The Contenders: It’s Grow or Else, Smaller Banks Say

Chris Roberts didn’t become CEO of Encore Bank in early 2019 with small dreams.

Roberts and Phillip Jett bought out the two major shareholders of Capital Bank in Little Rock in March, changed the name and went on a capital-raising spree.

In a few short months, Roberts and his team raised about $57 million and added 459 shareholders.

The capital helped strengthen the bank’s financials, a step important for the team’s plan to grow Encore’s business.

So far so good, as Encore’s assets jumped from $158 million in September 2018 to $247 million a year later.

Encore had one location when Roberts took over. He said the bank will soon have branches in Rogers, Fayetteville and Jonesboro and is looking at expanding outside Arkansas to Dallas and Fort Worth, and Nashville, Tennessee.

“It was exciting,” Roberts said. “I describe [Encore] as a sleepy little bank. We are certainly a private boutique bank, and we are going to be branch-light. Our plan all along was to grow into a large community bank.”

Roberts and Encore aren’t anomalies in that regard; smaller banks are often faced with the choice of growing or finding a buyer.

That was the choice Steve Stafford had a few years ago. Stafford, CEO and chairman of First National Bank of Green Forest, devised an expansion initiative he said the bank needed in order to better handle more costly banking regulations.

First National, which had nine branches in four northwest Arkansas counties, changed its name to Anstaff in 2014 — an homage to the founding Anderson and Stafford families — and acquired Twin Lakes Community Bank of Flippin in 2015.

Anstaff went from having assets of $430 million to $698 million by September 2019.

“The acquisition we made went very well; it put us in additional markets that we liked,” Stafford said. “There is a size you need to be. We needed to be bigger and it is working very well for us. It has helped us in our ability to take care of our customers.”

New Markets

Armor Bank CEO Chad May said his bank has grown significantly during the past couple of years and is now vying for the much-desired Jonesboro market.

Armor was called Forrest City Bank when it was purchased by the Waldrip family in 2017. It was one of the state’s smallest banks with two branches and less than $50 million in assets. In September 2019, Armor had boosted its footprint to nine locations (not all full-service branches) and nearly $100 million in assets.

The Waldrips injected some capital into the bank, which allowed it to move quickly into the Little Rock market, and then last year the bank paid $8.4 million for First Delta Bank of Marked Tree and its $59.6 million in assets.

Later in 2019, Armor hired Brock Fletcher and Bryan Wagner to run its Jonesboro operations.

May said the bank will break ground for a branch in Jonesboro that it expects to open in 2020.

“Our bank, going back to when the new ownership group bought the bank, the goal from there forward was to grow and gain scale so we can ultimately serve more clients and grow across the state of Arkansas,” May said. “It’s measured growth and all part of the plan. The scale helps you go to additional markets, build branches, operate branches in new markets. That is the infrastructure building we have to do to achieve the growth.

“That’s what you will see from us: periods of growing into new markets like Jonesboro, and we were fortunate to have the First Delta acquisition.”

Stone Bank of Mountain View also expanded by acquisition when it bought the $94 million-asset DeWitt Bank & Trust in 2019.

Stone’s assets have jumped from $217 million in 2017 to $471 million. The DeWitt purchase gave the bank entry into DeWitt and Gillett.

“To build value in a banking franchise you have to have a presence in growth markets,” Stone Chief Executive Officer Marnie Oldner said.

“You have to get to a certain size so that you are profitable. We felt that we needed to have a larger presence both in new markets as well as new products and our image. We had to grow all of those things in order to build value for our company.”

Bank Tech

Oldner said Stone Bank’s growth during the past few years has slowed recently but should still be well above average for the industry this year.

Oldner said Stone’s expansion wasn’t just geographic.

Oldner said her bank’s expertise was in agriculture lending and government-guaranteed loans such as those from the Small Business Administration and the U.S. Department of Agriculture.

The bank expanded those programs, which allowed it to then sell the guaranteed loans for income to support the expansion.

The DeWitt banks played into that strategy because of their row-crop lending portfolio.

“That was a good catch there for us,” Oldner said. “That is more of a diversified portfolio, and at the same time we are using something we know how to do. Our business plan has us growing in the markets we have now entered so we can shore all of that up while going into the next three years.”

In addition to diving into lucrative industry loans, a small bank can use its growing financial horsepower to invest in vital technology, May said.

Roberts said Encore is investing heavily in technology so that it can bring banking to its customers through online platforms and mobile applications without having to go heavily into branch expansion.

May said one of Armor’s earliest goals was to get money to strengthen its technological capabilities so it could compete with big banks without having the same brick-and-mortar exposure.

“The technology is out there, but it can be tough to have the scale to really afford the technology,” May said.

“The type of clients we were going to be going after, they don’t hope you have technology, they pretty much expect you’re going to have it. We have a full suite of products you would expect for a larger bank to have.”

Selected Bank Assets^*

*In millions, as of Sept. 30
Source: Federal Deposit Insurance Corp.