LaFrances Lead Investors Through Wisconsin's Greenwood's State Bank

What started as a niche lending venture in Wisconsin for the Stephen LaFrance family has morphed into a financial turnaround effort with more extensive Arkansas ties.

The Greenwood’s State Bank of Lake Mills, Wisconsin, was envisioned to serve as a lending platform for pharmacies when the LaFrances joined the investment roster in 2008.

Back then, the family was part of a group of pharmacy businessmen who helped raise $20 million to increase capital at the $45 million-asset bank. But things didn’t go according to plan.

Six years down the road, the LaFrance family is no longer in the pharmacy business after selling its seven-state chain of USA Drug, Super D Drug, May Drug, Med-X and Drug Warehouse stores for $438 million in September 2012 to Walgreen Co. of Deerfield, Ill.

The family’s ownership in Greenwood’s remains and has grown as work continues to improve the bank’s profitability and salvage the original investment.

“We’re one of the largest shareholders, but we’re not on the board of directors,” said Stephen LaFrance Jr. “We’re trying to make the best of a bank that went sideways on us.”

The LaFrances upped their stake in Greenwoods Financial Group Inc. with an additional $685,830 investment last year. The 22,861-share private placement boosted their position in the bank’s parent company to about 16.7 percent.

The family’s Greenwoods Financial holdings are worth about $2.1 million based on the bank’s current estimated book value.

The Arkansas connection to Greenwoods extends beyond the LaFrance family. Capital calls opened the doors wider for a group of Little Rock investors who own a combined 10.3 percent of Greenwoods Financial through AR Badger Investments:

  • Kevin Huchingson, president and CEO of Colliers International-Arkansas;
  • Mark Bentley, managing director and principal broker of Colliers International-Arkansas;
  • Matthew R. Jones, president of Legacy Capital Group;
  • Joseph Courtright, former president and CEO of USA Drug;
  • Dr. Scott Schlesinger;
  • Paul Hart, executive vice president and chief financial officer of RLJ McLarty Landers Automotive/McLarty Cos.;
  • John Pierron, senior vice president at Regions Insurance;
  • Dr. Jerry Prather;
  • Jason Prather, managing principle of Legacy Capital; and
  • Walthour-Flake Co., led by Dickson Flake, a broker at Colliers International-Arkansas.

The names on this list are familiar ones in association with various LaFrance family real estate investments. This Arkansas real estate tie helped send three loans during the past five months to Greenwood's State Bank totaling $2.2 million.

"They're such a small bank they don't have the loan capacity to do many of those out-of-market loans," Huchingson said.

The trio of mortgages is secured by Little Rock properties that include the Express Rx at 7612 Cantrell Road in midtown, the Center for Arkansas Legal Services at 1300 W. Sixth St. downtown and four small office buildings at 16603-23 Cantrell Road in west Little Rock.

The projects are owned by different limited liability companies managed through the Little Rock office of Colliers with Arkansas ownership connections to the Wisconsin bank.

LaFrance said the Arkansas real estate loans were directed to Greenwood's State Bank with an eye toward profitable diversification.

"They're a small community bank focusing on small community loans," he said. "We're trying to help the bank put good loans on the books. They don't get as many opportunities to make commercial real estate loans."

While the bank has made a handful of loan forays into Arkansas thanks to its contingent of Little Rock investors, there is no intention to expand Greenwood's presence in the state beyond the role of occasional lender.

The bank has expanded in Wisconsin during the past 18 months, buying the $76.3 million-asset Bank of Monticello near Madison, opening a wealth-management operation and purchasing the Mills Lake branch of Associated Bank of Green Bay.

“Our main focus is on acquiring banks up here in Wisconsin,” said Bill McDonald, CEO of Greenwood’s. “We’re looking at a lot of things right now. It’s a good market for what we’re trying to do up here.”

McDonald has talked to banks in the $100 million to $200 million asset size in hopes of striking more deals.

“Greenwood’s is positioned to be a buyer,” he said. “We have a lot of charters in Wisconsin and a lot of banks in the $400 million-asset and smaller size.”

McDonald is coming up on his fourth anniversary with Greenwood’s after a 25-year career in public accounting, with much of his work focused on banking.

Setting the stage for his arrival at the bank was a $3 million loss in 2009.

“We had to decide what to do with it,” LaFrance said. Management was replaced, and more capital was raised to solidify the bank, which led to increased Arkansas ownership.

McDonald was brought in to turn the bank around after “significant issues” arose and its affiliated credit corporation geared toward pharmacy lending was wound down because of changing market conditions.

“We’ve shown we have an ability to integrate and fix an organization that may have issues,” McDonald said. “We’ve done a pretty good job of that.”

“We were real lucky to get him,” LaFrance said of McDonald. “Our group got behind him and supported him.”

Greenwoods Pharmacy Financial LLC was envisioned to provide specialized banking services for independent pharmacy owners across the nation.

Dan Strause, who owned the Hometown Pharmacy chain of a dozen stores, was a leader in the GPF effort and remains a sizable investor with a 9.3 percent stake in Greenwoods Financial Group.

“We felt like there was a niche there,” LaFrance said of GPF. “We couldn’t get it off the ground, and we wound up with owners all over the country.”

While GPF floundered amid changes in Small Business Administration lending, Live Oak Bank of Wilmington, N.C., cropped up in 2008 as an independent funding source for pharmacies and other niche borrowers.

The $475 million-asset lender filed an $86.2 million IPO for Live Oak Bancshares Inc. last month after recording a $19.4 million profit during 2013.

Conventional banking suits LaFrance just fine.

“What’s started as a problem is a lot more fun,” he said.

The LaFrance family held a combined 8.15 percent stake in Delta Trust Banking Corp. of Little Rock, which is in the process of selling to Simmons First National Corp. of Pine Bluff.

The transaction is valued at $66 million, making the LaFrance family’s Delta Trust holdings worth about $5.4 million.