Editor’s note: This article is part of a special magazine celebrating 40 years of Arkansas Business. The full magazine is available here.
Susannah Marshall, Arkansas bank commissioner, believes banking consolidation will still be on the scene in the future but not to the same historic extent.
Marshall notes that there were 185 Arkansas state-chartered banks with total assets of slightly more than $7 billion back on June 30, 1984. Almost 40 years later, Arkansas is now home to 73 state-chartered banks that boast combined total assets of more than $158 billion as of Sept. 30, 2023.
“Although I do anticipate that the banking industry will continue to see consolidation across the sector at the national level, I believe it will be limited locally,” she said. “I also anticipate that as is tradition and given the right opportunity, our Arkansas banks will be prepared and ready to engage in acquisitions of other institutions outside of Arkansas.”
Marshall foresees a move toward more aggregation or combination of all financial services.
“With the Arkansas State Bank Department and the Securities Department joining together in the past year under a new leadership structure, we have increased our ability to evaluate and monitor activity in the financial services arena in a more consolidated fashion,” she said. “I believe we will continue to witness the blurring of lines between the bank and non-bank business sectors in the near and longer-term.”
Little Rock bank consultant Randy Dennis said recent bank failures on the national scene are indicative of more dominoes to fall.
“While I see few problems in Arkansas, I believe we will see an uptick in failed banks across the country, both from capital failures and liquidity failures,” said Dennis, president and CEO of DD&F Consulting. “Our Arkansas banks have proven that they are up for the challenge of taking advantage of failed or failing banks.
“Given the totally unexpected megabank failures last year, I am convinced that the Fed’s position on historic rate increases in its fight against inflation has added substantial risk to our bank’s lending and securities portfolios.”
“The higher cost of funding has placed increased pressure on our banks with low- earning weak credits or non-earning assets and has shut off their ability to grow out of their problems by making current market rate loans to offset the lack of earnings.”
Technology will remain an ongoing challenge for banks, credit unions and other financial service companies, Dennis said.
“Clearly, one of the things that keep our bankers up at night is cybersecurity and technology risk,” he said. “We know we are vulnerable to cyberattacks, malware, data breaches and other techno challenges that can compromise our operations, reputation and customer trust.
“On the other side of the coin, we also understand that community banks need to invest in digital innovation and online services to meet customer expectations and compete with larger banks and fintechs.
“Knowing what technology is needed, knowing how to utilize it and weighing the short- and long-run cost of implementation must be carefully considered by our banks, especially those under $3 billion-$5 billion in assets with little room for error.”
Marshall doesn’t see any abatement in the push for technological advancement in products and services within the banking industry.
“This focus on technology will likely surge in the near and longer term as consumers and customers desire and expect to layer technology into all facets of their lives and specifically in their banking and financial relationships,” she said. “With adoption and utilization of advancing technologies, we will need to be more focused than ever on security and protection of customer data all while we are faced with an extreme level of fraud and increasing cyber risks within all business sectors.”
Sign up for Daily E-news
