‘New’ Banks Back off Northwest Branch Expansion

(To see a list of the largest public banks in Arkansas, click here. For the largest private banks, click here.)

The Northwest Arkansas banking industry, like residential and commercial real estate, is overbuilt.

“I’d say that’s pretty obvious what’s going on,” said Liberty Bank of Arkansas northwest division president Howard Hamilton.

Liberty, chartered in Jonesboro, entered the area banking market when it acquired Arkansas State Bank and its three branches in Siloam Springs in 2005.

Since then, Liberty has added five branches for 10 total, but has put on hold plans for a new, 24,000-SF headquarters at the corner of Joyce Boulevard and Vantage Drive in Fayetteville.

Liberty already has city approval to build it, but along with a couple other potential locations in Benton County, the bank won’t be investing in new brick-and-mortar infrastructure this year.

“There really isn’t much branch expansion going on,” Hamilton said. “It’s just indicative of the market. The banking industry is as healthy as our customers are, and the whole market is having a pause.”

Of all the eight banks that entered the market since 2004 a less-is-more approach benefited Signature Bank of Arkansas. It entered the market with $41.2 million in capital at its first branch and has grown its share of deposits in Washington and Benton counties to $297.1 million, or 3.51 percent of the two-county total as of June 2007.

Liberty’s deposits have grown only $7.5 million in that span, to $206.9 million, around 3.7 percent of the market.

“We’re very pleased with the branches we have,” Hamilton said. “We always have high expectations for growth and market penetration. Whether we have met those goals, I would say we could always have done better.”

Bank of the Ozarks, a publicly traded bank based in Little Rock, brought eight branches to the two counties from 2005-2007, achieving $104.3 million in deposits, or 1.23 percent of the market. It now has 10 offices and has pushed back plans to open more until “a few years from now,” said spokeswoman Susan Blair.

“Overall we’ve been pleased with the progress for our offices in the market,” Blair said. “A couple things have impacted us, namely the proliferation of branching that began at the same time of our expansion.

“There’s been a flattening of the yield curve, a squeeze on interest margins and a squeeze from the economic slowdown. It’s had an effect on how fast we can achieve profitability. But those are short term challenges and we’re in it for the long, long term.”

Blair said the proliferation of competition isn’t just an area phenomenon, and BOZ is encountering similar situations in Conway, Cabot, Marshall and Clinton.

Blair noted that in the 20 Arkansas counties where BOZ has operations, there are 81 institutions controlling $28.5 billion in deposits.

In Dallas, where BOZ has added six branches, the 12-county metro area has 186 banks with $174 billion in deposits. Compared to Arkansas, that’s roughly five times the deposits but with only a little more than twice the number of banks.

Little Rock-based Metropolitan, which said it would spend $30 million on its 12 branches, had a total of $70.2 million in deposits at the nine branches open as of last June 30, just a 0.83 percent share.

Compare that to startup Parkway Bank, which entered the market in 2005 with $39.1 million at its first branch. The bank, which moved to the market from Portland, Ark., and sacked its top brass last year because of its lackluster performance, has $71.9 million in deposits at three branches.