Farmers Bank Shareholders Set for $4.5 Million Cash Out

The pending $4.5 million sale of Farmers Bank of Hamburg will further pare the headcount of Arkansas lenders with less than $50 million in assets to four.

The sale to Southern Bancorp Inc. of Arkadelphia also marks the final reward for investors who stood by Farmers when insolvency was knocking on the door.

Since 2008, the bank has produced a combined net income of only $103,000. Its biggest profit during the past 15 years was recorded in 2007: $3 million.

That historical figure reflected a $2.7 million reduction in its loan loss reserves tied to the ill-fated Hermitage Tomato Cooperative Association.

That bookkeeping move was made in advance of a favorable outcome in a long-running legal battle with Uncle Sam.

Farmers Bank collected almost $4.4 million in February 2008 from the U.S. Department of Agriculture after the 8th U.S. Circuit Court of Appeals in St. Louis ruled in its favor.

The decision required the USDA to honor a sizable chunk of its guarantee on loans totaling more than $8 million to the tomato cooperative.

The judgment essentially repaid Farmers Bank the loss it was forced to book in 2003 in connection with the cooperative and the USDA dispute.

Shareholders invested $5 million to keep the bank solvent in the third quarter of 2003 as a preface to pursuing claims against the USDA. Most of that emergency recapitalization was repaid by dividends of $3.1 million in the first quarter of 2008.

Mixed in with the fiscal drama, the Federal Deposit Insurance Corp. issued a November 2004 cease-and-desist order to clean up unsafe and unsound bank-ing practices related to violations of the Bank Secrecy Act and fix informa-tion technology shortcomings.

Inexplicably, the FDIC terminated the order in November 2006 but didn’t announce Farmers Bank was in compliance until a year later.

The pending book value transaction will fold Farmers Bank into Southern Bancorp Bank, a $1.1-billion asset community development financial institution that operates in eight counties in southern and eastern Arkansas as well as nine counties in Mississippi.

Among the leading investors in Farmers Bank are:

• The Nancy C. Foote Spivey Revocable Trust of Hamburg, 31 percent worth about $1.4 million.
• Spivey Family LLLP, led by John Spivey III of Little Rock, 18.3 percent worth about $824,845.
• Phil and Inez Barnes of Hamburg, 13.8 percent worth about $621,000.
• Bobby and Elizabeth Witherington of Hamburg, 6 percent worth about $271,410.

Farmers Bank, Hamburg
Staff: 12       Full-Service Locations: One
(All dollars in thousands)

Source: FDIC