” Rutledge said. “Are we continuing to open new accounts and getting new customers? Every situation is different.

“We do believe in brick and mortar. Can you do without as many assets tied up in branches as you could in the past? Probably you can.”

First Security is expanding its northwest Arkansas network with the purchase of a Farmington branch from First Federal Bank of Harrison. The location will bring the number of branches First Security has in Washington County to 11, but it is the first outside of Fayetteville and Springdale.

First Federal opened the location in 1997. Sixteen years later, its deposit total stands at $10.7 million.

Chris Wewers, president and CEO of First Federal Bank, said the decision to sell the Farmington operation was made as part of the company’s “branch rationalization” efforts.

“We were looking around at our branch network: size, location and lending activity over time,” Wewers said. “We decided we’re probably not the best owner of it. Let’s see if someone else is interested in it.

“You have to build critical mass to support and justify a full-service facility. I’d like to see [deposits of] $20 million in terms of a rock-bottom number. We do look at the average among branches in a market though.”

If the Simmons-Metropolitan combination results in some branch consolidation in central Arkansas, Wewers said First Federal needs to be on the list of interested parties.

First Federal, which has operated a loan production office in west Little Rock, is in the process of opening its first full-service location in central Arkansas. The company will set up shop in leased space formerly used by Centennial Bank at Little Rock’s Pavilion in the Park.

Expanding First Federal’s book of business and personnel are considerations before the company takes on another location.

“A pretty building on the outside isn’t as important as what’s on the inside,” Wewers said. “It starts with the people. We’re trying to make sure we’re being good stewards with good branches in good locations operated by good people.”

David Dowd, president and CEO of Cross County Bank of Wynne, wasn’t put off by the $9.6 million deposit base of a Brinkley branch that was shopped by Evolve Bank & Trust of West Memphis.

He liked what he saw at the profitable operation, which opened in October 2010.

“That was an opportunity that presented itself,” Dowd said. “Brinkley is not a whole lot different than any of our other markets. We felt like it had a really good staff who we could work with.”

The branch is one of four locations operated in Brinkley by three lenders. Signature Bank of Arkansas in Fayetteville, which bought the Bank of Brinkley in 2007, has two offices. BancorpSouth Bank of Tupelo, Miss., and Evolve operated one each.

The Brinkley branch will be Cross County Bank’s second location outside its namesake base. The first was in Jonesboro, which opened in April 2006. The deposit total there is at $19.6 million.

The markets for Little Rock’s Bank of the Ozarks run the gamut from tiny and rural such as Western Grove (Newton County) to the sprawling metro areas of Dallas and Atlanta.

“A relatively small branch can be very profitable in a small market,” said George Gleason, chairman and CEO of Bank of the Ozarks. “It really is an evaluation of cost, the operating cost of a branch and the quantity of business in that market.”

Sprinkling in some de novo branches with acquisitions remains a part of BOZ’s recipe for profitable growth.

“Our philosophical response is this: We continue to appreciate that all customers, to some extent, still want physical, personal contact with their banker in the context of a traditional branch. But certainly the need for numerous branches is diminishing as more and more customers utilize mobile banking, the internet, alternate banking and other electronic vehicles.”

First Security’s Reynie Rutledge said electronic banking has changed the face of banking, but the brick and mortar branch still has its place in the order of things.

“I’m sure there are less people coming in, but there are still people coming in,” he said. “They don’t have to come in as often because of technology. It’s not the same as looking someone in the eye. If you don’t have branches, people won’t have a place to come to.”