A recent Federal Reserve report indicates that half of the counties in the United states lost bank branches between 2012 and 2017, a trend that resulted from bank mergers and consolidations.
The Fed indicated the most deeply affected banks are in rural counties that tend to be poorer, composed of residents with less education and with a greater proportion of African Americans.
With Arkansas being largely a rural state, the trend towards fewer branch banks in low population areas is a concern. But mergers aren’t necessarily a bad thing.
“Bank mergers and acquisitions allow for the introduction of new technologies, offer a broader array of services, increase capital for loans and serve different markets,” says Arkansas Bankers Association President/CEO Lorrie Trogden. “As part of the merger process, regulators monitor a bank’s performance under the Community Reinvestment Act to ensure that banks serve all parts of the community.”
Trogden says banks do much more than just take deposits and cash checks.
“Arkansas banks are the cornerstone of their communities, providing financial support, guidance and expertise to local government, economic development, education and other civic entities,” she says. “While the financial services industry in Arkansas continues to experience change through mergers and acquisitions, Arkansas banks continue to successfully meet the needs of their customers across the state.”
The June 2017-June 2019 State Bank Department Annual Report states that although two counties lost bank headquarters (headquarters relocation and a consolidation), there were 52 new branches approved by the Arkansas State Bank Department. This includes branches in small cities such as Dumas, Gurdon and Hector.
“In addition, assets for state-chartered banks headquartered in Arkansas have continued to grow year over year,” Trogden says. “Assets for state-chartered banks in Arkansas have expanded to $105.4 billion and as of September 2019, the FDIC shows nationally-chartered Arkansas banks reporting $6.5 billion in assets. With Arkansas remaining one of the most financially sound states in the country and an affordable and business-friendly state, the financial services industry will continue to thrive, thus safely and soundly serving the citizens of Arkansas.”
Community banks are the single greatest economic developer in rural communities, says Arkansas Bankers Association Chairman Robert Robinson, Community President/Senior Credit Officer for Simmons Bank in El Dorado.
“Community banks do a whole lot more than most people think,” Robinson says. “We provide loans to small-business men and women entrepreneurs. We typically are the lender of choice on home loans. To see banks disappearing in rural communities is a concern. We are definitely seeing it in Arkansas, but probably not to the degree that surrounding states are experiencing.”
While internet banking has become popular, often older people, particularly in rural areas, like to have one-on-one interactions with their bankers.
“Some people don’t trust the internet,” Robinson says. “They like to look at someone across a desk. It is a generational thing. I think that is slowly changing, but changing more slowly in rural markets.”
Robinson says banks shouldn’t be faulted for closing branches; it is an economic decision that has nothing to do with being insensitive. Banks need to make a profit to meet the obligation of providing a fair return to their shareholders. Robinson says banks are going to put their resources in areas with greater growth opportunities, which are usually metropolitan areas.