Bank deposits rise in Northeast Arkansas, growth mirrors other regional gains

Bank deposits have experienced double-digit growth during the past seven years in Northeast Arkansas. As of mid-2017, there were $2.972 billion in bank deposits in the Jonesboro metro, an 18% jump since 2010, according to the Federal Deposit Insurance Corporation (FDIC).

Centennial Bank controlled 25.84% of the deposit market share in the region, as of June 30, 2017, followed by Simmons Bank with 9.16%. IberiaBank (8.01%), Regions Bank (6.83%) and First Community Bank (6.25%) rounded out the top institutions in the region as determined by deposit market share, according to FDIC data.
Centennial Bank Regional President Davy Carter told Talk Business & Politics explosive growth in the region’s banking sector has led to more competition, and it’s a good thing. There are 19 banks in the market with 57 total offices.

“Arkansas is blessed with a lot of good banks,” Carter said. “The positives (of growth) far outweigh the negatives. Competition is good. … We welcome it. It’s a great market here.”

The top four lending institutions remain unchanged since 2010, but their share of the market has shrunk.

In 2013, Conway-based Centennial’s parent company, Home Bancshares, bought Liberty Bank in a $280 million deal. At the time, the deal was the largest in-state banking transaction in the history of Arkansas, and made Home Bancshares the second-largest bank holding company headquartered in Arkansas.

Liberty Bank Chairman Wallace Fowler founded the bank in 2003, and knew Home Bancshares Chairman John Allison for many years. Fowler owned a furniture store on Main Street in Jonesboro in the 1960s and Allison, a Jonesboro native, worked at a clothing store down the street. The two men would often share coffee in those days.

Home Bancshares (NASDAQ: HOMB) finished 2017 with more than $14 billion in assets, aided by a blockbuster Florida merger. For the period ended Dec. 31, the holding company reported net income of $23.3 million or 13 cents per share, down 50% from $46.8 million or 35 cents a year ago. Excluding a one-time charge of $36.9 million related to tax liability changes, earnings for the quarter were $60.2 million or 35 cents per share. Wall Street had expected the Arkansas regional bank to post fourth-quarter earnings of 34 cents per share, according to Thomson Reuters.

For the year, Home Bancshares reported net income of $135.1 million or 89 cents per share, compared to year-ago results of $177.1 million or $1.26 per share. Those results include one-time charges related to Hurricane Irma and merger-related expenses, and the aforementioned provision for changes in future tax liabilities.

DEPOSIT MARKET SHARE
Liberty Bank, then based in Jonesboro, controlled 34.43% of the $2.51 billion bank deposit market in Jonesboro in 2010, according to the FDIC. Centennial’s share has dropped by nearly 10% since then, while Simmons fell from 10.04% to 9.16%, IberiaBank fell from 8.24% to 8.01%, and Regions Bank fell from 8.16% to 6.83%.

During the past three years, however, Centennial’s market share has grown. In 2015, the bank controlled 23.1% of the market, and that grew to 25.21% by 2016. Simmons Bank accounted for 10.37% of the market in 2015, and dropped to 10.18% the next year.

Bank deposit growth remained relatively flat from 2010 to 2015. During that five-year period, it grew from $2.510 billion to $2.527 billion. In the last three years those deposits have ballooned by more than $445 million. An improved economy, stronger jobs market, and commercial growth have led to the recent boom, Carter said. The healthcare sector has experienced major growth in recent years, and has solidified Jonesboro as a regional medical care hub, he said.

NEA Baptist Hospital opened a $400 million hospital four years ago on U.S. 49 in the northeast section of the city. The hospital initially had 180 hospital beds. By 2017, it ballooned to 228 beds and there is room to expand by another 72 beds. When the campus was first built it was one of the largest private capital projects, in terms of dollars spent, in state history. Businesses have been growing around the new hospital.

St. Bernards is on the verge of completing the second phase of a four-phase plan to renovate itsentire campus. The Heartcare Center was expected to be finished by the end of March, Vice President of Affiliated and Senior Services Kevin Hodges said. The $137.5 million project is expected to be completed by the end of 2019, and will increase the building space on the downtown Jonesboro campus by 25% to 1.026 million square feet, he said. More than four years ago, administrators decided to formulate a plan to renovate and streamline services, he said.

TECHNOLOGY, CUSTOMER EXPECTATIONS
Banks and banking needs have significantly changed during the last couple of decades, Centennial Bank Northeast Arkansas Division President Deana Osment told Talk Business & Politics. Regulations are stricter and it’s a more competitive market in Jonesboro, she said. Two generations of customers are accustomed to getting their information from their smartphones.

Technology shifts have allowed customers more immediate access to account information, she said. Staying on top of technology trends whether it’s phone applications or others is crucial. Money changes hands at a much faster rate than it used to, she said.

“Our customers want real time-convenience and we plan to give it to them,” Osment said.

Fewer customers come to the physical bank, meaning brick-and-mortar buildings are not as big a priority as in years past, Carter said. Studying the underlying metrics and analyzing the trend lines is the key to success in an evolving market such as Jonesboro, he added.

The number of state and nationally chartered banks in Arkansas declined during the past seven years, but the number of bank employees has been on the rise. In 2010, the state had 130 banks, but as of 2017 the number had dropped to 97 banks. Most of that bank loss occurred from 2010-15 when the state lost 26 banks. In 2010, there were 18,069 bank employees, according to FDIC. That number jumped to 21,380 by 2017.

Banking in Northeast Arkansas isn’t a lot different from banking in other parts of the state, Carter said. Agriculture is the dominant economic sector in the region, primarily through row-crop production. He said the differences are not between markets, but are urban versus rural. Urban-area loans are more centered on commercial development while rural lending is more driven by housing, vehicles and personal loans.

But other parts of the state are just as agriculture-dependent, Osment said, noting that one example is the livestock and poultry sector in Northwest Arkansas.

Jonesboro has experienced bank growth during the past several years, but it still trails other major metro areas in the state. The largest bank deposit market metro in the state is Little Rock. The capital city region had $19.925 billion in deposits among its 35 banks in 2017. Northwest Arkansas’ 40 banks had deposits totaling $10.871 billion, while Fort Smith’s 21 banks had $4.636 billion in deposits.

Carter is optimistic about continued growth in the regional banking sector. The economy will always run through cycles, but the area’s diverse economic base helps to insulate it when the national economy suffers. That base includes food processors, Arkansas State University, the healthcare sector, the growing retail sector and others. Mark Young, CEO of the Jonesboro Regional Chamber of Commerce, often says while no economy is recession-proof, Jonesboro’s economy is recession-resistant.

OTHER REGIONAL GROWTH METRICS
Jonesboro’s banking growth was mirrored in other key economic indicators. Craighead County and Jonesboro set new records in sales tax collections in 2017. Craighead County collected $19.989 million in sales and use tax, a 3.1% ($616,288) increase from 2016, according to the Craighead County Treasurer’s Office.

Jonesboro collected $17.83 million in sales and use taxes, a 2.91% increase ($504,075) from the previous year. The county and city also set collections records in 2016. During the last five years Jonesboro’s collections have risen by 16%, and have steadily grown each year. Craighead County had an almost identical growth pattern.

In 2016, the city collected a record $17.326 million in sales tax receipts, a 4.43% increase from 2015. Since 2012, the city’s sales tax revenue has grown by 15.3%.

Craighead County collected $19.372 million in county sales tax last year, a 5.2% increase from 2015. The total is also a high mark in the county. Since 2010, the county’s sales tax receipts have grown from $15.599 million, a 24% spike.

The city’s building permit numbers took a dive in 2017, but those figures had been steadily growing each year for almost a decade. The city issued $147 million in commercial and residential permits last year, a 21% drop from the previous year. It’s a 2.6% drop from 2015. Two proposed convention centers projects were delayed last year, and had they proceeded, city officials predicted the city would have issued up to $200 million in building permits.

Jonesboro issued approximately $186 million worth of residential and commercial permits in 2016, a 23% increase from the more than $151 million in permits in 2015. At least $66,119,810 worth of single-family home construction was permitted last year, a 43.4% increase from 2015. Commercial sales topped $59 million, a more than 40% increase from the previous year.

Craighead County tax revenue totaled $20.635 million in 2017, up 27.3% in the seven-year period compared to $16.211 million in 2010. Poinsett County tax revenue was $3.04 million in 2017, up 10.4% compared to the $2.75 million in 2010.

The region’s employed stood at an estimated 60,981 in December 2017, down from a peak of 63,794 in July 2017, but ahead of the 2016 annual average of 60,217. The annual monthly average for employment is up 11.5% between 2016 and the average of 53,985 in 2010, according to to U.S. Bureau of Labor Statistics figures.