Banks Battle for Deposits

Regional Bank Market Share
Click here for a pie chart detailing market share in county areas. Click here for the list of bank market share in the six-county area. And click here for the top five counties in the region by deposits. (Lists and charts require Adobe Acrobat viewer. Click here for a free copy.)

A collective yawn and “ho-hum” could be heard throughout Northwest Arkansas in late October when the Federal Deposit Insurance Corp. released its deposit market share data.

Arvest Bank of Bentonville is still No. 1, and everybody knows it. In fact, everybody knew it a year before the data came out, and barring a major catastrophe, it will probably hold true next October.

Still, there are some interesting trends in the data: regional growth eclipsed the state’s deposit growth, ANB Financial N.A. of Rogers almost doubled its deposits from year to year, and the new-to-the-market banks chipped away at long-established banks’ share in the market.

Deposits in Benton and Washington counties grew by 16.6 percent overall from $5.17 billion to $6.03 billion from June 30, 2004, to June 30, 2005. Deposits were up by 11.7 percent from $8.22 billion to $9.18 billion in the six-county region that includes the Arkansas River Valley with Northwest Arkansas. Both demographics outpaced the statewide deposit growth rate of just under 7 percent.

That’s a 76.5 percent increase for both the two-county area and the larger six-county region since June 30, 1995.

Market share data from the Federal Deposit Insurance Corp. became available in late October, and the Northwest Arkansas Business Journal took a look at how some of the area’s banks fared.

Data for the Fayetteville-Springdale-Rogers metropolitan statistical area was intentionally excluded, because it includes McDonald County, Mo. Instead, data was gleaned from each county in the area.

The Business Journal defines the “Northwest Arkansas market” as being divided into two geographical subsets of the state: Benton and Washington counties combined; and the six-county area, which also includes Carroll, Crawford, Madison and Sebastian counties. A complete bank-by-bank breakdown for the six-county region is available via the links above.

According to the FDIC, there were 24 unique banking institutions doing business in Benton and Washington counties as of June 30, up from 19 just a year before. The six-county region grew by the same number, up to 39 banks this year from 34 in 2004.

Those numbers do not include Metropolitan National Bank of Little Rock, which has since opened for banking business in the two-county area; Priority Bank of Ozark, which is slated to open for deposits in Fayetteville before Dec. 1; or BancorpSouth Bank, which has offices in the Arkansas River Valley but plans to open in Benton and Washington counties at some point in the not-so-distant future.

In 2003, there were 21 banks in the two-county area and 37 in the six-county region.

The number of bank offices increased by 10 in both demographics from 149 to 159 in the two-county area, and from 258 to 268 in the six-county region.

Second Best

Dan Dykema sat in his Rogers office on a blustery November morning. Behind him, outside his westward facing window, workers on a flatbed truck unloaded bundles of 10-foot drywall. Dykema said it was going to the finish-out of about 3,000 SF of space in his bank holding company’s year-old building — just some of the space he had built for future expansion.

Dykema, chairman and CEO of ANB Financial N.A., had the bank’s headquarters, operations and training building erected on the west side of Interstate 540 near the Pleasant Crossing exit. Barbed wire strung on wooden posts separates farmland from the asphalt parking lot. He said the spot was picked because it’s centrally located and, for the time being, has easy on-off access from I-540.

ANB’s deposits increased 49 percent year-over-year. In Benton County alone, the bank spiked deposits by 65 percent from $271 million to $450 million. Dykema shrugs it off.

“They’re broker deposits,” he said. “It’s not ‘in-market’ share.”

He said he prefers to fund some of ANB’s loan demand through third-party deposits that the bank can get on the open market rather than by running certificate of deposit specials. The perception is that that is an expensive way to increase deposits, but “it’s no more expensive,” he said.

John Lewis, founder and former president and CEO of The Bank of Fayetteville N.A., said funding loans through broker deposits can be a good way to make some money — if one knows what they’re doing and they do it at the right times.

If return on assets is an indicator, then Dykema would know. ANB has topped the Business Journal’s list of private banks ranked by ROA for the last two years, coming in with “S” corporation adjusted ROA of 1.82 percent for year-end Dec. 31, 2004.

“I wish they were all non-interest bearing checking accounts, but they’re not,” Dykema said.

Still the bank managed to hang onto the No. 3 spot in the two-county area, and the No. 5 spot in the six-county region with only 11 offices, and none outside the two-county area, except for a loan production office in Utah. Arvest has 45 and 65 offices respectively.

Wins and Losses

Arvest’s stranglehold on the market slipped slightly from 43 percent in 2004 to 41.3 percent in 2005 for the two-county area, and a smidge from 31.8 percent to 31.4 percent in the six-county region, though deposits grew by 12 percent and 10 percent respectively.

Its losses supposedly are spurred by the entry of new and new-to-the-market banks.

Pinnacle Bank of Rogers, the first of the new banks to open, posted a 1.89 percent market share in Benton County, and no deposits in Washington County.

At the bottom of the pile, Little Rock-based Bank of the Ozarks, which opened offices in the two-county area late this spring, managed to beat out First State Bank of Northwest Arkansas with $19.3 million in deposits. BOZ ranks No. 23 out of 24 in the combined two-county area.

In Washington County alone, newbies Signature Bank of Arkansas (No. 12), Legacy National Bank (No. 13), Liberty Bank of Arkansas (No. 14) and Bank of the Ozarks (No. 15) beat out longtime market players Regions Bank, First State Bank and First Western Bank and Trust Co.

Only one bank in the two-county area’s combined top 10 made significant movement in its deposit market share. Liberty Bank of Arkansas moved from the No. 11 spot in the two-county area for 2004 to No. 8 in 2005. In 2004 the bank was considered Siloam Springs-chartered Arkansas State Bank and had only five offices. Since Liberty Bancshares Inc. of Jonesboro acquired ASB, however, the group has become more aggressive, opening two new offices with plans to open at least four more within the next two years.

Howard Hamilton, regional president for Liberty, said the bank runs competitive CD specials to help goose deposits. But deposit market share isn’t the end-all, be-all for Liberty.

“It’s just one factor,” Hamilton said. “We’re really looking at growing our business [but] market share will take care of itself if we take care of our customers.”

Regions Grows Slower than Statewide Market

“Regions Bank of Birmingham, Ala., remains the largest banking operation in Arkansas, but its share of the deposit market continues to slide. It is down to 10.9 percent, a 3.71 percent decrease in a year,” according to an article that appeared in Arkansas Business on Oct. 24.

“Regions Financial Corp.’s deposits in Arkansas grew by 13 percent in one year, solidifying the Birmingham, Ala., bank as the largest in Arkansas,” the Arkansas Democrat-Gazette reported on Oct. 30.

Neither publication has published a correction. What’s a reader to believe?

Decide for yourself.

The Federal Deposit Insurance Corp. takes a snapshot of bank deposits on June 30 of each year and releases that data in the fall. On June 30, 2004, Regions reported deposits in Arkansas of just over $4 billion, which represented 10.34 percent of statewide deposits of almost $38.7 billion.

One day later — months before the FDIC released its 2004 Summary of Deposits — Regions acquired Union Planters National Bank of Memphis, which had just under $380 million in deposits, or 0.98 percent of the statewide market. Regions’ combined deposits were, therefore, $4.38 billion, and its market share was 11.32 percent.

During the next year, the state’s deposit market grew to $41.35 billion, an increase of 6.91 percent. Banks whose deposits grew faster than statewide deposits gained market share; banks whose deposits failed to keep up with that pace lost market share.

On June 30, 2005, Regions’ deposits were $4.5 billion — 12.7 percent higher than they had been on June 30, 2004, but only 2.93 percent higher than they were when Union Planters’ Arkansas deposits were acquired the next day.

Bottom line: Regions added $128 million in deposits after the acquisition of Union Planters, but that wasn’t enough to keep pace with the rapid growth of the statewide market. Its market share, which was 11.32 percent on the day of the UP acquisition, was down to 10.9 percent on June 30 — a 3.71 percent decline.

— Gwen Moritz