Count Ross Whipple, chairman and CEO of Summit Bank, among Arkansas lenders looking for new territory to invest stockpiled profits.
In Whipple’s case, his potential area of operation lies within a 350-mile radius of the company’s Arkadelphia headquarters.
"We’ll have $40 million in excess capital by the end of the year," Whipple said. "We need to leverage that. That’s not just Summit. There are a lot of other banks out there like us."
For now, his $1.1 billion-asset concern remains an Arkansas-only enterprise that is pushing its way northward into new markets.
Whipple is pleasantly surprised with Summit Bank’s start in Faulkner County. The lone Conway office, which opened Sept. 6, marked the bank’s first new full-service branch in more than three years.
"It’s exceeded our expectations," Whipple said. "We had hoped to have $50 million in loans booked during the first 12 months. That would be fairly phenomenal. In April, we’re past $40 million already, with more loans that are approved but aren’t booked."
Summit’s Conway move was launched with the hiring of Derrek Thomason, former Conway market president for Metropolitan National Bank, along with an eight-member team of staffers who worked with him.
Summit Bank is in the process of wading deeper into the Faulkner County market, home to 15 other banks operating 62 offices. (And counting. Delta Trust & Bank, which opened a loan production office in Conway last June, confirmed in March that it was scouting for a place to put a full-service branch.)
"We have received regulatory approval for another branch and hope to start construction as soon we get approval from the city," Whipple said. "We’d like to build another branch in the next 12 to 24 months. We need at least three branches to service the market for now, and we’ll see where it goes from there."
The company has followed a growth path absent acquisitions since Summit’s start in 2000. But it’s not because Whipple is averse to buying banks as a means to enhance expansion.
"I can’t find anyone to buy," he said.
Unable to strike any deals at the right price, Whipple has followed a de novo branching strategy that has served Summit Bank well. An all-important component to that is finding the right person to oversee business in new markets such as Conway.
Similar hires will precede any moves to other new markets such as Jonesboro, Fayetteville, Texarkana or out-of-state destinations.
"Earnings are still good," Whipple said. "Asset quality is good. We’re looking for ways to expand our franchise and leverage our capital.
"We want to loan money. That’s what we do. We have more liquidity than we’ve ever had."
Franchise Building
Summit Bancorp Inc. is the second bank-building project undertaken by Whipple. The effort is twice as big as his first one: Horizon Bancorp Inc., a $551 million-asset holding company with operations in Arkadelphia, Sheridan, Malvern and Hot Springs.
Horizon Bancorp was sold in February 1998 in a $150 million stock swap with Mercantile Bancorporation Inc. of St. Louis, which itself was acquired by Firstar Corp. of Milwaukee in 1999.
Two years later, Firstar morphed into U.S. Bancorp after purchasing the company and relocating its headquarters to Minneapolis.
Today, the former Horizon Bank offices operate under the U.S. Bank banner.
The string of deals was in the heyday of mergers and acquisitions, and the Horizon Bancorp. transaction represented a whopping sales multiple of 3.2 times book value. The bank-buying landscape is radically different these days.
However, well-run public bank holding companies are returning to favor, and that bodes well for future valuations on privately held ventures such as Summit Bancorp.
Whipple, sounding like a man who could sell as well as buy, said the key to building shareholder value and possibly attracting larger premiums was the footprint of a bank’s operations.
"That’s going to drive bank multiples," he said. "Where are you? What markets are you in?"
For now, his focus is on growing the Summit franchise with opportune expansions into good markets. Whipple looked at joining the lending party in northwest Arkansas but could never get comfortable with any of the potential deals examined.
He downplays any significance to his ability to avoid buying into trouble through acquisition opportunities in Benton and Washington counties.
"I’ve looked at a lot of banks up there during the past three to four years," Whipple said. "It’s better to be lucky than smart. We couldn’t pull the trigger for some reason."
Summit wasn’t immune from problem loans, but its setbacks have proven manageable as the company continued to generate profits and dividends through the travails of the financial sector.
Nonaccrual loans at Summit totaled $9.2 million in 2011 versus $7.3 million in 2010. Real estate loans account for about 79 percent of the company’s $739 million loan portfolio.
The 2011 nonaccrual total was composed of about $5.4 million in real estate loans dominated by three categories: commercial, about $2.2 million; 1-4 family residential (single-family houses to quadplexes), nearly $1.7 million; and construction, almost $1.1 million.
Commercial loans accounted for the single largest category of nonaccrual loans for Summit: $3.7 million.
Those licks are more than covered by $14.5 million in loan loss reserves. In 2011, the company recorded a 13.8 percent return on average equity.
"Hopefully, you won’t see a lot of volatility in our earnings," Whipple said. "That’s the way we’re built. We’re structured to make money but not to make too much money because of too much risk.
"I’m not a banker. I’ve never been a banker. I’m a risk manager. That’s what I do."