TRIUMPH BUYING FARMERS BRANCH
Community bank will gain $25M in deposits
February 25, 2011, Memphis Business Journal
Triumph Bank is acquiring the Arlington branch of Farmers Bank of Lynchburg, including $25 million in deposits and up to $10 million in loans, in what is being touted as the first in-market competitive purchase in years.
The deal, which needs state and federal regulatory approvals, could close by the end of the first quarter and will be a profitable purchase from the start, says Triumph Bank president and CEO Will Chase.
For the 5 year-old, $244.5 million Triumph Bank, the deal puts it squarely in the northeast growth path for Memphis and Shelby County, and just inside the Interstate 385 loop, which is expected to eventually bring hundreds of rooftops to sleepy Arlington.
“We’re very bullish on Arlington,” says Triumph founder and board chairman Lane Carrick. “When the world starts healing and people start building houses, Arlington will be just that place.”
More than just the acquisition of one branch in a town of 10,000, the deal could at long last signal the start of what many have said is a necessary contraction in the number of Memphis-area banks.
To date there have been no bank failures or FDIC-assisted takeovers in the Memphis area or the state, but several have shaky balance sheets, Carrick says, declining to name them on the record. But opportunities for deals are expected, he says.
“I think the real salient point is there’s a whole lot of community banks and the FDIC signals a process that says we’re going to have a whole lot less of them,” Carrick says.
Bill Menkel, president and CEO of Farmers Bank of Lynchburg, says those potential opportunities prompted ownership of Farmers Bank sell its lone Shelby County branch in order to concentrate on other markets and adjust its balance sheet for future opportunities.
“We’ve got a long-term strategy with bank roll-ups,” says Menkel, former president at Magna Bank. “I’m not saying we might not come back to Memphis someday, but it didn’t make sense to have one little outpost.”
In Arlington, the full-service branch operates as Arlington Community Bank, a division of Farmers Bank of Lynchburg. It was a branch Farmers acquired as part of a deal in December 2008 the then-troubled $110 Oakland Deposit Bank, which had three branches in Oakland, Somerville and Arlington.
The troubles Oakland Deposit Bank experienced were largely limited to its branch in Oakland and have since been cleaned up, Menkel says.
“Arlington was separate, it’s own self and outside all of that,” he says. “That’s by the wayside-ancient history.”
That said, Triumph is going to scrutinize closely the loan portfolio of the Arlington branch, Chase says.
Terms of the contract call for it to get the building, land and equipment, $25 million in deposits and “up to” $10 million in loans. The majority of the loans are to individuals and not heavily influenced by commercial real estate, Chase says.
The bank has about 1,200 checking accounts, 300 certificate of deposit accounts and 300 loans, says Triumph COO Mike McCarver.
For Triumph Bank, which recently completed its second profitable year, the deal continues a trend of being opportunistic in how it expands, Carrick says.
But even Carrick was surprised to be reminded that with the exception of its headquarters building at Poplar and I-240, all of its branches are the previous homes of other banks and it has yet to build a branch from the ground up.
Its last branch was the Collierville branch acquired from Bank of America in 2006. That branch had been operated by at least three other banks. Its Germantown branch off West Street has a similar history.
With the Arlington acquisition, Carrick admits the bank is going to have to change its idea of having a centrally located headquarters and four branches-a “core and four” approach-to a “core and more” strategy.
To reach its goal of $500 million to $1 billion in assets, Chase and Carrick think Triumph is looking like a bank that will have seven to eight retail branches.
By the end of the year, Chase says Triumph should be at about $300 million. To elevate it to $1 billion and not take years to do it, Carrick says an acquisition is highly likely. It’s in a position to do that and the time may be right.
“We’re one of the banks that’s in control of our destiny.” he says.