Commercial Lending Skyrockets While Residential Remains Steady

Bank Loans
Click here for a chart of lenders with the biggest increases in loans processed. (Lists and charts require Adobe Acrobat viewer. Click here for a free copy.)

The dollar value of processed mortgages in Benton and Washington counties increased a whopping 145 percent from about $5.82 billion in calendar 2003 to about $14.26 billion in calendar 2004.

The vast majority of that lending was in commercial projects for both new construction and refinancing of existing commercial sites.

Rob Brothers, president of Arvest Bank-Rogers, said he wasn’t surprised by the increase in loan dollar value, considering the growth in the area and the number of commercial developments that began in 2004 along the Interstate 540 corridor. The Rogers Arvest alone increased its loan portfolio by $106 million in 2004, Brothers said. And the company did one $30 million refinance project, a record for Arvest, he said.

During 2004, the 70-acre Beau Terre Office Park in Bentonville sold for $55.87 million, Brookhaven LLC began a 472-unit apartment complex in Springdale valued at $25 million, and the First Baptist Church of Springdale began construction on its Church at Pinnacle Hills in Rogers for about $25 million.

Brothers and other area bankers said that if you start adding up transactions like that, a 145 percent increase really isn’t far fetched.

Though the fruition of many commercial projects in 2004 ruled the lending market, residential mortgages still proved to be a “Steady Eddie” for many Northwest Arkansas lenders despite rising interest rates.

The bottom line, lenders said, is people are moving to town and buying homes.

The ‘A’ List

Of the $14.26 billion in 2004 loans, 30,833 transactions worth $10.04 billion were made by the 40 institutions on the Northwest Arkansas Business Journal’s 2004 list of the area’s largest mortgage lenders. The complete list is on Page 36.

Last year, the Business Journal calculated that 40 lenders processed 28,268 loans worth a total of $4.53 billion for calendar 2003. While the number of loans by those institutions on the list increased by only 2,565, the dollar value increased 121 percent.

This year’s list is ranked by number of mortgages processed by a company within the calendar year and deliberately excludes credit unions, family trust transactions or any other company processing fewer than 75 loans within the year. Commercial mortgages and their values were included.

Waco Title Co. of Springdale, owned by Arvest Bank Group Inc., supplied the raw data consisting of lenders, dollar values and closing dates.

Both the 2003 list and the 2004 list contained 40 lenders, but 11 of the lenders on this year’s list replaced institutions that did not process at least 75 loans, or dropped out of the market completely.

Benton County had more loans processed and a higher dollar value in loans with 56.6 percent of the transactions (17,488) and 53.6 percent of the dollar value ($5.39 billion) for the year.

Bentonville-based Arvest Bank and its subsidiaries processed 11,005 loans in 2004, 9.8 percent higher than it and Superior Federal Savings Bank processed the year before.

Superior FSB was acquired by Arvest in 2003, so its numbers were added into Arvest’s totals for a more accurate comparison of the bank’s position in the market.

Arvest alone processed 35.6 percent of the loans on the list and 16.8 percent of the dollar value on the list.

The gap between the No. 1 spot and No. 2 spot didn’t narrow any from 2003 to 2004. The next highest number of loans processed was 1,916 by ANB Financial N.A. of Rogers, a mere 6.2 percent of those transactions calculated in the list. ANB did, however, enjoy a 9.2 percent increase in the number of loans it processed and a 32.8 percent increase in the dollar value it loaned for a total of $393.9 million in 2004 (see deposit market share story, here).

Residential Arvest

According to the Federal Deposit Insurance Corp., Arvest has 41.3 percent of the total deposit market share in Washington and Benton counties, so it’s not surprising that the bank also dominated in mortgage lending. As of June 30, Arvest had 45 offices in the two counties alone, more than any other competitor.

Arvest broke the $1 billion lending mark for the third year running. Brothers and other Arvest officials said the bank is on track to do the same again in 2005.

Payne Brewer is an executive vice president and loan manager of Arvest Bank-Fayetteville. He said the company has a goal of reaching the $2 billion mortgage lending mark, though it may be a few years in the making.

Brewer was able to provide a breakdown of the bank’s residential lending for the last two years and so far this year. He said in 2003, Arvest loaned $682 million for residences, and about 60 percent of those were refinances due to low interest rates. But in 2004, when rates climbed a little, the bank had about $514 million in residential loans. About 60 percent of that year was in purchases, he said.

So far in 2005, the bank has loaned about $459 million in residential mortgages, about 70 percent to 75 percent of which are for new purchases, Brewer said.

But Brewer said Arvest doesn’t bank on its market share or the number of offices it has to bring customers in.

“You can build all the buildings you want and that’s not going to get you the business,” he said.

Instead, the bank relies on its autonomous community banking approach with local lenders and local decision makers in each town (Bentonville, Fayetteville, Rogers, Springdale and Siloam Springs). It all boils down to relationships and customer service, Brewer said.

Arvest retains the servicing rights to all of its loans, Brewer said, which in turn gives the bank an opportunity to earn the customer’s business.

The action also increases the bank’s deposit base, through the retention of the escrow accounts. And since banks loan on a percentage of their deposits, it gives Arvest the ability to loan more.

Other Lenders

The lender with the highest positive percentage change in the number of loans it processed was El Dorado-based First Financial Bank, with one loan origination office in Fayetteville.

Jerry Bullard, chief operating officer of FFB, said the office is exclusively for agricultural lending and that the increase was probably due to expansion at one or more of the poultry operations in Northwest Arkansas.

Of the non-bank lenders, Wells Fargo Home Mortgage Co. dropped from No. 3 on 2003’s list to No. 4 on the 2004 list.

Justin Moore, manager of the three Wells Fargo offices in Northwest Arkansas, said what his offices have lost in volume, they’ve made up in dollar value.

“It’s been a record-breaking year for us,” he said, noting that the average home purchase price has gone from about $125,000 in 2003, to $148,000 in 2004 and is about $167,000 so far in 2005.

The average loan value on the list includes commercial projects, so the figures are skewed.

“What we do for our customers keeps them coming back,” Moore said.

Janie Boyce, sales manager for the mortgage department in Arkansas for Bank of America, said statewide purchases are up. She said 87 percent of her statewide consumer mortgages were new purchases, so clearly people are buying homes.

“In ’03, you just had to have a body in a chair,” she said of the refinancing boom. “In ’04 we had to get back to the basics of who we had relationships with … We’ve [had to] dig in to be successful in ’04 and ’05.”