State Charters Dwindle, but Fee Hike, Arvest Keep Bank Department Afloat

(Click here for a list of the region’s banks.)

Higher assessment fees and the addition of out-of-state assets to the Arvest Bank charter are helping the State Bank Department offset the revenue lost by the continued decline in the number of banks it regulates, said Bank Commissioner Frank White.

Unlike most state agencies, the Bank Department receives no tax revenue. Instead, it is supported entirely by fees and assessments from state-chartered banks. An increase in the assessment formula was announced in July, and banks began paying the higher assessments on Jan. 1.

To make the medicine go down easier, the commissioner forgave a half-year’s assessment last year, using about $2.25 million of the $3.5 million surplus the department built up between 1991 and 2000, when it ran its first-ever operating deficit.

When the fiscal year ends on June 30, White said, the department will have spent about $5.3 million, and its surplus will be about $1.4 million.

The department regulated 142 separately chartered banks as of June 30, 2001. But that number has since declined by 10, and two more state charters are expected to be dissolved by the time the fiscal year ends. (See sidebar below)

Seven of the charters lost this year were related to the decision by Arvest Bank Group of Bentonville to collapse all of its banks into a single charter — the state’s oldest charter, formerly known as McIlroy Bank & Trust of Fayetteville. The collapse of the Arvest charter at Rogers isn’t expected to be complete until June, but six others across the state already have been completed.

The same decision by Arvest, however, is the first really good news for the Bank Department in several years: Arvest also collapsed five Oklahoma charters and one Missouri charter into Arvest Bank of Fayetteville, and the state assessment formula now is applied to assets from those banks as well.

Arkansas typically has been on the losing end of multi-state charter mergers. The Bank Department lost control of all 11 of the charters that were part of First Commercial Corp. when that holding company was sold to Regions Bancorp of Birmingham, Ala., in 1998. All were rolled into Regions Bank’s Alabama state charter.

The sale of First United Bancshares Inc. of El Dorado to BancorpSouth Inc. of Tupelo, Miss., in 2000 also cost the department since three of First United’s banks were state-chartered. All were rolled into BancorpSouth’s Mississippi state charter, as was Pinnacle Bank of Little Rock, which BancorpSouth acquired on Feb. 28.

Arkansas had to compete with Oklahoma for the right to regulate the growing Arvest banking operation, White said.

“We just told them what we would do. We didn’t cut any rates or anything,” he said, although he accused Oklahoma of trying to undercut Arkansas’ regulatory fees.

“We tried to impress upon them, the roots of the Walton family being what they were, we would hope they would maintain their charter in the state of Arkansas. They had worked with our department before, and we felt like we had a good working relationship.”

But the decisive factor, he said, was probably a U.S. District Court of Appeals ruling in October 2001 that effectively exempted commercial banks from the Arkansas constitutional restriction on usury.

“Had we lost that lawsuit, I think they would have put the charter in Oklahoma because that would have had a profound impact on them,” White said.

No New Banks

In addition to assessment fees, the department also collects application fees for new charters, new branches, conversion from national to state charter and the like. In the current fiscal year, however, there have been no new charter applications. If none is filed and approved before the end of June, the 2002 fiscal year will be the first in at least five years in which no new bank charters have been issued.

Nor have any national banks converted to state charters since June 30. The only charter conversion in the state has gone the other direction: First Bank of Montgomery County in Mount Ida converted to a national bank, renamed First National Bank, on April 1.

Dan Horton, chairman of First Community Banking Corp. of Hot Springs, the holding company for the Mount Ida bank, said the decision to convert was a practical one.

The holding company’s other two banks are First National Bank of Hot Springs and First National Bank of Mena. To produce advertising materials that could be used throughout the franchise, all three banks needed to have the same name. It was much cheaper to bring the name of the two-branch Mount Ida bank in line with the others than to rename all 16 of the holding company’s locations, but renaming the bank required converting to a national charter.

“I just love the State Bank Department. We had absolutely no problems with the state,” Horton said.

Horton said First Community had no plans to collapse all three of its charters into a single national charter because the company prefers to keep strong local boards of directors.

State Banking Department Assessment Rates

(Effective July 2001)

Fixed fee: — $1,200

Plus: — 0.345% — per $1,000 of the first $10 million in total assets*

Plus: — 0.23% — per $1,000 of the next $15 million

Plus: — 0.1725% — per $1,000 of the next $25 million

Plus: — 0.80625% — per $1,000 of the next $200 million

Plus: — 0.10% — per $1,000 of the next $250 million

Plus: — 0.075% — per $1,000 of the next $1.5 billion

Plus: — 0.045% — per $1,000 of assets greater than $2 billion.

*As reported on Dec. 31 and June 30.

Banks in Arkansas by the Numbers

Year — State Charters — National Charters

1996 — 164 — 75

1997 — 163 — 73

1998 — 160 — 61

1999 — 149 — 50

2000 — 148 — 46

2001 — 142 — 41

2002 — 130* — 42

*Includes the collapse of Arvest Bank of Rogers into Arvest Bank of Fayetteville and the acquisition of Peoples Bank of Imboden by First Community Bank of Jonesboro, which are expected to be completed by June 30.

Sources: Annual reports of the state bank commissioner, as of June 30 of given year, and actions approved by state and federal bank regulators since June 30.

State Bank Charters Dissolved Since June 30, 2001

• Arvest Central Bank & Trust of Little Rock, merged with Arvest Bank of Fayetteville.

• Farmers & Merchants Bank of Prairie Grove, merged with Arvest Bank of Fayetteville.

• Springdale Bank & Trust, merged with Arvest Bank of Fayetteville.

• Simmons First Bank of Dumas, merged with Simmons First Bank of South Arkansas at Lake Village.

• Arvest Bank of Fort Smith, merged with Arvest Bank of Fayetteville.

• First Arvest Bank of Siloam Springs, merged with Arvest Bank of Fayetteville.

• Bank of Bentonville, merged with Arvest Bank of Fayetteville.

• Bank of Mansfield, merged with Bank of Mulberry.

• Pinnacle Bank of Little Rock, merged with BancorpSouth Bank of Tupelo, Miss.

• First Bank of Montgomery County, converted to national bank charter.

• Arvest Bank of Rogers, expected to be merged with Arvest Bank of Fayetteville in June.

• Peoples Bank of Imboden, expected to be merged with First Community Bank of Jonesboro before the end of June.

Sources: State Bank Department, Federal Deposit Insurance Corp.