Optimism ?en Vogue? for Bankers in 2004

(Click here to see the list of the biggest deals of 2003.)

Last year’s refinancing boom had probably reached its saturation point by the time rates got ratcheted higher, the cumulative affect being a breather for bankers even in Northwest Arkansas’ rockin’ market.

Still, several area bankers agree that economists’ expectations for a brighter national economy in 2004 can only mean more good things for the two-county area. The optimism local lenders, including United Bank President Jeff Lynch, said should spark commercial lending.

Lynch said United Bank’s commercial clients are already thinking more positively about the economy in general, which tends to lead them to thinking about purchasing equipment and property.

“They are ramping up for a good, strong economic recovery,” Lynch said.

Jeff Dunn, president and CEO of Bank of Arkansas, said much of the same. Increased loan demand should also come from the manufacturing sector, he said.

“Right now, if you are in a business, sales might be flat because the economy is down, so you are not going to spend money to increase your capacity,” Dunn said. “We think that people will start thinking about growing their businesses [in 2004], and that will cause people to start using their lines of credit to grow their business and make capital investments in their business.”

Dunn said he sees both refinancing and the three-, five- and seven-year fixed rate activity slowing down as interest rates rise. But, he said, rates “ought to stay in check until election time.”

Dunn said Bank of Arkansas is looking for growth in the treasury services, or cash management, area of its market.

John Lewis, president and CEO of The Bank of Fayetteville, said “the outlook for banking in Northwest Arkansas is probably better than any place in the country.”

But if rates stay flat, margins will remain low. That’s why the money to be made this year will be in investment advising and the fee side of banking, Lewis said. Both will require institutions to keep a close eye on expenses.

Competitors don’t seem too concerned with the recent acquisition of Superior Financial Corp. by Arvest Bank Group and First Security Corp.’s imminent buyout of First National Bank of Springdale. The buyouts loom especially large in Washington County where all four institutions already have branches.

Had both those deals been completed in June when the Federal Deposit Insurance Corp. published its latest market share report, the surviving entities would have had a combined 52 percent of the Washington County market.

Arvest and Superior’s combined share is about 34.19 percent. First Security and First National would have about 18.05 percent, leaving the other 11 institutions with full-service banking operations in Washington County to vie for the remaining 48 percent.

Benton County, already ruled by Arvest and devoid of the Springdale bank, won’t see major changes in market share.

“I don’t think we’ll see much of a difference,” said Dan Dykema, CEO of Bentonville-based Arkansas National Bank, pointing out that Superior’s market share was relatively small and First National’s customers will fit well with First Security.

Lynch and Lewis aren’t worried either.

“We’ve got our own niche,” Lewis said.

TAB CHART

Watching Washington

The following are banks and their shares of the Washington County market with dollar values listed in thousands:t

t

			2003
		2003	Market
Rank	Bank	Deposits	Share
1	Arvest Bank*	$796,741	34.19%
2	First National Bank of Springdale**	$294,408	12.63%
3	Bank of America	$217,360	9.33%
4	Bank of Fayetteville	$204,151	8.76%
5	Bank of Arkansas	$151,433	6.50%
6	Community Bank of North Arkansas	$150,402	6.45%
7	First Security Bank**	$126,227	5.42%
8	Simmons First Bank of Northwest Arkansas	$117,422	5.04%
9	United Bank	$91,579	3.93%
10	First Federal Bank of Arkansas	$76,487	3.28%
11	Arkansas National Bank	$64,129t2.75%
12	First State Bank (branch of Lonoke)	$21,915	0.94%
13	Arkansas State Bankt$13,728	0.59%
14	First State Bank (branch of Huntsville)	$4,228	0.18%
	Total	$2,330,210

Note: All values are as of June 30, 2003, the most recent available from the Federal Deposit Insurance Corp. *Already includes acquisition of Superior Bank of Fort Smith. **Buyout of First National by First Security has not yet consummated but is expected during 2004.t

Source: Federal Deposit Insurance Corp.