The Arkansas Banker September 2016

Agricultural Lending Conference

Banking on Trust Departments

The Arkansas

Banker Getting Ready for the New

Overtime Exemption Rules

Volume C, No. 9 | September 2016 September 2016 | The Arkansas Banker

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The Arkansas Banker | September 2016

The Arkansas

Banker

Volume C, No. 9 | September 2016

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

CONTENTS COLUMNS

Washington Update

Sean Williams Rob Nichols

Jim Edgrington

11 Political Perspective

Roby Brock

31 Industry News 32 Professional Development

DEPARTMENTS

33 Member News 36 Banker News & Moves 39 Classifieds 39 Index of Advertisements 12 Emerging Leaders

Day at the Capitol 14 Getting Ready for the New

Overtime Exemption Rules

SUBSCRIPTION

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

By Stuart Jackson

16 Agricultural Lending Conference

MAGAZINE RATES

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

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ADVERTISEMENT

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.

Chairman’s Column

Bill Holmes

10 Industry Insight

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.

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

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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.

President’s Column

EDITORIAL OFFICE

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

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FEATURES

18 Does the Recent Slump in the

Farm Economy Mean Ag Lending

is Over?

By John Blanchfield

20 2017 Ag Outlook

By Dan Manternach

22 2016 Trust Conference 24 Unique Assets: The Hidden

Half of Your Client’s Wealth

By Brad Davidson

27 Banking on Trust Departments

By Liz Maio, Tom Pecoraro, Bill Smith & Laura Lee Miller

September 2016 | The Arkansas Banker

3

PRESIDENT’S COLUMN An Idea Worth Stealing...

Picasso had a saying — “good artists copy, great artists steal” — and we have always been shameless about stealing great ideas.

We are almost through September; school has started, football games have been won and lost, and the days are getting shorter. All of these events are tied to September, year in and year out. They are expected and looked forward to. They are a part of our lives.

Just as consistent as September, there are parts of our banking lives that are now almost taken for granted. In addition to employing over 20,000 Arkansans, banks continue to be the primary institutions for savings, lending and financing of the economic growth in our communities.

But, even beyond that service role, Arkansas bankers are committed to making the towns where they live and work the very best that they can be.

Banks make charitable contributions to help better communities, whether it is Habitat for Humanity, Red Cross drives, ALS golf tournaments or Meals-on-Wheels, Arkansas banks are there with contributions of both money and time. Our bankers serve on countless non-profit boards, volunteer at schools and sponsor hundreds of baseball and football teams.

So what does that have to do with stealing? Last June, we were in Wisconsin for the 2016 Central

States Conference. Joe Witt, President & CEO of the Minnesota Bankers Association presented us with an idea that the MBA was taking up. The idea had come out of a recent board meeting where they had discussed the fact that the banking industry is the best at community involvement.

No industry has a better record of supporting and growing their communities; not the doctors, not the lawyers and not the accountants. Yet, at the same time, lots of public policy makers and some of the media, consistently hammer on banks.

The board asked the MBA to come up with a program that would highlight the good work that banks do all year long, each and every year, in their communities. The result was a program called “Community Impact Week.” They asked all of their banks to support this effort by signing up on the MBA website and by encouraging their employees to engage in some form of volunteer efforts during a specific week. The MBA will then highlight the work being done through social media and print media throughout the state.

We think it is a great idea; and we think it is worth stealing.

The Arkansas Bankers Association is leading a charge to unite our member banks in a “Week of Impact” in the spring of 2017. We will ask that each bank set aside some time during this week to

ABA STAFF

BILL HOLMES

BARRY JACKSON

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

SVP/COO 501.978.3613 | BARRY.JACKSON@ARKBANKERS.ORG

CARLA BRINKLEY

KAMI T. COLEMAN

VP/CONTROLLER 501.978.3608 | CARLA.BRINKLEY@ARKBANKERS.ORG

AVA F. ROBERTS

VP/DIRECTOR OF GOVERNMENT RELATIONS 501.978.3606 | AVA.FRANKS@ARKBANKERS.ORG

JESSICA SAHENE

MARKETING COORDINATOR 501.978.3609 | JESSICA.SAHENE@ARKBANKERS.ORG

STUART THALHEIMER DAVIS

EXECUTIVE ASSISTANT 501.978.3605 | STUART.THALHEIMER@ARKBANKERS.ORG 4

PRESIDENT & CEO BILL HOLMES

The TheArkansas ArkansasBanker Banker || September September2016 2016

VP/PROFESSIONAL DEVELOPMENT 501.978.3614 | KAMI.COLEMAN@ARKBANKERS.ORG

TRACI LOGSDON

DIRECTOR OF COMMUNICATIONS 501.978.3603 | TRACI.LOGSDON@ARKBANKERS.ORG

BRENDA SCARBROUGH

PROFESSIONAL DEVELOPMENT COORDINATOR 501.978.3607 | BRENDA.SCARBROUGH@ARKBANKERS.ORG

support one or more charitable organizations of your choice to help reach a yet to be determined goal of community service hours.

By pooling our resources, we can cast a much brighter spotlight on the impact that banks make in our communities. The ABA will coordinate the approach and will provide support in the following vital areas: Media and social toolkits will be made available so we can effectively communicate the week’s giving and to applaud the bank’s contributions.

Consistent messaging will increase public support and awareness.

A statewide news release for promotion and recognition of participants, especially touting the number of hours volunteered that week.

ABA will gather pictures, stories and video for posting on Twitter, Facebook, and www.arkbankers.org. These narratives will be told, not only during the “Week of Impact,” but throughout the year, reinforcing the important roles our banks play in Arkansas.

We will have more information out in the coming month, including social media guides, and FAQs. We feel strongly that we can help change the perception of our industry by casting a bright spotlight on what banks are doing all the time – building stronger communities.

ABA EXECUTIVE COMMITTEE

SEAN WILLIAMS | CHAIRMAN

Federal BankPac Contribution The Arkansas Bankers Association was recognized for their $25,000 contribution to the Federal BankPac at the AmBA Summer Leadership Meeting in Seattle this July.

Pictured are ABA President & CEO Bill Holmes; ABA Chairman Sean Williams, First National Bank of Wynne; AmBA Chairman Dan Blanton; AmBA President & CEO Rob Nichols; and ABA Chairman-Elect Dave Dickson, Union Bank & Trust Co., Monticello.

DAVE DICKSON | CHAIRMAN-ELECT

CATHERINE OWEN | VICE CHAIRMAN

First National Bank of Wynne, Wynne

Union Bank & Trust Co., Monticello

Eagle Bank, Little Rock

JUDY LAWTON | TREASURER

ROBERT Y. TAYLOR | PAST CHAIRMAN

BILL HOLMES | PRESIDENT/CEO

Heartland Bank, Little Rock

The Citizens Bank, Rogers

ABA BOARD OF DIRECTORS

PAT ANDERSON | GROUP 5

DAVID DOWD | GROUP 1

Arkansas Bankers Association, Little Rock

JON HARRELL | GROUP 3

WILSON MOORE | GROUP 2

Simmons Bank, Pine Bluff

Cross County Bank, Wynne

Generations Bank, Rogers

Bank of America, Little Rock

PHIL BALDWIN | GROUP 2

TROY DUKE | GROUP 5

DARWIN HENDRIX | GROUP 4

JERRY MORGAN | GROUP 1

The Citizens Bank, Batesville

Gateway Bank, Rison

Bank of Delight, Delight

Focus Bank, Jonesboro

JIM CARGILL | GROUP 2

DON GIBSON | GROUP 3

J. MICHAEL JONES | GROUP 5

RANDY SCOTT | GROUP 1

Arvest Bank, Little Rock

Legacy National Bank, Springdale

Merchants & Farmers Bank, Dumas

Farmers Bank & Trust Co., Blytheville

GENE CRAWFORD | GROUP 5 First National Bank of Crossett, Crossett

CHRIS GOSNELL | GROUP 4 Farmers Bank & Trust Co., Magnolia

CHRIS LEHMAN | GROUP 1 First Delta Bank, Marked Tree

JIM TAYLOR | GROUP 3 First Security Bancorp, Fayetteville

SCOTT HANCOCK | GROUP 3

CRAIG MOBLEY | GROUP 4

LYNN WRIGHT | GROUP 2

Centennial Bank, Fayetteville

First Financial Bank, El Dorado

Regions Bank, Little Rock

September 2016 | The Arkansas Banker

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CHAIRMAN’S COLUMN Telling Our Stories, In Washington & At Home It’s been well over a month since our Bank Management Seminar at the Hilton Sandestin Beach Golf Resort & Spa and I’m still hearing AND also telling stories about memorable times had on the coast! We, as an association, learned a lot in having a destination meeting and the opportunity to fellowship with friends in a very relaxed environment was incredibly enjoyable. I appreciate the ABA team and their exceptional job of planning, organizing, and balancing our work and relaxation time in the sun. A tremendous blessing of life is making memories with friends and family that we then carry throughout our years. This year’s BMS was full of fun, fellowship and special times with Arkansas friends, and for that, I am extremely thankful.

About the time you receive this publication, our Annual Washington Visit will be taking place (September 20 -22), and several of you will be there advocating on behalf of Arkansas banks.

This fast-paced visit is very educational and, I believe, represents the most vital couple of days for our advocacy efforts each and every year.

One of the things I enjoy most about our ABA meetings is interacting and sharing with fellow bankers. Much of that interaction amounts to telling my stories and also hearing the stories of my friends and peers from across the state.

We don’t necessarily think of our discussions in those terms, but when we interact regarding the challenges and opportunities we face, we’re really telling our stories. And, there is much to tell!

While we’re in D.C., we’ll focus on telling those

personal stories to our congressional delegation about precisely how our customers and our delegations’ constituents are being impacted by government overreach, burdensome community bank regulation, abuses by the Farm Credit System and Credit Unions and other pertinent issues.

It’s imperative that we tell our stories in Washington, and I believe equally important that we tell our stories right here at home. As community bankers, we have plenty of content for great stories, and we need to tell them. Many times, our stories are incredible, impactful stories of change, resilience, growth and evolution.

The collective story of community banking includes who you are, who we are, what we do, where we are today, as well as our challenges and opportunities. It also includes the history that came before us, and the future that we are now molding and shaping together. We need to tell our stories to everyone: our customers, our prospective customers, our communities and our policymakers. In Arkansas, we are community bankers, and we are something different, we are something that makes a difference, and we are something that matters for the communities and people we serve. Whether it be Wall Street, the press, regulators or Credit Unions, we simply cannot afford to let others tell our story for us!

CHAIRMAN SEAN WILLIAMS President & CEO First National Bank of Wynne

I encourage you to tell your story this month!

Our stories are authentic and powerful, and together, we can and will positively impact the future of both our communities and our industry.

ABA EMERGING LEADERS SECTION COUNCIL BLAKE FLETCHER | VICE PRESIDENT

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Stone Bank, Little Rock

Relyance Bank, Pine Bluff

JOHN ANDERSON | SEC./TREAS.

GEORGE PURVIS | SEC./TREAS. Cornerstone Bank, Eureka Springs

EDUARDO ABRIL | GROUP 4 First State Bank of DeQueen, DeQueen

BURT HICKS | GROUP 5 Simmons Bank, Pine Bluff

HUNTER NORTON | GROUP 3 First Security Bank, Fayetteville

NATALIE BARTHOLOMEW | GROUP 3 First National Bank of NWA, Rogers

BLAKE JOHNSON | GROUP 1 Evolve Bank, Jonesboro

BEN RIDINGS | GROUP 2 Bank of the Ozarks, Little Rock

JOHN BOLLINGER | GROUP 3 The Bank of Fayetteville, Fayetteville

MATT LAFORCE | GROUP 2 First Security Bank, Searcy

RACHEL SCHWARTZ | GROUP 4 Farmers Bank & Trust, Texarkana

BRANDON GENTRY | GROUP 1 Cross County Bank, Wynne

JAMES LYLE | GROUP 5 McGehee Bank, McGehee

SANDY STARNES | GROUP 2 The Citizens Bank, Batesville

ROBERT HARGIS | GROUP 5 The Citizens Bank, Monticello

RYAN MOORE | GROUP 1 Centennial Bank, Jonesboro

HUNTER WINDLE | GROUP 4 The Malvern National Bank, Malvern

2016 The Arkansas Banker | September 2016

ABA Live Events ABA Professional Development

Live Events...

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

OCTOBER 2016

2–6

| Basic Lending School

Holiday Inn Presidential, Little Rock Who Should Attend: Loan Officers, Lending Support staff, New and Intermediate Lending staff

24

| 2016 ABA Bank PAC Golf Tournament

24

| Advanced Consumer Lending

25

| IRA School

25

| Bank Directors I Workshop

7–8

| Marketing Conference

14

| Bank Internal Audit Fundamentals

15

| IT Audit for Financial Auditors

12–13 | 2016 Agricultural Lending Conference

Crowne Plaza, Little Rock Who Should Attend: Arkansas Ag Lenders & Ag Officers

19 | Commercial & Industrial Lending in Today’s Competitive Market

Crowne Plaza, Little Rock Who Should Attend: Commercial Lenders, Credit Analysts, Loan Documentation Specialists, Branch Managers, Private Bankers, and Business Development Officers

20

20

| Intro to Commercial Lending

Crowne Plaza, Little Rock Who Should Attend: Commercial Lenders, Credit Analysts, Loan Documentation Specialists, Private Bankers, Business Development Officers, and Branch Managers

2–3

Crowne Plaza, Little Rock Who Should Attend: Consumer Loan Officers, Branch Managers, Assistant Branch Managers, Personal Bankers, Management Trainees, Collection Officers Crowne Plaza, Little Rock Who Should Attend: New Accounts Representatives, CD Personnel, Savings Counselors, Investment and Trust Personnel who are newly involved in the opening, selling, marketing, or administration of IRAs, Experienced IRA Personnel who like a slower pace workshop to cover all the new changes in a comprehensive manner Crowne Plaza, Little Rock Who Should Attend: Bank Directors, Executive Management, Senior Bank Officers, Shareholders

| ELS Day at the Capitol

Arkansas State Capitol, Little Rock Who Should Attend: Bankers interested in building relationships with state lawmakers and learning more about the legislative process.

NOVEMBER 2016

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Pleasant Valley Country Club, Little Rock

| CECL Workshop

Embassy Suites, Little Rock Who Should Attend: Bank professionals seeking to better understand the proposed changes to the impairment model for assets carried at historical book value

| Trust Conference

Hot Springs Convention Center, Hot Springs Who Should Attend: Trust Officers, Wealth & Private Banking Directors, Senior Financial Advisors, Personal Bankers, Estate Planning Attorneys, Senior Level Executives, Portfolio Managers

Crowne Plaza, Little Rock Who Should Attend: Anyone responsible for marketing, public relations, and advertising Crowne Plaza, Little Rock Who Should Attend: Internal Auditors, Managers, Executive Management, and Board Members Crowne Plaza, Little Rock Who Should Attend: Internal Auditors, Managers, Executive Management, and Board Members

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

September 2016 | The Arkansas Banker

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WASHINGTON UPDATE Dodd-Frank’s Price Tag The president’s Council of Economic Advisers seems to have taken to heart Mark Twain’s suggestion to “get your facts first, then you can distort them as you please.”

A report from the group released in August reviews the aggregate performance of community banks then boldly — and illogically — concludes that the Dodd-Frank Act has not harmed that segment. Specifically, the report claims that bank branching patterns, lending growth and geographic reach “show that community banks remain strong.”

The statement is jaw-dropping in its willful disregard for the true cause and effect of the disappearance of 1,708 banks — or 22 percent of the industry — since the enactment of DoddFrank in 2010. It’s as if the White House is saying “what does it matter if we are losing a bank a day, there are others around that can lend.”

We know how much it matters — to you and to the communities that no longer have their local hometown bank. And we know that it is more than just market forces and “macroeconomic conditions” that are driving the twin trends of bank consolidation and the dearth of new bank charters.

As I said in a letter to the CEA respectfully challenging its conclusions, the thousands of pages of new regulations that have been imposed on community banks in recent years is an enormous driver of decisions to sell to a larger bank. Those same regulations are restricting product offerings, like mortgages, and discouraging banks from growing for fear of the increased regulation that is triggered by crossing an arbitrary asset threshold. This leaves customers with fewer choices and communities with less service.

live bankers who are grappling with how to grow their business in the current regulatory environment, they could have gotten right to the heart of the matter. They might have heard something like this, taken from a note that one of AmBA’s members recently sent explaining his bank’s decision to hang it up: Unfortunately we became a victim of Dodd-Frank. The effects of Dodd-Frank… plus other regulatory issues… resulted in financial projections showing substantial declines in revenues and increases in compliance costs, reaching the point that in a few short years an otherwise healthy community bank with strong capital and satisfactory earnings could no longer meet a number of financial bench-marks set by the regulators. These conclusions forced the bank to sell now when our shareholders and some of our employees would be less adversely affected.

ROB NICHOLS

President & CEO American Bankers Association

When this bank merged with a larger one, half of its employees lost their jobs. And that highlights yet another costly toll of government-induced consolidation: the lost contributions of men and women who play leading roles in their communities.

John Ikard, last year’s AmBA chairman, said it well in his farewell speech at our convention. A community can lose their bar or their grocery store, but they can’t lose their bank, adding that online lenders are no replacement. “You can’t go online to get a leader. Banks don’t just provide money. They provide the people who serve on the school board, United Way, churches.”

That kind of involvement — which undoubtedly makes communities richer — is not something any economist can put a value on.

Complex, ill-fitting rules — from Dodd-Frank and beyond — are also to blame for the lack of de novos in recent years. The CEA suggests the real reason is low interest rates, but large numbers of new banks have formed in past recessionary times, so that argument just doesn’t wash.

The CEA’s conclusions, in short, feel forced and out of touch. Had the researchers called real,

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The Arkansas Banker | September 2016

© 2016 American Bankers Association. All rights reserved. Reprinted with permission.

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!

TUESDAY, OCTOBER 4 Lead the Way At Your Branch 1:30 p.m. - 3:30 p.m.

The Green Book & ACH Payments 1:30 p.m. - 3:30 p.m.

Analyzing Tax Returns for Mortgage Decisions 10:00 a.m. - 12:00 p.m.

WEDNESDAY, OCTOBER 5 Creating a Customer Service Experience That Will Sell 1:30 p.m. - 3:30 p.m.

Excel Explained: Managing Large Workbooks 10:00 a.m. - 12:00 p.m.

Developments in Federal Wage and Hour Law 1:30 p.m. - 3:30 p.m.

THURSDAY, OCTOBER 6 Fair Credit Reporting Act Compliance: 10 Critical Issues 10:00 a.m. - 12:00 p.m.

FRIDAY, OCTOBER 7 CRE: Recent Trends, Competitive Strategies, Risk Management 1:30 p.m. - 3:30 p.m.

Adverse Action Notices 10:00 a.m. - 12:00 p.m.

Writing Business Account Procedures—New CDD Rules Impact 1:30 p.m. - 3:30 p.m.

THURSDAY, OCTOBER 13 Dealing with Casual Days, Dress Codes and Work Appearance 10:00 a.m. -12:00 p.m.

Malicious Software: Overview and Impact of Malware 2:00 p.m. - 3:30 p.m.

Put the Skids on Boring Training 1:30 p.m. - 3:30 p.m.

Writing New Accounts Procedures 1:30 p.m. - 3:30 p.m.

FRIDAY, OCTOBER 14 Opening Deposit Accounts Online— Includes New CDD Rule 1:30 p.m. - 3:30 p.m.

MONDAY, OCTOBER 17 Decoding Financial Statements & Tax Returns: Part 1 1:30 p.m. - 3:30 p.m.

Interest Rate Risk: Operating in a “Normal” Rate Environment 1:30 p.m. - 3:30 p.m.

THURSDAY, OCTOBER 20 Information Security Basics: Board of Director’s Edition 1:30 p.m. - 3:30 p.m.

Opening Trust Accounts: 10 Hot Spots 10:00 a.m. - 12:00 p.m.

FRIDAY, OCTOBER 21 TRID for Construction Loans 10:00 a.m. - 12:00 p.m.

New Business Accounts: The Interview, New CDD Rules & more 1:30 p.m. - 3:30 p.m.

MONDAY, OCTOBER 24 Decoding Financial Statements & Tax Returns: Part II time RESPA Section 8 Violations: They’re Back!

10:30 a.m. - 12:30 p.m.

THURSDAY, OCTOBER 27 TUESDAY, OCTOBER 18

Compliance Perspectives: A Monthly Update 1:00 p.m. - 2:00 p.m.

TUESDAY, OCTOBER 11

Uniform Commercial Code Rules 10:00 a.m. - 12:00 p.m.

Compliance for Commercial Lenders 1:30 p.m. - 3:30 p.m.

Troubled Debt Restructuring: Part 1 1:30 p.m. - 3:30 p.m.

When a Loan Customer Dies: What Are the Top 15 Issues?

1:30 p.m. - 3:30 p.m.

WEDNESDAY, OCTOBER 12

WEDNESDAY, OCTOBER 19

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

Workplace Violence 1:30 p.m. - 3:30

FDIC Rolls Out New IT Examination Work Program 10:00 a.m. - 12:00 p.m.

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

September 2016 | The Arkansas Banker

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INDUSTRY INSIGHT Succession Planning: How Deep is Your Bench?

Boards of directors play an important role in this process — helping to ensure the bank has a robust and effective process for identifying top talent and ensuring a smooth transition for key management positions, especially in the C-Suite.

Succession planning is all about ensuring you develop your “bench” — recruiting and developing the talent that represents the future — and instilling in these employees the knowledge, skills and abilities (referred to as KSAs) to enable them to be successful in their current roles and well-positioned to take on increasing areas of responsibility and more challenging jobs. A formalized succession planning process to support this objective provides several key benefits, including: Identifying the key roles in the bank’s management structure; Documenting the critical skills and competencies needed to support strategic objectives; Identifying potential internal candidates for succession by job role; Assessing whether internal candidates possess necessary job skills; and Communicating the importance of succession planning to all key stakeholders From AmBA’s perspective, the industry has embraced the need for succession planning and is taking concrete steps to address talent gaps.

Many state bankers associations have taken steps as well, such as implementing emerging leaders programs to engage younger bankers in the advocacy process and help them develop their skills and professional networks.

The graduate banking school marketplace is seeing a resurgence and, in some cases, record attendance levels, further demonstrating the investment many banks are making in their future.

A clear byproduct of this heightened interest in succession planning and leadership development is that as the industry distances itself from the financial downturn, banking will be positioned once again as a “career of choice.” A dynamic

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The Arkansas Banker | September 2016

culture is also being created in many community banks that provide opportunities for people to grow and advance.

This culture development requires the full support of the CEO, the board and senior leaders. When properly executed, culture can be a competitive advantage and a key opportunity to reach out to the new generation of bank employees (the much-talked-about millennials).

The board has many competing responsibilities — especially given the current regulatory environment and importance of risk management oversight. Your shareholders and regulators want to know that you have in place a solid plan of action as part of the bank’s longterm vision or if called upon in an emergency.

This fiduciary responsibility goes beyond the CEO’s office and includes most other key positions, including division heads.

Not only must the board address the risks associated at the C-Suite level, it must also look internally at director succession to ensure that the board’s composition continues to satisfy the needs of the bank. It’s important to integrate this level of review into the annual process leading to the recommendation of the slate of directors in support of the annual shareholder vote.

Additionally, boards must consider the key skills required to serve as a director, who in the community may represent ideal candidates and how best to attract these individuals. Given the demands on these individuals in their current day jobs, and the increased level of governance required of bank boards, this can often be a challenging proposition.

Proper planning and the development and management of a well-thought-out succession planning methodology will go a long way toward ensuring that your board of directors remains vital and serves the bank well.

Having a culture that recognizes the importance of leadership development, as well as the discipline to identify critical roles and functions — with an eye towards the future — can help position a bank for continued growth and success.

GUEST COLUMNIST JIM EDRINGTON

Vice President of Professional Development American Bankers Association

© 2016 American Bankers Association. All rights reserved. Reprinted with permission.

Succession planning is a concept that is gaining more and more prominence, and for good reason. As baby boomers continue to retire in record numbers, banks are faced with making decisions about key positions that will impact their future success and it’s important to “get it right.”

POLITICAL PERSPECTIVE The Undecided in the Home Stretch We’re finally past Labor Day and the traditional home stretch of the Presidential election is upon us. In truth, Labor Day doesn’t hold the same sway it once did.

GUEST COLUMNIST ROBY BROCK Talk Business & Politics

With candidates jockeying for Presidential position three years or more in advance, we’re pretty familiar with our finalists long before we were in the old days. Twenty-four hour news coverage and social media has further propelled our awareness, interest and disgust in the race far sooner than usual. This explains why there is a relatively small undecided group of voters who haven’t confessed who they’ll vote for in the Presidential race. We’re in the single digits — around 7% — who don’t know if they’ll vote for Donald Trump, Hillary Clinton, or someone else.

The undecided vote is still enough to change the race in one of the major candidate’s direction, but I would argue that those votes will split and splinter pretty evenly. I could also argue that a big percentage of the undecided vote today may not vote at all out of frustration for their choices.

What can change the race?

There could be a game-changing moment in the upcoming debates. World events or a national calamity could dramatically alter the direction of the race, such as what we saw with the financial meltdown in the Fall 2008 race between John McCain and Barack Obama.

McCain’s wishy-washiness about the situation — he said the fundamentals of the economy were “strong” when they weren’t — came across as lacking in astuteness. Obama made a pivotal and widely respected move to calmly endorse the Bush administration’s plan to pull the world financial markets back from the brink with an aggressive strategy of government intervention.

McCain opposed the bailout effort only to reverse course a few days later.

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.

Whether you agree or disagree with decisions made, the week that the financial crisis erupted was a defining moment in the race.

There were other factors working in Obama’s favor eight years ago, but as the financial markets raced to the bottom, the young Illinois senator’s popularity soared to the top. McCain never recovered in the polls after his handling of that turning point.

A catastrophic financial event doesn’t seem likely to swing the election this cycle; there’s more chance that something of a terroristic nature could strike fear in voters’ minds and change their votes. But I’m not sure anything can change a decided voter’s pick today.

Hillary Clinton has been on the world stage for more than 30 years. If you’re still undecided about her, I’m not sure what could help formulate your opinion. Donald Trump is a known commodity as a reality TV star and longtime business personality. His year and a half on the political scene has cemented many folks’ opinion of his Presidential temperament.

Undecided voters may be waiting to see if at the end of the day they can forgive his lack of knowledge and details about many issues and positions or if his inexperience proves too big of a liability. Those voters may side with Hillary, a candidate they may not trust completely but trust to not drive the nation into a ditch.

As we sometimes say in the political world, I believe the major party candidates’ reputations and perceptions are “baked into the formula” already. There’s little that can be done to reverse the negatives or influence the positives of Clinton or Trump.

At this point for undecided voters, it’s the lesser of two evils. That choice may render a noseholding vote for some on Election Day, but it may result in a few more couch potatoes on November 8th.

September 2016 | The Arkansas Banker

11

Emerging Leaders Day at the Capitol

October 20, 2016 | 8:45 a.m. - 1:00 p.m.

About the Day at the Capitol

Agenda

The Arkansas Bankers Association Emerging Leaders Section will be hosting its Day at the Capitol event on Thursday, October 20, 2016. This event, which began in 2012, gives bankers the opportunity to visit the State Capitol, build relationships with state lawmakers, and learn the workings of the legislative process. Day at the Capitol is held every other year, rotating with the Emerging Leaders Day with the Regulators.

8:30 a.m.

For more information about the Emerging Leaders Day at the Capitol, please contact Ava Roberts, VP / Director of Government Relations, at 501.978.3606 or ava.roberts@arkbankers.org.

To register for this event, log on to www.arkbankers.org, or contact Brenda Scarbrough at 501.978.3607 or brenda.scarbrough@arkbankers.org. Space is limited for this event, so reserve your spot today!

12

The Arkansas Banker | September 2016

Check-in

State Capitol Room 171

8:45 a.m. State Capitol Tour 10:00 a.m. Representative Panel

State Capitol Room 171 • Representative Jeremy Gillam (Dist. 45), Speaker of the House • Representative Joe Jett (Dist. 56), Chair of Revenue and Tax for the 90th General Assembly • and others

10:45 a.m. Break 11:00 a.m. Senator Panel

State Capitol Room 171 • Senator Jonathan Dismang (Dist. 28), President Pro Tempore • Senator Keith Ingram (Dist. 24), Senate Minority Leader • and others

11:45 a.m. Break 12:15 p.m. Lunch

with State Representatives who are connected to the banking industry

Capitol Hill Building, 1524 West 4th Street

AmBA Training ABA Professional Development

AmBA Training...

Provides valuable curriculum in a virtual classroom setting, with the leadership of industry professionals. All assignments and exams are completed online.

Building Customer Relationships

Bank Lines of Business

Law and Banking: Principles

10/24/2016 - 11/18/2016

11/14/2016 - 3/17/2017

Intro to Agricultural Lending

Building Customer Relationships

11/14/2016 - 3/17/2017

10/3/2016 - 12/9/2016

10/24/2016 - 11/18/2016

Marketing Financial Services

Commercial Lending

10/3/2016 - 2/3/2017

10/24/2016 - 1/27/2017

Introduction to Agricultural Lending

The Mortgage Business

10/3/2016 - 10/28/2016

10/3/2016 - 12/9/2016

10/24/2016 - 12/9/2016

The Banking Industry

Analyzing Financial Statements

10/11/2016 - 11/4/2016

10/31/2016 - 3/3/2017

Bank Lines of Business

The Banking Industry

10/11/2016 - 11/4/2016

11/7/2016 - 12/2/2016

General Accounting

Bank Lines of Business

10/11/2016 - 2/10/2017

11/7/2016 - 12/2/2016

Building Customer Relationships

Building Customer Relationships

10/17/2016 - 11/11/2016

11/7/2016 - 12/2/2016

General Accounting The Banking Industry 11/28/2016 - 12/23-2016

Bank Lines of Business 12/5/2016 - 1/6/2017

Building Customer Relationships 12/5/2016 - 1/6/2017

Consumer Lending 12/5/2016 - 3/31/2017

CRCM Online Review Course 12/12/2016 - 2/24/2017

Fundamentals of Mortgage Lending 12/12/2016 - 1/27/2017

The Banking Industry

Consumer Lending

Managing Interest Rate Risk

10/17/2016 - 2/17/2017

11/7/2016 - 1/13/2017

CTFA Online Review Course

Money and Banking

Analyzing Financial Statements

10/17/2016 - 1/13/2017

11/7/2016 - 3/10/2017

1/3/2017 - 4/21/2017

The Banking Industry

Basic Administrative Duties of a Trustee

The Banking Industry

10/24/2016 - 11/18/2016

12/19/2016 - 1/20/2017

1/3/2017 - 1/27/2017

11/14/2016 - 12/30/2016

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

September 2016 | The Arkansas Banker

13

Getting Ready for the New Overtime Exemption Rules and Traps to Avoid The Department of Labor recently updated the rules related to certain exempt employees under the Fair Labor Standards Act. The Department of Labor estimates that more than 50,000 exempt Arkansas employees (those employees who are presently salaried and not eligible for overtime) will be impacted by the changes. Here is our take on the changes made, the traps to avoid and how to prepare.

ABOUT THE AUTHOR

Stuart Jackson is a partner at Wright Lindsey Jennings and the leader of WLJ’s Labor & Employment Team. You can e-mail him at wjackson@wlj.com. You also can follow WLJ’s’ Labor & Employment Team on Twitter @WLJEmployment.

14

THE FLSA AND THE NEW OVERTIME EXEMPTION RULES

The Fair Labor Standards Act requires the payment of overtime to employees who work more than forty hours in a given week unless a specific exemption applies. The new rules impact the exemptions that allow a business to pay an employee a set salary instead of an hourly wage and overtime.

The main thing we’ve all been waiting for is the new minimum salary level for the administrative, professional, executive and computer exemptions. The new rules set the level at $913 a week, which equates to $47,476 per year. That is a significant increase of $458 per week, and that is the new “reality” for employers that will take effect during the payroll period that includes

The Arkansas Banker | September 2016

December 1, 2016.

Other changes include: The salary levels will be adjusted every three years (instead of every year as originally proposed) beginning in 2020.

The “highly compensated employee” exemption level jumps from $100,000 per year to $134,004 per year.

As we predicted in our “In the Workplace 2016” article published in Arkansas Business earlier this year, the Department of Labor’s new overtime exemption rules do in fact allow the inclusion of certain bonuses when determining an employee’s total pay for purposes of the exemptions.

Non-discretionary bonuses, incentive payments and commissions paid on a quarterly or more frequent basis can account for up to 10% of the required weekly salary level. Such payments may include, for example, nondiscretionary incentive bonuses tied to productivity and profitability. Employers are allowed to make a “catch-up” payment in any given quarter to ensure an employee’s salary level in fact reaches the new minimum level.

DON’T FALL INTO A TRAP WHEN MAKING THE TRANSITION

One of the main questions we’ve received is this – can an employer get around the new overtime exemption rules by treating employees as independent contractors?

The answer is an emphatic “no,” unless you want to get in trouble with various government agencies, including the Department of Labor and the Internal Revenue Service.

Another potential “trap” we see – trying to limit your newly non-exempt employees to just forty hours of work per week. Chances are these employees were working more than forty hours per week prior to the overtime exemption rules change. Following the change, your newly non-exempt employees may be tempted to work “off-the-clock” for a variety of reasons. If you go this route, monitor your employees’ time carefully and pay them for any time exceeding forty hours in a week.

A related pitfall when trying to limit employees to just forty hours per week – penalizing employees for working “unauthorized” overtime. While the common sense approach might be to withhold payment for unauthorized work time, chances are your business did in fact benefit from the work. To avoid any claim that you violated the Fair Labor Standards Act by refusing to pay for overtime work, you should discipline (such as verbal or written counseling) employees for any unauthorized work time, but pay them for the time worked.

Finally, be aware of how your employees use home computers and smartphones.

Previously exempt employees who could work and communicate with you 24/7 are now on-the-clock. Anything other than a de minimis amount of time spent working or communicating should now be compensated. These previously exempt employees may have the hardest time making the transition to recording their time. You will need to help them with that transition and stay on them about accurately recording their time.

HOW TO PREPARE

Will there be bumps in the road for a lot of employers making the transition?

Undoubtedly. But, you can prepare by doing the following:

You have until the pay period including December 1. Have your soon-to-be non-exempt employees start recording their time now. This helps in two ways – it gives you an idea of just how many hours a week they work and it gets them in the habit of accurately recording their time.

Start talking to your employees now about the transition and why it’s happening. Although no one is being demoted and no job duties are being changed, some of your previously exempt employees will feel as if they have taken a step backwards. Help them ease into the new “reality” all businesses and millions of employees nationwide are facing.

Did You Know?

Banks often ask whether an employee can be classified as exempt under the administrative exemption. As explained by the Department of Labor, the administrative exemption is “limited to those employees whose primary duty relates to the administrative as distinguished from the production operations of a business.” For example, the Department of Labor has taken the position that employees who perform the typical job duties of a mortgage loan officer do not qualify under the administrative exemption, meaning those employees must be paid overtime. As the DOL stated: Work such as collecting financial information from customers, entering it into the computer program to determine what particular loan products might be available to that customer, and explaining the terms of the available options and the pros and cons of each option, so that a sale can be made, constitutes the production work of an employer engaged in selling or brokering mortgage loan products.

Such duties do not relate to the internal management or general business operations of the company; they do not involve servicing the business itself by providing advice regarding internal operations, unlike the duties of employees working in, for example, a firm’s human resources department, accounting department, or research department. The typical job duties of a mortgage loan officer comprise a financial services business’ marketplace offerings, the selling of loan products. Their duties involve the day-to-day carrying out of the employer’s business and, thus, fall squarely [outside the administrative exemption].

Decide how you are going to handle after-hours communications/work – are you going to take away 24/7 access through computers and smart phones, or are you going to ensure that any work time is recorded and compensated?

Consider the use of the “fluctuating workweek” method of calculating overtime, which results in half-time overtime instead of time-and-a-half overtime. This method, however, is extremely complicated to administer.

Consider biting the bullet and increasing the pay of those nowexempt employees making less than the new standard. Remember, up to 10% of the salary under the new rules can be in the form of a non-discretionary bonus, incentive payment or commission.

Make sure you have a written policy warning employees about working off-the-clock and mandating that they accurately record their time.

Finally, take the time now to review all of your non-exempt positions. You may decide some of those positions should in fact be non-exempt, regardless of whether the positions make $913 a week or more. If so, now is as good a time as any to make those changes.

This transition will not be easy, but at least you have a few months to prepare. Don’t wait until the last moment to start your transition.

While it is possible that another exemption might apply (possibly the highly-compensated employee or outside sales exemptions), the administrative exemption does not in this particular situation.

September 2016 | The Arkansas Banker

15

AGRICULTURAL LENDING CONFERENCE

OCTOBER 12-13, 2016 | CROWNE PLAZA, LITTLE ROCK What’s on the horizon for ag banking in Arkansas? Attend our 2016 Agricultural Lending Conference to find out! We’re bringing in speakers from around the region to give Arkansans a look at the climate of ag banking, market trends, machinery prices, and more! Join us October 12-13 in Little Rock for this information-packed two-day event.

Featured speakers include Steve Apodaca, American Bankers Association; Wayne Beaty, 4-B Financial Consulting; Thomas Blackmon, Blackmon Auctions; John Blanchfield, Agricultural Banking Advisory Services; Michael Hinze, Blackmon Auctions; Vicki Kraai, InterAction Training; Dan Maternach, Perfect Fit Presentations; Ben McMahan, Federal Reserve Bank of Kansas City; Bill Miller, Farmer Mac; and Arkansas Secretary of Agriculture Wes Ward.

Also on the day’s agenda is a Legislative Panel with Senator Bruce Maloch, District 12; Representative Ken Bragg, District 15; Representative Dan Douglas, District 91; and Representative DeAnn Vaught, District 4. These state lawmakers will weigh in on legislation’s effect on agricultural businesses and loans, and give some insight on the next regular session, set to begin in January 2017.

16

The Arkansas Banker | September 2016

WHO SHOULD ATTEND

The Agricultural Lending Conference is targeted to ag lenders, officers, credit managers and analysts. Community Bank CEOs and customers will also benefit from attending this industry update.

FOR MORE INFORMATION

For more information, log on to www.arkbankers.org, or contact Brenda Scarbrough at brenda.scarbrough@arkbankers.org or via phone at 501.978.3600.

AGRICULTURAL LENDING CONFERENCE AGENDA

Wednesday, October 12

Thursday, October 13

8:00 a.m. Registration/Continental Breakfast

8:30 a.m.

Continental Breakfast

9:00 a.m. Farm Financial Health:

Where We Are and How We Got Here 9:00 a.m. Arkansas Agricultural Industry Update

Dan Manternach, Perfect Fit Presentations, LLC

Wes Ward, Arkansas Agriculture Department Get the latest data from USDA ERS on the state of farm financial conditions, Secretary Ward will provide an update on Arkansas’s agricultural industry and including current national readings on key financial ratios for farmers, how the Arkansas Agriculture Department’s programs and activities. they compare to ratios over past 40 years, and the dominant drivers of these ratios over the past five years. This session will also include a subset of data 9:30 a.m. Muddling Through...Looking for the Right showing the current financial conditions among farmers by USDA farm

Opportunities in a Tougher Environment resource regions that overlap in Arkansas.

John Blanchfield, Agricultural Banking Advisory Services As exciting as the last ten years have been in agricultural banking, the next 10:15 a.m. Farm Financial Prognosis: Where We Are Headed & Why ten could be equally less fun. Look at every farm publication in the country

Dan Manternach, Pefect Fit Presentations, LLC and the message is clear: the boom is over. For bankers who are creative, This session features an overview of the supply and demand situation for key have sharp analysis skills, and have strong lending policies in place, there will crops, livestock and poultry in Arkansas and the latest outlook for 2017 key be many opportunities to pick up new business from customers who need Arkansas crops under three weather scenarios. Also, get crop-by-crop cost real help. 2017 is going to be a tough year for everyone in farming and in of production and profitability estimates under each weather scenario that agricultural banking, but together, we will muddle through. could influence changes in crop mix/acreage allocation for Arkansas farmers

8:45 a.m. Welcome & Announcements

10:45 a.m. Managing Interest Rate Risk

Bill Miller, Farmer Mac This session will examine the effects of a rising interest rate market to agriculture and what community banks can do to mitigate that risk. Learn more about secondary markets and other opportunities to offer your borrowers interest rate management solutions.

11:45 a.m. Lunch featuring Steve Apodaca,

Center for Agricultural & Rural Banking, AmBA

An Update from the AmBA’s Center for

Agricultural & Rural Banking Apodaca will provide an update on national issues of interest to agricultural bankers such as regulatory reform, the reform of the Farm Credit System, projections on the ag economy, guaranteed lending, rural appraiser recruitment and more.

1:00 p.m. Understanding Yourself & Others: Elevate Your

Effectiveness in a Relationship with Others

Vicki Kraai, VK Solutions, LLC This informative and interactive session will develop your ability to better assess situations and people, both in relations with your loan customers and your fellow bank employees. You will gain an understanding of the impact of what you say and how you say it. This session also includes a self-assessment that will enlighten you about your own personal communication style.

3:15 p.m. Agricultural Values & Trends

Thomas Blackmon, Blackmon Auctions

Michael Hinze, Blackmon Auctions During this session, our Arkansas expert auctioneers will discuss the current market for farm machinery as well as their estimate of the market trends.

4:00 p.m.

Legislative Panel Sen. Bruce Maloch, Magnolia; Rep. Ken Bragg, Sheridan; Rep Dan Douglas, Bentonville; and Rep. DeAnn Vaught, Horatio.

5:00 - 6:00 p.m.

Networking Reception

in 2017. This session will include an overview possible changes in farm programs or policy under either a Trump or Clinton Administration that could impact “farm financial health.”

11:15 a.m. USDA Farm Service Agency Guaranteed Loan

Origination and Servicing

Wayne Beaty, 4B Company Financial Consulting This session will cover four areas: Guaranteed Lending Overview; Guaranteed Loan Application Preparation; Guaranteed Loan General Servicing; and Guaranteed Loan Liquidation and Loss Claim Preparation.

12:15 p.m. Lunch 1:15 p.m. Agricultural Banking Conditions & Credit Risk

Benjamin McMahan, Federal Reserve Bank of KC This session will feature a high-level overview of current agricultural and agricultural banking conditions, paired with a summary of prudent practices that can aid in management and monitoring of potential exposure to agricultural credit risk.

2:00 p.m. Loan Restructure Requests are on the Rise...

Is Your Bank Prepared?

Bill Miller, Farmer Mac Many rural borrowers are requesting additional options to lower expenses and improve their working capital positions in order to prepare for what may be a new ‘normal’ in commodity price markets. Good borrowers may struggle—Will you be prepared to assist in tougher times? Learn about new secondary market solutions to provide capital to viable, yet struggling farm operators.

3:00 p.m. Adjourn

Click here to register for the 2016 Agricultural Lending Conference!

September 2016 | The Arkansas Banker

17

Does the Recent Slump in the Farm Economy Mean Agricultural Lending by Community Banks is over?

ABOUT THE AUTHOR

John Blanchfield has been involved in agricultural banking policy and farm finance for nearly 40 years. He owns Agricultural Banking Advisory Services, an independent consultancy that is dedicated to helping ag bankers and their customers better understand the intersection of ag policy and the real agricultural economy. He oversaw agricultural banking policy for the American Bankers Association in Washington for over 25 years. In 2015 he was recognized by the American Bankers Association with a new award named in his honor for his commitment to agricultural banking. He can be reached at john.blanchfield@verizon.net.

Hear more from John Blanchfield at the 2016 Agricultural Lending Conference!

18

Community bankers face a dizzying array of complexities managing their banks.

One new worry is the question about the stability, reliability, and desirability of having agricultural credits in the loan portfolio. After enjoying the greatest economic boom in more than a century, the farm economy has rapidly returned to earth. Thanks to low interest rates, favorable tax treatment of farmer cap-ex, insatiable demand for U.S. agricultural commodities from places like China, and a boom in ethanol production, U.S. farmers and ranchers enjoyed unprecedented prosperity for much of this century. Net cash farm incomes soared to an all-time national high of $135 billion in 2012.

USDA projects that 2016 net cash income will settle in around $91 billion. Historic high prices for farm commodities like cotton, corn, beans, dairy and others are nearing lows that have not been seen by many bankers in their entire careers. For some bankers who may be nearing the end of their careers, the Spector of the 1980s is looming — the worst economic recession in the agricultural economy since the 1930s. Is this the time to shed farm assets from your portfolio?

I don’t believe we are looking at a similar 1980s style meltdown in the farm economy. I have spent all of my career in agricultural banking and agricultural policy and believe that while we may see some rough patches in the future, we are not looking at anything as severe as what we saw in the 1980s. I base my belief on four key differences between then and now.

Despite the fact that there was much screaming, cursing, spitting and hand wringing over the creation of the

The Arkansas Banker | September 2016

last farm bill (The Agriculture Act of 2014), agriculture ended up with a fairly conventional piece of farm legislation that will guide federal policy over the next 5 to 7 years. Most importantly, there is some serious money in the legislation for farmers if prices continue to decline. In 2015, the first year that there was any payout, the 2014 Farm Bill paid $5.2 billion to over 976,000 farmers. Farmers in Arkansas received over $217 million, one of nine states to receive over $200 million. USDA has projected that we will see a payout in 2016 that will be 30% higher than the 2015 payout.

I believe USDA is understating this number and that we could see payments much higher because prices have been so low. In addition to crop price supports (the names have been changed, but the money still functions to support prices), Congress continued the generous subsidies of Federal Crop Insurance, an important risk management tool for farmers and an important risk mitigation tool for bankers who lend against crops.

In 1987 Congress created a unique lending tool just for ag lenders — a secondary market for farm real estate mortgages, known today as Farmer Mac. For ag bankers Farmer Mac is the crown jewel in the 21st Century community banker’s toolbox. Farming has become a very expensive business and as a result the demands for credit have grown exponentially. In many cases community bankers have seen their customers grow beyond what they can accommodate due to risk management concerns and legal lending limits issues. For some bankers who have been unwilling to

change this has meant that agricultural lending has left their portfolios.

Innovative community bankers have turned to the secondary market created by Farmer Mac and they now originate and sell their farm real estate mortgages, thus preserving income and preserving the relationship with their farm customers. No, it is not ag lending like it used to be done, but it is ag lending in the 21st century and those bankers who are willing to adapt are finding new opportunities beyond their wildest dreams. More information about Farmer Mac can be found at www.farmermac.com.

USDA, through the Farm Service Agency, now provides a credible guaranteed loan program that has enabled banks all over the country to extend credit to over 35,000 farmers who would not qualify for credit without the guaranty. Some ag bankers may remember the USDA guaranteed loan programs of old — a dysfunctional mess that was hard to use and bulky at paying if there was a loss. Through hard work on the part of USDA, a willingness to listen, and some great people in the banking industry, USDA has completely redesigned their guaranteed loan program and today the guaranteed loan programs are a fully functioning credit enhancement. If you do not have someone on your staff who understands the Farm Service Agency Guaranteed Farm Loan programs, and you are lending money to farmers, you need to get your staff educated, and quickly. More information about the Guaranteed Farm Loan programs can be found at www.fsa.usda.gov/ programs-and-services/farm-loanprograms/guaranteed-farm-loans.

Bankers have access to better farm financial statements than ever before.

To many ag bankers reading this, you are thinking “not by much”. However, real progress has been made in the

farming community to increase their understanding of farm financial statements and to do a better job of management accounting. Following the farm economy crack-up in the 1980s, a group of bankers and others got together to try to standardize what constituted a standard set of farm financial statements and to reach some agreement on how to analyze them.

The result, under the stewardship of the Farm Financial Standards Council, is an industry agreed to set of recommended financial statements for agricultural producers and an agreed to set of financial ratios that bankers can use to analyze the information.

There is still a lot of work to be done in this area, but through the creation of some farm financial standards, a solid foundation has been built. This is one area where the torch is being passed from one generation of ag bankers to another and I hope the next generation of bankers is up to the task.

Given how big the financial numbers have gotten in farming, 20th century credit analysis will not work in the 21st century. More information about farm financial statement can be found at www.ffsc.org.

Agriculture, and agricultural banking in the United States is the envy of the world.

I know this because I have spoken with ag bankers from all over the world and their admiration for the American way of ag banking is immeasurable. Community bankers in America have rolled with the punches thrown by agriculture over the decades and they have always emerged stronger than before. When I speak to audiences today and see all of the bright young ag bankers in the audience I am confident that the agricultural banking business has a secure future. Agriculture is a key component of the success of many community banks, and it will remain so; it is too important to our country and too important to the 21st century community bank.

September 2016 | The Arkansas Banker

19

2017 Ag Outlook: How Some Will Join the Cheers, Manage the Fears, and Avoid the Tears!

ABOUT THE AUTHOR

Dan Manternach is the founder and President of Perfect Fit Presentations, LLC. Dan has a unique combination of skills as an agricultural economist, and investigative reporter as well as an award-winning communication skills.

Hear more from Dan Manternach at the 2016 Agricultural Lending Conference!

20

As an agricultural economist for decades now, there are two things I’ve learned beyond the shadow of doubt: First, it’s often not so much “what” you know that gives you a competitive edge.

It’s when you know it!

Second, it’s not so much what you don’t know that can bite you. It’s what you “think” you know that isn’t true!

As a former editor of Ag Lender magazine, I’m looking forward to addressing Arkansas ag lenders at the 2016 Agricultural Lending Conference in Little Rock on October 13 to shed some light, hope, and insight on where we are in U.S. agriculture, how we got here and where we’re going!

I’ll be sharing nuggets I glean from the latest financial health metrics from USDA and Federal Reserve Bank. Trends in key financial ratios can be used like a financial CAT scan to spot promising (or threatening) trends, particularly as I will focus on subsets in the data that apply particularly to the MidSouth and Delta region.

The Arkansas Banker | September 2016

I’ll pay special attention to the latest trends in land values and rents. Those years where values kept rising for everybody and varied only by degree are taking a breather. The latest update shows only a slight downturn nationally, but a mix of gainers and losers among the states. Arkansas farm real estate was among the gainers. But it wasn’t so positive for farmers. I’ll explain why.

Later in the day, I’ll share my “farm financial prognosis.” I’ll give you the “Reader’s Digest” version of the fundamental supply/demand/ price outlook for key crops and livestock sectors big in Arkansas. I’ll have the latest crop budgets and profit outlook for 2017 that may influence wise changes in the crop mix for your farmer clients next season. I’ll share a little trick for assessing variation in marketing skills among farmers and helping them to improve.

I’ll even stick my neck out at the end with a short synopsis of key differences we might see in farm policy between a Trump or a Clinton Administration!

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.

September 2016 | The Arkansas Banker

21

TRUST CONFERENCE

NOVEMBER 2-3, 2016 | EMBASSY SUITES, HOT SPRINGS 2016 TRUST CONFERENCE AGENDA Wednesday, November 2, 2016 8:00 a.m.

Registration / Continental Breakfast 8:45 a.m.

Welcome & Announcements 9:00 a.m.

Unique Assets:

Hidden Half of Your Clients’ Wealth

Brad Davidson, Unique Asset Partners LLC Unique assets are as important to affluent investors as their traditional investments – in many cases, more important. In this presentation Brad Davidson will share findings from his firm’s survey of trust institutions. He will identify the services unique asset owners most desperately want, and will recommend three steps institutions should consider taking to offer those services while minimizing risk exposure.

10:00 a.m.

Jennie Clark Stewart, Kutak Rock, LLP 11:00 a.m.

Coffee & Vendor Networking Break 11:30 a.m.

Topic & Speaker TBD 12:00 p.m.

Lunch 1:00 p.m.

Nonverbal Communication:

“The Hidden Message” Bill Acheson In face-to-face communication, body language accounts for more than two thirds of the impact of your message. This session will examine how to create first impressions, establish rapport, project personal power, and identify deception through nonverbal communication.

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The Arkansas Banker | September 2016

2:30 p.m.

Snack & Vendor Networking Break 2:45 p.m.

Recent Arkansas Cases and Federal Estate,

Gift, and Income Tax Developments of

Interest to Trustees and Executors

Dan Young, Rose Law Firm This presentation will provide a review of recent decisions of the Arkansas Court of Appeals and Arkansas Supreme Court on topics such as the authority of joint trustees of a husband-wife joint trust to act separately, property rights in divorce, procedure for paying a creditor claim in probate; and summary of recent tax developments including basis reporting to estate beneficiaries, charitable set-aside deduction, proposed regulations that will significantly reduce discounts on the transfer of business interests, rulings allowing extension of time to make the portability election, and an easier way to obtain a waiver of the IRA 60-Day rollover deadline.

3:30 p.m.

The Fiduciary Rule:

What It Means for Trustees and Custodians

Bryant K. Cranford, Rose Law Firm The DOL’s new fiduciary rule expands the definition of “investment advice,” resulting in a number of entities being deemed fiduciaries that were not previously designated as such.

The rule’s best interest contract (BIC) exemption allows fiduciary advisers to continue receiving variable compensation, subject to certain conflict of interest constraints. In the presentation, we will review the key features of the DOL’s final fiduciary and conflict of interest rule, its anticipated impact, and what you should do now to ensure that you are prepared to comply with the rule.

Click here to register for the 2016 Trust Conference!

ABOUT THE TRUST CONFERENCE The role of a community bank’s trust department is a unique one — from assisting with estate and retirement planning to staying current on very specific legal and ethical responsibilities. The 2016 Arkansas Bankers Association Trust Conference is structured to meet those unique needs. Join your colleagues from across the state to discuss the tools and strategies needed to serve your customers and manage your portfolio of business in today’s demanding environment.

WHO SHOULD ATTEND? • • • • • • •

Trust Officers Wealth & Private Banking Directors Senior Financial Advisors Personal Bankers Estate Planning Attorneys Senior Level Executives Portfolio Managers

FOR MORE INFORMATION

For more information about the 2016 Trust Conference, log on to www.arkbankers.org, or contact Brenda Scarbrough at brenda.scarbrough@arkbankers.org or via phone at 501.978.3600.

4:15 p.m.

5:00 p.m.

John Shram, Winburn Mano Schrader & Shram, PLLC Reception

Thursday, November 3, 2016 8:30 a.m.

Continental Breakfast 9:00 a.m.

Regaining Customer Intimacy: Apply

Proven Customer Experience Management

Practices to Build Rock-Solid Relationships

with Your Highest-Priority Customers

Chuck Bruney, Align FSC Consumers and businesses are no longer steadfastly loyal to their banks. Instead, they’re shopping for value and transferring larger portions of their business from one provider to another with little concern for fidelity. And, why not? They have a wider array of choices than ever before from an expanding and diverse pool of capable providers who are transforming themselves into convenient, lifestyle-oriented partners. The good news is that straightforward Customer Experience Management practices are now readily accessible to manage your customer interactions, build rock-solid relationships with your highest priority customer segments, and accelerate your banks growth and profitability.

This interactive intersession will provide you with a practical approach for how you can begin designing and reacting to your customer interactions to meet or exceed their expectations and increase satisfaction, loyalty and advocacy.

10:00 a.m.

Topic & Speaker TBD 11:00 a.m.

Vendor Networking Break 11:15 a.m.

The Properly Managed ILIT

Luke Ramsey, The ASA Group In this informative session, Luke Ramsey will identify the tricks that life insurance companies use that the trustee must be able to identify and manage. The discussion will include: Why insurance companies have made changes to existing policies; How to identify the changes and how it will affect the performance of the ILIT owned policies; How the changes can change how gift tax returns need to be filed; How the NAIC’s rules can prevent you from getting the information necessary to properly administer a life insurance policy, and Options for ILIT’s that every trustee needs to know, including: when the annual gifting exclusion is not enough to fund a life policy; other funding options when the ILIT cannot properly fund the life contract, and how to use an ILIT owned policy to create liquidity to pay for a long term care event.

12:00 p.m.

Lunch 1:00 p.m.

A New Look at Investing

and Finances Across Generations Speaker TBD 2:00 p.m.

Topic & Speaker TBD 3:00 p.m.

Adjourn

September 2016 | The Arkansas Banker

23

Unique Assets:

The Hidden Half of Your Client’s Wealth

ABOUT THE AUTHOR

Brad Davidson is Managing Partner with Unique Asset Partners, a Baltimore, Maryland firm that connects owners with vendors qualified to administer all types of unique assets.

Trust professionals are often surprised to learn that stocks, bonds, mutual funds and other liquid investments represent roughly half — but only half — of the assets owned by wealthy Americans.

The other half consists of assets found on “Main Street”, not Wall Street — investments such as real estate, closely held business interests, life insurance, mineral interests and artwork. These “unique assets” are just as important to their owners as traditional investments yet fiduciaries tend to focus on preserving and growing the latter while ignoring the former. Because unique assets are so important, trust professionals should better understand them and, especially, the services their owners need to preserve and grow their value.

Hear more from Brad Davidson at the 2016 Trust Conference!

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Most trust institutions struggle with unique assets. Especially since the OCC published its Unique and Hard-to-Value Assets Handbook1 in 2012, many have wondered how stack up versus their peers, so my firm conducted a survey2 of 47 trust departments, trust companies and other organizations providing unique asset services.

Here are some key findings:

Unique Assets Are as Valuable as Traditional Investments

Because only estates worth $5 million or more must file them, estate tax returns provide insight into the investments of America’s millionaires – the “1%”. (See chart below.) A study3 of federal estate tax filings conducted annually by the Internal

Revenue Service found that in 2014 the single biggest investment category listed on estate tax returns was liquid assets such as stocks, bonds and mutual funds (shown in orange). No surprise there.

But what is surprising is that liquid assets comprised only about half of the assets (51% of smaller estates, 46% of larger ones). Where did the decedents invest the other half?

One type of unique asset — real estate, shown in grey in the chart — comprises 23% of assets in the smallest estates, down to just 10% of assets in the largest ones.

Other unique asset types (shown in blue on the chart) comprised 27% to 44% of the investments owned by decedents as listed on estate tax returns filed in 2014.

These group consisted of: Private equity investments Hedge funds Closely-held stock (often family businesses) Limited partnerships Oil, gas and mineral interests Insurance Collectibles The more affluent the individual, the greater the odds he or she owns unique assets. Among the wealthiest, unique assets often represent the lion’s share of their net worth—for example entrepreneurs who’ve made small fortunes building a portfolio of rental real estate, running a successful small business or owning oil wells.

Virtually all of the organizations participating in Spardata’s Survey reported holding real estate-based unique

assets in client accounts. Closely-held (usually family-owned) businesses were the next most widely held unique asset type; followed by life insurance (where cash value exists), mineral assets, loans and notes. Bringing up the rear was “specialty real estate” including farms, ranches, timber, orchards etc. Chart 2 (“Popularity Contest”) lists the most commonly cited unique asset classes.

Readers may infer that in general, affluent investors are most likely to own real estate, somewhat less likely to have interests in closely-held businesses, and so on.

What Happens When…?

Generally speaking, entrepreneurs need nobody’s help preserving and growing the value of the unique assets they created.

But one question keeps them awake at 4 a.m.: who will provide those services after they die (or get Alzheimer’s, want to stop working so hard, etc.)?

There are some obvious options, none good. Usually the spouse is unwilling and/or unable (and even if willing and able, is just as old as the entrepreneur and not getting any younger). The children live out of state, are in medical school, have “issues” or are otherwise unavailable and/or uninterested. Trusted advisors — attorneys, accountants, financial advisors — are expert at their specialties but typically have little or no experience managing unique assets.

Even though there is no obvious options, still entrepreneurs resist suggestions to

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sell their unique assets and invest the proceeds in traditional investments.

(Based on nearly 30 years appraising unique assets for estate and gift tax purposes, it is the author’s experience that most unique assets owners and their families have emotional as well as financial attachments to these investments. Furthermore they think the stock market is nothing but a casino, rigged to reward insiders.) The fact they can use Section 754 to step up their tax basis at death is another reason not to sell.

The bottom line: owners often seek someone (better yet, a professional fiduciary) who for a fee can preserve and grow the value of their unique assets.

What Services Are Needed?

The seven most widely owned unique asset categories are 1. Real estate 2. Closely-held businesses (including S corporations, LLCs, FLPs etc.)

3. Life insurance 4. Mineral oil and gas interests 5. Loans and notes 6. Intellectual property 7. Tangible assets and collectibles The activities required to preserve and grow the value of unique assets vary by asset type. For example, listed below are the services owners of (i) incomeproducing real estate owners and (ii) mineral interest say they want when they are unable to perform these activities themselves: Income-Producing Real Estate Pay property taxes and insurance; Conduct annual inspections; Provide leasing services (including collection of rents); Supervise contractors (for example, lawn maintenance, asbestos removal, repairs and maintenance); Handle asset sales; Process distributions; Vote shares for annual meeting and

other corporate actions; and Assist with valuation.

Minerals, Oil & Gas Process division transfer orders; Negotiate leases and releases: Record instruments, operating agreements and contracts; Review/approve division orders; Review current leases to ensure they favor landowner and not the drilling company; Review authorization For expenditure (AFE) requests; Audit royalty accounting reports; and Assist with valuation.

What does all of this mean to community trust institutions seeking to differentiate themselves and attract new assets in the crowded financial services marketplace?

Senior management should ask the strategic question, “do we want to accept unique assets or not?” (Remember Chart 1. Saying no means ignoring half of the assets your best clients own. A “refusal” policy is also seen as a big negative by estate attorneys.) If the decision is made to accept unique assets, then the organization should consider offering services unique asset owners find valuable and are willing to pay for. To the extent current employees lack the necessary expertise, acquire it by engaging thirdparty vendors to provide the service(s).

Now your relationship managers will be able to have a conversation with their most affluent clients and prospects along these lines: “Client/Prospect, you are doing a great job managing your (apartment building, oil wells, timber acreage etc.) and I hope you will continue for years to come. But when the day comes when you can’t (or don’t want to) do it any more, you should know that my organization provides services to preserve and grow the value of unique assets like yours. Isn’t it good to know that if you (or your family) ever needs it, we can help?”

1. http://www.occ.gov/publications/publications-by-type/comptrollershandbook/Unique_and_Hard-to-Value_Asset_Booklet.pdf 1. Unique Asset Survey: Findings, Observations & Recommendations. Brad Davidson, Principal; Securities Pricing and Research, Inc. (d/b/a Spardata) (June 2014) at p. 8.

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Even though your clients may not require these services for decades (if ever), you can use this capability to attract plenty of traditional investments today.

Organizations should consider requiring clients interested in utilizing unique asset services in the future, to have $X in liquid assets under your asset management today.

This is a powerful message that attracts new assets — both unique and traditional.

As proof, consider a white paper4 authored by Susie Roh, who at the time ran the trust department of a community bank. Ms. Roh was tasked by her bank’s president to win more referrals, so she conducted one-on-one interviews with estate attorneys, accountants and other “centers of influence” in her bank’s footprint in which she asked “what factors are important to you when referring your clients to a trust institution?” The top two factors were 1. The financial strength of the institution’s balance sheet.

2. A local trust officer (not an 800 number).

Neither reason should surprise the reader. But what may surprise is the third most popular response: the institution’s willingness to handle all of my clients’ assets, not just the “easy” ones. The author cannot stress enough how many unique asset owners (and their trusted advisors) seek providers of unique asset services.

Think how excited your clients and prospects would be to learn you not only manage traditional investments skillfully, but unique assets also. What a way to differentiate your organization from its competitors!

In conclusion, trust organizations marketing themselves as serving the affluent should ponder on the fact that half of the investments of such people consist of unique assets – and therefore they should offer services unique asset owners find valuable and are willing to pay for.

1. http://www.irs.gov/pub/irs-soi/12estateonesheet.pdf 1. Susan M. Roh, “Is the Trust Industry a Declining Business Line or Can It be a Fee Income Driver for a Thriving Community Bank?” white paper (April 2014) at p. 18.

Banking on Trust Departments: Avoiding Pitfallsby Lizto Minimize Liability Maio, Tom Pecoraro, Bill Smith & Laura Lee Miller Trust services have long represented a means of generating income, diversifying a bank’s business and providing elite services to high-value customers. As professional trustees, banks must establish and implement appropriate controls. In addition, their employees must follow appropriate procedures, and understand and implement the specific requirements of each individual trust.

Unfortunately, however, even the most sophisticated trustees may face a variety of potential pitfalls, which, if not avoided, can result in litigation and potentially large losses. Such events can render an otherwise profitable business, unprofitable, resulting in tensions and conflicts with the high-value customers the bank coveted with the provision of trust services.

For example, in May 2015, a Missouri jury awarded an individual beneficiary and co-trustee $78 million, including $32.1 million in punitive damages, in a suit against Wells Fargo for the bank’s failure to fully disclose financial transactions in two family trusts.1 The judge also later ordered Wells Fargo to pay the trusts $17.8 million as a result of its breach of duties to the trust beneficiaries.2 1. Y. Peter Kang, Wells Fargo Hit with $78M Verdict Over Mismanaged Trusts, LAW360 (May 12, 2015, 8:53 PM), http://www.law360.com/articles/655147/ wells-fargo-hit-with-78m-verdict-over-mismanaged-trusts.

2. Judge: Wells Fargo must pay woman $17.8 million, KCCI Des Moines, (Oct. 10, 2015, 10:03 AM), http://www.kcci.com/news/judge-wells-fargo-must-paywoman-178-million/35617538.

3. Rich Lord, “Scaife received nearly $450M from trust over last 20 years,” http://www.post-gazette.com/local/city/2015/05/01/Richard-Mellon-Scaife-got405-million-from-trust-fund/stories/201505010244.

Similarly, in Pennsylvania, two plaintiff beneficiaries are suing PNC Bank and two individual co-trustees, asserting that they breached fiduciary duties and seeking over $400 million in damages.3 While these high-profile cases are generating headlines due to the large amounts at issue and the personalities involved, similar disputes arise on a routine basis. These recent cases, and there are many other examples which could be cited, highlight the critical need for trustees to have strong policies and procedures in place to avoid common trust pitfalls and to be vigilant in complying with those procedures and practices. This protocol is especially important for large bank trust departments, which often serve as fiduciaries over trusts with very substantial assets. It is, of course, fundamental that all trustees, irrespective of the size or scope of the trust, must be faithful to the terms of the trust instrument and comply with duties imposed by common and statutory law.4 Our focus here, however, is on three common scenarios that can create exposure for trustees (and their professional liability insurers) in virtually any jurisdiction or circumstance.

4. The technical aspects of trustee duties and liabilities are beyond the scope of this article. Generally, the trust instrument is the primary source of governing authority for a trustee. Where the trust instrument does not provide sufficient guidance, state statutes such as the Uniform Trust Code (“UTC”) and the Uniform Prudent Investor Act (“UPIA”) may control. In the banking sector, the FDIC’s Trust Examination Manual also may serve as a useful guidance instrument for trust concepts, principles, and law.

5. Unif. Trust Code § 804; Unif. Prudent Inv’r Act § 2(b) (Unif. Law Comm’n 1994) (“A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as part of an overall investment strategy having risk and return objectives reasonably suited to the trust.”).

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Three Common Trustee Risks That Can Lead to Trustee Liability Risk #1: Failure to Prudently and Impartially Administer the Trust

As a general matter, trustees must prudently administer the trust in accordance with the terms of the trust instruments to the extent possible, legal, and with respect to public policy.

However, it is difficult, if not impossible, to draft a trust instrument capable of predicting every circumstance that may arise during the lifetime of the trust. Where the trust instrument is silent or where provisions conflict, the trustee should follow the applicable statutory standards. In a Uniform Trust Code (“UTC”) or Uniform Prudent Investor Act (“UPIA”) state, a “whole portfolio” approach should be applied to investments, meaning that the trustee must maintain a level of diversification and risk that a reasonably prudent investor would utilize in dealing with her own property, considering the purposes, terms, distribution requirements, and other circumstances of the trust.5 Whether a specific investment was prudent generally is evaluated at the time that the investment was made, not in hindsight after its success or failure is known.6 Because the standard of prudence is relative, to the extent that the trustee has sophisticated skills, she must utilize those skills to the extent that she would with her own property.7 Inevitably, where a trustee plays an active role in administering a trust, she will be required to exercise discretion. The standard of discretion may be specified in the trust instrument. If it is not specified, the UTC and UPIA may help guide the trustee’s choices. For example, in the context of investment, the UPIA directs trustees to consider such factors as economic conditions, the expected tax consequences of the investment, the role of the investment in the overall portfolio, and the need for liquidity or income.8 The UTC provides that a trustee shall exercise her discretionary powers “in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.9” In one case, a New York court found that a large bank serving as trustee violated the state’s Prudent Investor Act by maintaining a concentration of only one company’s stock in a trust for 20 years while the value of the stock declined precipitously.10 The court noted that a prudent investor would have sold at least 95% of the stock during that time.11 The court imposed a surcharge on the bank along with statutory interest, compounded annually, on the value of the shares from the date from which they should have been sold.12 In another case, a Washington court held that a bank 6. Unif. Prudent Inv’r Act § 8 (“Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight.”).

7. Unif. Prudent Inv’r Act § 2, Comment (“Because the standard of prudence is relational, it follows that the standard for professional trustees is the standard of prudent professionals; for amateurs, it is the standard of prudent amateurs”).

8. Unif. Prudent Inv’r Act § 2(c)(1-8).

9. Unif. Trust Code § 814(a).

10. In re Hunter, 100 A.D.3d 996, 997, 955 N.Y.S.2d 163, 165 (2012), as revised (Apr. 24, 2013).

11. In re Hunter, 100 A.D.3d. at 997.

12. In re JP Morgan Chase Bank, 27 Misc. 3d 1205(A), 910 N.Y.S.2d 405 (Sur. 2010) aff ’d sub nom. In re Hunter, 100 A.D.3d 996, 955 N.Y.S.2d 163 (2012), as revised (Apr. 24, 2013).

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trustee was liable for loss as a result of failure to diversify assets by holding only tax-exempt, fixed-income municipal bonds.13 The court reasoned that a prudent investor would have diversified between tax-exempt and equity securities.14 It is also fundamental that a trustee must administer the trust impartially. While a trustee must act in accordance with the terms of the trust instrument, he also must be able to identify all beneficiaries of the trust to whom he owes a duty and act in their best interests.15 This does not mean that a trustee must give equal regard to all beneficiaries. Rather, he must give due regard to each beneficiary’s respective interest.16 In McNeil v. Bennett, for example, a court concluded that a large bank and other trustees breached their duties in overseeing a $300 million trust and ordered a surcharge against the trustees on commissions earned over a period of nearly ten years.17 The plaintiff, the eldest income beneficiary of a trust created by his father for him and his siblings, contended that, among other issues, the trustees failed to give impartial consideration to his interests by providing his three siblings materially greater access to information and influence over trust decisions.18 The trial court had noted that the trustees deliberately excluded the plaintiff from a letter which discussed how the family trusts operated, including an explanation of the trust instruments.19 The trial court also cited evidence that the trustees regularly met with the plaintiff ’s mother and siblings outside the presence of the plaintiff and discussed issues affecting the trusts.20 The appellate court affirmed the trial court’s conclusion that the trustees breached their fiduciary duties by failing to give impartial consideration to the plaintiff ’s interests.21 13. Baker Boyer Nat. Bank v. Garver, 43 Wash. App. 673, 681, 719 P.2d 583, 589 (1986).

14. Baker Boyer Nat. Bank, 43 Wash. App. at 686, 719 P.2d at 591.

15. Unif. Trust Code § 803 (“If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests.”).

16. Id. 17. McNeil v. McNeil, 798 A.2d 503, 510 (Del. 2002).

18. McNeil, 798 A.2d at 510 (Del. 2002).

19. McNeil v. Bennett, 792 A.2d 190, 212 (Del. Ch. 2001) aff ’d in part, rev’d in part sub nom. McNeil v. McNeil, 798 A.2d 503 (Del. 2002).

20. Bennett, 792 A.2d at 199.

21. McNeil, 798 A.2d at 510.

Risk #2: Failure to Avoid Conflicts of Interest and Self-Dealing

Generally, a trustee should not profit from administering the trust, except to the extent that the trust instrument provides for payment of reasonable compensation to the trustee.22 A trustee must not “self-deal” except as authorized by the trust instrument, the beneficiaries, or a court.23 A trustee also owes a “duty of loyalty” and must avoid conflicts of interest. Moreover, the trustee is required to broadly disclose such conflicts when they arise in order to permit the beneficiaries to determine whether to ratify the conduct in question.24 Duty of loyalty issues arise typically in dealing with trust property.25 For example, a Kentucky court found a breach of fiduciary duty where a bank trustee sold trust-owned real estate to a corporation that was a significant bank customer and which was owned by an individual who joined the bank’s board of directors shortly before the sales transaction.26 Duty of loyalty issues also may arise through investment decisions made by the trustee. In First Alabama Bank of Huntsville, N.A. v. Spragins, the court held that where a bank invested 70-75% of the trust property in its own shares, the bank breached its duty of loyalty.27 Similarly, JPMorgan recently settled a lawsuit alleging that it caused trusts to lose about $13 million from its decisions to purchase more than 177 investment products, mostly from itself.28 Trustees must be especially scrupulous in avoiding favoring one trust over another, as such conduct also may be deemed a breach of the duty of loyalty. For example, in Wiggins v. PNC Bank, Kentucky, Inc., the bank acted as a trustee of two trusts with different grantors and different remaindermen, but the same lifetime beneficiary.29 The court held that the bank had a conflict of interest when faced with the choice of whether to invade the corpus of one of the trusts to provide for the lifetime beneficiary.30

beneficiaries to ratify any potentially problematic transactions, but it also serves the practical function of creating trust between the fiduciary and the beneficiaries. Following this protocol is essential to a successful working relationship.

In addition, thorough and accurate documentation is imperative.

Trustees should assume that their actions will ultimately be scrutinized, and accurate and complete records will allow the trustee to defend him or herself in the event that a dispute arises. For example, the UTC imposes an affirmative duty to keep qualified beneficiaries of a trust reasonably informed of the administration of the trust and of the material facts necessary for them to protect their interests.32 This duty includes responding promptly to requests for information, supplying beneficiaries with a copy of the trust instrument upon request, and sending reports of the trust property, income, and liabilities to distributees or permissible distributees.33 A trustee also must account for trust property timely and accurately, maintain adequate records and carefully designate trust assets as separate from the trustee’s own property.34 In one case, a bank acting as trustee invested all of the trust’s assets in one company’s stock, believing that investment to be sound on the basis of reports by market analysts. However, the bank’s investment officer could not produce any copies of any reports by such analysts at trial. Based on a “pattern of neglect,” the court awarded 20 years of lost capital and statutory interest on that amount.35 Timely, accurate reports to beneficiaries and thorough record keeping probably could have helped to prevent the liability.

Particularly with professional trustees, a potential exposure involves the client’s perception that the professional can perform the tasks of an accountant, a tax advisor, an investor, and/or an attorney. Historically, trust law precluded delegation of investment and management functions. The current trend, however, has been to allow such delegation as appropriate for the trust.31 Nevertheless, trustees must be cognizant that the delegation of such duties does not create actual or apparent conflicts of interests.

Risk #3: Failure to Effectively Communicate with Beneficiaries

Professional, institutional trustees, perhaps even more than a trustee who shares a close personal relationship with the trust beneficiaries, must be careful to keep trust beneficiaries fully and timely informed. Effective communication not only allows the 22. Unif. Trust Code § 802(h).

23. Unif. Trust Code § 802(b).

24. Unif. Trust Code § 802(a) (“A trustee shall administer the trust solely in the interests of the eneficiaries”); Unif. Trust Code § 1009 (“A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless: (1) the consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or (2) at the time of the consent, release, or ratification, the beneficiary did not know of the beneficiary’s rights or of the material facts relating to the breach.”).

25. Unif. Trust Code § 802, Comment (“Most but not all violations of the duty of loyalty concern transactions involving the trust property”).

26. Thomas v. Turner, 736 S.W.2d 343, 345 (Ky. Ct. App. 1987).

27. 515 So. 2d 962, 964 (Ala. 1987).

28. JPMorgan Chase Settles Suit over Christ Church Trust Accounts, Indianapolis Business Journal (Sept. 3, 2015), http://www.ibj.com/articles/54720jpmorganchase-settles-suit-over-christ-church-trust-accounts 29. 988 S.W.2d 498 (Ky. Ct. App. 1998).

30. Id. at 502.

31. Unif. Prudent Inv’r Act § 9.

32. Unif. Trust Code § 813(a).

33. Unif. Trust Code § 813(c).

34. Unif. Trust Code § 810.

35. In re JP Morgan Chase Bank, 27 Misc. 3d 1205(A), 910 N.Y.S.2d 405 (Sur. 2010) aff ’d sub nom. In re Hunter, 100 A.D.3d 996, 955 N.Y.S.2d 163 (2012), as revised (Apr. 24, 2013).

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more important than ever that banks have in place insurance products appropriately tailored to all of the various risks they face, including losses arising out of errors and omissions in their trust services.

Establishing and Adhering to Sound Procedures and Controls Is Key to Avoiding or Minimizing Liability Ideally, trustees will all make prudent investments, impartially administer the trust, avoid conflicts of interest, keep thorough records, and communicate with the trust beneficiaries. Adhering to such practices is critical and bank trust departments should implement procedures and internal controls to ensure that these practices are understood and followed.

One useful resource for trustees seeking to establish or refine procedures and controls is the FDIC Trust Examination Manual,36 which provides concrete examples of documents that a trustee should maintain, including evidence of appointment, supporting documentation for actions taken by the trustee, trust committee meeting minutes, accountings, documents acknowledging the receipt of assets, and many other types of records.37 The Manual also provides guidance on maintaining an administrative file, a tickler system, and other records registers and logs.38 Thus, although trust examinations are governed by policy and not regulation, consulting the FDIC materials may be useful in connection with establishing and maintaining proper internal procedures and controls for trust administration.39

Insurance Products Can Protect Trustees and Minimize Exposure to the Institution The practices outlined herein provide general guidance to help mitigate risk exposure, but even when these practices are followed, trustees often find themselves at the center of disputes, which routinely result in litigation. This scenario often develops when a trust suffers a large loss in assets, due to failed investments or otherwise. Trust beneficiaries will seek to blame trustees, particularly institutional trustees with deep pockets, rightly or wrongly, to offset trust losses. And, personal or familial animosity between or among trust beneficiaries can exacerbate these types of disputes and make resulting litigation relatively more adversarial and protracted than disputes involving solely commercial parties.

Indeed, recent CNA claim experience suggests an increase in trust-related disputes and claims activity.40 This increase may be attributed to a variety of factors, including increased assets under management, recent downturns in the investment markets, high profile cases such as those discussed above, more well-educated beneficiaries, and/or more aggressive plaintiff ’s lawyers. It is, thus, 36. FDIC Trust Examination Manual, Section 2, available at https://www.fdic. gov/regulations/examinations/trustmanual/section_2/fdic_section_2-internal_ controls_and_auditing.html#operintcontrol_principal_and_income.

37. Id. at Section 2(G)(2).

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Professional Liability Errors & Omissions (E&O) insurance can cover various types of potential exposures that are not typically covered under the terms of general liability insurance policies.

Subject to the terms of conditions of the specific policy, E&O insurance generally provides coverage for negligence or mistakes that cause financial harm in connection with the rendering of professional services by the insured. Such policies typically cover both the obligation to pay damages for covered claims, as well as the costs of defending against such claims. Bankers’ Professional Liability policies may cover economic losses resulting from mistakes committed in connection with the bank’s provision of financial services, including errors or omissions made by bank trust departments.

Preparedness and prevention are key areas of concern for trust departments. The time and resources devoted to identifying the pitfalls that trustees face and how such losses may be avoided is time and money well spent. As a starting point, we have identified broad areas of potential risk and highlighted practices that trustees can follow to attempt to avoid and mitigate trustee liability risks. However, given the nature of the trust business, the uncertainties of the markets and the litigiousness of our society, banks should consult their agents, brokers and insurers to discuss the various insurance products and resources available to help insulate them from trust service exposures.

About the Authors Liz Maio is a Bank Industry Leader at CNA Insurance Companies.

Tom Pecoraro is a Financial Institution Risk Control Consultant, CNA Insurance Companies.

Bill Smith and Laura Lee Miller are Attorneys at Wiley Rein LLP, who counsel and represent insurers in connection with policies issued to financial institutions.

The purpose of this article is to provide information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the date of the article. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional. In addition, CNA does not endorse any coverages, systems, processes or protocols addressed herein unless they are produced or created by CNA. Any references to non-CNA websites are provided solely for convenience, and CNA disclaims any responsibility with respect to such websites. To the extent this presentation contains any examples, please note that they are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental.

In addition, any examples are not intended to establish any standards of care, to serve as legal advice appropriate for any particular factual situations, or to provide an acknowledgement that any given factual situation is covered under any CNA insurance policy. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All CNA products and services may not be available in all states and may be subject to change without notice. “CNA” is a service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office. Certain CNA Financial Corporation subsidiaries use the “CNA” service mark in connection with insurance underwriting and claims activities. Copyright © 2016 CNA. All rights reserved.

38. Id. at Section 2(F).

39. See https://www.fdic.gov/regulations/resources/director/presentations/ Regulatory-Exam-Process.pdf.

40. January, 2010 to June, 2015 claims data.

INDUSTRY NEWS

Stackhouse Accepts Career Achievement Award St. Louis Fed Executive Vice President of Banking Supervision and Regulation Julie Stackhouse recently accepted Delta Sigma Pi’s Career Achievement Award in a ceremony in St. Louis. She was honored for her distinguished career with the Federal Reserve and her vast service to the community.

Delta Sigma Pi is a professional business fraternity. The national award is presented annually to the Delta Sigma Pi member who has most distinguished himself or herself in business, government or education and, through his or her accomplishments, has furthered a higher standard of commercial ethics, culture, and the civic and commercial welfare of the community.

The Delta Sigma Pi career achievement award has been presented since 1992 and past recipients include former President of International Private Banking for Bank of America Eduardo Aguirre and former Chairman of PricewaterhouseCoopers Dominic Tarantino.

“I am truly honored to receive this award,” Stackhouse said. “Like so many people, I did not come from a privileged family.

Instead, I simply worked hard. To be recognized for hard work is especially humbling.”

At the ceremony, Stackhouse described how Delta Sigma Pi gave her the opportunity to develop basic skills necessary in life and prepared her for a career. Working with very bright people at the Federal Reserve, she added, taught her the importance of developing people so they are motivated to achieve more. And charitable work, she said, helped her learn the power of passion.

Among the highlights of the ceremony was the airing of a video tribute to Stackhouse from Fed Chair Janet Yellen.

“Julie has made significant contributions to the Fed’s oversight of community banks, which play such an important role in providing services in areas often underserved by large banks,” Yellen said.

“She’s improved the Fed’s outreach to

Pictured (from left) at the recent Delta Sigma Pi Career Achievement Award ceremony for Executive VP Julie Stackhouse are St. Louis Fed employees Lili Saint Christopher, Allen North, Lindsay Cronin, Wendy Eilers, Bank President Jim Bullard, Julie Stackhouse, Jon Basden, Erik Soell, Julie Bauer and Jim Fuchs.

bankers, helping them understand our goals and improved the education of Fed staff, who help ensure that banks are operating safely and soundly.”

Stackhouse continues to engage in nonprofit activities, with a special emphasis on those that support women.

In 2010, she was named one of the Most Influential Business Women by the St. Louis Business Journal.

Yellen added, “Julie has been a strong example to women at the Federal Reserve and a leader of efforts to enhance opportunities for women at the Fed.” Stackhouse joined Delta Sigma Pi in 1978 while pursuing her degree from Drake University in Iowa. Following graduation, she started working for the Kansas City Fed as an Assistant Bank Examiner and became that bank’s first female officer in 1986 and first female SVP in 1993.

In 1995, Stackhouse left the Fed and relocated to Minnesota as a part of a job transfer for her husband. Over the next five years, she raised her two children and volunteered on both her city’s planning and economic development commissions, served on the boards of a community foundation and arts and humanities council, and led Boy Scouts and Girl Scouts troops for her children.

In 2000, Stackhouse joined the Minneapolis Fed before transferring to the St. Louis Fed in 2002, where she serves as the Executive Vice President and Managing Officer of Banking Supervision, Credit Risk Management, Community Development and Learning Innovation.

Stackhouse has served on the advisory board that developed the Washington University Women’s Leadership Certificate Program and served as St. Louis Chapter President of National Charity League Inc. She also serves as secretary for Open Door Animal Sanctuary and participates on the Women’s Advisory Board for Variety – the Children’s Charity. She was recently named President-Elect of the board of National Charity League Inc. and will become Board President in June 2017.

Wendy Eilers of Treasury Technology Services currently serves as Delta Sigma Pi’s National Organizational Development Committee Chair. Eilers learned last year of Stackhouse’s involvement and helped coordinate her nomination submission.

“I immediately thought Julie would be a great Career Achievement Award recipient,” Eilers said. “Her impressive narrative of career success in the Federal Reserve System while balancing family and volunteer commitments easily qualified her for the award.”

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PROFESSIONAL DEVELOPMENT 14 Graduate from ABA Consumer Lending School

Lenders from across the state spent a week in Little Rock August 8-12 for the ABA’s Consumer Lending School, taught by Dr. John Dominick and Ron Rushing.

Graduates of this year’s program were Eric Perry, Stone Bank, Mountain View; Vince Vire, Southern Bank, Bald Knob; Brady Bone, Peoples Bank, Sheridan; Aaron Brown, First Arkansas Bank & Trust, Jacksonville; Omar Morales Perez, Legacy National Bank, Springdale; Chad Harbison, Bear State Bank, Jonesboro; LaRanda Cook, The Bank of Lake Village, Lake Village; Zach Henry, Helena National Bank, West Helena; Ever Cuellar, Legacy National Bank, Springdale; Sundee Hendren, Bank of Gravett, Gravette; Derek Reynolds, Bank of McCrory, McCrory; Charli Gipson, Bank of McCrory, McCrory; and Jodie Yates, Signature Bank, Bentonville.

Arkansas Bankers Receive Diplomas from GSB-Colorado The Graduate School of Banking at Colorado (GSBC) has announced the graduation of three Arkansas bankers as a part of the class of 2016.

Phillip Partain, Saline County Community Bank President for Arvest Bank, is the 2016 recipient of the Graduate School of Banking at Louisiana State University Scholarship.

The graduates are pictured from left to right: Clayton Howell, Centennial Bank, Beebe; Jeff Neil, Arvest Bank, Pea Ridge; and Jeff Maland, Signature Bank of Arkansas, Fayetteville.

Partain has been in banking fore more than 20 years. He said that the GSB experience would be an excellent resource in terms of planning and preparation as he serves not only in his bank, but also in the community.

GSBC awarded 159 total graduates from across the nation with a certificate in banking in a ceremony which took place Thursday, July 28 at the Folsom Field Skyboxes on the University of Colorado campus in Boulder, Colo.

GSBC is America’s Premier Community Banking School which prepares bankindustry professionals to take on senior management roles within their organizations.

Each student has been recognized by his or her bank CEO, president and supervisor as a rising star within their organization.

During the 25-month program, which meets two weeks each July for three consecutive years, students are required

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Partain Receives Graduate School of Banking Scholarship

For over a half century, the Graduate School of Banking at LSU has been a major provider of advanced financial education in the United States. to complete six intersession research The School’s purpose is to fill the need for projects, on-campus coursework, exams graduate level study by bank officers and others meeting admission requirements and a bank management simulation. leading toward a broader knowledge and In addition to academic coursework, understanding of major banking functions; students enjoyed networking with others completion of the program has become a in their region, as well as exploring requisite to professional advancement in Boulder throughout their two-week visit. many banks.

The Arkansas Banker | September 2016

MEMBER NEWS Arvest Recognized

By SBA as Top Lender in Arkansas

Stone Bank Breaks Ground for White Hall Banking Center

The United States Small Business Administration (SBA) recently recognized Arvest Bank as the 2016 U.S. Small Business Administration Arkansas District Top 7(a) Lender of the Year.

The designation is based on the number of loans secured during fiscal year 2015.

This is the second consecutive year Arvest has been recognized for this achievement.

“Small businesses greatly contribute to the success of local communities and our national economy as a whole,” said Jason Warren, Business Banking Manager for Arvest Bank in Little Rock. “We are honored to be part of the success of these entrepreneurs by providing them with banking solutions that not only help get their businesses started, but also help them grow and reach the financial goals they have set for their companies.”

In addition to the bank’s accomplishments during fiscal year 2015, Arvest was recognized by the SBA as the No. 1 SBA lender in Arkansas for the second quarter in fiscal year 2016.

According to the SBA, small businesses create almost two-thirds of net new jobs every year and employ more than half of all Americans. Fiscal Year 2015 was a record year in lending for the SBA, which helped provide almost $33 billion in loans through its 7(a) and 504 loan programs. The 7(a) loan program is a general small business loan for start-up or existing companies. Small businesses apply for a 504 loan to finance fixed assets such as real estate and equipment.

The SBA helped create or retain more than 680,000 jobs nationwide during the 2015 fiscal year.

Breaking ground for the White Hall Banking Center were: Shareholder Ken Compton, CEO Marnie Oldner, Chairman J.T. Compton, White Hall Mayor Noel Foster, President Nick Roach, Architect Greg Steinbeck, Shareholder Kevin Compton, Director Fred Williams, White Hall Market Manager Kelly Williams

In early 2017, White Hall will be home to Arkansas’ newest, most state-of-the-art financial center – Stone Bank at White Hall.

“We’ve made a $3 million commitment to the White Hall community, said Stone Bank CEO Marnie Oldner. “Our bank’s roots are in Jefferson County and we believe that the businesses and families of the White Hall community will embrace our banking concepts and enjoy working with the local banking professionals that will be managing the bank.”

The new 5,000 square foot bank is being constructed on 4-plus acres at 7739 Sheridan Road – in the heart of the fastest-growing part of the city. As White Hall Mayor Noel Foster said at the groundbreaking, “We have a lot of developers looking at this corridor as key to the future of Jefferson County. I believe this new bank will soon be surrounded by motels, restaurants, retail establishments and professional buildings. And with the highway department’s plans to expand the road to five lanes, Sheridan Road will become one of our cities main arteries.”

The new bank will be headed by Vice President and Market Manager Kelly Williams, a veteran banker with deep roots in the White Hall community.

Stone Bank was founded when a group of Mountain View businessmen purchased the charter of the Bank of Altheimer in 2007. In addition to the headquarters in Mountain View, the bank has an office in Little Rock and will be breaking ground on new, full service facilities in Harrison, Arkansas later this year.

SVP for Retail Banking, Kirby Williams said “Our management team has been studying the latest trends in the delivery of banking products and has designed an ‘outside the box’ plan which utilizes “untethered bankers” who are armed with tablets that bring the bank to the customer. Customers will be greeted in an informal lounge area, which includes a coffee bar and mobile devices for accessing bank products. The latest “Intelligent Teller Machine” (ITM) will be deployed, allowing our customers to complete practically any transaction remotely – with or without the assistance of a live teller.” Oldner added, “The White Hall bank will also feature a detached pavilion with a full kitchen and facilities for community events such as our annual Veteran’s Day celebration, Easter egg hunts and civic and community events.

September 2016 | The Arkansas Banker

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MEMBER NEWS ARKANSAS BANK DEPARTMENT

APPLICATIONS & APPROVALS

Branch Bank Application An application filed by the Farmers Bank and Trust Company, Blytheville, Mississippi County, Arkansas, to establish a branch banking facility at 55 Park Street, Wilson, Mississippi County, Arkansas, with a temporary address of #1 Park Street, Wilson, Mississippi County, Arkansas, until the permanent facility is complete, has been approved.

August 10, 2016.

An application filed by River Town Bank, Dardanelle, Yell County, Arkansas, to establish a branch banking facility at 3201 West Main, Russellville, Pope County, Arkansas, has been approved.

August 15, 2016.

Back to School!

Hometown bankers across Arkansas were out and about making a difference at the start of this school year. Pictured here are Firstar Bank employees Michael Bloom and Brooke Moreton as they deliver school supplies collected at the bank’s annual School Supply Drive to Ashley Ahlert and Ami Curry at the Children’s Emergency Shelter in Fort Smith.

An application filed by Southern Bancorp Bank, Arkadelphia, Clark County, Arkansas, to establish a branch banking facility at 502 East Main Street, Gurdon, Clark County, Arkansas, has been approved. August 18, 2016.

October 16, 2016

Nashville, TN

The all-day ABA Bank Director Boot Camp, in partnership with BKD, will help bank directors hone their expertise on regulation, oversight and strategic planning for growth and profitability.

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aba.com/DirectorBootCamp 1-800-BANKERS

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The Arkansas Banker | September 2016

MEMBER NEWS

FNBC Among ‘Best Banks to Work For’ In August, the American Banker Magazine published its fourth annual list of the 60 best banks to work for, with FNBC Bank of Ash Flat making the list, ranked at No. 10.

FNBC Bank holds $376 million in assets, and currently has 101 employees. The organization was recognized for their “Give a Wow” employee recognition program, mystery shopper incentive program, and senior leadership’s weekly branch visits.

Help Your Community ‘Get Smart About Credit’

Is your community smart about credit?

The American Bankers Association’s Get Smart About Credit Day, slated for Thursday, October 20, is the perfect opportunity to encourage young people to develop responsible credit habits.

The program is a national campaign of volunteer bankers who help young people develop responsible credit habits. The program focuses the following important financial obstacles facing teens; paying for college, building good credit habits, and protecting their identity.

This program is an opportunity for Arkansas banks to plug into a national effort to equip students with ways to ensure a financially fit future. Your bank can team up with the AmBA in this effort to teach the local community how to effectively use credit, by using provided resources. To participate in this program, and access customizable resources and communications tools, log on www.aba. com.

Altom Named to Agricultural & Rural Bankers Committee Russell Altom, SVP of Agricultural Lending at Relyance Bank in Pine Bluff, has been appointed to the American Bankers Association Agricultural and Rural Bankers Committee. Altom will start his term of service at the 2016 Agricultural & Rural Bankers Conference in Indianapolis in November.

experience, with 19 years at Relyance Bank. He is a graduate of the Mid-South School of Banking and currently serves as President of the Star City School Board.

The Agricultural and Rural Bankers Committee is one of the oldest special interest committees at the AmBA, with origins dating back to 1911.

The group was first tasked to find ways to work with the U.S. Department of Agriculture and others to support programs to improve agricultural productivity to increase food and fiber production. Today, committee members continue to provide guidance to staff of the AmBA Center for Agricultural and Rural Banking, and provide recommendations to the association’s policy-setting committees.

Altom received his Bachelor of Science in Agriculture from the University of Arkansas at Monticello. Following college, he was employed for two years with USDA before entering the banking industry. Altom has 29 years of banking

Bankers Named to Central Arkansas RMA Board of Directors The Central Arkansas Chapter of the Risk Management Association has announced its 2016-17 Board of Directors and Officers.

“Our chapter continues to grow and serve the Natural State,” Chapter Past President David Marks stated. “We have outstanding Officer and Board leadership. Marcus Guinn is poised to lead the chapter to even higher success. Our upcoming program and guest speaker line-up is outstanding.

Thank you to our members, sponsors and friends.”

2016-17 Chapter Officers are: President: Marcus Guinn, Arvest Bank Vice President, Gary Edwards, CPA, BKD LLP 2nd Vice President: Colbey Frisbee, First Community Bank Treasurer: Kristen Brown, CPA, JPMS Cox Secretary: Robert Smith, Friday, Eldredge & Clark Past President: David Marks, Arvest Bank

2016-17 Chapter Board Members are: Jackson Balentine, One Banc & Trust Daniel Beck, Quattlebaum, Grooms & Tull Erin Brogdon, Wright, Lindsey & Jennings Aaron Brooks, Bank of the Ozarks Ryan Carrus, Carrus Financial Management David Coleman, Simmons Bank Heather Drew, One Banc & Trust Adam Gilbert, DD&F Risk Management Group Christine Miller, Heartland Bank Karen Davidson, Citizens National Bank Phillip Partain, Arvest Bank Ronnie Peters, DD&F Risk Management Group Steven Sperry, Regions Bank The Central Arkansas Chapter of the Risk Management Association operates as one of over 115 satellite chapters of the RMA, which was founded in 1914 to assist commercial bankers in making better lending decisions through the exchange of credit information.

September 2016 | The Arkansas Banker

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BANKER NEWS & MOVES RAWSON NAMED MARKET PRESIDENT HUNTSVILLE/MADISON COUNTY Jason F. Tennant, Executive Vice President, Cornerstone Bank, is pleased to announce the promotion of Bob Rawson to Market President of the bank’s Huntsville and Madison County markets. Rawson has been the senior executive in the Madison County market since the bank’s initial entry approximately one year ago and has been greatly responsible, along with his team, for the bank’s initial success and growth in Madison County.

Rawson is a graduate of St. Louis University with a degree in Finance and Accounting, as well as receiving his MBA from Webster University. Prior to his most recent tenure with Arvest, Rawson served a total of 25 years with Farm Credit Services and U.S. Bank. Additionally, he is Vice President of the Madison County Fair Board, Secretary of the Madison County Cattlemen, past President of the Huntsville Kiwanis Club and a Deacon at First Baptist Church of Hindsville.

Tennant stated, “Promoting people within our company such as Bob gives me great pleasure.

Bob has been instrumental in helping guide our institution as we have grown our franchise in Madison County over the past year. We feel fortunate to have him leading our team

of professional bankers and look forward to his continued leadership, as our bank continues to grow its client base throughout the Madison County area.”

CLINE APPOINTED TO CORNERSTONE BANK ADVISORY BOARD Charles T. Cross, President & CEO, Cornerstone Bank, is pleased to announce the appointment of David Cline to the bank’s Advisory Board of Directors for Madison County. Cline, who is a lifelong resident of Huntsville, is the former owner and operator of Huntsville Milling Company

and current Manager of Powell Feed in Huntsville.

Cross stated, “David is our second board appointment in Huntsville and we are excited to add him to our growing bank team in Madison County. His knowledge of the Huntsville community and its residents will serve our bank well as we continue to grow moving forward. We are very fortunate to welcome him into the Cornerstone family and know we are blessed to have his affiliation with our company.”

Cline, along with his wife Whitney, reside in Huntsville and have three children, Brittney, Brooke and Blair. They also have two grandchildren, Chett and Clansy.

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The Arkansas Banker | September 2016

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BANKER NEWS & MOVES LOVE, BRIGHT PROMOTED AT THE CITIZENS BANK The Citizens Bank has announced the promotions of Ed Love and Jill Bright, both of whom work out of the bank’s Rogers location.

Ed Love, who has been with the bank for three years will now serve as City President Rogers.

Jill Bright, who has been with the bank for 11 years, will now serve as VP / Director of Marketing and Business Development.

UPTON NAMED SVP/CTO AT STONE BANK Marnie Oldner, Chief Executive Officer of Stone Bank, has announced that Bruce Upton has been named a Senior Vice President and Chief Technology Operations officer of the Mountain View, Arkansaschartered bank.

“Bruce is nationally recognized as one of the top experts in bank technology and cyber-security,” said Oldner. “He has made an immediate impact on our bank’s technological capabilities and our ability to develop cutting edge banking products for our customers. We feel very fortunate that he chose to join our management team.”

For the past 15 years, Upton headed up BLU3 Technologies, Inc., a network security, information systems audit and network consulting company with more than 200 clients

in Arkansas and nationwide.

With particular expertise in the banking and medical fields, BLU3 emphasized e-commerce and network advice on management and implementation of systems and technologies.

A U.S. Air Force veteran with multiple overseas deployments, Upton retired with the rank of Captain.

Upton has multiple professional and technical certifications, which supplement a BS in Industrial Technology from Southern Illinois University and a MS in Operations Management from the University of Arkansas.

He is a doctoral candidate seeking a PhD in Information Quality from the University of Arkansas at Little Rock.

CITIZENS BANK OF BATESVILLE ANNOUNCES NEW MARKETING TEAM Phil Baldwin, President and CEO of Citizens Bank of Batesville, has announced two new marketing positions. Baldwin named Don Hale as Senior Vice President of Marketing and Tim Byers as Vice President of Marketing.

“As Citizens Bank continues to expand, we recognize the importance of developing a strategic marketing team. We are committed to growing our base and increasing our visibility in the markets we serve. This includes utilizing technology to reach new customers and maximizing our reach with traditional media,” Baldwin said. “We believe the addition of these two key positions will allow us to market our products and services at the highest level.”

Don Hale comes to Citizens Bank from the Diamond Agency, an El Dorado-based marketing and public relations firm he launched in 1996. His firm has received

wide-ranging professional recognition, including Best of Show from the Bank Marketers Network and multiple Diamond Awards from the Arkansas Hospital Association. Hale was appointed to the Arkansas Educational Television Commission and served as the commission chairman. He has also served as Chairman of the South Arkansas Development Council, the El Dorado Chamber of Commerce, Main Street El Dorado and the El Dorado Rotary Club. Hale attended the University of Arkansas at Fayetteville, and he and his wife, Andrea, have three children.

Tim Byers’ career includes a decade of experience in digital marketing, analytics and project management with Acxiom and Merkle. A Batesville native, Byers’ work includes projects with clients such as Abercrombie & Fitch, Under Armour, Eddie Bauer and General Motors.

Byers attended Williams Baptist College, and he and his wife, Jacklyn, have two sons.

Loan Manager. Prior to joining Arvest, he began his banking career in 1984 with Merchants National Bank in Fort Smith, moved to First National Bank of Fayetteville in 1988 and continued with successor banks – Worthen National Bank and Boatmen’s National Bank until joining Arvest.

“Arvest Bank has always been able to depend on and benefit from Payne’s knowledge and experience,” Mark Ryan, Arvest Bank Benton County Loan Manager said. “His banking experience is a resource to our customers. He understands a businesses’ financial needs and knows how to provide sound solutions and advice to our customers.”

A native of Fayetteville, Brewer earned his Bachelor of Science of Business Administration in finance and banking, graduating with high honors in 1984 from the University of Arkansas at Fayetteville.

BREWER NAMED BENTON COUNTY COMMERCIAL LOAN MANAGER

He has completed Arkansas Bankers Association Lending School at Arkansas State University in Jonesboro in 1985, American Bankers Association Commercial Lending School at the University of Oklahoma in Norman, Okla., in 1987 and the School of Banking of the South at Louisiana State University in Baton Rouge, La., in 1993.

Arvest Bank is pleased to announce that Payne Brewer has been named Commercial Loan Manager for Arvest Bank, Benton County.

He will share the role previously handled by Mark Ryan with Jason England. Ryan was promoted to Loan Manager in June.

Brewer has been very active in community service and was involved in numerous organizations during his time in Fayetteville and Fort Smith. He is a Paul Harris Fellow and is the current president for the Rotary Club of Downtown Rogers and is serving on the board of the Arkansas Public Theater. He is a graduate of the Fayetteville Chamber of Commerce Leadership Fayetteville Class of 1993.

Brewer worked for Arvest Bank in Fayetteville since 1997 as Senior Vice President then as Executive Vice President and

He and his wife, Tina Brewer, have two adult sons, a daughterin-law and two grandsons.

September 2016 | The Arkansas Banker

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BANKER NEWS & MOVES ARVEST BANK NAMES JIM CARGILL PRESIDENT & CEO FOR CENTRAL ARKANSAS Arvest Bank has announced the promotion of Jim Cargill to the position of President and CEO for the bank’s Central Arkansas market. Cargill currently is president and sales manager for the market, where he is responsible for retail and consumer banking operations.

He will succeed current Central Arkansas CEO John Womack who recently announced his retirement, effective Sept.

30. In his new role, Cargill will be responsible for all aspects of banking operations and strategic direction for Arvest in Central Arkansas, which includes more than 450 associates and 32 banking locations in 12 communities.

“Jim has been part of our growing company for more than 30 years and has greatly contributed to the success of Arvest by ensuring we deliver customer-focused banking, provide customers with convenient and comprehensive financial solutions and stay on the cutting-edge of emerging new technologies in our industry,” said Womack. “I’m excited for Jim to take over leadership of the great team here in Central Arkansas and look forward to the continued success he will foster for our customers and our communities.”

Cargill is a native of Lewisville and a fourth-generation banker who began his career at his family’s bank working with his grandfather who was president of First National Bank in Lewisville. His parents, grandparents and greatgrandfather were affiliated with the Lewisville bank and his father was chairman and

38

CEO there. Cargill has held a number of leadership roles during his career with Arvest. He has worked in multiple Arvest markets including Rogers, Bentonville and Little Rock, as well as Bartlesville and Shawnee, Okla.

County. “We want them to know that they have a true financial partner in Arvest, so we designed the business team to assist with advice and guidance that can help them better manage everything they need to do.”

He attended the University of Arkansas where he majored in finance and banking. He is a graduate of the American Bankers Association Graduate School of Commercial Lending and of The Professional Masters of Banking Program at The Graduate School of Banking, Louisiana State University.

Graydon Rochelle has been with Arvest Bank for the past seven years, starting as a branch manager and most recently working as a private banker. He will be the Business Banking Manager for the team.

Cargill serves on the board of the Arkansas Bankers Association, UALR Foundation, Our House and the Little Rock Regional Chamber of Commerce. He also is a member of the Downtown Little Rock Rotary Club.

Womack joined Arvest in 1999 and served for 11 years as president of the bank’s Fort Smith market before being named CEO of the Central Arkansas territory. He has worked in banking in Oklahoma and Arkansas for 42 years.

THREE NAMED TO ARVEST BANK BUSINESS TEAM Arvest Bank is pleased to announce that Graydon Rochelle, Randy Durbin and Gail Sneeringer have been named to a new team designed to help businesses that bank with Arvest Bank.

The creation of the business banking department is part of a bank-wide emphasis to better serve our business customers with dedicated staff that offer specialized products with quicker turnaround times.

“We know that business owners have to wear many hats to keep their business operating and growing,” said Craig Rivaldo, president and chief executive officer for Arvest Bank in Benton

The Arkansas Banker | September 2016

Rochelle graduated from the University of Arkansas with a Bachelor of Science in finance and investments in 2008. He has a Qualified Financial Advisor designation and holds Series 7 and 66 securities licenses.

He serves on the BentonvilleBella Vista Small Business Council, the Westark Area Council and the Boy Scouts of America Executive Board. He is the current president of Lowell Kiwanis.

He is married to Caitlin Rochelle.

Randy Durbin is the new Business Banker and has worked for Arvest Bank since 2010 when he started as a financial services representative. Most recently, he worked as a treasury management advisor for three years before joining the team.

He attended Fresno State University and is American Bankers Association Small Business Banker Certified.

Durbin serves on the Rogers Public Library Foundation board and the Rogers Small Business Council of the Rogers Chamber of Commerce.

Gail Sneeringer is also a Business Banker on the team and has worked for Arvest Bank for seven years, starting as a teller and most recently as a branch sales manager.

She is originally from the St. Louis, Mo., area and is a graduate of the Arvest EDGE Program.

She and her husband, Jeffrey Sneeringer, live in Bentonville and have two adult daughters and a granddaughter.

GREEN NAMED MARKET PRESIDENT AT RELYANCE BANK Chuck Morgan, President and CEO of Relyance Bank, N.A. has announced the promotion of Todd Green to Hot Springs and Hot Springs Village Market President.

“Todd has done an excellent job for our bank in many different capacities and most recently done so in fostering a culture of superior customer service and growth in our Hot Springs markets. He leads by example and is quick to give credit to his team for these positive results,” says Chuck Morgan, President and CEO of Relyance Bank.

Green earned his Bachelor’s Degree and Master of Business Administration degree at Henderson State University.

He is a 2012 graduate of the Southwestern Graduate School of Banking at Southern Methodist University, and has served in several leadership roles within the bank over the past seven years.

He is a member of Hot Springs Fifty for the Future, the Executive Leadership Team for the Continued on page 39

BANKER NEWS & MOVES

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ADVERTISEMENTS For more information on advertising in The Arkansas Banker, please contact Traci Logsdon, Director of Communications, via email at traci.logsdon@arkbankers.org, or by phone at 501.978.3603.

The Arkansas

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

American Heart Association’s Hot Springs Heart Ball, a graduate of Leadership Hot Springs – Class XXVI, a member of the Elder Team at Lake Valley Community Church, and is actively involved with the Hot Springs Metro Partnership and the Chamber of Commerce, as well as a volunteer with the Arkansas Blood Institute.

AHLEN HIRED AS BANK DEPT CHIEF COUNSEL The Arkansas State Bank Department has hired John W. Ahlen IV as Bank Chief Counsel.

Ahlen will be responsible for preparing case strategy and serving as an expert litigator before federal and state courts and agencies. In addition, he will be the Bank Commissioner’s chief legal adviser regarding all banking issues, including the drafting of legislation and Bank Department rules and regulations.

Ahlen most recently served as General Counsel for the Arkansas Auditor of State, joining that office in February 2015. Prior to that, beginning in 2002, Ahlen was Assistant Parliamentarian and Legislative Analyst for the Arkansas House of Representatives.

Ahlen began his professional career in August 1999 as a project assistant in Washington, D.C., with the law firm Wilmer Cutler Pickering Hale and Dorr LLP. In July 2002, Ahlen returned to Arkansas, accepting a position as real estate appraiser trainee and office manager for Duke and Associates Real Estate Appraisals in Atkins.

Ahlen received his Juris Doctor from the William H. Bowen School of Law at the University of Arkansas at Little Rock in 2014. He received a Bachelor of Arts in history, with an emphasis on politics, from Hendrix College in 1998.

Ahlen is a member of the Arkansas Bar Association. He serves on the Association’s Governance Committee and Uniform Laws Committee.

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Arkansas Bankers Association

Salute to Veterans

Help the ABA Salute our banker veterans with a special feature in next month’s issue of The Arkansas Banker. Log on to www.arkbankers.org to submit the names of veterans currently serving in your bank!

September 2016 | The Arkansas Banker

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OUR VOICE

Talk Business & Politics is a multi-media news organization focused on business and politics in Arkansas. Our new statewide platform is the result of a merger between Talk Business & Politics and The City Wire. With a combined 24 years of being news leaders in their respective areas, the newly merged Talk Business & Politics brand has become the most respected and resourced media in the industry.

Content is driven by Roby Brock and Michael Tilley (The City Wire) and their team of veterans. The recent merger created the only media company in the state offering multi-platforms dedicated to business and political news, including niche regional coverage and insights into Arkansas’ top economic sectors.

Brock is the host of Talk Business & Politics, which airs Sunday mornings at 9:30 a.m. on KATV Channel 7 and also 10:00 a.m. on KAIT Channel 8, having interviewed more than 3,000 business and political leaders. He also moderates a radio program which airs on NPR affiliates statewide. Supporting staff, contributors, and content partners represent the most knowledgeable and experienced in their fields.

Digital platforms such as Talkbusiness.net, daily and weekly E-Newsletters, Facebook, Twitter, LinkedIn, YouTube and iTunes allow news and information from around the state to be made accessible as it is happening and keeps those most affected in the know.

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Our audience leads with CEOs, presidents and primary executives of companies statewide. In addition, business owners of $2.5+ million in sales revenue, elected officials at all levels, trade association executives and higher education representatives also receive our publication and products.

Many of our readers and viewers are also the newsmakers driving business and political headlines in Arkansas, nationally and internationally.

The magazine edition reaches affluent decision-makers across the state and is an essential resource guide for new entrepreneurs and leaders at all levels of government. With a dedicated 12,000 copies bi-monthly, readers receive an in-depth look at business and political profiles, the most current developments in key regions and industries, plus corporate and policy strategies.

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