Community First Trust Attracts $6M Buyer

William Kerst Jr. has stayed aboard as president of Community First Trust Co. after the June 30 sale to Farmers Bank & Trust of Magnolia.

William Kerst Jr. wasn’t looking to sell Community First Trust Co. in 2021. But two years ago, events began pulling the president and CEO of the Hot Springs enterprise toward the possibility.

A string of would-be buyers came calling unexpectedly, putting the notion in play. The surprise interest led him down a meandering path to a $6 million deal with a fourth party: Farmers Bank & Trust of Magnolia.

“I was basically minding my own business, and I had three offers come out of nowhere,” Kerst said. “We had not sent anything out to indicate we were available. It wasn’t even on my radar.”

None of the sales queries for his trust company with its $340 million in assets under management was from banks or banking affiliates. The unsolicited offers all came from out-of-state financial services companies looking to expand into Arkansas.

“It just fit with what they were trying to accomplish,” Kerst said of the sudden interest in Community First. He declined to identify the names of the three companies that reached out to him about a potential sale.

The first suitor contacted him in October 2019, and two others made their introductions in midsummer 2020. By then, Kerst was in the midst of due diligence and discussions with the first company.

“When the pandemic hit, the discussions slowed down dramatically,” he said.

In the weeks and months that followed, Kerst couldn’t pull the trigger on a sales agreement. The idea of selling remained on his mind nonetheless.

“I couldn’t get in a comfort zone with them,” Kerst said of the suitors. “Randy Dennis [president of Little Rock’s DD&F Consulting Group] convinced me to talk with Farmers.”

So he approached the $1.8 billion-asset lender, and a getting-to-know-you meeting was set.

Kerst had his doubts but found the dynamics appealing. “The culture was just so welcoming,” Kerst said. “… They bought land for us to build a new building before we had signed a single piece of paper.”

Patmos Holdings LLC, an affiliate of Farmers Bank & Trust, acquired a 3.4-acre site in Hot Springs at the southwest corner of Higdon Ferry and Twin Points roads on April 9 for $668,000.

A 19,000-SF office building is under construction to house Community First as well as accountant and attorney tenants. The project should be completed by March.

What prompted Dennis to suggest Kerst call Chris Gosnell, CEO at Farmers Bank & Trust?

“I thought it would just be a good pairing,” he said. “I think the world of both of them. He’s got a great business and built a great shop. He’s like a lot of us. He’s getting older.”

Kerst said another factor that kept him ruminating on the idea of selling was his kids. None of his four sons was interested in succeeding him.

“That was another reason,” he said. “None of them wanted to work in the business.”

The trust business has been a part of the name and capabilities of Farmers Bank & Trust since it opened in 1906. Combined with the June 30 acquisition of Community First, the bank’s trust assets under management would rank as the eighth largest in Arkansas at $487 million.

But the bank’s trust operations and Community First will continue to stand and operate separately. “We’re going to maintain our independent status,” Kerst said “That’s helpful to us because we provide trust services for a lot of community banks.”

Kerst is staying aboard as president, and his wife, Leslie Ballentine, will remain as chief financial officer.

In addition to Hot Springs, Community First offices in Hot Springs Village, Little Rock, Russellville and El Dorado provide new markets for Farmers.

Looking Back

Community First was a unicorn when it was founded as a free-standing, public non-depository trust company in 1998. The venture remained a unique corporate creature in Arkansas during its 23-year run.

“We’re regulated by the State Bank Department,” Kerst said. “Our charter is as if we’re a bank, but we can’t make loans or take deposits.”

No other public and independent trust company like Community First ever formed under the Arkansas Trust Institutions Act of 1997. Some of Kerst’s original partners had advocated for the legislation that made the venture possible.

In 1998, the leadership was divided among Kyle McDonald, chairman; Charles Dudley II, president and chief executive officer; and Kerst, executive vice president and secretary of the board.

Other aspiring trust venturers did look to follow in Community First’s footsteps.

“Over the years, I had several calls from people who wanted to do it,” Kerst said. “But the $1 million capital requirement kept them from jumping in, and it’s a labor intensive business that you have to have a good staff to take care of the people the way you want to.”

He got into the trust business through First Commercial Bank of Little Rock. His first job there was as an internal auditor, and his first five audits were in the trust department. Kerst continued to work in the department and had been there 10 years when news broke that led to a key career decision.

Regions Financial Corp. announced on Feb. 9, 1998, its intention to buy First Commercial Corp. in a $2.7 billion deal that would create the nation’s 26th-largest banking firm.

Kerst was working for First Commercial in Hot Springs at the time, less than four months after the Arkansas Trust Institutions Act became law.

To move up the ladder with Regions would require moving to Birmingham, Alabama, or Atlanta. But Kerst didn’t fancy the idea of uprooting his pre-teen boys, and so he stayed in Hot Springs and joined the Community First Trust effort.

“We started at zero with no clients and no assets under management,” Kerst said. “We were at $30 million after the first year and losing money. I do remember that.”

It took about 4.5 years to reach break-even.

“The business was good, but the costs were greater than I anticipated,” he said. “I thought it would take two years to begin breaking even.

“The clients that followed us were just tremendous, along with the referrals from accountants and attorneys in Hot Springs who embraced the idea. But people were still afraid of an independent trust company.

“They were not new, just new in Arkansas. Some were afraid we wouldn’t make it.”

The first Monday of business began in memorable fashion. “All of the computers were stolen over the weekend,” Kerst said. “The security system was installed but not activated. That was an interesting start.”

Among his new challenges after the sale to Farmers Bank & Trust: helping develop the Texarkana market.

The same basic allure that drew him to the trust business has not waned. “I love helping other people,” Kerst said.

“At the end of the day, we’ve helped someone with a problem.”