The Arkansas Banker April 2016

2016 Group Meetings

ERM & The Committee Process

Bank M&A

The Arkansas

Banker

The Convention Issue

Celebrating 125 Years of Service to the Arkansas Banking Industry Volume XCX, No. 4 | April 2016 April 2016 | The Arkansas Banker

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You better bring your appetite.

It’s time for the 58th Annual Simmons Bank Strawberry Breakfast.

Come enjoy a home-cooked breakfast and all the fresh strawberries you can handle.

Simmons Bank Strawberry Breakfast Little Rock Marriott Ballroom | Friday, May 13 | 6:45–8:00 a.m.

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The Arkansas Banker | April 2016

The Arkansas

Banker Volume XCX, No. 4 | April 2016

The Arkansas Banker is the official publication of the Arkansas Bankers Association.

CONTENTS

EDITORIAL OFFICE

1220 West Third Street Little Rock, AR 72201 Phone 501.376.3741 | Fax 501.376.9243 www.arkbankers.org

ADVERTISEMENT

COLUMNS

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Political Perspective

Rob Nichols Roby Brock Ava Franks

23 Industry News

DEPARTMENTS

26 Professional Development 27 Member News 28 Banker News & Moves 30 Index of Advertisements

12 2016 Group Meetings

FEATURES

21 ERM and the Committee

Process: What Directors

Need to Know

By Karl Nelson

22 Bank M&A:

Is it a Good Deal?

MAGAZINE RATES

Cover price is $5.95 each. Annual subscription rates are $40.00 for members and $60.00 for non-members.

POSTMASTER: Send address changes to Arkansas Bankers Association, 1220 West Third Street, Little Rock, AR 72201.

Washington Update

Bill Holmes

10 Government Relations

SUBSCRIPTION

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

Phone: 501.376.3741. Periodical postage paid at Little Rock, AR.

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The publication of advertisement does not necessarily represent endorsement of those products or services by the Arkansas Bankers Association. The Editor reserves the right to refuse any advertisement.

Subscription to The Arkansas Banker magazine, which began monthly publication in April 1917, is included in the membership fees to the Arkansas Bankers Association.

President’s Column

EDITORIAL

The Arkansas Banker seeks to reflect the banking news of Arkansas and other news of direct interest to the Arkansas Bankers Association. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the Arkansas Bankers Association. Articles may be reproduced with written permission only.

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THE CONVENTION ISSUE

By Bob Fegtly

2016 ABA Annual Convention Get ready for this year’s Annual Convention with highlights from the 2016 program.

See page 14

April 2016 | The Arkansas Banker

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PRESIDENT’S COLUMN Get Energized at the Annual Convention On May 11,12, and 13, more than 350 ABA members, directors, stockholders, and guests will converge in Little Rock for the 126th Annual Convention, celebrating our 125th Anniversary as an association. It will be a meeting of motivation, leadership, recognition and rekindling of old friendships. The ABA team organizes, plans, and conducts this meeting filled with high energy, inspiration, and celebration.

During the Convention, there will be a plethora of opportunities to engage in: leadership presentations, official business sessions that will direct the future of an industry that has 19,000+ employees in Arkansas, hear from nationally recognized keynote speakers, as well as an award session that honors individual milestones in banking for their 40 and 50 years of service. And speaking of recognizing ABA members — at this year’s convention we will honor two banks who are turning 125 along with the Association, and three additional banks celebrating their 100-, 50-, and 25-year anniversaries.

Our Convention is an outstanding professional development opportunity. The ABA team showcases impactful keynote sessions addressing key industry issues and opportunities facing our banks. Our educational sessions and the Day with the Commissioner focus on delivering actionable ideas to help our bankers grow their institutions.

Our Convention is also a family reunion. Come and reconnect with old friends and make new friends as well. Feel the support of bankers from across the state. Experience the energy of our

younger bankers and emerging leaders as they grow into our next bank leaders.

Our Convention is informative. Come to the Day with the Commissioner and hear from the ASBD, CSBS, FED and FDIC. After lunch you will meet Dan Blanton, Chairman of the American Bankers Association and hear the latest developments going on in the financial services industry. Be sure and visit the Trade Show to explore the latest trends and products available to make our banks better.

PRESIDENT & CEO BILL HOLMES

I look forward to the Convention every year as my best opportunity to be professionally recharged. I always return to my desk with new knowledge, new ideas, and new materials. But for all the tangible, practice-related takeaways the convention represents, the best part is the chance to reconnect with our members. This, I believe, is the best of what banking offers us all: connections to something bigger than ourselves.

Please join us at our annual Convention where we gather to celebrate our accomplishments, educate ourselves on issues that affect our banks and our communities, and plan for the future of our association. It is critical that each of our local banks are represented to share their voice as we elect officers to the board, adopt resolutions to support and strengthen our legislative platform, and talk to each other about our challenges and successes as bankers and guardians of our communities. I know you’ll be energized by all that the Convention has to offer.

ABA Convention, circa 1940

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The Arkansas Banker | April 2016

Campaign Season is Underway

A group of Arkansas bankers attended a banker-focused fundraiser for Congressman Bruce Westerman held at Simmons Tower in downtown Little Rock on Friday, April 1.

Special guests Senator John Boozman and Senator Tom Cotton were also in attendance as bankers and federal representatives discussed future plans of attack for federal regulatory relief.

ABA EXECUTIVE COMMITTEE Parkway Bank, Rogers

ROBERT Y. TAYLOR | CHAIRMAN

SEAN WILLIAMS | CHAIRMAN-ELECT First National Bank of Wynne, Wynne

DAVE DICKSON | VICE CHAIRMAN Union Bank & Trust Co., Monticello

JUDY LAWTON | TREASURER Heartland Bank, Little Rock

CHUCK MORGAN | PAST CHAIRMAN Relyance Bank, Pine Bluff

BILL HOLMES | PRESIDENT/CEO Arkansas Bankers Association, Little Rock

ABA BOARD OF DIRECTORS PHIL BALDWIN | GROUP 2 Citizens Bank, Batesville

J. MICHAEL JONES | GROUP 5 Merchants & Farmers Bank, Dumas

GREG CONNELL | GROUP 2 The Farmers & Merchants Bank, Perryville

CRAIG MOBLEY | GROUP 4 First Financial Bank of El Dorado, El Dorado

TROY DUKE | GROUP 5 Gateway Bank, Rison

WILSON MOORE | GROUP 2 Bank of America, Little Rock

Regions Bank, Hot Springs

ELIZABETH FARRIS | GROUP 4

JERRY MORGAN | GROUP 1 Focus Bank, Jonesboro

GARY GOLDEN | GROUP 4 First State Bank of DeQueen, DeQueen

Eagle Bank, Little Rock

SCOTT HANCOCK | GROUP 3 Centennial Bank, Fayetteville

RANDY SCOTT | GROUP 1 Farmers Bank & Trust Co., Blytheville

DREW HARPER | GROUP 2 Bank of the Ozarks, Little Rock

MIKE SMITH | GROUP 5 McGehee Bank, McGehee

JON HARRELL | GROUP 3 Generations Bank, Rogers

JIM TAYLOR | GROUP 3 First Security Bancorp, Fayetteville

DARWIN HENDRIX | GROUP 4

STANHOPE WILKINSON | GROUP 3 Farmers Bank & Trust, Greenwood

Bank of Delight, Delight

CATHERINE OWEN | GROUP 2

CHARLES HORTON | GROUP 1 Fidelity Bank, West Memphis

ABA STAFF BILL HOLMES

PRESIDENT/CEO 501.978.3602 | bill.holmes@arkbankers.org

CARLA BRINKLEY

VP/CONTROLLER 501.978.3608 | carla.brinkley@arkbankers.org

AVA FRANKS

VP/DIRECTOR OF GOVERNMENT RELATIONS 501.978.3606 | ava.franks@arkbankers.org

JESSICA SAHENE

BARRY JACKSON

SVP/COO 501.978.3613 | barry.jackson@arkbankers.org

KAMI TAYLOR COLEMAN

VP/PROFESSIONAL DEVELOPMENT 501.978.3614 | kami.coleman@arkbankers.org

TRACI LOGSDON

DIRECTOR OF COMMUNICATIONS 501.978.3603 | traci.logsdon@arkbankers.org

BRENDA SCARBROUGH

MARKETING COORDINATOR 501.978.3609 | jessica.sahene@arkbankers.org

PROFESSIONAL DEVELOPMENT COORDINATOR 501.978.3607 | brenda.scarbrough@arkbankers.org

STUART THALHEIMER

CAROL ALLEN

EXECUTIVE ASSISTANT ADMINISTRATIVE ASSISTANT 501.978.3605 | stuart.thalheimer@arkbankers.org 501.978.3600 | carol.allen@arkbankers.org April 2016 | The Arkansas Banker

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WASHINGTON UPDATE Help Us ‘Power Up’ I think most bankers would agree that the policy environment today is not a heck of a lot better for our industry than it was in 2008. Politicians continue to take cheap shots at banks, even going so far as to force the industry to pay for the highway spending bill enacted last December.

This is an untenable position. Banks are far too important to hometowns across America to unfairly remain a political punching bag. It’s not just that the continued sweeping, anti-bank rhetoric damages our reputation, which could deter customers from banking. That is a problem, to be sure — and policymakers should see how counterproductive it is to send consumers away from the safety of regulated institutions.

But the more damaging result is the policies — particularly in the form of overly prescriptive regulations — that follow the rhetoric. Policies that do not recognize how banks interact with their customers, or how bank lending propels the growth and prosperity of their communities, do more far more harm than good. They deny credit to creditworthy borrowers, make homeownership prohibitive and perversely promote consolidation among smaller banks that are sometimes the only financial services provider in town.

This needs to change.

That’s why AmBA spent the first few months of 2016 reviewing and revitalizing the advocacy tools and programs bankers use to amplify their voice in Washington.

We found we do some things well, but also that there were other things we should be doing better, differently, new or on a grander scale. We’ll be implementing changes on our end, including using new social and digital advocacy tools to better communicate, mobilize and coordinate our efforts. But we need bankers to make a shift as well.

Specifically, we are asking bankers to do three things that we think will help rebuild the banking industry’s political clout. We are calling this initiative “Power Up,” and I am asking for your active participation.

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The Arkansas Banker | April 2016

THREE STEPS TO ‘POWER UP’

1. Engage in grassroots leadership.

You are already community leaders, which makes you important to elected officials. We need to go the next level and become an invaluable resource to them.

Host lawmakers in your community and in your bank. Introduce them to other community VIPs, including your business customers. Help them with their campaigns either by hosting a fundraiser or providing manpower.

As you do so, your member of Congress will learn the valuable role your bank plays in the community, and how policy affects your customers — their constituents. That is the best way to ensure they will consider your views when a banking issue comes up for a vote.

If you have or are willing to build or deepen a relationship with your lawmaker, please let AmBA know by filling out our Lawmaker Relationship Form on aba. com/PowerUp. 2. Join BankPac — or your state’s Federal Pac. BankPac and connected state political action committees comprise a critical tool for advancing a pro-banking agenda in Washington, but we can only talk to bankers about it — and how they can support it — if a senior executive at the bank provides prior approval.

It is critical that we obtain this prior approval as soon as possible. AmBA is already contacting those banks that have provided approval — particularly those whose leaders serve on AmBA councils — about hosting in-bank campaigns for BankPac. A signed prior approval form will permit us to help banks implement a simple employee deduction plan which, when multiplied by thousands of banks, can yield big results. The BankPac prior approval form is available on aba.com/ PowerUp; please fill it out.

ROB NICHOLS

President & CEO American Bankers Association promoting legislation and bolstering political candidates.

Unlike BankPac, the Fund can accept both personal and corporate contributions, which are unlimited. The more contributions the Fund receives, the more we can do to improve the policy environment in Washington. More information and a donation form are available on aba.com/PowerUp. All of these steps are aimed at dramatically expanding bankers’ participation in the political process and thereby increasing our political strength. But it is equally important that we deploy our expanded resources more deliberately and aggressively. That means being more discerning in our financial support to lawmakers and more proactive in our use of media in political campaigns. Rest assured that the state associations will remain critical partners in making these kinds of funding decisions.

I firmly believe that the three components of our Power Up initiative will set banking on the path to becoming a more formidable political force. We won’t get there overnight. In fact, I expect we will need a good two years to fully “power up.”

But with your support and leadership, I’m confident we will build banking’s clout and create a more positive policy environment for your customers and communities.

3. Donate to the Fund for Economic Growth. The Fund is the new name for the 501c4 that several AmBA banker leaders started in 2012. It helps demonstrate the economic impact of U.S. banks and pro-growth policies by educating policymakers and the public, © 2016 American Bankers Association. All rights reserved. Reprinted with permission.

ABA Live Events ABA Professional Development

Live Events...

Provide you with face-to-face interaction with an expert instructor!

MAY 2016 9–12 | Compliance School

Crowne Plaza, Little Rock Who Should Attend: Compliance Officers

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| Advanced Tax Return Analysis

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| Bank Lending for the Retail Manager

11–13 | 126th Annual Convention

Little Rock Marriott & Statehouse Convention Center, Little Rock Who Should Attend: CEOs, Presidents, Chairmen, Board of Directors, Senior Executives and Management

JUNE 2016

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| Loan Assistants & Processors Workshop

Holiday Inn Presidential, Little Rock Who Should Attend: Loan Assistants and Loan Processors, Credit Administration Supervisors, and other members of the bank’s loan support staff with credit administration responsibilities

Holiday Inn Presidential, Little Rock Who Should Attend: Branch Managers, Relationship Managers, Loan Documentation Specialists, Private Bankers and Business Development Officers

16–17 | Emerging Leaders Leadership Conference

The Chancellor Hotel, Fayetteville Who Should Attend: Anyone in the bank interested in furthering their leadership skills

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| Collecting Debts the Smart and Efficient Way

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| FDIC Banker Outreach

| Introduction to Consumer Lending

Holiday Inn Presidential, Little Rock Who Should Attend: Community bankers and lenders who participate in their bank’s consumer loan origination process; Newly appointed loan officers, and members of the bank’s credit administration and loan processing areas

Holiday Inn Presidential, Little Rock Who Should Attend: Commercial Lenders, Credit Analysts, Relationship Managers, Branch Managers, Private Bankers and Business Development Officers

Holiday Inn Presidential, Little Rock Who Should Attend: Loan Officers, Collectors, and Loan Administration Personnel Embassy Suites, Little Rock Who Should Attend: Bank Directors, CEOs and Bank Officers

14–15 | Certified Bank Security Manager Certification Holiday Inn Presidential, Little Rock Who Should Attend: ISO, IT Managers, Compliance Personnel, Security Officers, Operations Officers

JULY 2016 14–15 | Consumer & Real Estate Lending Compliance

Embassy Suites, Little Rock Who Should Attend: Compliance Officers, Loan Officers, Loan Processors and Auditors

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

April 2016 | The Arkansas Banker

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POLITICAL PERSPECTIVE The Folly of Lazy Language For years, I’ve watched politicians maneuver their rhetoric through policy debates and stump speeches. Especially at the state level, many know the nuances of the debate pretty well, while some leave a lot to be desired.

I flash back to the days when a Jodie Mahony would confound the entire Arkansas House of Representatives over a subtlety in education policy that was far over the heads of many of his colleagues. Mahony was almost always correct and eventually the discussion would bore that out.

I remember another instance where a group of upstart Republicans — David Sanders, Jonathan Dismang, and John Burris — held their own in the health care debate with then-Gov. Mike Beebe. It was a clarifying moment of real legislative sausage-making that brought about the private option health care plan.

Once I saw a state legislator who was past his prime, Nap Murphy, handle an 82-page rewrite of the state’s probate code. When asked on the floor of the House by a first-term female lawmaker named Becky Lynn about some details of the bill, Murphy called her “little lady” and inferred that she didn’t need concern herself with such matters. Lynn corrected him and informed Murphy that she probably did since she was an attorney who specialized in probate and estate work.

In today’s Presidential campaign, we see a variety of lazy rhetoric from nearly all of the remaining major party candidates. Bernie Sanders recent foray into describing how he’d “break up the big banks” — a cornerstone of his candidacy — left a lot to be desired when pressed for details. A New York Daily News editorial board meeting quizzed Sanders for more answers on exactly how he’d accomplish this goal.

Sanders offered a few probable scenarios such as executive fiat, using Dodd-Frank, perhaps the Fed or U.S. Treasury had the power already.

In short, Sanders really wasn’t sure. Some have

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The Arkansas Banker | April 2016

defended Sanders arguing that he is right that there is some method established in current law and executive privilege to begin this process on the remote chance that he wins in November (a big if), but it underscores the point I’d like to emphasize that politicians rely often on a haze of language to rally their supporters when we deserve much more in the realm of specifics.

Bernie’s bank debacle isn’t the only instance.

Donald Trump has been as vague as any candidate on how he’d achieve the myriad items on his agenda to “make America great again.” Ted Cruz also speaks in broad terms about restoring freedom and prosperity to the country.

GUEST COLUMNIST ROBY BROCK

Hillary Clinton — and all of the other candidates — could take a cue from her husband who actually pulled together a book when he ran for President in 1992 titled “Putting People First.” Yes, it was a manifesto full of campaign spin. However, the 232-page book did have dozens of chapters dedicated to policy-specific action items to back up his promises.

For instance, in education, Bill Clinton outlined 15 specific policy points that would impact everything from school standards to child safety to alternative learning and worker retraining. I’m not saying it was perfect, nor did I agree with all of the policies outlined in the book. But it was a comprehensive, wonky and definitive outline of the minutiae that is a part of governing that seems lost at the national level these days. A reporter or citizen could ask for greater detail on certain points and could find or be given an in-depth answer.

In 2016, be wary of the campaign buzz phrases.

They’re easy to remember but difficult to implement. When searching for your final candidate — at any level — ask more, seek more, expect more. Don’t settle for electing politicians on the promise of their stewardship; elect them for the specifics of what they plan to achieve.

Roby Brock is the Editor-in-Chief of Talk Business & Politics, an Arkansas-based multimedia news organization.

Read news or sign up for daily newsletters at TalkBusiness.net.

ABA Webinars ABA Professional Development

Webinars...

Provide the option of training as many employees as you wish for one price, all from the convenient location of your home institution!

MONDAY, MAY 2:

FRIDAY, MAY 6:

MONDAY, MAY 16:

ERM for Community Banks: Keep it Simple 1:30 p.m. – 3:30 p.m.

Check Handling Do’s and Don’ts 1:30 p.m. – 3:30 p.m.

Small Business Lending Today: Part II 1:30 p.m. – 3:30 p.m.

TUESDAY, MAY 3: Call Reports: RC-C Loan Coding and Related RC-R Reporting 10:00 a.m. – 12:00 p.m.

MONDAY, MAY 9: Are They Really a Bank Prospect?

12:00 p.m. – 1:00 p.m.

TUESDAY, MAY 10:

Advanced Financial Statement Analysis 10:00 a.m. – 11:30 a.m.

CRA Review and Update 1:30 p.m. – 3:30 p.m.

Commercial Loan Documentation: Part I 1:30 p.m. – 3:30 p.m.

WEDNESDAY, MAY 11:

Leading From the Inside Up 2:00 p.m. – 3:00 p.m.

Understanding Commercial Loan Documentation 10:00 a.m. – 12:00 p.m.

WEDNESDAY, MAY 4:

Introduction to ACH: ACH Basics & Overview – Part I 1:30 p.m. – 3:30 p.m.

Real Estate Law for Bankers 10:00 a.m. – 12:00 p.m.

Coaching Excellence 1:30 p.m. – 3:30 p.m.

Commercial Loan Documentation: Part II 1:30 p.m. – 3:30 p.m.

TUESDAY, MAY 17: Your Financial Institution’s Culture 10:00 a.m. – 11:30 a.m.

Advanced Cash Flow Analysis 10:00 a.m. – 11:30 a.m.

Letters of Credit 1:30 p.m. – 3:30 p.m.

WEDNESDAY, MAY 18: Is Your Cybersecurity Risk Assessment Complete?

2:00 p.m. – 3:30 p.m.

THURSDAY, MAY 19:

Lending 101 1:30 p.m. – 3:30 p.m.

Employment Law Update: Part III 10:00 a.m. – 11:30 a.m.

THURSDAY, MAY 12:

Introduction to ACH: ODIF Operations – Part II 1:30 p.m. – 3:30 p.m.

Excel Explained: Minimize Spreadsheet Errors 10:00 a.m. – 12:00 p.m.

Modern Bank Robbery Procedures: Cyber Incident Response 2:00 p.m. – 3:30 p.m.

Employment Law Update: Part II 10:00 a.m. – 11:30 p.m.

THURSDAY, MAY 5:

BSA for the Frontline 1:30 p.m. – 3:30 p.m.

FRIDAY, MAY 20: Basics of Global Cash Flow Analysis 1:30 p.m. – 3:30 p.m.

MONDAY, MAY 23:

Writing an Effective Credit Memorandum 10:00 a.m. – 12:00 p.m.

Dissection of Malware 1:30 p.m. – 3:30 p.m.

Alert! New CIP Rules on Prepaid Cards 10:00 a.m. – 12:00 p.m.

Employment Law Update: Part I 10:00 a.m. – 11:30 a.m.

FRIDAY, MAY 13:

Call Report Fundamentals 1:30 p.m. – 3:30 p.m.

All about Escrows 1:30 p.m. – 3:30 p.m.

Commercial Real Estate Cash Flow Analysis 1:30 p.m. – 3:30 p.m.

Managing in the Middle 1:30 p.m. – 3:30 p.m.

For more information about ABA Webinars, log on to www.arkbankers.org or call 501.376.3741 April 2016 | The Arkansas Banker

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GOVERNMENT RELATIONS AmBA Government Relations Summit The American Bankers Association Government Relations Summit was held March 14-16. As you can see from our photos, we hit the ground running and were ready to work this Washington trip. The all-star lineup of speakers at the American Bankers conference included bank industry champions such as Senator Richard Shelby (R-AL) and politicos such as Charlie Cook from the Cook Report.

During the AmBA meetings, we received a letter co-written by Reps.

Scott Tipton (R-CO) and David Scott (D-GA), which urged federal banking agencies to tailor regulations so they do not utilize a one-size fits all approach. A sign-by date of March 24 was implemented, and we took this letter with us to each Congressman to present during our meetings. We are pleased to report that 133 Representatives signed this letter, including members of our own delegation.

While this may have been “only a letter” and not a bill, it is important that we had such a quick and positive reaction from our Representatives.

Each victory needs acknowledgment, and continued efforts such as this will only add to the pressure for relief.

Your next opportunity to represent Arkansas bankers in our nation’s capitol will be in September, during the ABA’s Annual Washington Visit.

Watch for a save the date to drop into your mailbox and inbox.

Bankers listen to Senator Shelby during the GR Summit program.

VP / DIRECTOR OF GOVERNMENT RELATIONS AVA FRANKS

Senator Tom Cotton discusses the status of Senate bills that impact the banking industry.

Congressman French Hill asks bankers for input, he specifically asked for examples of customer experiences with federal banking laws.

Arkansas bankers with Congressman Bruce Westerman during the 2016 American Bankers Association Government Relations Summit.

Pictured, from left, are Bill Holmes, Ava Franks, Casey Washam, Frank Scott, Blake Fletcher, Chris Gosnell, Jim Taylor, Jeff Lynch, Barry Jackson, Congressman Bruce Westerman, Robert Taylor, Arkansas State Bank Commissioner Candace Franks, Jim Cargill, Sean Williams, Don Walker, and Bruce Maloch.

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The Arkansas Banker | April 2016

Arkansas bankers and Arkansas State Bank Commissioner Candace Franks during the 2016 AmBA Government Relations Summit. Pictured, from left, are Jim Cargill, Chris Gosnell, Bruce Maloch, Jeff Lynch, Frank Scott, Sean Williams, Casey Washam, Robert Taylor, Jim Taylor, Bill Holmes, Commissioner Candace Franks, Barry Jackson, Don Walker, and Blake Fletcher.

Sean Williams asks Congressman Rick Crawford to sign on a letter to Federal Regulators regarding federal regulatory relief for banks during the 2016 AmBA Government Relations Summit.

Jim Taylor presents a federal regulatory relief letter to Congressman Steve Womack and asks for his support and his signature while Bill Holmes, Womack’s Chief of Staff, Beau Walker, and Barry Jackson look on.

April 2016 | The Arkansas Banker

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2016 Group Meetings With the 2016 ABA Group Meetings now in the books, new group officers, ABA board members, and Emerging Leaders Section Council members have been nominated for 2016-17. Attendees of each meeting heard association updates, including the progress of grass roots activities, state and federal PAC updates, and details regarding the March AmBA Government Relations Summit.

GROUP 3

Fayetteville Country Club, Fayetteville | Wednesday, March 9 Group Chairman

Jason Tennant, Cornerstone Bank, Eureka Springs

Group Vice Chairman

Lance Lanier, Citizens Bank & Trust Co., Van Buren

ABA Board Member

Don Gibson, Legacy National Bank, Springdale

Emerging Leaders Natalie Bartholomew, Section Council Member First National Bank of NWA, Rogers Scholarship Winner

Charles D. Holliday, University of Arkansas

GROUP 2

Pleasant Valley Country Club, Little Rock | Thursday, March 24 Group Chairman

Drew Harper, Bank of the Ozarks, Little Rock

Group Vice Chairman

Chip Blanchard, First State Bank, Russellville

ABA Board Member

Jim Cargill, Arvest Bank, Little Rock

Emerging Leaders Sandy Starnes, Section Council Member Citizens Bank, Batesville

GROUP 4

SAU Don Reynolds Center, Magnolia | Friday, March 4

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The Arkansas Banker | April 2016

Group Chairman

Lori Ross, Bank of the Ozarks, Arkadelphia

Group Vice Chairman

Franklin Bass, Simmons Bank, Hot Springs

ABA Board Member

Chris Gosnell, Farmers Bank & Trust, Magnolia

Emerging Leaders Eduardo Abril, Section Council Member First State Bank of DeQueen, DeQueen

Group Chairman

Daniel Robinson, Simmons Bank, Jonesboro

Group Vice Chairman

Paul McAnally, Southern Bancorp, Trumann

ABA Board Member

David Dowd, Cross County Bank, Wynne

Emerging Leaders Ryan Moore, Section Council Member Centennial Bank, Jonesboro

Grand Prairie Center, Stuttgart | Tuesday, March 22

GROUP 5

GROUP 1

Jonesboro Country Club, Jonesboro | Tuesday, March 8

Group Chairman

Jim Daniels, First NaturalState Bank, McGehee

Group Vice Chairman

Mark Owen, Bank of Star City, Star City

ABA Board Member

Gene Crawford, First National Bank of Crossett, Crossett

Emerging Leaders James Lyle, Section Council Member McGehee Bank, McGehee

April 2016 | The Arkansas Banker

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Convention & Trade Show ARKANSAS BANKERS ASSOCIATION ANNUAL

Annual Convention Celebrates 125 Years of Service to the Arkansas Banking Industry The 2016 ABA Annual Convention, slated for May 11-13, 2016, culminates the ABA’s 125th anniversary celebration, and we’re taking the opportunity to celebrate our service to the Arkansas banking industry with a line-up of excellent speakers, a top-notch trade show, and an array of networking opportunities.

The ABA Annual Convention has always been a time when bankers from across the state can come together and discuss the issues of today, as well as celebrate the role they play in making The Natural State a better place to live, do business, and call home.

CONVENTION HIGHLIGHTS

Our event kicks off on Wednesday, May 11, with an address from Senator John Boozman, before the start of the opening reception and Trade Show.

The Annual “Day with the Commissioner” will be held on the morning of Thursday, May 12; informational sessions will continue into the afternoon on that day.

On Thursday, we will celebrate the individuals who have dedicated their careers to the banking industry. The second annual “Milestones in Banking” awards will honor those who have served the banking industry for 40 and 50 years.

The CNA Chairman’s Reception will take place on Thursday evening, from 5:30 to 6:30 p.m., giving attendees a chance to mingle and put in Silent Auction bids before the start of the evening’s banquet festivities.

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The Arkansas Banker | April 2016

The DD&F Legacy of Leadership ABA Annual Banquet and Officer Installation is slated for Thursday at 6:30 p.m. This event will honor both our current and past leadership.

The Simmons Strawberry Breakfast, now in its 58th year, will be held on Friday, May 13, and will showcase fresh Arkansas strawberries.

On Friday, attendees will hear from political analyst Steffen Schmidt, Ph.D., and two industry veterans with tips on how to get your bank on track for success for the next 125 years.

Convention Agenda WEDNESDAY, MAY 11, 2016

3:00 p.m. – 6:30 p.m.

Registration Open

4:00 p.m. – 4:45 p.m.

U.S. Senator John Boozman (Invited)

5:00 p.m. – 7:00 p.m.

Opening Reception

5:00 p.m. – 7:00 p.m.

PAC Silent Auction

THURSDAY, MAY 12, 2016 7:00 a.m. – 8:30 a.m.

Registration Open

7:00 a.m. – 8:15 a.m.

Breakfast in the Trade Show

8:30 a.m. – 9:00 a.m.

Commissioner’s Welcome & Remarks Candace Franks, Commissioner

Arkansas State Bank Department 9:00 a.m. – 9:30 a.m.

Margaret Liu Conference of State Bank Supervisors

9:30 a.m. – 10:00 a.m. Agricultural Banking Conditions & Credit Risk Benjamin McMahan

Federal Reserve Bank of Kansas City 10:00 a.m. – 10:30 a.m. Trade Show & Refreshment Break 10:30 a.m. – 11:15 a.m. The Economic Outlook for

Arkansas and the Nation William Emmons

Federal Reserve Bank of St. Louis 11:15 a.m. – 11:45 a.m. Doreen Eberley

FDIC Division of Risk Management Supervision 11:45 a.m. – 12:45 p.m. Lunch in the Trade Show

BKD Milestones in Banking Awards

12:45 p.m. – 1:30 p.m. A View from Washington Dan Blanton American Bankers Association 1:30 p.m. – 2:00 p.m.

ABA Business Session Opening Comments Officer Nominations Treasurer’s Report

Emerging Leaders Section Update

THURSDAY EVENING EVENTS

5:30 p.m. – 6:30 p.m.

CNA Chairman’s Reception

6:30 p.m. – 8:30 p.m.

DD&F Legacy of Leadership

ABA Annual Banquet & Officer Installation

FRIDAY, MAY 13, 2016 6:45 a.m. – 8:00 a.m.

Simmons Strawberry Breakfast

8:00 a.m. – 8:30 a.m.

Opening Comments & Welcome Government Relations & PAC Report 8:30 a.m. – 9:30 a.m.

Fear & Loathing on the Campaign Trail 2016 Steffen Schmidt, Ph.D., Iowa State University 9:30 a.m. – 10:30 a.m. The New Bank Earnings Model

Jim Burson, Cornerstone Advisors 10:30 a.m. – 11:30 a.m. ERM & The Committee Process:

What Directors Need to Know

Karl Nelson, KPN Consulting 11:30 a.m.

Closing Remarks

DOWNLOAD THE

Mobile App There’s an app for that! You’ll have agendas, speaker presentations, exhibitor information, and more at your fingertips with the ABA Convention Mobile App. Just search “Arkansas Bankers Association” in the App Store!

April 2016 | The Arkansas Banker

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Meet Your 2016

Convention Speakers

SENATOR JOHN BOOZMAN

The State of Arkansas John Boozman, a successful businessman and life-long resident of Arkansas, was sworn-in as U.S. Senator on January 5, 2011.

Raised in Fort Smith, John graduated from Northside High School and went on to play football for the University of Arkansas Razorbacks while completing his pre-optometry requirements. He graduated from the Southern College of Optometry in 1977 and entered private practice that same year co-founding a family business with his brother that would ultimately become a major provider of eye care to Northwest Arkansas.

COMMISSIONER CANDACE FRANKS

Arkansas State Bank Department Franks was appointed as Bank Commissioner by Governor Mike Beebe on June 13, 2007.

Commissioner Franks was reappointed by Governor Beebe to a second four-year

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The Arkansas Banker | April 2016

term on June 13, 2011. On December 4, 2014, newly elected Governor Asa Hutchinson announced he would retain Franks as Commissioner to continue her leadership role in his administration and reappointed her for a third four-year term on June 13, 2015. As Bank Commissioner, Ms. Franks oversees the Arkansas State Bank Department. The Bank Department is the chartering and regulatory authority for state banks that have a main office in Arkansas. As of January 21, 2016, the agency supervised 83 state-chartered commercial banks with total assets of $57.6 billion.

Commissioner Franks recently served a one-year term as Chairman of the board of directors of the Conference of Bank Supervisors.

DAN BLANTON

American Bankers Association Blanton is the 2015-16 Chairman of the American Bankers Association, and Chief Executive Officer of Southeastern Bank Financial Corporation and Georgia Bank & Trust in Augusta.

Blanton has held numerous leadership positions including Chairman of the Georgia Bankers Association and Chairman of the ABA Community Bankers Council. In 2009, Mr. Blanton was selected to serve on the newly-formed FDIC Advisory Committee on Community Banking. He completed his twoyear term in November 2012. He currently serves on the Advisory Board of Augusta University Hull College of Business and on the Board of Governors of the Pinnacle Club.

Blanton began his banking career in Augusta, Georgia, in 1976. He attended the Georgia Banking School in 1982 and graduated from the Graduate School of Banking at Louisiana State University in 1985.

JAMES BURSON

Cornerstone Advisors Burson brings a deep knowledge of the financial services industry as well as a wide range of executive management and business planning experience to his position as Senior Director of Cornerstone Advisors’ Strategic Planning practice.

During the course of his career Jim has facilitated and developed an array of strategic planning initiatives. Before joining Cornerstone, Burson served as the Executive Vice President and Chief Revenue (Operating) Officer of a large regional bank, giving him insight into the world of retail and commercial banking management and operations. Specific responsibilities in this role included the development and implementation of customer and revenue strategies as well as overall management of retail banking, commercial banking, agribusiness banking, mortgage services, marketing, and customer experience.

DOREEN R. EBERLEY

FDIC As the Director of the FDIC’s Division of Risk Management Supervision (RMS), Eberley is responsible for FDIC’s programs designed to promote financial institutions’ safety and soundness and those institutions’ adherence to FDIC statutes and regulations; domestic and international banking policy development; supervisory enforcement initiatives; and regulatory approvals that allow banks to engage in certain activities or transactions carried out through the Division’s workforce of approximately 2,837 employees deployed in six regional offices and 86 field offices nationwide.

Prior to this appointment, Eberley served as the Senior Deputy Director of RMS and was Regional Director of the FDIC’s New York Region.

WILLIAM R. EMMONS

Federal Reserve Bank of St. Louis Bill Emmons is an Assistant Vice President and Economist at the Federal Reserve Bank of St. Louis. He conducts policy analysis and speaks frequently on topics including the economy, housing and mortgage markets, banking, financial markets, financial regulation, and household financial conditions.

Mr. Emmons has been with the St. Louis Fed since 1995. He also serves as an Adjunct Professor of Finance in the John M. Olin Business School at Washington University in St. Louis. Prior to joining the St. Louis Fed and Washington University, he was on the faculty of the Amos Tuck School of Business at Dartmouth College, in Hanover, New Hampshire.

MARGARET LIU

Conference of State Bank Supervisors Liu is Senior Vice President and Deputy General Counsel at the Conference of State Bank Supervisors (CSBS). She oversees CSBS’s work with Congress, leads staff support for the CSBS Emerging Payments Task Force, and provides legal support across CSBS and its affiliated organizations.

Prior to joining CSBS in 2009, Liu worked as a consultant on financial services policy issues and at Fannie Mae, where she held several positions, including Vice President in the Single Family Mortgage Business and Vice President for Industry Relations. Liu has served as Chair of the State Banking Law Developments Subcommittee of the AmBA Banking Law Committee. She is also a former President of Women in Housing and Finance.

KARL NELSON

KPN Consulting Karl Nelson is the Founder and CEO of KPN Consulting. His career has included senior positions with IDC Deposits and Promontory Interfinancial Network. In addition, Nelson served as a Senior Vice President with the Federal Home Loan Bank of Atlanta from 1991 through 2002 where he managed the sales and marketing, strategic planning, and trade association/ regulatory outreach efforts. Prior to joining the Home Loan Bank, he was involved for eighteen years with various regional banks.

Nelson serves on the faculties of the Graduate School of Banking in Madison, Wisconsin and Boulder, Colorado, and the Graduate School of Bank Investments & Financial Management in Columbia, South Carolina.

BENJAMIN MCMAHAN

Federal Reserve Bank of Kansas City McMahan serves as a the Federal Reserve Bank of Kansas City’s central point of contact for a portfolio of community banks and contributes to many of the bank’s agricultural initiatives.

He grew up on a small family farm in North Central Kansas that specialized in corn, soybeans, pigs, and cattle. He is a graduate of Baker University with a Bachelor’s Degree in Finance and completed the Graduate School of Banking program at the University of Wisconsin-Madison.

Prior to joining the Federal Reserve Bank of Kansas City as an examiner in 2012, McMahan spent eight years working as an examiner with the Farm Credit Administration.

STEFFEN SCHMIDT, PH.D.

Iowa State University Known as Dr. Politics to his many readers, followers and fans, Steffen Schmidt has been analyzing the Iowa caucuses and U.S. national politics since 1972 and is currently teaching a free, short online course on the caucuses. He is an internationally recognized expert on American elections.

He is a Professor of Political Science at Iowa State University. He’s the author of 11 books including the best selling college textbook American Government and Politics Today, which has been read by over 3 million college students.

April 2016 | The Arkansas Banker

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Spouse & Guest Events MARLSGATE PLANTATION TOUR & LUNCHEON

Thursday, May 12, 10:40 a.m. – 2:15 p.m.

Fourteen miles southeast of Little Rock stands Marlsgate Plantation, a stately columned Greek Revival Mansion shaded by ancient oaks and a pecan grove overlooking the waters of Bearskin Lake. Majestically rising amid acres of rice, cotton and soybeans, Marlsgate is a reflection of the opulent plantation era when cotton grew tall and there was a privileged class of wealth in the Arkansas Delta.

Marlsgate’s fine detail begins with brick Doric columns over forty feet in height and continues inside with original beveled glass windows, sliding oak doors, handcrafted woodwork, Carrara marble fireplaces, and sculpted metal ceilings throughout the mansion. White oak floors were installed over an inch thick layer of horsehair insulation. The mansion was constructed with 32 rooms and contains 11,000 square feet of living space. The first floor has a magnificent central hall and staircase, drawing room, dining room, music room, master bedroom, plantation office, and a separate kitchen and service wing attached to the mansion in the prevailing custom of the day. Second and third floors contain additional bedrooms, sitting rooms and private studies.

Attendees will spend the morning touring the gardens and home with Mr. David P. Garner, followed by a two-course lunch prepared by the home's private chef.

WALK THE ROCK!

Friday, May 13, 9:00 a.m. – 10:00 a.m.

Bring your walking shoes and join other guests for a Friday-morning jaunt in Little Rock’s River Market Park. Meet in the Marriott lobby at 9:00 a.m.

Auction

The ABA Auction has become a Convention tradition, and is a major fundraiser for political advocacy. There will be a variety of items available for your bids – such as travel packages, Razorback tickets, and jewelry. The Silent Auction will be open Wednesday evening during the Opening Reception, and continue on Thursday evening during the Chairman’s Reception.

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The Arkansas Banker | April 2016

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APR IL 9 TH , 10:24 A .M .

GET TING A POSITIVE RETURN ON TRUST IN AN INS TANT,

LU CI A M A R T I N E Z ACH I E V E D T H E R E WA R D O F A R EL AT I O N S H I P B U S I N E S S

A simple handshake wasn’t enough when Lucia Martinez’s client walked in to hand-deliver her final loan payment.

Lucia’s community bank had backed the city’s only woman-run auto-body shop for more than 10 years. Supported by CNA’s deep understanding of business risk, the bank had the confidence to invest in good ideas from uncommon sources. Now Lucia was ready to hug her friend, a thriving small business owner ready to talk expansion. Great job, Lucia.

To learn more about our broad portfolio of insurance products and services for community banks visit, www.cna.com/communitybanks.

CNA is proud to be the endorsed carrier of the Arkansas Bankers Association.

Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities, or places is coincidental. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2014 CNA. All rights reserved.

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The Arkansas Banker | April 2016

ERM and the Committee Process:

What Directors Need To Know

ABOUT THE AUTHOR

Karl Nelson is the Founder and CEO of KPN Consulting.

His career has included senior positions with IDC Deposits and Promontory Interfinancial Network. In addition, Nelson served as a Senior Vice President with the Federal Home Loan Bank of Atlanta from 1991 through 2002 where he managed the sales and marketing, strategic planning, and trade association/ regulatory outreach efforts.

Hear more from Karl Nelson at the ABA Annual Convention!

It seems that each banking crisis brings about a response from our regulators concerning risk management practices. Fortunately, these banking crises are rare, but we have seen two such periods since the 1980s and the recent one did result in 519 failures to date. In our state, we have witnessed just two failures, but despite that record, all banks in all states will be involved in a trend of enhancing risk management procedures. Historically, we have used a “Committee Process” to manage risks in our organizations and these various Committees typically involve our Boards of Directors. Typical Committees include those for Credit, ALCO, Governance, Compliance, Audit, and Technology and, for the most part, this process has worked. But, with the failures associated with this last crisis, we find renewed interest from our examiners about how this process works and how it failed to predict losses in our loan portfolios.

The main problem appears to be what is now being referred to as the “Silo” problem. By this, we mean that each of these Committees may have been seeing their own specific risks; however, the process was not putting all of the information about risk together for a larger picture of overall risk within the organization. An example might be the move away from floating rate loans to fixed rate credits that was occurring due to competitive factors. We knew that it was necessary to meet the demands of borrowers but if we were not factoring in the interest rate risk that this kind of activity creates, we found ourselves at risk of rising rates. This kind of risk is typically discussed in ALCO but if the Credit Committee wasn’t talking to ALCO, this additional risk could have been missed – the “Silo” effect.

Though we do not appear to have complete agreement from the various regulatory bodies about what we call this enhanced

risk management concept, many are using the term “Enterprise Risk Management” (ERM) to describe this issue. From our perspective, we see a strong focus from both the Federal Reserve and the OCC on ERM, however, we see less demand from the State and FDIC as to use of this terminology.

What is not in doubt, however, is the fact that all four regulators do have a desire to see all of us enhance how we manage risk.

And, the key to this desire appears to be the use of forward-looking risk assessment as a replacement for what has historically been all about looking at the past. For example, many of us grew up measuring Liquidity Risk through various balance sheet ratios and that concept worked well so long as the future and the past were well correlated.

Unfortunately, the banking industry in 2007 did not correlate well to that of 2006 (profits were off by some 30%) and this set off a search for a better measurement tool for Liquidity Risk. We are now using something called a Contingency Funding Plan (CFP) as a tool for measuring Liquidity Risk and this is just one example of how we are adopting more forward-looking assessment tools as part of this ERM exercise. As this ERM process continues to evolve and we continue to see future-oriented tools replacing historic measurement techniques, all of us will be looking into the future for sound risk management procedures.

Fortunately, our friends from the regulatory arena are providing us time to make these adjustments, but those who ignore the need for improving how they manage risk are taking a chance on a bad exam in their future. Instead, we should all be figuring out the best tools for our own specific organization and understanding what ERM is all about is a great starting point for our banks.

April 2016 | The Arkansas Banker

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Bank M&A: Is It a Good Deal?

As a bank M&A consultant for over 30 years, the question I get is always the same – Is this a good deal? This question comes from both sides. So what do we mean when we say “it’s a good deal” from both the buyer’s and the seller’s perspective?

ABOUT THE AUTHOR

Bob Fegtly is one of the founding managing partners of DD&F Consulting Group headquartered in Little Rock AR. Bob serves as a Principal on various acquisition teams, specializing in mergers and acquisitions of financial institutions, including holding company and subsidiary acquisitions and sales, branch acquisitions and sales and whole bank transactions.

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The Arkansas Banker | April 2016

From a buyer’s perspective a transaction has to be accretive to book value, tangible book value and earnings per share for the transaction to be a good deal. Accretion means the stockholders of the buyer are financially better off than if they hadn’t done the transaction. It does not necessarily have to be accretive from the outset but must be accretive over some defined period of time. All transactions are unique and entered into for various reasons. The traditionally accepted norm says that if a transaction is entered into for strictly financial gain, the resulting tangible book value dilution should be paid back from earnings generated within three years. If the transaction is entered into because of strategic considerations, the transaction needs to be accretive within five years. Shareholder value has to be enhanced or there is no financial reason for an acquisition. However, there can be intangible benefits that sometimes can’t be quantified. Under those considerations management has to determine the value of those intangibles to the organization.

Buyers also have to take into account the type and amount of consideration used in a given transaction. Consideration in the form of cash usually enhances the earnings or earnings per share (EPS) going forward but creates dilution to tangible book value. The dilution is the result of marking the assets and liabilities to market. For publically traded banks, if their stock is trading at a high multiple, and if they pay a less multiple for the target bank, then the transaction can be accretive from a tangible book value standpoint but hurts the EPS going forward. A balance between cash and stock used for consideration needs to be carefully evaluated to balance the impact on tangible book value and EPS. From a sellers perspective a transaction must provide an increase in value over the current value of your bank. So how to you measure your bank’s current value? There are many measurements of value; accounting book value, trading or transaction multiples of peers, replacement cost valuation, liquidation value, etc. However, all these types of measurements base the value of organization on past performance. The only method which values the bank on expected performance is the Discounted Cash Flow Valuation. This method values your organization based on the present

INDUSTRY NEWS Arkansas Universities Take Part in CSBS Community Bank Case Study

Mark Owen, President of the Bank of Star City, works with one of two University of Arkansas at Pine Bluff teams taking part in the CSBS Community Bank Case Study Competition. from The Banker’s Advocate, March 31, 2016

value of future cash flows which also includes the terminal value at some future date. If the present value of the future cash flows for your organization is less than an offer to sell your bank, then you should sell because you are getting more value than your current value. Conversely, you wouldn’t sell your bank if the offer was less than the present value of the future cash flows.

Sellers also need to take into account the type of consideration received and the tax consequences of each. Cash has no risk but may be a taxable event depending upon your basis. Also, the value of that cash producing future income is dependent upon how it is reinvested. Stock carries the risk of the acquiring institution.

You would also be able to avoid taxes until the stock is sold and could have upside if the acquirer is a well-managed and profitable institution. However, with a minor position in the acquiring institution, you also give up control of your investment.

So back to the question “Is it a good deal?” – could be, it just depends!

Students from four universities in Arkansas – more schools than any other state – are participating in the 2016 Community Bank Case Study competition, sponsored by the Conference of State Bank Supervisors (CSBS).

A total of 33 teams representing 25 colleges and universities in 18 states are involved in the competition, including the following four institutions in Arkansas: Arkansas State University; the University of Arkansas, Fayetteville; the University of Arkansas at Pine Bluff; and the University of Central Arkansas.

In the nationwide team competition, undergraduate college students – under the guidance of a school faculty member – have established partnerships with local community banks.

The teams are conducting original research to: Assess the impact of the bank’s small-business lending efforts on the community.

Analyze how the institution’s smallbusiness lending affects financial performance.

Evalute the institution’s management of small-business lending.

The banks with which the Arkansas schools are working are: Arkansas State University: Three separate teams are each working with Farmers Bank and Trust, Blytheville. The teams’ adviser is David Kern, Ph.D., Associate

Professor of Finance.

University of Arkansas, Fayetteville: A single team is working with Today’s Bank, Huntsville. The team’s adviser is Tim Yeager, Ph.D., Associate Professor of Finance.

University of Arkansas at Pine Bluff: Two teams are working separately with their own banks – Peoples Bank, Sheridan, and Bank of Star City. The teams’ adviser is Joon “John” J. Park, Ph.D., Associate Professor of Finance.

University of Central Arkansas: Five separate teams are each working with First Service Bank, Greenbrier. The teams’ adviser is Alex Fayman, Ph.D., Associate Professor of Finance.

The teams will be responsible for submitting a paper consisting of up to 25 pages that discusses their case-study findings, and a video that highlights the findings.

The deadline to submit the paper and video is May 2, 2016.

The winning team will be announced in May during the 2016 CSBS State-Federal Supervisory Forum in Denver and students on the winning team will have an opportunity to attend the “Community Banking in the 21st Century” research and policy conference in 2016.

The fourth annual conference is scheduled for September 28-29 at the Federal Reserve Bank of St. Louis. Organizers of the conference are CSBS and the Federal Reserve System.

In addition, the members of the winning team each will win a $1,000 scholarship.

April 2016 | The Arkansas Banker

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INDUSTRY NEWS No Specific Methodology Required for Credit Model

By Richard S. Plotkin from The Banker’s Advocate, March 31, 2016

The soon-to-be-issued credit-impairment model does not prescribe a specific modeling technique or loss methodology, according to the Financial Accounting Standards Board (FASB).

FASB reiterated this guidance at a “round table” session with community bankers, regulators, auditors and banking lobbyists to discuss implementation of the Current Expected Credit Loss (CECL) model, according to an article posted February 11, 2016, on the website of BKD, LLP, a national CPA and advisory firm.

The meeting was held February 4, 2016, at FASB headquarters in Norwalk, Connecticut.

Among those attending were representatives of financial institutions, and senior officials from the federal banking regulatory agencies, Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB) and Conference of State Bank Supervisors (CSBS).

The bankers emphasized the need for an agreement among banking regulators, SEC, auditors and PCAOB on an acceptable level of precision needed to support the increased judgment the new standard will require.

Regulators expressed their commitment to make their supervision of CECL implementation reasonable for community banks.

The American Bankers Association has expressed concern that the lack of capacity for complex financial modeling will put community banks at a competitive disadvantage.

FASB said the standard does not require the use of a specific modeling technique or loss methodology, and that banks can continue using a FAS 114 approach to evaluate individual loans.

Robert Storch, the Chief Accountant of the Federal Deposit Insurance Corporation, noted that with some

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The Arkansas Banker | April 2016

adjustments, methodologies currently used would be appropriate for smaller banks.

These methodologies include Excel spreadsheets, used by 84 percent of community banks in the U.S. On February 22, FASB responded to a bipartisan letter from 62 members of Congress who requested that the organization provide more information about its consideration of more practical alternatives to a complex modeling requirement.

The members of Congress signing on to the January 29 letter also inquired about the impact of the accounting standard on general credit availability and economic growth.

FASB responded, in part: “The proposed standard does not prescribe that organizations use specific estimation methods in any specific circumstance, but rather it allows the latitude for an organization to apply judgment to develop estimation methods that are appropriate and practical for the circumstance. In essence, historical experience remains the foundation of the estimate.

“We have already incorporated these changes into the proposed standard which will allow all financial institutions (including community banks and

credit unions) to leverage their existing processes. These changes make clear that a community bank or credit union will not be required to perform complex modeling or hire outside consultants.”

The final standard is being drafted after a prolonged period of review. Issuance is expected in the second quarter of 2016.

The most recent Exposure Draft of the proposed standards update, issued on December 20, 2012, is on the FASB website.

The implementation date is not until 2019 for public business entities that meet the definition of an “SEC filer.”

Public business entities not meeting the definition of an SEC filer, and all nonpublic business entities, have until 2020 to implement the standard.

In 2011, the Office of the Comptroller of the Currency and Federal Reserve estimated loan-loss reserves would have to be increased by 30 percent to 50 percent when the model was implemented.

This projection was based on conventional expectations and 2010 data.

Now, however, the American Bankers Association, citing a survey conducted by financial services provider Keefe, Bruyette & Woods, predicts a median increase for reserves of 3 percent for small and midsized banks.

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PROFESSIONAL DEVELOPMENT 13 Bankers Complete Commercial Lending School The ABA Commercial Lending School was held April 4-8 with 13 bankers from across the state in attendance.

This week-long event allowed students to expand their lending knowledge on topics ranging from understanding a borrower’s business and assessing financial performance, to identifying and managing problem loans and establishing credit discipline.

Instructors were John Cochran and Ron Rushing.

Graduates of the 2016 ABA Commercial Lending School were Daniel Bell, Focus Bank, Jonesboro; Matthew Cramblett, The Capital Bank, Little Rock; Cody Gregory, Bear State Bank, Harrison; Hunter Johnson, Southern Bancorp, Arkadelphia; Brad Martin, Citizens Bank & Trust Co., Van Buren; Ed McKinley, Arkansas County Bank, Lockesburg; Ethan Provost, Centennial Bank, Russellville; Eric Roberson, The Citizens Bank, Arkadelphia; Shaun Robinson, Bank of the Ozarks, Malvern; Cindy Smith, First National Bank of Crossett, Crossett; Erika Spears, Warren Bank & Trust, Warren; Kelly Williams, Stone Bank, White Hall; and Melissa Wilson, Centennial Bank, Russellville.

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June 16-17, 2016 The Chancellor Hotel, Fayetteville

MEMBER NEWS

Simmons Bank Converts to Arkansas State-Charter Effective upon the opening of business on April 1, Simmons First National Bank, the subsidiary of Simmons First National Corp., has converted from a national banking association to an Arkansas state-chartered bank. The bank’s name will change to Simmons Bank.

Simmons Bank is a member bank of the Federal Reserve System through the Federal Reserve Bank of St. Louis.

The conversion isn’t expected to affect the bank’s customers in any way. Customers will receive the same protection on deposits in Simmons Bank as they received with deposits in Simmons First National Bank.

“The charter conversion is a strategic undertaking that we believe will enhance our operations in the long term,” said Marty Casteel, chairman and chief executive officer of Simmons Bank. “We’re strongly committed to operating our organization with a focus on community banking. We believe it will be advantageous for our shareholders, customers and associates to work with regulators who are accustomed to community banks and the challenges they face.”

ARKANSAS BANK DEPARTMENT

APPLICATIONS & APPROVALS

Branch Bank Application An application filed by the Merchants & Farmers Bank, Dumas, Desha County, Arkansas, to establish a branch banking facility at a temporary address of 4500 Highway 5 North, Suite 6, Bryant, Saline County, Arkansas, with the permanent address at 3512 Highway 5 North, Bryant, Saline County, Arkansas, has been approved. March 7, 2016.

Charter Conversion Application An application filed by Simmons First National Bank, Pine Bluff, Arkansas, a national bank, for conversion to a state-chartered bank to be known as Simmons Bank, Pine Bluff, Arkansas, has been approved. March 31, 2016.

Mortgage Programs Get Creative to Promote American Dream While today’s real estate market continues to be driven by historically low interest rates, some consumers can take advantage of programs that make buying a new home an even more realizable dream.

Rural Development and Section 184 Indian Home Loans, as well as the HomeReady® program, are a few examples of vehicles for acquiring a mortgage that have more relaxed requirements than conventional loans.

In some cases, this means consumers can benefit from less strict guidelines in terms of income, down payment, and other upfront costs.

A Rural Development Loan, for example, offers benefits like no down payment and reduced mortgage insurance for residents in states like Arkansas. The loans, backed by the U.S. Department of Agriculture, are designed to promote expansion into rural communities. Many of these rural communities, however, are located just beyond city limits and surprisingly close to suburban areas.

“Many homebuyers are unaware of programs like the Rural Development Loans and are very surprised when they see some of the geographic areas where these loans are available,” said Eric Cullum, Mortgage Loan Manager for Arvest Bank. “We encourage borrowers to explore all of their loan options before they start house-hunting. If they realize they can potentially save money by getting a zero down payment loan with reduced mortgage insurance rates in an attractive area, it can expand their options.”

Fannie Mae’s new HomeReady program, meanwhile, boasts a unique structure for consumers. In addition to down payments as low as three percent and reduced mortgage insurance, HomeReady also offers a new feature that allows income to be considered from non-borrower household members, as well as non-occupant

borrowers who are extended family members.

“HomeReady provides a lower-cost option for low-to-moderate income families, including those who may have multiple earners in one household,” said Cullum. “It offers an opportunity for these families to get more for their money.”

The Section 184 Indian Home Loan Guarantee Program is backed by the U.S. Department of Housing and Urban Development and is another alternative for those who can prove Native American heritage. The program is designed specifically for Native Americans, Alaskan Villages, Tribes or Tribal entities who live on or off native lands. It offers up to 97.75 percent financing and is applicable to home purchases, new construction and refinancing.

All of these programs are lesser-known options than VA and FHA loans, which also provide more lenient standards than conventional mortgages. VA loans, backed by the U.S. Department of Veterans Affairs, provide 100 percent financing for veterans, require no down payment, and offer a fixed interest rate and no monthly mortgage insurance, which is a significant savings for consumers.

FHA loans, backed by the U.S. Federal Housing Administration, benefit lowerincome families because they require a lower down payment, offer lower interest rates and accept lower credit scores than traditional programs.

All of these programs can help some consumers realize homeownership easier than via the conventional process.

“Generally speaking, with any type of loan product, the home affordability index, which is based on interest rates, pricing and associated factors in home buying,” said Cullum, “is the best it has been in probably 30 years.”

April 2016 | The Arkansas Banker

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MEMBER NEWS MCLINTOCK PROMOTED AT ARVEST BANK, SPRINGDALE Arvest Bank is pleased to announce that Ben McLintock has been promoted to Vice President by the Board of Directors in Springdale.

McLintock has been with Arvest Bank since January 2014 as a regional investment officer for the Springdale and Siloam Springs markets for Arvest Wealth Management (formerly Arvest Asset Management).

“Ben has done a good job working with the Arvest team and finding opportunities to create fully-banked, delighted lifetime customers,” said Lisa Ray, president and CEO for Arvest Bank in Springdale. “He has earned many degrees and designations, including being a licensed attorney and Certified Fund Raising Executive, that make him an ideal resource for customers and associates regarding investments, financial planning, trust, estate planning, business law and tax and transactional law.”

McLintock grew up in Forestville, Calif., and earned his Bachelor of Arts in broadcasting and marketing from San Francisco State University in 1999. He

earned his Juris Doctor in 2013 from the University of Arkansas School of Law and his Master of Laws in taxation in 2015 from the University of Alabama School of Law. He holds insurance licenses for Arkansas and Oklahoma, an Arkansas Law License since 2013, Certified Fund Raising Executive designation since 2009 and holds the Series 7 and 65 Securities licenses.

He and his wife, Kelly McLintock, live in Springdale with their three children, Gunnar, Grace and Emily.

ARVEST NAMES BEN WILBURN COMMERCIAL AND AGRICULTURE LENDER IN HARRISON Arvest Bank has announced that Ben Wilburn has been named Commercial and Agriculture Lender for the Harrison market, a position that is unique to the community. Wilburn will work as a commercial lender with emphasis in agriculture, given his extensive experience in the field. He previously worked for Arvest in Clarksville as a credit analyst.

“Ben has grown up and spent many years working in the agriculture industry and he can easily identify with the needs

First Community Bank Treats Local CPAs First Community Bank delivered trays of Bundt cake desserts to local tax offices in honor of their service this tax season.

“Each year we try to let our hometown accountants know that we are thinking about them and appreciate their hard work during one of their busiest times of the year,” said Boris Dover, First Community Bank president and chief operating officer. “With return deadlines quickly approaching, tax professionals can certainly use a little boost of energy from the sweet treats.”

Pictured (from left to right) are First Community Bank loan officers, Ron Carter and Hank Pearce; COO and president, Boris Dover; and First Community Financial Services advisor, Audrey Pool.

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The Arkansas Banker | April 2016

and challenges of our customers, which positions him well to provide them with banking solutions to achieve their objectives,” said Scott Tennyson, market president for Arvest Bank in Harrison. “We are glad to have his expertise in this area and look forward to the service he will provide this community.”

Wilburn earned a bachelor’s degree in Agriculture Business and a master’s degree in Agriculture Economics, both from the University of Arkansas.

He is a native of Valley Springs and attends Ridgeway Church of Christ. Wilburn will work out of the Arvest Bank branch at 401 North Walnut Street in Harrison.

He lives in Harrison with his wife, Hannah.

PERRY NAMED LOAN OFFICER AT STONE BANK Nick Roach, President and Chief Lending Officer of Stone Bank, has announced that Eric Perry has been named a Loan Officer at the Mountain View, Arkansas-chartered bank.

“We’re very pleased to add Eric to our lending staff here in Mountain View, said Roach. “He is very familiar with the area and has extensive experience in agriculture, which is a very

important area of lending in our bank.”

A fifth generation native of the Stone County area, Eric attained a BS in Animal Science and Agricultural Business from College of the Ozarks in Branson, Missouri. His previous work experience has been in the live production area with Caldwell Foods and as a farm/ ranch manager in Arkansas and Oklahoma. He most recently managed a 5,000 acre cattle ranch in Oklahoma with more than 800 head of cattle.

Eric and his wife Tammy Perry and their two children live on a family farm in the Fox area.

HARDKE NAMED COMMUNITY BANK PRESIDENT Farmers and Merchants Bank President and CEO, Gary Hudson on behalf of the Board of Directors, names David Hardke Community Bank President of Prairie County. Farmers and Merchants has banks in Hazen and Des Arc. Hardke has more than 44 years of experience in banking; 20 of those with Farmers and Merchants Bank. He is a

BANKER NEWS & MOVES graduate of the University of Central Arkansas with a BA degree, majoring in business management.

FARMERS AND MERCHANTS BANK PROMOTES RODGERS

Hardke also is a graduate of the School of Bank Marketing at the University of Colorado in Boulder, Colorado, and of the Graduate School of Banking and Louisiana State University.

Farmers and Merchants Bank’s Tabatha Rodgers has been promoted to Vice-President of Mortgage Lending. The announcement was made by the bank’s President and CEO, Gary Hudson, on behalf of the Board of Directors.

He is has served as recorder/ treasurer for the City of Hazen for 19 years and remains an active member of the Hazen Chamber of Commerce. David and his wife Nita are members of the Hazen First United Methodist Church.

FARMERS AND MERCHANTS BANK PROMOTES HAWKINS Farmers and Merchants Bank’s Erik Hawkins has been promoted to Assistant Vice-President and Loan Officer in the bank’s Perryville branch.

The announcement was made by the bank’s President and CEO, Gary Hudson.

Hawkins is a native of Perry County, Arkansas. He and his wife Ginny reside in Conway.

Hawkins graduated from Perryville High school. He furthered his education at the University of Arkansas Community College at Morrilton, and completed his Bachelor of Science in Education Arkansas Tech in Russellville.

While attending college, Hawkins worked as a teller at the Perryville bank and upon graduation became a teacher and coach at Perryville High School.

In 2013, Farmers and Merchants Bank hired Hawkins as a loan officer.

He is a member of the Perry County Chamber of Commerce board, a member of the Petit Jean Razorback Club and serves on the Farm Family Council.

Rodgers has been an employee of Farmers and Merchants Bank for fourteen years, having worked as a teller, real estate loan assistant, loan administrative assistant and most recently as Executive Administrative Officer.

She is a 1997 graduate of Stuttgart High School and hold a Bachelor of Science degree in Marketing from Arkansas State University in Jonesboro.

Rodgers is an active volunteer in PEO, currently serving as president. She and her husband Brandon have two sons.

VANSANDT NAMED COMMUNITY BANK PRESIDENT Farmers and Merchants Bank President and CEO Gary Hudson, on behalf of the Board of Directors, has named Kirk Vansandt Community Bank President for South Arkansas County and Lee County.

Vansandt of DeWitt is a loan officer, specializing in agriculture lending. He has worked at Farmers and Merchants Bank since 2008.

He earned a Bachelor’s Degree in Business Administration from the University of Central Arkansas. Vansandt is active in

various DeWitt civic activities, including the DeWitt Chamber of Commerce, DeWitt Industrial Development Commission, Rotary Club, and Acres of Help. He and his wife Holly are members of First Baptist Church of DeWitt.

FARMERS AND MERCHANTS BANK PROMOTES WASHAM Farmers and Merchants Bank’s Casey Washam has been promoted to Vice President and Loan Review. The announcement was made by the bank’s President and CEO, Gary Hudson.

Washam is a native of Kentucky, graduating from Murray State University in 2001 with a Bachelor of Science in Business.

He is also a 2009 graduate of the Graduate School of Banking in Boulder, Colorado. He started his career in banking in 2003 with Chart Bank in Perryville which was acquired by Farmers and Merchants Bank in 2008.

Washam has a long history of community service, most recently as a member of the Stuttgart Kiwanis Club.

He enjoys spending time with his daughter and his wife Katie.

MOLLY CARPENTER PROMOTED AT FNBC Marty Sellars, CEO and President of FNBC, recently announced the promotion of Molly Carpenter to Vice President of Marketing and Public Relations. Carpenter has been employed with FNBC for 2 years and was previously Director of Marketing & Public Relations.

Carpenter will continue to oversee all marketing and public relations activities for FNBC’s 10 locations. As a member of the bank’s senior management team, she will contribute to the bank’s overall management and strategic vision.

“Molly adds a great deal of marketing strength and professionalism to FNBC’s senior leadership team,” Sellars said. “She has transformed our marketing department into a high performing and highly recognized marketing function.

Molly’s professional capabilities, combined with her high energy and charisma, make her a great addition to our team, and further exemplifies the bold past and the bright future at FNBC!” Carpenter is a fourth generation community banker at FNBC Bank. Prior to joining the bank in 2014, she worked at Ozarka College in the Public Relations Office.

She is active in numerous community and professional organizations including immediate past-president of the Quad Cities Rotary Club, and serves on the Ozarka College Foundation Board, Sharp County Community Foundation Board, and the Spring River Paramedic Ambulance Service Board of Directors.

In 2015, she was recognized by Arkansas Business as one of 20 in their 20s: The New Influentials, and as one of the Top 25 Community Bank Influencers on Twitter by the Independent Community Bankers of America (ICBA).

Carpenter, a native of Ash Flat and Highland High School alum, holds a Master of Business Administration from John Brown University and a Bachelor of Science in Journalism from Arkansas State University in Jonesboro. She is a member of the Graduate School of Banking in Colorado’s Class of 2017.

She is the daughter of FNBC Bank Chairman Martin Carpenter and wife, Lori.

April 2016 | The Arkansas Banker

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BANKER NEWS & MOVES FNBC BANK MAKES HIRES FNBC Bank CEO and President Marty Sellars has announced the hire of a team of four community bankers to join the existing team in the Mountain Home market. The new hires include Shane Davis, Senior Vice President and Commercial Lender, Debbie Howard, Vice President, Mortgage and Consumer Lender, Cheryl Chappell, Consumer Lender and Mortgage Processor, and Christine Lewis, Commercial Loan Processor.

Prior to joining FNBC Bank, all four were employed with another bank in Mountain Home. FNBC’s Mountain Home office, located at 102 Hwy. 62 E, is led by Community President, Executive Vice President & Chief Lending Officer Chad Hudson. The team will begin transitioning to FNBC Bank immediately.

“We are thrilled to be adding these successful and aggressive bankers to our team of community bankers,” said Sellars. “They bring over 70 years of combined banking experience, but of even more value to our organization is their level of leadership and commitment to their customers and communities.”

“This group of professionals brings a ton of experience in commercial and mortgage lending,” said Hudson. “I am looking forward to working with this entire team as we continue to grow and expand FNBC’s footprint in the Mountain Home and surrounding market.”

Sellars added that strategically FNBC is seeking other growth opportunities through mergers and acquisitions.

“These hires are one step in what will be many strategic steps for organic and acquired growth at FNBC Bank,” he said. “We will also remain zealous in making sure every person and organization we consider is a cultural fit.”

Shane Davis brings over 20 years of banking experience and Howard brings over 35 years.

Davis was most recently employed as a Senior Vice President where he worked primarily with commercial and small business customers. He began his banking career in Mountain Home in 1995.

“Shane is a dynamic lender who puts his customers and community first,” said Hudson.

“His level of experience, expertise and

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The Arkansas Banker | April 2016

ambition made him an excellent candidate to join our team, and I am looking forward to working with Shane and this team to expand and elevate our banking experience for Baxter County.”

A native of Little Rock, Davis has become engrained in the Mountain Home and Baxter County community. He serves on the Mountain Home Volunteer Fire Department, is the Mountain Home Fire Department Auxiliary President, and is a member of the East Side Baptist Church. He was recognized by the U.S. Small Business Administration as the 2004 Financial Service Champion of The Year, and most recently, was recognized as the 2015 Banker of the Year by the Baxter Bulletin.

Davis holds a Bachelor of Science in Communication with a minor in Business Administration from the University of Arkansas in Little Rock. He and his wife, Tammy, have three children: Jacob Davis, Landon Crider and Bailey Crider.

Debbie Howard was most recently employed as Vice President, Commercial Lender and Mortgage Originator.

“Debbie is a seasoned mortgage lending professional in the Mountain Home market and will be a huge asset to our mortgage lending team,” said Hudson.

“She has been instrumental in the startup of several mortgage lending departments in other financial institutions in the area, and I am elated to be bringing someone with her level of mortgage lending expertise and knowledge to our existing department.”

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Howard graduated from the American Bankers Association’s Lending School, and is a charter member of the Gassville Lions Club and a former Business Professional Women’s member. She is a native of Marion County, and has one daughter, Ashley, and one granddaughter, Kennedy.

Cheryl Chappell, a native of Wynne, has over 30 years banking experience. She most recently served as an assistant to senior-level credit officers.

Christine Lewis, a native of Mountain Home, has 15 years banking experience as a commercial loan assistant. She holds a Bachelor’s degree in Business Administration with an emphasis in Finance from the University of Central Arkansas.

The Arkansas

Banker 1220 West Third Street Little Rock, AR 72201 Phone 501.376.3741 Fax 501.376.9243 www.arkbankers.org

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