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Small Arkansas Banks Plow Onward in Face of AttritionLock Icon

5 min read
Small Arkansas Banks Plow Onward 128709
Jeff Hobbs, president and CEO of Community State Bank in Bradley. ( David Yerby)

If an annual trophy was given for the Arkansas bank voted least likely to survive, Community State Bank in Bradley could very well be a multiyear winner. The dubious feat would be possible thanks to its launch in a catastrophically bad year for banks 86 years ago and a recent two-year stint in the shadows of bankruptcy.

The bank weathered its first year of business in 1933, when the nation’s 12-month body count of bank-thrift failures topped 5,000, and remained a going concern in its southern Lafayette County hometown, less than 6 miles from Louisiana.

For now, the $21 million-asset lender ranks as the smallest of 92 banks based in Arkansas. But that’s a distinction new ownership intends to shed in the coming quarters as Community State Bank builds on its mainstay clientele of logging contractors and cattlemen.

Backed by Dallas-area investors and led by a familiar face, Community State Bank emerged in February from a 30-month limbo created by the Chapter 11 bankruptcy of its former parent company.

“It took us a while to put this deal together, but we finally got it bought,” said Jeff Hobbs of the effort to acquire the bank that began in 2017.

In advance of the $2.6 million purchase, Hobbs returned as president and CEO in August 2018. He had served as an executive vice president at Community State during 2007-12 and as president during 2013-14.

Hobbs said the bank is poised for better days after cleaning up its loan portfolio and reworking its vendor contracts during the past 14 months.

Its efficiency ratio improved from 80.68% to 70.46% during the first six months of 2019. Deposits grew from about $14.4 million to more than $18.2 million since the ownership change.

Community State Bank went live with its first-ever mobile app on Oct. 16 (Apple | Android). The application gives customers remote bill-paying capabilities as well as letting them make deposits and transfer money without visiting the bank’s lone office in Bradley (population 550).

A future capital raise to fund expansion and support growth is on the agenda for 2020, but Hobbs is keeping the bank’s goal for total assets under wraps for now.

“We do have a target,” he said. “We have to branch in order to survive. We’ll really define our strategic plan in January, and everyone will be on board with whatever is decided.”

RELATED: Number of Smallest of the Small Banks Continues to Dwindle

Others Report

With total assets of $41 million, Clarendon’s Merchants & Planters Bank is nearly twice as large as Bradley’s bank and the second-smallest in Arkansas. It too is wading into new platforms for conducting business and reaching customers.

“We’ve leapt into the 21st century with internet banking,” said Kendall Henry, CEO of Merchants & Planters. “It’s available on a limited customer basis for now, and we’ll push it out for full access by year’s end.”

He said bank leadership has mulled over stepping into new markets to expand opportunities but has opted to stay put for now.

Jim Daniels, CEO of McGehee’s First NaturalState Bank, said embracing technology is important to staying relevant, and no matter the format, it has to be wrapped with customer service.

“We’re old-school bankers,” Daniels said. “We get out and meet people and make contacts, personalized customer service. You can have all the bells and whistles, but customer service is still the most important. You have to deliver a good experience for the customer.”

During the past three years, the bank has grown its total loans by 82%, from $21.1 million to nearly $38.5 million, and opened a Dumas office.

“Dumas has been a good fit, Daniels said. “We had a customer base up there who wanted us to have a local presence to allow them to transact business there.

“We plan to go to a true full-service location eventually. There’s no property under contract, but we’d like to have a full-service branch up there during the next 24 months.”

He said the bank leadership has discussed raising capital and venturing beyond Desha County. Nothing is on the drawing board for the near future though.

“We intend to do everything within our power to stay independent,” Daniels said. “We’re not at the end of our rope. But if we do get there, we’ll tie a knot and hang on.”

Among the smallest banks in Arkansas, Security Bank in Stephens is different. The $69 million-asset bank is part of a two-bank holding company, Smith Associated Banking Corp.

Small Arkansas Banks Plow Onward 128709
Guy “Buck” Smith, CEO of the million-asset Security Bank in Stephens. ( David Yerby)

That relationship connects the south Arkansas bank with the $112 million-asset Bank of Salem in north Arkansas, which affords increased economies of scale through shared costs.

In addition to having a sister bank, Security Bank also operates a loan production office in Hot Springs.

“If Security Bank was a stand-alone, we would probably have a different plan,” said CEO Guy “Buck” Smith. “We do very little commercial lending. That’s not our forte.”

Opened in the 1990s, the Hot Springs office provides lending opportunities not found in the bank’s hometown of 800 in the southwest corner of Ouachita County between Camden and Magnolia.

“It’s been a driving force in our loan demand,” Smith said of the Hot Springs office. “We focus on one- to four-family residential loans and consumer loans.”

In addition to battling for loans in Hot Springs, the Stephens bank competes for deposits from customers in Camden, Magnolia and El Dorado.

“We’re not the best example of expanding with new branches,” Smith said. “That’s not on our horizon anytime soon. We’re kind of a sleeper, a small boutique lender with good people. We’re accustomed to paying more for our deposits to get new relationships.”

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