Building Banks? Buy the Dozen

There are at least 58 announced bank offices to be erected in Benton and Washington counties by the end of 2007. Some are under construction now, some will be relocations, and some will not be “stand-alones,” but all will contribute to the bottom line for contractors in the area.

It may be impossible to estimate how much will be spent — or invested — on bank construction in the next three years. But by the end of 2006, Little Rock’s Metropolitan National Bank alone plans to build 12 banks, a total 63,800 SF, in the two-county area. It has said the total price tag on its market entry, including land and technology, will total more than $30 million. Susie Smith, senior executive vice president with MNB, said she couldn’t break out how much of that figure was just for construction.

But banks, even a cookie-cutter prototype like MNB’s, aren’t cheap to build. Arvest Bank Group Inc. in Bentonville has said it spends between $750,000 and $1 million building each of its now-familiar yellow stucco and blue neon prototypes.

Not every bank going up will be a prototype. Some for MNB and Jonesboro-based Liberty Bank of Arkansas will be county headquarters, which are prototype look-a-likes with larger footprints.

With those numbers, a $55 million to $65 million estimate on bank construction by year-end 2007 is not out of line.

So who are the contractors getting a share of the booming banking business in Northwest Arkansas, and why?

Matt Bodishbaugh, vice president of CDI Contractors LLC in Rogers, said his company landed the Metropolitan account and will build at least 12, and as many as 14, northwest offices for the bank.

“Relationship and reputation” are why CDI got the contract, he said.

Bodishbaugh’s mantra echoes what bankers say about landing big finance deals. CDI, based in Little Rock, has done previous projects for MNB in central Arkansas including its headquarters in Little Rock’s Metropolitan Tower.

“It is a premier account for us,” Bodishbaugh said. “They’ve got the most aggressive building program in this market right now.”

The second most aggressive has to be Little Rock-based Bank of the Ozarks, which will build at least 12 offices by the first quarter of 2008.

Susan Blair, vice president with BOZ, said her company will select a contractor for each building based on the bidding process and the lowest bidder’s ability to complete the job efficiently and effectively.

Massy Construction and MDH Builders, both of Little Rock, have built BOZ branches throughout the state, Blair said.

Arvest, which as a total of 60 offices in the two-county region, operates in much the same way as BOZ, officials at the chain said. Arvest plans to build two branches, and have extensive renovation on four more, during the next seven months.

Since Arvest operates six “autonomous” banks in the area, the selection of contractors is made by each local bank president and board. The process takes into account factors such as recommendations, whether or not the contractor is an Arvest customer, and the extent of the relationship. Timetables, reputation and ability are also big factors, said Jason Kincy, Arvest Bank Group’s advertising manager.

The Bentonville-based bank averages between three and four new offices a year, Kincy said, and it has used Heckathorn Construction Co., Nabholz Construction Corp., Gary Brandon Enterprises and Crossland Construction Co. among other general contractors at various times.

Bodishbaugh said there’s no big deal about building a stand-alone bank office, and that any good general contractor can do it. The trick is in outfitting the bank with the specialized equipment — vaults, secure drive-through windows, and teller cash drawers — that makes a bank a bank.

That equipment typically requires a specialized subcontractor. Basically, Bodishbauah said, it’s his company’s responsibility to leave the right sized hole for the subcontractor to fill and to make sure the building is ready when it’s time to install.

“It is a coordination exercise,” he said. “It’s not rocket science, but you need to have the ability to coordinate.”

Niche Monopoly

No matter who pours the foundation and erects the walls of a bank, there is one company in the state that probably does at least some subcontracting for each office somewhere down the line.

Nabholz Client Service, under the Nabholz umbrella, is a sub-contractor for Diebold Inc., a bank equipment manufacturer.

Estimates from both bankers and the contractors who build banks indicate that Nabholz Client Service installs about 90 percent of the Diebold equipment in Northwest Arkansas, a number that is probably the same for the entire state.

And Diebold is the overwhelming choice of equipment for bankers. Based in Canton, Ohio, Diebold reported 2004 net income of $183.9 million, up 5 percent from $174.7 million in 2003. The company makes physical and electronic security equipment and voting machines, and can fetch up to $40,000 for a state-of-the-art automatic teller machine.

There are other manufacturers. In its first permanent location in Fayetteville, Signature Bank of Arkansas used Hamilton Safe products. But even Hamilton’s equipment was installed by Nabholz Client Service.

Banks usually purchase their equipment directly from a Diebold representative. Night deposits, drive-through pneumatics and other bank-specific gear is delivered to Nabholz Client Service, which then does a turnkey installation when the bank is ready.

Mike Jensen is a vice president with Nabholz Construction and the unit manager of the Rogers client service office. He said his six-member team has fitted about 49 banks so far this year, but his team works in Missouri and Kansas mostly, and very little in Northwest Arkansas.

Austin Kyzer is the statewide client service manager for Nabholz and he offices out of Conway, though the division has recently opened an office in Jonesboro.

NCS worked on 401 banks statewide in 2004 and has touched at least 252 so far this year, Kyzer said.

The NCS division brings in about 1 percent of the corporation’s total annual revenue, Jensen said. Last year the firm reported revenue of about $257 million, so if those numbers are true, then the installation business is worth less than $3 million.

Jensen said he can bill an average, idyllic installation at about $13,000. If that number is true, he’s billed close to $637,000 for work his team has done outside of the state. That would put a statewide estimate for Kyzer at closer to $5 million.

Kyzer has a team of 13 and said in a typical week they will work on six different banks in the state. Those may not be full installations, he said, but partial installations or retrofits here and there.

His team can install a bank’s vault in six or seven hours. Full-sized vaults are made up of pre-cast concrete panels weighing between 4,800 and 5,000 pounds each that are welded together and then fitted with a door.

Kyzer said it’s not uncommon for his teams to work through the night to meet an opening deadline.

When told there are 50-plus bank offices going up in Northwest Arkansas in the next three years, Bodishbaugh was only mildly impressed. He pointed a thumb out his office window on Walsh Lane, adjacent to Pinnacle Hills Parkway in Rogers. There’s a Parkway Bank, a First Western Bank & Trust Co. and a Regions Bank all under construction now, he said. They’re “all within a five iron of one another,” he said.