After nearly a century, Bank of Eureka Springs is outgrowing its name.
With a new generation of management at the helm, the family-run Arkansas bank plans to expand into five other communities and change its name to Cornerstone Bank.
Charlie Cross, who succeeded his father as chief executive officer about two months ago, said the $110 million-asset, three-branch bank must grow to survive in the face of tighter margins and increasingly expensive regulations.
"I genuinely believe that as a bank we have got to make the strategic decision to become a more regional player to be viable," said Mr. Cross, 38. "The regulatory burden and cost associated with it is easier for a regional bank to deal with."
Several industry observers said the move is perfectly timed: Other community banks in the northwest corner of the state have been stung by an overbuilt real estate market and are focused on preserving capital, and Bank of Eureka Springs can capitalize on that to pick up new business.
Mr. Cross is the fifth generation to run the bank his family founded 96 years ago. (His father, John F. Cross, 73, remains the chairman.)
It has historically stuck to doing business in Eureka Springs, avoiding the temptation of the more high-growth and competitive markets in neighboring Benton and Washington counties.
The bank's loan portfolio reflects its conservatism. As of March 31 its net chargeoffs were 0.02% of loans, compared with an average of 0.46% for other Arkansas banks with $100 million to $300 million of assets, according to data from the Federal Deposit Insurance Corp. Its noncurrent assets plus other real estate owned were 0.33% of assets, versus 1.56% for its state peers, the FDIC data indicates.
Such strong credit quality puts the bank in a great position to focus on growth, said Randy Dennis, the president of DD&F Consulting Group in Little Rock.
"Bank of Eureka Springs has never been the most aggressive lender, chasing real estate," Mr. Dennis said.
Now it can afford to move into new markets, and it might not be as tough to gain traction there as in the past, with other lenders distracted by credit-quality concerns, he said. "It's a good time, because everyone else is pulling back."
Still, the bank, which expects to officially adopt the Cornerstone name sometime this fall, does not plan to go far afield or enter markets it considers to be overbanked.
Instead Mr. Cross said it would look to add branches in communities that are no more than an hour's drive from its headquarters and are known for their growing population of retirees.
Curtis Carpenter, the managing director for Sheshunoff & Co. Investment Banking, said the relocating retirees bring deposits with them, and "opening some branches to capture that business would build a lot of shareholder value."
But to make the venture worthwhile, Bank of Eureka Springs must find local bankers willing to lead a new branch, Mr. Carpenter warned.
"It's all about people," he said. "Banking is a people business. It's not just opening a branch on a corner. The No. 1 success factor is attracting the right person to run it."
Mr. Cross said he will not rush the five branches he hopes to build and agrees that the success of the expansion will hinge on the bankers he is able to hire.
He said he has been talking to bankers and building relationships for years. "I'm a big believer in mining for people."
