Bank Deposits Skewed By ANB’s May Closure

The ANB bubble is impossible to deny. Deposits in Northwest Arkansas are now just below what they were as of mid-year 2006.

Bank growth, mostly in Benton County, was much like the fabled man behind the curtain – all was not what it appeared to be.

Deposits in the six-county region that make up Northwest Arkansas shrank to $10.5 billion as of June 30, off 12.5 percent compared with the same period a year earlier.

Bankers expected to see the dip due to the failure of Bentonville-chartered ANB Financial on May 9. But nobody knew exactly how much until the Federal Deposit Insurance Corp. released its annual deposit market share data in mid-October.

(To see a breakdown of deposits in the six-county region of Northwest Arkansas, click here.)

ANB’s nine branches, five in Benton County and four in Washington County, reopened the following Monday as branches of Pulaski Bank & Trust, which had outbid three other banks, according to FDIC spokesman David Barr.

Pulaski had a 90-day option to buy the branches at 95 percent of their appraised value and ultimately bought all but the branch that was attached to the ANB operations center at 3605 Southern Hills Blvd. in Rogers.

Pulaski hired 65 ANB employees, and it bought $212.9 million in insured deposits, paying a premium of 1.011 percent (about $2.15 million) for the privilege.

By the time the 2008 summary of deposits snapshot was taken seven weeks later, only $127.25 million of those deposits remained in Pulaski Bank’s eight Northwest Arkansas branches – a 40 percent runoff that a bank official said was “strategically encouraged.”

And as of Sept. 30, IberiaBank Corp., the Louisiana-based parent to Pulaski, reported only $113 million of the ANB deposits were still on the books.

Beth Ardoin, executive vice president and director of communications for IberiaBank, said about $80 million of the ANB deposits that Pulaski Bank acquired actually belonged to depositors who did business with ANB through loan production offices in St. George, Utah, Idaho Falls, Idaho, and Jackson Hole, Wyo.

County Changes

Leaving ANB’s 2007 brokered deposits in the calculations, as is done on all charts tied to this story, Benton County had an overall deposit decrease of 31 percent, or about $1.58 billion.

But if ANB’s 2007 brokered deposits are omitted ($1.47 billion as of June 30 that year), then Benton County’s total deposits only shrank about 3 percent and the six-county market was down only a quarter of a percent.

Washington County lost just more than three-quarters of a percent in its total deposits, presumably partly due to ANB’s failure, though where the deposits went isn’t apparent.

According to the FDIC, national deposits grew about 6.7 percent from 2007 to 2008. Statewide, deposits were down 0.16 percent.

Nonetheless, Washington County deposits were ahead of Benton County for the first time since 1994, if only by $23 million.

Benton and Washington counties control 65 percent of deposits in the six-county market, which also includes Carroll, Crawford, Madison and Sebastian counties.

Only Sebastian and Crawford counties grew deposits during the year, and Crawford County by more than the national average.

Sam T. Sicard is vice president of the First National Bank of Fort Smith. His family owns First Bank Corp., the holding company for FNB, Citizens’ Bank & Trust Co., Bank of Rogers and the National Bank of Sallisaw (Okla.).

As for Sebastian County, Sicard said the market has heretofore been “stable,” though that may change with recently announced layoffs at Rheem Manufacturing and Whirlpool. But even with those, Sicard is hopeful that a recent bevy of companies, notably Pradco-Fishing and Umarex USA, moving to the Fort Chaffe area will help offset unemployment for the county.

As for Crawford County, Sicard said he believes some people have moved there because the school systems are good and home and land prices are a little less expensive. The Experian call center that opened in Van Buren in 2006 has helped the area with jobs, he said.

Arvest Bank, the state’s largest bank in terms of deposits, lost nearly 4.5 percent of its market share in Washington County but gained 5 percent in Benton County, where it dominates with a 53 percent share.

Certificate Deposits

(To see a list of the top Northwest Arkansas banks ranked by CD rates, click here.)

Fayetteville-based Signature Bank of Arkansas and The Bank of Fayetteville were paying a premium for desirable deposits in October.

Both banks were offering a 3.5 percent simple rate (3.55 APY) on 12-month certificates of deposits for $1,000 on Oct. 22, which ranks among the highest in Northwest Arkansas.

Thirteen banks in Benton and Washington counties were surveyed on Oct. 22. The group included startup and new-to-the-market banks (those that had opened in the two-county market since 2004), as well as the top three banks by deposits in each county and Pulaski Bank & Trust Co.

According to Bankrate.com, the best 12-month certificate of deposit rate in the country on Oct. 22 was with GMAC Bank of Midvale, Utah, paying a 4.35 annual percentage yield.

The national average, according to Bankrate.com, for a one-year CD was 3.6 percent.

The Wall Street Journal published the prime lending rate at 4.5 percent that day.

It should be noted that all banks surveyed offered special CDs that mostly had higher rates or gimmicks (like early withdrawal), but for odd time frames so an apples to apples comparison was impossible.

Jim Taylor, the Northwest Arkansas division president for First Security Bank, said in his estimate 99 percent of depositors use a special to get the higher rate, so comparison of basic rates can be misleading.

President and CEO of The Bank of Fayetteville, Mary Beth Brooks, said her bank has loan demand, so garnering deposits by paying slightly higher CD rates is an acceptable trade off.

Also, the bank borrows money from the Federal Home Loan Bank, but lately those funds are drying up.

“We still have a good pipeline of loans to close in the next two months,” Brooks said. “I think now is a good time to make loans.”

Brooks said BOF isn’t loaning to build subdivisions or spec homes, but “if it’s good commercial, income-producing property by a strong borrower, then we will still loan them money.”

BOF has nine branches, including one that opened in August in Farmington. It’s the third largest bank in Washington County in terms of deposits with 9.79 percent of the market share. BOF has no branches in Benton County.

“We don’t have the ad dollars and branches, so we pay up,” said Gary Head, chairman and CEO of White River Bancshares Co., the holding company for Signature Bank, which is the fourth largest bank in Washington County with 8.44 percent of the market share.

The bank’s growth has been slower in Benton County, where it only controls 2.7 percent of the deposits and is ranked No. 9.

“I’m a new bank and I still have to pay people to come find me … you can spend your money on billboards, or you can pay your depositors,” Head said.

Taylor said FSB’s rates “are somewhat lower than some of the others, but I think that speaks to our overall liquidity.”

“Your bread and butter are your core deposits. We’re trying to take care of our core customers,” Taylor said. And keep a decent margin, he added.

Depositors should not expect to see Pulaski Bank setting the curve for CD rates, according to Ardoin of IberiaBank Corp.

“We have priced ourselves to remain competitive but not to be the market leader,” she said. “Our strategy is almost always to build relationships based on exceptional service and not by being the top of the market in pricing.”

It’s worth noting that three of the banks surveyed are under regulatory enforcement actions: Springdale-based Legacy National Bank and Little Rock-based Metropolitan National Bank with the Office of the Comptroller of the Currency; and Parkway Bank of Rogers with the Federal Deposit Insurance Corp.

Some bankers said those banks’ higher rates might be driven by a need to generate deposits and boost their capital.

(To see a line graph depicting the past decade’s performances by the banks, click here.)

 

Arkansas Business editor, Gwen Moritz, contributed to this story.