Maintaining brand equity as the bank expands: since its market population isn't growing, Farmers & Merchants Bank, Stuttgart, Ark., is pursuing a growth through acquisition strategy. The bank tries to draw in new customers and hold existing ones through its personal focus and strong community connections, explains marketer Donna Kimes.

• Author: Kimes, Donna
• Position: Interview

Tell us about the market where Farmers & Merchants Bank is located.

Stuttgart is in southeast Arkansas, about 45 miles from Little Rock. The area is noted for rice growers and also for the migratory water fowl. Duck hunting here is huge.

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The bank was started in 1945 just before the end of World War II. The goal was to ensure that "regular folk," particularly farmers, could borrow money. We still hold on to those principles. We do a lot of agricultural lending and we'll also do very small consumer loans that larger banks probably would not take the time to do. We're like a lot of community banks in the rural areas of America. We have to offer all the technological services of a mega bank and still hang on to the personal services that small community banks have performed for decades.

That being said, we're in areas that mega banks don't want to serve. We're located in communities that are mostly stable but not growing. So our growth comes primarily from acquisitions.

Why did the bank pursue a strategy of growth through acquisition?

Rural American has not seen the resurgence in population growth that some people were predicting 10 or 20 years ago. The population in our markets is static at best.

In this area, you see a number of family-owned banks. As these families grow older, the world changes, and some of them do not want to continue in banking. Since we are a well-capitalized bank, it made sense for us to pursue a strategy of growth through acquisition. In 1994, when we made our first acquisition, we had assets of $100 million. Since then, we have acquired six additional banks--some of these acquisitions had more than one branch--and our assets have grown to $575 million.

Are you mostly an agricultural bank?

Ag lending is a specialty. Not everybody wants to do it. But, it has been our bread and butter. On the other hand, we don't want to become too overly dependent on ag lending. The markets here are not large enough to enable us to specialize in only one type of banking. Like most banks in rural communities, we have to be all things to all people.

Does your bank have a strategic plan?

We're owned by a one-bank holding company made up of a little less than 500 diversified stockholders. Basically, our plan is to remain an independent bank and give our stockholders a good return on their investment. Our board and the executive team meet annually to talk strategy and revisit our strategic plan.

Who are your competitors?

We have competitors in all of our markets. There is a large regional bank out of Tupelo, Miss., that has about $13 billion in assets and this bank has branches in two of our markets. There's at least one other community bank in all of our markets. Some of our markets are overbanked. We serve one community west of Little Rock that has a population of 5,000, with seven banks.

Can you describe your marketing plan?

Marketing plan? What's that? Just kidding. In the past I would do a full blown formal plan with tons of market research, project calendar, zero-based budgeting, etc. And every year I ended up throwing it out the window because of major changes in our market. For our bank, a marketing plan that is fluid enough to account for quick acquisitions and the sudden changes we've experienced in 10...