Banks fewer than in 2002

Decatur State Bank contract still pending

Wednesday, July 11, 2012

— The number of banks in Arkansas has shrunk by 31 percent in the past 10 years, but that doesn’t mean banking in the state is declining.

There were 126 banks based in Arkansas as of March 31, down from 182 in the first quarter of 2002. Nationally, there are 7,300 banks, down 23 percent in 10 years.

But bank assets in Arkansas are up 97 percent and deposits have increased 88 percent over the period to more than $60 billion in assets and more than $49 billion in deposits.

The decrease in banks has several causes, said Candace Franks, commissioner of the Arkansas State Bank Department.

The leading managers of some banks have decided to retire and get out of banking, so they have sold their banks, Franks said.

Garland Binns, a banking attorney with Dover Dixon Horne in Little Rock, noted that some banks in financial trouble have been sold.

“This morning I was at one of the smaller banks in Arkansas that signed an agreement to be acquired by a larger banking organization in Arkansas,” Binns said late last month. “We’ll see that trend continue.”

Decatur State Bank, which has $146 million in deposits and haslost almost $15 million in the past five quarters, has an application pending to be acquired by Mathias Bancshares of Springdale, Binns said.

Other banks have simply merged their subsidiary banks into one charter to be more efficient. Home Banc-Shares of Conway collapsed subsidiary banks in Cabot, Conway, Little Rock, North Little Rock and Mountain View into one institution, Centennial Bank, in 2008.

And two banks have failed - ANB Financial in Bentonville in 2008 and First Southern Bank in Batesville in 2010.

The economy is one reason banks’ deposits have grown so much, Franks said.

“Customers are looking for safe places like local community banks to put their money instead of other areas where it may not be as safe,” Franks said.

The Federal Deposit Insurance Corp. protects each bank account up to $250,000, guaranteeing that a customer won’t lose money up to that amount even if the bank fails.

Even though almost 60 banks have disappeared in 10 years, more than 230 branches have been added and the number of employees has grown by almost 5,500.

“It just takes more people to run a bank now with the compliance issues banks face,” Binns said.

Most of the significant increase in branches in the past 10 years occurred early in that period, and the number of branches added in Arkansas in recent years has slowed dramatically. Last year, there were only 10 applications for branches filed with the Bank Department and only 15 in each ofthe two previous years, according to the Bank Department’s recent newsletter.

“We’ve seen several branch locations close in the last two or three years,” Franks said.

There was a net loss of 22 branches in Arkansas from 2009 to 2011, the department’s newsletter said. One reason is the way customers transact their banking business.

A recent report indicates that the percentage of bank customers who prefer self-service methods for their bank transactions - such as online or mobile banking - has increased from 49 percent last year to 53 percent this year, the newsletter reported.

Since 1994, Bank of the Ozarks has grown by building new branches, said Susan Blair, a spokesman for the bank.

Only in the past two years, because of the opportunities available through buying failed banks, has the Little Rock based bank acquired other banks. Bank of the Ozarks has bought seven failed banks in the past two years, all of them out of state.

“However, we have continued to add [newly built] branches every year,” Blair said.

Bank of the Ozarks will open at least four offices this year - a branch in Southlake, Texas, and in The Colony, Texas, and loan production offices in Austin, Texas, and Atlanta.

“We believe brick-and mortar branches are still an important delivery channel for our customers,” Blair said.

News, Pages 3 on 07/11/2012