Fayetteville-chartered Arvest Bank was already big in terms of assets — $17 billion — ahead of the Bear State Financial deal announced Tuesday (Aug. 22), and Arvest also had around $10 billion in loans through the second quarter of this year.
But analysts say the $391 million acquisition of Little Rock-based Bear State will give Arvest a 16% increase in loans, 76% of which are real estate loans in good standing and located in areas where the bank could use more exposure.
“I think this deal makes a lot of sense for Arvest and looks to be a strategic play to grab more solid loans without also adding to branch counts in markets they are already in,” said Dr. John Dominick, banking consultant and professor of finance at the University of Arkansas. (Dominick is also a board member of Fayetteville-based Signature Bank of Arkansas.)
He said the markets where Bear State has a solid presence outside of Benton and Washington counties had to look appealing for Arvest, particularly the Jonesboro market given the growth there. While Dominick said there are already a lot of banks staking claims in Jonesboro, Arvest “brings a lot of clout to any market they enter.”
Will Brackett, senior vice president of Banks Street Partners in Atlanta, told Talk Business & Politics that Arvest picked up a high performing bank with a great reputation in this deal.
“Bear State is a high performer and there is some overlap, but there’s more opportunity for Arvest in complementary markets,” Brackett said. “Also, Bear State has been fairly aggressive technology-wise. They have been proactively networking with financial technology firms and applying it to their banking operations in order to deliver customers new products. I think Arvest had to like that as well.”
One of the best perks for Arvest in the deal, Brackett said, is the solid loan portfolio they get from Bear State, which runs a very clean operation with just 1% of its $1.649 billion loan portfolio being non-performing.
“I believe this deal is a big win for Arvest in every way namely because it should be accretive to earnings right away,” he added.
The acquisition was an all-cash deal valued at $391 million, which also gave Bear State investors a nice premium on a stock that was already trading a solid premium relevant to earnings, Brackett said. Dominick agreed the price paid looked to be a win-win for each party and said it would be uncharacteristic for Arvest to overpay given the bank’s conservative ownership.
As acquisitions go, this is the first deal Arvest has made since 2013 and Brackett said it looks as though bank ownership has been judicious at what they have considered for acquisition. The deal will put Arvest at about $20 billion in assets and make it one of the largest privately held regional banks in the country.
Although all Arvest branches are technically part of the same Fayetteville charter, the company maintains 16 separate community bank markets in Arkansas, Missouri, Kansas and Oklahoma, each with its own executive team and advisory board.
Craig Rivaldo, president of Arvest Benton County, told Talk Business & Politics, Arvest leadership is excited to bring its services to the rural markets that can sometimes be overlooked. He said this mission goes deep into the bank’s DNA and the Bear State deal gives Arvest access to several smaller markets.
Of the 34 markets in which Bear State operates there were 18 which are new to Arvest. In Arkansas those include the smaller towns such as Ashdown, De Queen, Dierks, Glenwood, Manila, Monette, Mount Ida, Nashville and Waldron, in addition to the larger city of Jonesboro.