The Arkansas Banker Fall 2023

FALL 2023

Finding New Bank Talent pg 34

Meet New State Treasurer

LARRY WALTHER pg 20

Plus

FARM BILL UPDATE –––––– AI'S BENEFITS & CHALLENGES

WHAT'S NEXT FOR THE ST. LOUIS FED

Chairman

OF THE BOARD ABA CHAIRMAN JIM TAYLOR LAYS OUT HIS AGENDA

THE ARKANSAS BANKER

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2 • FALL 2023

A PUBLICATION OF THE ARKANSAS BANKERS ASSOCIATION

CONTENTS

FALL 2023

VOLUME CVI, NO. 3

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ARKANSAS BANKERS ASSOCIATION STAFF

President/CEO Lorrie Trogden VP/Controller Carla Brinkley VP/Professional Development Kami T. Coleman Office Manager Peggy Cecere

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Fundraising and Member Services Associate Whitney Horton Administrative Support Specialist Abi Johnson

EDITORIAL STAFF

Editor Roby Brock Creative Director Ashlee Nobel

Lee Lee Arts + Design

Contributing Writers

Adrienne L. Baker, Duncan Bellingrath, Rachel Davis, Ed Elfmann, Julia A. Gutierrez, Susannah Marshall, Rob Nichols, Jim Taylor, Carl White

The Arkansas Banker (ISSN 004-1726) is published quarterly by the Arkansas Bankers Association, 1220 West Third Street, Little Rock, AR 72201. Phone: 501.376.3741.

Periodical postage paid at Little Rock, AR. Postmaster: Send address changes to Arkansas Bankers Association, 1220 West Third Street, Little Rock, AR 72201. Subscription to The Arkansas Banker magazine is included in the membership fees to the Arkansas Bankers Association. Cover price is $5.95 each. Annual subscription rates are $40.00 for members and $60.00 for non-members.

Federal tax law prohibits the deduction of lobbying expenses for federal incomes tax purposes. Organizations like ABA, which assess member dues, are required by law to notify their members of the portion of their dues attributable to lobbing/and therefore non-deductible on your federal tax return. For the year 2022, it is estimated that 9.08% of your dues will be attributable to lobbing as defined by the IRS. Contributions to ABA are not charitable contributions, however, they may be deductible as a legitimate business expense.

02 President’s Message 06 Professional Development

Departments

Columns

12 The Millennial Minute:

04 Chairman’s Column 08 Washington Update 10 Commissioner's Column 14 Emerging Leaders

BANKER Q&As

Macie Stone

16 Five Minutes With ...

Jay Wisener

INDUSTRY UPDATES

18 Artificial Intelligence

The benefits and challenges.

Features

20 New State Treasurer

30 Farm Bill Update

22 News on UDAAP

Why passing a Farm Bill in Congress will help community banks.

34 BankTalentHQ

For entry level employees or seasoned veterans, this website could help your bank.

26 COVER STORY ABA Chairman

Jim Taylor of First Security Bank leads the Arkansas Bankers Association as Chairman of the Board.

Serving clients.

A legal breakthrough.

24 St. Louis Fed

Chair Replacement How does that work?

38 FedNow Rollout

Early adopters update.

40 Rising Interest Rates What to watch for.

42 Bank Directors Workshop Developing leadership.

43 NEWS & MOVES

THE ARKANSAS BANKER

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PRESIDENT’S MESSAGE

Lorrie Trogden | President & CEO | Arkansas Bankers Association

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write this two weeks before we go to Washington D.C. for our fall fly-in trip. On this trip each year, we meet with various regulatory agencies and our Congressional

delegation. It is a very busy two days, but we manage to fit it all in and work hard to make a difference for our industry.

There are certain topics that we’ve covered time and time again for the last five years I have been with the ABA, such as credit unions and cannabis banking. People sometimes ask if we get tired of talking about those same issues over and over. Maybe we do, but we must never, never, never give up. You cannot facilitate change if you stop talking about an issue that you are passionate about. These issues are vitally important to our industry and one day you might just put a hairline crack in the dam that may work its way into a flood.

We are finally seeing movement with cannabis banking. I read an alert yesterday saying a bipartisan coalition of senators behind a cannabis banking bill are pushing for a markup and are working across the aisle to shore up additional support. This could be our hairline crack. Cannabis banking is on the topic list for our trip, and we will continue to support it until a bill passes.

We will be covering a multitude of issues, but these are two of the most important topics right now.

Durbin 2.0 – Senator Marshall’s bill applying the Durbin amendment to credit cards is not getting much movement as a stand-alone bill, but he continues to make attempts to attach the language to “must-pass” legislation, like the NDAA and omnibus bills. We are staying in contact with our Senators, asking for them to register their opposition to allowing the language to be inserted into other bills.

An Advocacy Alert link for Durbin 2.0 has been included in the Government Relations section of the Tuesday eNews for almost two months. If you have not clicked the link to register your opposition, I urge you to do that as soon as you get the next eNews. It is vitally important that our delegation hear more from us about this bill than from the merchants and retailers.

Small Business Lending Data Collection (1071) – An Advocacy Alert link for 1071 has also been included in the eNews for about two months. In addition to the advocacy link, there are materials for your business customers as well. This is going to hurt their small business and they need to understand that. You are the only one that will be able to get that message across. I urge you to utilize the advocacy link and the small business materials to educate your customers about how the 81 additional data fields will affect their business. You’ll see an article in this magazine outlining two 1071 lawsuits filed by bankers associations against the CFPB. Injunctions have been issued, but there is no guarantee that the courts will vacate the rule, so we continue our advocacy efforts for Congressman Hill and Senator Boozman’s Small LENDER Act. This bill would raise the threshold for the loan exemption from 100 to 500, and lower the business revenue exemption from $5 million to $1 million. You can read more about this issue in the Chairman’s Column.

“Never, never, never give up.” - Winston Churchill 2 • FALL 2023

Chairman Jim Taylor (our resident 1071 expert) or I will be happy to answer any questions you may have about either of those bills or any other federal regulatory topics we are advocating about on our trip.

I close with a giant thank you to our banks, bankers, and bank board members that have contributed to both our PACs. Those contributions are one of the most important investments you will make in our government relations efforts. We MUST have representatives at state and federal tables when important decisions are being made. Be assured, if we do not have a seat at the table, we WILL be on the menu.

There is a thank you list in the magazine, so if you bump into someone you know on the list, please thank them for investing in safeguarding the banking industry. We are now able to take contributions by credit card online. You’ll find this on our website under the Advocacy tab. We are already making candidate campaign contributions and have not yet made it to the half-way mark for our ABA BankPAC fundraising goals. We need to bring more contributions in than we are putting out, and I encourage you to participate by making a PAC contribution. You will be recognized in the magazine and at our Annual Convention and other major conferences.

I’ve been on the road making visits and collecting hats! (Check out my social media or LinkedIn posts.) Let me know when I can come and say hello as I would love to schedule a visit…and maybe leave with new bank hat swag to feature in my posts. As always, never hesitate to call, text or email me about anything the ABA can be of help with - we exist to help you!

Lorrie Trogden, President & CEO

THE ARKANSAS BANKER

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CHAIRMAN’S C O LU M N

The Effects of Dodd-Frank Section 1071

on Community Banks Jim Taylor | Chairman | Arkansas Bankers Association

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he Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, brought significant changes to the financial industry. One particular sec-

tion, Section 1071, was introduced to promote fair lending practices by requiring financial institutions to collect and report data on small business lending. While the intent behind this provision was to enhance transparency and address potential disparities, it has had notable effects on community banks. Let’s explore the potential impacts of Dodd-Frank Section 1071 on community banks and the challenges they face in complying with the new requirements.

Community banks, often characterized by their smaller size and local focus, have traditionally played a vital role in supporting local economies and providing credit to small businesses. However, complying with the reporting requirements of Section 1071 has imposed an additional regulatory burden on these institutions. The collection, maintenance, and reporting of small business lending data necessitate significant investments in technology, staff training, and compliance measures. This places a strain on the limited resources of community banks, diverting their attention and resources away from their primary mission of serving their local communities.

Community banks are known for their personalized and relationship-based approach to lending. However, the introduction of Section 1071 has increased compliance costs for these institutions.

Community banks often lack the same economies of scale as larger financial institutions, making it harder for them to absorb the costs associated with new compliance measures. These costs include hiring specialized staff, investing in data management systems, and conducting internal audits to ensure accurate and timely reporting. As a result, community banks may face challenges in maintaining their competitive edge and providing affordable credit options to small businesses.

The reporting requirements under Section 1071 demand detailed information on small business lending, including loan amounts, interest rates, and borrower characteristics. While this data collection aims to identify potential disparities and ensure fair lending practices, community banks encounter challenges in gathering and organizing the required data. Unlike larger banks with established reporting infrastructures, community banks may rely on manual processes or less sophisticated systems, making it time-consuming and resource-intensive to comply with the new regulations. This may hinder the ability of community banks to adapt swiftly to the reporting requirements and redirect their focus away from fulfilling their customers request in a timely manner.

Community banks face a unique set of challenges compared to larger financial institutions. With limited resources, these banks may struggle to keep up with the ever-increasing regulatory landscape.

Compliance with Section 1071 may result in community banks dedicating a significant portion of their resources to meet reporting

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obligations, leaving them with fewer resources to invest in innovative products, technology advancements, personalized customer service, and the communities they serve. This could put them at a competitive disadvantage against larger banks that have greater financial capacity to absorb regulatory costs and invest in customer-centric initiatives.

Dodd-Frank Section 1071 was enacted with the aim of promoting fair lending practices and enhancing transparency in small business lending. However, its implementation has had significant implications for community banks. These institutions, already operating on limited resources, face increased regulatory burden, compliance costs, and data collection challenges. Moreover, the diversion of resources towards compliance measures may hinder their ability to compete effectively with larger banks and continue serving their local communities in a personalized and efficient manner.

As community banks we must not let the overburdensome reporting requirements of section 1071 take our focus away from providing essential and timely financial solutions to our small business customers. These entrepreneurs power the local economies of every town in Arkansas, both large and small. I assure you that your association continues to battle for relief from Section 1071’s overwhelming effects on small business lending.

For example, we encourage French Hill to reintroduce the Small Lender Act which will reduce the definition of a small business from $5 Million in gross revenues down to $1 Million in gross revenues along with extending the implementation from 18 months to 3 years. The Texas Bankers Association along with the American Bankers Association have sued the CFPB seeking to invalidate the final rule on the premise that it will drive small lenders from the market due to their inability to comply with the final rule’s “burdensome and overreaching reporting requirements”. The result of this lawsuit is a temporary injunction for the implementation of 1071 for members of American Bankers Association and Texas Bankers Association. This decision is being appealed and we anticipate the US Supreme Court to rule later in 2024. If the verdict is overturned the CFPB will set a new timeline for those member banks, in the meantime, if you are not a member of AmBA or TBA, the original implementation timeline is still applicable.

As policymakers and lawmakers evaluate the impact of Section 1071, it is crucial to consider the unique circumstances of community banks and explore potential avenues to alleviate their compliance burden without compromising the goals of fair lending. Striking a balance between regulatory oversight and supporting the essential role community banks play in local economies will be crucial for fostering a vibrant and inclusive financial ecosystem.

In full disclosure a portion of this article is the product of ChatGPT. If you read the article in the last Arkansas Banker, you know that Artificial Intelligence will be playing a larger role in our lives.

THE ARKANSAS BANKER

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PROFESSIONAL D E V E LO P M E N T

Calendar of Events OCT - DEC 2023

October 12

THURS DAY 9 A.M.­– 4 P.M.

O P E N I N G N E W AC C O U N T S

Well-trained bankers who recognize and stop attempted illegal activity are the first line of defense in protecting a financial institution from fraudsters.

Unfortunately, new account personnel are too often trained “on the job,” which result in an environment of potential vulnerability and unnecessary losses for the bank. Additionally, with constant new regulations, ongoing training is paramount to maintain diligence and update processes and procedures. This oneday program is the most comprehensive seminar on deposit accounts in the state. Will answer many of the complicated questions customers and employees ask. Highly interactive. Come prepared to have your questions answered.

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MO N DAY 9 A. M. ­ – FRI DAY 5 P. M.

G S B BAN K T E CHN O LO GY S E CURI T Y S CHO O L

This event is designed to provide an overview of commercial lending t. You will learn the necessary skills to analyze, and if required, approve a business loan.

The program is organized by first evaluating a credit through financial analysis to assess the risk reward relationship. Following the financial assessment portion of the program, participants will dive into the elements of managing business relationships profitably and under approved risk guidelines. Participants will have exposure to assessing loan suitability, structuring a loan and developing a sound lending understanding upon which to build comprehensive commercial and business relationships.

INSTRUCTOR: Suzie Jones

INSTRUCTOR: Graduate School of Banking

LOCATION: ABA Professional Development Center

LOCATION: University of Wisconsin-Madison

MO NDAY 9 A .M.­– F R I DAY 4 : 3 0 P.M.

ABA COMMERCIAL LENDING SCHOOL

Learning or just refreshing your lending skills is a necessity in today’s competitive banking environment.

The purpose of the ABA Commercial Lending School is to prepare commercial lenders who have not been exposed to formal commercial lending education – or lenders who want to broaden their commercial lending knowledge – to serve efficiently and profitably as commercial loan officers. This intensive one-week school exposes students to the major issues commercial lenders face.

INSTRUCTOR: Ron Rushing LOCATION: ABA Professional Development Center

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WEDNESDAY 5:30 P.M.­ – THURSDAY 3:30 P.M.

2023 EMERGING LEADERS LEADERSHIP CONFERENCE

Our Leadership Conference offers a unique educational experience focused on banking industry trends and leadership development skills.

The Emerging Leaders Section works to engage, connect, and empower banking professionals from across the state to shape and lead the future of the financial industry. Get access to top industry thought leaders and grow your network. Share ideas with your peers and get strategies for solving your challenges. Get answers to professional problems that you can put into action. Gain insight to help you influence positive change within your organization.

LOCATION: Clinton Presidential Center, Little Rock, AR

FOR MORE INFORMATION ABOUT ABA TRAINING & EVENTS, AND TO REGISTER, LOG ON TO WWW.ARKBANKERS.ORG.

November 16 T H URS DAY 9 A.M.­– F R I DAY 4 : 3 0 P.M.

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BANK SUPERVISOR SCHOOL

December 05 TU E S DAY 10 A.M.­– 12 P.M.

BI-MONTHLY COMPLIANCE BRIEFING: DECEMBER

This is an opportunity to finetune and polish your leadership/ supervision skills. Get the latest management tools. Learn best practices. Build a productive team through effective planning, coaching, and decision making. Succeed at managing and leading others. You will strengthen your ability to lead others! This school offers a blend of critical management topics and a path to targeted professional development.

Keeping up with changes and deadlines in the compliance area gets more complex every year. Now, we can assist you with that task. This series includes bi-monthly (6), twohour webinars focused on the most recent changes to the compliance landscape. Who should attend? Anyone in the institution having compliance responsibilities - when you think about this, it could be just about anyone in the institution.

This may include members of senior management, operations personnel, lending personnel, underwriters, customer service representatives, back-room personnel, and of course compliance officers, auditors, and attorneys, and anyone else in the institution that might benefit from this valuable information.

LOCATION: Virtual

Don’t Forget!

Emerging Leaders Leadership Conference October 18th-19th

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2023 BANK COUNSEL CONFERENCE

This conference will include two days of presentations on recent state legislation and court decisions involving banking and commercial laws, as well as presentations on federal banking regulations and other current issues.

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THE ARKANSAS BANKER

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WASHINGTON U P DAT E

ADVOCATING FOR ACRE:

How Congress Can Help Rural America Rob Nichols | President and CEO | American Bankers Association

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armers and ranchers today face numerous challenges: from the skyrocketing costs of materials to supply chain disruptions to difficulties purchasing rural land—all while interest rates are rising. As a result, many are relying

more on credit than ever before. For those who are young, beginning, or socially disadvantaged farmers, these obstacles can seem insurmountable—in fact, 69% of young farmers say that access to capital is a top challenge to beginning a career in farming.

Fortunately, there is a simple solution that can help make credit more accessible to these agricultural borrowers: the bipartisan ACRE Act, a bill that ABA is aggressively championing in Congress.

Formerly known as ECORA, this bill would amend the IRS code to level the playing field for banks— especially community banks—by allowing lenders to exclude from gross income any interest they receive on loans that are secured by farm real estate or aquaculture facilities. The bill also allows for the exclusion of interest on certain home mortgage loans in rural communities.

Removing the taxation of interest will bring down the cost of making these loans,

“ABA estimates that this important legislation could expand access to affordable agricultural and home loans to more than 4,000 rural communities across the U.S. and deliver approximately $1.4 billion in annual interest expense savings.” making them more affordable for farmers, ranchers, and rural homeowners. In fact, ABA estimates that this important legislation could expand access to affordable agricultural and home loans to more than 4,000 rural communities across the U.S. and deliver approximately $1.4 billion in annual interest expense savings to farmers and ranchers in 2023—savings that can make a crucial difference to the nation’s producers.

This simple, commonsense solution does not require the creation of new government payments or programs—quite the opposite.

It provides an avenue for increasing competition and generating growth in rural communities efficiently and organically. It also levels the playing field between all agricultural

“ABA is urging bankers and their customers to get in touch with their members of Congress and urge them to pass the bill. Bankers can contact their lawmakers easily through ABA’s grassroots platform, SecureAmericanOpportunity.com. ” 8 • FALL 2023

lenders, which will result in more choices and lower rates for rural borrowers.

ABA has been a vocal proponent of this bill, and we were pleased to see such a significant response from lawmakers in this Congress. The ACRE Act already has 20 bipartisan cosponsors in the House and has been introduced in the Senate by Sens. Jerry Moran (R-Kan.) and Angus King (I-Maine).

Lawmakers now have an opportunity to help sustain and grow rural America by sending this bill to President Biden’s desk.

That’s why ABA is urging bankers and their customers to get in touch with their members of Congress and urge them to pass the bill. Bankers can contact their lawmakers easily through ABA’s grassroots platform, SecureAmericanOpportunity.com. The association has also prepared a toolkit, accessible at aba.com/ACREtoolkit, that provides an issue backgrounder, talking points and key points that bankers can use when explaining to lawmakers why this law is needed.

Our nation needs a thriving agricultural sector. With your help, we can help remove one of the roadblocks standing in the way of the nation’s farmers and ranchers.

Email Rob at nichols@aba.com.

THE ARKANSAS BANKER

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COMMISSIONER'S C O LU M N

Commercial Real Estate –

Now is the Time to Prepare Susannah Marshall | Commissioner | Arkansas State Bank Department

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n the past few articles, I have focused my comments on interest rate risk, deposit and funds management practices and concentrations on the liability side of a bank’s balance sheet. Now, I

want to turn the conversation back to a topic that has been somewhat in the background in recent years; yet it is a subject that once again warrants our time and attention now and in the immediate future, Commercial Real Estate (CRE) concentrations. In recent months, regulators have again elevated their focus on CRE concentrations even as so much discussion has been directed to liquidity risk. I want to share with you a few thoughts regarding CRE concentrations so that your bank’s Board and Senior Management are prepared if your bank is engaged in this regulatory conversation.

As of March 31, 2023, the most recent aggregate data available, Arkansas reported 16 state-chartered banks (approximately 22%) with either non-owner occupied CRE concentrations in excess of 300% of Tier 1 Capital plus credit loss reserves, or acquisition, development, and construction loans in excess of 100% of Tier 1 Capital and credit loss reserves, and some institutions reported both concentrations. The numbers track somewhat close to our position in March 2009 where we had 31% of our Arkansas state banks reporting some type of CRE concentration. Many of us can vividly remember the 2009 timeframe which led to unprecedented levels of deterioration in CRE values further impacting Asset Quality and the overall health of banks both nationally and locally.

Now is the time to enhance risk management practices around CRE 10 • FALL 2023

concentrations. Regulators have begun to escalate the reviews of institutions which hold CRE concentrations. A variety of factors are impacting CRE portfolios in today’s market: rising interest rates, unyielding inflation, uncertain pandemic revival concerning CRE utilization, declining real

emphasizing credit risk within CRE concentrations. On June 29, 2023, the federal banking agencies issued the “Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.” This Statement replaces a 2009 Statement and will serve as a companion

“Arkansas reported 16 state-chartered banks (approximately 22%) with either non-owner occupied CRE concentrations in excess of 300% of Tier 1 Capital plus credit loss reserves, or acquisition, development, and construction loans in excess of 100% of Tier 1 Capital and credit loss reserves, and some institutions reported both concentrations.” estate values in some markets and overall economic variability. Regulators want and need to know how bank management teams are identifying, measuring, monitoring, and controlling these known risks within loan portfolios and specifically CRE holdings.

Further, conversations between regulators and bankers regarding CRE concentrations are beginning to occur more frequently and outside the scope of an examination.

Preparedness is key in mitigating CRE concentration risks, as well as assuring regulators that your bank is actively managing its CRE concentration.

Additional communications have been sent to the industry as another indication that the regulatory agencies are

to the long-standing, joint “Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” which was issued in December 2006. Further, at least monthly, I am reading an article with a theme around CRE market conditions and their future outlook or how banks can enhance their CRE concentration risk management practices. I remain positive about overall credit quality and loan portfolio performance as we begin the third quarter; however, I along with all banking regulators, remain keenly aware of the challenges that exist in this uncertain economic environment and the potential impacts these challenges present on the CRE portfolios of financial institutions.

THE ARKANSAS BANKER

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BANKER Q&A

THE

MILLENNIAL MINUTE with Macie Stone AVP ITM/Branch Manager Legacy National Bank, Fayetteville

WHEN DID YOU DECIDE TO BECOME A BANKER?

WHAT IS SOMETHING YOU REGRET NOT HAVING STARTED SOONER?

When I was 18, I got a job as a part time teller at a local bank. A few months later I ended up going full time. I loved the customer interaction, helping solve problems and building relationships with customers. My original plan was to be an elementary school teacher but I’m so grateful my path led me to banking.

Running. I always wanted to be able to run but never thought I could. I met someone a little over a year ago who gave me great advice and encouraged me, and it has been one of the best things for me mentally and physically.

DO YOU HAVE A MENTOR? Yes! I have been lucky enough to have worked with and learned from one of the best leaders at our company for the past 4 ½ years. I can absolutely say I would not be where I am in my career without her strong leadership, guidance, knowledge, and patience.

WHAT’S THE MOST HELPFUL BANKING PRODUCT ON THE MARKET TODAY? I think mobile deposit is one of the most helpful banking products today. Everyone stays so busy and in a hurry these days. They want quick and convenient. It doesn’t get much more convenient than being able to deposit your checks from your phone.

DESCRIBE THE PERFECT SUNDAY. The perfect Sunday would be waking up without an alarm, making breakfast for my son and me, going for a run to the park by our house, curling up on the couch with a good book OR on the porch if the weather is nice, ordering sushi for dinner and ending the night watching a funny movie.

12 • FALL 2023

DO YOU HAVE ANY STRANGE PHOBIAS? I’m afraid to fly, but I am also extremely afraid of airplanes just flying over me. I know it sounds ridiculous, but I have a fear they are going to crash where I’m at.

WHAT HABIT DO YOU WISH YOU COULD BREAK? I wish I could break my habit of drinking a 12 oz. sugar free Red Bull every morning. I know they are terrible for me. I have tried to like coffee, but I just can’t do it!

“I think mobile deposit is one of the most helpful banking products today. Everyone stays so busy and in a hurry these days. They want quick and convenient.”

THE ARKANSAS BANKER

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EMERGING LEADERS

EMERGING LEADERS CONFERENCE

Aims to Attract Young Talent

Duncan Bellingrath | President | Emerging Leaders Section

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he 2023 Arkansas Bankers Association (ABA) Emerging Leaders Section Conference date is set for October 18-19 in Little Rock. The

Emerging Leaders Section (ELS) was established to provide leadership and professional development training for the state’s emerging leaders and to prepare them to become the industry’s next generation of leaders. The ELS council and ABA staff have worked diligently to create a fun and impactful group of presenters for this event. The topics consist of banking trends, self-improvement, and CEO and Legislative panels.

I believe the Emerging Leaders Section is a vital program for the future of the banking industry. Ernst & Young recently released an article regarding the upcoming transformation of the banking industry.

While I do not fall under the Gen Z category, the article addresses the transformation that we are seeing today as more and more Baby Boomers retire and the industry needs to backfill these positions. The article projected that Gen Z will account for approximately 27 percent of the workforce by 2025. Banks will need to adapt to attract this vital demographic. The next generation of bankers offers fresh perspectives that

align with the increasingly diverse customer base that banks have today.

A main focus of the ELS Council is how to attract young talent and how to educate the next generation of the great careers within the banking industry. I have spoken to a number of high school and college students regarding the banking sector, and it has come to my attention that there exists a prevailing misconception.

Many students mistakenly believe that pursuing a college education or specializing in banking and finance is a prerequisite for a career in the banking industry. That is simply not true. The banking sector offers

a wide range of opportunities for individuals, regardless of whether they are attending college or majoring in banking and finance. The banking industry is diverse and encompasses various roles and functions, making it accessible to people with different backgrounds and skill sets.

We will talk through and hear from speakers at our fall event on the changes and what the future of banking looks like.

I attended my first Emerging Leaders Conference in 2018. I left the conference thinking about what leadership means beyond its definition and the importance of teamwork. I want to encourage you to think about what the future looks like inside your bank. Who will the next generation of leaders be, what co-workers would benefit from attending this conference, and encourage them to register for the conference. I am looking forward to seeing and meeting you and your co-workers at our Emerging Leaders Conference in Little Rock on October 18-19.

“Gen Z will account for approximately 27 percent of the workforce by 2025. Banks will need to adapt to attract this vital demographic.”

The views in this article are those of Duncan Bellingrath individually and do not reflect those of Simmons Bank.

14 • FALL 2023

SIMMONS BANK Hot Springs Group 3

LATRECIA CARROLL VICE PRESIDENT STONE BANK Little Rock Group 1

IAN BRYAN SECRETARY/ TREASURER SIMMONS BANK Russellville Group 2

ELS COUNCIL MEMBERS AARON BELL AT LARGE

FIRST SECURITY BANK Jonesboro Group 1

TAMMY ENGLE ARVEST BANK Siloam Springs Group 2

AMBER MURPHY AT LARGE

FIRST FINANCIAL BANK El Dorado Group 3

BRANDI RAY FARMERS BANK AND TRUST COMPANY Malvern Group 3

CHANCE ROBBINS CS BANK Eureka Springs Group 2

RHETT SHEPARD CENTENNIAL BANK Little Rock Group 1

LAUREN STATON RELYANCE BANK White Hall Group 3

ALLISON WILLIAMSON AT LARGE SIMMONS BANK Marshall Group 2

S E C T I O N

DUNCAN BELLINGRATH PRESIDENT

EMERGING LEADER

ELS EXECUTIVE COMMITTEE

THE ARKANSAS BANKER

• 15

BANKER Q&A

FIVE VE minutes with...

Jay Wisener

President, Arkansas Region First National Bankers Bank, Little Rock

Q. HOW DID YOU GET STARTED IN BANKING?

A.

With a degree in finance, I knew that banking was something that I was interested in, even though my family didn’t have much history in working in banking. So, I talked to a friend from my hometown of Warren who worked for the Arkansas State Bank Department. He encouraged me to apply with the bank department. I was hired in April of 1992 and worked as a safety and soundness examiner for just under four years. It was a great way to learn a lot in a short time about the banking industry.

“To maintain a healthy and growing banking industry in Arkansas and beyond, it takes giving back and supporting our trade associations which are vital to the well-being of community banking in our state.”

16 • FALL 2023

Q. YOU SERVE ON THE ABA BOARD OF

DIRECTORS, WHY DO YOU FEEL SERVICE TO THIS ORGANIZATION IS IMPORTANT?

A.

To maintain a healthy and growing banking industry in Arkansas and beyond, it takes giving back and supporting our trade associations which are vital to the well-being of community banking in our state. The ABA provides a number of key resources that really help our industry, from training, networking, industry events and serving as a voice/representative in legislative affairs affecting the banking industry at both the state and national level. It’s very important to have the ABA representing the bankers in Arkansas as we are all busy doing our daily jobs of leading our community banks.

Q. WHAT’S THE DIFFERENCE BETWEEN A BOSS AND A LEADER?

A.

To me, a leader is someone that leads by example and actually doesn’t mind rolling up his or her sleeves to get your hands dirty if need be to get the job done. A boss gives orders and just supervises. A true leader works side by side with his or her time. Leaders lead by doing and showing, not just by talking.

Leaders also truly listen. My grandmother told me once, “There’s a reason God gave you two ears and one mouth!”

I see firsthand ALL the “many special things and

ways that community banks truly support and serve the communities where they are located.

”

Q. WHERE DO YOU FIND YOUR SUPPORT/INSPIRATION?

A.

In my role at FNBB and growing up in a small town in Arkansas, I get to travel around the state visiting and talking with our customer community banks. I see firsthand ALL the many special things and ways that community banks truly support and serve the communities where they are located. I find my inspiration knowing that our bankers’ bank serves these banks with our products and services which helps these banks continue to stay locally owned and be a resource for its community for generations to come.

Q. MY SECRET WEAPON IS MY…

A.

Desire to help others and following through when I say I will do something. Also, being friendly and treating others like they would like to be treated is not a bad thing! You never know when someone is just having a bad day.

Q. WHAT’S SOMETHING PEOPLE DON’T KNOW ABOUT YOU?

A.

I’m one of the few bankers that doesn’t play golf. I’d rather be playing a pinball machine or two or three.

THE ARKANSAS BANKER

• 17

INDUSTRY U P DAT E S

Artificial Intelligence THE BENEFITS AND CHALLENGES FOR FINANCIAL INSTITUTIONS

by Julia A. Gutierrez

T

he technologies of artificial intelligence (AI) are becoming an integral piece of the world we live.

These technologies are being deployed across a plethora of fields ranging from simple devices such as a cell phones to more complex technologies such as autonomous vehicles or the diagnosing of diseases. Artificial intelligence is even rearing its advancing technological head into the playing field of banking. It is a constantly evolving technology that many industries are jumping into while other are slowly pushed into in their efforts to thrive. For banks, it’s critical to embrace the advancements of the future, but also to consider the security and regulatory requirements and overall risk to the organization and its customers.

WHAT IS ARTIFICIAL INTELLIGENCE Artificial Intelligence is a term that commonly references the various technological capabilities that allow for the analyzation of data and the identification of patterns to make decisions and impact an outcome. Some examples of these AI type activities or branches include machine learning, natural language processing, robotics process automation, and speech and object recognition. Machine learning is a branch of AI and computer science that focuses on the use of algorithms and data to imitate human learning patterns, while gradually improving the accuracy. With machine learning, the system learns and improves, as new data or is made available. Another branch of computer science and AI is natural language processing. This branch of AI enables computers to process human language, received through text and spoken words, and to understand the meaning and intent. It basically allows a computer system to understand the semantics of conversational language. The AI branch of robotics process automation, 18 • FALL 2023

also known as software robotics, is the use of applications and systems to perform human-like tasks. It uses intelligent automation technologies and rule-based software to perform business process activities at a more efficient volume, reducing the need for human resource or involvement in the task. Finally, the AI branch of speech recognition enables a system to identify and process human speech into a written format. Speech recognition may also be referred to as automatic speech recognition, computer speech recognition, or speech-to-text.

This AI technology is often confused with voice recognition which focuses on identifying an individual user’s voice. However, speech recognition focuses on translating speech from verbal to text. Each of these artificial intelligence branches are utilized throughout financial institutions and countless other industries around the world.

THE BENEFITS OF ARTIFICIAL INTELLIGENCE Artificial intelligence is used in various fields and applications ranging from online shopping, advertising, and machine translation enabling cross-language communication, to improving the overall operations and cost efficiency of financial institutions. The use of artificial intelligence technologies in financial institutions can drastically reduce operational costs while significantly increasing productivity. With its broad range of uses, AI can potentially aid financial institutions in reducing costs associated with products and services, and it can enhance the overall customer experience as it bridges the gap between customer convenience and relationship. AI can benefit a financial institution’s lending process as it can expand credit access, assist in financing decisions, decrease the underwriting times and costs, and enhance both the borrower and lender experience. AI can be beneficial throughout other areas within financial institutions such as identity validation and

real-time antifraud monitoring. The opportunities and benefits when it comes to AI and financial institutions seem to be endless. But there has to be challenges, right?

ARTIFICIAL INTELLIGENCE CHALLENGES Artificial intelligence isn’t perfect. Like any other enhancing technologies, AI comes with its own set of risks and challenges. Some of those risks and challenges include system integration and a gap in skills. With system integration, the data behind AI is equally as critical as the technology itself. In order for the utilization of AI to be beneficial and effective, the data quality and quantity need to be accurate.

This involves organizing data and preparing for integration. This means that financial institutions with a core processor will have to coordinate between their core system and their AI technologies. This can often be a complex and costly undertaking and financially burdensome, especially for small financial institutions and community banks.

Financial institutions may also run into a more complicated integration processes if their core processors and AI solutions vendor are competitors of the same or similar products and services. This challenge often leads to increased fees and costs for integration. Even if financial institutions are able to work out all the kinks related to system integration, there is always the challenge of obtaining expertly trained staff who are knowledgeable in building and deploying of AI solution. With the rapid advancement and use of AI technologies, it has led to a shortage of skilled AI experts in the broader labor force. While this is a challenge that is expected to improve in the future, at present, it leaves financial institutions competing with large tech companies such as Apple or IBM when recruiting for AI talent.

An even more challenging area associated with artificial intelligence and financial institutions is meeting compliance expectations on technologies that are surrounded by so much regulatory uncertainty.

Financial institutions are expected to identify and manage all risk related to artificial intelligence and how it is used within the organization. It’s not enough for financial institutions to simply employ the technologies of AI, but rather they are expected to understand the data or inputs that drive the outcomes. Financial institutions are expected to ensure that all data used within the various branches of AI, align with

“AI ...can expand credit access, assist in financing decisions, decrease the underwriting times and costs, and enhance both the borrower and lender experience.” regulatory compliance requirements. For example, if the machine learning branch of AI is used in the decision-making for credit, the bank should understand and be prepared to explain what the contributing factors were that the AI system used to make that decision (i.e., what data was inputted to receive the outcome/decision). It is critical that financial institutions are not only able to understand and explain this process, but also that all the data used within the AI system meet regulatory requirements. This means ensuring that the AI system isn’t using information that may violate consumer or fair lending laws.

Financial institutions that are utilizing AI should have processes in place that allow for the identification of risk, both new and emerging, as well as controls for managing that risk. Because of the rapidly evolving technologies of AI, there is always the challenge of changes in risk level or even unidentified risk developing. Financial institutions need to be prepared to rise to the occasion when it comes to meeting those regulatory and risk challenges, whether that be through an increased frequency in monitoring and reviewing established controls or contracting with external vendors to conduct robust third-party risk management.

The use of AI technologies within financial institutions has captured the interest of regulators and policymakers alike. A couple of key concerns are always the safety and soundness of financial institutions and consumer protections. While AI is constantly growing and advancing, many of the banking laws and regulations currently on the books are still a little behind the times, leaving some areas of

regulatory uncertainty. Nevertheless, regulators acknowledge the benefits of AI and support the responsible innovation by financial institution. In 2021, the agencies (Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve Board) issued RFI’s (request for information) on the use of artificial intelligence by financial institutions. In 2022, the OCC (Office of the Comptroller of the Currency) issued supervisory expectations for how banks should manage risks associated with AI. And most recently, in April 2023, a joint statement was issued by the agencies on the enforcement efforts against discrimination and bias in automated systems. The 2023 statement outlines some of the challenges of AI and serves as a reminder that financial institutions must embraces responsible innovation.

CONCLUSION For financial institutions to thrive in the industry and remain relevant in the market, they must continue to be forward thinking and responsible in their innovation efforts.

Artificial intelligence is an ever evolving technology and convenience of the world in which we live. Financial institutions must engage in the balancing act of supporting new and innovated technologies for its consumers, while also acknowledging the managing the risks and challenges of such growth. It is imperative to fully understand the technologies that our institutions relies on for its operation and that we remain abreast of any arising issues in the regulatory world. Artificial intelligence is the future and it’s filled with risks and rewards.

ABOUT THE AUTHOR Julia A. Gutierrez serves as C/A’s Director of Education; developing curriculum and presentations, as well as presenting at various schools and seminars; both live and in a livestream/hybrid format. Julia has over 20 years of financial industry experience to the Compliance Alliance team.

THE ARKANSAS BANKER

• 19

INDUSTRY U P DAT E S

New State Treasurer Wants to Serve Office’s Customers Better D

on’t look for new Treasurer of State Larry Walther to make big changes to the office he’s been appointed. He doesn’t believe in messing

up a good thing and he also wants to learn more about who the office serves before looking for ways to tweak improvements.

“I want to know who our customers are,” Walther said in a recent TV interview on Talk Business & Politics and Capitol View. “I’m thinking about how I can improve the Treasury.

It’s a well-run machine right now. You don’t want to tweak things that are already going well.”

20 • FALL 2023

“I have a passion for education and that’s something that is important to me ... economic education in adults.”

Walther said he didn’t think he would serve four more years at his previous state post, Secretary of the Department of Finance and Administration – the agency he had run for nearly nine years. He informed Gov. Sarah Sanders, who would be making the appointment to fill the State Treasurer’s position after the untimely death of Mark Lowery, and let her know he’d be willing to serve as Treasurer.

The DFA Secretary sits on the Board of Finance, which oversees investments made by the Treasurer’s office. Last fiscal year, the office earned $254.6 million in interest for the state. Walther’s knowledge of the office made his selection a good fit.

The Treasurer’s office performs some education-related functions by helping spread more financial literacy to schools and adults, and the office encourages parents and grandparents to invest in the state’s 529 plan, which allows for tax-free savings for college.

“I have a passion for education and that’s something that is important to me. I’m on the board of a college. I’ve done a lot in this area.

My major in college was economics and that was a long time ago. But there’s a program that the Treasury has responsibility for, and it’s designed to promote education in adults, economic education in adults. You know, the basics of how to run their own home, don’t over-extend yourself, live within your means and things like that. And I think I can be of value to the state promoting something like that,” he said.

“We also had the 529 savings plans that will allow their children and grandchildren to go to college and they can do it tax-free with the money that’s in the 529 plan,” he added. “Education is the thing that makes the biggest difference in a person’s ability to support their family.”

Larry Walther, Treasurer of State.

THE ARKANSAS BANKER

• 21

INDUSTRY U P DAT E S

Big News UDAAP FRONT ON THE

by Adrienne L. Baker

A

United States District Court in Texas issued a final judgment prohibiting the CFPB from expanding its UDAAP purview to cover discrimination. Here’s what you need to know. In March 2022,

CFPB announced it would “scrutinize discriminatory conduct” including close examination of financial institutions’ decision-making in advertising, pricing, and other areas “to ensure that companies are appropriately testing for and eliminating illegal discrimination.” CFPB sought to examine documentation of customer demographics and the impact of products and fees on different demographic groups, among other things. In March 2022, CFPB published an updated exam manual outlining these 22 • FALL 2023

changes, all of which were implemented pursuant to CFPB’s authority to examine for UDAAPs (unfair, deceptive, or abusive acts or practices).

In September 2022, the American Bankers Association and six other trade groups sued CFPB and its director, Rohit Chopra, for exceeding the agency’s legal authority with the update to the UDAAP

“The court set aside the March 2022 manual updates, finding CFPB exceeded its statutory authority under the DoddFrank Act.”

urging by the ABA and others. The ABA maintains that CFPB cannot use its UDAAP authority to extend fair lending laws beyond the bounds set by Congress.

On September 8, 2023, the court granted judgment to the plaintiffs. The court set aside the March 2022 manual updates, finding CFPB exceeded its statutory authority under the Dodd-Frank Act. The court did not rule on the plaintiffs’ other arguments, which included claims of substantive and procedural impropriety.

As for the remedy, the court declared that pursuing any examination, supervision, or enforcement action against any member of a plaintiff organization based on CFPB’s interpretation of its UDAAP authority announced in the March 2022 manual update would be unlawful. It barred CFPB from such conduct.

While a boon to banks, the ruling is limited. The injunction does not restrict CFPB’s ability to pursue examination or supervision of acts or practices that qualify as “unfair” independently of the position announced in its March 2022 update to the manual’s UDAAP provisions. It only restrains agency conduct based on the disputed agency rule. Further, the injunction is limited to plaintiffs’ members, who can disclose their membership to CFPB to stop prohibited conduct. The plaintiffs include: • Chamber of Commerce of the United States of America • American Bankers Association • Consumer Bankers Association • Independent Bankers Association of Texas • Texas Association of Business • Texas Bankers Association • Longview Chamber of Commerce

ANOTHER CHALLENGE TO CFPB AUTHORITY exam manual. In their lawsuit, the plaintiffs said they support the fair enforcement of nondiscrimination laws but “cannot stand by while a federal agency exceeds its statutory authority, creates regulatory uncertainty and imposes costly burdens on the business community.” The lawsuit was filed after CFPB declined to rescind the UDAAP exam manual update, despite

In May 2023, the ABA joined a Texas lawsuit seeking to invalidate CFPB’s Final Rule regarding data collection by commercial lenders. The Final Rule was issued under section 1071 of the DoddFrank Act, which amended the Equal Credit Opportunity Act to require commercial lenders to collect data from loan applications to facilitate enforcement

of fair-lending laws. The Act required lenders to determine if the business is woman-owned, minority-owned, or a small business, and to compile and report 13 data points to CFPB. CFBP’s Final Rule significantly expanded the reporting requirement to 81 data points.

In the lawsuit, the plaintiffs seek a preliminary injunction that would suspend the Final Rule, as well as a declaration that the Final Rule is unlawful. The plaintiffs assert four bases to invalidate the Final Rule: • CFPB’s funding structure is unconstitutional; • CFPB exceeded its statutory authority; • CFPB’s action was arbitrary and capricious in violation of the Administrative Procedure Act because CFPB did not respond to significant issues raised by interested parties; and • CFPB’s action was arbitrary and capricious in violation of the Administrative Procedure Act because CFPB did not engage in a proper cost-benefit analysis.

This lawsuit is at an early stage. The Final Rule remains operative at this time.

However, the earliest compliance date for covered financial institutions is October 1, 2024. It is possible the court will decide the case before then. Nonetheless, covered financial institutions should be prepared to comply with the Final Rule if it is not invalidated before then.

On July 31, the court entered a limited preliminary injunction to postpone enforcement of the Final Rule only to the plaintiffs and their members and only until the Supreme Court enters a decision in the related case of Cmty. Fin. Servs.

Ass’n of Am., Ltd. v. CFPB, 51F.4th 616 (5th Cir. 2022). If the Supreme Court reverses the 5th Circuit’s decision in Cmt. Fin. Servs., the preliminary injunction will automatically dissolve and CFBP will extend plaintiffs’ and their members’ deadlines for compliance with the requirements of the Final Rule to compensate for the period during which the Final Rule is stayed.

THE ARKANSAS BANKER

• 23

INDUSTRY U P DAT E S

Replacement for

St. Louis Fed Leader

Underway

J

ames Bullard, president and chief executive officer of the Federal Reserve Bank of St. Louis announced in July that he would leave the post in mid-August. Bullard is the inaugural

dean of the Mitchell E. Daniels, Jr. School of Business at Purdue University.

“It has been both a privilege and an honor to be part of the St. Louis Fed for the last 33 years, including serving as its president for the last 15 years,” Bullard said. “This is an outstanding organization with staff in every area of the Bank bringing their passion, integrity and a deep sense of purpose to our mission of promoting a healthy economy and financial stability. The Bank is well-positioned for ongoing success and impact.”

Bullard, 62, led the St. Louis Fed through the Great Recession, the COVID pandemic, and most recently, a period of high inflation that has involved raising key interest rates sharply. He was one of the Fed presidents on the influential Board of Governors, which sets monetary policy for the U.S.

“It has been both a privilege and an honor to be part of the St. Louis Fed for the last 33 years.”

24 • FALL 2023

by Roby Brock

Bullard, 62, led the St. Louis Fed through the Great Recession, the COVID pandemic, and most recently, a period of high inflation that has involved raising key interest rates sharply.

He was familiar to many bankers in Arkansas as he frequented the state over the years. A successor has not been named, but the Bank’s first vice president and chief operating officer, Kathleen O’Neill Paese, assumed the duties of interim president and CEO effective immediately.

A search committee is underway to name Bullard’s replacement and one Arkansan will have a prominent role in selecting a successor. The search committee is composed of the six Bank directors who are not affiliated with regulated banks or financial institutions (Class B and Class C directors), including: • R. Andrew Clyde, president and CEO, Murphy USA, El Dorado, Ark. • James M. McKelvey, Jr., founder and CEO, Invisibly, Inc., St. Louis. McKelvey chairs the Bank’s head office board and will also serve as the search committee chair.

• Carolyn Chism Hardy, president and CEO, Chism Hardy Investments LLC, Bartlett, Tenn. Chism Hardy is the deputy chair of the Bank’s head office board and will serve as the vice chair of the search committee.

• Lal Karsanbhai, president and CEO, Emerson Electric Co., St. Louis • Penny Pennington, managing partner, Edward Jones, St. Louis • Michael Ugwueke, president and CEO, Methodist Le Bonheur Healthcare, Memphis, Tenn.

Of interest, neither the President nor the U.S. Senate have any say in picking presidents of the 12 regional Fed banks. They’re chosen by their private sector boards of directors, subject to the approval of the Fed Board of Governors in Washington, D.C. Presidents of the 12 regional Fed banks are up for reappointment every five years.

The Federal Reserve Bank of St. Louis, one of 12 regional banks, serves the Eighth Federal Reserve District, which includes all or parts of Missouri, Illinois, Indiana, Kentucky, Tennessee, Mississippi and Arkansas.

by Roby Brock

J

im Taylor grew up on a farm in Pottsville in the heart of Arkansas’ River Valley. His father was a builder and farmer, and Jim’s mornings, afternoons and weekends were filled with doing whatever needed to be done – fixing a fence, painting

a door, hauling hay, or cutting firewood. It’s a work ethic and humble beginning that has made him the principled banker he is today.

Illustration by Ashlee Nobel THE ARKANSAS BANKER

• 27

“I grew up on a farm and I thought I was either going to be a farmer or a veterinarian or something along those lines. I never dreamed that I'd get into banking,” Taylor said.

After graduating from nearby Arkansas Tech University with a degree in agricultural business, he landed a job with Farm Credit PC, a federal land bank. His upbringing was a big help. He was recruited away to a banking job in Texarkana – on the Texas side – and spent over a decade in that role.

An introduction by developer Jim Lindsey to Renie Rutledge, First Security Bank’s Chairman and CEO, led to Taylor being recruited to start a new territory for the Searcy-based bank in Northwest Arkansas in the late ‘90’s. It worked out pretty good.

“We started from scratch,” Taylor recalls. “I moved up here from Texarkana in 1998. We had a set of building plans and a vision for what we wanted to do, and we just started from there.

I helped grow us to where we were number two in market share in the market.”

In 2012, Taylor transitioned to First Security’s holding company and took on statewide responsibilities. Today, he holds two titles:

Senior Vice President at First Security Bancorp and Chairman of the Arkansas Bankers Association.

His chosen profession – banking, not farming or being a vet – is in an industry that has survived and thrived through plenty of tumult. For Taylor, he sees tremendous resiliency from Arkansas banks during the latest economic turmoil.

“We've got one of the strongest banking economies in the country, and I think that's pretty evident by the fact that a lot of our banks went outside the state and became more regional players,” he said, also noting the strong capital of the state’s community banks.

Arkansas banks showed tremendous leadership during the COVID-19 crisis and now they’re weathering the teetering signals that could tip the national economy into a recession.

“You go back and look at the PPP [Payroll Protection Program] and how the community banks in the middle of the country rolled that out and did it in such a stellar way. There was very little fraud that came out of PPP through community banks. And the delivery processes, we were working 24 hours a day, seven days a week. We literally had people inputting stuff 24 hours a day just

THE VISION

UP PARTICIPATION B R OA D E N E D U CAT I O N A L O P P O RT U N I T I E S

& in policy shaping

become more engaged

AT T H E S TAT E A N D FEDERAL LEVELS

28 • FALL 2023

“WE'VE GOT ONE OF THE STRONGEST BANKING ECONOMIES IN THE COUNTRY.”

Jim Taylor, Senior Vice President at First Security Bancorp and Chairman of the Arkansas Bankers Association.

so we could get money to our customers that needed it to stay afloat,” Taylor said.

Regulatory challenges and a rising interest rate environment are the latest hurdles for the banking industry to navigate. Taylor said with solid liquidity, leadership from State Bank Commissioner Susannah Marshall, and community leaders who have been through up and down cycles, he’s not concerned in the long run. He does believe the higher interest rates will be here for longer than expected.

“I think we're going to see a new norm. More and more people are coming to the realization that this is going to be a longer period of higher rates. But you know, historically, it's still not that bad,” he added.

As the new chairman of the Arkansas Bankers Association, Taylor has a big vision for where he wants to see the trade group focus. He wants to up participation, broaden educational opportunities, and become more engaged in policy shaping at the state and federal levels.

“We want the association to be as strong as we possibly can be," Taylor said. "With the pandemic, it taught everybody that you

didn't have to necessarily come out of your office or come out of your home office and get back in and participate as much as we did before. The challenge is to get more people to participate in our education programs, in our convention, in our mega conferences.

To do that, we want to be able to show that we're worthy, that we are working hard for the industry and working hard for the banks, and we need their support."

"The board is becoming more active. It's going to be a board that's going to have one-on-one relationships with banks, even banks that don't have representation on the board. If we don't evolve, we're going to die. If we continue to do things like we've always done, we're not going to grow, we're going to dwindle," he added. "I wish I knew who originated this quote because I really like it: 'If you don't have a seat at the table, you're probably on the menu.' We want to always have a seat at the table. We never want to be on the menu. That goes with whether we're at the State House talking to state legislators or if we're in D.C. making our case with federal regulators or our representatives."

THE ARKANSAS BANKER

• 29

30 • FALL 2023

2023

Farm Bill

Update

by Ed Elfmann

E

very five years, Congress passes an all-encompassing piece of legislation to support agriculture, rural, and nutrition policies. This legislation is commonly known as the Farm Bill. Why does the Farm Bill matter to agricultural bankers?

THE ARKANSAS BANKER

• 31

WHAT IS THE FARM BILL AND WHY DOES IT MATTER? The Farm Bill has existed in many different forms since the 1920s. The 2018 Farm Bill is the most recently enacted Farm Bill. The 2018 Farm Bill was organized into 12 different titles and the 2023 Farm Bill will likely be organized the same way. The titles are: Commodities, Conservation, Trade, Nutrition, Credit, Rural Development, Research, Forestry, Horticulture,

The Farm Bill affects every American through all the different programs within the legislation and it has impact on rural banking in many ways.

32 • FALL 2023

Crop Insurance, and Miscellaneous. The titles create an organized way to split up the agencies within USDA. Among the 12 titles, agricultural bankers are most affected by the following six: Conservation, Trade, Credit, Rural Development, Forestry, and Crop Insurance.

These titles have loan programs that can be used by lenders to finance their customers.

The Credit title has Farm Service Agency (FSA) Guaranteed Loan Programs, which are the most used by rural bankers.

The American Bankers Association’s Agricultural and Rural Bankers Committee has developed a list of priorities for the 2023 Farm Bill.

due to jurisdiction issues. Regardless, ABA will continue to push for passage of ACRE and discuss it at every available opportunity, including statements for the record during Farm Bill hearings.

• Increase the size of FSA Guaranteed Loan limits on Farm Ownership Loans to $3.5 million and Farm Operating Loan Programs to $3 million;

WHAT IS THE TIMING FOR THE FARM BILL?

• Modify the USDA Beginning Farmer and Rancher Loan Programs to better reflect the current farming structures that exist in agriculture; • The Down Payment Assistance Program needs to be adjusted to inflation;

... agricultural bankers are most affected by the following six [titles]: Conservation, Trade, Credit, Rural Development, Forestry, and Crop Insurance.

Through ABA’s ongoing discussions with members of the House and Senate Agriculture Committees and Congressional staff, many lender priorities will likely be included in the 2023 Farm Bill including ABA proposals to increase the FSA Guaranteed Loan Programs; modify the Beginning Farmer and Rancher Loan Programs; adjust the Down Payment Assistance Program; ease of use for Rural Development Loan Program; and technology modernization.

• The Interest Assistance Program needs to be reinstated. It should be limited to Beginning Farmers and Ranchers or distressed borrowers; • More consistent funding for Rural Development Loan Programs as these programs are often lacking funding. Additionally, the approval process for these programs is currently too long and inconsistent; • Technology modernization for USDA Loan Programs.

ACRE AND THE FARM BILL ABA has been a supporter of the Access to Credit for our Rural Economy (ACRE) Act, which removes the taxation on income earned from interest on farm real estate loans, rural housing loans, and aquaculture loans. Despite currently having 20 cosponsors in the House and 2 cosponsors in the Senate, ACRE is unlikely to be part of the Farm Bill because it is tax legislation. The Farm Bill has traditionally avoided including tax-related legislation

The 2023 Farm Bill is unlikely to be completed by the expiration date of Sept. 30, 2023, which means there will be a short-term extension that will likely go through Dec. 31, 2023. Based on this timeline, the Senate and the House of Representatives will consider their versions of the 2023 Farm Bill during October. After the legislation moves through both chambers, the agriculture committees will come together for a conference committee where the differences between the two versions will be worked out. It is also an opportunity to make sure lender priorities are included in the final 2023 Farm Bill.

After the conference committee, the legislation goes back to the floors of the Senate and the House of Representatives, where it will be voted on again, hopefully pass, and then head to the president for his signature.

This process is never easy, and the 2023 Farm Bill will be harder to pass into law than past Farm Bills. This is due to the shrinking number of members of Congress from rural areas. The Farm Bill affects every American through all the different programs within the legislation and it has impact on rural banking in many ways. ABA will continue to work with other groups towards the final passage of the 2023 Farm Bill this fall. Bankers live and work in the same rural communities as our farmers and ranchers, and it is vital that these rural communities have the resources they need to thrive.

ABOUT THE AUTHOR Ed Elfmann is ABA Senior Vice President, Agriculture and Rural Banking Policy.

THE ARKANSAS BANKER

• 33

BankTalentHQ HELPING RECRUIT

& ELEVATE

BANKING CAREERS

BankTalentHQ is a website – www.banktalenthq.com – that provides coaching advice, career outlooks, industry opportunities, and a variety of employment options ranging from internships to seasoned professionals.

34 • FALL 2023

T

he Illinois Bankers Association launched a new initiative several years ago to help recruit new employees and elevate existing workers in the field of banking. BankTalentHQ is a website –

www.banktalenthq.com – that provides coaching advice, career outlooks, industry opportunities, and a variety of employment options ranging from internships to seasoned professionals.

Randy Hultgren, a former Congressman, is now the CEO of the Illinois Bankers Association, which manages BankTalentHQ. He offered insight on what the site is hoping to accomplish and some of the trends he’s witnessing through the portal.

ABA: What are you seeing in the marketplace right

now? It’s a pro-worker environment right now with almost two job openings for every one worker.

Randy Hultgren: We're seeing the same. It's not maybe as bad as it was a year or two ago. We're seeing some improvement there, more applicants, more people interested in working in banks. We see it as a really good environment for people to be looking to join a bank as an employee, or to grow in their careers, and move up into different potential areas where they could serve within banks where they can make better salaries, better opportunities all the way around for them.

ABA: You cater to entry level workers as well as veterans in banking. First, what do you find draws a young person to banking? How do you appeal to younger people to get into banking to begin with?

Hultgren: Part of our challenge with BankTalentHQ, but also with state banking associations and our bankers, is really helping young people realize that there's so much more to working in a bank than what they have in their mind. The old mindset of a banker sitting in an office and saying no - there's just so much more there for people.

There are career opportunities in finance, in lending and, and in personal service. There are also great opportunities in marketing, technology, communications, and information. We also try to appeal to younger workers to be interested in working in banks because there are wonderful career benefits, great salaries, and great opportunities for them to grow, develop, and serve.

One of the things that I love about banking is that it's still people helping people. The idea of banking is helping someone make their dreams come true. That's what a banker loves to do is coming alongside people, planning, understanding finance and lending and credit, and all of these different things. Being able to walk alongside an individual or customer and to guide them towards fulfilling whatever their objective is and what their dream is. That can be incredibly fulfilling for people.

I also love that bankers are oftentimes the first ones to step up when there's a need in a community, when there's a crisis. Oftentimes it's the people at the bank who start the process of setting up a fund to help a family or help a community that's in need.

THE ARKANSAS BANKER

• 35

We're... providing other training, other resources “ to allow people to be able to move into a different area of banking than they've been in in the past that might help them further their career.

”

ABA: Why do banks need to recruit young workers

into their workforce?

Hultgren: We need young people to continue to be interested serving in banks and serving customers. But we want young people to see that the banks still are a vital resource for them. You know, I think there's some young people, and a lot of other people these days, who don't necessarily need to go into the lobby of a bank as often as they used to. A lot of things can be done through our phones or through our computers to be able to transact. But when there's a big major event that's going on where it's impacting my own finances, I want to have somebody that I can turn to who can help guide me through that process.

Banking is still relationship-based. And so again, that's why it's so important for us to have young people in the workforce. One of the things we talk about often with our bankers here in Illinois, but also down in Arkansas and other places, is to be reaching out to young people while they're still in school. I know Arkansas bankers do a great job in providing financial literacy training to young people in high school, middle school, grade school and encouraging people when they're looking to go to college to consider banking or finance as a great career. I think that's what is going to make banking strong for decades and decades to come.

ABA: What else are you're seeing at BankTalentHQ

in terms of more veteran bankers. What is happening in the market right now?

Hultgren: Again, there's great opportunity there as well. One of the big challenges that we're talking about often, especially with our smaller banks and smaller communities, is a lot of their leadership might be older and they need to make sure that there's a succession plan in place of future leadership for that community bank. It's so important, certainly for that bank, but also for that community.

I just am convinced that a community bank is oftentimes the lifeblood of that community going forward. So for people who have been in banking, one of the things they certainly understand are the benefits of a career in banking. They understand that it's very rewarding, it's an opportunity to help people, but it can also 36 • FALL 2023

be a great salary with great benefits. I think one of the challenges that we're seeing from more seasoned workers or veteran workers in banking is that people can feel like they get almost typecast in a certain role in a bank.

What we're doing with BankTalentHQ with different banking associations is providing other training, other resources to allow people to be able to move into a different area of banking than they've been in in the past that might help them further their career. Ultimately, if they're going to be a leader of a bank, president of a bank, they need to understand all of these different functions, not just the function that they've done personally, but to be able to see beyond that. That's a lot of what we do with BankTalentHQ is provide that training, provide that coaching, provide connections, and help people see other opportunities outside of just the line of work that they've been in. It really sets them up to be ultimately a leader of a bank, to lead divisions, or maybe ultimately be president of a bank.

ABA: What are your hopes for Arkansas, for some

of the bankers who will read this interview and possibly work with BankTalentHQ.com?

Hultgren: Our hope is that they will use it, that they'll take a look and see that this is a wonderful resource for their bank, for people within their bank, and to be able to find new talent that might be coming from other parts of Arkansas or even other parts of the country. It really is the first time where there's a place where people can go to be able to find opportunities, but also find individuals and make those connections.

Our hope as well is people - young people who are interested in banking - maybe they're finishing up their degree, finishing up their university work, that they'll see that this is a great place for them to get engaged, to put their resume, to put their profile on BankTalentHQ to have it seen by bankers across the country, all different kinds of banks, all different sizes of banks.

We want to help make banks stronger by building greater talent within the banks, and then also giving wonderful opportunity for people to pursue their own careers and development by finding more opportunities that they wouldn't have been able to find through other resources.

THE ARKANSAS BANKER

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INDUSTRY U P DAT E S

FEDNOW

Fast Uptake or

Slow Rollout?

by Rachel Davis 38 • FALL 2023

T

he introduction of the Federal Reserve's real-time payments platform, known as FedNow, has sparked considerable interest in the financial sector. While participation is on the rise,

challenges with technology integration and fraud prevention may flatten the adoption curve for the new instant payment infrastructure. Here’s a look at the first few weeks of the rollout.

“Access to FedNow isn’t the issue as much as redesign of back-office systems and processes that enable real-time data flow and payments orchestration.”

PARTICIPATION At FedNow’s launch on July 20, 2023, 35 early-adopting banks and credit unions had instant payments capabilities through FedNow, and 16 service providers were ready to support payment processing for banks and credit unions. In addition, the U.S. Department of the Treasury announced it would be an early adopter, and is using FedNow for certain types of payments. As of the writing of this article, the number of financial institutions live on FedNow grew to 55 plus the U.S. Department of the Treasury’s Bureau of the Fiscal Service, and 20 certified service providers had completed testing certification to support payment processing for participants. See which organizations are live on FedNow. Earlier this year, the Fed announced that 57 institutions had been certified to use FedNow. Certification requirements include confirming the ability to transmit and process ISO 20022 messages, and demonstrating the ability to operate in a 24x7x365 instant payments environment.

A Forbes industry expert predicts that 200 financial institutions will be onboarded on the system by the end of 2023. However, even if FedNow participation increases to 500 in 2024 as Forbes projects, adoption by less than 6% of all banks and credit unions in the U.S. represents a slow rollout.

designed for the real-time environment.

Access to FedNow isn’t the issue as much as redesign of back-office systems and processes that enable real-time data flow and payments orchestration. This is the type of digital transformation banks and credit unions need in order to be certified for FedNow participation.

Another potential technology integration issue involves fraud prevention.

One of the criticisms of FedNow is the basic nature of anti-fraud measures in its initial release. The Fed plans to add new anti-fraud tools in 2024, and even then financial institutions will need to continue to actively minimize the risk of fraud associated with instant payments.

FedNow participants need to integrate the system into their fraud management programs. Some institutions may need to

add resources and technologies to protect against this risk.

Still, the early adopters have proven the technology integration can be accomplished.

Some of the successful practices emerging with FedNow implementation include: • Going live with receive-only initially in order to better manage the transition before adding send functionality • Using a phased rollout approach to specific customer segments By modernizing the U.S. payment infrastructure, FedNow could help to reshape the landscape of payments across the country, and level the playing field for banks and credit unions. Financial institutions that adopt FedNow gain the capability to meet growing customer demand for instant payment options.

“A Forbes industry expert predicts that 200 financial institutions will be onboarded on the system by the end of 2023.”

TECHNOLOGY INTEGRATION ISSUES Though no major reports of widespread integration issues have yet emerged, it’s recognized that like any technology integration, going live on FedNow is a complex undertaking. Financial institutions still operating on legacy systems are likely to face the most extensive challenges since most older systems weren’t

ABOUT THE AUTHOR Rachel Davis is the Product Manager of GRC and professional education for banks, credit unions, and non-bank financial services at OnCourse Learning. Rachel has worked in the financial services industry for 12 years and keeps up to date on financial industry hot topics.

THE ARKANSAS BANKER

• 39

INDUSTRY U P DAT E S

Economic Uncertainty, Rising Interest Rates CHALLENGE BANKS

by Carl White

T

he U.S. banking system is sound and resilient, with strong capital and liquidity, according to the latest report on bank supervision and regulation released in May by the Federal Reserve Board of Governors.1 Nevertheless, bank supervi-

sors are actively monitoring risks associated with credit, liquidity and interest rates. These risks have risen in 2023 because of prevailing economic conditions and uncertainty about the future path of the economy.

The banking system was challenged earlier this year by the failures of three large banks (Silicon Valley Bank, Signature Bank and First Republic Bank). Even though those failures were largely triggered by concentrated funding sources and poor interest rate risk management at the institutions themselves, fear of contagion led to an anxious couple of months for depositors, investors and regulators.

Of greater concern for the industry has been the effects of rising interest rates on the cost of deposits and other funding (causing costs to rise) and the fair value of investments in fixed-rate securities

40 • FALL 2023

(causing the value to decline). Loan delinquency rates in some loan categories have begun to inch up, albeit from very low levels, leading many banks to increase the funds set aside to cover future credit losses. Higher interest rates when loans reprice means some borrowers may be challenged to make loan payments.

FUNDING COSTS RISE One of the most noteworthy developments in banking over the past year has been an increase in funding costs. Deposits—typically the lowest-cost liabilities—fell almost $1 trillion between April 2022 and April 2023, after a pandemic-led surge pushed them to an all-time high of $18 trillion in April 2022.

The most significant outflows have occurred at institutions with high levels of uninsured deposits. In turn, many banks have had to rely more on costlier wholesale funding—fed funds (overnight borrowing from other banks), brokered deposits, Federal Reserve facilities and Federal Home Loan Bank borrowings, for example—to meet loan demand.

Rising interest rates have increased funding costs, regardless of type.

CYBERSECURITY AND CRYPTORELATED RISKS

“Of greater concern for the industry has been the effects of rising interest rates on the cost of deposits and other funding (causing costs to rise) and the fair value of investments in fixed-rate securities (causing the value to decline).”

Another potential source of liquidity— the sale of investment securities held as assets—is problematic because the increase in interest rates has lowered their value; selling these assets would turn unrealized losses into realized ones.

Examiners are closely monitoring supervised banking organizations with significant underwater securities holdings and other interest rate risk exposures, conducting targeted exams as needed. Exams have been focused on deposit trends, the diversity of funding sources, the current value of investment securities and the adequacy of contingent funding plans.

COMMERCIAL REAL ESTATE CONCERNS Examiners are also paying close attention to banks with significant commercial real estate (CRE) portfolios. Concerns about credit quality typically rise when economic conditions are uncertain and interest rates are rising, but this cycle has the additional twist of a secular decline in demand for office space related to the rise in remote work.

If this dip in demand leads to a downturn in property values, CRE mortgage holders may find it much harder to refinance maturing loans. Furthermore, as interest rates increase, capitalization rates tend to increase as investors expect a higher rate of return. Many properties may be unable to produce the desired rate of return, limiting investment in commercial real estate.

Since 2006, the Federal Reserve has increased its monitoring of CRE loan performance and has established expectations for expanded risk management practices for banks that are heavily concentrated in CRE. In June 2022, the Fed expanded exam procedures for banks with significant CRE concentration risk. In addition to focusing on banks’ financial condition, capital planning and risk management, examiners are taking a close look at construction and land development activities, since construction lending typically accounts for a large share of losses when CRE markets deteriorate.

Other loans to businesses—called commercial and industrial loans—are also under scrutiny as examiners assess the effects of rising interest rates on their performance.

As noted in previous supervision reports, regulators are paying close attention to cybersecurity risks. Vulnerabilities noted in exams are being addressed, and examiners are testing banks’ preparedness for ransomware attacks and other security breaches.

Upheaval in crypto markets in late 2022 and early 2023 led to extreme deposit runoffs at banks that service the crypto industry: Silvergate Bank, an $11 billion bank with close ties to the industry, voluntarily liquidated in early 2023; and crypto-related business exposure was partially responsible for the failure of Signature Bank around the same time. In early August, the Federal Reserve released additional information about a new supervision program for banks that engage in “novel activities” related to crypto-assets and other fintech-related lines of business.

WHAT’S AHEAD As we look ahead to the remainder of 2023, it is likely that bank funding costs will remain elevated. Recent data from the Federal Reserve’s Senior Loan Officer Opinion Survey also point to ongoing tightening in credit markets, and we’re seeing rising delinquencies on consumer loans.

These data point to the need for continued vigilance by bankers and bank supervisors and highlight the importance of ensuring adequate access to contingency funding lines.

Despite some positive market signals, there are still significant headwinds ahead.

“Recent data from the Federal Reserve’s Senior Loan Officer Opinion Survey also point to ongoing tightening in credit markets, and we’re seeing rising delinquencies on consumer loans.”

1. The semiannual report covers banking conditions, as well as regulatory and supervisory developments for the institutions under the Fed’s supervisory umbrella.

This article is part of a series titled “Supervising Our Nation’s Financial Institutions.”

THE ARKANSAS BANKER

• 41

INDUSTRY U P DAT E S

Bank Directors WORKSHOP

S

everal bank directors from around the state recently took part in a bank directors workshop led by David Kemp of Bankers Management, Inc. Deputy Commissioner Dharmin Patel along with Asst.

Deputy Commissioner Gary Bush of the Arkansas State Bank Department also spoke to the group of directors. Discussion about industry challenges, board responsibilities and key regulations were all covered during the workshop as well as hot topics such as technology, staffing, and interest rate increases.

42 • FALL 2023

NEWS & MOVES JIM HUDSON NAMED BY GOVERNOR AS DFA SECRETARY

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ov. Sarah Sanders announced that Jim Hudson will serve as chief fiscal officer and secretary of the Arkansas Department of Finance and Administration. He replaces Larry Walther, who was appointed as Arkansas Treasurer of State following the July passing of Treasurer Mark Lowery.

“Jim has devoted his career to serving the people and state of Arkansas. He has helped lead our state to record low unemployment and strong economic growth and has the experience we need to keep Arkansas’ finances strong. I’m honored that he has agreed to serve in my Cabinet and help us make Arkansas the best state in the country to live, work, and raise a family,” Sanders said.

Hudson has held various leadership positions in the Arkansas Economic Development Commission and the Arkansas Department of Commerce, most recently serving as the chief of staff under Secretary

Hugh McDonald. In his role as chief of staff, Hudson had responsibility for driving improved efficiency and effectiveness of the department across all nine of its divisions.

Prior to joining AEDC, Hudson served for 11 years in pastoral ministry at Fellowship Bible Church in Little Rock. Before his work at Fellowship, he served as chief legal counsel for Technisource, a technology staffing and solutions company in Little Rock, and at Staffmark, a commercial staffing company in Fayetteville. Hudson also held various legal and human resources positions with ALLTEL in Little Rock.

Hudson is a native of North Little Rock, Arkansas.

He received a bachelor’s degree from Hendrix College, his Juris Doctorate from the William Bowen School of Law, a master’s degree from John Brown University, and a master’s degree in divinity from The Southern Baptist Theological Seminary.

“JIM HAS HELPED LEAD OUR STATE TO RECORD LOW UNEMPLOYMENT AND STRONG ECONOMIC GROWTH AND HAS THE EXPERIENCE WE NEED TO KEEP ARKANSAS’ FINANCES STRONG.”

ADFA AWARDED $75 MILLION

IN FEDERAL TAX CREDITS TO CREATE LOW INCOME HOUSING

T

he Arkansas Development Finance Authority (ADFA) recently awarded more than $75 million in federal Low-Income Housing Tax Credits (LIHTC) that will generate approximately $64 million in equity.

The LIHTC were awarded based on a competitive application process to six different developers and will be used to build nine affordable multi-family developments consisting of 499 units for Arkansas families, seniors, and people with disabilities. The total construction cost of the nine developments is about $89 million and will create hundreds of jobs.

The LIHTC program is an important resource for creating affordable housing in Arkansas. The LIHTC program is the state’s primary means of drawing private capital towards the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households.

Developers awarded LIHTC sell the credits to investors at a discounted rate and use proceeds as partial financing for their development. The investors claim the tax credits over a 10-year period to offset their federal income tax liability. The LIHTC are designed to cover approximately 70% of each development’s eligible development costs.

In exchange for the credits, developers must limit occupancy to households earning less than 60% of the area median income and keep rents at the affordability level set by the United States Department of Housing and Urban Development. This affordability must be kept for 30 years.

In addition to LIHTC, ADFA loaned approximately $16 million in federal HOME Investment Partnerships Program (HOME) funds to developers awarded LIHTC.

THE LIHTC PROGRAM IS THE STATE’S PRIMARY MEANS OF DRAWING PRIVATE CAPITAL TOWARDS THE ACQUISITION, REHABILITATION, OR NEW CONSTRUCTION OF RENTAL HOUSING TARGETED TO LOWER-INCOME HOUSEHOLDS.

THE ARKANSAS BANKER

• 43

NEWS & MOVES

CROSS BANK Brandon DeGroat

Jonesboro Community Bank President

Chaun Yielding

PROMOTES TWO

Internal Audit Manager

C

ross Bank announced the promotion of two employees: Brandon DeGroat to the position of Jonesboro Community Bank President, and Chaun Yielding to Internal Audit Manager.

DeGroat joined Cross Bank in December of 2022, serving as Vice President and loan officer of its Jonesboro market.

An alumnus of Arkansas State University in Jonesboro, DeGroat holds a Bachelor of Science degree in Finance and a Master of Business Administration.

He is a member of the Jonesboro Chamber of Commerce’s Young Professionals Network and the Northeast Arkansas Home Builders Association.

Chaun Yielding currently serves as Vice President and Chief Deposit Officer for Cross Bank and will now also hold the position of Internal Audit Manager.

Yielding has been with Cross Bank for 24 years, joining the bank in 1999 as a

teller. She held many other roles in customer service and branch operations before being promoted to Vice President and Chief Deposit Officer in 2020.

Yielding is attending her second year at the Barret School of Banking in Memphis, Tenn., and will graduate in May of 2024.

“I am always thrilled when we are able to promote someone who has shown drive, dedication and the desire to grow within our bank. Chaun and Brandon will continue to demonstrate these traits in their new roles, and the bank will benefit greatly from their leadership,” said Cross Bank President & CEO, David Dowd.

CITIZENS BANK HIRES

ZACH MCCOY AS NEW CFO

B

atesville-chartered Citizens Bank has hired Zach McCoy as its new executive vice president and chief financial officer. He replaces Karen Shaw, who was promoted to chief risk officer to expand the bank’s enterprise risk management division.

McCoy was most recently senior vice president of corporate finance at Bank OZK of Little Rock.

“I am confident Zach McCoy will make an excellent addition to our executive team,” said Adam Mitchell, CEO and president of Citizens Bank.

“His extensive experience in corporate finance and strategic mindset make him a strong fit for this role. We know his contributions will strengthen our

44 • FALL 2023

financial operations and drive continued growth.”

McCoy holds a bachelor’s degree from the University of Central Arkansas, with a major emphasis in accounting and finance and a minor emphasis in psychology. He is a Certified Public Accountant (inactive), a member of the American Institute of Certified Public Accountants and the Arkansas Society of Certified Public Accountants.

Citizens Bank has 212 employees, according to the most recent data from the Federal Deposit Insurance Corp. (FDIC). As of March 31, the bank’s assets totaled $1.4 billion. That’s up from $1.23 billion compared with the same date in 2022.

“HIS EXTENSIVE EXPERIENCE IN CORPORATE FINANCE AND STRATEGIC MINDSET MAKE HIM A STRONG FIT FOR THIS ROLE.”

BANK COMMISSIONER SUSANNAH MARSHALL

WILL ALSO LEAD ARKANSAS SECURITIES DEPARTMENT

G

Susannah Marshall

Securities Department Commissioner/ State Bank Department Commissioner

ov. Sanders also appointed state Bank Commissioner Susannah Marshall as Commissioner of the Arkansas Securities Department effective immediately. She becomes the state’s 19th Securities Commissioner.

A new state law, Act 475, placed the Arkansas Securities Department under the Arkansas State Bank Department. Act 475 transferred the administrative functions of the State Securities Department to the State Bank Department and amended the law concerning the organization of the department. The act also stipulates that the Governor appoints the Securities Commissioner who will report to the Bank Commissioner, or the Bank Commissioner may act as the Securities Commissioner.

Marshall, who was reappointed Commissioner of the State Bank Department in June by Gov. Sanders, will serve as both the state’s Securities Department Commissioner and the state’s Bank Department Commissioner. Both commissions are under the umbrella of the Department of Commerce.

“Susannah has been a tremendous leader for the Arkansas State Bank Department, and I have no doubt her experience and expertise in the financial industry will enable her to effectively lead the Arkansas Securities Department,” said Secretary of Commerce Hugh McDonald. “Serving dual roles has unique challenges, but I am confident that Susannah is up to the task of continuing the excellent service that ASD has provided Arkansans for more than half a century.”

Campbell McLaurin, who has served as the interim Commissioner since March 2022, will continue serving the department in the role of Deputy Commissioner.

McLaurin successfully led the department through an orderly transition in the merger with the State Bank Department.

Established in 1959, the primary functions of the Securities Department are to protect Arkansas consumers, educate investors, and safeguard the state’s financial markets. It became part of the state Department of Commerce in 2019.

“I am honored to receive the appointment to serve as the state’s Securities Commissioner,” said Marshall. “I believe the alignment of the Arkansas Securities Department with the Arkansas State Bank Department will serve to enhance our oversight and supervision of the financial services sector in Arkansas. I look forward to working with Governor Sanders, Secretary McDonald and the Securities Department team to build on the history and strong foundation of the ASD. Together, we will work to further develop the mission and focus to help protect consumers, enhance financial services education and provide a safe and opportunistic economic environment in Arkansas.”

Marshall has worked for the Arkansas State Bank Department since 1995 and was appointed Deputy Bank Commissioner in 2007. From 1995 to 2003, she served as a commercial bank examiner. She became a financial analyst in 2005 and was promoted to financial analyst supervisor before being named the Deputy Bank Commissioner.

“I BELIEVE THE ALIGNMENT OF THE ARKANSAS SECURITIES DEPARTMENT WITH THE ARKANSAS STATE BANK DEPARTMENT WILL SERVE TO ENHANCE OUR OVERSIGHT AND SUPERVISION OF THE FINANCIAL SERVICES SECTOR IN ARKANSAS. ”

THE ARKANSAS BANKER

• 45

NEWS & MOVES UMB BANK HIRES

JEFFREY HENDRICKS IN CORPORATE TRUST DIVISION

U

MB Bank has hired Jeffrey Hendricks as vice president, relationship manager in the Corporate Trust division.

Hendricks is responsible for day-to-day administration of a book of trustee and escrow agent appointments and negotiating document provisions of new accounts by working with in-house and outside counsel, financial advisors and underwriters.

He will also promote UMB in the trustee and escrow agent market with a focus in Arkansas and southern Missouri.

“I am honored to join UMB’s corporate trust team,” said Hendricks. “The bank is a leader in the trust space and I’m excited about the opportunity to grow UMB’s presence in the Arkansas market.”

Prior to joining UMB Bank, Hendricks was vice president, corporate trust administrator at Bank OZK for 16 years.

“With over a decade of industry experience under his belt, Jeff was a natural additional to our division,” said Douglas Hare, senior vice president and regional manager at UMB Bank, “We welcome his expertise as we continue to expand to new regions.”

Hendricks earned his Bachelor of Arts in business administration and finance from Ouachita Baptist University and his Bachelor of Business Administration in accounting from the University of Arkansas at Little Rock.

UMB is headquartered in Kansas City. It has branches in Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas.

“THE BANK IS A LEADER IN THE TRUST SPACE AND I’M EXCITED ABOUT THE OPPORTUNITY TO GROW UMB’S PRESENCE IN THE ARKANSAS MARKET.”

SOUTHERN BANCORP HIRES

JEREMY DAVIS AS PRESIDENT OF MORTGAGE COMPANY

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outhern Bancorp, a Community Development Financial Institution (CDFI), announced the hiring of a president of mortgage, a position that will lead its mortgage company and expand its efforts in the industry. Following a nationwide search, Jeremy Davis of Nashville, Tenn., has been selected for the role.

“The expansion of our mortgage business, with a particular focus on reaching Black and Hispanic prospective homebuyers, aligns with our efforts to help close an approximate 30-point homeownership gap these minority households face when compared to white households. In order to address this long-standing and systemic challenge, we needed a leader with a proven track record of providing affordable and responsible mortgages and homebuyer education to first-time homeowners,” said Darrin Williams, CEO of Southern Bancorp, Inc. “Jeremy hits the mark perfectly, bringing extensive experience in both building and operating

46 • FALL 2023

successful mortgage companies focused on minority communities, as well as a passion for this work that we believe will be key as he builds a team of like-minded lenders to serve communities across the South and Mid-South,” he added.

Davis brings to the role more than 20 years of experience in both the mortgage industry and as an advocate for advancing financial equity in under-resourced communities. He previously served as president and CEO of InQlusion Mortgage Capital, a full-service, diversity-focused home lending company with a footprint spanning the entire southeast U.S. Prior to this, Davis was the director of mortgage at FirstBank, where he and his team won the 2020 National Mortgage Bankers Association’s Diversity & Inclusion Award for market outreach strategies that promoted fair lending and minority housing needs.

The mortgage company led by Davis will serve as a standalone division under the Southern Bancorp umbrella, a structure that supports the CDFI’s ability to balance mission and margin. One of America’s oldest and largest community development banks, the organization consists of three separate CDFIs working together, including Southern Bancorp, Inc., a bank holding company; Southern Bancorp Bank, a community development bank; and Southern Bancorp Community Partners, a 501(c)(3) nonprofit loan fund.

GRAYCEN BIGGER HIRED AS FNBC’S

STRATEGIC PARTNERSHIPS ASSISTANT VICE PRESIDENT

G

Graycen Bigger

Strategic Partnerships Assistant Vice President

raycen Bigger has been hired by FNBC as its new strategic partnerships assistant vice president where she will work closely in support of the bank’s CDFI-designation.

In this newly created role for FNBC, Bigger will forge community connections, enhance FNBC’s presence in the community, foster strategic partnerships and promote financial education. In addition to her role at FNBC, Bigger is also the executive director of the Northeast Arkansas Regional Intermodal Facilities Authority, which promotes job creation, improving infrastructure, and workforce development.

“We are thrilled to have Graycen join our team of community bankers,” said FNBC President & CEO Marty Sellars. “She has played an important role in some of our area’s most recent economic development success by working tirelessly to connect industry leaders to Northeast Arkansas. As a community bank, we understand we play a vital role as a catalyst for

economic development, and adding Graycen to our team will only further our mission.”

In 2016, FNBC was awarded Community Development Financial Institution designation by the CDFI Fund, part of the U.S. Department of Treasury, which indicates the bank has devoted at least 60% of its total lending, services and other activities to benefit low-income communities. This designation allows FNBC to be eligible for grant opportunities to ensure fair access to financial resources for underserved people and communities.

“We may have only received our CDFI designation in 2016, but FNBC has been serving the CDFI mission for more than 110 years,” said Dana Batterton, FNBC Executive Vice President, Chief Risk Officer and CDFI-lead for the bank. “I’m looking forward to working with Graycen to identify and build key partnerships to create even greater opportunities for the communities we serve.”

UNION BANKSHARES OF MENA TO UNIFY BANK CHARTER

U

nion Bankshares, Inc. of Mena announced a plan to unify the organization under a common name and bank charter.

The Union Bankshares, Inc. holding company currently operates two Arkansas bank charters, Union Bank and First National Bank at Paris. First National Bank at Paris operates branches under the First National Bank and Community National Bank brands.

First National Bank at Paris and Community National Bank have long been a part of the Union Bank family, operating within the Union Bankshares, Inc. holding company since 2005.

The charter consolidation is expected to be finalized in February 2024, at which time all nine offices in five counties will operate as Union Bank.

Customers will be able to do business at any of the bank’s nine locations in Booneville, Caulksville, Clarksville, Hatfield, Mena, Ozark, Paris, Waldron, and Wickes.

“Unifying our banks under a common name and charter will allow us to fully leverage our combined strengths, as we continually invest in our customers and communities,” said Jarrod Yarnell, Chief Executive Officer of Union Bank. “The confusion of having three distinct names within our holding company will be gone, but our ownership, management and operations will remain just as they are today.

We remain firm in our commitment to local bankers making local decisions,” he added.

“We’ve always been the premier local bank in Arkansas’ West Central and River Valley communities. As a community bank, we take great pride in our relationship-based business model focused on building long-term trust with our customers. After all, we live in your community too, and your success is our success,” said Steven Sosebee, River Valley Market President of Union Bank. “Our allegiance to our communities is stronger than ever with our soon-tobe common name and banking charter.”

“UNIFYING OUR BANKS UNDER A COMMON NAME AND CHARTER WILL ALLOW US TO FULLY LEVERAGE OUR COMBINED STRENGTHS, AS WE CONTINUALLY INVEST IN OUR CUSTOMERS AND COMMUNITIES.”

THE ARKANSAS BANKER

• 47

NEWS & MOVES

FIRST SECURITY BANK PROMOTES Brad Edwards

Senior Vice President, Credit Risk Officer

BRAD EDWARDS AND AARON BELL Aaron Bell

Market Leader for First Security Bank in Jonesboro

F

irst Security Bank has promoted Brad Edwards to senior vice president, credit risk officer.

Edwards led First Security’s entry into the Jonesboro market upon joining the company 17 years ago as president & CEO. Edwards has an extensive record of community service, having served in leadership capacities and board member roles with numerous local organizations. He said he looks forward to continued service with St. Bernards Healthcare’s Governing Board of Directors as well as Jonesboro Economic Development Corporation and Jonesboro Unlimited.

“We greatly appreciate Brad’s commitment and service to our community”, said former Jonesboro Mayor Harold Perrin, who currently serves as senior vice president of business development for First Security. “As he moves on to an expanded role with

First Security, our Jonesboro team looks forward to continuing the bank’s legacy of service to the place we are proud to call home.”

In success of Edwards, Aaron Bell has been named market leader for First Security Bank in Jonesboro. Bell has served with First Security for 12 years, most notably as senior vice president, senior lending officer. He has worked in several First Security market areas, including Northwest Arkansas, Central Arkansas and now Northeast Arkansas, as of the past two years.

Bell was born in Jonesboro but grew up in Texas. When the opportunity arose to move back closer to family, he took the leap and immediately began investing in the community via Jonesboro Advertising and Promotion Commission Sports Complex Steering Committee, Arkansas State University Museum Advisory Council, and United Way Loaned Executive Program.

“Aaron’s history with the bank and ties to this community give me confidence he will continue serving our customers and leading our team forward with excellence,” said Brad Edwards. “I am incredibly proud of our entire First Security Jonesboro team and their array of involvement in our growing community. We are very excited about the future for Jonesboro and First Security Bank.”

STONE BANK OPENS CHENAL PARKWAY FACILITY IN LITTLE ROCK

S

tone Bank has opened its new, full-service banking facility at 12615 Chenal Parkway. The three-story building, built by Bank OZK in 1998, was acquired this year by Stone Bank and is undergoing an extensive renovation to serve as the company’s corporate headquarters.

The retail branch bank features lobby service, four drive-up lanes and a 24-hour automatic teller

48 • FALL 2023

machine that also serves as an interactive teller machine (ITM) to extend live teller access beyond traditional banking hours.

“This is a very exciting time for Stone Bank,” said Stone Bank CEO Marnie Oldner. “This location puts us in the middle of one of Arkansas’ busiest intersections and the modernization of the building to serve as our headquarters for years to come will make a notable impression on the neighborhood.”

Stone Bank has offices in Little Rock, DeWitt, Gillett, Mountain View, Harrison and White Hall.

GENERATIONS BANK HIRES

NEW MARKET PRESIDENT FOR ROGERS

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Josh Vasquez Rogers Market President

ogers-based Generations Bank has hired Josh Vasquez as the company’s market president in Rogers. He replaces Max Harrell, who was elevated recently to chief growth officer.

Most recently, Vasquez was vice president and community outreach officer for Encore Bank in Rogers.

“It’s a joy to welcome Josh to our team in Rogers,” Generations Bank President Joe Ruddell said. “Josh’s experience in the Northwest Arkansas banking industry, along with his dedication to building meaningful relationships with his customers and colleagues, make him a great fit for the Market President role.”

Vasquez, a Northwest Arkansas banker for 20 years, immigrated from El Salvador to Los Angeles when he was 8 years old to live with his mother. Not long after, they left California for Northwest Arkansas, and Vasquez graduated from Decatur High School.

Vasquez is currently attending the Graduate School of Banking at Colorado.

He belongs to several boards, including the Rogers Lowell Chamber. He is also involved with L.I.F.E. Prep of NWA, Salvadorenos Unidos Para Arkansas, Mercy Hospital and Single Parent Scholarship Fund of Northwest Arkansas.

Vasquez is a 2015 graduate of Leadership Springdale and a 2018 graduate of Leadership Benton County. He is a member of the Northwest Arkansas Business Journal’s 2022 Forty Under 40 class.

Generations Bank has approximately 130 employees, 10 Arkansas locations and one in Missouri. The bank has one Rogers branch. According to the FDIC, the bank had $831.5 million in assets as of March 31. That’s up from $743.4 million (11.8%) compared with the same date in 2022.

“JOSH’S EXPERIENCE IN THE NORTHWEST ARKANSAS BANKING INDUSTRY, ALONG WITH HIS DEDICATION TO BUILDING MEANINGFUL RELATIONSHIPS WITH HIS CUSTOMERS AND COLLEAGUES, MAKE HIM A GREAT FIT FOR THE MARKET PRESIDENT ROLE.”

ARVEST BANK ESTABLISHES CENTERS OF EXCELLENCE TO FOCUS ON SPECIFIC INDUSTRIES

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ayetteville-chartered Arvest Bank has established new initiatives dubbed “centers of excellence” focused exclusively on the healthcare and food value chain industries.

Geordie Sanborn, with over 15 years of healthcare sales experience, joins the company from Bank of America to lead the healthcare center. Levi Price, with 12 years at Arvest and most recently as a loan manager in Siloam Springs, was chosen to lead the food value chain center due to extensive experience and relationships in agriculture.

The centers of excellence will focus on creating tailored products and solutions for industry-specific business needs.

“Arvest is well-known for its community focus, so while it’s unique for a bank of our size to establish dedicated centers of excellence, doing so will allow us to use that strength to better serve our customers,” Laura Merling, Arvest’s chief

transformation and operations officer, said in the release. “Geordie and Levi have the experience and industry reputation to successfully lead this initiative, and we’re excited for the opportunity this will bring to our customers in these respective markets.”

Since last year, Arvest has been working with Google’s cloud computing division to overhaul its current IT architecture and systems, including migrating its data centers to Google Cloud.

With over $27 billion in assets, Arvest serves over 110 communities through more than 200 branch offices in Arkansas, Kansas, Missouri and Oklahoma.

THE ARKANSAS BANKER

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