Market Deposit Growth Slowed

Despite giant dips in the stock market and a deposit insurance coverage increase to $250,0000, deposits in Northwest Arkansas were up less than 2 percent from a year prior. That’s according to deposit market share data released by the Federal Deposit Insurance Corp. in mid-October.

The six-county market total as of June 30, the FDIC’s annual deposit market share cutoff date, grew to $10.7 billion from $10.5 billion the year prior. The Business Journal classifies the Northwest Arkansas market as Benton, Carroll, Crawford, Madison, Sebastian and Washington counties. A county-by-county deposit breakdown is available here.

In 2007, the total six-county market had about $12 billion in deposits, but that reflected about $1.57 billion in brokered deposits held with former ANB Financial of Bentonville. The bank’s brokered deposits skewed the market share data for several years, but in 2008 the market’s total dipped 12.5 percent when the brokered deposits were omitted after ANB’s failure.

The 2 percent growth is much slower than the market has seen in the last decade, which was in the 5 percent range through the early 2000s, then took a dramatic jump (11.6 percent) in 2005. That same year, ANB’s deposits were up 49 percent; about 39 percent of the bank’s deposits that year were brokered, or out-of-market.

Nationally, deposits were up 7.5 percent from mid-2008 to mid-2009 and grew almost 5 percent the year before. Arkansas as a whole experienced deposit growth of about 3 percent in the last year.

Many bankers offered their opinions on why the local market grew slower than the state or national level. Their opinions are as varied as the number of banks.

One theory was banks chose to shed some deposits to avoid paying the higher deposit insurance premium the FDIC began to charge this summer to boost the Deposit Insurance Fund. But most didn’t buy that explanation, saying deposit growth is driven by loan demand.

Tim Yeager, associate professor at the University of Arkansas, said he thinks the Northwest Arkansas market grew at a slightly slower pace than the national average because of slow growth in the area.

He said there is some evidence people pulled money out of the stock market in the last year and put it into certificates of deposit, even if the pace was slow. A couple of banks have told him they have paid down brokered deposits and had a small increase in time deposits.

Yeager believes the larger banks are experiencing a disproportionate benefit because there is a flight “to perceived safety” by consumers and many of the larger banks have more business accounts, and business accounts overall are not spending. 

 

County Comparisons

In 2008, only Sebastian and Crawford counties grew deposits, Crawford County by more than the national average.

As of mid-2009, however, four of the six counties grew deposits, three of those greater than the national average. Madison County had the largest percentage increase, but the smaller size of its deposit base means a large percentage increase is relatively easier to achieve. The total dollar value increase in Madison County was $11.4 million.

Washington County’s 5.27 percent growth was actually more difficult considering its deposit base is roughly twenty times the size of Madison County’s. The total dollar increase in Washington County was $18.1 million.

Deposits in Benton County shrank 0.82 percent. Last year was the first time since 1994 that deposits in Washington County surpassed Benton County, due in large part to ANB. In 2008, Washington County had only $23.1 million more in deposits than Benton County. This year, the spread was $226.8 million.

Still, Benton and Washington counties make up 65 percent of the six-county deposits, a total of more than $7 billion.

 

The Banks

It’s no surprise Fayetteville-chartered Arvest Bank controls the most market share within the six-county area, almost a third of it, with a total of $3.43 billion in deposits. That number is up slightly from $3.42 billion a year before. The bank is also the largest in the state in terms of deposits.

Arvest lost market share in Benton County, where it now controls 50.8 percent of the deposits, but gained more than 9 percent in Washington County.

First National Bank of Fort Smith is the second-largest bank in the six-county market with 7.54 percent of the total market share, or about $804.2 million in deposits, which includes deposits at the former Bank of Rogers. Its charter was collapsed into FNBFS’ in December 2008.

Iberiabank, formerly known as Pulaski Bank & Trust Co., which purchased many of the assets of ANB including its deposits, had June 30 deposits of $106.2 million, down 16.5 percent from $127.2 million in 2008. All of those deposits are in Benton and Washington counties.

One of the largest percentage increases in deposits was made by Regions Bank in Washington County, which experienced 201 percent growth from $21.1 million to $63.7 million in the year. Most of that was in the bank’s Fayetteville office, which had total deposits of $56.3 million as of June 30. But even with that, its market share was still only 1.76 percent in the county.

The bank only operates two branches in Washington County and announced in October it would soon close its Springdale office on Sunset Blvd. Jerry Vest, president of Region’s Northwest Arkansas operations, was unavailable for comment.

Banks posting the largest declines in market share in Benton County were Parkway Bank of Rogers (down almost 55 percent) and Chambers Bank (down 43 percent).

Those posting the biggest increases were Fayetteville-chartered Signature Bank of Arkansas (87 percent) and Legacy National Bank of Springdale (74 percent).

Jon Harrell, Signature’s Rogers president, said the bank’s dramatic deposit growth in one year was due to two factors: public funds and organic core deposit growth. About $40 million of its $80 million increase is public funds, such as school districts, he said.

The growth means Signature is the No. 2 bank in Benton County with 5 percent of the market share, up from No. 9 last year.

Another big winner was Fayetteville-chartered Bank of Arkansas NA, which is a subsidiary of BOK Financial Corp. of Tulsa. It had a 112 percent increase in its deposits in Benton County year-over-year. The bank only operates two offices, one each in Benton and Washington counties.

At Bank of Arkansas money market deposit accounts were up 182 percent to $82.4 million from a year prior. Time deposits of $100,000 or more grew a whopping 550 percent to $142.4 million, up from $21.9 million.

Core retail deposits grew 76 percent to $112.4 million from $63.8 million.

Jeff Dunn, president of Bank of Arkansas, said the bank’s deposit growth is likely due to a combination of things. People and businesses are holding on to cash and not putting it in the market or spending it on capital expenditures, he said. And, the bank’s sister banks in Colorado, Texas and Arizona have been able to offer wealthy clients FDIC-insured coverage by spreading deposits across its network of seven individually chartered banks.

In the River Valley, Fort Smith-chartered thrift Benefit Bank had the largest deposit increases year-over-year, growing by 15 percent in Sebastian County and 25.8 percent in Crawford County.

“A lot of growth in our deposits were a reflection in our funding needs,” said Joe Edwards, president and founder of Benefit. A lot of the loan demand has come from the bank’s new loan production office in Springdale.

Benefit opened the office in June 2008, with some former employees of ANB. Most of the LPO’s lending has been commercial, Edwards said, but there is a good mix of residential, too, but no speculative lending.

He said the bank does not buy deposits, but has aggressive rates. “We’re not always the top of the market but we’re close to the top,” he said.

And he looks for more deposit growth soon. Edwards hopes to convert the Springdale LPO into a full-service deposit-taking branch next year, maybe by the end of the first quarter.