The Arkansas Banker Winter 2019

Winter 2019 • Volume CIII, No. 8

ASSET/LIABILITY MODELING | ASSET/LIABILITY VALIDATION | ASSET/LIABILITY CONSULTING

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Winter 2019 • Volume CIII, No. 8

COLUMNS

President’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Lorrie Trogden

Chairman’s Column. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Rob Robinson

Washington Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Rob Nichols

Member Spotlight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Candace Franks, Banks Commissioner

DEPARTMENTS Live Events & Webinars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 AmBA Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Member News. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Banker News & Moves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

ARTICLES The Arkansas Farm Mediation Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Repealing the Federal Tax Exemption for Credit Unions . . . . . . . . . . . . . 24 Save 10 for Bankers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Women in Banking: Laurie Stewart. . . . . . . . . . . . . . . . . 36 The Arkansas Banker Online Join us at www.arkbankers.org to read and share statewide banking news!

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.

Arkansas Bankers Association Staff Lorrie Trogden, President/CEO • Carla Brinkley, VP/Controller • Kami T. Coleman, VP/Professional Development • Heather Hill, Administrative Assistant • Jessica Sahene, Technology & Marketing Director • Michael Spigner, Communications Director

Winter 2019 n The Arkansas Banker

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President’s Message ABA OFFICERS Rob Robinson, IV, Chairman Simmons Bank, El Dorado

Jonathan Harrell, Chairman-Elect Lorrie Trogden | President & CEO Arkansas Bankers Association

Generations Bank, Rogers

Jim Cargill, Vice Chairman

as;dfgijaofgjasogasodf To quote Gretchen Rubin: “The days are long, but the years are short.” October marked my one-year anniversary as the ninth President/CEO of the Arkansas Bankers Association, and what a fantastic year it has been. I have thoroughly enjoyed traveling the state getting to know all of you, as well as spending time in both our state and national capitols advocating on behalf of our industry. I am extremely thankful for our ABA team, they are the backbone of our association and keep us moving ever forward. They have given tremendous support during my first year.

Arvest Bank, Little Rock

Starting with state advocacy, it was announced in October that in 2020 the State Bank Department and other Department of Commerce agencies will be moving into the old Verizon headquarters on Riverfront Drive. We are monitoring moving plans to ensure that everything we worked out with the governor during the legislative session comes to fruition. I will continue to give updates in our Tuesday eNews updates.

Arkansas Bankers Association, Little Rock

November brought filing for state House and Senate seats, and as I am writing this, two days remain in the filing period. There are several races important to our industry in which we are utilizing our PAC money wisely. Contributing to the ABA BankPAC helps support pro-industry candidates, and it is important that we replenish what was utilized this cycle. I encourage your bank to contribute, along with your personal contribution; every dollar counts and is put to good use. For information about donating to the state and federal PAC, please visit the Advocacy page on our website (www.arkbankers.org). Great things happen when bankers come together, and your PAC contribution is one of the most important investments you can make to protect the future of our industry.

Tom Grumbles, Treasurer First Service Bank, Greenbrier

Cathy Owen, Past Chairman Eagle Bank & Trust, Little Rock

Lorrie Trogden, President & CEO

BOARD OF DIRECTORS Johnny Adams, Conway Craig Attwood, Pine Bluff Jeff Brecklein, Jonesboro Nathan Gairhan, Springdale David Jessup, DeWitt Lance Lanier, Van Buren

Moving on to federal advocacy, we had a group of 18 bankers on the fall D.C. advocacy trip, and everyone did an excellent job discussing industry important issues with both regulators and our congressional delegation. The trip included visits with FinCen, CFPB, FDIC, Federal Reserve, and the OCC. Our group was able to meet with the newest Federal Reserve Governor, Mikki Bowman. We talked through our list of issues and she also had many questions for us. In addition, the ABA hosted a well attended reception for our delegation and their hard working staffers. It was a successful trip, and the Association greatly appreciates our volunteers who make the trip.

We would love to have even more bankers attend next year. Our spring trip dates are March 23-25, 2020, so watch for registration to open soon.

Barry Ledbetter, Little Rock

We recently concluded three ABA events — the MEGA Conference, the ELS Leadership Conference, and the Women in Banking Conference. I truly appreciate you investing your professional dollars with us, which allows us to give you a return on that investment with conferences offering the most upto-date education on hot topics by top rated national speakers. Our next big event is the Annual Convention, so save the date for April 7-9, 2020.

Randy Scott, Blytheville

I conclude with well wishes for you and your family during this holiday season and look forward to an exciting new year and all that it has to offer!

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Wilson Moore, Little Rock Evelyn Morris, El Dorado Marnie Oldner, Little Rock Mark Roberts, Malvern Lori Ross, Arkadelphia Todd Smith, Magnolia Jason Tennant, Eureka Springs Lynn Wright, Little Rock

Community Bank Depo$it$ Where Have They Gone?

By Julie Stackhouse, Executive Vice President Banks — especially small banks — have traditionally made money by accepting deposits from local customers and then lending the money at a higher rate. The difference — called the net interest margin — was and is used to: • Cover overhead, other expenses and provisions for loan losses • Pay taxes • Reward investors with dividends That model worked pretty well for decades. However, growing competitive and technological changes are altering the banking landscape. And the changing behavior of “core” depositors is affecting small-bank balance sheets.

Core Challenge$

So what is happening and why? Community bankers surveyed by state bank commissioners as part of the 2019 Community Banking in the 21st Century research and policy conference cited several factors for the challenge of both holding onto core deposits and keeping their costs down.1 Most noted market competition, particularly from other depository institutions that had local headquarters or branches.

Others pointed to internet competition, including competition from banks elsewhere in the country. Still others cited nonbank financial competitors, including the prevalence of apps that provide banking-like services. Deposits generated through those apps are held in banks, but they may be far away from the app user’s location. As one survey respondent put it, “Apps remove the need for bank products other than as holding tanks for short-term cash deposits.”

it difficult to attract and retain traditional core deposits. Many rural areas are facing an out-migration of population, reducing the local deposit base. And some bankers reported that younger consumers—in addition to being more comfortable with new technologies—are not saving as much or in the same way as their parents and grandparents.

New Funding $ource$, New Risk$

The change in deposit competition means new risks for many small banks. Interest rate risk tops the concerns, as deposits generated through nontraditional means are typically more sensitive to changes in interest rates, particularly rising rates.

Bankers also face more uncertainty with regard to deposit longevity. Deposits may not “stick” with a bank if the depositor finds a better deal elsewhere. For that reason, banks must more carefully plan to meet unexpected deposit runoff. This is especially important should a bank experience financial difficulties.

What about the Future?

Banks—as well as bank regulators—are adapting to the new funding environment but are concerned about the unintended consequences should these challenges grow. This includes a possible acceleration of industry consolidation. In the meantime, the consumer holds the key!

Notes and References 1. “Community Banking in the 21st Century (PDF).” Federal Reserve System, the Conference of State Bank Supervisors and the Federal Deposit Insurance Corp., Oct. 1-2, 2019.

The funding challenges facing traditional banks are not limited to growing competition. Shrinking rural markets also make

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CHAIRMAN’S COLUMN Rob Robinson | Chairman Arkansas Bankers Association

It’s been a FULL Fall!

Hope everyone is enjoying the season change here in Arkansas.

Just back from a trip to and from NWA and the colors along I-49 were really popping. The same can be said for your Association.

It has been a super busy fall at the ABA so let’s recap: In early October, 18 Arkansas Bankers traveled to Washington, D.C. for the annual fly-in visit with the Regulators and our Arkansas Delegation. We pushed hard for continued regulatory relief and for clarity on other issues. Specifically, we stressed for the need to increase CTR thresholds, requested a federal beneficial ownership registry, pressed for CRA modernization, registered our concerns surrounding the increased burden collecting HMDA data, and expressed our continued frustrations with Credit Unions and their tax-exempt status. The Safe Banking Act had just passed in the House, so we urged the Senate delegation to follow suit. These face to face visits really makes a difference, especially when you can give a first-hand example of how a regulation negatively impacts a customer – we shared a bunch of these.

Following the D.C. Fly-In was MEGA Conference. Over 350 bankers from across the state attended this two-day conference in Little Rock and the feedback on the program has been very positive. In addition to the great subject matter tracks available for attendees, Rob Nichols, President of the American Bankers Association, was on hand to provide an up to the minute update on advocacy efforts on going in D.C. If you haven’t already, please let us know how we can make MEGA Conference better for next year. As you probably know, this event is a huge undertaking to put together so special kudos to the staff for all their hard work.

The Emerging Leaders Section held their annual conference in Little Rock on October 22nd and 23rd. Seventy of the best and brightest bankers from around Arkansas took advantage of networking opportunities, heard from national renowned speakers and elected officers for the coming year. Please join me in congratulating the new slate of ELS Officers: Evelyn Morris of First Financial Bank (El Dorado), President; Brandon Gentry of Cross County Bank (Wynne), Vice President; and Derek Eckelhoff of First Security Bank (Rogers), Secretary/Treasurer. One of the highlights of the conference was recognizing the very first recipient of the Bill Holmes Leadership Award. A well deserved congratulations to Beth Presley, Marketing Manager, with Arvest Bank in Fort Smith.

I also would like to thank George Purvis for his wonderful leadership of ELS this past year. His guidance made working with the ELS a real pleasure.

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If you are keeping score at home, that is three huge ABA events just in the first four weeks of October alone. Well, there were five weeks in October this year, so why not throw in one more for good measure?

The American Bankers Association’s Annual Convention took place from October 27th to October 29th and was held in Seattle, Washington. We had a great contingent from Arkansas representing our state so I want to thank Larry and Wendy Wilson (First Arkansas Bank and Trust), Jon and Sheila Harrell (Generations Bank), Cathy and Steve Owen (Eagle Bank and Trust), Sandy Starnes (Citizens Bank), Phillip Baldwin (Citizens Bank), and Lorrie Trogden (ABA) for joining Leigh Anne and I on the trip.

In 2020, expect to see our National Association focus on CRA Modernization, the HMDA headache, and the Real Time Payments issue, in addition to the lingering hangovers associated with CECL, Cannabis Banking, Credit Unions, and AML/BSA. New to the radar is CAMELS reform – stay tuned. Also, don’t be surprised if compliance on Hemp Banking becomes more difficult/confusing than that of Cannabis Banking. The legalization of the former and compliance thereof will ultimately come down to the interpretations of the Rules and Regulations forthcoming from the USDA. They are expected shortly and should include insurance coverage provisions and licensing requirements for producers. Is it November yet?

In closing, I want to wish everyone happy holidays and a great upcoming new year. I have many things to be thankful for and one of those is your continued support of the Arkansas Bankers Association.

ABA PROFESSIONAL DEVELOPMENT

LIVE EVENTS

Providing you with face-to-face interaction with expert instructors!

January 2020 Supervisor Boot Camp • January 14 – 15 Foundations of Commercial Lending • January 22 – 23 Bank Directors Workshop • January 28 Key Ratio Analysis: Calculating the Numbers Correctly! • January 29 Basic Personal & Business Tax Return Analysis • January 30

February 2020 IRAs: The Basics • February 13 Breaking Into Banking • February 20 Secured Loan Documentation • February 26 Real Estate Loan Documentation • February 27

March 2020 Security Hot Topics • March 5 Consumer Lending School • March 10 – 11 Loan Assistants & Processors Workshop • March 12 Call Report Preparation: Review & Update • March 26

ABA PROFESSIONAL DEVELOPMENT

WEBINARS

Collecting Debts and Bankruptcy • January TBD Cannabis Banking • 10:00 a.m. - 11:00 p.m. (CT) January 16

February 12

March 4

For more information about ABA Live Events or Webinars log on to www.arkbankers.org or call 501.376.3741.

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WASHINGTON UPDATE Rob Nichols | President & CEO American Bankers Association

Building Success in Washington

Between the end of September and the end of October—at the same time the House was beginning its impeachment inquiry—a remarkable thing happened. Representatives turned their attention to two different, pressing banking issues—cannabis banking and modernization of our anti-money laundering compliance framework—and advanced bipartisan legislation to address them.

Around the same time, federal regulators took action on several other priorities, from implementing sections of S. 2155, which made tailoring of regulation the law of the land and finalizing the new community bank leverage ratio, to raising the appraisal threshold for residential real estate transactions and proposing changes to the FDIC’s national rate cap regulations.

For all the acrimony and dysfunction that seems to be defining our capital these days, Washington sure is producing some smart, commonsense banking policy. How have we managed to see so much progress on banking issues in such a divisive atmosphere? And what does this mean for banking as the 2020 elections approach?

I believe our industry’s success in Washington starts with your hard work at home. While ABA and your state association are working to help you succeed in the future, you are the ones demonstrating the critical role banks play in the economy by making sure your customers and communities have what they need to thrive. And a national survey (see chart on opposite page) that ABA commissioned and released in October found that you are performing this role very well: • Nine in 10 Americans are very satisfied or satisfied with their primary bank • 96 percent rate their bank’s customer service as excellent very good or good • 93 percent rate their access to banking services as excellent or good Results like these, including a recent Gallup poll that found the highest public opinion of banking in more than a decade, matter because they give policymakers more reason to support you.

We’re also succeeding in Washington by making it clear that banking policy is bipartisan. No matter who holds the gavel in Congress or controls the White House, they need to understand banks and bankers today. So we’ve been working closely with leaders and lawmakers on both sides of the aisle and in both chambers to educate them on issues that are affecting your ability to serve your customers and communities.

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The Arkansas Banker n Winter 2019

Finally, we’re succeeding in Washington because bankers continue to engage in the process. Bankers and state association executives in states that first legalized marijuana, for example, took the lead in educating their peers and lawmakers on the implications of leaving the cannabis industry unbanked. Those include the tax consequences, the public safety risks, and the impact on non-cannabis bank customers.

Other bankers are shaping outcomes by participating in their state’s Washington Visit, analyzing regulatory proposals, conducting critical reviews of our comment letters and responding to grassroots alerts.

All of this puts us in an excellent position as we head into an election year that, yet again, could shift the balance of power.

To further bolster the industry’s position in advance of the 2020 elections, ABA is actively scaling our BankPac and our Voter Education initiatives with the intent of supporting Democratic and Republican candidates who understand and appreciate the important role banks of all sizes play in this country. At the same time, we’re building out our new grassroots platform, Secure American Opportunity. That’s where you’ll find information on actionable policy issues and learn what you can do to shape the outcome, whether it’s writing to your lawmakers or commenting on a regulatory proposal.

And while we don’t and won’t participate directly in the presidential race, we stand ready to correct the record if candidates misrepresent our industry or pursue policies that will harm your ability to serve your customers and communities.

Survey Shows Banks Most Trusted to Keep Data Safe

39%

SAVE THE DATE! ABA GROUP MEETINGS Group 1 • February 4 • Searcy

Banks

Group 2 • February 20 • Pratt Place Barn, Fayetteville Group 3 • February 13 • Oaklawn, Hot Springs

5%

17%

5%

Government Nonbank Payment Providers (Apple Pay, Venmo, etc.)

Healthcare Providers

1%

1%

Telecom Companies

Major Retailers

Each group has approximately the same number of banks to encourage more banker participation and to allow members to collaborate, network, and address any concerns more easily.

Banks Most Trusted

by All Age Groups

44% 37%

37%

18-29

30-44

While the ABA is located in Little Rock, our members reside throughout the state. To create a focus on banker involvement, increased communication, and grassroots advocacy, the Association divides the state into three geographic groups.

The groups from around the state meet in a forum to network, make new contacts, hear how other members deal with issues, and learn the importance of “real life stories.”

41%

36%

45-54

55-64

65+

Americans are Happy with their Bank...

9 in 10

account holders are “very satisfied” or “satisfied” with their primary bank

96%

rate their bank’s customer service as “excellent,” “very good” or “good”

93%

rate their access to banking services as “excellent” or “good”

Group 1

Chairman: Brandon Gentry, Wynne Vice Chairman: Kyle Schlenker, Cherry Valley

Group 2

Chairman: Mike Donnell, Danville Vice Chairman: Adam Rutledge, Springdale

Group 3

Chairman: Craig Manatt, Sheridan Vice Chairman: Todd Smith, Magnolia

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Arkansas Based Family Owned CREDIT LIFE & DISABILITY INSURANCE

5

minutes with...

John Harrell Chairman of the Board Generations Bank, Rogers, AR

Live Life.

Leave a Legacy.

How did you get started in banking?

My family has been in banking for generations. I knew halfway through college it was the career I wanted to pursue. Immediately upon graduating from the University of Arkansas, I worked for the Arkansas State Bank Department as an examiner where I met several of my peers in the banking community today.

Over the course of your career, what is the biggest shift you’ve seen in banking?

Without a doubt the impact and effect of technology on how banking products are distributed to our customers and how it effects how we do our daily jobs today compared to when I first started in the business. The thing that hasn’t changed as much for community banks is that relationships are still key in how we do business.

What advice do you have for young bankers starting their careers?

From a community bank standpoint, make sure you work for a bank that listens to how YOU think your generation wants to do business. To be viable today, banks have to listen to younger bankers and make sure we change our approach to doing business with current and future customers and leaders that are now a part of the market. If you are a part of a bank that has this mentality and approach; listen, learn and be patient, opportunities will come your way.

What’s the most helpful banking product on the market today?

No doubt, your phone. All products are designed to be accessed by your phone. Most consumers don’t keep checking account transaction registers any more. Everyone just checks the balance on their phone and rolls with it. Items clear so quickly now, there is little float and soon real time payments will most likely eliminate it.

What trait does the modern banker need to have to be successful?

Donna Spakes donna@flicar.com 501.519.0555 | 800.446.2214 flicar.com

You have to understand and appreciate the importance of technology. Also, being intentional about relationships is key to success both inside the bank and with customers.

What’s your biggest guilty pleasure?

For my 50th birthday, I told my wife I wanted a tricked-out golf cart. I guess that solved my mid-life crisis!

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The Arkansas Banker n Winter 2019

ABA PROFESSIONAL DEVELOPMENT

AmBA TRAINING AmBA Training includes extensive learning opportunities suited to specific job roles, in both facilitated and self-paced online formats, as well as in person. Flexible and cost-effective, AmBA’s online training opportunities are continually updated to provide a superior learning experience that can be accessed from anywhere, at any time.

UPCOMING COURSES The Banking Industry

Marketing Planning

January 6, 2020 – January 31, 2020

February 16, 2020 – March 12, 2020

Fundamentals of Mortgage Lending

Wealth Management and Trust Conference

January 13, 2020 – March 20, 2020

February 23, 2020 – February 25, 2020

Website or Decisioning Tool? Why Not Both?

Introduction to Trust Products and Services

January 16, 2020

February 24, 2020 – March 27, 2020

Introduction to Agricultural Lending

IRA Online Institute

January 19, 2020 – March 12, 2020

February 24, 2020 – May 17, 2020

Managing Funding, Liquidity and Capital

Legal Foundations in Banking

January 26, 2020 – February 27, 2020

March 23, 2020 – June 5, 2020

Insurance Risk Management Forum

Managing the Bank’s Investment Portfolio

January 26, 2020 – January 29, 2020

March 23, 2020 – April 24, 2020

Bank Lines of Business

Marketing Management

January 27, 2020 – February 21, 2020

March 23, 2020 – April 17, 2020

Analyzing Bank Performance

Risk Management Conference

January 27, 2020 – March 13, 2020

March 25, 2020 – March 27, 2020

Conference for Community Bankers

Compliance Schools

February 9, 2020 – February 12, 2020

March 28, 2020 – April 3, 2020

CRCM Exam Prep February 10, 2020 – February 14, 2020

For more information about AmBA Training, log on to www.arkbankers.org or call 501.376.3741.

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MEMBER SPOTLIGHT

CANDACE FRANKS Bank Commissioner

Candace Franks was born and raised in Jonesboro, Arkansas. Her father was an ophthalmologist and her mother was a homemaker. She had the “average town kid type of childhood” and had a passion for history.

That passion led her to pursue a degree in history, then a master’s degree in American History. Candace then went on to get her law degree. Once out of law school, Candace started working at the Arkansas Attorney General’s office, but knew there was something better suited for her elsewhere. Everything changed for her when her friend called about a job opening at the bank department for an attorney.

“I didn’t know what the bank department was or what they did.

I had no experience with that at all. That’s how I ended up at the state bank department. That was in 1980. It’s been an incredible experience,” says Franks.

At first, Candace wasn’t sure that this was the role for her. She didn’t know the industry, but time flew by and after a few years she developed an enthusiasm for the industry and wanted to stay. She says it is that enthusiasm that has kept her in her position.

She has served the financial regulatory body for nearly 40 years, first as general counsel from 1980-1995 to the bank department then she was appointed to Deputy Commissioner and General Counsel until 2007. Then, she was appointed as the 21st Commissioner of the Arkansas State Bank Department. Not only is she the longest appointed commissioner, she is also the first female and first professional bank regulator appointed to her position.

“I’ve had great opportunities. I’ve worked for six bank commissioners and five governors, and I have to say that all of them have been very different, but I just feel very fortunate because all of them have been very professional and very special people to work for and work with. It’s been very fulfilling.”

During her time in this role, she has been through four banking crises. While they all affected her, the 2008 recession hit her harder. “I took it personally, it was hard for me to see bankers that I’d known for 30 years struggling.” Candace adds, “I think you have to decide that it’s not personal and you have to man up and go do what you need to. You’ve got to deal with it.

You’ve just got to decide if that’s what you want to do and it’s your responsibility to do it.”

Candace isn’t all work though. She met her husband Roger during college. He was also earning a degree in social work.

Roger has been at his current job for 38 years. While Candace says, “Nothing much changes about us, we’re pretty boring,” the two have worked as a team since the beginning.

They have one daughter, Ava, who was born in 1983. And six weeks after Ava was born, Candace jumped back into work during the legislative sessions.

“I couldn’t have done it all without Roger’s help. He gave me a lot of support at home. He was always very supportive and encouraging when I had training or travel,” Franks says.

She adds that a good support system allowed her to pursue her career and fulfill her duties. She knows that it is a struggle for women to find the work and home life balance.

“Arkansas Bankers are fortunate to have a Commissioner like Candace. She genuinely cares about the banks and bankers under her supervision and wants to see them succeed and prosper.

Arkansas is very, very lucky to have Candace Franks lead the Bank Department.”

Robert L. Robinson, IV Community President/Senior Credit Officer Simmons Bank 12

The Arkansas Banker n Winter 2019

“How you work through your work and your home duties should become part of your everyday life. Both Roger and Ava were always interested in what I did. When we attended the bankers association events, or traveled to visit congressional delegations, and those kinds of opportunities, they both went with me a lot and enjoyed it. It was always just kind of part of what we did.”

Candace says she would like to have more females as bank examiners and the ones that are at the bank department do a really wonderful job. But often it can be hard when they have a family, especially young children. Examiners have to travel a lot and may be out for a week or two, which can be a challenge if you don’t have help from home or other family support.

She does see things shifting in the banking industry and says there are good opportunities for women in banking.

“There are a lot of women in the industry in lower level positions. I don’t really know why that has happened. I don’t know if it’s because women haven’t felt like they could get promoted so they haven’t worked for it or whether or not they just haven’t had the opportunity. I think that women need more chances to be able to be promoted and get into more executive positions of these institutions. I’d like to see more of that over the next years. It’s a great industry, so I would certainly encourage participation in it.”

(Left to right) Governor Asa Hutchinson, Deputy Secretary of State Dwight Southerland, and Candace Franks as she is sworn in as Bank Commissioner.

OPPORTUNITY

AWAITS AT GSB

The Arkansas Bankers Association is pleased to offer scholarship opportunities to its member bankers through the Herbert V. Prochnow Educational Foundation, a supporting organization to the Graduate School of Banking at the University of Wisconsin – Madison. Scholarships are distributed through the ABA for the Graduate School of Banking and the GSB Human Resource Management School.

Sponsored by:

NEARLY

$300,000

IN SCHOLARSHIPS AVAILABLE ANNUALLY

Educating Professionals, Creating Leaders

GSB.org

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A Review of the CFPB’s Latest Supervisory Highlights

By Victoria E. Stephen The Consumer Financial Protection Bureau (CFPB) recently released its Summer 2019 Supervisory Highlights, which includes key findings from the CFPB’s exams for the most part between December 2018 to March 2019. In each edition, the Bureau chooses the areas where it has seen the most supervisory activity, and for this one, it highlighted auto loan origination, credit card account management, debt collection practices, FCRA information furnishing, and mortgage loan origination.

Auto Loan Origination

In the auto loan origination space, the CFPB called out lenders who sell “GAP insurance” to consumers with low loan-to-value ratios because they likely would not benefit from the additional coverage. If the vehicle were stolen or damaged, the difference in the amount owed on the loan and the amount obtained from the insurance company is likely to be low. As such, the Bureau found that consumers showed “that they lacked an understanding of a material aspect of the product” by purchasing a product they would not benefit from, and that lenders had enough information to know this and sold the insurance to them anyway.

This was considered an “abusive” practice because it took “unreasonable advantage” of this lack of understanding, and needless to say, a lot of GAP insurance was refunded.

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Credit Card Account Management

The first issue in this area was with so-called “triggering terms” found in Reg. Z, 12 CFR 1026.16(b). In some exams, institutions included triggering terms in their advertisements and simply failed to provide some or all of the required additional disclosures. In others, there were issues with the “one click away” rule.

Not only were some disclosures multiple clicks away, but some were not properly labeled at all or were not conspicuous. I’ll note that these issues often come up in Compliance Alliance’s document reviews, so it would be worthwhile to do a double check of your credit card ads before they’re published.

This wasn’t the end of the credit card issues either. In general, 12 CFR 1026.12(d) prohibits credit card issuers from offsetting credit card debt with a consumer’s deposit account. However, there’s an exception for a security interest in a deposit account if the consumer affirmatively agrees in the account-opening disclosures. The hang up is that the security interest cannot be effectively the same as the right of offset, so an institution that just routinely includes a security interest provision in the cardholder agreement would generally not qualify for the exemption.

The Bureau highlighted that the consumer must be aware that granting a security interest is a condition for the credit card (or for more favorable terms on the account) and must specifically intend to grant a security interest in the account. Some indicators of the consumer awareness and intent mentioned were: (1) separate signature or initial lines on the agreement indicating that a security interest is being given; (2) placement of the security agreement on a separate page from any other disclosures; and (3) referencing a specific amount of deposited funds or a specific deposit account number.

Debt Collection Practices

The Fair Debt Collection Practices Act (FDCPA) of course prohibits using any false, deceptive, or misleading representation or means in the process of collecting any debt. Specifically, Section 807(2)(A) of the FDCPA prohibits falsely representing the character, amount, or legal status of any debt. Examiners found that certain debt collectors claimed that interest was owned on debts when, in fact, it was not authorized by the underlying contracts between the debt collectors and the creditors. In doing so, the debt collectors falsely represented to consumers the amount due and ultimately had to provide remediation. As a side note, a “debt collector” for FDCPA purposes generally does not include a bank that collects its own debts in its own name, but we’ve talked to many Compliance Alliance members who follow the FDCPA rules as guidelines, even though they technically do not apply as a matter of law.

Mortgage Loan Origination

The focus of this section was on the inaccurate disclosure of annual percentage rates and total annual loan costs in reverse mortgage transactions. While most of our members do not originate reverse mortgages, this is still a sobering reminder of how pervasive a failure to properly calculate the APR can be, and the very high cost of consumer restitution.

If you’re interested in reviewing the review in its entirety, you can access it at: https://files.consumerfinance.gov/f/documents/ cfpb_supervisory-highlights_issue-19_092019.pdf

About the Author

FCRA Information Furnishing

The Fair Credit Reporting Act (FCRA) requires that when a bank that is acting as an information “furnisher” receives a notice of a dispute from a consumer reporting agency (CRA), that it complete its own investigation generally within 30 days. Not only did some institutions miss this deadline, but others failed to conduct an investigation or respond at all. In addition, if a furnisher determines that previously furnished information is not complete or accurate, the furnisher must promptly let the CRA know and provide any corrections or additional information to make the reporting complete and accurate. Some failed to provide these corrections or updates, while others did so, but subsequently continued reporting inaccurate information after the correction.

Another issue cropped up with accounts that were paid-in-full or settled-in-full. Certain institutions had a practice of deleting the identification number when an account was paid in full, and this practice changed the search key that the furnishers used for matching when making account updates. As a result, the CFPB found that almost two thousand accounts were not updated to reflect the correct paid-in-full or settled-in-full status.

Finally, the Bureau found that when some institutions received consumer disputes, they continued furnishing information about the disputed accounts for several months without providing the CRA with notice that the information was disputed, in clear violation of the FCRA. In response to these findings, the CFPB required them to set up enhanced monitoring activities, as well as policies and procedures on compliance with furnisher-specific requirements of the FCRA, in addition to providing evidence of corrective actions.

Victoria E. Stephen Deputy General Counsel

Victoria E. Stephen, CRCM, serves as Associate General Counsel for Compliance Alliance and was recently appointed as the supervising attorney of Hotline. While receiving her Bachelor of Business Administration in Banking Finance from The University of Texas McCombs School of Business, Victoria worked in both deposit and lending services. She continued her interest in financial services at the University of Texas School of Law by focusing on secured transactions, taxation, contracts, and corporate governance.

Victoria has since worked in corporate tax law, mergers and acquisitions, and performed legal research on a range of regulatory issues. Since joining the Compliance Alliance team in 2015, Victoria has written many articles for a variety of publications, and spoken at a number of compliance schools and conferences. Victoria heads our team of hotline attorneys who assist members with the spectrum of regulatory compliance questions on a daily basis, and serves as Editor of Compliance Alliance’s monthly Access Magazine.

The Arkansas Banker n Winter 2019

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Max Harrell Loan Officer Generations Bank, Rogers, AR What can banks do to better appeal to millennials – in the workforce and as customers?

Banks can appeal to millennials as customers by providing quick and easy service at the touch of a button or screen in most cases.

Millennials are doing more, more efficiently and banks should take notice. Millennials pursuit is to make things as simple and easy as possible and this includes our banking. Banking is a service and we, as bankers, need to recognize that. We are constantly in competition not only with other banks but other service industries as well. The more efficient other services become the more banks need to follow this trend. Banks can appeal to millennials in the workforce by providing better work atmospheres. Most banks I see and know about have focused so much on the customer that the work atmosphere is lacking. Often times banks can be caught between a fast-food restaurant and a hospital lobby environment. When competing with other jobs in the market it can be challenging for banks to keep up. In NWA, banks are competing for high level employees with the likes of Wal-Mart, J.B. Hunt, Tyson, and Wal-Mart vendors and suppliers. This can be a difficult task for banks to compete in regards to pay, vacation time, ability to rise within the company, etc. I think banks offer incredible opportunities for highly-skilled workers, but we need to adjust our focus to accommodate the millennials in the workforce who have options galore.

What technology innovation has made the most impact on your life?

The smartphone without a doubt has made the most impact on my life. There is not a lot that I do on a day-to-day basis that I can’t do on my smartphone. Emails? Live TV? Music? Podcasts? Banking? I can be in any place, at any time, and access all of these things within seconds. The smartphone can be a tremendous asset with the ability to access such a wide range of options so quickly. My smartphone is an integral part of my ability to interact with people, especially those that I may not see on a regular basis. It keeps me connected to a world that is moving at a breakneck speed. However, with all the positives that the smartphone provides there are some negative impacts as well. I have caught myself noticing that it becomes my default in times of silence or inactivity. Sometimes enjoying a moment of silence or actually watching a moment take place without recording can be just as refreshing as the instant access my smartphone can provide.

What civic project has your bank participated in that touched you the most?

My bank has been a participating partner with the Clover Community School in Bentonville. The Clover Community School provides hands on, project based education for students who desire to learn in an engaging environment. Each year we provide a Banking 101 class that is taught by our employees on their school grounds. We have a wonderful relationship with the owners of the school and students alike. The school was started by a mother whose child has autism and was looking for a learning environment that gave him life skills and useful knowledge at a pace and place that suited him best. The thing that has touched me the most about the Clover Community School is that a mom with a child who has autism decided to not only have an impact on her son’s life but an impact on so many others, me included.

What can you simply not resist?

I am a sucker for ice cream. I could eat it for all three meals and then dessert.

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TALKING POLITICS Avoiding a Toxic Work Environment

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by Stuart Jackson Over the last several years (and perhaps even decades), political discourse has really headed south, and this is increasingly causing problems in the workplace – from co-workers not wanting to work with each other to loud and disruptive arguments to even fistfights. According to a 2018 Randstad US study, 49% of employees in the United States enjoy discussing politics with other employees, but 55% of those same employees have witnessed “heated political discussions or arguments at work” leading to stress, anxiety and an overall negative impact on productivity.

An initial reaction many private employers have is to simply ban “political” discussions at work. However, some political discussions among private company employees may be protected by the National Labor Relations Act. Even in a non-union setting, the NLRA “protects the rights of employees to engage in ‘concerted activity’, which is when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment” according to the National Labor Relations Board’s website. Some employee discussions that have a significant political aspect may also address the terms and conditions of the workplace. Examples for Arkansans could include discussions about raising the state’s minimum wage, protections for LGBTQ employees, or the impact of medical marijuana.

New guidance issued by the NLRB in mid-2018 attempted to balance the rights of employees to exercise their rights with the rights of employers to maintain discipline and productivity in the workplace. Rules that are generally lawful include rules that prohibit “behavior that is rude, condescending or otherwise socially unacceptable”; “disparaging or offensive behavior”; and behavior that creates “discord with clients or fellow employees.”

However, employers still must be careful not to apply these rules to discipline employees for conduct that would be considered concerted activity.

So what steps can private employers take to minimize toxic political discussions at work without running afoul of the NLRA? Here are a few ideas: 1. Do you have policies on being professional and collegial? Do not allow “heated” discussions or yelling of any kind, and expect mutual respect among all employees. This rule on expected behavior also carries over to employee interactions online.

2. Do you have a policy on violence in the workplace? Heated discussions and even fights have broken out in some situations.

3. Your workplace is not where one employee should try to change the political views of others. Prohibit political ads or stickers, or outright political campaigning, during work hours.

This can include prohibiting solicitation of campaign donations or the distribution of campaign materials during work hours.

Be careful though – it is important to have a non-solicitation policy that is uniformly enforced.

4. Managers and supervisors should stay well above the fray — they have to be the adults in the room and set an example of professionalism. Taking sides in a political argument does not help.

5. Do not allow an employee’s legitimate political views to impact his or her pay or performance reviews from a management perspective (although how he or she expresses those views could have an impact).

6. Finally, have clear and well-publicized anti-harassment policies. Some topics — like immigration or even terrorism — can easily morph into a potential harassment claim. For example, in the course of a conversation, one employee might say to another, “All Arabs are terrorists,” which would certainly be offensive to many employees and could lead to potential national origin, race or religious discrimination claims.

One hopes that people are waking up to just how toxic political discourse has become and can simply agree to disagree.

But until the pendulum swings back a bit, employers can and should take steps to ensure politics do not impact the jobs their employees have been hired to do. Get your policies in place and talk to your employees about them before we get deep into the 2020 election cycle.

Stuart Jackson, a partner on the Labor & Employment Team at Wright, Lindsey & Jennings LLP, has been practicing in the employment law field for over twenty-seven years. You can contact him at sjackson@wlj.com, and you can follow the Labor & Employment Team on Twitter @ WLJEmployment.

The Arkansas Banker n Winter 2019

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The Arkansas Farm Mediation Act

By Cami Davis Farm Mediation Coordinator Arkansas Department of Agriculture

The Arkansas Farm Mediation Act (Act) impacts the actions lenders can take on a wide variety of agricultural loans that meet certain criteria. Many lenders are not aware of the Act or the Arkansas Farm Mediation Program (Mediation Program), now being administered by the Arkansas Department of Agriculture under the Transformation and Efficiencies Act of 2019.

Agricultural mediation is designed to serve as a confidential and cost-effective way for farmers or producers and their creditors to resolve disputes collaboratively with the guidance of a neutral mediator. Through the Mediation Program, creditors and farmers can avoid the burdensome cost and time required for litigation while achieving mutually beneficial outcomes.

The Mediation Program is completely voluntary, confidential, and provided at no cost to participating farmers and creditors.

The Mediation Program is governed by Ark. Code Ann. 2-7-101 – 2-7-310. These statutes set forth the requirements that must be met prior to a lender taking action against a qualifying loan that is delinquent, distressed, or subject to a monetary or other default.

A loan qualifies for the Mediation Program if it is a secured debt with a balance of at least $20,000. The farmer must own or lease at least fifty acres of agricultural property or have generated gross sales of farm products totaling at least $20,000 in any of the three preceding years. If these conditions are met, the creditor, prior to initiating legal action against the farmer, is required to send a one-page form called the “Creditor Notice to Farmer of Right to Request Mediation” (often referred to as a “Creditor Notice”) by certified mail to the farmer. This form can be found on the “Services” section of the Arkansas Department of Agriculture’s website.

After a creditor sends a completed Creditor Notice to a farmer, a copy must be sent to the Mediation Program at the address listed at the bottom of the form. The Mediation Program will create a case file and provide the farmer with an information packet.

The packet will include a letter informing the farmer that he or she has fourteen days to request mediation by completing the enclosed forms and returning them to the Mediation Program.

A release will be issued to the creditor if a request for mediation is not received from the farmer within the 14-day period.

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A creditor will be notified within five days of a farmer’s request for mediation. The Mediation Program staff will arrange for a mediator, venue, and meeting time that works for both the creditor and farmer. All participants will be notified in writing once the mediation is scheduled.

If the farmer has additional qualifying creditors, these creditors will be notified of the mediation and will have a right to attend and participate in the process but will not receive a release at the end of the mediation. Additional qualifying creditors may be added to the mediation if the farmer has multiple agricultural loans that are not in good standing.

Mediations are also relatively quick. The process generally takes an average of forty-two days after receipt of the farmer’s request for mediation. While the parties’ advocates may attend and participate, both creditor(s) and farmer are required to personally attend the mediation and have the authority to negotiate. The initiating creditor will be issued a Release at the end of the mediation regardless of whether an agreement is reached.

The release is good for one year from the date of issue.

All mediators on the Mediation Program’s roster are attorneys who are also certified mediators through the Arkansas Alternative Dispute Resolution Commission (ADR) program, a division of the Administrative Offices of the Courts. The ADR have defined qualifications and training that must be completed to become certified, which includes an additional six hours of continuing mediation education each year.

The Arkansas Department of Agriculture proudly administers the Mediation Program as an opportunity to support farmers and creditors. Our goal is to promote stability and good financial health for the agricultural industry along with a positive lending environment in Arkansas without the added time, stress, and expense of litigation. To find out more about the Mediation Program, you can contact: Cami Davis, Farm Mediation Coordinator, Arkansas Department of Agriculture, 501-2196384 or cami.davis@agriculture.arkansas.gov. or review information about the program at arkansas.agriculture.gov.

First Community Bank Brings Gardening Expert P. Allen Smith to Independence County First Community Bank hosted a Taste of Moss Mountain Farm featuring gardening expert P. Allen Smith at UACCB’s Independence Hall to a crowd of more than 500 in October. The event was an effort of the “Bloom with Us” program, a statewide initiative between Smith and First Community Bank to beautify communities while raising awareness of the benefits of pollinator gardens and encouraging others to plan their own.

“The Chairman and CEO of First Community Bank, Dale Cole, is a visionary who is passionate about the health of our region,” said P. Allen Smith. “That is why I am excited to work with First Community Bank. They are making important investments to improve the health of pollinators across the Arkansas and Missouri regions.”

Smith wowed the eager crowd with slides featuring his home and gardens at Moss Mountain just outside Little Rock. He covered a plethora of fall-themed gardening and decorating guidelines, giving advice on which plants he deemed top performers. He created two floral arrangements in pumpkins that he later raffled off much to the delight of the masses. Drawings were held for a pollinator garden kit, a trip to Moss Mountain Farm, several P. Allen Smith cookbooks and recipe cards.

The evening was rounded out with a cooking demonstration with Smith and local restaurant owner Natalie Cox, to share with the crowd recipes and samples for a cranberry pecan rice salad, Smith’s famed Aunt Jamie’s cookies, buttermilk pecan pie tartlets and citrus tea.

“As a company, we truly believe in giving back to the communities in which we live, and we were so pleased to have P. Allen Smith visit and share his vast knowledge of gardening, decorating and cooking with our community,” said Dale Cole, CEO, First Community Bank. “I’d also like to note that the wonderful butterfly sculpture seen on stage during the event was done by local sculptor, John Ellis. We will be bringing his sculptures to each of our pollinator gardens and invite everyone out to enjoy them.”

Smith has designed and installed pollinator gardens at over 20 First Community Bank locations throughout Arkansas with one extending into Pineville, MO. To visit a garden near you, please visit www.firstcommunity.net for a location guide and more information about the “Bloom with Us” program.

“...I am excited to work with First Community Bank. They are making important investments to improve the health of pollinators across the Arkansas and Missouri regions.”

P. Allen Smith The Arkansas Banker n Winter 2019

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2019 MEGA Conference Go big or go home—that’s the Megasaurus motto.

And that’s what it was! The two-day 2019 ABA MEGA Conference, combined eight annual conferences into one incredible experience that included professional development, networking, and an on-site trade show that offered one-on-one time with vendors.

Event highlights included lunch speaker Rob Nichols, CEO and president of the American Bankers Association, while another day offered a hemp banking panel that discussed information about this new crop frontier.

Throughout the two-day event, attendees enjoyed networking with peers from across the state and learning the newest banking trends during the job-specific tracks, whether they needed to know more about agriculture banking, bank management, compliance, lending, marketing, security, technology, and trust.

It was all there.

(Top photo) The “Price is Right” gameshow proved to be popular among conference attendees during the trade show reception.

(Middle photo) Banker Jason Tennant of Cornerstone Bank, Eureka Springs competes for prizes during the show.

(Bottom photo) Almost 200 bankers and vendors gathered for lunch each day at this year’s conference.

(Top photo, opposite page) Speaker Cindy Prince of Compliance Alliance spoke on several subjects such as compliance in advertisements, marijuana banking, and compliance management systems.

(Second photo, opposite page) Speaker Tim Leonard of the Commercial Bank of Texas ‘wowed’ attendees with his presentations during the Technology and Security Conferences.

(Third photo, opposite page) Hemp banking panelists Dan Martini, American Bankers Association; Daniel Beck, Simmons Bank, and Kevin Hart, Green Check, discuss the economics of hemp production.

(Bottom photo, opposite page) Heather Meek of the Sells Agency discussed the shifts in the media consumption and the changes in internetconnected devices among today’s culture.

(Inside photo, opposite page) American Bankers Association President and CEO Rob Nichols gives an update from Washington, D.C. to Arkansas bankers.

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Proved to be

BIG!

More MEGA pictures on the next page.

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MEGA continued from previous page.

(Top left photo) MEGA the megasaurus getting advice from Mainstreet Advisors!

(Middle photo on left) Wayne Goode of First Financial Bank educated members on the importance of being prepared in case of an active shooter in the workplace at the MEGA conference.

(Bottom left photo) Herbert Thomas with First National Bankers proudly showed off his MEGA t-shirt!

(Top right photo) MEGA and Kevin Pulliam discussed security measures at the SBS CyberSecurity booth.

(Bottom right photo) MEGA stopped for snacks at the ESQ Realty booth at the conference.

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The Arkansas Banker n Winter 2019

Anatomy of a Bank Acquisition Heading into 2020

By Debra Cope

“Banking is a relationship-driven business, particularly in a community bank...”

Greyson Tuck.

Bank mergers and acquisitions have been slowing down just a tick amid growing conviction that the economy can’t continue to expand indefinitely. But banks remain active deal-makers, and boards have a pressing need to understand how transactions come together, according to Greyson Tuck, a partner in the law and consulting firm Gerrish Smith Tuck.

“Many independent directors, whether they’ve been through an M&A transaction or not, are not intimately familiar with how a transaction works,” Tuck says.

By far the biggest driver of bank M&A today is the quest for scale, Tuck adds. “Everybody is of the belief that bigger is better and more efficient.”

Another factor is what he calls “the arms race for deposits. If you are deposit-heavy, there is probably somebody that will buy you and pay a nice premium.” Finally, banks with young but experienced CEOs and management teams are attracting a lot of attention from others that are hungry for talent and succession plans.

American Banker recently reported that although the pace of M&A has been slower in 2019 than prior years, more than 180 mergers were announced through the end of September.

Additionally, a survey of 571 bankers by the Conference of State Bank Supervisors conducted between April and July pointed to an eventual acceleration in merger activity. Almost a quarter of banks said they had made an acquisition bid to another bank in the past year, up from 20 percent in last year’s survey. More than 14 percent of banks said they had received an acquisition offer in the past year, up from 13 percent in 2018 and 11 percent in 2017.

Tuck identifies four areas where boards may wish to focus their energies when presented with an acquisition.

Understand financial assumptions and their limitations. It is relatively easy to paint a glowing picture of how a merged entity would perform. Directors should push for clear explanations of the assumptions and keep in mind the data processing adage, “garbage in, garbage out.” Projections are limited value if they don’t reflect reality.

Tease apart the social and financial issues. “It’s easier to recover from a financial misstep in an acquisition than to deal with a clash of cultures,” Tuck says. “If the cultures don’t mesh, it hardly matters what the financial metrics are, because we probably haven’t made a good deal.” Social issues can include matters of autonomy, such as whether employees can easily take time during the day to attend a child’s school performance or whether they need to schedule the absence two weeks in advance. Social issues can also include the credit culture, such as the degree of flexibility a loan officer has to accommodate a customer’s specific needs.

Keep front-line employees engaged. “Banking is a relationship-driven business, particularly in a community bank,” Tuck says. When customer-facing employees on both sides buy into the deal, their enthusiasm can be influential. But if a deal is announced and no work has gone into bringing tellers and other front-line employees on board, there is a potential that customers will hear a message of disappointment.

Evaluate the deal against the goal. The ultimate responsibility of an acquirer is to engage in a transaction that enhances shareholder value for the owners, Tuck notes. Does the deal increase earnings per share? Support the stock’s liquidity?

Provide new talent? Expand the bank’s geographical area? A deal may not meet all these criteria, but it should meet some of them. “The acquirer needs to be very strategic and specific in identifying the reasons for the transaction,” Tuck says.

One of the key questions for directors to ask is: Who is getting what in this deal? The board of the acquiring bank should have a clear picture of what benefits the institution stands to realize, Tuck explains. Are there nonfinancial benefits as well as financial ones? Is the case clear that the bank should spend the time and effort to pursue the deal?

“Directors of the acquiring bank shouldn’t micro-manage the deal,” Tuck says. “But they should be very cognizant of the financial and social issues that arise in an acquisition and be prepared to offer sound advice to management.”

This article originally appeared in the November/December 2019 issue of ABA Banking Journal Directors Briefing. © 2019 American Bankers Association. Reprinted with Permission.

All Rights Reserved.

The Arkansas Banker n Winter 2019

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Repealing the Federal Tax Exemption for Credit Unions Under current law, the federal tax code exempts credit unions from corporate income taxes. Credit unions were granted their tax exemption with the understanding they would provide financial services that were unavailable or difficult to obtain elsewhere to lower-income, unbanked individuals with a strong common bond.

However, evidence indicates that credit unions have evolved since their exemption was granted and now closely resemble other financial institutions that are subject to the corporate income tax. The exemption for credit unions is not justifiable on the grounds of sound tax policy.

By Erica York

Credit unions face restrictions on the types and sizes of loans they can offer. For example, until 1977, most federal credit unions could not offer real estate loans. In the past, credit unions primarily provided small-value, nonmortgage loans to individuals and households; credit union assets were chiefly loans to individuals. These services were largely unavailable from traditional banks, especially for individuals of modest means during the Great Depression era.

Ultimately, credit unions have been expected to avoid high-risk, high-return investments in favor of safe, lower-interest investments, such as small personal loans.

Overview of the Exemption

Evolution of the Industry

The original purpose of credit unions shows that they generally have three distinguishing characteristics to justify their exemption from federal income taxes: a restricted customer base, lowand middle-income members, and types of services offered.

While the total number of credit unions has been in steady decline for decades, the industry is growing both in terms of members and assets. In 2008, the industry reported total assets of $885 billion and 88.6 million members. By the end of mid2019, the industry’s assets surpassed $1.5 trillion while membership increased to more than 118 million.

Credit unions are nonprofit financial cooperatives that accept deposits, make loans, and offer other types of financial services to their members. Federal chartering of credit unions began in the midst of the Great Depression with the Federal Credit Union Act of 1934. Prior to this, many states had passed laws allowing for state-chartered credit unions.

Services Offered

According to the Internal Revenue Service, a “major reason for the establishment of credit unions in this country was to provide their members with a source of personal loans, in small amounts and for a short term, which generally were difficult to obtain from other financial institutions, absent the payment of usurious interest rates.”

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Since the inception of the credit union tax exemption, the financial sector has undergone significant changes. Likewise, research has determined that “the credit union industry has evolved over time such that many of the financial services that credit unions now provide are similar to those offered by banks and savings associations.”

Data shows that credit unions are growing rapidly, which means that the revenue lost from the tax exemption is likewise growing. Given the changes in the financial sector, it is useful to examine the extent to which credit unions fulfill their original purpose — serving low- to middle-income customers with a common bond and avoiding risky investments in favor of smaller, safer investments — to see whether continued tax exemption is warranted.

While the total number of credit unions has been in steady decline for decades, the industry is growing both in terms of members and assets. ...Data shows that credit unions are growing rapidly, which means that the revenue lost from the tax exemption is likewise growing.

Expansion of Services Offered by Credit Unions

The credit union industry has repeatedly tried to lift limits on what activities it can undertake, such as the caps on its business lending. Currently, lending to member businesses in excess of $50,000 is limited and business loans may not exceed 1.75 percent of a credit union’s net worth or 12.25 percent of a credit union’s total assets (whichever is lesser). But, credit unions sought and won approval to do business lending through the Small Business Administration; these loans, along with loans that are under $50,000, are not subject to the caps. Credit unions have also pushed to increase the limitations on loans and to exclude certain other business loans from the cap.

While these changes in services may align with broader changes in the financial sector, they do not align with the original, tax-exempt status of credit unions.

Reasons to Repeal the Credit Union Exemption

As it stands today, the exemption for credit unions violates at least two principles of sound tax policy: neutrality and efficiency. The principle of neutrality requires taxing similar economic activities the same. Taxing some financial institutions that provide similar, or even the same, services while not taxing others violates this principle. Non-neutrality in the tax code leads to a misallocation of resources: the tax-exempt industry can grow at the expense of the taxed industry, leading the tax-exempt industry to become larger and less productive than the taxed industry. In the absence of preferential treatment, this inefficient diversion of resources would not occur.

Repealing the credit union tax exemption would make the tax code more equitable by treating similar economic activity the same. Additionally, it would provide lawmakers with revenue that could be used to make improvements to other areas of the tax code.

Conclusion

Credit unions were granted tax-exempt status with the understanding that they would use their tax savings to serve tight-knit groups of customers of moderate means who could not access financial services at banks. However, in the decades since, credit unions have grown to resemble banks. The common bond of their members has been watered down to the point that there are credit unions anyone can join. Credit unions are not more likely than banks to serve lower-income households, and evidence indicates that credit union members may be more well off than bank customers. Finally, credit unions have begun offering services and engaging in activities that have traditionally been offered by taxable financial institutions.

The tax exemption for credit unions is not justifiable under principles of sound tax policy, nor under the rubric that lawmakers have used in the past to evaluate the tax-exempt status of financial institutions. Credit unions compete with banks for similar customers and offer similar financial services but do so with the benefit of not paying the taxes that their competition must pay. Ending this disparate treatment would improve the neutrality of the tax code and provide revenue that could be used to make pro-growth changes.

About the Author

Erica York is an Economist with the Center for Federal Tax Policy at Tax Foundation.

For the complete article go to https://taxfoundation.org/repealing-credit-union-exemption/

The Arkansas Banker n Winter 2019

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Working with and Creating a

By Bruce Johanson The Arkansas Bankers Association (ABA) was established in 1891. Over the past 128 years, there have been a total of nine Association leaders. Another Arkansas organization was formed in 1973, Johanson & Associates, Inc. (J&A) and has had three leaders over the past 46 years. Even though J&A is only a third of the ABA’s age, the two organizations have had an ongoing relationship since the mid-80s. J&A has worked with five of the nine ABA leaders and staff and many of its member banks throughout Arkansas.

Bruce Johanson’s dad Dr. Richard (Dick) C. Johanson was a twenty-year career HR executive with Ford Motor Company and Continental-Emsco (parts supplier and services company to the oil industry) in Dallas, Texas before moving his family to Fayetteville, Arkansas the summer of 1969. From 1969 to 1989, Dick was a management professor for the Walton College of Business at the University of Arkansas. Dick formed J&A in 1973 as a management consulting firm and considered it a side business to supplement his professor salary. Bruce’s mom, Shirley, was the company’s secretary and handled all the administrative and secretarial functions. From 1973 to 1986, J&A assisted a variety of organizations including Gott Manufacturing Company that made the polyurethane coolers that were first used on utility vehicles.

“Dad worked closely with President/Owner Mr. Dick Gentry in Winfield, Kansas to expand its product line and ultimately, the company sold to Rubbermaid. Another project involved dad leading a strategic planning and organizational structure retreat for Governor Dale Bumpers and his cabinet members held at Queen Wilhelmina State Lodge,” recalls Bruce Johanson.

In 1986, Bruce joined the family business after completing five years of HR experience in the oil and gas industry and two years of college level teaching in the Management Department at Arkansas Tech University in Russellville. That same year, Bruce and his father traveled to Little Rock to start what is now a 33-year relationship.

At the time, the ABA was in a seven-story office building in downtown Little Rock. “We met with ABA Executive Director H.C. “Bo” Carvill (1966 – 1994) to discuss the need for an Association strategic plan and base salary pay ranges for the ABA staff.

I remember Bo and his office manager both smoked. Back then it was acceptable to smoke in the office, and there was a cloud of smoke in Bo’s office during our first meeting.” Once the projects were completed, J&A continued to support the ABA from an HR standpoint until Bo retired in 1994.

During Dick’s time with the company, he consulted with the following banks: Commercial National Bank of Little Rock, National Bank of Commerce in Pine Bluff, City National Bank of Fort Smith, First Western Bank of Booneville, First National Bank of Phillips County and Bank of Fayetteville. “Dad consulted to CEOs Bill Bowen, Sonny Henson, Jeral Hampton, Bill Brandon and John Lewis, plus up-and-coming bank executives including Jack Fleischauer, Jim Harwood and Bart Lindsey. Dad assisted John Lewis by completing the bank charter package that established Bank of Fayetteville in 1987,” says Bruce.

In 1989, Dick retired, and Bruce managed the company for the next eleven years. Bruce expanded the product offerings including leadership training, employee handbooks, salary and benefits surveys and HR outsourced services. Bruce supported ABA Executive Director Dan Bailey (1994 – 2000) and we com-

(From left to right) Blair and Bruce Johanson.

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pleted a strategic plan, handled HR issues as needed, and kept the Association’s compensation structure updated. In addition, Bruce handled the HR function for Bank of Fayetteville until the bank grew to a size to hire a full-time internal HR professional. Some of the other banks that Bruce provided HR services to included First National Bank of Phillips County, Elk Horn Bank, Citizens Bank & Trust of Van Buren, Twin City Bank, and First Federal Bank.

In the 90s, J&A teamed up with banking ESOP expert Dr. Bob Sellers company Banking Consultants of America (BCA). Bruce implemented their copyrighted Job Evaluation and Salary Administration Program (JESAP 1985-2019) and performance-based incentive compensation plans as BCA was installing ESOP and other deferred compensation plans. Bruce assisted several bank clients in 15 different states and coast to coast.

In 1999, Bruce’s twin brother, Blair joined the firm and they changed the company name to Johanson Consulting, Inc. (JCI).

Blair started in HR after obtaining his MBA from the University of Arkansas and then became a hospital administrator for a national drug and psychological hospital for seven years and a practice management operations professional for four years.

In 2000, John Lewis offered Bruce a position as the EVP of Retail Banking for Bank of Fayetteville. “I had been elected to the Board of Directors in 1997, and with Blair at the firm, I decided it made sense to change careers.”

After a couple of years at Bank of Fayetteville, Bruce realized his best value and skill was being an independent consultant and returned to JCI and to work alongside Blair.

While Bruce was at the Bank of Fayetteville, Blair was able to work with newly promoted ABA President/CEO Ken Hammonds (2000 – 2011) and provided HR support and strategic planning sessions with the ABA Board during Ken’s tenure at the ABA. When Bruce returned, Blair passed on the HR consulting support for the ABA until Ken’s retirement and ABA President/CEO William R. (Bill) Holmes (2012 – 2018) promotion.

“During Bill’s time, we developed a strategic plan, worked through HR issues, completed annual staff compensation plan updates, and started administering the annual Association’s Salary and Benefits Survey,” recalls Bruce.

It was this same time that Blair and Bruce decided to modernize the company name to Johanson Group (JG).

With Bill retiring from the Association in 2018 for health reasons, the fifth and current leader that the Johanson Group has had the opportunity to support was hired, President/CEO Lorrie Trogden. Lorrie just completed her first year last month and the Board of Directors did a great job selecting Lorrie. The Association is in good hands under her and her staff’s direction.

Artful expertise.

You’ve put in the time and effort to build a successful financial institution, and we’re dedicated to understanding your industry. Our banking buffs can help guide you through regulatory changes and perfect the masterpiece that is your business.

Everyone needs a trusted advisor.

Who’s yours?

bkd.com/fs • @BKDFS

The Arkansas Banker n Winter 2019

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2020 Graduate School of Banking

Scholarship Opportunities

Graduate School of Banking at LSU Scholarship TWO Scholarships available* School: Graduate School of Banking at LSU Session Dates: May 25 - June 5, 2020 Deadline:

March 29, 2020

Amount:

$4,145 for first year only

Details: Over 15,000 executives have successfully completed the GSB program, held each spring on the LSU campus in Baton Rouge. The School’s purpose is to fill the need for graduate level study by bank officers and others meeting admission requirements leading toward a broader knowledge and understanding of major banking functions. Completion of the program has become a requisite to professional advancement in many banks. Executives at multi-billion dollar financial institutions as well as community banks find that the School’s curriculum addresses their educational needs. *one scholarship available exclusively to women and minorities

Jeffrey and Diana Owen Scholarship for Emerging Community Bank Leaders School: AmBA Stonier Graduate School of Banking Session Dates: June 4 -11, 2020 Deadline: March 1, 2020 Amount: $4,245 (AmBA member) or $5,245 (non-member) for first year only Details: Stonier has provided executive education to more than 20,000 senior-level bankers and regulators, including some of the most respected banking executives in the U.S. The purpose of Stonier is to prepare today’s banking leaders for tomorrow’s opportunities by providing the nation’s premier executive education program. This develops the skills for effectively recognizing and handling high-level management issues, through the industry’s most thorough and rigorous curriculum, while preserving the integrity of how the business of banking is conducted.

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The Arkansas Banker n Winter 2019

Prochnow Educational Foundation & Arkansas Bankers Association Scholarship TWO Scholarships available School: Graduate School of Banking at Wisconsin Session Dates: August 2 - 14, 2020 Deadline:

April 17, 2020

Amount:

$4,500 ($1500 for three years)

Details: GSB’s Graduate School Program provides a comprehensive course of study of general banking and management subjects especially designed to meet the needs of bankers whose responsibilities and scope of activities are expanding. The school’s curriculum reflects the contemporary trends affecting the financial services industry. Core courses address broad areas of finance, marketing, management, and the environment in which banks operate.

GSBC/Arkansas Bankers Association Future Leaders Scholarship School: Graduate School of Banking at Colorado Session Dates: July 19 - 31, 2020 Deadline: March 1, 2020 Amount: $1,460 per year for up to three consecutive years Details: The Graduate School of Banking at Colorado (GSBC) partners with the Arkansas Bankers Association each year to offer the GSBC Future Leaders Scholarship. Awarded to one banker per state, per year, recipients receive $1,360 per year for three years to attend GSBC’s Annual School Session, and must enter as a first-year student.

GSB Human Resource Management School Scholarship School: Graduate School of Banking at Wisconsin Session Dates: March 29 - April 3, 2020 Deadline:

February 21, 2020

Amount: $1,050 Details: GSB’s Human Resource Management School provides the foundation for new or veteran human resource professionals to tie together important issues in human resource management with an understanding of the business of banking. This is your opportunity to learn from respected industry experts about today’s key issues in human resource management and how they relate to the bank’s bottom line profits.

SWGSB Millennium Scholarship School: SW Graduate School of Banking Session Dates: May 25 - June 4, 2020 Deadline:

March 29, 2020

Amount: $1,500 per year for up to three consecutive years Details: The SW Graduate School of Banking (SWGSB) is the financial services industry’s best source for education, training and information – designed specifically for bank officers. It is considered by many to be the nation’s top educational source for commercial and consumer lenders, loan and operations officers, bank regulators, as well as marketing and management professionals.

Visit www.arkbankers.org or call Kami Coleman at 501.978.3614 for more information on how to apply.

The Arkansas Banker n Winter 2019

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EMERGING LEADERS UPDATE

Evelyn Morris | ELS President Arkansas Bankers Association

How long have you been in the banking industry, and with First Financial Bank?

For all practical purposes, I was born into banking. I am a 5th generation banker. My great-great grandfather played a pivotal role in the founding of the Arkansas Bankers Association and my great-grandfather, grandfather, and father all served as charimen of the ABA. I started my banking career nearly 16 years ago as a Bank Examiner with the Arkansas State Bank Department and I have been with First Financial Bank almost six years.

How long have you been involved with the Emerging Leaders Section of the Arkansas Bankers Association?

I attended my first Emerging Leaders Conference early in my career. Then I served on the Emerging Leaders Council from 2009-2013.

What are some of your favorite experiences from being involved in the Emerging Leaders Section?

Every banker has a story. And those stories are shared at the Emerging Leaders Leadership Conference.

Through my involvement with Emerging Leaders listening to stories of leading bankers and developing friendships with my peers from across the state have been my favorite experiences.

Several examples include how another banker helped them achieve success by taking a risk on them or opened doors of opportunity. Other stories offer the lessons of “do’s and don’ts”, or the importance of staying connected with your peers because there will come a time when you need each other. Not ‘if’ you will need each other, but ‘when’ you will need each other.

Listening to the stories of bank leaders has provided valuable insight that I have carried with me long after the conference is over.

What advice do you have for anyone just getting started in the banking industry, or someone who has worked in the industry only for a short time?

Make the effort to grow your perspective.

If given the opportunity, go to work for the Arkansas State Bank Department. This experience will give you a global perspective by exposing you to multiple areas of a bank. It can give you the opportunity to see how a different banks operate, allow you to see management practices that lead to success, and creates opportunities to develop peer relationships.

Don’t turn down the opportunity to learn a new area of the bank. Apply for positions that will grow you. It will only broaden your knowledge and experience, and give you a better perspective.

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The Arkansas Banker n Winter 2019

To you, what is the most enjoyable aspect of being a banker?

The most enjoyable aspect of being a banker is knowing what we do changes lives for the better.

Not only do we have an impact on our customers, but bankers have a meaningful and positive impact on the communities we serve. While banks are the backbone of our communities, bankers are the boots on the ground, serving on non-profit boards and other organizations that help people, grow our local economies, and bear much good fruit. I love sitting back and observing something great in our community knowing we played a part.

As the 2019-2020 Emerging Leaders Section president, are there any specific goals you would like to achieve?

I hope to work with the ABA staff, Brandon, and Derek to spark involvement among Emerging Leaders in the association, to ensure every banker in the state knows about the Emerging Leaders Section, and to explore new avenues to improve the gap between Emerging Leaders and Executive Leaders.

Are you involved in any other organizations or extracurricular activities?

I am a mom; therefore, my most important extracurricular activities include standing on the side lines watching our girls enjoy soccer, dance, and softball, and Campfire girls.

I also enjoy serving on the United Way Board of Union County and leading a Bible Study.

Tell us something that your fellow bankers might be surprised to know about you!

I enjoy painting abstract art. I like using the “right side” of my brain as much as the “left side”.

Is there anything else you would like to share with our Arkansas bankers?

I am thankful for the opportunity to serve as the ELS President and look forward to a great year!

Photos: (Opposite page, bottom) Evelyn and her father, Joe Miles, retired banker and former ABA chairmen.

Top photo: Evelyn and her husband David, and daughters Claire and Cameron.

Above photo: Evelyn serving alongside other United Way board members at the Salvation Army.

Left photo: The Loan Operations Team at First Financial on Halloween — the Overall Group Winner of the Bank Costume contest!

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2019-2020

The Emerging Leaders Section (ELS) was organized by, and is under the direction of, the Arkansas Bankers Association (ABA) Board of Directors. The ELS was established to provide leadership and professional development training ground for the state’s young bankers, and to prepare them to become the industy’s next generation of leaders. These are the 2019-2020 council leaders.

ELS Executive Members

Evelyn Morris President First Financial Bank El Dorado

Brandon Gentry Vice President Cross County Bank Wynne

Derek Eckelhoff Secretary/Treasurer First Security Bank Rogers

ELS Council Members

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Brent Atkins Simmons Bank Hot Springs

Reggie English MNB Bank Malvern

Whit Penick First Security Bank Little Rock

Kyle Schlenker First Financial Bank Cherry Valley

Ralph Bradbury First National Bank Little Rock

Brock Ferguson Centennial Bank Jonesboro

Chris Pledger First Service Bank Little Rock

Christie Turner First State Bank Fayetteville

Shawn Dunham United Bank Rogers

Lance Nutt FBT Bank & Mortgage Fordyce

Carrie Price Southern Bancorp Arkadelphia

The Arkansas Banker n Winter 2019

Emerging Leaders

LEADERSHIP CONFERENCE Develop. Connect. Engage.

The 2019 Emerging Leaders Leadership Conference offered networking opportunities and the chance for young bankers to meet with peers last October in downtown Little Rock at the Clinton Presidential Center.

The slate of speakers at the conference included Joe Micallef, Donna Flynn, and Dave DeFazio. Micallef’s “Create a Culture of Success” provided tips for developing training programs for businesses. A native of Australia, Micallef also showed effective ice-breaking techniques which made for a fun session.

Donna Flynn demonstrated that managing people and leading people is both an art and a science. She showed how to recognize defensiveness and how to deal with it and focus on the “real” issues at hand, rather than the distractions.

Dave DeFazio hit the ground running with a list of apps to help the business person in the 21st century capitalize on how to manage money and help their finances work better and smarter. He showed how consumer purchase behaviors and changing attitudes about traditional banking have created an opening for digital trendsetters to reimagine how financial services can work in a modern world.

The conference was also the setting for the announcement of the winner of the Bill Holmes Leadership Award. The inaugural recipient was Beth Presley of Arvest Bank of Fort Smith. The award is named in honor and memory of the late Bill Holmes, who served as president & CEO of the Arkansas Bankers Association from 2012 – 2018. The award is in recognition of outstanding leadership and community commitment among emerging leaders in Arkansas banking. Nominees are considered for this award based on their contributions to team success, industry success, and making an impact on their community.

(Above photo) 2018-2019 ELS President, George Purvis, 2019-2020 ELS officers: President Evelyn Morris, Vice President Brandon Gentry, and Secretary/Treasurer Derek Eckelhoff.

(Below photo) Bill Holmes Leadership Award winner, Beth Presley (holding award) with some of her Arvest co-workers.

The Arkansas Banker n Winter 2019

33

Save

Bankers

Retirement

for

By Shelly Loftin

Senior Vice President • Retail, Payments & Lending American Bankers Association

Today could be the day. The day you make a small decision within your bank that starts a ripple effect designed to change lives all over our great state for the better.

Save10 has the power to change your family’s life, your employees’ lives and the lives of countless others by simply spreading the word.

What is Save10?

Save10 is a specific call to action for women to commit to save at least 10% for retirement.

The United States has a retirement crisis. Half of retirees retired on Social Security alone, and future generations are even less prepared. We’ve gotten a bad deal on how we prepare to exit the workforce. Many of us delay saving for the perfect time, but that perfect time never arrives.

Why Save10?

As banks committed to our communities, it is imperative we help people take charge of their financial wellbeing. That is an overwhelming task, so the least we can do is provide them with a simple starting point. Save10 is that starting point.

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The Arkansas Banker n Winter 2019

Why is Save10 targeted at Women?

Women have longer life expectancies than men, step out of the workforce more often as caregivers, and make less money than men. This means that saving is more critical for women than for

men. But studies also show that we have a gender wealth gap where women “own” or save 32 cents of every dollar, compared to men.

Women also feel particularly alienated by the financial industry.

If banks would speak to young women in college or just starting their careers with messaging to save 10 percent, to avoid credit card debt, to pay down those loans, and, more importantly, to feel informed and empowered right out of the gate, women will feel a lot less alienated from their finances.

Research concludes that once women start saving into a retirement plan, there is little likelihood they will change their contribution, and the younger they start, the better. If most young people under 30 could elect to save 10 percent into their work retirement plans or personal IRAs, they should be able to retire at 65, the normal age of retirement.

This campaign is for everyone, but by focusing on young women and girls these habits can begin forming early and banks can help educate an entire generation to become savings driven and debt averse.

Why should banks support Save10?

The overarching reason is very simple — what is good for women is good for business. Women are expected to have close to 1 trillion dollars in buying power by 2020, and 57% are heads of the household. Most of the private wealth that changes hands in the coming decades is likely to go to women.

Which brings us to another strong argument for supporting Save10: your brand. Resources aren’t infinite, competition isn’t limited, your products aren’t perfect and you are no longer solely in control of your message. Building a brand associated with financial literacy, united around a key opportunity that affects everyone, with a simple goal of helping women save, is an easy win in every community you serve. As individuals are just beginning to save, they are less rate sensitive, which will keep your cost of funds low, but the return on the way you make them feel is high. The best brands are successful in making themselves human. What is more human than the struggle to save?

There are already many apps, programs and online banking features designed to automate these functions, but have you made sure your customers know what you have or pointed out some savings bright spots from your customer base to others?

One of the best ways that banks can support Save10 is by creating and marketing savings accounts to children, especially girls, that emphasize the importance of setting aside 10% and incentivizing keeping the funds in the account, growing ...What is good for women is over time. Simmons Bank launched its good for business. Women interest-bearing Save10 Youth Savings Account on Oct. 10, which includes an are expected to have close to opening deposit match, rewards students for good grades, and includes a 1 trillion dollars in buying bonus for committed savers at age 18.

power by 2020, and 57% are heads of the household.

Most of the private wealth that changes hands in the coming decades is likely to go to women.

To ensure the gender wealth gap continues to close, banks must seize the opportunity to play a key role. The discussions around personal finance shouldn’t only look at what women are making and spending, but what are they keeping? In the United States, where women who work year-round earn somewhere near 82 cents for every dollar earned by men, it is safe to say there also is going to be a gap in their savings.

Another reason to consider Save10 is talent. Banks typically have a majority of women in their workforce, so normalizing saving not only benefits bank customers, but it also benefits the majority of their teams. Supporting the women in your workforce by making sure they understand the importance of saving for retirement goes a long way and influences their loyalty to your company. Don’t get me wrong, there are many other factors in making a career choice, but a bank that empowers women to build a nest egg for after they hop off the career ladder is well on its way to building a brand advocate.

Other banks can follow suit and offer savings accounts that act as “training wheels” accounts for retirement savings by matching the initial deposit, providing messaging that empowers kids to save 10 percent of gifts, allowance, and summer jobs, and encourages parents, friends, and others to “match” kids’ contributions.

Banks are in a unique position to create, cultivate and share content that helps local women understand the importance of saving. Banks considering a content and branding strategy tied to financial literacy, including savings, as a way to differentiate themselves are most certainly playing the long game.

A bank committed to teaching women healthy saving habits and backing a challenge designed to educate women and help normalize savings is a bank anyone can get behind. The bottom line is that what helps women build wealth helps banks make money.

For more information on the Save10 movement and/or the Save10 challenge, please visit save10challenge.com or email save10campaign@gmail.com.

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35

Women in Banking

Laurie Stewart CEO, Sound Community Bank Sequim, Washington

By Evan Sparks

Not far from the Strait of Juan de Fuca, between Washington state and British Columbia, the town of Sequim features a dynamic female leader: Sound Community Bank and its CEO, Laurie Stewart. A trailblazer for women in banking in Washington state, one of American Banker’s Most Powerful Women in Banking and now chair of the ABA, Stewart had a winding path to leadership — one forged by determination, generosity, openness to opportunity and a widening circle of family.

An accidental banker While family has always come first for Stewart, banking was something she fell into accidentally. It was on Whidbey Island that she first got the idea that banking coud be more than just a job. She moved up the ranks to head teller, branch operations supervisor and the loan desk. She hit her first barrier when she asked to be promoted to an officer of the bank.

There was only one female bank officer in that location, and her boss told her that she shouldn’t wait to fill her shoes — the incumbent would have the job until she dies. Stewart chuckles as she recalls the conversation. “It’s really good I took his advice, because Jo Balda worked until she was 85, “ she says. “If I’d been waiting around for Jo’s job, I’d still be in Oak Harbor.”

“...banking is a fabulous career and a noble profession... We need to do a better job helping our communities know the difference banks made.”

Laurie Stewart 36

The Arkansas Banker n Winter 2019

Meanwhile Stewart learned all she could about banking completing her degree part-time. Her boss got her into a class for commercial lending officers by a ruse, knowing they wouldn’t welcome a woman as a student, she recalls. “He called the head office in Everett and said, ‘There are a bunch of us commercial lenders who have to go to this class for 10 weeks straight. We need someone to take notes.’”

Stewart then became a bank examiner, putting 80,000 miles on her car doing community bank examinations for two years.

By then, banks had begun to hire what she call “token women,” and “I had skills that a lot of other women didn’t.” She returned to the Everett bank as an officer, becoming the first female VP there. She later joined a California-based thrift and rose to become its first female SVP. In 1989, while she was casting about for her next step, a recruiter called her about an opening at a $38 million-asset institution in Seattle. “What do you know about credit unions?” he asked.

Credibility on credit unions AGE Federal Credit Union was a cooperative for cooperatives: it served the employees of independent grocers and retailers and was a proud part of the Evergreen State’s strong culture of cooperative and mutual businesses like REI and Washington Mutual. Stewart was the board’s second choice, after the first hire — a veteran of a big bank — walked out on his first day when he realized how different a small credit union would be.

It wasn’t long before Stewart realized the credit union would need to grow and change. The independent retailers who formed its field of membership were shrinking as chain supermarkets and retailers expanded. “The common bond we had was not sustainable,” she reflects. The credit union needed to grow to survive but it didn’t seem to Stewart fair to do that within the bounds of the credit union charter.

“Philosophically for me, I always had this back-of-my mind feeling that we call 911, we use the services in the community, but we don’t really support the community,” Stewart says. “We would maximize our tax advantage. Is that equitable if we move outside our area of focus?”

In the late 1990s, she began having conversations with the board about converting to a bank charter which would allow the organization to grow throughout the community. “That was really difficult for the board,” says longtime bank board member Bob Carney. “She had this vision of where we could go and certainly got us there, but the board struggled with it for a couple years. Once she picks a goal, she hits her goals.”

Stewart’s vision for converting the bank “gave us an opportunity to grow the institution,” adds David Haddad, the vice chairman of the bank. In 2003, what had by then been renamed Credit Union of the Pacific officially became Sound Community Bank, a mutual savings bank. (In 2012, it became a commercial bank.)

In converting, Stewart made a rare move in the credit union world. “We paid an extra dividend to our members before we converted because they’d helped build the organization.”

Stewart didn’t have to persuade just the board — she also had to persuade the National Credit Union Administration, which was loath to see its members leave for another regulator. “We were probably the last credit union conversion before NCUA began applying some very arbitrary rules,” she says. “We did have resistance. It took us a long time to get NCUA’s approval.”

Today, amid a wave of acquisitions taking banking assets the opposite way, into the credit union sector — 12 in 2019 alone when this issue went to press — Stewart hopes to use her experience to focus public attention on the issue of credit unions’ tax advantage. She thinks bankers can make headway by pointing out that credit unions are the only tax-exempt organizations — apart from churches and very tiny nonprofitsthat don’t make key transparency filings. “When the public

found out the NFL was a not-for-profit, all of a sudden the NFL paid attention,” she says. “It was a huge deal. I think my experience can help with that conversation.”

Glen Simecek, president and CEO of the Washington Bankers Association, agrees. “She has credibility that few other bankers possess” on credit unions, he says.

‘It never occurs to me that somebody wouldn’t be my family.’’

Another priority for Stewart is to champion diversity and inclusion in the banking industry. As a female CEO who broke through glass ceilings in her rise to the C-suite, she consciously built a senior executive team that’s half female. Her inspirational qualities go beyond banking. “She’s one of the first people I call to ask for advice when navigating a male-dominated career field,” says Annie Olson, the firefighter. “I practiced mock interviews with her. It’s the most important part of the process.”

Stewart’s advice for women seeking to advance in banking: raise your hand. “Most women think that if they do a really good job, somone will lean down, pluck them out and promote them,” she says. “No! You’ve got to raise your hand and say, ‘I can do it, I want a shot.’ Women don’t raise their hands enough.”

She also challenges banks to think beyond race and sex when assessing diversity. “We’ve got a long way to go in terms of inclusion and thining about who’s comfortable,” She says. For example, Sound Community Bank recently worked with the Hiring Our Heroes program to onbard a U.S. Marine officer in the marketing department. It can be a challenge for some civilian companies to provide a welcoming environment for service men and women transitioning out of active duty, Stewart explains.

She also thinks banks have more to do to include LGBT bankers.

Years ago, she hired a gay man to an executive role who had never felt it was safe for him to be out at work until he came to work for her. “You’ve got to be bold,” she says, both in setting goals for diversity and inclusion and communication benefits.

Her interest in diversity comes back to family, she thinks.

“I don’t know if there’s something in my personality that naturally mothers,” Stewart reflects “Some part of that role of inclusiveness has been in me since I was a kid. It never occurs to me that somebody wouldn’t be my family.”

This article originally appeared in the November/December 2019 issue of ABA Banking Journal. © 2019 American Bankers Association. Reprinted with Permission.

All Rights Reserved.

The Arkansas Banker n Winter 2019

37

How Competitive is the Banking

Industry in

Competition Intensity Depends on the Measurement

Arkansas?

A few years ago, a journalist asked me why the banking market in the Fayetteville MSA was so uncompetitive. I was surprised by the question because it is common knowledge that competition among the 33 banks in the MSA is extremely intense. Indeed, it seems there are branches on every corner.

The journalist was basing the question on the most recent deposit market share report from the FDIC, which showed that deposit holdings among banks in the MSA were highly concentrated. I assured him that, despite the report, the market for loans and deposits was highly competitive. That discussion, however, led me to think carefully about why deposit share concentration—the most common measure of banking market competition—could be such a misleading measure. My co-author, Garrett McBrayer, and I argue that this measure exaggerates the potential for collusion while diminishing the potential for competition. We developed a new measure, which we call the Bank Competition Index (BCI), that better balances collusion and competition, and it paints a very different picture of the intensity of competition in Arkansas’ urban banking markets.

Figure 1. Offices per 1000 People by State

38

The Arkansas Banker n Winter 2019

by Timothy J. Yeager

Bank Competition is Rooted in Arkansas’ History

In 1994, Arkansas became the second to last state (before Iowa) to deregulate intrastate branching across county lines. Although the number of banks has declined sharply since then from 275 to 92, the state still has a large number of community banks given the gradual adjustment to deregulation. We would expect, then, that competition would be fierce in Arkansas banking markets.

States with high numbers of banks should also have high numbers of branches competing for business. Figure 1 displays a heat map by state of offices per 1000 people. Higher values, reflected by darker colors, represent greater office density. At 0.42, Arkansas ranks sixth behind North Dakota, Nebraska, South Dakota, Kansas, and Iowa. Moreover, the state ranks 8th for the lowest deposit-share concentration, meaning that deposits are evenly distributed across banks in the state. These measures consistently reflect a high degree of bank competition within in the state. Banks, however, typically compete for business at the local level rather than the state level, and competition may differ significantly across markets within the state.

Deposit Concentration Can Be Misleading Most banks define their main competitors as other banks in the relevant county or metropolitan statistical area (MSA) where they operate, so competition should be measured locally. The most common measure, the deposit-share Herfindahl Hirschman Index (HHI), ranges between 0 and 1, and higher values indicate less competition because deposit share is less equally distributed among banks in the market. (See the nearby box insert for an explanation of how HHI is computed.)

The theory behind HHI as a measure of competition is that markets where a few firms have significant market share are less competitive because those firms can collude either explicitly or tacitly to drive up prices and earn monopoly profits. Banks operating in such markets should have relatively high net interest margins because they can exploit their market power by paying lower deposit rates or charging higher loan rates than banks in more competitive markets.

Deposit-share HHI calculated from the 2019 FDIC Summary of Deposits shows that the average metropolitan banking market in Arkansas is less competitive than the average of the 392 MSAs nationwide. Table 1 lists the eight MSAs in Arkansas, and the right-hand columns show the HHI value and percentile ranking for each MSA. Lower HHI values reflect greater competition.

Jonesboro is the most competitive MSA in the state with an HHI ranking at the 14th percentile nationwide. Texarkana and Fort Smith rank near the top third in competition, while Hot Springs, Little Rock, and Memphis are close to the median. The Fayetteville MSA is at the 85th percentile, and the Pine Bluff MSA ranks at the 99th percentile, meaning that they are among the least competitive MSAs in the nation. The average Arkansas MSA for deposit-share concentration is at the 52nd percentile. Based on their personal experiences, many Arkansas bankers would vehemently disagree with these rankings. Moreover, the rankings don’t correlate with the large numbers of banks and offices in the state, reflecting the long history of community banking and the relatively late branching deregulation. Deposit-share HHI seems to be omitting important characteristics of competition.

Herfindahl-Hirschman Index The FDIC Summary of Deposits data lists each bank’s deposits by branch each year as of June 30. From that data, we compute each bank’s deposit market share. The Herfindahl-Hirschman Index (HHI) is the sum of the squares of those market shares.

HHI ranges from 0 to 1, where 0 is the most competitive. If each bank in a market holds a small portion of the deposits, the sum of the squares of those market shares is close to zero. On the other hand, if one bank holds all the deposits, HHI equals one.

Consider a county with three banks: A, B, and C. Each has onethird of the deposits in the county. HHI is computed as (1/3)2 + (1/3)2 + (1/3)2 = 0.33. Instead, suppose that deposits are less equally distributed so that Bank A has 70% of the market share, B has 20%, and C has 10%. HHI in this case is computed as: (0.7)2 + (0.2)2 + (0.1)2 = 0.54. Higher deposit concentration leads to higher index values. banks’ market power comes from collusive behavior. However, market competition is diminished only if banks actually collude! Collusion becomes increasingly difficult as the number of banks in the market increase because coordination is more complex and the benefits to banks from deviating and underpricing the competition increase. If banks do not collude, markets where one bank has a dominant share of the deposits may be even more competitive than markets where deposits are evenly distributed.

The Bank Competition Index Given the limitations of deposit-share HHI, we developed the Bank Competition Index (BCI) that better balances the potential for collusion against the potential for competition. We constructed the BCI using two intuitive assumptions. First, bank competition is primarily a battle for scarce customer relationships because those relationships are the primary sources of market power. Second, more competition should depress the average net interest income of banks in the market.

Despite its widespread use, deposit-share HHI can be a misleading measure of bank competition because it assumes that

Our research identifies three structural characteristics of a banking market that determine its competition intensity because they consistently compress bank margins. The first characterisTable 1. Competition Intensity of Arkansas MSAs tic is the familiar deposit-share HHI of all banks in

BCI HHI the market. This measure may be incomplete, but it still matters. Markets with more equally distribMSA Value Pctl. Value Pctl. uted deposits are likely to be more competitive Little Rock-North Little Rock-Conway 0.28 1% 0.14 51% because the potential for collusion is reduced.

Hot Springs 0.27 1% 0.13 45% Fayetteville-Springdale-Rogers 0.23 1% 0.23 85% The second characteristic is the number of officFort Smith 0.23 2% 0.12 33% es (main offices, full-service branches, and loan Jonesboro 0.18 10% 0.10 14% production offices) per 1,000 people in the marMemphis 0.15 16% 0.14 53% ket. The rationale is straightforward: more bank Texarkana 0.12 28% 0.12 38% offices reflect banks’ financial and geographical Pine Bluff -0.03 85% 0.63 99% commitments to compete for deposits and loans.

Average for all Arkansas MSAs 0.18 18% 0.20 52% Banking Industry continued on next page.

Sources: FDIC Summary of Deposits, FFIEC Call Reports, and authors’ calculations.

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Banking Industry continued from previous page.

The final characteristic is the distribution of customer relationships among banks in the market. To measure this, we compute the difference between the deposit-weighted and unweighted average ratios of nonmaturity deposits (deposits without explicit maturities) to total liabilities of all banks operating in the market. Nonmaturity deposits are core bank funds that reflect deep ties between depositors and the bank. A wider difference between the weighted and unweighted ratios signals more competition intensity because such markets contain a substantial share of banks with relatively few core deposits and, hence, few relationships. In the absence of collusion, these banks compete aggressively with the more established banks to deepen their customer relationships, which is the ultimate source of market power.

Consider two markets, A and B. On average, nonmaturity deposits are plentiful in both markets. In Market A, most banks have relatively few nonmaturity deposits because one bank holds a dominant share of core deposits leaving the others to rely on noncore funding. In Market B, the nonmaturity deposits are held equally among the banks.

Because most banks in Market A hold few nonmaturity deposits, they have strong incentives to build customer relationships by wooing loan customers from other banks with generous terms and attracting local depositors with generous rates. In essence, the battle for customers offsets the potential for collusion. Because banks in Market B have higher percentages of nonmaturity deposits and, presumably, deeper community relationships, they have weaker incentives to attract customers from other banks.

Banks in Market A also have more powerful risk-taking incentives. On the one hand, they have incentives to underprice competitors to capture existing business. On the other hand, they have incentives to make loans to risky borrowers at high interest rates to offset high funding costs. Empirically, banks with less reliance on nonmaturity funds experience higher credit risk.

In sum, banking markets are more competitive if they have more equal deposit market shares, more offices per capita, and a more unequal distribution of market power as measured by wider differences between the weighted and unweighted average ratios of nonmaturity liabilities to total liabilities. We weight these three characteristics by their long-term impacts on net interest income to derive the BCI value for each market and each year. The index is constructed so that its long-term average is zero, and higher values reflect more intense market competition.

BCI shows that Arkansas MSAs are highly competitive Unlike deposit-share HHI, the BCI shows that the Arkansas MSAs are among the most competitive in the U.S. The left-hand columns of Table 1 list the BCI value and percentile ranking for

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The Arkansas Banker n Winter 2019

each of the eight Arkansas MSAs relative to all MSAs in the U.S. Remarkably, four of the MSAs rank in the top six nationwide.

The Little Rock market is the 2nd most competitive MSA in the nation, followed by Hot Springs (3rd), Fayetteville (5th), and Fort Smith (6th). On average, the Arkansas MSAs are at the 18th percentile of banking competition.

Table 2. BCI Factor Contributions

MSA

Nonmaturity Spread

Offices

HHI

Little Rock

45%

22%

34%

Hot Springs

27%

43%

30%

Fayetteville

64%

24%

13%

Fort Smith

37%

21%

42%

Jonesboro

11%

32%

57%

Memphis

67%

-18%

51%

Texarkana

32%

5%

62%

Pine Bluff

-304%

48%

356%

For several of the MSAs, the differences between HHI and BCI percentile rankings are striking. Fayetteville and Little Rock, for example, drop from the 85th and 50th percentiles, respectively, to the 1st percentile when measured by BCI. Table 2 displays the percentage contribution from the three factors to each MSA’s BCI value, and the percentages in each row sum to 100%. The Little Rock and Fayetteville MSAs are more competitive than average primarily because of the wide gap between the weighted and unweighted nonmaturity liability ratios. The high BCI for the Hot Springs MSA results from the high number of per-capita offices, and the Fort Smith and Jonesboro MSAs are competitive primarily because of their even distributions of deposit shares across banks.

Competition in Arkansas counties The relevant market for banks operating outside of MSAs is the county. In this case, the disagreement between HHI and BCI in measuring competition intensity in rural Arkansas counties is much smaller. Figure 22 displays a heat map for 2018 of all Arkansas counties (including those in MSAs) by competition quartile where competition is measured with deposit-share HHI. Darker shades represent more competition. According to this measure, just 39% of the 54 rural counties are more competitive than the median U.S. rural county.1 Figure 3 displays a similar heat map where competition is measured with BCI. According to BCI, 46% of the Arkansas rural counties are more competitive than the median county. In sum, both HHI and BCI show that Arkansas banking markets in rural counties in 2018 are somewhat less competitive than the typical rural county nationwide.

Table 3 lists the ten most competitive rural Arkansas counties as ranked by BCI in 2018. Cleburne County is at the top of the list, and it ranks in the 2nd percentile among rural counties nationwide. Indeed, each of the top ten Arkansas counties rank at or below the 15th percentile.

Table 3. Ten Most Competitive Arkansas Counties

County

Value

BCI Pctl.

Value

HHI

Figure 2. Competition Intensity by HHI Quartile

Pctl.

Cleburne

0.11

1.2%

0.19

14.6%

Marion

0.10

1.7%

0.29

43.7%

Baxter

0.10

1.7%

0.18

9.7%

Lafayette

0.05

4.8%

0.43

69.9%

Ashley

0.05

5.1%

0.27

37.5%

Clark

0.02

9.2%

0.28

42.4%

Van Buren

0.02

10.2%

0.19

12.9%

Chicot

0.01

12.5%

0.32

51.5%

White

0.00

14.3%

0.29

44.9%

Cross

0.00

14.3%

0.34

54.2%

Average

0.05

7.5%

0.28

38.1%

Sources: FDIC Summary of Deposits, FFIEC Call Report BCI and HHI do not always agree on competition intensity within a county. Lafayette County provides a clear example. With a population just below 6,700, the county has five banks operating in the market. Bodcaw Bank holds 57% of the county’s deposits, followed by BancorpSouth Bank with 16%. The unequal distribution of deposits among the banks suggests that competition is relatively weak. The difference between the weighted and unweighted nonmaturity deposit ratio, however, is 5.5%, second highest in the state. This difference indicates that several banks in the county are competing aggressively for business.

In addition, the (adjusted) number of offices per 1000 people of 0.40 ranks tenth in the state. Empirically, these two characteristics offset the high deposit concentration, making it likely that banks in Lafayette compete rather than collude.

Source: FDIC Statistics on Depository Institutions

Figure 3. Competition Intensity by BCI Quartile

Conclusion No single indicator is a perfect measure of competition. However, our objective in developing the Bank Competition Index is to improve upon the heavily used deposit-share Herfindahl Hirschman Index by creating a measure that better accounts for bank competition rather than collusion.

We certainly believed that the new index would show that Arkansas banking markets were highly competitive, but even we were surprised when the results ranked four of the state’s MSAs in the top six nationwide. Our guess is that Arkansas bankers won’t find it difficult to believe that the markets they operate in are extremely competitive.

Source: FDIC Statistics on Depository Institutions Table 1. See Arkansas Bank Competition.xlsx. US averages are from bci_all_years_all_vars.xlsx , MEANS sheet.

Table 2. See bci_all_years_all_var.xlsx sheet called BCI_Components Table 3. See ArkansasBankCompetition.xlsx CNTYPCTL sheet.

Timothy J. Yeager is Professor of Finance and holds the Arkansas Bankers Association Chair in Banking at the University of Arkansas.

Garrett McBrayer is Assistant Professor of Finance at Boise State University.

1. Data from ArkansasBankCompetition.xlsx in sheet ARK2018. Ultimately data are from BCI_Tableau.xlsx 2. Maps come from ‘Banker Articles BCI Quartile Maps.twb’ ultimately derived from BCI_Tableau.xlsx which comes from BCI_Update.sas.

The Arkansas Banker n Winter 2019

41

A Big Reason

By Darrin Williams,

Southern Bancorp, Inc. CEO As I travel across Arkansas from Blytheville to Mt. Ida or Eudora to Little Rock, I’m always intrigued to hear the stories and see the impact that local banks have on our communities. Whether providing access to capital for small businesses, helping folks buy their first home, or opening child savings accounts, banks are key anchors throughout the state because we open the doors to opportunity and prosperity. But, I have also learned that many in our communities don’t realize this prosperity because they don’t participate in the mainstream financial system.

Nationally, over six percent of households are unbanked and 19.6 percent are underbanked. Unbanked households have no formal banking relationship while underbanked households might have a minimal relationship such as a checking account. Both rely on alternative financial services (AFS) like check cashers or payday lenders.

In Arkansas, the number of unbanked and underbanked households is above the national average: eight percent and 22.7 percent, respectively. To put that into perspective, the unbanked population is roughly the same size as Conway, and the underbanked population is slightly larger than the population of Pulaski County and Benton County – combined.

That’s a huge market that we can do a better job of serving. But first we have to understand what that market needs. To help illustrate the challenges faced by unbanked and underbanked households, Southern Bancorp recently partnered with the Financial Health Network to host a FinX – a financial experience. The event is a hands-on, empathy-building, educational simulation in which participants complete a series of daily financial tasks like cashing a paycheck, transferring money to another person, and buying household items. But there’s a catch: they cannot use traditional banking services like debit cards or direct deposit. Instead, participants must rely on AFS products like reloadable cash cards, check cashers, or wire transfers like the millions of unbanked and underbanked consumers have to do each day.

Tasks that may take a person with a banking relationship five minutes to do often take hours to complete for someone without such a relationship, not to mention the fees. One of the teams in our simulation, after trying three times unsuccessfully to cash a $15 personal check, ended up paying a six dollar check cashing fee to the one AFS provider that would even cash the check. Those fees represent money that could be reinvested in our local economies to build stronger communities and change customer’s lives. I first experienced FinX in 2017 as part of the Financial Health Network’s EMERGE Conference in Austin, TX. I was blown away by the difficulty, by the fees, and by the frustration of just trying to perform basic financial tasks. That’s why I wanted to bring FinX to Little Rock. Participants spanning the private, public, and nonprofit sectors used words like “frustrated,” “mad,” “disoriented” to describe their experience. As we all know, those are not exactly words we want people to associate with banking. But these feelings aren’t entirely unfounded.

An FDIC Report noted that trust between customers and financial institutions was one of the main reasons people continue to be unbanked.

Indeed, 30 percent of unbanked families said they don’t trust banks.

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The Arkansas Banker n Winter 2019

to “Bank On” Arkansas Further, many financial institutions do not have a product designed to tap into the unbanked and underbanked market. Unbanked households noted this, too: many said the reason they didn’t have a bank account was because the fees were too high or unpredictable. But Southern Bancorp and others are working to change that perception.

Not only because it’s the right thing to do, but because it makes business sense.

According to a 2017 report from the Financial Health Network, formerly the Center for Financial Services Innovation, the underserved market is worth approximately $173 billion nationwide. And it’s growing.

From 2015 to 2016, it grew by approximately $10.7 billion. That’s not a standalone report. LiveRamp – previously Axciom – also noted the market’s potential because of its size: in 2014, the segment was composed of 24 million households, or over 50 million adults. Not only do we need a product to reach this market segment, but we also need a coalition.

Bank On Arkansas+ is that coalition. Nationally, the “Bank On” movement is an attempt to address the underbanked problem by encouraging financial institutions to join together and create “safe” accounts, low-cost bank accounts that provide households with a safe place to save, conduct basic financial business, and build a credit history. In Arkansas, there are nine partnering financial institutions offering a Bank On certified account: Bank of America, Diamond Lakes Federal Credit Union, Iberia Bank, U.S. Bank, Wells Fargo, First Security Bank, Citizens Bank, Simmons Bank, and Southern Bancorp. These financial institutions, together with community-minded coalition partners like the United Way, the Arkansas Community Action Agencies Association, Inc., the Arkansas Foodbank, and Entergy Arkansas to name just a few, have committed to “ensuring that all Arkansans have access to safe, trusted, and affordable banking so they have the opportunity to save for themselves, build wealth for their families, and improve quality of life in their communities.”

I would highly recommend learning more about this coalition and consider joining at https://www.bankonar.org/. Having a certified Bank On product is not required to join, but simply being part of the coalition will help decrease the underserved population and open up more opportunities in communities throughout Arkansas. By working together, we can create a healthier financial future for all Arkansans.

(Top photo) Mayor Frank Scott announcing that the City of Little Rock was joining the BankOn Arkansas coalition. (left to right): Kara Wilkins, Executive Director, BankOn Arkansas+; Darrin Williams; Mayor Frank Scott; Little Rock City Director Ken Richardson; John P. Bethel, Director of Public Affairs, Entergy Arkansas.

(Middle photo, left to right) Mimi San Pedro, Chief Strategy Officer, The Venture Center; Staci Croom-Raley, Executive Director, HIPPY USA. (Bottom photo, left to right) Little Rock Mayor Frank Scott; Miguel Lopez, VP of Community Development, First Community Bank; State Rep. Jamie Scott; Kendra Pruitt, Senior Advisor to Mayor Scott; Dana Batterton, Executive VP and Chief Risk Officer, FNBC Bank.

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Industrial Hemp: A Challenging Crop In the last few years many people have become interested in growing industrial hemp. We have observed the acreage of this crop soar since the federal and state legislative approval of the cultivation of industrial hemp in Colorado. In just a few years, the planted acreage in CO has gone from 220 in 2014 to nearly 86,000 in 2019; nationally there were over 500,000 acres planted. The particularly strong interest in Hemp is a result of a rapidly growing cannabidiol (CBD) product market. Consumer acceptance and consumption of CBD products has been creating a strong demand for the crop production.

What makes this crop unique is that hemp has been grown around the world for several hundred years. Industrial hemp was first classified by Carl Linnaeus in 1753. He named the plant Cannabis Sativa L. with the L representing the first initial of his last name. He was very familiar with this crop as it was widely grown at the time in Europe for its use in fiber products.

There currently are three main product areas that this crop can be a source for: seed, fiber and last but most popular lately is the cannabidiol (CBD) market. The industrial hemp seed is relatively high in protein and oil, proving a quality feed source for many products consumed in world markets. The plant fiber is a very durable product but has a difficult time competing with synthetic products. The fiber is used around the world but is not as widely adapted. The last and fastest growing market for this crop is the CBD market. CBD is marketed now as a food and or a diet additive. There are numerous claims and testimonials promoting improved health benefits. As the recent interest and demand for consumer industrial hemp and CBD products continues to grow, it is creating market acceptance across the United States.

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The Arkansas Banker n Winter 2019

By Rick Novak

Director of Seed Programs Department of Soil and Crop Sciences Colorado State University

Industrial hemp cultivation was legislated illegal in the 1930s.

The prohibition of the cultivation of hemp ended all related crop production research and variety improvement. Other crop research continued to move forward with improved varieties throughout the years, leaving hemp far behind other crops. When Colorado legislation approved the cultivation of industrial hemp in 2014, it had many plant breeders scrambling because of the shortage of reliable genetics of industrial hemp. With very limited resources of reliable genetics available around the world, many hemp breeders simply relied on feral plant material to develop new plant varieties.

Development of new reliable and stable varieties doesn’t just happen overnight but may take several years. Plant breeders that are currently developing new hemp varieties are utilizing the Association of Seed Certifying Agencies (AOSCA) seed certification program as a variety verification process for maintaining their new varieties that are now being marketed.

It is important to recognize that AOSCA seed certification was established over 100 years ago and began because of a need to have a traceable verification process that supports genetic purity for crop variety developers. Seed certification has been the most reliable and preferred method for maintaining genetic purity for many of the agricultural crops in our nation over the last century. Seed certification has worked very effectively to maintain varietal purity for many crops over the years and will work for industrial hemp as well.

Besides the seasoned agriculturalists, we are finding many new opportunist type growers that want to produce hemp, which is creating a unique learning curve for all. Hemp can be grown

successfully, but has its own set of management obstacles when compared to other commercial crops.

I have identified some of the factors that make this crop a unique challenge.

1. The legislative limit of 0.3% Tetrahydrocannabinol (THC) for this crop separates industrial hemp from its sister crop marijuana. This strict limit of THC percentage is a concern for many because if the grower’s crop is tested by their respective regulatory agency and the field is determined to have a higher amount of THC than 0.3% the current law requires the crop to be destroyed. Since hemp production does carry a risk for the growing plants to go “hot�, the resulting destruction of the crop can be financially devastating.

2. Because of the lack of basic agronomic research, there are several production challenges. We do not have a clear understanding about plant fertility requirements, disease issues, pest problems and water requirements. Weed control is a huge issue for many growers as there are no commercial herbicides available labeled for this crop at this time. Without commercial herbicides available for weed control, growers must rely on mechanical weed control or hand weeding. Hence, the labor intensiveness may limit the size of production besides being costly to the crop budget.

3. Hemp can be grown in different planting schemes depending on what the intended production is to be used for. Planting schemes will also cause the plants to grow differently. Plant populations can be as low as 2,000 plants per acre for CBD production or at a higher population around 1,200,000 plants per acre for the production for seed or fiber. Row spacing can also be a variable in production fields. This variability can be associated to differing mechanical weed control options. Additionally, growers need to keep in mind that seed quality and seedling mortality in the field has been an issue for some growers. It is highly recommended that all seed be tested by an accredited seed laboratory to ensure good seed viability.

Even though significant challenges are associated with growing this crop, many industrial hemp growers are experiencing significant financial rewards and are excited about these new opportunities. I strongly recommend that any potential growers educate themselves with respect to all of the associated production risks. Successful growers can be described as great managers with strong attention to detail. Many successful growers start with modest acreage and expand as they learn the business. This crop can be described as an old crop reinvented with challenges and opportunities. Again I strongly encourage all potential growers of industrial hemp to seek out as much information as they possibly can.

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6

Things Successful Business Development Cultures Have In Common

Traditional officer call programs are being replaced by business development cultures. It’s a necessary transition for organizations that intend to attract, retain, and grow relationships.

Historically, business development programs have been focused on two practices…identifying top customers or prospects and making calls. It’s a strategy with an acceptable foundation, but flawed execution. Identifying targeted customers and prospects is essential for any effective business development process. However, the addition of making calls, needs to change. Simply making calls doesn’t produce optimum results.

Relationship managers need to add value to their activities, interactions and contacts.

The old saying that time is money, is true. Time is the thing customers and business owners protect when they are contacted by a relationship manager from your bank. Time is the thing your employees will say is missing when they are assigned business development responsibilities. Time is a valuable commodity, so, using it wisely is a strategic advantage.

Successful business development needs to transition from a program to a culture. Programs suggest there is a beginning and an end. Cultures, on the other hand, are driven by ongoing practices, embedded in everyone’s activities. Cultures thrive when values and behaviors are shared by the entire team.

There are six foundations that business development cultures leverage to manage their success. Review the foundations and identify where your organization could enhance activities and migrate from a business development program to a business development culture.

1. Management Structure • Identify who will be the champions of your business development culture and make sure they are committed to active participation.

• Utilize your top performers. They will set the benchmark for desired performance. Then identify which relationship managers and support must be involved because their engagement will ensure success.

• Create business development job descriptions for leaders, participants, and support staff.

2. Information Management • Focus your activities on targeted customers, prospects and centers-of-influence.

• Develop an information management system that is easyto-access, use and maintain.

• Incorporate goal setting, performance tracking and reporting to assess relationship development activities and results.

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The Arkansas Banker n Winter 2019

By Tom Hershberger, CEO, Cross Financial, Lincoln, NE

3. Participant Accountability • Develop a uniform goal setting process that can be documented and incorporated into performance measurements.

• Set realistic performance goals for activities and results that can be controlled by participants.

• Help relationship managers outline the action plans and activities that will ensure they can achieve their established goals.

4. Performance Measurement • Define which business development activities and results will be measured, including the source of the measurement and the planned reporting frequency.

• Create extremely simple ways to collect and report contact management information.

5. Sales Support • Provide training to enhance relationship building skills and support ways to create and manage referral networks.

• Develop product and service information that can be used in-person or digitally.

• Create digital content that can be used by participants to build connections and credibility.

6. Reward Systems • Develop rewards for activities and results. Activities will convert to habits and effective activities will convert to results.

• Integrate coaching and mentoring into reward systems.

There is no replacement for positive reinforcement.

• Clarify rewards for individual and team categories. Leverage the potential of unifying your teams with shared achievements that are driven by desired outcomes for individual relationship managers.

Whatever the status of our business development culture, enhancements will help improve results. Remember that transformations take time. Don’t expect overnight changes just because you have decided to focus on business development.

Spend time identifying and leveraging your competencies.

They represent a comfort zone for relationship managers. Then develop and introduce the necessary changes to move from the existing practices of your business development program to your emerging business development culture.

ABA BankPAC Skeet Shoot Tournament Raises over $2000 Over 20 bankers took aim at raising funds for the ABA BankPAC Skeet Shoot Tournament. The shoot was held at the Blue Rock Sportsmans Club in October and over $2,000 were raised for the ABA BankPAC. Bankers shared a day of laughs and competition. They then enjoyed a BBQ lunch outdoors sponsored by BKD, LLP. The event ended with the winners being announced and awarded prizes. First place winner was Patrick Hum with Stone Bank who won a Rugger shotgun sponsored by Works24. In second place, Vince Stone with Stone Bank. And tying for third place was Freddie Black and Duncan Bellingrath with Simmons Bank. The 2nd and 3rd place winners received sound cancelling ear muffs and a Yeti Mug from SettlePou. ABA BankPAC, the bipartisan political action committee created to support candidates who advocate a free and competitive marketplace. The ABA BankPAC is your Political Action Committee (PAC). ABA BankPAC is nonpartisan and is comprised of a state and a federal PAC. One hundred percent of the funds raised for ABA BankPAC are used for political contributions.

Prize winners Patrick Hum (shown with Rick Wilson in top photo), Freddie Black, Vince Stone (second photo) and Duncan Bellingrath (bottom photo).

(Top photo on page) The group at the ABA BankPAC Skeet Shoot Tournament gathering at the Sportsmans Club in North Little Rock.

(Bottom photo, left to right) George Purvis, Jay Wisener, Robert Coleman, and Rick Wilson.

The Arkansas Banker n Winter 2019

47

Member News

World Services for the Blind Honors Arvest’s Jim Cargill with Award

ABA Honors Husband-Wife Banker Team with Bruning Award

(Picture, left to right) Kevin Sabin, president/ CEO of Arvest Bank; Jim Cargill, president/CEO of Arvest Bank in central, northeast and southwest Arkansas, and Sharon Giovinazzo, president/ CEO, World Services for the Blind.

The American Bankers Association announced the recipients of both the Bruning and Blanchfield Awards, the association’s premier awards presented for contributions to ag banking. For the first time, this year’s Bruning Award will be presented to a husband-wife team, Gary and Hanna Canada (shown above, in center with their family), two agricultural bankers known for running Bank of England in England, AR, hand-in-hand.

Gary Canada, the bank’s chairman and president, is a longtime ag banker who has served on numerous committees and boards throughout his career, including ABA’s Agricultural and Rural Bankers Committee, the Bayou Meto Irrigation District and the Arkansas Rice Council. In addition to running the bank, he has run a cow-calf operation and farmed cotton, rice and wheat. His wife, Hanna serves as EVP at Bank of England. She began her banking career as a teller and today serves on the board of directors.

Winning this year’s Blanchfield Award which was presented to a non-banker for contributions to ag and rural banking is James Radintz, who recently retired as a senior executive at the USDA’s Farm Service Agency. During his 38-year career at USDA, Radintz held several leadership positions, including deputy administrator for farm loan programs and director of the loan making division. Both awards were presented at the ABA National Agricultural Bankers Conference last November in Dallas.

Photo of Canada family courtesy of James Wolfe.

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The Arkansas Banker n Winter 2019

World Services for the Blind, a Little Rock-based nonprofit organization that works to empower those who are blind or visually impaired, recognized Jim Cargill, president and CEO of Arvest Bank in central, northeast and southwest Arkansas, with the 2019 Vision Award in late October.

The Vision Award is presented to an individual who has “demonstrated far-reaching vision to successfully orchestrate events through business enterprise and community involvement to help better society for all citizens, both with and without sight.”

Arvest Bank President and CEO Kevin Sabin presented Cargill with the 19th Annual Vision Award.

“The task World Services faces is monumental, yet they continue to succeed, innovate and expand their programs - changing lives in the process,” said Cargill. “It is my hope that this recognition gives our business community pause, so we can all better determine how our companies can contribute to supporting individuals of all abilities, and also build a more diverse workforce.”

More than 25 million Americans, age 18 or older, are visually impaired to the point that they must make drastic changes to their daily lives.

World Services for the Blind is the only comprehensive vocational rehabilitation organization in the World that provides job placement for those who are visually impaired. It serves clients as young as Pre-K students, to senior adults, in 50 states and 58 countries.

Cargill is a fourth-generation banker who has worked for Arvest Bank for 34 years. He currently serves as vice chairman of the Arkansas Bankers Association; executive committee member of the Little Rock Regional Chamber of Commerce board of directors; board member, 50 for the Future; and board member, Big Dam Bridge Foundation.

Member News First Community Bank Awarded Prestigious Department of Defense Pro Patria Award When asked why he nominated First Community Bank for the Pro Patria award, Vice President of Commercial Lending and first lieutenant, Chris Milum says, “First Community Bank has not only supported me with my job at the bank, but also my service with the Arkansas Army National Guard. They have been very supportive of me and my family during my time away from work, but they also value the training and leadership skills I have obtained from the National Guard. I have had to attend various military courses to further my education, job skills, and leadership ability with the military that requires me to miss work.

First Community Bank has supported my family during those times as well as the times I have been called to service during natural disasters here at home. I take great pride in serving my country, but it takes a strong family and employer to support you while you are gone. I couldn’t ask for a better organization to work for!”

First Community Bank has been awarded the 2019 Pro Patria award from the Employer Support of the Guard and Reserve group, also referred to as the ESGR. The ESGR’s Pro Patria Award is presented annually by each ESGR State Committee to one small, one large, and one public sector employer in their state or territory. Recipients have demonstrated the greatest support to Guard and Reserve employees through their leadership and practices, including adopting personnel policies that make it easier for employees to participate in the National Guard and Reserve. This is the highest-level award that may be bestowed by an ESGR State Committee.

The Pro Patria award was presented to First Community Bank by Dr. Gil Fowler (shown above, Dale Cole of First Community Bank and First Lieutenant Chris Milum), ESGR Area Chair of Arkansas, who said, “On behalf of a grateful nation and our citizen soldiers, congratulations and thanks for all that you do and will continue to do on their behalf. First Community Bank is an example that others should emulate.”

Marlene Keenan joins Fidelity Bank Board of Directors

fidelitybanker.com

“First Community Bank is tremendously proud to receive such a prominent award, and we thank the ESGR State Committee and the Department of Defense for recognizing our organization,” said Dale Cole, CEO, First Community Bank. “Our community sincerely does come first in our eyes, and we’re committed to honoring those individuals who serve our country as members of the Guard or Reserve.”

First Community Bank honors the following veteran and active duty military personnel: • Chris Milum, First Lieutenant, Active, 2012-Present • Jennifer Wyatt, E-4/Senior Airman, Veteran, 2001-2005 • Craig Jarvis, E-4/Senior Airman, Veteran, 2002-2006 • Clint Howard, Major, Veteran, 1998-2018 • Phillip Reeves, E-4/Senior Airman, Veteran, 2011-2014 • Jacob Thomas Palese, Sergeant, Active, 2013-Present

Marlene Keenan has spent 47 years in the banking industry, shattering the glass ceiling and proving there is in fact a place of power for women in the finance world. In 1986, Marlene accepted a job at Fidelity Bank in West Memphis, AR. She has spent the last 33 years paving her way from the Controller position to Executive Vice President/CFO. Keenan is Fidelity’s first female Executive VP, first Chief Financial Officer - male or female and now Fidelity’s first female bank director. With a strong knowledge of both cash and accrual accounting systems, Keenan has taught “How a Banker Runs an Investment Portfolio” at the Independent Community Banking Association Bond Academy and served as the Regional President for the Fidelity Information Services User Group. She was born, raised and still resides in Memphis, TN, where she attended the University of Memphis and earned a BBA in Accounting. Fidelity is honored to select Marlene Keenan to join our Board of Directors as our first female counterpart.

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49

&

Banker News

Moves

Union Bank and Union Bankshares Announce New Positions The Boards of Directors of the Union Bank of Mena and Union Bankshares, Inc. announce the appointment of Kevin Williams as President of the Union Bank of Mena and Jarrod Yarnell as Chief Executive Officer of Union Bankshares, the holding company which owns the Union Bank of Mena and the First National Bank of Paris. In their new roles, Kevin and Jarrod will succeed Philip Hensley, who will continue his involvement with the organization as Senior Advisor to the Union Bank of Mena.

Kevin Williams joined the Union Bank of Mena in 2003 and has held a variety of roles throughout the organization including lending, internal audit, finance, risk management and compliance. Prior to joining the Union Bank of Mena, he worked as a Bank Examiner in the Arkansas State Bank Department. He is a native of Mena and graduated from Mena High School and the University of Central Arkansas with a Bachelor of Business Administration degree. He is actively involved in the community, currently serving as Chairman of the Mena Intermountain Airport Commission, and he formerly served as President of the Mena Lions Club. As part of his new role, Kevin will also be appointed to the Boards of Directors of the Union Bank of Mena and the First National Bank of Paris.

Jarrod Yarnell has served as President of the First National Bank of Paris since 2007, shortly after its acquisition by Union Bankshares. During that time, he has overseen the growth of the Paris bank from $100 million in assets to $180 million today, and has led the recent successful opening of branches in Clarksville and Ozark. Prior to that, he served in various lending roles for Summit Bank of Arkadelphia and Superior Bank of Fort Smith, and as a Bank Examiner for the Arkansas State Bank Department. He is a native of Ozark and graduated from Arkansas Tech University with a Bachelor of Science degree in Economics and Finance, and from the Sam M. Walton College of Business at the University of Arkansas with a Master of Business Administration degree.

He is actively involved in the Paris community, having served as President of the Paris Area Chamber of Commerce, the Paris Rotary Club and the Boys and Girls Club of Paris. Jarrod’s appointment as Chief Executive Officer of Union Bankshares represents an expansion of his current responsibilities as he will continue to serve as President of the First National Bank of Paris. He will also be named to the Boards of Directors of Union Bankshares and the Union Bank of Mena.

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In his new role, Philip Hensley will continue to serve as a member of the Boards of Directors of the Union Bank of Mena and First National Bank of Paris, and will focus on customer relationships and community relations. Philip joined the Union Bank of Mena in 2000, became President in 2002, and became Chief Executive Officer of Union Bankshares in 2002. During this time, he presided over the growth of the organization from $110 million to $260 million in total assets. Additionally, he oversaw the acquisition of the First National Bank of Paris in 2005.

“We are extremely excited about the appointments of Kevin Williams and Jarrod Yarnell to their new roles with the Union Bank of Mena and Union Bankshares,” said John Stevenson, Chairman of Union Bankshares. “Over the past 15 years under Philip’s leadership, our organization has enjoyed tremendous growth and recognition as the leading bank in each of our home communities. During that time, Jarrod and Kevin have been key contributors to that success and have demonstrated that they are among the brightest and most capable young bankers in the state. We are highly confident in the ability of this team to continue to lead our organization going forward.”

GSB Welcomes Gary Sams as SVP Commercial Lending Grand Savings Bank is pleased to announce the hiring of Gary Sams as Senior Vice President, Commercial Lending at their Fayetteville location. A seventeen-year banking veteran of consumer, mortgage and commercial lending, Sams has led many diverse teams and projects.

A business strategist passionate about sustainability, Sams brings a demonstrable history of delivering community-based, innovative solutions to complex challenges to GSB. After earning his Bachelor’s degree in Management Accounting from John Brown University, Sams spent several years in northeastern Wisconsin before returning to the Natural State. He and wife, Kristi, along with their four daughters, live in Fayetteville where they call the Hogs and cheer on the Packers.

“I expect Gary’s knowledge and leadership to become a driving force in commercial lending at GSB that will serve our customers and our community well. We are pleased he is joining our team.” said Guy Cable, Grand Savings Bank CEO.

Simmons Announces New Hires and Promotions Matt Reddin, who most recently served as Simmons Bank’s president of banking enterprise, has been named executive vice president and chief banking officer.

The promotion, which places Reddin at the helm of nearly all of the bank’s revenue-generating business units, caps 18 years of industry experience and nearly five years at Simmons.

“Matt’s natural leadership and penchant for creative solutions have strongly complemented Simmons’ growth trajectory,” said Marty Casteel, Simmons Bank chairman and CEO. “We’re confident that his skills will be leveraged to even greater effect with this enhanced role.”

Stepping into a role vacated by Chris White, Simmons’ freshly promoted Arkansas regional community president, Paul Lowe has joined the bank as central Arkansas market president. In this position, Lowe will oversee Simmons’ highest-ranking market by branch locations, working with customers and associates to drive a client-focused delivery of Simmons’ full suite of banking products.

Lowe joins Simmons from Arvest Bank, where he served as executive director of corporate and commercial banking. Prior to his time at Arvest, Lowe served as Bear State Bank’s corporate banking division president.

As Simmons’ director of C&I banking, Lisa Montejo Chrzanowski will spearhead Simmons’ C&I loan banking strategy, focusing on expanding options for Simmons’ business and commercial clients.

Bringing more than 20 years of industry experience, Chrzanowski joins Simmons from Bank of America, where she most recently served as senior credit products officer and senior vice president.

Chrzanowski is a graduate of the Little Rock Chamber of Commerce’s Leadership Greater Little Rock, class XXVII.

Chris White, who has seen Simmons grow from $2.4 billion in assets to its current size of $17.9 billion since joining the bank in 2004, has been promoted to Arkansas regional community president.

Prior to this promotion, White served in a variety of roles across Simmons’ home state, most recently as central Arkansas community president. In this role, he oversaw and developed Simmons’ presence in the Little Rock area. White will now lead Simmons’ 11 Arkansas community presidents as these local leaders focus on strategy, business development, and loan and deposit growth.

Lumsden Named to Stone Bank Board of Directors Eddie Lumsden, of Bayo Meto (Arkansas County), has been named to the Stone Bank Board of Directors. He and his family are the owners of Lumsden Farms, Inc., The Schoolhouse Lodge, and DOA Guide Service.

Lumsden was named a board member of DeWitt Bank and Trust Company in 1990 and has served in that capacity for the past 30 years. He was appointed Chairman of its Board in 2018.

Lumsden is a graduate of DeWitt High School and a 1965 graduate of The University of Arkansas, Fayetteville, with a Bachelor of Science degree in Agriculture.

“We are so fortunate to add Eddie Lumsden to our board of directors,” said Kevin Compton, Chairman of the bank’s board.

“His business experience, contacts and understanding of the agriculture economy of this region will be a great asset to our shareholders and customers.”

The bank has experienced extraordinary growth in recent years by developing an Agri Lending Center and a Government Guaranteed Loan Division, which provides lending insured by the Farm Services Agency, USDA and Small Business Administration nationwide.

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Citizens Bank Strengthens Operations Through Series of Recent Promotions To reward their service and best utilize their skills, Citizens Bank is proud to announce the well-deserved promotions of Aaron Herndon to Retail Branch Manager and Consumer Loan Officer; Katherine Harris to Vice President and Market Retail Manager; Tonia Daniels to Retail Branch Manager and Consumer Loan Officer; and Sherry Rorie to Vice President and Human Resources Officer.

Aaron and Katherine are based at the bank’s headquarters location in Batesville. Tonia and Sherry will continue to serve out of the Arkadelphia office.

Herndon leads the retail operations at Citizens Bank’s headquarters, guiding the professional development of his retail team to exceed customer expectations, while he also broadens his capabilities into the area of consumer lending.

Herndon joined Citizens Bank in 2006 as a Teller and Customer Service Representative, and has held several positions of increasing responsibility, including Retail Manager at the bank’s Airport Branch. In 2014, he transitioned into the Loan Processing operations, and served as Loan Assistant Supervisor and Market Loan Coordinator.

He earned an Associate of Applied Science Business Services degree, with a Banking and Finance focus, from the University of Arkansas Community College at Batesville. He also graduated from the Barret Graduate School of Banking and the Citizens Bank EDGE leadership program.

Herndon, a Cave City native, is a member of the Old Independence Regional Museum and the Board of the Batesville Area Arts Council.

As Vice President and Market Retail Manager, Katherine Harris routinely travels to support the operations of all retail bank branches in North Central Arkansas, the largest market within the Citizens Bank organization.

As a longtime banking professional, Harris ensures branch compliance and consistency with all bank policies. She also serves as a mentor to individual staff members in such important areas as branch management, customer service, community involvement, and new business development.

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Harris most recently served as Assistant Vice President and Retail Branch Manager for the Headquarters branch. She began her career with Citizens Bank seven years ago as a Teller and Customer Service Representative at the branch in Pleasant Plains. She transferred as Assistant Manager at the Eagle Mountain location, and was named its Retail Branch Manager in 2015.

She earned a Bachelor of Business Administration Degree with an emphasis in Business Management from the University of Central Arkansas. Harris and her husband, Derek, have two children, Owen Harris, 4, and Eden Harris, 20 months.

Tonia Daniels has built an outstanding banking career by working in a variety of departments over the past 10 years.

Prior to her most recent promotion, she had gained a wealth of knowledge and experience as a Teller, Customer Service Representative and Executive Loan Assistant, and recently completed Consumer Lending training.

As Retail Branch Manager, Daniels is responsible for all sales and operations activities within the branch, plus development of new loan and deposit business, and building relationships to retain and grow existing business.

Daniels is a graduate of Leadership Clark County and has served on the Board of the local Kiwanis Club. She and her husband, Damon, have three adult children, all of whom live in Clark County.

During a 23-year banking career, Sherry Rorie has gained considerable experience in Retail Management, Accounting, Loan Operations, Maintenance and Deposit Operations. As Human Resources Officer, Rorie expands her responsibilities to include employee relations, affirmative action, benefits management, and payroll. She will continue to serve out of the Arkadelphia office.

Rorie has proudly raised her family in Clark County. Her community involvement includes her service as a Board member of CASA, the Court Appointed Special Advocate programs that support abused and neglected children. She is also active with the Sunrise Rotary Club and the Arkadelphia Public School District, where she volunteers in a curriculum that provides financial education to students. She has two daughters, Riley, 23, and Reagan, 17.

First Financial Bank Announces Promotions

The Arkansas State Bank Department Promotes Four Members of Staff

First Financial Bank of El Dorado recently announced the promotion of three long-time Arkansas and Mississippi banking leaders.

The Arkansas State Bank Department has promoted Lance Black and Ellliot Hartle to Junior Bank Examiners.

Craig Mobley, EVP, in El Dorado, has been named Chief Operating Officer, with responsibilities for specialty lending divisions across the United States. Additionally, he will help to refine and streamline operational processes throughout the bank. Mobley is also leading the transition team in the acquisition of First National Bank of Wynne, which will add an additional seven branches and 82 employees to First Financial Bank. Now in his sixth year with FFB, Mobley will report to Chris Hegi, CEO. Chris Johnson, Retail Market President in Little Rock, has been named Regional Market President for the state of Arkansas. In his new role, Johnson will continue to lead the Little Rock market efforts, but have additional responsibilities across the state as well. Johnson joined FFB in 2016 and has been instrumental in their entry and growth in the Central Arkansas market. He will report to Craig Mobley, COO. Brad Ogletree, Retail Market President in Carthage, has been named Regional Market President for the state of Mississippi. Since joining FFB in 2006.

Ogletree has helped FFB become a market-share leader in Leake County. His new role will allow him to continue his local leadership in Carthage but also have additional responsibilities across Mississippi. Ogletree will report to Craig Mobley, COO. “With the recent and future growth of the bank, these changes will better help us clearly define, meet, and measure our objectives going forward”, stated Hegi, “We’re excited about the future of FFB and these three will be part of our continued success in Arkansas, Mississippi, and across the US”.

Lance Black has a Juris Doctor (JD) Degree from the William H. Bowen School of Law and serves as a Trust Examiner in our Little Rock office.

Ellliot Hartle, a veteran of the U.S. Air Force, has a Bachelor’s Degree in Finance and serves as an Information Systems Examiner in our Little Rock Office.

The Department also promoted Daniel Park and Joel Futrell to Senior Examiners.

Daniel Park has a Bachelor’s Degree in Finance and serves as a commercial examiner in our Springdale office.

Joel Futrell has a Bachelor’s Degree in Business Administration and serves as a commercial examiner in our Little Rock office.

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Arvest Bank Names Heck Executive Director of Consumer Lending Arvest Bank is pleased to announce Doug Heck has been named executive director of its consumer lending division.

Heck, who has more than 23 years of industry experience, has served in a variety of roles during his 13 years at Arvest.

In his new role as executive director of the bank’s consumer lending division, Heck will oversee consumer loan underwriting and processing, product management, a business intelligence and analytics team, and systems/technology management.

Heck also will oversee the addition of several new staff members, including positions related to strategic marketing, technology and decision sciences.

Heck earned a bachelor’s degree in business administration with an emphasis in marketing from Eastern New Mexico University. Additionally, he completed the Sam Walton Institute for Leadership program and graduated with honors from the Graduate School of Banking at Colorado.

First Service Bank Expands its Conway Team First Service Bank announced in November that Kevin Wish has been hired as Community Market President and Sr. Loan Officer in the Conway market.

“We are confident that Kevin Wish will be an asset to our team and know our customers will benefit from his 25 years of experience and depth of banking knowledge,” said Tom Grumbles, President/CEO and Chairman of the Board of First Service Bank.

Kevin Wish was raised in Clarksville, AR and is a 1994 graduate of the University of Arkansas, where he majored in Financial Management. He began his banking career in 1994. Kevin and his wife Alison have called Conway, AR home since 1998. They have three children, Emily, Natalie, and Anna Claire. Kevin currently serves on the Conway Airport Advisory Committee, Arkansas Aviation Historical Society Board, is a member of Kiwanis Club of Conway, and is a 2002 graduate of the Faulkner County Leadership Institute.

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Citizens Bank & Trust Announces New Staff Members Citizens Bank & Trust Company of Van Buren is pleased to announce the addition of Evan Faries and Erica Medlock to its staff.

Evan Faries joined the bank in July as a lending officer and has several years of experience in banking. He is a graduate of Van Buren High School and University of Arkansas Fort Smith with a Bachelor’s Degree in Political Science. Evan enjoys spending free time with his wife and two children. His hobbies include softball, basketball, golf, fitness, gaming and music. He is also an avid fan of Star Wars and Marvel/DC Comics.

Erica Medlock joined Citizens Bank in September as a Mortgage Loan Officer.

She is a graduate of Alma High School and University of Arkansas Fort Smith with a Bachelor’s of Science Degree in Organizational Leadership and holds a CPE Certificate from the Arkansas Bankers Association. Erica enjoys spending free time with her husband, Brandon, and three children, Seth, Jacob and Allison. She currently serves as secretary of the Van Buren Kiwanis Club, is an Ambassador for the Fort Smith Chamber of Commerce, volunteers for the United Way and is a Leadership Crawford County alumni.

Anstaff Bank Announces Opening Of Newest Branch in Mountain Home Anstaff Bank announced the opening of its newest branch at the corner of Wallace Knob Road and Highway 62/412 in Mountain Home according to Jerry Don Cunningham, Market President.

“We are excited to bring a second full-service branch to Mountain Home to better serve our customers,” said Cunningham.

“We are extremely happy with how well the building process went and can’t wait to show it off to our customers.”

The new Anstaff location is a full-service branch with a drive-thru and ATM. The lobby is open Monday through Friday from 8:00 a.m. to 5:00 p.m. The drive-thru is open Monday through Friday from 7:30 a.m. to 5:30 p.m., as well as, Saturday from 9:00 a.m. to noon.

Simmons Bank Named an SBA Lender of the Year for Arkansas District In November, Simmons Bank was recognized as the Category One “Small Business Administration (SBA) Lender of the Year” at the 2019 SBA Lender Awards, hosted by the Arkansas District Office and the Arkansas Community Bankers Association. The Category One awards designation recognizes financial institutions with more than $6 billion in assets. Simmons had 22 7(a) loans in its home state of Arkansas for SBA’s fiscal year ending Sept. 30, 2019, totaling $5,691,900 (amount excludes 504 loans).

“We’re thankful to our customers whose trust and loyalty have made Simmons a leading small business lender in Arkansas,” said Mark Wilson, Simmons Bank’s director of small business lending. “There’s no greater achievement for a bank than putting someone in business, and Simmons’ dedicated team of professionals works daily to enrich lending experiences for our small business customers.”

The award follows recent steps by Simmons to bolster its small business leadership. In May 2019, Simmons announced its hire of Little Rock-based Itzel Meador to serve as SBA regional manager of sales and business development for the bank’s eight-state footprint.

First Arkansas Bank & Trust Celebrates 70 Years of Service For First Arkansas Bank & Trust (FAB&T), November marked 70 years of service to the people and communities of Central and North Central Arkansas. What started with one location in Jacksonville, Arkansas, has grown into a network of 22 branch locations, a full-service mortgage department, trust and wealth management services, a credit card division located in Kennesaw, Georgia, a 24/7 Customer Call Center located in Jacksonville. and customers worldwide.

“When my father, Kenneth Pat Wilson, helped bring banking services to Jacksonville in 1949, I’m certain there was no way that he could have ever envisioned what our bank family has become. Times and technology have definitely changed, but the one constant that we can look to is that this is a business devoted to serving the customer. For 70 years, we have proudly provided financial services to tens of thousands of people across not only this area, but around the country and world. That is not a responsibility that I, or the bank, take lightly” said Larry T. Wilson, Chairman, President, and CEO of FAB&T. Wilson went on to state that the culture of FAB&T is what sets it apart. “We have a mission statement and core values that we live by, just as many successful organizations, but what motivates me every day is that one of those core values is ‘Make It Fun.’ We have fun at work. We have fun with each other. We have been recognized as a Best Place to Work by Arkansas Business Publishing Group numerous times, and we were recently named a Best-In-State Bank by Forbes. We must be doing something right to be recognized by Forbes; but, to be named a Best Place to Work is an employee-driven process. That tells me that who we are matters to our team, and that is very special. As long as I am still having fun, I will continue to come to work. I don’t see that changing anytime soon.”

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Citizens Bank and Trust @CitizensBankVB

Citizens Bank and Trust had a great time serving pizza to the 8th graders at Leadership Safari! #thatsmybank

Grand Savings Bank

because #BankersGiveBack!

Union Bank of Mena

October 25 at 8:27 PM Union Bank of Mena is proud to partner with an anonymous donor and the Mena Band Boosters to purchase a new drumline for the Bearcat Band this year.

527 likes Grand Savings Bank Siloam team had a GRAND time at Big Brothers Big Sisters of Siloam Bowl for Kids’ Sake event! #LifeisGrand

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Email photos + stories of your bank giving back to be highlighted in The Arkansas Banker and through ABA Social Media channels to mike.spigner@arkbankers.org.