When Arkansas' Southern Development Bancorp. was founded 10 years ago- at the urging of Gov. Bill Clinton-its mission was to rebuild the local economy.

The idea was to use profits from a banking subsidiary, Elk Horn Bank and Trust, to pay the expenses of community development affiliates. But over time the charitable side of the company grew faster than the bank, leaving $111 million-asset Southern Development to rely on supplementary grants.

Now the company hopes to raise $20 million in a secondary stock offering to buy more banks so it can again be self-sufficient.

"To make certain we are going to be in the community development business for a long time, we have to get away from grants," said William H. Brandon, president and chief executive officer of Arkadelphia-based Southern Development. "And the only way to do that is to grow big enough not to need them."

The first target is Helena, Ark.-based First Delta Corp., where Mr. Brandon is chief executive officer. A deal between the two-which could be announced as early as this week-would allow First Delta's two bank subsidiaries, with combined assets of $115 million, to keep their charters, management teams, and boards. Bank profits would be filtered through the holding company and sent back to the community.

Over the years Southern Development's nonprofit affiliates have stressed job training and job creation. For example the Good Safe Fund has trained welfare recipients to be home health nursing aides. And the Arkansas Enterprise Group provides technology and support to manufacturing companies.

"This allows us to be more proactive," said Thomas C. McRae, president of Arkansas Enterprise Group. "The larger we get, the more we can go out into the community, identify opportunities, and put businesses together."

Southern Development works like this: Its stock is owned by large corporations and foundations, including International Paper Co. and the Walton Family Foundation, of Wal-Mart Inc. fame. The shareholders do not take a dividend, freeing the profits of Elk Horn Bank and Trust to fund Southern Development's charities.

Mr. Brandon, a former president of the American Bankers Association, said he believes Southern Development will have to buy two community bank companies, or about $200 million of assets, to generate enough income to eliminate the grants. The company's charities currently need about $500,000 a year in grants to stay afloat.

If Southern Development succeeds in expanding the banking side of its business, the charity side could be grown as well. Mr. Brandon said he would like to eventually own up to six banks, which would double the development work the company could afford to do.

"If we can get funding up to a comfortable level, we think we can do this forever," he said. "That is certainly our goal."

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