A young horse allegedly of the same herd heavily secured by BancorpSouth Bank. Source: Facebook.

Does BancorpSouth Bank Have a Collateralized Horse Obligation?

Investors in BancorpSouth Bank have some new horses considered assets, and they’re allegedly starving — as much as the bank appears to be struggling…

Penn Little
Mar 4 · 7 min read

Bancorpsouth Bank (NYSE: BXS) is one of many public companies that hit a 52-week low last week. They are based in Tupelo, Mississippi, have been growing through acquisitions of other banks, and are now the country’s 84th largest financial institution (in terms of assets under management).

One of those acquisitions placed BXS in Oklahoma for the first time with a non-depository, loan processing branch in the city of Durant, just north of the Texas border. Last week a social media report surfaced that linked the Durant Branch, and BXS’s recently reported evaluation of its new assets — to some very hungry, if not starved, horses.

Just a few miles north, in Caddo, Oklahoma. A woman alleging to be a former employee of that ranch, “Dufur Performance Horses,” claimed she quit after four years “in late 2019.” The employee expressed she wasn’t being allowed to care for the herd properly. Photos accompanying the post (seen below) of severely malnourished horses are purportedly those owned by the Dufur outfit.

Photos of horses allegedly owned by the Dufur Ranch. Source: Facebook.

The particular link originated when BancorpSouth Bank acquired Van Alstyne, TX based “Texas Star Bank” last year. According to the Van Alstyne Leader, “Texas Star Bank began in 1890 in Van Alstyne (As First National Bank of Van Alstyne) and has branched out to include seven full-service banking offices in Collin and Grayson counties and one loan production office in Durant, which opens a BancorpSouth door in southern Oklahoma as well.”

UCC filings with the state of Oklahoma designate that this particular farm did use their horses as security to procure three separate loans with Texas Star. In four documents (all seen below), the location listed on all four interrelated UCC filings reveals that then-Texas Star’s and now-BXS’ Durant “loan processing” branch recorded these advances. The farm’s owners, Alan and Teri Harper-Dufur (a married couple), are listed as the borrowers.

The lack of terminations on file suggests they own and still serve the loans as well.

Mr. Dufur, no stranger to borrowing money, was once President of First National Bank of Durant. However, he was sanctioned twice by the Office of the Comptroller of the Currency in 1998. According to court documents, “Dufur had fraudulently induced (a borrower) to sign the agreements and (the court ruled in) favor of (the borrower) on her negligence counterclaim against the Bank.”

UCC Filing noting names and registration numbers of horses owned (borrowed against) by Teri and Alan Dufur. Source: State of Oklahoma.

BancorpSouth Bank’s Performance

A random sampling of value fluctuations of BXS and a handful of peers (holding between $15-$25 billion in assets), taken over the last year is alarming. The data shows BXS is about as deficient in value as these horses are in grain and hay.

The Buyout of Texas Star

Side-by-side, the banks look very different, and their valuations are miles apart. So, the shareholder(s) of Texas Star, were handsomely rewarded. However, the acquisition may have shattered many small-town relationships, and also could be shoring up some very risky lending.

Information gleaned from BXS’s 10-K filing released on 2/27/20

The State of Oklahoma’s UCC filings list over a dozen other loans for the Dufurs and related entities, but the only bank (in that database) that has approved loans collateralized by horses for the couple is Texas Star.

Texas Star has financed at least three other loans for Dufur-owned entities, such as the ones seen below for Efficient Fuel Solutions LLC, and another for Applied Energy Solutions Inc.

Loans by Texas Star to Dufur-owned Efficient Fuel Solutions LLC. Source: State of Oklahoma.
Applied Energy Solutions Inc.’s Receivables Loan. Source: State of Oklahoma.

(According to the filings — The Dufurs and related entities appear to have leveraged loans in the names of dozens of associated businesses and personal assets involving different collateral including an airplane; however, that aircraft was sold in December 2019, according to flightaware.com.)

On the grander scale, the same filings show that many of the loans issued by Texas Star involve more risky collateral or “portfolio loans.”

Last week BancorpSouth Bank issued its annual investor filing with the Federal Deposit Insurance Corporation (FDIC) (otherwise known as the “Form 10-K”). In the filing, the big bank says it plans to evaluate its newly acquired assets and collateral. Specifically, it stated:

“Effective September 1, 2019, the Company completed the acquisition of Van Alstyne Financial Corporation and its wholly-owned subsidiary, Texas Star Bank (collectively referred to as “Texas Star”) pursuant to which Texas Star merged with and into the Company. Texas Star operated seven full-service banking offices located in Collin and Grayson counties in Texas, and one loan production office in Durant, Oklahoma. Under the terms of the definitive agreement, the Company issued approximately 2,100,000 shares of the Company’s common stock, plus $21.4 million in cash for all outstanding shares of Texas Star. See Note 2 to the Company’s Consolidated Financial Statements included elsewhere in this Report for additional information regarding the acquisition of Texas Star.”

Then they continued that, now, following the acquisition, they would take a look at the collateral. Specifically, the filing stated:

Due to the Company’s evaluation of post-merger activity and the extensive information gathering and management review processes required to properly record acquired assets and liabilities, the Company considers its valuations of Texas Star’s assets and liabilities to be provisional as management continues to identify and assess information regarding the nature of these assets and liabilities for the associated valuation assumptions and methodologies used.”

In a request for comment, via telephone, an employee of the Durant branch said they couldn’t comment; however, she allowed me to leave a message for the Durant branch’s President. That message has yet to be returned.

I also spoke with a confidential source and expert who works in agricultural finance, specifically on the insurance side. He noted, “Basically, in the banking industry, these small hometown banks are struggling to stay afloat to meet all the federal regs and whatnot, such as Dodd-Frank. However, for the little guy to comply, they have to join big brother, and sadly joining big brother means it can’t easily offer the portfolio loans upon which the local communities, inclusive of farmers, feed stores, and mechanic shops thrive.”

The expert added, “The capital investment it takes to run a farm is huge! And they need these small portfolio loans. Sadly, in this case, it appears like the Dufurs were just a ‘smoke-and-mirrors’ operation, and the chickens are comin’ home to roost.” However, the source added, the latter opinion is, of course, “informed speculation.”

BancorpSouth’s website has a “Corporate and Social Responsibility” statement that reads:

“At BancorpSouth, we are committed to a culture of respect, diversity, and inclusion in both our workplace and communities. We support the right to free speech, the open exchange of ideas, and the exercise of religious freedoms. BancorpSouth has a longstanding commitment to equal treatment and we oppose any form of discrimination.”

It’s unclear if “equal treatment” applies to animals. Nonetheless, if this is, in fact, BancorpSouth’s collateral: it may be in the best interest of their investors (relying on their collateral so that BXS shares hold their value) for the big town bank to find a way to get those horses some food.

Data Driven Investor

from confusion to clarity not insanity

Penn Little

Written by

Entrepreneur & Investigative Journalist www.pennlittle.com/publications

Data Driven Investor

from confusion to clarity not insanity

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