Area Banks Struggle to Meet State Average

The Northwest Arkansas Business Journal’s list of banks gives some indication of just how competitive banking is in the region. Just a handful of institutions fared as well or better than the state average in their returns on assets and equity for 1998.

The Federal Deposit Insurance Corp. reports that commercial banks in Arkansas reported an average return on assets of 1.22 percent. For banks with assets of less than $100 million, the average return on assets was 1.07 while larger banks, those with assets of more than $100 million, averaged 1.28 percent.

Just two institutions from Washington and Benton counties beat those averages. United Bank of Springdale, which has a thrift charter, reported an ROA of 1.34 while Farmers & Merchants Bank of Prairie Grove had 1.30 return on assets.

The top two banks, based on ROE, were both Fort Smith institutions: First National Bank and City National Bank reported ROAs of 1.590 and 1.360, respectively. First National Bank of Huntsville, with an ROA of 1.350, placed third.

Statewide, return on assets has been declining in recent years. The average for all commercial banks was 1.28 in 1997. Smaller banks, those with less than $100 million in assets, averaged 1.20 ROA in 1997 while larger institutions averaged 1.31.

In 1996, average ROA for all Arkansas commercial banks was 1.30. Smaller banks averaged 1.25 while larger banks reported average ROA of 1.31 in 1996.

At the same time, the number of reporting institutions in Arkansas fell as did the number of banking employees, both undoubtedly the result of mergers.

By year’s end in 1998, there were 202 reporting institutions in Arkansas, compared with 1997 when there were 226 institutions. The state had 234 institutions in December 1996.

The FDIC counted 10,279 banking employees in Arkansas in 1998, compared with 12,242 in 1997 and 13,182 in 1996.

While branching activity remains strong in the region, there have also been mergers. Federal Savings Bank merged with Farmers and Merchants Bank, which was First Commercial Corp.’s lone holding in Northwest Arkansas. But First Commercial was subsequently purchased by Regions Financial Corp.

Bank of Elkins became part of Chambers Bancshares and Community Bank is currently in the process of merging with Chambers.

Simmons First Bank of Northwest Arkansas closed a deal to acquire Bank of Lincoln, an acquisition that was to be completed May 1.

The Journal’s list includes information on 29 financial institutions, including those headquartered in Fort Smith as well as in Madison and Carroll counties.

But several banks with operations in the two-county region of Northwest Arkansas aren’t included on the list. NationsBank and Regions Financial Corp., for example, isn’t included because neither company reports its numbers by state.

Additionally, institutions with headquarters in other regions of the state – First Financial Bank, for example – aren’t included because their Northwest Arkansas operations are operated as branches. Their filings don’t separate results by region.

Impressive asset growth

The region’s newest banks reported the biggest gains in deposits since 1997. Community Bank of Fayetteville, founded in 1995, reported an increase of more than 109 percent in growing its assets to nearly $65.7 million.

Northwest National Bank of Gravette, established in 1996, rerported an increase of nearly 82 percent. It reported $21.6 million in assets.

Bank of Rogers, founded in 1995, and Arkansas National Bank, established in 1994, both rerported gains of more than 54 percent in their deposits.