Bank on Pressure for Market in 2001

There are still too many banks in Northwest Arkansas.

Local bankers say the already pressured local market could see more consolidations, mergers or buyouts in 2001 if an expected further economic slowdown hits the nation.

John Lewis, CEO and president of The Bank of Fayetteville, said that normally when there’s too much of anything in an environment, forces begin to work toward reaching an equilibrium. The Arkansas State Bank Department lists 18 financial institutions that are based in Benton and Washington counties and seven with branches here that are based outside the area.

“It’s kind of like having too many newspapers here, and look what happened there,” Lewis said. “What could happen if there’s a national slowdown is that the forces at work in the local banking industry are going to be exacerbated. Whether or not we get a soft landing remains to be seen. It’s too early to call, but it’s clear that competition here is already tremendous.”

A strained economy translates into fewer homes being built and fewer cars being bought, bankers said. But Lewis said the real killer for Fayetteville would be a scenario like fewer college students coming to the University of Arkansas campus.

“Certainly, college students underpin a major portion of our local economy,” Lewis said. “More students means more faculty, apartment buildings, etc. …

“I can tell you that if we went down as little as 1,000 students, you would see a major adjustment in areas like retail sales and restaurants.”

One good barometer of a local economy’s health has traditionally been new housing starts. The Northwest Arkansas Regional Planning Commission only had new construction data for 2000’s first half.

But those numbers showed a 3 percent dropoff in residential building permits obtained in the two-county area compared with the first half of 1999. There were 666 new permits through the first two quarters of 1999 and 643 in the first half of 2000.

According to the same reports, however, new dwelling units increased from 780 in 1999’s first half to 908 this year.

Paul Justice, planner for the commission, said dwelling units rose this year because several large apartment buildings were opened in Springdale. So overall, more places to live were built.