Editor’s note: Guest contributor Scott McClymonds, founder of Fayetteville-based strategic consulting firm CEO Velocity, recently interviewed several regional and community banking executives across Arkansas about corporate strategy and their management styles. The following Q&A is with Bob Burns, CEO of Farmers Bank and Trust of Magnolia.
Scott McClymonds: Bob, can you talk to me about the acquisition of 1st Bank and how it will benefit Farmer’s?
Bob Burns: Our merger with 1st Bank gave us 5 new locations and will put our total assets at around $1.2 billion. We started the process in about April of 2014, and finally gained all government approvals last week. Of course there are many operational and regulatory issues to work out, and they are time consuming and challenging.
This acquisition made a lot of sense for us because it is a logical extension of our existing market area. Texarkana is a growth market and only one hour from our headquarters. We already had two offices there, and the city has positioned themselves well economically with their roads and interstates, healthcare system, and higher education. It’s a great area for businesses to settle and grow.
All in all, the merger will be good for the longer term wealth of our shareholders and will increase our loan generation.
Scott: What new leadership wrinkles does the merger bring?
Bob: The easy part is the technology piece, but the real challenge is the cultural integration of the various backgrounds, work processes, and leadership styles. Solving cultural issues is 90% of the battle. Getting people to work together and play as a team is crucial.
You have personality types that worked maybe 20 years together who are now in a different reporting and value structure. It’s a real challenge. Bringing over that experience level and integrating it is a great thing. In the employee ranks some people will resist change, but you have to help them get past it. Everyone likes change as long as it isn’t them.
Scott: What do you see as your most crucial leadership duties?
Bob: My main jobs are to set direction and the speed of travel, to give clarity to leadership, and allow everyone in a leadership role to clearly understand expectations and provide resources to achieve them. My philosophy is more along the lines of getting the right people on the bus and in the right seat. Clarity and courage are essentially what leadership is about. People have to trust where you’re taking them and that you have integrity.
Early on there were 2 or 3 bankers who contributed to my philosophy on bank leadership. I was heavily influenced by Wayne Hartsfield, a banker in Searcy, AR. We spent a lot of time together, and I liked how he worked through problems.
The military also influenced my leadership. I was on active duty for six years and the rest in the reserves. I taught at the Command and General School in the military, and at the National Defense University. I had the opportunity to see many of great military leaders, and was able to work with General (Norman) Scharzkopf for a while.
Scott: What are the greatest opportunities and challenges you see for your bank & the industry in 2015?
Bob: The greatest challenge is the increasing regulatory burden. It eats up so much time that could be spent with customers. There’s so much more paperwork as well as increased collateral requirements from the regulations brought on by the mortgage meltdown in 2008.
It’s hard to determine what regulatory shoe falls next. Washington seems to see all banks the same, (but) don’t make any distinction between community and commercial banks. One size fits all in their eyes.
Scott: How can community and regional banks out-compete larger institutions with their expansive technology, personnel, and marketing budgets?
Bob: You have to make some the assumptions that you’re in a market that has growth potential and other competitors are looking for that business. Not all banks focus on exactly the same market.
For example, we compete against Wells Fargo and Bank of America. They’re in wealth management, but that isn’t our bread and butter. We specialize in (the middle market) businesses with $500,000 to $10 million in sales, maybe $15 million.
Wells Fargo looks at bigger lines, and you just need to find your niche and provide what (customers) want.
Scott: What do you think the banking industry will be like in the next 3 years?
Bob: Banks under $500 million in assets will have efficiency issues going forward to keep up with the costs of regulation, technology, and everything else. The ideal size is at least $750 million to keep efficiencies in your growth markets.
Oftentimes bank boards are older and not as sophisticated on technology and don’t want to learn. Sometimes the human element won’t let them embrace the new model and they will be acquired. It is difficult for a lot of the banks in small communities to compete unless they are in a niche market (where) they are vulnerable and many will be sold at low multiples.
Read more analysis from McClymonds at this link.