Arvest Dominates Region?s Market Share

Sam Walton, the late founder of Wal-Mart Stores Inc., had an idea that reshaped the retail industry worldwide. Jim Walton, the youngest of Sam’s three sons, is using his idea to reshape the region’s banking business.

Jim Walton is chairman of Arvest Bank Group Inc., which has become as intimidating to other bank systems in the area as Wal-Mart is to Kmart.

Founded in 1975, Arvest has slowly gobbled up several successful banks in Arkansas, Oklahoma and Missouri and made them even more successful.

Arvest banks own 42.5 percent of the market share in Northwest Arkansas’ four largest towns of Fayetteville, Springdale, Rogers and Bentonville. It owns a whopping 51.6 percent of the share among Benton County banks and 32.2 percent of the Washington County market share. Bank of Bentonville leads the way with more than a 13 percent share, or $517.3 million in deposits among its 11 sites. Arvest Rogers was second at $391.9.

McIlroy Bank of Fayetteville is the oldest bank — 130 years — west of the Mississippi River and has enjoyed a long relationship with many generations of families in Washington County. But Hayden McIlroy sold the bank in 1986 to Arvest, and the future has never been brighter.

“We just had our best earnings year and return on equity in the history of the bank,” said Gary Head, president of McIlroy. McIlroy was third in Northwest Arkansas with $339.7 million in deposits.

The Arvest holding company alone enjoyed a 13 percent increase in gross revenue from 1999 to 2000 with $230.6 million.

Arvest is planning to consolidate all of its banks under one charter by the end of 2002, a move welcomed by the individual banks interviewed by the Northwest Arkansas Business Journal.

“If Jim Walton didn’t believe one thousand percent this was a better way to do it, we wouldn’t be doing it,” Head said. “He’s not just doing it to be bigger. Why in the world would Jim Walton be doing it just to be bigger? He’s Jim Walton. It’s [being done] to be better.

“So many people live double lives up and down [Arkansas] Highway 71. Look at how many people work at Tyson, J.B. Hunt, Wal-Mart, and they can live all over Northwest Arkansas. The whole region of Northwest Arkansas is so intertwined that the timing couldn’t be better. How great is it to be an Arkansas company built by Arkansas people instead of being based in Charlotte, N.C., or Birmingham, Ala. I’m really proud of that.”

Bank of America is headquartered in Charlotte; Region’s Bank is headquartered in Birmingham.

Arvest is also beginning to take control of some Oklahoma markets. There are 25 towns in Arkansas with Arvest banks, another 20 in Oklahoma and seven in Missouri.

Greg Reed, president of Farmers & Merchants Bank in Prairie Grove, was at the bank when it was a smaller, family owned bank in the 1980s.

“With the backing Arvest is able to provide, there are so many more services, types of loans and investments we just wouldn’t be able to do if we were still a small bank. But [Arvest] is keeping local management under local control with a local board and local decision-making. That’s not the most economical way if you’re a bean counter, but it’s a big benefit to our market. The people familiar with our market are the ones making the decisions out here.”

Head said Walton wants to keep the consolidation “oblivious” to each bank’s community.

“Bentonville will not tell Fayetteville how to make its loans, and Fayetteville will not be telling Bentonville how to make its loans,” Head said.

Head is among a number of former bankers at McIlroy who worked with the now-defunct Worthen Bank chain.

“We learned what didn’t work,” Head said.

All of the banks in Arvest’s group will become known as Arvest Bank once the consolidation is complete.

“Nobody working here is named McIlroy anyway,” Head said. “I like to think the reason people bank here is we have the best people and the best service. Some people will probably call this McIlroy Bank the rest of their lives. I don’t care what they call it as long as I get their business.”