Banks Must Split Share of $8.22B In Area Deposits

For all but one bank in Northwest Arkansas, the controlling interest in the deposit market share game is pie in the sky.

To the surprise of no one, Fayetteville-chartered Arvest Bank continues to have a stranglehold on the market, with $2.22 billion in deposits in Benton and Washington counties, or a 43 percent share of the market.

Deposits in Benton and Washington counties grew by 9.8 percent overall from $4.71 billion to $5.17 billion from June 30, 2003, to June 30, 2004. Deposits were up by 6.5 percent from $7.72 billion to $8.22 billion in the six-county region that includes the Arkansas River Valley with Northwest Arkansas.

That’s a 94.4 percent increase for the two counties and a 68.8 percent increase for the larger region since June 30, 1994.

Market share data from the Federal Deposit Insurance Corp. became available in late October and the Northwest Arkansas Business Journal took a look at how area banks stack up.

Specific data for the Fayetteville-Springdale-Rogers metropolitan statistical area was intentionally excluded, because it includes McDonald County, Mo., and at least two banks from that state. Instead, data was gleaned from each county in the area. For convenience, the “Northwest Arkansas market” has been divided into two geographical subsets of the state: Benton and Washington counties combined; and the six-county area, which also includes Carroll, Crawford, Madison and Sebastian counties.

Benton, Washington and Sebastian counties rank No. 2, No. 3 and No. 4 respectively in the state as the largest counties terms of dollar value deposits, behind Pulaski County.

Three out of six ain’t bad.

According to the FDIC, there were 19 banks in Benton and Washington counties as of June 30, 2004. There were 34 banks in the six-county area. A complete bank-by-bank breakdown for the six-county area is available on page 21.

Those numbers do not include Pinnacle Bank of Bentonville, which opened on Aug. 23 and will eventually relocate its charter to Rogers.

The numbers are down for both geographic areas of the state’s northwest corridor since June 30, 2003. The two-county area is down from 21 banks, and the six-county area down from 37 banks.

This is due in part to the acquisition of First National Bank of Springdale by Searcy-chartered First Security Bank; the purchase of Superior Bank of Fort Smith by Arvest Bank Group Inc. of Bentonville; and First National Bank in Green Forest’s acquisition of Madison Bank & Trust, all within calendar 2003.

The number of offices increased from 142 in the two-county area to 149 in the 12-month period, and from 245 to 258 in the six-county region.

Arvest’s 43.04 percent share in the two-county area is up from a 42.96 percent share a year earlier. It’s figures and Superior’s were combined for 2003 market share comparisons.

But farther from its center of operations, Arvest only controls 31.8 percent in the six-county region, or $2.61 billion in deposits. That’s a mere $386 million more than the two-county area and down from 32.5 percent a year earlier (again combined with Superior’s numbers).

The second winner in the race for market share in the two-county region was First Security Bank. First Security’s increase is due to its purchase of FNB of Springdale, but its 2003 total is less than the combined deposits from both banks in 2002 (see charts, p. 23). That is typical of a buyout, and it looks like Arvest and Bentonville-based Arkansas National Bank picked up at least some of the deposits.

FSB now has 10.2 percent of the market share with $526 million in deposits, down from 10.9 percent share (combined with FNB of Springdale for comparison) a year before, but up from and $511 million.

In the larger six-county region, First National Bank of Fort Smith overtook BancorpSouth Bank of Tupelo, Miss., for the No. 2 spot, even though they both lost percentage of market share.

In a bookkeeper’s nightmare of coincidentally juxtaposed numbers, FNB grew deposits to $543 million from $531 million, but dropped from 6.8 percent to 6.6 percent from in market share. BancorpSouth dropped from 7 percent to 6.4 percent in share because its deposits dipped from $543 million to $531 million.

But the $12 million difference between the two banks was not a direct deposit share swap. Jim Patridge, regional president of BancorpSouth, said his bank had a $23 million reduction in public funds, but was able to grow back $11 million.

And, as far as he knew, the public funds did not go to FNB.

Deposit Debate

Depending on who’s asked, deposit market share may or may not be a big deal.

Even officials from Arvest, who hold the lion’s share of the market, say the numbers reported by the FDIC aren’t necessarily a good indicator, because they don’t include managed accounts and trusts.

Deposits “are not a real good scorecard” said David Short, president of Arvest Bank-Bentonville.

“Just Arvest-Bentonville, for example, we’re something over $700 million when you look at our internal balance sheet that we separate,” Short said. “But we’re well over a billion dollars off balance sheet on the trust and investment side.

“Twenty years ago, those dollars would have been in deposits,” he said.

But now most people have their money in brokerage accounts, 401(k)s or other managed, but not federally insured, accounts.

The downtown Bentonville location alone has more deposit value than any other local Arvest office with $393.4 million, according to the FDIC.

Rob Brothers, president of Arvest Bank-Rogers, said most of Arvest’s loan portfolio — about 78 percent — is tied up in real estate, both residential and commercial.

That’s not surprising since Arvest’s Northwest Arkansas banks and Arvest Mortgage Co. combined closed almost 30 percent of the mortgage transactions in Benton and Washington counties for calendar 2003 (see story, p. 26).

But Jim Taylor, regional president for First Security Bank, said deposit market share is a great indicator of his bank’s overall size and rank in the market place. FSB looks at the data annually and compares it with similar MSAs and the bank’s peer group, he said.

On Nov. 15, First Security Bancorp, the holding company for FSB, opened the $25 million First Security Center, a 14-story multi-use building in Little Rock. Taylor said the bank will announce two to three new northwest offices in the next six months and could add up to five ATMs in the area by mid-2005.

On Nov. 15, it opened its FSB Business Banking Center in Springdale. The new office will cater to business professionals on the go and offer services targeted specifically for that segment of the bank’s customers.

FSB will continue to pursue the real estate market, Taylor said, echoing the Arvest officials who said that is a reliable growth area for local banks.

“This is a strong real estate market,” Taylor said. “It’s almost like this market is creating its own synergy.

The bank is not above pricing for deposits, he said.

“We’re still just a big community bank … We don’t have the luxury of some of the big banks have,” he said.

“We want to get all of the money we loan from the people here in Arkansas … We pay premium pricing for our deposits.”

Patridge, with BancorpSouth Bank in Fort Smith, said deposit market share doesn’t tell the whole story.

“We have a significant number of cash management accounts that are not part of the deposits,” he said.

BancorpSouth’s deposits would be about 20 percent higher if the cash management accounts were on the books, he said.

BancorpSouth will fight to maintain and grow its market share as well. Patridge said the bank has options on two locations in the Benton-and-Washington-county area, but nothing is ready to announce.

“Naturally, we think we can fill a need,” Patridge said. “We are going to do it in a very targeted and focused way.”

Other newcomers to the market have taken a similar approach.

First Bank Corp. of Fort Smith is parent company to the First National Bank of Fort Smith, Citizens’ Bank & Trust Co. of Van Buren and the National Bank of Sallisaw (Okla.). In September, it announced it would acquire the Bank of Rogers. The deal is expected to close on Nov. 30.

Sam T. Sicard, vice president of FNB of Fort Smith, said he thinks deposit market share data is important, but it’s not as relevant as it used to be.

The majority of FNB’s deposits are consumer, Sicard said, but the bank has higher than average commercial deposits compared to its peers.

FNB sees the majority of its two to three year growth in Northwest Arkansas through the Bank of Rogers, he said. He added that the Sebastian County market has shrunk recently, partly due to the addition of three credit unions there.

“I think it’s going to be tough,” Sicard said.

Market In Review

This year bank activity in Northwest Arkansas has been rife with openings, startup announcements and closings on land by established south Arkansas institutions ready to open offices.

If and when all the announced and new-to-the-market institutions are open for business, there will be 39 banks for consumers to choose from in the six-county region.

Arkansas State Bank recently became Liberty Bank of Arkansas, a mirror of new majority owner from Jonesboro, and Community Bank of North Arkansas recently changed its name to Chambers Bank of North Arkansas — some proof that market share is somewhat dependant on marketing.

There were also announcements of several banks sticking their toes into the market waters through the opening of new mortgage origination offices.

Bruce Branch, executive vice president of Parkway Bank in Rogers, said his bank began making loans this past summer. Parkway awaits state regulatory approval before it can become a full-service bank. Branch said he expects a ruling on Nov. 23 and hopes to be able to start taking deposits soon thereafter.

“The proof will be in the performance,” he said about the bank’s deposit base. He and his co-workers are chomping at the bit to get started, and think there’s enough business for everyone.

“It will be difficult for all the announced banks to operate with the current amount of business,” one banker said as an aside.

Another, who asked not to be identified said, “Over speculation has a way of correcting itself.”

He did not wish his competitors ill will, but he didn’t wish them any luck either.

Decade of Deposits
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Six-county Market Share Breakdown
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Market Share
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