Magazine article American Banker

An Industry David Reloading Its Slingshot

Magazine article American Banker

An Industry David Reloading Its Slingshot

Article excerpt

After raising $16 million in a recent stock offering, an Arkansas bank may soon put its improbable credit card juggernaut back into gear.

Simmons First National Bank of Pine Bluff, which made a national name for itself by offering low-rate cards, stopped accepting out-of-state applicants a year ago because the demand had outstripped its capacity.

But president J. Thomas May said the bank is in good position to acquire an as-yet-unidentified Arkansas institution that would bring in the deposits Simmons needs to fund more card loans.

The bank, a subsidiary of the $700 million-asset Simmons First National Corp., has thrived despite a usury law likely to send most card issuers in search of a friendlier regulatory climate. It has succeeded by accepting the most creditworthy of those applicants calling in unsolicited and charging them a healthy $35 to $50 annual fee and a $10 penalty if they exceed their credit limits.

Simmons' acceptance rate is just 31%, about half the industry average.

The calls come in because Simmons perennially tops the low-interest-rate lists published by various consumer newsletters. Arkansas law caps the rate at five points over federal funds, currently 8%.

Because Simmons has a relatively small and selective portfolio, with $160 million in receivables, its loss rates are quarter the industry average.

The fall in the federal funds rate two years ago generated up to 9,000 incoming telephone calls an hour - although Simmons couldn't handle that many because its 23 phone lines were jammed. …

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