Volume 6, Issue 3
Page 3
State Bank Department
50
for all commercial banks in
the United States rose from
40
41
1.19 percent to 1.28 per-
cent, or by 7.56 percent.
banks
Arkansas commercial
of
30
banks were more profitable
26
than commercial banks in
20 Texas and nationwide from
1994 through 1998, re-
N
u
m
ber
10
12 cording an average return
on assets of 1.26 percent.
0
However, from 2000
Yes No Uncertain
through 2004 – a period
during which large out-of-
Would your bank consider establishing
state banks were fortifying a
a de novo branch in another state?
sizable presence in Arkan-
sas – commercial banks
with main offices in the
Source: Survey of Arkansas state-chartered banks dated July 16, 2009
state posted an average re-
turn on assets of 1.09 per-
Hot
tions with main offices in esting – if inconclusive –
cent.
Topic
Arkansas operated 146 findings.
The 17-basis point drop
branch offices in eight Texas is one of only
for Arkansas commercial
two states that “opted
banks represents a decrease
Continued from Page 2
other states: Alabama;
Florida; Kansas; Missis- out” of the interstate
of 15.60 percent.
merger transaction with an sippi; Missouri; Okla-
branching provisions of
Other findings of the
Arkansas bank in which homa; Tennessee; and
Riegle-Neal, thus prohib-
Bank Department survey
the out-of-state bank is the Texas.
iting banks from branch-
include:
“resulting bank.” In such The banks surveyed by
ing into and out of the
 Twelve banks re-
cases, the charter of the the Bank Department
state. Subsequently, the
sponded that they would
Arkansas bank must be at were not asked why they
state allowed de novo
consider establishing a
least five years old. favor or oppose de novo
interstate branching on a
branch in another state if de
A state bank in Arkansas interstate branching. Pre-
reciprocal basis, effective
novo interstate branching is
is permitted to operate a sumably, however, banks
September 1, 1999.
permitted nationally by fed-
branch in another state that oppose unrestricted
In the five full calendar
eral law. Forty-one banks
only pursuant to an inter- interstate branching do so
years preceding 1999
would not consider estab-
state merger transaction because of the potential
(1994-1998), average re-
lishing a branch in another
with an out-of-state bank for heightened competi-
turn on assets for com-
state, while 26 banks are
in which the state bank is tion from financial institu-
mercial banks with main
uncertain.
the “resulting bank.” tions entering the Arkan-
offices in Texas was 1.16
 Four banks that favor
The Obama administra- sas market.
percent. In the five full
de novo interstate branch-
tion proposal would elimi- The isolated effect on
calendar years following
ing are uncertain if they
nate the merger require- bank profitability of low-
1999 (2000-2004), average
would consider establishing
ment, which typically is ered barriers to market
return on assets for this
a branch in another state if
more costly and cumber- entry is difficult to esti-
group of banks had in-
permitted by federal law.
some for a bank wanting mate with precision.
creased to 1.21 percent.  Three banks that op-
to establish a single branch There are too many other
This 5-basis point move pose de novo interstate
office in another state. factors in motion. Ac-
represents a percentage branching stated they would
As of September 21, knowledging this, some
increase of 4.31 percent. consider establishing a
seven of the 135 FDIC- simple number
For the same periods, branch in another state if
insured financial institu- “crunching” yields inter-
average return on assets allowed by federal law.
September 30, 2009
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