Iberiabank’s plans for Arkansas never materialize, especially in Northwest Arkansas

Iberiabank management had big plans for the area almost eight years ago when the Lafayette, La.-based bank took over the failed Northwest Arkansas operations of ANB Financial. But those plans were never realized in the competitive region.

Iberiabank CEO Daryl Byrd told local media in May 2008 that the bank would take over the nine ANB branch locations through Pulaski Bank and Trust – another banking operation then recently acquired by Iberiabank. He said the bank felt fortunate to pick up the branches in Benton and Washington counties and the bank might add more local locations because he saw tremendous opportunity in this region.

Over the past seven years, Iberiabank has downsized its local branch count, closing its Bella Vista location in 2012 and selling off the main branch office location near Pleasant Grove Road in Western Rogers. On Friday (Feb. 5), Iberiabank management said it will consolidate several of its branch locations in Northwest Arkansas and Little Rock in March. It will completely shutter six branch locations in Northeast Arkansas. The reason bank management cited for the branch reductions is that more consumers are using mobile banking options today as we have become a largely “cashless society.”

In Springdale, the Iberiabank branch at Elm Springs Road will close with the accounts and operations consolidated into the branch located on East Robinson Road. In Fayetteville, the bank will close its location on Mission Boulevard and consolidate that into the West Wedington branch. In Little Rock, the Markham Street branch will be consolidated into the Pulaski Heights location on R Street.

Bank management did not estimate the number of jobs that could be lost with this transition saying they planned to use attrition to keep as many bankers on staff as possible.

The move to rein in branch counts does not came as a surprise particularly in Northwest Arkansas given its excess banking capacity.

“The market in Northwest Arkansas is grossly overbanked. There are too many branches and far too many banks for the size of this economy. The region is seen as the economic engine for banks around the state and it’s understandable that banks want to locate here,” said John Dominick, a finance professor at the University of Arkansas.

For example, Northwest Arkansas has 38 banks operating in the region with $9.053 billion in deposits, according to the FDIC and as of June 30, 2015. The central Arkansas metro, which is almost double the population of Northwest Arkansas, has just 33 banks with $16.36 billion in deposits.

Dominick, who is also a board member at Springdale-based Signature Bank, said operating branches with low deposits are a costly venture, which is why even the large institutions like Bank of America shuttered hundreds of branches in recent years.

When Iberiabank took over from ANB in 2008, the FDIC said there were roughly $213 million in Northwest Arkansas deposits. In the first year Iberiabank ran the local branches, the deposits dwindled to $106.2 million between the eight branches in the two-county area, according to the annual bank deposit report. However, deposits have grown in recent years, rising from $112.19 million in 2012 to $216.71 million in 2015.

A rule of thumb in the industry is that banks need to have $100 million in local deposits to justify the overhead expense of a branch location. When the Iberiabank consolidation is completed next month, none of the five branches it operates in the local market will have $100 million in deposits. The three branches in Benton County share $100.43 million in deposits. The two remaining branches in Washington County will have $42.616 million in Fayetteville, with $73.65 million in Springdale.

Dominick said the trend of branch closures is expected to continue as more banking operations have moved online and to mobile means.

“My students never write checks. They are a debit (and/or) credit card customer only and they can conduct most of their banking needs using an ATM,” he added.

Dominick remembers when Iberiabank took over the ANB branches and said the local market was crowded then and it’s more concentrated today.

“Banks from outside the region come in and try to buy business from other banks. They do this by discounting loan costs which then erodes the margins for all the banks in the region,” he said. “Today, the margins are razor-thin and many times it’s better to sell off a branch office location and consolidate where you can.”

Simmons First National sold off several of the Metropolitan National Bank branches it purchased in 2014 to First National Bank of Paragould, who wanted to come into the Northwest Arkansas market in the past year.

Farmers & Merchants Bank in Stuttgart closed on its purchase of the Bank of Fayetteville in late 2015. Gary Hudson, president and CEO of Farmers and Merchants Bank told Talk Business & Politics in November he was fully aware of the competitive climate in Northwest Arkansas. He said buying a name brand like Bank of Fayetteville and keeping local management was the best way he knew to enter the market.

Hudson said it’s like three popcorn stands lined up in row, they all sell popcorn, but their service can be differentiator. He expects the bank will expand its footprint across the local region over time.