Deposits grew at a rate of 8.42% across the nations’ banks according to the June 30 market share report made public Tuesday (Oct. 2) by the Federal Deposit Insurance Corp.
In Northwest Arkansas the deposit growth rate was 7.77%. and the Fort Smith market was basically flat at 0.11% – this compared to statewide deposit growth of 2.68%.
Tim Yeager said this upward trend has been in place since 2008 and in a large way is linked to the extra money added to the economy through the Federal Reserves’ quantitative easing policy. Yeager is the Arkansas Bankers Chair at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis.
He said quantitative easing puts more money into circulation which is mostly captured by the largest banks but eventually trickles down to community banks.
Yeager said individual and business consumers are also investing less money outside of banks which is helping to push total deposits up.
He said the total deposit growth of $1.36 billion around the state also includes brokered certificates of deposits although there has not been as much of that activity in recent years amid tepid loan demand. Brokered deposits consist of money solicited via internet sales from people living outside the region or state but they show up as local deposits among the banks selling them.
“You don’t solicit deposits unless there is ample demand to loan that money out at a reasonable margin,” Yeager added.
Arvest has the biggest market share of deposits across the state.
The bank was also the biggest winner in its home base of Northwest Arkansas and moved up the list with strong deposit growth in the Fort Smith metro area.
Company wide, Arvest grew deposits by more than $2 billion from June 30 of last year through June 30, 2012. That included an acquisition of Union Bank of Kansas City with assets of $459.4 million. That deal closed in June of this year.
Arvest growth inside both Northwest Arkansas and Fort Smith rose 18.89% and 13.5%, respectively, from a year ago.
Arvest spokesman Jason Kincy said the Northwest Arkansas market has always been strong given its longevity and financial security over the past two decades. He did not dismiss the fact that some of the growth could be related to the overall quantitative easing effect on the more abundant money supply.
In Northwest Arkansas Arvest had total deposits of $4.555 billion at the end of June. Deposits grew by more than $732 million in the year-over-year period inside this local market.
Yeager said that would be a “huge” increase for consumer activity alone.
Arvest continues to hold a lion’s share of the local deposits with 51.36% of the market. This is up from 46.56% a year ago. There are 38 banks in the Northwest Arkansas metro area, unchanged from a year ago.
Kincy said free checking and Arvest’s sound financial footing are drawing more customers to bank. Yeager said Arvest also grew loans by $700 million companywide with a very strong cash position of $1.8 billion.
In the Fort Smith market Arvest rose to second place with a 13.5% jump in deposit growth from a year ago. The overall Fort Smith market which includes 23 banks, posted near-flat growth, up 0.11% from a year ago.
“We had tremendous growth in the Fort Smith metro area. There continues to be an increase in deposits flooding into the banks. With long-term rates at all-time lows along with continued uncertainty about the economy, most of the customers continue to seek safety and stability,” said Craig Rivaldo, CEO and president of the Fort Smith banking region for Arvest.
He said the purpose of quantitative easing is to help lower interest rates in the bond market, and he would think there is some direct impact to higher deposits overall.
“I would believe that the instability in the global markets, thus making the U.S. bond market more attractive, has had as much to do with driving down long term interest rates. For foreign investors, there has not been many good options for sound investment,” Rivado explained.
He, like Kincy, says Arvest is a community bank and credits the sizeable deposit growth for the institution back to its strength and stability.
“If a customer is going to put their money in a bank, they are going to seek a very stable bank that is equally committed to seeing the community succeed, does not get more committed than Arvest,” Rivaldo said.
Arvest bank’s consolidated call reports indicate individual and corporate consumer deposits rose by $92 million from a year ago in demand accounts. Non-transaction accounts for consumers grew by $548 million from a year ago.
U.S. government accounts at Arvest rose more than $1.2 million from a year ago, while state and political account deposits fell by $9 million at the end of June from the year-ago period.
Banking analyst John Dominick says a fair number of institutions in the Northwest market have been shrinking their overall size to get capital ratios up as they work to appease regulators.
He says a dozen or so banks are working aggressively on their balance sheets and without steady loan demand, shrinking a deposit base is often used.
“Banks will generally let their brokered deposits roll off of the books and try to keep any local core deposits they have. Banks want to hold on to local deposits because that is cheapest form of money that also works to raise capital levels,” Dominick said.
Among the 38 banks in Northwest Arkansas the vast majority of institutions slipped in market share from a year, even if they saw an increase in the total number of deposits.
The same was true in the Fort Smith market, with 65% of the banks in this market seeing market share slip from a year ago.
Liberty Bank was one of the few that moved up the ladder in market share. The Jonesboro-based bank grew deposits by $31.57 million in the Fort Smith metro area from a year ago. Market share rose slightly from 1.11% to 1.84%.
In Northwest Arkansas Liberty Bank grew deposits by $32.7 million from a year ago. Market share rose to 2.44%, up from 2.23% in June 2011.
Chambers Bank also grew in both markets, up $15.1 million in Northwest Arkansas and up $5.768 million in the Fort Smith metro area.