Albert Solaroli, the Florida businessman who pleaded guilty last April to money laundering related to an infamous $1.5 million loan from One Bank & Trust, is scheduled to be sentenced Thursday by U.S. District Judge Brian Miller in Little Rock.

Just last week, Miller denied Solaroli’s 18th request to travel. It was a pretty bold ask considering how strenuously federal prosecutors in Little Rock objected to his 17th request in December, when Solaroli wanted to go to Canada for “important business and family related reasons.”

First Assistant U.S. Attorney Pat Harris pointed out that Solaroli “only has cash in personal bank accounts of $46.00” and his house in Florida is being foreclosed.

“Yet the defendant has the wherewithal to travel 16 times since indictment, including trips to Europe and Canada. And all this done when the defendant owes the victim in this case over $1.5 million dollars. … It appears that the defendant is not reserving his resources for victim restitution, but is travelling way too much.”

Most regulated industries don’t get to choose who regulates them, but, to a limited degree, banks do. And while the door can swing both ways, in reality the traffic has flowed in one direction: converting from national charters to state charters.

You’d better believe Paul Groot is aware of the trend. He’s the assistant deputy comptroller who two weeks ago took charge of the Office of the Comptroller of the Currency in Little Rock.

“As soon as I hear that someone’s even thinking about it, I go out and meet with them and tell them what they do get for their fees,” said Groot, who headed a team of bank examiners in Little Rock from 2007-13 and then led the OCC office in Cincinnati for two years.

Chris Dunn, who had been ADC for the OCC in Little Rock since 1997, resigned last July to become executive vice president for regulatory affairs and risk strategy for the largest Arkansas banking company he regulated, Simmons First National Corp. of Pine Bluff.

Between Dunn’s departure and Groot’s arrival, First National Bank of McGehee applied to convert to a state charter to be called First NaturalState Bank. When that is approved by state regulators — no conversion request has been turned down in the 36 years that Candace Franks has worked for the State Bank Department — the number of national bank charters in Arkansas will fall to 20 while the number of state banks will grow to 83.

(The OCC also regulates the only thrift left in the state: Priority Bank of Fayetteville.)

Stone Bank of Mountain View — formerly Ozark Heritage Bank — switched from a national charter to a state charter in 2015. Two OCC-regulated thrifts, Benefit Bank of Fort Smith and United Bank of Springdale, converted to state bank charters in 2014. First National Banking Co. of Ash Flat became state-chartered FNBC Bank in 2013.

Bank Department Benefits

The beneficiary of the conversion trend has been the Arkansas State Bank Department. It regulates about 78 percent of the $73 billion in assets reported by banks chartered in Arkansas. Nationally, the OCC regulates about 70 percent of bank assets, including the six largest banks in the country — JPMorgan Chase, Bank of America, Wells Fargo, Citibank, U.S. Bank and PNC Bank.

Franks, who has been commissioner of state banks for the past nine years, says her asset base is growing even though the roster of bank charters is shrinking due to acquisitions and reorganizations. (That includes Simmons’ decision to collapse seven state bank charters into its flagship Simmons First National Bank in 2013 and 2014.)

“If they’re interested, we’re happy for them to come and talk to us,” Franks said. The department even has packets made up called “Benefits of Being a State Chartered Bank” that include testimonials from state bank executives — including Martin Carpenter, who recently retired as CEO of FNBC Bank — on the decision to convert.

The State Bank Department, Carpenter said, has “a vested interest in the well being of the communities throughout Arkansas and for us that made them the best partner for us going forward.”

Franks said she couldn’t remember the last Arkansas state bank that converted to a national charter. Occasionally an OCC-regulated thrift will convert to a national bank charter; that’s how the OCC gained seven new banks last year. No state-chartered bank in the country converted to a national charter in 2015.

Why is the trend so one-sided? “There are a lot of reasons for converting,” Groot said. “I expect every board to look at it periodically.”

For one thing, state regulatory fees are somewhat lower — a few thousand dollars a year for small banks like First National of McGehee — although Groot argues that OCC services make up for the difference.

And there have been suggestions that state regulators can be more lenient; a study released by the Federal Reserve Board in 2014 concluded that banks could “arbitrage” their safety and soundness ratings, at least temporarily, by switching regulators.

But Randy Dennis, a bank consultant with DD&F Consulting in Little Rock, dismissed the idea of a less stringent regulator because even state-chartered banks must select a primary federal regulator — either the Federal Reserve Bank or the Federal Deposit Insurance Corp. — and state and federal regulators take turns leading routine examinations every 12 to 18 months.

Marnie Oldner, CEO of Stone Bank, said her board simply wanted a regulator more in touch with Arkansas.

“Sometimes local economies create vulnerabilities that are not as prevalent in other localities,” Oldner said in an email. “What I believe our Arkansas State Bank Department understands is the world Arkansas banks live in. They better address the appropriate regulations to our issues.

“It was our experience that the OCC examination agenda and communications had to come from and go through Washington. I felt we had no voice. Trivial issues were made too big and we paid too much to address them at a time we could little afford to do so.”

Groot points out that OCC regulators are actually on the ground in Arkansas, although his office also regulates some banks in Mississippi, Tennessee and Texas because OCC regions don’t follow state borders.

“State regulators tout that they are local,” he said. “Well, I’m local. I live here in Little Rock.”

State law in Arkansas keeps regulatory actions against state-chartered banks confidential, which might also be an appealing difference. OCC orders are released publicly a few weeks after they are entered.

But Franks discounted that because no state bank escapes federal regulation, and the Fed and the FDIC also make their orders public. “Generally, if we’ve issued an order, there’s also a federal order,” she said.

Getting Out From Under

One thing that seems undisputed: The Arkansas State Bank Department tends to release banks from regulatory orders much faster than the OCC.

Franks said banks that comply with orders are typically released from special oversight after the next regular examination or even earlier. While an order is in place, Franks said, a representative of the State Bank Department attends every meeting of the board of directors — “not to give advice, but to answer questions.”

Dennis, who has consulted with banks in many states, said an OCC order can feel interminable.

“The OCC — and I think statistics would bear this out — it would take you twice as long to get out as it would from the Fed or the FDIC,” Dennis said. “The OCC’s favorite word was ‘seasoning.’

“What does that tell you as a bank? ‘You don’t trust me.’ So you had national banks across the country that found themselves under an order, and they stayed there forever.”

One of those was Oldner’s bank, which slogged through almost five years under an OCC regulatory order. Ozark Heritage was finally released from that OCC order last April — and promptly applied for a state charter and a new name.

The renamed Stone Bank is not typical, Groot said.

“Banks that come out from an order or some sort of enforcement action, our experience is not that they immediately go out and get a state charter,” he said. “Ozark Heritage was an exception.”

And Dennis, an unapologetic fan of Franks and the Arkansas State Bank Department, agreed.

“There’s also a thing called Stockholm syndrome,” he joked. “I’ve seen a few cases of it across the country. I’ve heard directors say, ‘The OCC saved us.’ And in some cases they probably did.”

OCC-regulated Institutions in Arkansas

Ranked by assets (in millions) as of Sept. 30, 2015

^*Only remaining thrift chartered in Arkansas
^**Application for conversion to Arkansas state charter pending

Source: Federal Deposit Insurance Corp.

The economic recovery in central Arkansas accelerated in 2015, with job growth surpassing the national average since March, said Metroplan, the federally designated planning agency for Pulaski, Faulkner, Saline and Lonoke counties.

“By September of 2015, regional jobs had reached a new high of 353,100,” according to Metroplan’s report “Metro Trends: Economic Review and Outlook,” released last month. The report examines economic trends for the Little Rock-North Little Rock-Conway Metropolitan Statistical Area, with a focus on the future of work in central Arkansas.

Job growth last year was concentrated in the services: professional and business services, leisure and hospitality, and education and health, as the accompanying chart shows.

“The mining and construction sector (mainly construction) ranked second among regional job-gainers in the past year, showing strong gains after several years of losses during the 2009-2010 recession and the ensuing slow recovery,” the report says.

More information can be found at Metroplan.org.

As State President of U.S. Bank, Michael A. Shelley is responsible for commercial, consumer and trust banking throughout Arkansas. He has more than 30 years of experience as a commercial banking executive, corporate CFO and CPA.

Shelley earned a BBA in accounting at the University of North Texas and is a Certified Public Accountant. He is a member and director of Fifty for the Future, a trustee of Baptist Health, has served as president of the Baptist Health Foundation and now serves as a member of that foundation’s advisory board.

Shelley plays piano for relaxation, sings in the Immanuel Baptist Church Sanctuary Choir and with the River City Men’s Chorus and has performed with the music group Alabama and with Duke Ellington.

Arkansas has seemed to be an outpost of your company, yet U.S. Bank is the 11th largest by deposits of 129 banks doing business in the state. What has been your strategy for gaining market share?

With 42 branch locations and 43 ATMs in the state, Arkansas is an important market for U.S. Bank. We have gained market share in Arkansas through building skilled teams to provide first-rate customer service in consumer as well as commercial and commercial real estate banking. What we do really well in Arkansas is provide credit to consumers and businesses. In 2015, we provided over $315 million in new commercial, consumer and mortgage loans.

You’ll be retiring at the end of January. What are you proudest of achieving at U.S. Bank?

The team we have built. The bank gave me the entrepreneurial freedom to create and mold business units to meet the needs of our communities in Arkansas. You cannot find that sort of creative freedom at other large companies. The ability to identify, hire and mentor people and then to see them succeed and grow has been the best part of my leadership role.

How has technology changed banking during your career?

Technological changes in banking transformed the manner and speed of processing transactions and the manner in which we interact with customers. Many customer encounters are now electronic, and that requires robust systems and frequent technology updates.

You’ve been active in the community in central Arkansas. What will retirement look like for you?

It looks pretty busy. In planning for retirement, I moved off some boards and in most cases had some of my senior staff replace me. Baptist Health has always had a special place in my heart; I am moving to a more active role on that board in 2016. We love to ride bicycles, so you can look for me to be on the River Trail quite a bit. I also hope to spend more time at the piano and with my grandchildren.

Tell us about your performances with Duke Ellington and Alabama.

Duke Ellington and his band came to Dallas to perform his jazz mass in 1973. I was a college music student and was selected to sing the tenor solo in the performances. Duke told me I “had a lot of soul for a white boy,” the highest musical compliment I could have received.

In the 1990s I had the good fortune to serve as banker to the band Alabama, and we became friends with band members Randy Owen and Teddy Gentry. Teddy called me from a recording studio in Nashville and said they were looking at a new song, “Angels Among Us,” and Randy said he “could hear Michael” singing this with them. The song was a hit and is found on their “Cheap Seats” and “Greatest Hits III” albums.

I ended up singing three different background parts and my voice was doubled, so there are six of me on the song. My wife, Judy, and our youngest son, Aaron, also sing on the recording, and Aaron is in the music video as well. We performed the song live at June Jam in Fort Payne, Alabama, before about 50,000 fans.

Andrew McCormick has been promoted to bank junior examiner by the Arkansas State Bank Department.

McCormick is a commercial examiner assigned to one of two groups based in Little Rock. He was hired at the end of 2013, and had previously worked for River Town Bank in Dardanelle and for U.S. Bank and Arvest Bank in Little Rock.

See more of this week's Movers & Shakers, and submit your own announcement at ArkansasBusiness.com/Movers.

Blake Fletcher has been hired as senior lending officer for the new Little Rock loan production office of Stone Bank of Mountain View.

Fletcher is a Lonoke native and a graduate of theUniversity of Arkansas at Fayetteville.

Before joining Stone Bank (formerly Ozark Heritage Bank) in October, he spent almost six years with Arvest Bank.

See more of this week's Movers & Shakers, and submit your own announcement at ArkansasBusiness.com/Movers.

Derek Whitehead has been named account executive in the Conway office of Crews & Associates of Little Rock.

He has been an account executive in Crews’ Little Rock office for six years. He is a graduate of the University of Central Arkansas at Conway, and his wife, Amy Whitehead, directs UCA’s Center for Community & Economic Development.

See more of this week's Movers & Shakers, and submit your own announcement at ArkansasBusiness.com/Movers.

David McBee has been promoted to branch administrator at Arvest Bank in Yellville, and Keri Yarbrough has been promoted to private banking adviser at Arvest in Conway.

McBee, a native of Mountain Home who joined Arvest five years ago, previously worked for First Security Bank. He is enrolled in the Graduate School of Banking at Louisiana State University.

Yarbrough was a financial adviser with Morgan Keegan before joining Arvest Wealth Management in Little Rock in 2008. She is a native of El Dorado and a graduate of the University of Arkansas at Little Rock and is licensed to sell insurance and securities.

The sale of Twin Lakes Community Bank of Flippin (Marion County) marked the fourth Arkansas lender to change hands during 2015 for a book value multiple in the 1.34-1.45 range.

The $112 million-asset lender was purchased for $15.3 million cash by First National Bancorp Inc. of Green Forrest (Carroll County).

That price registered at about 1.42 times book.

Twin Lakes will operate alongside FNB’s $432 million-asset Anstaff Bank for a spell and will be merged at an undetermined time in the future.

The move expanded FNB’s four-county north Arkansas franchise into two new counties and pushed total assets beyond $500 million.

Twin Lakes broke the $100 million-asset threshold in early 2015, nine years after it opened for business back in February 2006.

During its nearly 10-year run, the bank lost about $987,000. Half of its fiscal years were profitable, though mostly marginal.

2011 was a year that saw the provision for loan losses at Twin Lakes climb and the red ink top $2.1 million.

A first-quarter loss of $119,000 became a $1.2 million loss in the second quarter, which was followed by a $500,000 loss in the third and a $300,000 loss in the fourth.

2015 was shaping up to be its strongest performance.

Through the first nine months of the year, Twin Lakes recorded net income of $941,000.

The bank built a 16.2 percent deposit-based market share in Marion County, second only to the 40.5 percent held by Arvest Bank of Fayetteville. Twin Lakes held nearly 5.8 percent of deposits in Baxter County, No. 6 among a field of 10 lenders.

The bank, the last lender based in Marion County, was established on the dormant charter of the Bank of Harrisburg (Poinsett County).

That charter became available courtesy of First National Corp. of Wynne, which bought the Bank of Harrisburg in a $14.9 million cash deal in 2005. The acquisition of the $68.3 million-asset lender represented a book value multiple of 2.3.

Twin Lakes Ownership

FNC, holding company of the $277 million-asset First National Bank of Wynne, owned the largest block of Twin Lakes Community Bank stock.

That 41.7 percent stake was worth more than $6.3 million in the First National Bancorp buyout.

Twin Lakes stockholders didn’t collect any dividends during the bank’s lifetime. Their payday came with the sale to FNB.

Sometimes held by a trust, limited partnership or individuals, seven of the largest shareholders in Twin Lakes are represented by:

• John Spence of Blakely, Georgia, 16,000 shares worth $521,300;
• Dane and Pamela Hudson of Flippin, 16,000 shares worth $521,300;
• Judy Loving of Yellville, chairman of Twin Lakes, 13,800 shares worth $449,600;
• Max Caldwell of Wynne, 12,592 shares worth $410,200;
• Jeff Gilbrech of Heber Springs, executive vice president and director at First National Bank of Wynne, 12,245 shares worth $398,900;
• Randy and Brenda Hopper of Flippin, 10,000 shares worth $325,800; and
• Fred Berry of Yellville, 10,000 shares worth $325,800.

Twin Lakes Community Bank, Flippin

Total Assets: $112.8 million      
Net Income: $941,000
Loans: $100.4 million
Full-Service Locations: 3 (Flippin, Mountain Home and Norfork)
Staff: 32

*In thousands. All information as of Sept. 30.

The sale of a North Little Rock eatery tipped the scales at $4.5 million.

Vera Cruz Properties Ltd. of San Marcos, California, bought the Chuy’s restaurant at 5105 Warden Road from NLR Palio Partners LLC, led by Clark Knippers.

The deal is financed with a 10-year loan of $2.07 million from First Internet Bank of Indiana in Indianapolis.

The 1.71-acre development previously was linked with a June 2014 mortgage of $2.83 million held by First State Bank of Russellville. NLR Palio Partners acquired the site 19 months ago for $1.14 million.

Ownership among the sellers was divided primarily between David and Holly Parker, 47 percent; and Richard and Nancy Parker, 47 percent.

The remaining 6 percent was split among the R. Bradley Parker Irrevocable Trust, 1.5 percent; Robert D. Parker Irrevocable Trust, 1.5 percent; Rachel Parker Harding Irrevocable Trust, 1 percent; Jessica Parker Casey Irrevocable Trust, 1 percent; and David Dallas Parker Irrevocable Trust, 1 percent.

Spirit Acquisition

A Sherwood car wash transaction weighed in at $2.5 million.

Spirit Master Funding X LLC, an affiliate of Store Capital of Scottsdale, Arizona, purchased the Boomerang Carwash at 7900 Hwy. 107.

The seller is Bailey’s Tunnel Wash LLC, led by John Bailey.

The 1.24-acre development previously was tied to a November 2012 mortgage of $14.1 million held by Arvest Bank of Fayetteville.

The property was bought more than three years ago for $2.4 million from 1908 Investments LLC, led by Mark McCaslin.

Multifamily I

Apartments in midtown Little Rock changed hands in a $1.74 million deal.

Alpha Holdings LLC, led by Howard Holmes and Rodney Turchi, acquired 27 units of the Lanai Apartments project at 5806-5808 B St. and 5815 C St. and eight units at 5718 B St. from the Jett & Georganne Ricks Family Corp.

The deal is funded with a five-year loan of $1.48 million from Bear State Bank of Little Rock. The property previously was linked with a July 2008 mortgage of $1 million held by Summit Bank of Arkadelphia.

The 0.96-acre property was assembled in four buys totaling $72,000. The sellers were Harry and Patricia Erwin and Fay and Gail Wardlaw, $11,000 in November 1976; Joseph and Ellen Kaufman, $10,000 in May 1978; Donald and Margaret Bratton, $13,000 in July 1978; and Jessie Siegman, $38,000 in September 1979.

Residential Acreage

A 39.8-acre residential tract near Roland drew a $1 million sale.

Boyd and Lynn Corley bought the land on the south side of Roland Cut-off Road from Waterview Meadows LLC, led by Bill Parkinson.

The deal is backed with a five-year loan of $776,000 from Little Rock’s Bank of the Ozarks. The land on the north side of the Waterview Meadows neighborhood originally helped secure a September 2007 mortgage of $3.4 million from Centennial Bank of Conway.

The property was acquired in September 2007 as part of a reported $7.86 million deal with Waterview Estates LLC, led by Rick and Randy Ferguson.

Multifamily II

Three apartment properties in Jacksonville combined for a $675,000 transaction.

KP Properties of Arkansas LLC, led by Paul Mead and Kel Benker, purchased the 46-unit Loop Road Apartments at 306 S. JP Wright Loop Road and the 14-unit South Park Apartments at 803 S. Redmond Road, a duplex at 801 S. Redmond Road and a vacant 0.88-acre parcel.

The seller is Martino & Carrasquillo Investments, led by Ronald Martino. The deal is financed with loans of $850,000 and $50,000 from Centennial Bank.

The property previously was linked with an August 2007 mortgage of $678,960 held by Imperial Capital Bank of Glendale, California, a September 2005 mortgage of $57,375 held by Eagle Bank & Trust of Little Rock and an August 2007 mortgage of $20,500 held by Arvest Bank.

Martino & Carrasquillo acquired the Loop Road project for $849,000 in August 2007 from Carl and Claudia Clem.

The other properties were bought for $380,000 in September 2005 from B2 Properties LLC, led by John Bingaman.

Retail Transaction

A 3,828-SF retail project in Maumelle rang up a $550,000 sale.

THM Properties LLC, led by Lynn Tiner, Matthew Hutsell and Jeremy McNabb, acquired the 127 Audubon Drive property, home to Little Caesar’s Pizza, H&R Block and The Mailroom. The seller is 4M Holdings LLC, led by Michael Fritz.

The deal is funded with a five-year loan of $440,000 from First Security Bank of Searcy. The 0.66-acre development previously was tied to a January 2014 mortgage of $207,000 held by Regions Bank of Birmingham, Alabama.

4M Holdings purchased the site for $182,000 in January 2002 from Phillips Development Corp., led by Elizabeth Small.

Surplus Sale

Five surplus school properties in North Little Rock were sold for a combined $475,000.

Terraforma LLC, led by David Bruning and Doug Meyer, bought the Argenta, Baring Cross, Lynch Drive and Rose City elementary schools for $300,000.

MVL-VLM Inc., led by Ben Engel, Juan Beltran and Cipriano Avila, purchased Redwood Preschool Center at 401 N. Redwood St. for $175,000.

The seller in both deals was the North Little Rock School District. The district acquired three locations in:

• March 1924, when the 7-acre Rose City site at 100 Earl St. was purchased for $4,000 from John and Hannah Atkins.
• May 1950, when the 3.99-acre Redwood site was acquired for $30,000 from Martha Shelby.
• August 1956, when the 15-acre Lynch Drive site at 5800 Alpha St. was acquired for $15,000 from Myrtle Bradburn.

The 1.6-acre Baring Cross site at 901 Parker St. was largely assembled in deals with Barney Smith in February 1910; Andrew and Fannie Amrhein in November 1936; Elizabeth Shoppard and Collie Runyan in April 1946; H.T. and Annabelle Lawrence in May 1946; and Mary Watson in June 1957.

The 1.03-acre Argenta site at 1300 Main St. was assembled in two deals totaling $23,800. The sellers were C.E. Moore, $1,800 in November 1901, and Ronald and Gail Oberlag, $22,000 in October 1989.

ABC Purchase

A commercial property in southwest Little Rock is under new ownership after a $150,000 deal.

ABC Auto Sales of LR LLC, led by Charles and Beatrice Ekworomadu, purchased the 9520 Interstate 30 project. The seller is the Dickerson Family Trust, led by Larry and Marita Dickerson.

The deal is backed with a three-year loan of $150,000 from Eagle Bank & Trust. The 0.92-acre development previously was linked with a March 2004 mortgage of $153,000 held by One Bank & Trust of Little Rock and a May 2005 mortgage of $200,000 held by Centennial Bank.

The property was bought for $180,000 nearly 12 years ago from Ron Pack Inc., led by Bob Fewell.

Seven-Digit Construction

Cafeteria Expansion    $6,146,000
Lakewood Middle School
2400 Lakeview Road, North Little Rock
Baldwin & Shell Construction Co., Little Rock

MRI Suite    $2,094,739
Arkansas Children’s Hospital
1 Children’s Way, Little Rock
Nabholz Construction Corp., Conway

Caterpillar Plant    $1,767,550
9201 Faulkner Lake Road, North Little Rock
Harold Hall Roofing Inc., Little Rock

Not long ago, crossing the $10 billion-asset threshold for a bank was merely a big round-number achievement. Now, however, banks surpassing $10 billion in assets face additional costs, fee restrictions and new layers of regulatory oversight.

The changes, wrought in response to the 2008 financial meltdown, flow from the Dodd-Frank Wall Street Reform & Consumer Protection Act of 2010 and its amendments.

The 2011 Durbin Amendment alone means a sizable revenue loss for $10 billion-plus banks. The amendment caps swipe fees — debit card interchange fees charged to merchants — at 21 cents plus 0.05 percent.

“That will be about a $5.35 million revenue loss to us each year,” said George Gleason, chairman and CEO of Bank of the Ozarks.

Bank of the Ozarks’ pending acquisitions of Community & Southern Bank of Atlanta and C1 Bank of St. Petersburg, Florida, will push the company from $9.3 billion to $15 billion in assets.

“Obviously, there’s some thought given to delaying when that occurs,” Gleason said of the milestone. “We’ve been planning for this for several years.”

Arvest Bank of Fayetteville, with $15.6 billion in assets, is the only Arkansas member among the 108 lenders in the $10 billion-plus club as of Sept. 30.

Centennial Bank of Conway at $8.5 billion and Simmons First National Bank of Pine Bluff at $7.5 million are themselves just an acquisition or two away from joining Arvest and Bank of the Ozarks in the $10 billion-plus realm.

Gleason views $10 billion as a milestone that should be traveled past in a hurry. “The regulatory responsibilities and obligations increase, and there are costs associated with that,” he said.

During the next three years, Gleason expects Bank of the Ozarks will incur $6 million in additional expenses to fulfill the heightened requirements of a $10 billion-asset lender: $3.7 million more this year, $1.7 million more in 2017 and $600,000 more in 2018.

“Those are relatively manageable numbers,” he said. “Our ability to absorb those costs is better than average.”

Most of the money will be spent to hire more people to beef up the bank’s regulatory compliance staff and to further develop and enhance the company’s models for capital and liquidity stress testing.

Bank of the Ozarks has already been doing stress testing in preparation for meeting the requirements of a $10 billion-plus financial institution. The tests are envisioned to measure the fiscal vitality of a bank encountering an economic downturn.

The Federal Reserve Bank and Federal Deposit Insurance Corp. give $10 billion-plus banks annual stress-test scenarios on Nov. 15. Banks are required to plug their numbers into the scenarios and report the outcomes to the regulators.

Newcomers start the official, regulatory-supervised testing the year after surpassing $10 billion in total assets.

“Increased regulatory scrutiny, increased stress testing and oversight by a new regulatory body [the Consumer Financial Protection Bureau] — the overall impact of that may sound more ominous than it really is,” Gleason said. “As a bank gets bigger, inherently it becomes necessary to do more comprehensive business continuity planning and risk management.

“The things that are required for banks over $10 billion are largely nothing more than what you would expect to encounter as a bank grows. It’s just a cost of doing business.”

The increased regulatory burden on banks as a whole has significantly changed the shape of the industry.

Gleason noted that 30 years ago, banks below $10 billion controlled 72.5 percent of assets. Today, the number is more than inverted to 18.6 percent. The ongoing evolution of banking is causing a divide between those who can’t or won’t roll with the changes and those who can and will.

“We’re looking at this very philosophically,” he said. “Regulatory requirements that exist today are actually encouraging consolidation. For those of us that are proven consolidators and acquirers, that is creating a tremendous amount of opportunity.

“The benefits to us exceed any additional costs we think we’ll occur. There’s a positive side to all of this, which we believe is a big positive for us.”

‘A Different Dynamic’

Arvest Bank was already north of $10 billion when that figure took on magnified relevance with the passage of Dodd-Frank. Arvest broke the $10 billion-asset threshold in the fourth quarter of 2008, ending the year at $10.2 billion.

The Arvest compliance staff numbered six or so in March 2013 when Cara James was hired as senior vice president and director of group compliance. The headcount is now 32 plus the support of a dedicated contractor.

“It’s a very different dynamic,” James said. “I’ve been in compliance for 23 years, and I’ve grown up with it. The new regs require a more robust and sophisticated compliance management system.

“The thing that impacts me nearly every day is the creation of the Consumer Financial Protection Bureau. The CFPB is the new sheriff in town.”

The bureau is charged with monitoring how banks deal with customers and is empowered to levy financial penalties for practices or acts deemed unfair, deceptive or abusive.

During 2014, the CFPB launched 50 enforcement actions and levied more than $2.5 billion in penalties and restitution for inappropriate billing, false product claims, hidden fees and the like.

“Consumer protection is so much more front-and-center than it has ever been,” James said. “Consumers have never been better protected and considered more than they have today.”

James works out of Arvest’s Tulsa office and makes an annual circuit of the 16 local advisory boards in Arvest’s four-state footprint to make reports and provide training. Monthly reports to the corporate board of directors are also part of her routine.

“The quantity and quality of assessment of work being done, the bar keeps getting raised,” she said. “I do have sympathy for those smaller banks that have a hard time competing for that talent. The pace of change is difficult.”

James noted that an industry shortage of experienced compliance personnel is causing a spike in salaries as banks compete for talent.

The ideal candidate is a detail-oriented person with a business or banking background capable of reading and interpreting regulations involving business practices. That person should also have an aptitude for communication and leadership and be able to relate technical information so that non-technical people can understand.

Statisticians and mathematicians are also in demand for the stress-test modeling required of $10 billion-asset lenders.

Centennial Bank, Simmons First and their parent companies, Home BancShares Inc. and Simmons First National Corp., are also gearing up for the transition.

Johnny Allison, chairman of Home BancShares, estimates that meeting the new requirements will add $12 million to $14 million in annual expenses.

“That’s taking money out of our shareholders’ pocket,” Allison said. “But it is what it is. A banker friend of mine who has been dealing with the changes told me it’s the biggest waste of time and money he’s seen yet. But we’re getting our arms around it.”

The Durbin Amendment, which caps swipe fees, was envisioned as a break for consumers if merchants pass the savings along. However, Allison and others are skeptical.

“Do you believe that’s going to happen?” he asked rhetorically. “The new regulator, the Consumer Financial Protection Bureau, that makes me nervous. But we all fear the unknown, and we’re plowing new ground.”

Allison believes that one way or another Centennial might breach the $10 billion mark by June 2017.

“By acquisition or organic growth, it’s inevitable we’ll pass $10 billion,” he said. “Would I like to do a trade to take me to $13 billion in advance of crossing over? That makes sense.”

Having as much money-making capacity as possible reduces the financial sting of the crossover costs.

“That’s why you hear a lot of people say, ‘We’re not going to step over it. We’re going to jump over it,’” said George Makris, chairman and CEO of Simmons First.

He said the revenue loss from the Durbin Amendment would cost Simmons between $4 million and $6 million based on today’s numbers.

Simmons is venturing into the world of stress-testing models and enhanced compliance mandates in advance of topping $10 billion.

“We spend a lot more time talking about ‘Are we prepared for the regulatory changes at $10 billion?’ than we do with our regular exams,” Makris said.

“We’ve already begun that process. We think we’re on top of that. If you wait, you’re behind the curve.”

Arkansas Banks Approaching & Beyond $10 Billion

*As of Sept. 30, 2015

	2010**	2011**	2012**	2013**	2014**
	$11,516,509	$12,527,568	$13,199,987	$14,081,085	$14,944,176
	$3,273,271	$3,841,651	$4,040,207	$4,791,170	$6,766,499
	$3,762,646	$3,604,117	$4,242,130	$6,811,861	$7,384,532
	$3,316,432	$3,320,129	$3,527,489	$4,383,100	$4,643,354

^**In thousands

The Little Rock Regional Chamber of Commerce announced Wednesday that Paul Latture will begin work immediately as vice president of economic development as well as executive director of the Metro Little Rock Alliance.

Latture has more than three decades of experience in economic development including 14 years as the executive director of the Port of Little Rock. Latture served as the chamber's executive vice president for economic development from 1993-1999.

Latture has also been president of chambers of commerce in Jackson, Mississippi; and Wichita Falls and Joplin, Missouri.

"This is a homecoming of sorts, to an organization that I both worked for and worked closely with for the past 30 years," Latture said in a news release. "It is highly respected in industry and economic development circles. I look forward to helping advance the job creation and business investment in central Arkansas."

Latture has been awarded the designations of certified chamber executive and certified economic developer.

"To find an individual as talented and as knowledgeable as Paul is exciting. To find one with this level of experience and level of comfort within our market is unbelievable," chamber President and CEO Hay Chesshir said. "This is a unique opportunity that doesn’t come around often."

Latture's position is part-time.

"Filling this position full time while the economic development lawsuit is ongoing is not an option," Chesshir said.

Economic development activities at the chamber have been largely on hold since a lawsuit last year questioned the constitutionality of city payments to chambers and related entities for economic development programs.

Home BancShares Inc. of Conway on Thursday announced fourth-quarter net income of $37.4 million, up 25 percent from the same quarter last year and its 19th straight quarter of record profit.

The publicly traded bank holding company (Nasdaq: HOMB), the parent company of Centennial Bank, said diluted earnings per share, excluding $2.9 million in merger expenses related to its acquisition of Florida Business BancGroup Inc., reached 56 cents.

The company also reported $232.3 million in organic loan growth during the quarter and a core efficiency ratio of 37.86 percent.

For the year, net income reached $138.2 million, up 22 percent from $113.1 million in 2014. Excluding merger expenses, diluted earnings per share for the year ended 2015 reached $2.06 per share.

"I am pleased to report the company’s outstanding quarterly and annual earnings and financial metrics," Chairman Johnny Allison said in a news release. "This past year, our team was diligent and motivated to reach and, in some cases, exceed our financial goals … We intend to keep up this momentum in 2016 by continuing to improve the company's earnings and financial metrics."

During the quarter, the company acquired six branches through the FBBI acquisition. It also plans to open a deposit-only branch in New York City during the first quarter of 2016. 

Home BancShares also closed one Arkansas location and three Florida locations during the quarter, and it aims to close two Arkansas locations and two Florida locations during the first quarter of 2016 as it seeks greater efficiency.

The company reported $17.3 million of non-interest income for the fourth quarter, compared to $10.2 million in 2014. Net interest income reached $100.1 million, compared to $83.4 million during the fourth quarter of 2014.

As of the end of 2015, Home BancShares had total assets of $9.29 billion, up from $7.4 billion at Dec. 31, 2014. The company is one of three Arkansas banks quickly closing in on $10 billion in assets — a key milestone for banks and how they are regulated.

Simmons First National Corp. of Pine Bluff on Thursday reported fourth-quarter net income of $23.9 million, up 90 percent from $12.6 million it reported in the same quarter last year.

Diluted earnings per share rose to 78 cents from 72 cents in the same quarter last year.

For the year, the company reported net income of $74.1 million, up 107 percent from $35.7 million. Diluted earnings per share rose to $2.63 from $2.11 in the previous year.

"We are very proud of our team for achieving record operating results in 2015," George Makris, chairman and CEO, said in a news release. "The hard work by all of our associates, especially those new to Simmons, has established a firm base on which to build. We look forward to continued momentum into 2016."

In a news release, the company reported fourth-quarter "core earnings" of $25.9 million, a record, and up nearly 128 percent from the same quarter last year. Diluted core earnings per share rose to 86 cents, up 34 percent from the same quarter last year.

For the year, core earnings were $89.6 million, up 131 percent from 2014. Diluted core earnings per share were $3.18, up 39 percent from 2014.

Net interest income for the fourth quarter rose 56 percent to $73.8 million. The company attributed the increase to growth in its legacy loan portfolio and earning assets acquired through its acquisitions of Community First and Liberty Bank.

Non-interest income for the quarter was $28.9 million, up $7.4 million from the fourth quarter of 2014. 

At the end of the year, Simmons First reported total assets of $7.5 billion, up from $4.6 billion at the end of 2014.

Later this week, Dennis Smiley is scheduled to be sentenced for bank fraud. If you want to know how a market-level bank president ended up owing $6 million to every other bank in northwest Arkansas, see our Whisper, As Sentencing Approaches, Dennis Smiley Attorney Says Banks Share Responsibility. The details are unique, but the plotline is as old as boy-meets-girl: Upstanding member of society gets in a financial pinch and uses his position to access someone else’s money, always with the intention of repaying it before any harm is done.

Smiley is almost a caricature. How could any intelligent, well-educated person — a banker, no less — mistake debt for wealth? How could he have overspent more than the vast majority of Americans, even well-paid ones, will earn in a lifetime of honest work?

Few people are in Smiley’s professional position, so few get the benefit of every doubt that his fellow bankers gave him when he schmoozed his way into another $100,000 or $200,000 of debt. But there is one part of Smiley’s story that feels very common and increasingly so: He started his adult life in debt.

“He would tell you that obtaining credit and living beyond his means has been a problem since he first got married and was in (college) on a part-time income,” Smiley’s attorney wrote in an appeal for leniency. “Even at that early stage, he began accumulating credit card debt and loans.”

It’s not clear that any of Smiley’s early debt was student loans, but most new college graduates arrive in the workplace with significant debt. According to the Institute for College Access & Success, seven in 10 graduates in the class of 2014 nationally and 55 percent in Arkansas had college debt averaging more than $25,000. Many, of course, owe much more.

Obviously we’re not arguing that early debt caused Smiley’s crimes or that everyone who starts his career with debt will end up in federal prison, as Smiley surely will. But the normalization of constant and eternal debt does give one pause.

Did you know a $3 million judgment in Oklahoma City recently followed Phil Herrington back to Little Rock?

The judgment was registered in Pulaski County Circuit Court against Herrington along with his Herrington Inc. and Gaillardia Development Co. LLC.

The judgment represents the outstanding balance on a $4 million loan from First Commercial Bank of Edmond, Oklahoma.

The 2012 loan was supposed to finance a 5.17-acre upscale residential development at the Gaillardia Golf & Country Club in Oklahoma City.

However, that nine-lot project called Cottages of Gaillardia never happened. The property wasn’t zoned properly, and the Gaillardia members strongly opposed the project.

Most of the FCB loan was used to repay a $3 million loan from Little Rock’s One Bank & Trust.

In its initial complaint, First Commercial alleged fraud against Herrington and Michael Heald, former senior EVP and COO at One Bank who became chief operating officer for Herrington.

The fraud allegations eventually fell by the wayside along with Heald’s listing as a defendant.

First Commercial landed a $3.7 million judgment against Herrington in June. The bank recovered the undeveloped land on the west side of the palatial 55,000-SF Gaillardia clubhouse at a $770,250 foreclosure sale in September.

The bank assigned the judgment against Herrington et al in October to Timberdell Road Group LLC.

The venture, representing a group of Oklahoma City investors, is scouring the land for Herrington assets to claim against the remaining $3 million judgment.

Liquidating Assets

In November, Phil and Annette Herrington sold their 6,151-SF home near the Pleasant Valley Country Club in west Little Rock for $1.3 million.

That was preceded by an Oct. 18-20 sale of art and antiques at their home.

The sales were held weeks ahead of Timberdell launching its search for Herrington assets in Pulaski County.

Two years ago, we told you about Herrington’s troubled ownership of Gaillardia, with its 275-acre golfing spread and 7,240-yard championship course. Herrington was ousted from operational control of the northwest Oklahoma City club amid accusations of mismanagement and later from ownership of Gaillardia.

You might recall that Herrington bought the club in December 2002 as part of a $9.1 million deal with OPUBCO Development Co., led by Christine Gaylord Everest.

In 2006, the last time Arkansas Business published a list of the largest shopping centers in the state, University Mall in Little Rock was still open and Pinnacle Hills Promenade in Rogers was the big new thing.

Pinnacle Hills is still the biggest thing — the largest shopping complex in the state at 1.1 million SF — but University Mall is long gone, replaced by Midtowne Little Rock. The 130,000-SF Midtowne just missed making the top 25 included in this week’s newly researched list.

More: Get the full list here.

The ensuing years brought developments that are now well-established, like The Promenade at Chenal, which opened in 2008 and ranks 11th on the list, and No. 16 Fort Smith Pavilion, which opened the same year.

Old-fashioned malls still show up prominently on the list — Nos. 2 through 6, plus No. 8 — but only No. 5 The Mall at Turtle Creek in Jonesboro was built in this millennium. Park Plaza dates to 1959, although it has been repeatedly renovated, most recently in 2007.

Instead, shopping centers connected by sidewalks and parking instead of concourses are standard. Lakewood Village in North Little Rock, still No. 9 on the list, pioneered the concept in 1985, when enclosed malls were still the rage.

One constant over the years is Dillard’s Inc., the publicly traded retailer based in Little Rock. Its department stores continue to anchor seven of the top eight developments.

The largest center without a Dillard’s store is the newest on the list: Gateway Town Center. Its anchor, the long-awaited Bass Pro Shops, opened just in time for Christmas 2014, and its 325,000-SF Outlets of Little Rock component opened to great fanfare in October. At the time, Michael Barelli, the vice president of New England Development of Newton, Massachusetts, projected that the 75 stores ultimately planned for the Outlets would employ 800 to 1,000 people year-round and generate $100 million in annual revenue.

One of the historic treasures of early 20th century major league baseball is headed toward the auction block, but conflicting claims on the famed Conlon Collection still await courtroom resolution.

Pulaski County Judge Chris Piazza green-lighted the future sale during a hearing Wednesday regarding the receivership of the collection’s former owner: John Rogers.

The hearing also served as an early skirmish among 10 parties with claims to partial ownership or secured interests in the Conlon Collection. The tangled claims are a microcosm of the chaotic business affairs of Rogers and his insolvent sports memorabilia and photo archives ventures.

Documents associated with the varied claims indicate that Rogers overpledged the Conlon Collection to secure debts and parceled ownership stakes to gain funds and placate creditors.

Viewed in its most sinister light, the sports memorabilia and photo archives dealer committed fraud along the way.

Rogers, an alleged serial fraudster accused of dealing in counterfeit memorabilia, remains under criminal investigation in the wake of an FBI raid on his North Little Rock business and home on Jan. 28, 2014.

Allegations of loan fraud are leveled against Rogers by the Bank of Little Rock and First Arkansas Bank & Trust of Jacksonville, which holds a judgment of more than $15 million against him and his business ventures.

First Arkansas is among the interested parties with a security interest claim on the Conlon Collection. Others include Mac Hogan, an Arkansas businessman and investor with Rogers, and George Demos, a Chicago-area businessman and avid collector of baseball memorabilia, both alleged fraud victims of Rogers.

Among those with a partial ownership claim on the Conlon Collection is Mark Roberts of San Francisco, a sports memorabilia collector who was the first to sue Rogers for fraud nearly two years ago. Roberts paid Rogers $1.1 million for an undivided 25 percent interest in the collection back in October 2010.

Arthur and Paul Jaffe of North Bergen, New Jersey, who also did business with Rogers, have claimed an unspecified ownership stake in the Conlon Collection.

The only parties to oppose the proposed sale of the collection are a group of Illinois residents with varied ownership claims totaling about 56 percent: Doug Allen, his wife Amy, Dale Huizena, Mark Theotikos and Bill Fulton.

All five are associated with Legendary Auctions of Lansing, Illinois. Doug Allen helped Rogers finance the Conlon Collection acquisition, and Rogers reportedly held an ownership stake in Legendary Auctions, which specialized in the sale of collectibles.

However, sources report that it was his ex-wife, Angelica Rogers, who owned a 22 percent piece of Legendary Auctions through her Angel Moon LLC.

The Allen group had physical possession of 185 Conlon plates bearing the images of some of the biggest names in pre-World War II baseball. Those negatives were returned to Arkansas late last year, although the Allen group maintained an ownership claim of those specific 185 plates, touted as the most valuable pieces.

Judge Piazza ordered efforts to sell the entire collection to move forward despite opposition by the Allen group. He said the particulars of who is entitled to receive what portion from the Conlon Collection sale can be addressed in the future.

Any money resulting from a sale will be put in the court registry for disbursement.

“We need to have some closure and try to salvage something for the people who have a claim on the collection,” Piazza said.

Question Marks

The Allen group’s claims to the Conlon Collection are connected with a series of documents detailing transactions with Rogers. Questions concerning that paperwork and other competing claims will be set for future argument before Piazza.

Other questions surrounding the collection may not receive answers.

The initial inventory of the Conlon Collection tallied 8,354 glass-plate negatives in 77 archival boxes when Rogers bought it in June 2010.

Four years later, the discovery was made that more than 500 plates were lost, stolen or sold.

“The how, why and when of that, who knows?” said Michael McAfee, court-appointed re-ceiver of the Rogers assets. “But we do know what’s missing, and they’re not all A-listers.”

The missing negatives of famous and less well-known baseball players from the original census of Conlon glass plates wasn’t uncovered until Rogers was removed from the operational picture of Sports Cards Plus and its affiliated ventures.

Mac Hogan, a big investor in the ventures, took the helm after Rogers was ousted in the weeks following the 2014 FBI raid.

At the direction of Hogan, the Conlon Collection was retrieved from Rogers and brought for safekeeping to a company-controlled warehouse. The boxes of glass-plate negatives had been kept in the basement at the grand 12,400-SF house that Rogers had built and his family had called home since 2010.

In a Sept. 14, 2015, affidavit, McAfee said the entire collection should have a value of $1.2 million to $3 million based on information from potential buyers and auction houses specializing in sports memorabilia.

Less than three months after Rogers entered the ownership picture, the Conlon Collection bore an amazing resale valuation of more than $8.4 million.

The number was courtesy of a marketing valuation report dated Sept. 15, 2010, commissioned by Rogers and made by Frank Ceresi of FC Associates of Arlington, Virginia.

The valuation made the $1 million acquisition by Rogers look brilliant, and he received more for the money than just the Conlon Collection, too.

Additional archived materials included The Sporting News Original Prints Library, an estimated 400,000 photos stored in 112 file cabinet drawers and 84 bankers’ boxes. The prints contained images from baseball, football, basketball, hockey and other sports.

Completing the roster of items purchased was an un-specified number of small archival boxes marked “Conlon original prints” and photo folders containing an estimated 18,000 miscellaneous sports negatives.

In return for all of the photos and negatives, The Sporting News also received a digitized copy of everything along with metadata.

The photo archive acquisition and digital library services agreement was made between Legends in Time LLC, doing business as Rogers Photo Archive of North Little Rock, and American City Business Journals Inc., publisher of The Sporting News in Charlotte, North Carolina.

The 14-page agreement contained a buy-back provision: “If at any time Rogers elects to directly sell the Conlon Glass Negatives, The Sporting News will be notified of such sale and have the right to match the best offer. If at any time Rogers elects to auction the Conlon Glass Negatives, The Sporting News can publicly bid on the collection, however, no matching right will be given.”

Rogers in Receivership, 2015*

*Represents the operations and assets of Sports Cards Plus Inc., Planet Giant LLC, Digital Stock Planet LLC and Photo Archive Partners along with the sports and celebrity memorabilia and collectibles of John Rogers and his ex-wife, Angelica Rogers, overseen by the court-appointed receiver, Michael McAfee.

Source: Pulaski County Circuit Court

(This article has been edited for clarity. See end for details.)

H. Dennis Smiley Jr., the former president of Arvest Bank’s Benton County market, expects to go to federal prison after he is sentenced Thursday for bank fraud.

All he and his defense attorney, W.H. Taylor of Fayetteville, have asked for in a sentencing memorandum is a shorter prison sentence — say, two years rather than five or more, as contemplated by federal sentencing guidelines — followed by a longer term of supervised release.

“Dennis Smiley is fifty-two years old and has about a twenty-five-year work life left,” Taylor wrote. “If he is not incarcerated for a long period of time, he should be able to pay a substantial amount of restitution over his work life. In fact, he may be able to pay the majority of the restitution owed.”

He apparently expects to be a high-income ex-con. When Smiley pleaded guilty in August to a single count of bank fraud, he agreed that he defrauded 23 banks out of $5.3 million ($6.3 million including accrued interest) through a combination of forged signatures and fraudulent collateral.

In seeking a lenient sentence, Smiley and his lawyer present a two-pronged argument:

1. Smiley is a good guy who simply could not control his lavish household spending, and
2. His victims should have known better.

The federal prosecutor doesn't see it quite that way. Instead, Acting U.S. Attorney Kenneth Elser of Fort Smith encouraged U.S. District Judge P.K. Holmes III to hold Smiley accountable for using a sophisticated scheme and for abusing a position of trust, both of which call for a longer sentence under the guidelines.

The Shakes

As Arkansas Business was the first to report in April 2014, Smiley amassed millions in debt spread across virtually every bank operating in northwest Arkansas by repeatedly pledging the $500,000 worth of phantom stock contained in his Arvest retirement account, assets that couldn’t legally be pledged at all.

Smiley had suddenly resigned from Arvest a couple of weeks earlier, after a check for payment on one of the many loans bounced, triggering a collapse of his scheme.

While Smiley’s fraud was believed to have started about 2009, Taylor’s sentencing memorandum said that Smiley’s debt problems date back 30 years.

“He would tell you,” Taylor wrote, “that obtaining credit and living beyond his means has been a problem since he first got married and was in school on a part-time income.”

Smiley lived beyond his means his entire adult life, even as those means became more and more substantial.

“He went on trips that he could not afford, bought his kids cars that he could not afford, and paid his children’s college and living expenses, which he could not afford. Smiley simply lived above his means in all aspects of his life. Despite his increasing debt, he always thought, almost until the end, that he would be able to pay it back.”

Taylor emphasized that Smiley had served on numerous boards of directors, often with access to their bank accounts, yet never stole or “even had a temptation to do so.”

Instead, he borrowed and borrowed and borrowed, which required fraudulent means as banks tightened their lending standards after the financial crisis of 2008.

He ultimately ensnared three co-workers, Jeb Mills, Chad Evans and Uva Phillips, in his fraud by having them sign paperwork that he used to obtain loans from other banks. This, his lawyer wrote, was “unforgivable.”

“He asked them to sign it and they did it because he asked them, not because they were going to realize anything from their actions.”

(Mills was moved from Arvest Asset Management to a job with Arvest Bank and was fined $15,000 by FINRA for signing documents for Smiley.)

Even when Smiley realized that he could never dig out of the hole, “his pride, greed and fear of failure got the best of him,” Taylor continued, describing Smiley’s state of mind as “hopeless,” “completely delusional” and “total denial.”

Smiley never told his family the truth. Twice in the memorandum Taylor describes Smiley waking up shaking each morning.

In 2011, he didn’t seek the Benton County presidency until Arvest CEO Kevin Sabin personally asked him to apply because he was afraid his debts would be discovered during the hiring process.

They weren’t, Smiley got the job, and his problem got worse.

“As a bank president, by design, he ran with a more affluent crowd, which increased the pressure on him to spend and do more. Over time, Smiley found himself unable to say no when it came to money. He could not say no to himself, his family, or to his friends.”

Not ‘Vulnerable Victims’

Arvest was not alone in placing unwarranted faith in Smiley. In his memorandum in support of a lenient sentence, Taylor suggests that the victim banks share some of the responsibility for facilitating Smiley’s fraud.

“The circumstances of the crime are somewhat curious as the offense would have never taken place if the victim banks had exercised basic due diligence in these transactions,” Taylor wrote.

The lenders “relied solely on Smiley” and didn’t communicate with his father, H. Dennis Smiley Sr. of De Queen, and his wife, interior decorator Cynthia Smiley, even when they supposedly co-signed for loans. Those signatures were forgeries.

Standard credit checks “were clearly ignored by all of the banks,” Taylor wrote. If they had checked, they would have found that Smiley’s credit card debt exceeded $100,000 and his credit score was below 700.

Furthermore, eight of the banks employed former Arvest officers, who “should have known that stock pledges from the Arvest Employee Stock Purchase Plan were prohibited.”

Elser, the prosecutor, countered that Smiley took advantage of his position and of other bankers.

“Smiley, with his extensive knowledge of [the] banking business, correctly calculated that the loans would much more likely be approved and would receive far less scrutiny if each bank believed that its loans were, in large part or wholly, collateralized with Arvest stock.”

(Clarification, Jan. 26, 2016: Jeb Mills, who facilitated some of Smiley's borrowing, was moved from Arvest Asset Management in April 2014, shortly after Smiley's fraud was discovered, to a business development role with Arvest Bank. The original article did not make his employment status clear.)

Every year, 25 to 30 aspiring singers participate in local auditions for the New York Metropolitan Opera. The judges are deeply experienced opera professionals who are credentialed by the Met to judge in these kinds of events around the country. The auditions are remarkable for many reasons, and it has been my privilege to play a very small part in the planning and staging over the last few years.

After the awards are announced and the singers feted, the judges make themselves available to provide feedback to each of the singers. This year, I helped time feedback sessions and manage the lines. So I was able to eavesdrop on many of the conversations as the judges gave young aspiring singers feedback. Most of the conversations were great examples of powerful feedback, delivered with skill and impact.

“Here is what I wrote down …” Since the judges had their notes with them, they were able to share very specific observations about what they heard, saw and thought. This was not the New Age “give them three positives for each constructive feedback.” The judges were very clear about what worked and what did not.

Because each of the judges has his or her own perspective, the feedback for each singer was different. But in all cases, they were clear, direct and fearless in owning their own knowledge of the art and their authority as a judge. No one was vicious or cruel — but there was no sugarcoating.

“What I think you should do is …” Each of the judges had clear recommendations, based on their notes and their conversation with the singer. Teachers, exercises, repertoire changes, physical presence, pacing and a dozen other areas were in bounds for suggestions. In many cases, they could coach directly through an exercise that would demonstrate the impact of what they had suggested. So along with the observations went ideas for making changes to improve.

“I want to encourage you to …” While there were no false compliments (usually a tool to make the feedback provider more comfortable anyway), much of the feedback focused on doing more of what worked. Encouragement about what was possible and letting go of limiting beliefs and habits was common in these sessions. Despite getting very challenging feedback about what was not working, the singers got solid encouragement about improving.

Not everyone in the group has a future on the Met stage. Only three were sent on to the next level of auditions. Yet I never heard anything approaching “Don’t give up your day job, kid.” To be fair, it would be rare to have a singer in the competition who did not have potential, but my sense was that any of these judges could provide tough love if they had to.

“Please let me know how it is going …” This part of the conversation varied. If a singer engaged well and responded to the judge, it was not at all uncommon to hear some added encouragement and accountability. “I want to hear you sing again in the next year” or “Please try that for six months and let me know what differences you see” were heartfelt and generous offers in this environment. The judges have no obligation to follow up or ever connect with the singers again, except for their desire to mine young talent for the sake of the art. This kind of offer is not just encouragement, but a subtle form of creating accountability. To a young singer, aspiring to a big stage, being on the radar screen with someone who is both knowledgeable and powerful in the community creates a huge motivation to improve — as well as a belief that he or she can.

Skilled and purposeful feedback is the foundation of growth and purposeful change. Giving feedback in clear and actionable style is the responsibility and obligation of leaders. The model above is a great way to begin building a feedback structure no matter the size of the organization you lead.

I. Barry Goldberg is an executive coach and Vistage chair. He holds an advanced certificate in leadership coaching from Georgetown University, where he is now on the faculty. You can reach him at Barry.Goldberg@EntelechyPartners.com.