Arvest Runs for the Oklahoma Border

TULSA — “Wind” isn’t the only thing sweeping down the plains of Oklahoma. Arvest banks are popping up here like derricks from the 1920s oil boom that still turn black gold into greenbacks.

Over the last decade, Arvest Bank Group Inc.’s aggressive foray into this state has made it the Bentonville company’s fastest growing market. According to Arvest’s June 30 filings with the Federal Deposit Insurance Corp., it had $1.33 billion in deposits at 41 Oklahoma offices or about 39 percent of its total $3.38 billion in deposits.

A number of additional Arvest locations in Oklahoma are chartered out of Arkansas and Missouri, and a handful of new branches have even opened since that report. Today there are 59 Arvest offices in Oklahoma or 46 percent of its 127 branches groupwide.

Arvest’s Arkansas deposits in June were $1.91 billion from 54 offices or 57 percent of its total deposits. In Missouri, nine offices accounted for $139.4 million (4.1 percent). There are now 55 Arvest banks in Arkansas and 13 in Missouri.

A charter consolidation is under way for all of Arvests’ banks, which do business under 10 different names. They’ll all soon operate as Arvest Bank, but it’s not clear whether the corporate charter will reside in Arkansas or Oklahoma.

Arkansas’ unfavorable usury laws have prompted Arvest to hang on to one of its Oklahoma charters, in case some remaining instate restrictions weren’t completely knocked down by the Gramm-Leach-Bliley Act of 1999. In particular, Arvest is interested in keeping the national credit card business it started after acquiring 50 percent of Oklahoma City’s Security National Bank during the mid-1980s.

Arvest, with about $4.1 billion in total assets, has the sixth largest market share in Oklahoma with 3.6 percent statewide. Bank of Oklahoma N.A., with 11.2 percent, has by far the largest share. But Arvest is way ahead of many others that have operated here even before Wal-Mart Stores Inc.’s late founder Sam Walton and his wife, Helen, bought into SNB.

“We’re extremely pleased with our growth in Oklahoma,” said Wal-Mart heir and Arvest Chairman Jim Walton.

“It has become a very significant part of our expansion strategy. Our banks have been very proactive in setting a high standard of customer service and this was our goal in moving to that market.”

Friendly service and “relaxed banking” are what’s made Arvest a hit in Oklahoma, said Oklahoma City division Chairman Burt Stacy. The former president of Arvest Bank of Bentonville and Arvest State Bank in Tulsa, Stacy said turning banking into a pleasant experience became a company priority in 1980. One day while he was working in his Bentonville office, Stacy glanced at a security monitor and noticed that Sam Walton was at the counter in the lobby. The Waltons paid about $300,000 for the bank in the mid-1970s, when it had $3.5 million in deposits. It has $517 million today.

Stacy said he went out to say hello, and Walton paused before responding.

“Sam looked up and said, ‘You know, this place reminds me of a funeral home. Y’all need to pop up some popcorn, blow up some balloons and play some music in here.'”

Stacy said the volume for Arvest’s music, and business, went up after that.

Time for Tulsa

Walton sent Stacy to Tulsa in 1991 after Arvest bought out Village South Bank, a small Tulsa institution with $17 million in deposits near the corner of 101st Street and Sheridan Road. Arvest used that acquisition as a springboard in 1992 to buy State Federal Savings & Loan, a failed thrift with $200 million in deposits and six locations. Stacy stayed through 1998 — when he began directing branch startups — and laid the groundwork that built the bank into the company’s second largest franchise. The Tulsa bank now has $495 million in deposits and about $591 million in assets.

Donald Walker, Bank of Bentonville’s president from 1991-98, replaced Stacy in 1998 at the State Federal Bank tower in downtown Tulsa. That year, the bank had about $460 million in deposits. Walker was also president of Arvest’s First National Bank of Siloam Springs, now First Arvest Bank, from 1984-91.

Since his arrival in Tulsa, Walker has helped increase Arvest State Bank’s profits by 80 percent and its penetration to 60,135 households through July, up 32 percent from 45,473 homes in 1998. The bank now has 18 branches throughout the Tulsa metro area, which has a population of 750,000 and takes in Broken Arrow, Owasso and Sand Springs.

July was ASB’s most profitable month ever, and for the last six months it’s recorded a 21 percent return on equity.

“It’s not anything that I’ve done,” Walker said. “We’re following through with the strategy started 10 years ago by Burt. One good thing about Jim, too, is he wants his presidents to run the banks. We set our own rates and make our own decisions.

“As we go forward with the charter consolidation, we may identify some economies of scale and ways to enhance the delivery of our services. But I assure you we’re not going to ask our customers to call all over the country to get answers to their questions.”

Walker said his bank’s goal is to have at least five services with each customer household, which could include anything from home loans to credit cards and trust services. The bank now averages 2.5 services per household.

“Within five years,” Walker said, “I believe [ASB] will be a $1 billion bank.”

Arvest: The Underdog

Gaining additional market share in Tulsa — Arvest’s first major metropolitan conquest –?won’t be easy.

There are 37 banks competing for market share in Tulsa County. Bank of Oklahoma, with $2.6 billion in deposits and a 32 percent market share for the county, looms as large here as Arvest does in Northwest Arkansas. And Bank of America, with $885 million in deposits and an 11 percent share for the same area, is nearly twice the size of Arvest’s 6.1 share of the county.

But a 1998 study conducted by former University of Oklahoma professor Robert Lusch showed that just within the Tulsa metro area, Arvest had a 14 percent share and was only a few points behind Bank of America. A concentration of 12 of Arvest’s branches within the city has helped.

The $453 million Rogers County Bank in Claremore, which is owned by Helen Walton’s brother, Frank Robson, is even a competitor to Arvest in several cities. The two entities are not linked, and RCB’s market share statewide is only 1.2 percent.

Besides the size of its Tulsa competitors, whose portfolios are far more commercial, Arvest has worked hard to overcome its lack of name recognition. Walker said probably 40 percent of his potential customers have no idea what Arvest is, and far fewer realize the connection to the Walton family. Many people even mispronounce the name. That’s due in part to the fact that Northwest Arkansas gets Tulsa TV stations and the Tulsa World newspaper, but there’s no east-to-west flow of area media.

The Northwest Arkansas Business Journal asked 10 random pedestrians in downtown and southwest Tulsa, “Do you know what Arvest is?” One of the ten, a middle-aged woman, said, “Isn’t that a small bank?” The other nine didn’t know.

“Certainly our name has not played as significant of a role here as it did in Arkansas,” Walker said. “But there’s a growing amount of respect for it now. We have located some branches in Wal-Mart stores, and certainly that’s helped.”

Braving a metropolitan market has presented other challenges for Arvest. Getting ASB’s 350 employees, or even just its 18 branch managers, together for Tuesday meetings is a logistical challenge. The bank had to become more familiar with fraud issues and learn how to effectively use student employees from six local colleges.

Mass Marketing

Instate deposits at all banks in Arkansas have grown to $32.7 billion, nearly catching Oklahoma’s $37.3 billion total. But there are still more than twice as many people just in the city of Tulsa than in all of Northwest Arkansas, which had a 2000 population of 311,259.

So despite Oklahoma’s prospects, the challenge was how to reach new customers.

The rate for a mid-week, quarter-page ad with color in the Tulsa World is about $2,600, unless the advertiser agrees to more frequency. So the bank focused its $1 million marketing and public relations budget, $300,000 of which is earmarked for advertising, at rush-hour radio spots and billboard signage. An estimated 350,000 people tune in during the morning and afternoon drive times to Clear Channel Communication’s 13 stations in Tulsa. Arvest State Bank runs 10-second spots during traffic updates “on the nines,” or every nine minutes each hour.

Arvest also got focused on residential sectors of the city. Its newest branches are on the front lines of Tulsa’s southwestward expansion and near gated communities such as The Estates of Forest Park and Preston Woods. A Jaguar dealership and upscale restaurants like The Bistro in Brookside are not far from Arvest’s retail prototype facility on 51st St.

Value-Added Services

One consumer area Arvest initially had trouble attracting in Tulsa was the high-balance customers. So Walker helped tailor a new division that targets professionals in the medical community who are likely to make more than $100,000 per year. ASB’s Private Banking division requires a minimum balance of $40,000 and some additional net worth criteria, but doctors and hospital administrative staff receive a slew of perks for the business. Basically, Walker said, they never have to visit a bank in person.

“It’s a real high-touch service,” Walker said. “Private Banking brought in 150 new customers in its first year and really exceeded my expectations. If they need to increase their line of credit for their business or home equity for some reason, they make a call to one person and we take care of them.”

Asset management and trust development have been slower because of tight competition. Arvest Asset has 18 offices region wide with 10 in Arkansas, one in Missouri and seven in Oklahoma. The latter has become a focus for that division, said its CEO Mel Parks, because of the area’s density of people and opportunity for growth.

Walker said opportunities to provide treasury services such as account sweeps and consolidated returns have been well received. And insurance and annuities show potential.

He said it will be tough for the bank to continue its rapid pace, since Bank of America’s change over from NationsBank has matured.

“Customers aren’t leaving there like they were during the late 1990s,” Walker said. “We were averaging 500 new checking accounts per week. That’s what our traditional banks do in a month.”

Walker said the key is to “provide extraordinary service” and convenient locations. Stacy added that having “the Walton culture” didn’t hurt.

“We livened up our lobbies,” Stacy said. “I don’t think our prices are necessarily better than anyone else. We don’t have chandeliers or thick carpet, but we offer convenience and our customers know we’re glad to have them.”