LITTLE ROCK – Further consolidation in Arkansas’ banking community likely is already under way, the CEO of Southern Bancorp said Tuesday.
“I think you’ll see probably massive consolidation here in Arkansas and I think that that’s probably under way right now and will continue,” Phillip Baldwin said after a speech at the Arkansas Small Business Awards luncheon. “We probably would anticipate growing ourselves as we acquire some banks that end up being sold.”
A timely example, First Arkansas Bancshares Inc. of Jacksonville announced Tuesday it would acquire Greers Ferry Lake State Bank of Heber Springs, which is owned by M&P Community Bancshares of Newport, and merge it into First Arkansas Bank & Trust.
Terms of the deal were not disclosed, but M&P CEO Jim Gowen Sr. said shareholders would reap a “substantial return” from the sale. Merchant & Planters Bank of Newport, owned by M&P, had assets of about $173 million. First Arkansas Bank & Trust had almost $487 million in assets as of March 31.
The announcement came a month after First Security Bancorp of Searcy announced it would buy Union Bank of Benton for an undisclosed sum.
Additionally, Conway-based bank holding company Home BancShares Inc. announced last week it would merge the Bank of Mountain View into Community Bank, pending regulatory approval, as part of an efficiency ad review study. Home Bancshares also recently announced it would acquire Centennial Bank of Little Rock.
A nationwide credit crunch, rising oil and gasoline prices, an economic downturn and all of the trickle down effects are playing a role in the bank consolidations past, present and future, Baldwin said.
Last month, ANB Financial of Bentonville was closed by the Office of the Comptroller of the Currency after experiencing large amounts of loan losses related to the downturn in both the construction and the real estate industry in Northwest Arkansas. Pulaski Bank and Trust Co., owned by IberiaBank Corp., purchased ANB’s local deposits prior to the closure and reopened branches in ANB’s nine offices.
But Randy Dennis, president of Little Rock-based DD&F Consulting Group, which provides consulting services to financial institutions, downplayed the effect the struggling economy has had on Arkansas banks so far, and said the banking community here is strong compared to other states, mainly because of agriculture.
ANB’s failure was due not so much to economic woes but overbuilding, and similar situations are unlikely to arise again anytime soon in Arkansas, Dennis said.
“Right now our banks have been minimally if at all affected by the subprime mortgage market,” he said. “If the downturn stays another six months and people get really scared and quit buying and you have commercial businesses falling off, then that’s where I think we’ll experience some troubles.”
Arkansas is strong capital-wise,” Dennis said. “I don’t see a lot of risky behavior in Arkansas banks, although there are probably a couple of smaller banks that might be on the edge.”
Many of the recent banking consolidations have been negotiated not because of trouble at one of the institutions, but because of the initiative of institutions with aggressive growth strategies, Dennis said.
Another factor, Baldwin said, is that Arkansas banks, especially in rural areas, are generally family-owned. Family members interested in running the bank are nearing retirement, and the younger generation has moved away and is not interested in taking over, Baldwin said.
“I think with the changes you’re seeing in the banking system, most families are saying let’s do our exit strategy,” he said.