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Blazing the new banking frontier.

Aggressive Financial Institutions Follow Growth in Ozarks

IF SUCH A THING AS AN ARkansas banking compass existed, it would surely point to magnetic northwest.

In the financial world of our state, the northwest corner is this era's great frontier, well-charted but not yet fully exploited. What, one may ask, is so different about northwest Arkansas banks?

The first difference is that the rest of the state is not experiencing a population explosion. So far, the region's bank deposit growth has kept pace with the migration, escalating 51 percent from TABULAR DATA OMITTED 1988 to 1992.

The second difference is a product of the first: The demand for loans is tremendous.

Arkansas banks have a collective loan-to-deposit ratio of 0.57, but, in glaring contrast, the banks of Benton and Washington counties have an aggressive ratio of 0.68.

Northwest Arkansas banks have become the most daring in the state as they battle it out for the privilege to make personal, home and business loans to thousands of incoming residents.

Of the larger banks in the region, the most aggressive lenders are the Bank of Bentonville and McIlroy Bank & Trust in Fayetteville, both belonging to the Walton-owned Arvest Bank Group Inc. The two banks boast loan-to-deposit ratios of 0.77 and 0.86, respectively.

It's a theme with Arvest, the most accomplished marketeer of the region. First National Bank & Trust Co. of Rogers and First National Bank of Siloam Springs both come in with a ratio of 0.71, and Springdale Bank & Trust makes them all look scrawny, actually loaning more money than it has in deposits for a 1.04 ratio.

The only exception in the Arvest family is The Farmers and Merchants Bank of Prairie Grove, with only a 0.56 loan-to-deposit ratio.

Together, the Arvest banks have $1.05 billion in deposits, gobbling up 46 percent of the total market, excluding savings and loans.

The Worthen Factor

The Bank of Bentonville used to be the largest single bank in the region, but that was before the big boys came to town.

Worthen Banking Corp., which recently became the largest holding company in the state after its merger with The Union of Arkansas Corp., now holds the biggest bank in northwest Arkansas, as well.

About 18 months ago, Worthen merged its Worthen National Bank in Springdale with First National Bank of Fayetteville. The result was Worthen National Bank of Northwest Arkansas and $356 million in deposits, compared with the $312 million of the Bank of Bentonville.

It's only getting bigger.

Worthen of Northwest Arkansas recently completed the purchase of FirstBank in Bentonville, which will add its $79.3 million to the pot on Oct. 29. A few days later, two branches of the Little Rock bank in Rogers and Bella Vista will be folded into the northwest Arkansas operations, chipping in another $17.5 million and bringing northwest deposits to nearly $453 million.

So far, Worthen of Northwest Arkansas has been relatively conservative in its loaning, with a loan-to-deposit ratio of 0.65.

Don Walker, president of the Bank of Bentonville and formerly president in Siloam Springs, welcomes the competition from Worthen but is politely skeptical of its motives.

"Anytime you eliminate a small local organization ... there will be pros and cons," he says. "The products and services may be greater, but the time it takes for response may be longer. We think we have a better feel for what our community wants and needs."

Nevertheless, Worthen's move is seen as a good sign.

"I think the most significant thing here is the movement of the large holding companies here," says Dick Trammel, senior vice president and board member of First National Bank and Trust Co. of Rogers. "I think they'll make better bankers out of all of us."

James Stobaugh, chief executive officer of Worthen of Northwest Arkansas, says his bank has made a special effort to become connected to the region, even winning the Business in the Arts award given away last year by the Fayetteville Chamber of Commerce.

Stobaugh also stresses the bank's local autonomy, but that could change. Dr. John Dominick, the Arkansas Bankers Association chair of banking at the University of Arkansas at Fayetteville, notes that in 1999 state law will allow banks to create branches freely anywhere in the state.

"You are going to see some of them merge the smaller banks with the larger banks in the holding company," he says. "It's a lot cheaper to run a branch than it is a separate bank."

Other Banks Try Their Luck

Worthen isn't the only large "flatland" holding company to dip its toes into the rambling waters of the northwest Arkansas banking market.

Simmons First National Bank of Pine Bluff has established branch banks in Rogers and Bella Vista and captured modest deposits of $21.2 million in the market. Simmons executives have admitted an interest in acquiring the "right bank" in northwest Arkansas and say they will be very picky about their eventual choice.

But Frank Anderson, vice president and senior investment analyst at Stephens Inc., says Simmons might pass over the pricey northwest Arkansas market for a while in favor of a bank in the northeast corner of the state. Simmons already has a branch in Jonesboro.

"Basically, what they are after is deposits," says Anderson, noting that the majority of Simmons' loan portfolio is in the credit card business. "They don't have to have a northwest Arkansas bank to do credit cards."

First Commercial Corp. of Little Rock also is in the game, owning Farmers & Merchants Bank of Rogers with its $83.5 million in deposits. In its present acquisition mode, First Commercial is bound to be seeking a greater presence in the market, making the bidding war for the best-performing independent northwest banks all the more interesting.

"When you are trying to be the largest bank in the state, as Worthen is and as First Commercial is, a lot of times you'd like to acquire an institution to keep your competition from getting it," Anderson says.

Independents Do Well

Many of the independent banks also are faring quite well.

The leader among them is First National Bank of Springdale, the fourth-largest bank in the region with $253.3 million in deposits and a conservative loan-to-deposit ratio of 55 percent.

The suitors have been many, but they have all been jilted, says Gene Thompson, the bank's president and CEO.

"We've had one or two direct offers recently, and six feelers ... but we have chosen to remain independent," he says, adding that banks in Tulsa, Okla., and Kansas City, Mo., are among those looking to get a piece of the action in the region.

The next-largest independent, Arkansas State Bank of Siloam Springs, has grown quickly to attain its $110 million in deposits, with a very impressive performance along the way. In 1992, the bank led the region in return on assets, at 2.21 percent, and was fifth in return on equity at 19.17 percent.

The Bank of Fayetteville has reached $102.3 million in deposits after only six years in existence, and it had the region's highest return on equity last year at 22.92 percent.

"We're just a traditional bank where people come in and make deposits," bank President John Lewis says. "I don't really care about growth. I care about quality of service. We've built a drive-up branch in two train cars down on Dickson Street. Our customers seem to like that."

To each his niche.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Washington and Benton counties, Arkansas banks
Author:Haman, John
Publication:Arkansas Business
Article Type:Industry Overview
Date:Oct 11, 1993
Words:1250
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