FNB Sees Green in its Communities

The First National Bank in Green Forest prides itself on being a locally owned community bank. With branches in Harrison, Huntsville, Kingston, Jasper, Berryville and Green Forest, it’s easy to see it has a strong connection to the smaller towns of the Arkansas Ozarks.

“We’ve had plenty of opportunities to sell, but we feel it’s important to serve the community,” said Stephen Stafford, president and CEO of FNB in Green Forest. “We feel like we can take care of our customers being locally owned better than someone outside of the area. We feel like that’s one of the reasons we’ve had such good growth and success over the years — because we take care of our customers and have interest [in them].”

The bank has amassed $381.9 million in assets, continuing a steady growth over the past decade that Stafford said was fueled by a 1994 Arkansas law that allowed banks to branch outside of their home county.

Now the bank, which is in its 75th year, has eight locations in Madison, Carroll, Boone and Newton counties, and has passed on opportunities to branch into Washington and Benton counties, Stafford said. Instead, the bank invested in Legacy National Bank of Springdale. One of Legacy’s primary investors is Gary George, CEO of George’s Inc.

For now, FNB is sticking with what it has known for the past 75 years — banking in communities where agriculture dominates its loan portfolio. And those communities, although not like its neighbors to the west, are having economic growth in every region. FNB wants to ride that type of growth and still stand on its own, Stafford said.

Seeing Green

The First National Bank in Green Forest, which was chartered in 1931, made a move into Berryville in 1991, but it didn’t start branching outside of Carroll County until the law was changed in 1994. With that, the bank started a growth spurt by opening its Harrison branch in Boone County in May of that year. Three years later, it opened a second location in Harrison.

In October 2003, FNB purchased Madison Bank & Trust Co. of Kingston for $3.2 million, giving them locations in the Madison County towns of Kingston and Huntsville. Madison Bank & Trust had $27.3 million in assets as of June 30, 2003, according to the Federal Deposit Insurance Corp.

In April, FNB branched into Newton County with a bank location in Jasper. With all the branches, who says money doesn’t grow on trees?

“I’ve been pleased and surprised by our growth,” Stafford said. “I never dreamed we’d be a $380 million bank. When I began working here, we were a $17 million bank.” Stafford joined FNB in 1978 as president and CEO.

According to the FDIC, FNB’s assets were up 25 percent for the year ended Dec. 31, compared to $303.4 million in assets for the previous year. Stafford said much of the asset growth has come with loan growth.

The bank has a good mix of agriculture and real estate loans, he said. FNB in Green Forest has been known for its poultry lending, but with the bank’s addition into Boone County, it brought a good amount of commercial loans to FNB’s portfolio.

For 2005, FNB had $235.2 million in net loans and leases, up 8 percent from $216.6 the previous year. Of that total, $178.1 million, 75 percent, were real estate loans. Interestingly enough, farmland loans were $61.8 million, up 5 percent from $58.7 million in 2004. That made farmland loans 26 percent of the real estate loan portfolio, more than commercial and residential.

Loans for one- to four-family residential real estate totaled $38.8 million in 2005, up 6.8 percent from 2004. Commercial real estate loans amounted to $43.1 million, up 7 percent from $40.1 million the previous year. Those numbers make up 16 percent and 18 percent of the real estate loans, respectively.

Because community banks across the U.S. have problems funding loans, Stafford said the bank has worked to increase its loan-to-deposit ratio. Doing so will keep the bank from relying on looking for other sources to fund loans, like borrowing from a federal home loan bank.

FNB’s loan-to-deposit ratio was 89 percent as of Dec. 31, up from 85 percent in 2004. A high 80-percentile ranking is considered good by most of the area’s top banks (PDF).

FNB’s deposits increased in 2005. The bank had $262.3 million in deposits, up 9 percent over $253.8 million the previous year.

For the four counties where FNB has locations, it had $256.9 million in deposits, giving the bank 18.83 percent of the market share — the third largest. In Carroll County, it had the No. 1 slot in market share with $139.6 million in deposits, taking 29.72 percent of the market. In Boone and Madison counties, it had the third largest market share with $92.1 million (13.41 percent) and $25.1 million (15.76 percent), respectively.

FNB has been able to grow and expand with its assets and income.

“Income-wise we’ve had two good years,” Stafford said. “Our income has steadily increased.”

The bank’s income grew 45 percent to $6.7 million in 2005 compared to $4.6 percent the previous year. And in 2004, income grew 70 percent from $2.7 million in 2003.

Building a Legacy

Stafford’s work with FNB caught the eye of a prominent poultry man named Gary George, but he wasn’t after Stafford for agriculture loans.

Instead, he was looking for some insight to help get his Legacy National Bank off the ground.

George and Stafford, along with Legacy’s President and CEO Don Gibson, had been friends since college. Stafford helped George and company establish and organize the bank prior to its March 2005 opening.

Stafford is on Legacy’s board of directors, and FNB is a shareholder in the bank. Legacy is a way for FNB to branch out to Washington and Benton counties through some loan participation, Stafford said.

When Legacy started taking deposits in March 2005, it had $21.7 million in assets. As of Dec. 31, it had grown to $131.8 million, a 505 percent increase.

“For Springdale and the area, we felt there was a need for a locally owned bank,” Stafford said. “And Legacy has been very successful.”