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Mary Beth Brooks: Farmers & Merchants’ Offer a ‘Surprise’ But Made Sense

3 min read

Selling the Bank of Fayetteville wasn’t urgent, CEO Mary Beth Brooks said Friday morning, but after Farmers & Merchants Bankshares of Stuttgart expressed an interest, the deal made a lot of sense.

“When we started talking, really, they are our kind of guys,” Brooks said in her first interview after the late-night announcement that the holding company for Farmers & Merchants Bank had struck a deal to buy Bankshares of Fayetteville Inc., the holding company for the Bank of Fayetteville.

The price tag of the all-cash transaction was not released, but the deal — expected to close in the fourth quarter — will push F&M’s assets above $1 billion and make it one of the 10 largest banks in the state. While the news release issued by the two companies said the Bank of Fayetteville name will remain on eight branches in northwest Arkansas, Brooks acknowledged that the two bank charters will “more than likely” be merged. In that case, the northwest branches will be branches of F&M, even if they operate under the Bank of Fayetteville brand.

That is the kind of consolidation that makes sense in a banking environment in which the regulatory burden has become too expensive for smaller banks like BOF, which has assets of about $350 million. Brooks, a former bank examiner, said regulators used to visit a bank every year or so; now, some kind of examination is going on every few weeks, requiring more staff time to respond to the examiners. Banks are also burdened by the time and cost involved in training staff to comply with new regulations.

Brooks said she had been acquainted with Gary Hudson, president and CEO of F&M, for many years, but the idea of merging their operations came out of the blue. “It was a surprise. And would I ever have thought we’d be doing business with a bank in Stuttgart? No.”

But the two companies share similar approaches to community banking, Brooks said, and the culture of F&M is not unlike what she called “the funky Fayetteville bank.” What’s more, the fact that their existing markets don’t overlap at all is a positive for the combined operation.

“They need growth, and they need to be in markets that are growing,” she said. Adding Bank of Fayetteville’s portfolio of commercial real estate loans to Farmers & Merchants’ agri-heavy assets will result in “good diversification.”

Still, Brooks expressed amazement at the number of banks that want to compete in northwest Arkansas — and especially in Fayetteville. In recent months, Citizens Bank of Batesville, First National Bank of Fort Smith and First National Bank of Paragould have entered Fayetteville for the first time. According to the Federal Deposit Insurance Corp., 25 different banks currently operate 56 offices in Fayetteville alone.

The announcement released late Thursday night included this statement from Hudson:

“We are very pleased with the opportunity to add The Bank of Fayetteville to the Farmers and Merchants Bank family. We share similar values and business philosophies of community involvement and commitment. We have full faith that combining the financial strength of our organizations will serve the customers of both institutions well.”

Farmers & Merchants Bank had $702 million in assets as of June 30. It has $101.7 million in equity capital and earned $7.6 million last year. Net income for the first two quarters was $3.3 million. It  operates branches in Stuttgart, DeWitt, Marianna, Hazen, Des Arc, Perryville and Morrilton.

Founded in 1987, the Bank of Fayetteville has five branches in Fayetteville plus branches in Farmington, Prairie Grove and West Fork. It had total assets of $348 million and $40.5 million in equity capital as of June 30. Bank of Fayetteville earned $2.5 million in 2014 and posted net income of $1.27 million in the first half of 2015.

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