Lavy discusses Priority Bank success, Frank Broyles friendship

Various ratios measure a bank’s performance.

One of the benchmark percentages is ROA, short for return on assets, which is a bank’s net income divided by its total assets.

As defined by the Federal Deposit Insurance Corp., ROA shows the percentage of how profitable a company’s assets are in generating revenue. The higher the ROA, the more money the company earns in its assets.

In Northwest Arkansas, Fayetteville-based Priority Bank has the best ROA of the 30 privately-owned banks doing business in the region.

The Northwest Arkansas Business Journal tracks data from the FDIC and compiles a list of all banks with at least one full-service branch in the six-county market area (Benton, Carroll, Crawford, Madison, Sebastian and Washington) based on which bank has the best ROA.

For a PDF of this year’s lists, separated by private and public banks, click here.

According to the FDIC, Priority Bank — with three Arkansas branches in Fayetteville, Prairie Grove and Ozark —  ended 2022 with a ROA of 2.06% (not adjusted for taxes) with assets of $90.64 million. No other private bank in Northwest Arkansas had a ROA ratio greater than 2%.

According to the FDIC, 83 Arkansas-chartered banks had a collective ROA of 1.30% at the end of 2022. Eleven of the 30 private banks on the Business Journal’s list were above that mark.

Trevor Lavy, 63, is Priority Bank’s owner, chairman and CEO. He grew up on Nebraska Cornhusker football, won a state basketball championship his senior year at Fayetteville High School, and has played approximately 200 rounds at Augusta National Golf Club.

Naturally, he used a sports analogy when crediting the bank’s success to its 35 employees.

“It always comes down to people,” he said. “[Former Nebraska football coach] Tom Osborne would tell you, ‘It’s the players.’ And that’s true. Whoever has the best people usually wins. It doesn’t matter if it’s a business, football or basketball team.”

BUYING A BANK
Through Priority One Holding Co., Lavy and business partner Bill Reich bought the $13 million-asset River Valley Savings Bank of Ozark (Franklin County) in September 1997 and changed its name to Priority Bank.

They both worked in corporate jobs for Springdale homebuilder United Built Homes (UBH). Lavy’s job supported the company’s in-house financing division.

“It was my job to place loans with different banks,” he said.

Through that work, Lavy got to know many bankers, including River Valley Savings Bank executives. A group of investors launched the one-branch bank in 1993. According to Lavy, the bank got “crossways” with bank examiners and had to sell. Lavy and Reich saw an opportunity.

“Bill and I put some money together to fund the purchase,” he recalled. “I told the Feds, ‘I can’t make any money in Ozark, but I can help you. And you can help me if I can buy this [bank].’”

Lavy, the bank’s sole owner for the past 15 years, left UBH at the end of 1999 to focus exclusively on Priority Bank. The company opened a full-service branch on Mission Boulevard in Fayetteville in 2005 and moved its headquarters to Fayetteville in 2014. That same year, Priority Bank added a third branch in Prairie Grove. Ray Stidham, Priority Bank’s president, leads the market there.

Lavy said one of the things he’s most proud of is having success through the years with different business models — none of them that you would consider traditional banking.

Priority Bank’s niche is lending to homebuilders’ customers in rural areas. Initially, the company focused its lending products on scattered lot builders. Unlike traditional new construction communities, where a builder will build a few streets, scattered lot builders typically work in different areas and build homes for customers who own their land.

“We financed builders for new construction all over the southeast [U.S.],” Lavy said. “Think about a builder that isn’t big enough to have their own financing arm. We did that through our mortgage company [Priority One Mortgage Corp.]. That was the original business model we put into the bank.”

About 10 years ago, Priority Bank shifted focus from originating mortgages to selling more loans in the secondary mortgage market.

“We hired a superstar named Kelli Franks to run that business, and she went out and built relationships with builders in this area,” Lavy said. “I am really proud of her and her [lending] team for their work. They are the gold standard for secondary market financing.”

Priority Bank’s loan originations totaled $77.2 million as of Dec. 31, 2022, primarily mortgages to customers in smaller, rural communities. That’s up 4% from the previous year. The lender is also among the most profitable in the state. Priority Bank reported a 19.71% return on equity (ROE) last year. Just seven Arkansas banks had a higher ratio.

BUILDING A FRIENDSHIP
Lavy moved to Fayetteville from Nebraska in 1977 before his senior year of high school. He earned an accounting degree from Ouachita Baptist University in 1982, then passed the Certified Public Accountant (CPA) exam while working for Arthur Young & Co. He later earned a law degree from the University of Arkansas in 1986.

While doing some pro bono legal work in the late 1980s representing Fayetteville High School athlete (and later Razorback basketball player) Davor Rimac in an eligibility dispute, Lavy sought help from Frank Broyles, the prominent and legendary UA football coach and athletic director.

In November 1991, their friendship grew during a trip to Hawaii. Lavy and his wife went to watch the Razorbacks play in the Maui Invitational basketball tournament. Broyles and his wife went, too, on the same flight. At Broyles’ suggestion, he and Lavy sat beside each other on the plane. Kellie Lavy and Barbara Broyles did the same one row behind them.

“We talked the whole way over,” Lavy recalled. “When we got there, he [asked], ‘Do you want to play golf tomorrow?’ So, we did that. Over golf, he [asked], ‘Do you want to go to the game together tonight?’ So, we did that. He was working the refs. I was working the refs. We played golf every day and ate dinner [together] every night.”

Broyles and Lavy became confidants and longtime friends who depended on each other to discuss business issues.

“We shared a love of sports and golf,” Lavy explained. “I think it was an oasis for coach [because] our friendship wasn’t athletic director/supporter. Even though he was, and I was. I never brought things like that up.”

Broyles joined Priority Bank’s board of directors many years ago, which gave the small bank an extra degree of cachet. He died in 2017 from complications of Alzheimer’s disease at 92. He remains a board director in perpetuity and, Lavy said, one of the wisest men he’s ever known.

“In addition to his business sense, his people-reading skills were off the charts,” Lavy said. “I was blessed to have coach as a mentor and a dear friend.”

Lavy said he’s dedicating the later stages of his career to embracing a work-life balance. It’s becoming clear to him that’s what he wants for his bank employees, too.

“I always had to work before,” he said. “Now that I probably don’t have to work [as much], I enjoy it even more. I have a wonderful staff and people who support me. I’m having as much fun today as I’ve ever had.”