A major natural gas find in central Arkansas promises to lift the economy of a largely rural area, and community banks are eager to set up shop there.
But a bank with four branches in the area has taken the unusual step of protesting its rivals' branch applications, arguing that right now towns such as Quitman and Heber Springs cannot support more banks. Related Link
He says he will continue to protest applications for branches in markets he believes cannot support them, and says he is even considering suing to shut down branches opened in Quitman and Heber Springs last month.
"There has to be a certain level of healthy competition to provide competitive pricing for the consumer, and nobody at our bank questions that," Mr. Wilson said in an interview. "But at some point, when you get to excessive competition, then the pricing becomes unrealistic and the earnings drop, and that affects all the banks in that area."
Several industry insiders said protests to stop a bank from entering a market were popular in the 1960s and 1970s but have become passe. Advances in market research have taken much of the guesswork out of site selection and given expansion-minded banks ammunition to quiet opponents, they said.
"Protesting [branches] just doesn't occur in banking anymore," said Kenneth Thomas, a Miami-based branching consultant for almost 40 years. "The market makes the decision, not the competitor."
Most banks would not branch into a new market "if it didn't make sense," Mr. Thomas said. "Would they do it to irritate another bank? No, they do it because they believe they can make money."
Cathy Ghiglieri worked as a regulator for 25 years before starting her own bank consulting company in Austin, Ghiglieri & Co. She said regulators typically will not deny a branch application unless there is a law limiting the number of branches that can open in a particular area.
"They generally view banks as sophisticated enough to analyze the market and determine where they want to put branches," she said.
Regulators often view more competition as a good thing for consumers because it leads to better interest rates and product variety, Ms. Ghiglieri said.
Mr. Wilson has opposed branch applications before. In 2005 he lodged a protest to stop the $2.5 billion-asset Bank of the Ozarks in Little Rock from opening a branch in Jacksonville. Regulators approved the application, but Mr. Wilson sued in the Pulaski County Circuit Court and, after a nearly two-year legal battle, Bank of the Ozarks sold its lot to First Arkansas and agreed not to open the branch.
His latest protests, filed in April, sought to block branch applications by the $577 million-asset First State Bank of Conway, Ark., and the $300 million-asset First State Bank of Lonoke, Ark. State regulators approved the applications, however, and June the Conway bank opened its Quitman branch and the Lonoke bank opened its branch in Heber Springs.
Both Quitman and Heber Springs are in Cleburne County, north of Little Rock.
Cleburne County has never been particularly fast-growing, but bankers like Larry Sims, the president and chief operating officer First State Bank in Conway, are betting that the 2004 discovery of the Fayetteville Shale gas field will change that.
A 2006 University of Arkansas study said that drilling in the shale would generate about $356 million of economic activity in Cleburne County between 2005 and 2008.
Quitman, with a population of 741, "is a small town, so you probably wonder why we want to be there," Mr. Sims said. He explained that "hundreds of millions of dollars" are expected to be poured into the area "and we need to be there."
Mr. Sims said that Mr. Wilson tried to block the construction of the branch because he fears competition.
"The main reason he protested was to protect his own interests," Mr. Sims said. "I believe in a free-enterprise system. You've got to be better than the next competitor, and that is the way I think it has to be."
Mr. Wilson pointed to the lack of substantial growth in Quitman as a reason to deny the First State application, and said regulators should have considered growth in that town, not in the entire county, when they made their decision.
Between 2000 and 2006 Quitman's deposits grew 8.7%, to $36.3 million, while its population from 2000 to 2005 grew just 3.8%, according to data from the Federal Deposit Insurance Corp. and the Census Bureau.
"My contention is if the Fayetteville Shale gas field develops as all of us hope it will and more people come into the market to live and work and deposit their money … fine, approve more branches at that time," Mr. Wilson said. "But until it occurs, it is speculation. And I am saying [regulators] should be prudent and conservative and wait until that occurs before you approve additional branches."
Mr. Sims, though, said the market is already being transformed by the discovery of the shale.
"You can barely get a hotel room in that part of Arkansas right now," he said.
In Heber Springs, a resort town, deposits have been growing at a faster pace than in Quitman. Between 2000 and 2005 Heber Springs' population grew 9%, to 7,016, and between 2000 and 2006 its deposits grew 37%, to $331 million.
David Estes, the president and CEO of First State Bank in Lonoke, said he decided to open a branch in Heber Springs because a loan office the bank opened there in January — with six lenders he hired away from Mr. Wilson's bank — had been doing well.
Though Mr. Wilson has a track record of protesting branch applications, he actually supported legislation passed in January that makes it easier for Arkansas-chartered banks to open branches in new markets.
The new law removed a stipulation that a state-chartered bank must prove there is a need in a community before it can branch there and Mr. Wilson supported it in his role as chairman of the Arkansas Bankers Association.
"That legislation was proposed with good intentions … so state banks wouldn't change their charter to national charters and leave the state department with no members," Mr. Wilson said.
Still, that does not mean he particularly liked it. "It was important for me to work with other members of the association to get the legislation passed and maintain a cohesiveness," he said. "That was more important than my personal concerns with the legislation."
