For well over a decade Olney Bancshares of Texas Inc. grew by nibbling on the rural Texas market, but after an Oklahoma acquisition last year nearly doubled its asset size, it says it is ready for bigger acquisitions, and it is looking in both states for targets.
"We've got deals on the table all the time," Pascal Hosch, the chief operating officer of the $973 million-asset Olney, said in an interview this month. "We get a lot of calls. People seek us out with way more deals than we could ever do."
The strategy is hardly trendy. While many banking companies have been flocking to metropolitan areas, Olney has stuck to rural ones. When the Texas merger and acquisition market heated up, it moved into Oklahoma, purchasing five branches from Gold Banc Corp. Inc. of Leawood, Kan. (Those branches, used to form the $406 million-asset Rose Rock Bank, nearly doubled Olney's size.)
Banking companies that hit the $1 billion-asset mark often fund continued growth with a public offering, but Olney has no such plans.
"We have no desire to do two things: Go public or sell the company," Mr. Hosch said.
Ross McKnight, who worked in both oil and agriculture, created Olney in 1987 by spending $5,000 to buy the defunct First National Bank of Olney. He is now Olney Bancshares' chairman and chief executive officer.
The company continued buying small banks and rural branches sold by rivals. It now has nine individually chartered banks.
"Originally, Ross' love was agriculture in rural America, so it made sense to acquire these smaller rural banks heavily involved in agriculture," Mr. Hosch said. "Ross will tell you he is no banker, so he wanted the banks involved in a business he understood."
Olney Bancshares has allowed most of the banks to keep their small-town namesakes, and most customer decisions are made locally. But issues that do not affect how the banks deal with customers have been consolidated to save money and improve efficiency.
"Even though I am only a $50 million bank, I offer every service, because I have a $1 billion holding company," said Debbie Shelley, Olney Bancshares' secretary and a vice president of First National Bank of Olney.
Every so often the holding company considers consolidating the banks into one charter, but it has never pulled the trigger.
"We know how to efficiently run those locations," Mr. Hosch said. The larger metropolitan banks that sold their rural branches did not understand the opportunities of small-town banking. "We spent less and made more, and that has translated into a good bottom line for us."
Olney's know-how in rural markets is born out by its financial ratios. Both its return on assets (2.62%) and its return on equity (20.34%) are well above the average for banking companies with $500 million to $1 billion of assets, according to Federal Deposit Insurance Corp. statistics. Olney's efficiency ratio at March 31 was 41.94%; the average for commercial banks with $500 million to $1 billion of assets was 57.31%.
Because it still operates like a small bank, there is not a lot of middle management, so the top bankers wear a lot of hats. Mr. Hosch is also the chairman and CEO of the $92 million-asset Graham National Bank and First National Bank of Olney.
"One of the things we learn to do at Olney Bancshares is multitask," he said. "If we think we can do the job at multiple locations, then we do that. It has worked well for us."
