Bonds Build First Security Bank Earnings In Recession

When it comes to boosting the bottom line with income from municipal bonds, First Security Bank of Searcy is king among banks based in Arkansas.

“Everybody is always making a bigger deal of that than I think it is,” said Reynie Rutledge, chairman and CEO of First Security Bank. “We’ve always had municipal bonds, and it’s been that way since 1977.

“As loan demand picks up, we’ll have less money in bond investments. Every bank balances its loans and deposits with investments.”

Rutledge’s aw-shucks insight notwithstanding, no Arkansas lender is as heavily into bond investments as First Security Bank.

The bank collected nearly $88.6 million on tax-exempt securities during 2012. That income figure was nearly double the combined total of seven of the largest Arkansas bank organizations: Bank of the Ozarks of Little Rock, the eight Simmons First banks, Arvest Bank of Fayetteville, Centennial Bank of Conway, Summit Bank of Arkadelphia and Liberty Bank of Arkansas in Jonesboro.

Banking on Bonds

2012 Bond Income*
First Security Bank $88,590
Bank of the Ozarks $15,807
Simmons First** $7,400
Arvest Bank $6,714
Centennial Bank $6,154
Summit Bank $5,810.00
Liberty Bank $2,797.00

*Income on tax-exempt securities issued by states and political subdivisions in the United States.
**Total of eight Simmons First banks in Arkansas. Dollars in thousands.

During 2008, income from tax-exempt securities totaled $11.2 million at First Security. As the recession hit loan demand, the bank moved heavier into municipal bonds and the like as a way to augment income.

“Our people work smart and do a good job,” Rutledge said. “As the economy has slowed, our loan growth has slowed down.”