Southern Bancorp, a rural community development bank, has agreed to buy a small El Dorado bank and use it as an anchor to reach disadvantaged areas in south Arkansas, Southern Bancorp’s chief executive officer said Thursday.
Southern Bancorp, which owns banks in Arkadelphia, Helena-West Helena and Ruleville, Miss., agreed to pay more than $5 million for Timberland Bank of El Dorado, an 8-yearold bank with about $140 million in assets. Timberland has been under a cease-and-desist order from the Federal Deposit Insurance Corp. since July.
Southern Bancorp received $11 million under the Treasury Department’s Troubled Asset Relief Program in January. At the time, Phil Baldwin, Southern’s chief executive, said the money would be used to expand in south and northeast Arkansas.
“This would be an anchor point for us [in south Arkansas], and we’ll be interested in expanding into the smaller communities in that area,” Baldwin said Thursday.
There are needs in El Dorado, too, especially with the recent closing of a Pilgrim’s Pride poultry processing plant that cost about 800 people their jobs.
“We think that we may be able to be of some service in that,” Baldwin said. “We think we can bring our expertise to El Dorado and be a good community citizen.”
Southern, the largest rural development bank in the country, with about $600 million in assets and 40 locations in Arkansas and Mississippi, has worked since 2003 on restoration in Helena-West Helena. It also has helped with community development efforts in its hometown of Arkadelphia in Clark County and in towns in Mississippi where it has bank branches.
Southern Bancorp paid about 0.5 times book value for Timberland, below the average of 1.6 times price-to-book value for banks in the Southeast United States with less than $150 million in assets. Timberland Bancshares, Timberland Bank’s holding company, agreed to take about $6 million in nonperforming loans out of the bank and try to collect those loans, Baldwin said.
“They feel like those loans are collectible, and we weren’t sure,” Baldwin said. “This way both of us are comfortable with the outcome.”
Tandy Menefee, chief executive officer at Timberland Bank, said he believes that the holding company will be able to collect on the bad loans.
“We want to [collect on the loans] as expeditiously as possible,” Menefee said.
Southern has no plans to eliminate any Timberland employees, said Menefee, who will remain as president at the bank.
Southern still has about $6 million remaining from the federal money it received. It hopes to use the money to make loans in the 40 communities where it has branches, Baldwin said.
“We’re also continuing to look at other markets to expand into,” Baldwin said.