Following progressive growth in the past two decades, the Springfield metropolitan statistical area banking industry has struggled to regain its branch-count footing following the Great Recession.
Losing six branch locations, 2010 marked the first branch-count decline in 20 years for the MSA. Reaching a 2009 peak of 199 branches in the five-county area – comprising Christian, Dallas, Greene, Polk and Webster counties – the MSA hovered below 196 branches for the next five years. When the Federal Deposit Insurance Corp. took its annual snapshot of bank deposits as of June 30, the number of active bank branches sat at 192 spread over 40 institutions, up from 35 institutions and 115 branches two decades ago.
Commerce Bank once again leads the MSA with a 14.39 percent market share, but the Kansas City-based institution only has the fourth most branches in the market. Springfield-based Great Southern Bank leads the pack with 24 MSA branches, at least one in each county but Webster, and controls 12.95 percent of the market share.
Empire Bank claims the second highest market branch count at 21 – with two others in the works – and a market share of 11.5 percent. With 13 branches, U.S. Bank snuck in to claim the No. 3 spot, just one ahead of Commerce’s 12 branches.
“We have seen a lot of startup banks and in the past that was very profitable, but with new regulations, that’s not the case anymore,” said Andrew Tasset, vice president and marketing manager for Empire Bank. “Acquisitions have been the name of the game with little organic growth to expand that footprint.”
According to the FDIC, the MSA hit 40 institutions in 1998, but has been slow to grow from there, fluctuating between 40 and 43 institutions for the past 16 years. Tasset points to market acquisitions such as Pine Bluff, Ark.-based Simmons First National Corp.’s (Nasdaq: SFNC) approximately $206.9 million purchase of Springfield-based Liberty Banks’ 24 branches and Poplar Bluff-based Southern Missouri Bancorp’s (Nasdaq: SMBC) $23 million acquisition of Nixa-based Peoples Service Co. and its 10-branch subsidiary Peoples Bank of the Ozarks. Tasset said mergers and acquisitions are good for the banking industry, but they don’t provide a new gain to the branch count bottom line.
“Historically, Missouri’s branch count showed steady growth because until the 1970s, banks were prohibited from branching,” said Brian Fogle, a 30-year banking veteran who has worked the last six years as president of the Community Foundation of the Ozarks. “Branch counts really had nowhere to go but up from that point, and now we are seeing some leveling out.”
Post-1970 branchingFogle said Missouri used to operate as a unit bank state, meaning if an institution wanted a second location, it needed a separate charter.
“Until 1970, they said you could have one branch, but it had to be within 1 mile of the headquarters,” said Fogle, who has taught a bank history class for the Missouri School of Bank Management for the past 25 years.
According to the Missouri Division of Finance, the restrictions were gradually removed during the 1970s and ’80s, when a federal court ruled national banks in the Show-Me State were no longer subject to Missouri’s branching limits. State banks were given parity and all restrictions as to location and number were eliminated. In 1997, Missouri also adopted a regional reciprocal interstate banking law allowing institutions in surrounding states to acquire Missouri banks.
“When the interstate laws were relaxed, you really saw a branch explosion,” Fogle said.
Since 1994, MSA branch count is up 66 percent and institutions are up 14 percent, according to the FDIC.
Overbanked?Despite the Springfield MSA’s stagnant growth, local bankers contend the five-county area is overbanked for a market its size.
State Bank of Southwest Missouri President Tom Fowler said his single branch at 3310 E. Sunshine St. was one of only a handful in the area when it opened 29 years ago. Now, the president said he counts 14 branches and ATMs along Sunshine, between Glenstone Avenue and U.S. Highway 65, leading to his front door.
“I think it speaks to the fact that we are a wealthy community,” he said. “As a banker, I don’t want competition, but it’s a good thing for the consumer. Competition leads to improved services.”
Empire’s Tasset said the competition connects directly to deposit market share.
“It’s neck and neck between the top three, and no one bank really dominates our market,” he said. “Per capita, Springfield has more banks than St. Louis or Kansas City. What does that say about being overbanked?”
Using data from the U.S. Census Bureau’s 2010 census and FDIC numbers for the corresponding year, Springfield Business Journal calculated banking institutions per capita for the three MSAs. The five-county Springfield area comes in at one institution for every 10,397 people. In Kansas City, the 14-county MSA has one per 13,953 residents, and in St. Louis, the per capita ratio jumps to one institution per 19,631 people.
“Springfield is an attractive market,” Fogle said, who most recently worked for Great Southern Bank as community development director. “A lot of banks come in from other areas that don’t have as much growth and are looking to acquire intuitions here. Simmons First and Southern Bank are good examples of that.”
Moving forwardTasset predicts nonorganic growth for the Springfield market, mostly through mergers and acquisitions. Empire, for example, has grown to 21 branches from eight in 1994, a rate of 162 percent. The bank, a charter of Jefferson City-based holding company Central Bancompany, only has built five branches in recent years, with all others added through acquisition. Mostly recently, it added five locations in a 2010 buyout of Citizens National Bank and acquisitions in the ’90s of Nixa Bank, Pleasant Hope Bank and Webster County Bank.
Fogle said he expects to see branch numbers shrink as consumer habits change.
“People don’t need bricks and mortar anymore; they have the Internet and online banking,” Fogle said, relaying an anecdote about his son’s first checking account. “He doesn’t even have paper checks, because he doesn’t need them.
“There has been a drastic shift in consumer habits and as online banking grows, we are going to see more consolidation and branch closures.”
Fogle said going forward, it could be hard for institutions to justify branches in smaller communities when a smart ATM can handle almost every need.
“It’s a whole new world for bankers,” he said. “They have been through some tough times during the recession and things are starting to look up, but I think the industry is going to have to look at everything with a different lens than they used to.”
