Arvest, the state’s largest bank, just got bigger pending the purchase of North Little Rock-based National Bank of Arkansas.
The two bank holding companies have entered into an agreement where Arvest Bank Group will purchase 100% of National Bank Corp., the parent of the central Arkansas bank. Financial terms were not disclosed.
The deal will give Arvest additional marketshare in the North Little Rock, Conway and Maumelle area, and is seen as a strategic move for that reason.
Arvest had made a play for Metropolitan National Bank last month entering the bidding process for that Little Rock bank being awarded in bankruptcy court. A bid finally won by Pine Bluff-based Simmons First National.
“This acquisition of NBA will certainly help improve our marketshare in central Arkansas. We are looking forward to getting acquainted with NBA’s associates and customers. We like their locations in North Little Rock, west Little Rock and Conway, particularly,” said John Womack, chairman and CEO of Arvest Bank in Little Rock.
He said Arvest has known the key owners of NBA for several years since the bank first organized in 1981.
The conversion is expected to take place sometime in the first quarter of 2014, after regulators have given the green light and customers have been notified of the deal. In the meantime, Arvest said it will complete the appropriate applications with state and federal regulators for this deal and running the two banks separately.
Womack said Arvest is acquiring all the assets, deposits and loans of the Little Rock-based bank. As of June 30, NBA reported total assets of $187 million, with deposits of $160 million. Loans averaged $98.7 million in the second quarter report with the Federal Deposit Insurance Corp.
NBA posted net losses of $44,000 through the first half of this year, pocketing just $8,000 in all of 2012.
While net profits have eluded NBA, it is well capitalized and not holding large amounts of real estate in its portfolio like the larger Metropolitan National Bank.
With the combined deposits of Arvest and NBA, the pro-forma bank will command 7.64% of the Little Rock marketshare, leaping over the pro-forma Simmons-Metropolitan bank marketshare of 7.13%, based on the June 30, deposit report by the FDIC.
Bank of America, Regions, Centennial and First Security Bank hold more deposits in the Little Rock market than either of the two previously mentioned banks pending mergers.
Phil Knight, a local banking consultant, said on the surface the deal looks like a good play for Arvest in terms of buying deposit marketshare, but without knowing how much was paid it’s hard to know how good. He said with NBA's book value somewhere around $15.5 million, this deal is likely quite a bit cheaper than the $56 million offer Simmons made for the larger Metropolitan National Bank.
Banks have been selling somewhere around 1.5 times book value, if the the bank is not under stress, according to Knight.
“Making the decision to sell was difficult, but knowing that the new owner will take good care of our NBA customers has made it easier,” said Bob Osborne, majority shareholder and board chairman for National Banking Corp. “I believe that right now is the right time to sell NBA and Arvest Bank is the right acquirer.”
Osborne said the planned merger will give NBA customers greater banking convenience throughout the state.
Garland Binns, banking consultant and attorney at Dover, Dixon and Horne, said the banking climate is ripe for consolidation and expects more deals to occur in the next year among Arkansas banks.
Already this year Conway-based Centennial announced it was acquiring Liberty Bank for $280 million. Simmons is acquiring Metropolitan National for $53.6 million. Chambers purchased the distressed Decatur State Bank, and First Federal acquired First National Bank of Hot Springs and Heritage Bank of Jonesboro in a $124 million deal.
Knight agreed that consolidation is likely to continue with the larger banks swallowing up the smaller institutions that find it harder to stay profitable amid onerous regulation and hyper competition.