Heartland Bank of Bryant and its parent company, Rock Bancshares Inc., have started 2016 amid changes in management, board membership and more.

Attention has turned from delivering dividends to building capital as nonaccrual loans mushroomed from $3.6 million in the first quarter of 2015 to more than $34 million at year-end.

Heartland recorded a nearly $4.7 million loss in the fourth quarter. Turmoil in the energy sector and issues with a couple of local borrowers are bruising the bank’s loan portfolio, according to Richard O’Brien, chairman, president and CEO of Heartland Bank.

Walter Quinn, a leading shareholder at the $241 million-asset bank, stepped down as chairman, president and CEO of Rock Bancshares as well as director at Heartland.

O’Brien took over Quinn’s roles at the holding company on an interim basis.

“He’s taken an indefinite leave of absence to focus on some of his personal business issues,” O’Brien said. “We fully expect him to be back.”

Quinn was unable to work out a settlement to satisfy delinquent debts associated with soured oil patch investments. That impasse resulted in Prosperity Bank of El Campo, Texas, filing a $4.9 million consent judgment against Quinn.

Also named in the Nov. 13 judgment are Quinn Investments Ltd., Quinn Management Co., RX Finance LLC, Rock Exploration LLC, Rock Oil & Gas LLC, QF Holdings LLC, The Quinn Living Trust and the Walter Quinn Irrevocable Family Heritage Trust.

Preceding Quinn’s hiatus was the exodus of three directors last year.

Dr. Mark van Overbeek resigned on June 12 as chairman of Heartland Bank and as a Rock Bancshares director.

Overbeek, of Incline Village, Nevada, held a 17.3 percent stake in Rock Bancshares that was second only to Quinn’s 52.3 percent.

Mark Brockinton, managing director of Aon Risk Solutions Transportation & Logistics Practice in Little Rock, resigned as a director at Heartland and the holding company on Sept. 29. Steve Didion, a California investment banker, followed suit on Dec. 31.

New directors at both the bank and the holding company are Judy Lawton, CFO and chief operating officer at Heartland; and Matt Keil, partner at the Texarkana law firm of Keil & Goodson.

O’Brien said that except for Quinn, the other changes had been planned for more than a year. Accompanying the change of directors was a suspension of dividends as Heartland braces for loan problems.

“There will be no shareholder dividend for the quarter ending Dec. 31, 2015, and I feel it unrealistic to expect any shareholder dividends over the next couple of quarters,” O’Brien told shareholders in a letter last month. “For a company that has prided itself on never having missed a quarterly dividend, that is a bitter pill to swallow.”

Never is a mighty long time.

According to regulatory filings, Heartland had an impressive 38-quarter run of delivering dividends totaling more than $33.2 million.

Heartland Bank by The Numbers

* In thousands

Last month, Arkansas Business Senior Editor George Waldon's excellent cover story highlighted the considerable burdens imposed on banks that exceed the 2010 Dodd-Frank Act's $10 billion asset threshold. 

But smaller banks across the country can attest that in today's environment such challenges are not confined to midsize and large financial institutions. For the past several years, headwinds facing community banks have driven record levels of bank consolidation.

Since 2013, more than 700 U.S. banks have merged with or been acquired by another institution. During the same span, the number of FDIC-insured banks has declined from 7,083 to 6,270, with Arkansas experiencing a drop from 120 to 106 such banks. 

This consolidation has been heavily weighted toward smaller community banks, with more than 90 percent of acquired banks holding less than $1 billion in assets. The trend doesn't appear to be slowing — analysts expect banking to remain an active deal sector in 2016 as community banks become even more attractive to their larger counterparts, and this week the CEO of the Consumer Bankers Association predicted that one in six banks nationwide will ultimately be forced to merge. 

Each of these acquisitions requires not only a buyer in search of growth opportunities, but a determination by the target that the time is right to sell. Why are community banks increasingly deciding that now is the time?

The Sale

The most commonly-cited cause of community bank struggles is Dodd-Frank, which marked its five-year anniversary last summer. Without delving into the merits of the law, it's certainly true that legislation intended to address the perceived excesses of the country’s largest financial players has instead disproportionately raised compliance costs for the smallest ones. 

According to recent interviews with community banks and credit unions conducted by the Government Accountability Office, Dodd-Frank has caused increases in staff, training and time allocated to regulatory compliance, additional updates to compliance systems, and even a decline in newly-regulated business activities such as non-qualified mortgage loans. Small banks generally lack the size and scale of larger entities to absorb these costs, causing some to pursue acquisitions as the best means of improving operational efficiencies and spreading the burdens across a broader revenue base.

A closer look, though, suggests that attributing all small bank struggles to Dodd-Frank may be more convenient than accurate. After all, the number of banks in the U.S. steadily decreased during the two decades immediately preceding the law’s passage, suggesting that other systemic factors are at play. 

At a fundamental level, it's become progressively difficult for banks under $1 billion in assets to stay competitive through organic growth alone.

Geographic and product deregulation, federal preemption and technological advances have allowed national and commercial banks to compete more directly in local communities, whittling away at community bank profits. Following the financial crisis, historically low interest rates have put pressure on bank margins. Disruptions in financial technology like marketplace lending, automated wealth management and e-payment platforms threaten to erode traditional banks’ historical share of these profitable products, and imbalanced loan portfolios can expose non-diversified lenders to industry-specific losses like those currently threatening energy-related assets.

Some management teams have taken a clear-eyed look at their future prospects as an independent entity in light of these factors and concluded that it’s time to pursue an exit strategy.

In addition to these competitive challenges, potential sellers are concluding that now is a good time to put themselves on the market. 

The above-discussed impact of size and scale on bank profitability is leading a host of midsize and regional institutions to explore growth through acquisition, giving sellers leverage to negotiate acceptable terms. Valuation multiples remain attractive and have been trending slightly upward despite interest rate uncertainty and market turmoil, with an average of 1.5x in 2015 and 1.3x in 2014. And more recently, with the Federal Reserve chilling large bank deal activity, activist investors have begun taking positions in underperforming community banks and pushing for a sale. 

Taken together, these dynamics make it difficult for bank leadership to exercise patience at the risk of being left behind and missing out on a desirable sale. 

The Cost

To be clear, the decline in community banks comes at a cost. These banks account for the largest share of small business and agricultural loans, a vital role in the health of the U.S. economy. Moreover, they hold particular importance in rural states like Arkansas where, as State Bank Commissioner Candace Franks has noted, local banks are often the primary or sole source of available lending. 

For this reason, as local banks continue to sell and the overall number of community banks remains in decline short-term, many maintain hope that through careful and innovative planning, cross-selling and customer integration, and a renewed focus on relationships, the community bank business model will evolve in ways that enable it to survive in an era of consolidation.  

Aaron Brooks is an attorney with Wright Lindsey & Jennings LLP, focusing primarily on mergers and acquisitions, corporate finance, securities compliance and general corporate matters. Email him at abrooks@wlj.com.

Arvest Bank announced Friday that William "Will" Fisher has been hired as a senior vice president in the bank's commercial banking division in Morrilton.

Before joining Arvest, Fisher was a location compliance inspector at Southwestern Energy. Before that, he spent 10 years at Petit Jean State Bank where he was a vice president and loan officer.

"Will is going to be a great asset for our customers in Morrilton and the community as a whole," Pat Murphy, community bank president for Arvest Bank in Conway and Morrilton, said in a news release. "He brings a great deal of experience to this position and is focused on supporting and growing this community. We are excited to have someone with Will’s experience join the Arvest team."

Fisher is a Wynne native who earned a bachelor of dcience in engineering from Arkansas Tech University in Russellville and has lived and worked in the Morrilton area most of his professional career.

Kathy Deck, director of the Center for Business & Economic Research at the Walton College of Business at the University of Arkansas at Fayetteville, has been named to the Real Estate Industry Council of the Federal Reserve Bank of St. Louis.

The Real Estate Industry Council is one of four industry councils created in 2006 to provide the Fed with feedback regarding economic conditions within the 8th District.

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

Alleged serial fraudsters trying to gain favor as FBI informants don’t make for reliable confidants.

That maxim was driven home earlier this month when Doug Allen received a stiffer sentence because of a March 2014 conversation with John Rogers, who was wearing a wire.

The recording captures Rogers baiting the former big-time auctioneer into talking about things that cost him dearly in U.S. District Court in Chicago.

Allen talked about how his negotiated guilty plea to one count of mail fraud would be severely screwed if the FBI knew he had tipped off Rogers in the past. He was right.

Previous friendly advance warnings to Rogers about wearing a wire and the raid two months earlier on his North Little Rock business and home didn’t play well with the feds.

“He made a fatal error in judgment that he deeply regrets and for which he apologized in person to the government,” Valarie Hays, Allen’s lawyer, told the court.

She added that due to the guilt Allen “felt for wiring up on a friend who was being investigated by the government, he told the friend about certain topics the government was investigating and that he was wearing a recording device. After government counsel learned about his disclosures, [Allen] justifiably lost his anticipated 50 percent off cooperation deal, and his conduct will undoubtedly increase his sentence.”

Allen was sentenced to 57 months in prison on Feb. 8 in part for obstructing a criminal investigation of Rogers. Allen’s attorney requested 18 months, a sentence slightly less than William Mastro, who allegedly orchestrated the crimes that Allen participated in during his 2001-09 tenure at Mastro Auctions.

Allen was originally indicted in July 2012 on 14 counts of mail and wire fraud connected with shill bidding and memorabilia fraud, along with three other Mastro staffers.

Some familiar names surfaced in court filings regarding the shill bidding scheme at Mastro.

Keith Olbermann, former ESPN sportscaster turned political commenter, and New York Yankees owner Hal Steinbrenner were listed among those who paid higher prices for auctioned sports memor-abilia items because of the scheme. The same goes for Mark Roberts, a San Franciso collector and the first person to sue John Rogers for fraud.

Allen was a partner with Rogers in Legendary Auctions, formed after Mastro Auctions closed in 2009 under the cloud of the FBI investigation.

He joins a line of former business associates, investors and creditors with grievances about misplaced trust in Rogers and financial claims topping $48 million.

The roster of plaintiffs suing Rogers stretches beyond Arkansas west to Texas, Colorado, Utah, California, New Zealand and Australia while extending north and east to Minnesota, Wisconsin, Illinois, New Jersey, New York, Massachusetts and Connecticut.

While the criminal investigation of Rogers proceeds, his creditors continue to sort through the corporate chaos left in his wake.

First Arkansas Bank & Trust of Jacksonville has staked a priority claim to what’s left of eight photo collections and six publication photo archives. The assets represent about 8 million scans and 4 million prints, according to Michael McAfee, court-appointed receiver of the Rogers assets.

Sources indicate the most valuable pieces and, in some cases, large chunks of an archive or collection were sold by Rogers years ago.

Details are available on the acquisition of some of the collections and archives. The price tags often don’t match what Rogers publicly claimed to have paid or what he told privately told investors.

In a May 2010 interview with Arkansas Business, Rogers said he looked at the Boston Herald archive but declined to pursue a deal because the archive was rather picked over.

A year later in an interview with the Arkansas Democrat-Gazette, Rogers announced he had purchased the Boston Herald photo archives. He claimed to have paid a whopping price for it: Between $4 million and $5 million.

The actual price has yet to surface. But other photo assets sought by First Arkansas have:

• Sport magazine, purchased in spring 2009 for $600,000;
• Chicago Sun-Times, bought in November 2009 for $900,000;
• Sporting News, acquired in July 2010 as part of a $1 million deal that included other photo assets;
• St. Petersburg Times, purchased in spring 2011 for $300,000;
• Boston Herald, bought in April 2011; and
• Seattle Times, acquired in June 2011 for $150,000.

Eight collections sought by First Arkansas include the:

• Barney Stein Collection;
• Don Wingfield Collection;
• Penske (Nascar), purchased in April 2010 for $35,000;
• A collection referred to only as “Spring Training”;
• NFL original negatives;
• Dixie Knight negative collection;
• George Michael Sports Machine Library; and
• Keystone Press Collection, 300,000 photos bought in October 2011 along with 1.2 million negatives from the Oakland Tribune in a deal with Zuma Press. No money changed hands. Zuma received a digitized photo library, and Rogers received ownership of the photos and negatives.

The photo collections and archives are stored at the former Rogers Photo Archives at 2401 Poplar St. and 115 E. 24th St. in North Little Rock.

Centennial Bank of Conway took ownership of the 29,190-SF office-warehouse complex, which includes the vacant 2501 Poplar St. warehouse, in December at a $1.47 million foreclosure auction.

To date, First Arkansas has collected $34,350 toward its default judgments against Rogers and his ventures. The tally owed to the bank has grown from $15.2 million to more than $16.4 million as of Jan. 31.

The bank landed a default judgment against Rogers personally in January 2015 and a default judgment against Sports Cards Plus Inc., Planet Giant LLC and Digital Stock Planet LLC in April 2015.

A new lawsuit has taken flight in search of money and assets from Little Rock businessman Walter Quinn.

Bear State Bank of Little Rock recently filed suit to recover $585,549 on a delinquent loan and take possession of his private jet.

Quinn personally guaranteed the debt, which is secured by a 1984 Dassault Falcon 200 owned by his Falcon Air LLC.

The loan originally totaled $1.6 million and dates back to March 2008 when it was made by Heritage Bank of Jonesboro.

Bear State inherited the loan in 2014 when it acquired Heritage as part of the $122.4 million cash-stock swap purchase of First National Security Co. of Hot Springs.

You might recall that Quinn is the leading shareholder in Rock Bancshares Inc., parent company of the $241 million-asset Heartland Bank of Bryant.

Late last year, he stepped down as chairman, president and CEO of Rock Bancshares as well as director at Heartland.

The move was described as an indefinite leave of absence to focus on some of his personal business issues.

Quinn was unable to work out a settlement to satisfy delinquent debts associated with soured oil patch investments. That impasse resulted in Prosperity Bank of El Campo, Texas, filing a $4.9 million consent judgment against Quinn in November.

Simmons Bank, the bank company owned by Simmons First National Corp. of Pine Bluff, will sponsor "The Arkansas Delta: Why It Still Matters," a conference on the future of the Arkansas Delta region, on Thursday, April 7, at the Pine Bluff Convention Center.

The publicly traded financial holding company said the conference is designed to help community leaders network and discuss how towns can be managed amid population declines. It will also feature panels on health care, education, agriculture and economic development.

The conference is 9 a.m.-4 p.m. with lunch served at noon.

"For years, many parts of east Arkansas have been losing population due to the mechanization of agriculture and other factors," said George Makris Jr., the chairman and CEO of Simmons First National Corp. "Unfortunately, that trend has accelerated in portions of the Delta since the turn of the century. It's time for those who craft public policy in our state to come up with a comprehensive plan for dealing with the problems associated with outmigration from the Delta."

The co-chairmen for the conference are Rex Nelson of Simmons Bank, Judge Raymond Abramson of the Arkansas Court of Appeals and Ritter Arnold of E. Ritter & Co. of Marked Tree.

Speakers include:

• John Kirk, the director of the University of Arkansas at Little Rock's Institute on Race and Ethnicity and the school’s Donaghey Distinguished Professor of History.
• Mike Preston, the executive director of the Arkansas Economic Development Commission, who will speak on economic development in the Delta.
• Greg Hamilton, a senior research economist, demographer and director of research at the Institute for Economic Advancement at UALR.

There is no registration fee, but those planning to attend are required to register in advance.

Someone who steals $1.5 million has to go to prison, U.S. District Judge Brian Miller told a former One Bank & Trust customer on Friday.

Miller sentenced Alberto Solaroli, a Canadian citizen doing business in Florida who pleaded guilty to laundering proceeds of a loan the Little Rock bank made in 2007, to one year and one day in federal prison to be followed by two years of supervised release.

The extra day of the sentence means Solaroli, 61, will be eligible for "good time" early release and will probably serve eight or nine months, defense attorney Omar Greene said after the hearing concluded late Friday afternoon. Solaroli will report to prison by April 26.

The hearing was a continuation of one started in January, but Miller had agreed to give Solaroli time to come up with the $120,000 restitution required under the plea deal he struck with federal prosecutors. Greene read an email from Solaroli's Canadian attorney saying mortgages on property in his wife's name had been executed on Friday and that the money would be wired to Greene's trust account on Monday.

Even if the restitution had been paid to One Bank before Friday's hearing, Miller said his "judgment gut" wouldn't let him agree to Greene's request for a probation-only sentence.

"I think when you steal $1.5 million, you deserve prison," Miller said. "…I put postal workers in prison for stealing gift cards. How can I look those people in the eye if I let a guy steal $1.5 million and not go to prison?"

Thanks to the plea agreement that held him responsible for only $120,000, the sentencing guideline range was 12 to 18 months, which Miller clearly thought lenient.

"To be very honest with you, Mr. Solaroli, if you were a younger person I'd be looking at going above the guideline," Miller said.

Patrick Harris, the first assistant U.S. attorney who prosecuted Solaroli, said after the hearing that the loan from One Bank was spent on, among other things, a couple of Porsches (almost $1 million, according to the indictment) and repaying a debt ($380,000) to Little Rock businessman David Crews, with whom Solaroli was in business in Florida.

Solaroli, while taking personal responsibility during the hearing, blamed Crews afterward.

"David Crews was the instigator of this," he said.

Phone numbers for Crews were either disconnected or were not accepting voicemail messages Friday afternoon, so he could not be reached for comment.

Crews has not been charged with any crime, but three former One Bank executives remain under indictment for their alleged roles in hiding Solaroli's default from federal regulators.

Gary Rickenbach, who allegedly invested in Solaroli's company before arranging the loan, has offered to plead guilty to misprision of a felony for failing to tell federal regulators that former One Bank  CEO Layton "Scooter" Stuart had cooked the bank's call reports, but only if U.S. District Judge Kristine Baker will agree to probation-only sentence. Baker has not announced whether she will accept the plea.

Michael Heald and Brad Paul are currently scheduled for trial beginning May 31.

A 59-unit apartment project in downtown Little Rock weighed in at $10.5 million. MacArthur Commons LLC, led by David Thompson, bought its namesake project at 414 E. Capitol Ave.

The seller is River Market South LLC, led by Jimmy Moses and Rett Tucker.

The deal is backed with a three-year loan of $7.5 million from Malvern National Bank.

The 1-acre development previously was linked with a July 2014 mortgage of $6.4 million held by BancorpSouth Bank of Tupelo, Mississippi.

The property was purchased in October 2005 as part of a nearly $5 million deal with the Arkansas Teacher Retirement System.

Wingate Purchase

A 93-room hotel in west Little Rock tipped the scales at $5.7 million.

LRWINS Hospitality LLC, led by Yogesh Asudani, acquired the Wingate by Wyndham at 1212 S. Shackleford Road from Little Rock Lodging LLC of Aberdeen, South Dakota.

The deal is financed with one-year loans of $4.5 million and $500,000 from First Arkansas Bank & Trust of Jacksonville.

The 1.86-acre development previously helped secure a January 2006 mortgage of $15.5 million held by LaSalle Bank of Chicago.

The location was bought for $945,000 in July 2001 from Big Town LLC, led by Mark Lee, Dr. William P. Fiser Jr. and Teresa Fiser.

Slim Transaction

A Little Rock restaurant changed hands in a $2.9 million sale.

A&J Lin LLC of Pleasanton, California, purchased the Slim Chickens at 7514 Cantrell Road from Fayetteville’s SC 7 Cantrell LLC, led by Tom Gordon and Dewitt Smith.

The development was funded with a three-year loan of $1.9 million from Arvest Bank of Fayetteville.

The 0.7-acre site was acquired for $810,000 in December 2014 from C&J Jernigan Investments LLC, led by the Charles & Jo Ann Jernigan Revocable Trust.

Baptist Acquisition

A 6,525-SF office building in west Little Rock shifted ownership in a $946,135 transaction.

Baptist Health bought the Arkansas Baptist Foundation project at 10117 Kanis Road from ABF Office LLC, led by Bobby Thomas.

The 1.5-acre site was purchased in February 1998 as part of an $84,000 deal with Baptist Health.

Agri Land

A nearly 199-acre agri tract in east Pulaski County drew a $497,425 sale.

K&D Huchingson LLLP, led by Kevin Huchingson, acquired the land along the east side of Plum Bayou south of Walter Estes Road, a mile east of Highway 161. The sellers are James and Susan Alexander.

The Alexander family has owned the land for more than a century.

Warehouse Sale

A 10,400-SF office-warehouse in southwest Little Rock rang up a $310,000 transaction.

I.U.P.A.T. District Council 80 Building Co. of Kenner, Louisiana, purchased the 10112 Chicot Road project from The Spin-Off Inc., led by Paul Eaton.

The 4.77-acre property was acquired for $300,000 in April 1998 from David and Naomi Woodall.

Commercial Ground

A 3.02-acre parcel in North Little Rock sold for $192,500.

GJ NLR Properties LLC, led by Asif Hemdani, bought the land on the east side of the Cypress Crossing project at 11100 U.S. 165.

The seller is Hwy 165 Development LLC, led by David Dunn.

The deal is backed with a $154,000 loan from Centennial Bank of Conway.

The property previously was tied to a December 2012 mortgage of $491,000 held by Metropolitan National Bank of Little Rock.

The land was purchased in November 2005 as part of a 77-acre deal totaling $1.2 million. The seller was Wilcox Investment Ltd., led by George and Shirley Wilcox.

Rural Residence

A 5,718-SF home near Roland weighed in at $1.02 million.

Jason and Sarah Everett acquired the 40-acre spread from Allen and Nancy Redding.

The deal is financed with a 30-year loan of $871,250 from Fairway Independent Mortgage Corp. of Plano, Texas.

The property previously was linked with a November 2013 mortgage of $307,800 held by Bank of America in Charlotte, North Carolina.

The land was bought for $120,000 in June 1998 from Dwight and Alyce Ann Capps.

Robinwood Abode

A 4,624-SF home in Little Rock’s Robinwood neighborhood is under new ownership after a $659,000 sale.

Mary and Ryan Allen purchased the house from Robert and Jennie Sexton.

The property is now securing a 10-year line of credit of $200,000 from Little Rock’s Bank of the Ozarks.

The residence previously was tied to a September 2010 mortgage of $285,554 held by Wells Fargo Bank of Sioux Falls, South Dakota.

The Sextons acquired the property for $505,000 in December 2006 from Clark Mason.

Country Club House

A 2,174-SF home near the Country Club of Little Rock changed hands in a $625,000 deal. Melissa Graves bought the house from the Elizabeth Brewer Rice Revocable Living Trust.

The deal is funded with a 30-year loan of $417,000 and a six-year loan of $83,000 from One Bank & Trust of Little Rock.

The property was purchased for $53,000 in July 1971 from Billie Amerine.

Woodland’s Home

A 3,824-SF home in the Woodland’s Edge neighborhood of west Little Rock rang up a $520,000 sale.

Cynthia and Jeffery Westcott acquired the house from Torin Gray. The deal is backed with a 30-year loan of $416,000 from Quicken Loans Inc. of Detroit.

The residence previously was linked with an October 2012 mortgage of $387,500 held by Bank of Little Rock Mortgage Corp.

Gray bought the property for $499,000 in May 2010 from Cleveland Home Pro-perties Inc., led by Justin Cleveland.

ACCC Financing

The owner of an 85,000-SF office building/condo project in downtown Little Rock picked up a $5.3 million funding agreement. 3rd & Commerce LLC, led by Jimmy Moses, received the five-year loan from Relyance Bank of Pine Bluff.

The Arkansas Capital Commerce Center at 200 River Market Ave. previously was tied to a November 2005 mortgage of $6 million held by LaSalle Bank.

Land for the seven-story building was assembled as part of two transactions.

The sellers were Drago Partners, led by Joseph Drago, $642,000 in March 2001; and Stephens Group Inc., led by Warren Stephens, $600,000 in January 1999.

Convenient Construction

Development of a Mapco convenience store in west Little Rock is backed with a $2.04 million construction loan.

NTI John Barrow Road LLC of Franklin, Tennessee, obtained the loan from Standard Insurance Co. of Hillsboro, Oregon.

NTI assembled the 1.23-acre site at 8818 Kanis Road in two May 2014 deals totaling $920,000.

The sellers were William Sutton, the Boyce R. Love Testamentary Trust and William L. Patton Family Ltd., $625,000; and JP Mortgage & Investments LLC, led by Danny Priest, $295,000.

Panera Funding

A Panera Bread project in west Little Rock is securing a $2.04 million mortgage.

Akshar 12 LLC, led by Shailesh Vora, got the two-year loan from Arvest Bank.

The 1.63-acre development at 10701 Kanis Road previously was linked with a July 2012 mortgage of $1.3 million held by First National Bank of Hot Springs.

The location was purchased for $713,000 in October 2007 from BancorpSouth Bank.

(Editor’s Note: This is the latest in a series of business history feature stories. Suggestions for future Fifth Monday articles are welcome. Please contact Gwen Moritz at (501) 372-1443 or GMoritz@ABPG.com.)

David Pryor, the former Arkansas governor and U.S. senator, was diplomatic when he suggested that he and fellow members of the University of Arkansas board of trustees not rush into a nine-digit bond issue primarily to add swankier seating to Razorback Stadium.

“A bond issue is a debt of the University of Arkansas,” Pryor said at the trustees’ Jan. 27 meeting. And while higher priced tickets and other private funds are expected to make the payments, “It is a debt of the people of Arkansas, and ultimately if something goes wrong, who’s responsible? And that’s the people.”

The trustees, with Pryor abstaining, voted to continue researching the $160 million in improvements pitched by Athletic Director Jeff Long, but no bond issue has been approved. Still, a casual observer might wonder how unelected UA trustees have the authority to borrow money ultimately co-signed by taxpayers.

The answer: Amendment 33.

Placed on the statewide ballot by petition and adopted on Nov. 3, 1942, by a majority of fewer than 1,600 votes out of almost 78,000 cast, Amendment 33 insulated institutes of higher education and “all charitable, penal or correctional institutions” from the whims and provincialism of politicians.

The legislature provides a level of funding, but the trustees of each institution decide how to spend and when to borrow. Under Amendment 33, “the management or control” of the institutions cannot be taken away from the trustees, so the powers that belong to the UA trustees also belong to the trustees of Arkansas State, Arkansas Tech, Henderson State, the University of Central Arkansas, Southern Arkansas University and the independent two-year colleges like Pulaski Tech.

“I support the concept of Amendment 33. I think you’ve got to let the board of trustees have independence,” Pryor said in a recent interview.

But the amendment made it harder for state government to make the various institutions serve statewide goals rather than their own interests.

“Because of Amendment 33,” Little Rock freelance journalist Ernie Dumas said, legislators “have just floundered around for all these years trying to come up with a way to regulate” the state-supported colleges.

Dumas, who began covering Arkansas state politics in the early 1960s, described Amendment 33 as the first in a series of petition-initiated amendments designed to limit political meddling in the day-to-day functions of government.

Amendment 33 was inspired by a political dispute between Roberta Fulbright, publisher of the Northwest Arkansas Times, and Gov. Homer Adkins, who defeated incumbent Gov. Carl Bailey in 1940.

According to the Encyclopedia of Arkansas, Bailey, a UA trustee, succeeded in getting Fulbright’s 34-year-old son Bill named president of the University of Arkansas in 1939. In the next year’s election, “She supported Carl Bailey over Homer Adkins,” Dumas recounted. “Holy Homer became the governor, so he punished her by stacking the board of trustees and firing Bill Fulbright.”

J. William Fulbright, an Oxford-educated Rhodes Scholar, recovered nicely from the episode. On the same 1942 ballot that brought Amendment 33, he was elected to the U.S. House of Representatives, and two years later he defeated Adkins to start a 30-year career in the U.S. Senate.

“Mrs. Fulbright’s revenge was complete,” Robert Leflar, former dean of the UA School of Law, said in an interview quoted by the Encyclopedia of Arkansas. Never again would an Arkansas governor exert so much power over the management of a state college or university.

Coordination

Amendment 33 did not keep legislators from favoring their alma maters and hometown colleges when it came to the only authority they retained, so in 1961, the legislature created the Commission on Coordination of Higher Education Finance. A few years later, it was replaced with the Arkansas Department of Higher Education.

ADHE, according to its own website, is “the administrative staff for the Arkansas Higher Education Coordinating Board,” and a coordinating board is qualitatively different from other state boards that have much greater power to regulate.

Instead, ADHE’s mission is “to advocate for higher education; to promote a coordinated system of higher education in the state; and to assist each of the publicly and locally supported institutions of higher education in the state in improving the delivery of higher education services to the citizens of Arkansas.”

In a recent interview, Jim Purcell, who was director of ADHE from 2008-11, compared the coordinating board to the Wizard of Oz — “that man behind the curtain who makes sure all the voices are heard.”

Like the Wizard, a coordinating board is not particularly great or powerful, but it can remind the individual institutions that they all play a role in executing a higher education agenda that benefits the state.

“There always needs to be an adult in the room because all of the systems will advocate for themselves and … and may see themselves as the total solution for the state,” said Purcell, who left Arkansas for a similar job in Louisiana and is now commissioner of postsecondary education for Rhode Island.

Arkansas is not unique in having multiple institutions for a coordinating board to try to wrangle. Louisiana has four systems underneath a coordinating board, Purcell said, “and while you can guide a state by policy and regulation and advocacy in the legislature, you really end up with management by charisma. It depends on who has the best management during a time period.”

Purcell likes the idea of a single statewide university system with one oversight board. Georgia’s higher ed system is organized that way — 29 public institutions in the University System of Georgia governed by the Georgia Board of Regents.

“If you can’t do that, then have a coordinating board that has strength and has teeth so they can make sure the state is getting what they want and need when they invest their dollars,” Purcell said.

Combining all of Arkansas’ state colleges and universities into one system is an idea that has been mentioned over the years, journalist Dumas said.

“One idea is to make all the institutions part of the UA, and then the board of trustees of the UA could be the Department of Higher Education,” he said. “Another idea is a board of regents.”

And while the legislature can’t mess with the work the college and universities do, Amendment 33 clearly anticipates that institutions could be “abolished or consolidated.”

Dumas won’t hold his breath.

“Or course, all the institutions would oppose being taken over by the University of Arkansas, so that will never happen.”

Amendment 33 Boards and Commissions Governing State Institutions

1. Term of office of members.

The term of office of members of the boards or commissions charged with the management or control of all charitable, penal or correctional institutions and institutions of higher learning of the State of Arkansas, now in existence or hereafter created, shall be five years when the membership is five in number, seven years when the membership is seven in number, and ten years when the membership is ten in number. Such terms of office shall be arranged by the General Assembly to provide a membership with one term of office expiring every year from the effective date of this amendment. The unexpired terms of members serving on the effective date of this amendment shall not be decreased.

2. Abolition or transfer of powers of board or commission - Restrictions.

The board or commission of any institution, governed by this amendment, shall not be abolished nor shall the powers vested in any such board or commission be transferred, unless the institution is abolished or consolidated with some other State institution. In the event of abolition or consolidation, the new board or commission shall consist of a membership of five, seven, or ten.

3. Increase or decrease of members of board or commission prohibited.

The membership of any such board or commission now in existence shall not be increased or decreased in number after the effective date of this amendment nor shall the number of members of any such board or commission created after this amendment is in operation be increased or decreased subsequent to its creation.

4. Removal of member - Procedure - Appeal.

The Governor shall have the power to remove any member of such boards or commissions before the expiration of his term for cause only, after notice and hearing. Such removal shall become effective only when approved in writing by a majority of the total number of the board or commission, but without the right to vote by the member removed or by his successor, which action shall be filed with the Secretary of State together with a complete record of the proceedings at the hearing.

An appeal may be taken to the Pulaski Circuit Court by the Governor or the member ordered removed, and the same shall be tried de novo on the record. An appeal may be taken from the circuit court to the Arkansas Supreme Court, which shall likewise be tried de novo.

5. Vacancy - Filling.

Any vacancy arising in the membership of such board or commission for any reason other than the expiration of the regular term for which the member was appointed shall be filled by appointment by the Governor, subject to approval by a majority of the remaining members of the board or commission, and to be thereafter effective until the expiration of such regular term.

At first, Sam McFadin thought it would be the perfect business paring.

Omega Capital of Tulsa bought a majority interest of McFadin’s M&M Environmental Oil Services LLC of Conway for $7 million in December 2014. The majority acquisition was supposed to “take us to the next level,” McFadin told Arkansas Business last week. The companies changed the name of the combined firm to the similar M&M Environmental Group LLC.

Instead of soaring under the ownership, M&M Environmental Group, which provided environmental services to the oil and gas industries, went into a tailspin. So did the relationship between McFadin and the Omega Group; eventually the two sides deadlocked on whether to file for bankruptcy protection late last year.

The stalemate caused Faulkner County Circuit Judge Charles E. Clawson Jr. to appoint a receiver, who filed for Chapter 7 bankruptcy liquidation earlier this month. The debt total hasn’t been released yet, but it’s in the millions. Centennial Bank of Conway sued M&M in January over a $3.6 million debt. The company also is a named defendant in at least seven other lawsuits.

And that count doesn’t include the lawsuit between the M&M Group and McFadin, which was filed in Faulkner County Circuit Court in October, shortly after McFadin was fired from the company he founded in 2010.

The M&M Group accused McFadin of fraud, misconduct and other wrongdoing. McFadin has denied the allegations and filed a counterclaim against M&M and Omega Capital, accusing them of breach of the employment agreement, defamation and other counts.

McFadin, in an interview, wouldn’t address the details of Omega’s allegations but called them “smoke and mirrors.” He said Omega has buyer’s remorse because it bought the company at the worst possible time, just as natural gas production in the Fayetteville Shale area was declining.

Omega, however, said in its court filings that McFadin mismanaged the company, including failing to pay nearly $800,000 in state and federal payroll taxes. The M&M Group lost approximately $2.3 million in the first three quarters of 2015 on revenue of $6.5 million, according to Omega.

“The claims of the creditors of M&M Environmental Group are well-detailed in the publicly filed complaints against Mr. McFadin,” Jason Martin, president of Omega, said in an email to Arkansas Business. “As a creditor of the company, Omega Capital intends to see those claims are established and a recovery made.”

He said the company doesn’t comment on pending litigation. M&M’s bankruptcy paused the lawsuit. It will be up to M&M’s trustee, Frederick “Tripp” Wetzel III of Little Rock, to decide whether to move forward with the case, and he didn’t return a call seeking comment.

Building a Business

McFadin said he worked on various oilfield service companies before he “basically figured out a way to start my own business.” With a $5,000 investment and a single power washer, he started M&M Environmental Oil Services in 2010.

The company offered services that included cleaning up the environmental footprint of drill rigs. “There’s a lot of different material created that needs to be disposed correctly, and that’s what we did,” McFadin said.

Revenue soared from $3.4 million in 2011 to $20.7 million in 2013, according to filings in the case. Through the first three quarters of 2014, revenue was $19 million. By the end of 2014, the company had more than 250 employees, an office in Damascus and two offices in Oklahoma.

“I got to the point to where we were getting so big that we were needing a new partner to take us to the next level,” McFadin said.

He was put in touch with Omega Capital in June 2014.

The Investment

After conducting months of due diligence, Omega agreed in December to acquire a 60 percent interest in M&M Environmental Oil Services, McFadin said. McFadin would own the other 40 percent of the renamed company.

“We are excited to partner with Sam and the rest of the M&M Environmental team,” Martin, president of Omega Capital, said in a Jan. 14, 2015, news release announcing the acquisition. “In addition to expanding our oilfield services business, we plan to offer our suite of environmental services to the steel, coal, construction and waste management industries.”

McFadin stayed with the company as CEO at a contracted annual salary of $300,000 plus an annual bonus of $250,000.

It turned out to be a terrible time, though, to invest in the gas and oil industry, McFadin said in an affidavit filed in the case.

Gas prices were declining and gas production in the Fayetteville Shale area was weakening.

Following the sale on Dec. 12, 2014, “worldwide prices for natural gas continued this decline,” McFadin wrote.

The Crash

On March 11, 2015, an M&M driver fell asleep and crashed on Highway 64 in Faulkner County. The driver was hauling waste material for M&M’s largest customer, Southwestern Energy Co. of Houston, the parent company of Seeco.

The accident caused an unknown amount of “drill cuttings” to be released.

Southwestern Energy, which represented about 75 percent of M&M’s revenue, abruptly ended its contract for environmental and trucking services and well completions as a result of the accident. M&M immediately laid off 200 employees.

McFadin told Arkansas Business in March 2015 that Southwestern told him the accident had caused too much “exposure” for the company. Omega said in its filings that it later learned that there had been other “historic safety issues” with Southwestern that McFadin failed to disclose.

M&M was left with about 50 employees between its offices in Arkansas and Oklahoma. McFadin said he planned for M&M to pursue other opportunities in commercial construction that the company had had to pass up when its employees were busy with the Southwestern contract.

Collapse

McFadin added long-haul trucking to the company’s portfolio of services in the summer of 2015. “It was successful,” he told Arkansas Business. “It wasn’t what our partners wanted.”

Omega said in its court filings, though, that McFadin bought trucking equipment through one of his own companies and leased that equipment to the M&M Group “at above-market rates and in excess of” McFadin’s or his company’s costs.

The M&M Group’s financial condition continued to sour.

In October, “even though M&M Group was experiencing financial difficulties and Omega was infusing cash to finance M&M Group’s operations (such as to make payroll), Sam McFadin purported to enter M&M Group into an Aviation Lease … without notifying Omega or the other members of M&M Group’s Board of Directors,” M&M Group said in its filing.

On Oct. 26, the M&M Group fired McFadin, citing breach of fiduciary duty, violation of company policy, misuse and misappropriation of corporate assets.

McFadin told Arkansas Business the move to fire him was “disheartening.”

“I injected almost $1 million of my own personal capital back into the business,” McFadin said. “I broke my back for the company, and I bought assets to try to start a new business.

“And they thought they could do it better, and, honestly, from the moment they released me, it just bled dry,” he said.

When M&M sued McFadin on Oct. 28, he was no longer CEO but was still a member of the board of directors.

During board meetings in November, Martin, the Omega president, sounded the death knell.

Between Sept. 21 and Nov. 13, Omega Capital loaned the M&M Group $540,000 to cover payroll and other expenses, according to the Nov. 23 board minutes filed as a court exhibit.

McFadin told Arkansas Business that M&M no longer has any employees, but he’s not sure when the company laid off the 50 or so that remained at end of October.

Martin also told the board of the company’s “substantial negative cash flow, previously undisclosed accounts payable, assets misappropriated by the former CEO of the company, declining asset values and negative net worth,” the minutes said.

Martin said the only thing to do was to “wind the Company down in an orderly fashion.”

The problem for the Omega ownership group was that McFadin wouldn’t go along. Under the company’s operating agreement, the board needed a 75 percent vote to file for bankruptcy, and McFadin and his representative held 40 percent of the vote and wouldn’t approve it at a Nov. 25 meeting.

In a letter to Martin the same day, McFadin offered to buy out Omega’s 60 percent interest in the M&M Group.

“As we have discussed M&M has no net value at this time as an operating entity and should probably be placed in bankruptcy,” McFadin wrote. The letter didn’t suggest a purchase price.

The M&M Group and Omega took the offer as an attempted “hostile takeover” of M&M Group’s remaining operations and assets. Omega asked Judge Clawson to appoint a receiver, and Clawson chose attorney Charles T. Coleman of the Wright Lindsey & Jennings firm in Little Rock.

Coleman said in his Feb. 10 report to Clawson that the members of M&M “are at an impasse in making decisions as to how the business and assets of M&M should be managed or liquidated. This has resulted in serious problems related to the operation of the business and defense of the pending lawsuits.”

Coleman’s recommendation was to file Chapter 7 liquidation since the company didn’t have any employees or operations to reorganize under Chapter 11.

M&M Group “is hopelessly insolvent and unable to continue operations and that creditors have already started the ‘race to the courthouse’ to dismantle M&M piecemeal,” Coleman wrote.

On Feb. 12, M&M Environmental Group filed for Chapter 7 in U.S. District Bankruptcy Court in Little Rock, where the case is pending.

Remember that big chunk of property in Franklin County that Allied Bank of Mulberry carried on its books for most of last year?

The $79.3 million-asset lender liquidated nearly all of that real estate in Wiederkehr Village through two transactions totaling about $1.2 million.

About 382 acres was sold for $540,000 to Duffield Aggregate LLC, led by Russellville businessman Luke Duffield.

The Wiederkehr Wine & Spirits liquor store at 109 Rue De Cabermet Drive was the centerpiece of a $670,000 sale.

In addition to the 7.12-acre libation outlet development at the northwest corner of Interstate 40 and Arkansas 186, the deal included 20 acres at the northeast corner of the crossroads.

The buyer was the corporation that originally conveyed all the property in Wiederkehr Village to Allied back in 2010: Wiederkehr Wine Cellars Inc.

The deed indicated little to no money changed hands, and on the surface appeared to be property forfeited in lieu of foreclosure linked with a 2008 mortgage of $1.2 million held by Allied.

However, in an interview with the Arkansas Democrat-Gazette in August 2014, Al Wiederkehr indicated the change of ownership was tied to a nominal sale and leaseback deal, there was no loan default and no financial problems with creditors.

You might recall this is the same property that Allied unsuccessfully attempted to sell in 2014 through an online auction. The acreage then carried a list price of $3.5 million and a starting bid of $1.1 million.

Only a handful of lawsuits that erupted from the upheaval at One Bank & Trust continue to wind through the court system.

The cases represent a mix of civil and criminal action put in motion after federal regulators and investigators began shaking up the Little Rock lender more than five years ago.

From a financial standpoint, the case that carries the most potential consequence for the $325 million-asset bank was filed late last year by billionaire Johnelle Hunt.

After landing a $14.7 million default judgment against One Bank’s parent company in September, Hunt’s BHL Financing LLC sued the bank.

The action represents a second lawsuit to collect on financial guarantees made by One Bank’s former owner, Layton “Scooter” Stuart, who died in March 2013.

The guarantees are tied to an October 2002 reworking of $30 million of debt amassed by Stuart in business dealings with Hunt’s husband, J.B. Hunt, namesake founder of J.B. Hunt Transport Services Inc. of Lowell.

The debt restructuring was orchestrated through various Stuart-controlled ventures, including One Bank and its parent company, OneFinancial Corp.

BHL Financing is trying to take possession of a Maumelle office building and $1.2 million worth of trust-preferred shares issued by West Tennessee Bancshares Inc. WTB is the holding company for the $339 million-asset Bank of Bartlett.

The 7,200-SF office building at 4 Country Club Circle carries a value of $655,700 at the Pulaski County Assessor’s office.

The 0.81-acre development and trust-preferred shares were carried on the books of OneFinancial until 2012, when Jerry Pavlas was brought in to replace Stuart as chief executive officer.

While pursuing OneFinancial assets, BHL has extended its collection efforts to OneFinancial’s biggest asset: One Bank. The end game isn’t to take possession of the bank itself but to merely recover assets to satisfy the debt.

The two collection cases cast a shadow on 2016, a year in which One Bank will have to rely solely on its operations for income. Three extraordinary items and an asset sale provided the bank with its only quarterly respites from losses since Stuart was ousted as chairman, president and CEO by the Office of the Comptroller of the Currency on Sept. 29, 2012.

The biggest item was booked in the third quarter 2015 by the Little Rock lender as $6.9 million in noninterest income. That was One Bank’s share of a settlement with Stuart’s estate, the U.S. Treasury and BHL Financing that divided $14.9 million from the life insurance payout on Stuart seized by the government.

Without its cut from the settlement, the bank would’ve posted a $1.3 million loss for the quarter and a $3.6 million loss for 2015.

The other two extraordinary items involving legal action were the repayment in the second quarter of 2014 of $3 million for life insurance premiums on Stuart’s policy and a $1 million insurance settlement in the third quarter of 2014 on coverage for “dishonest actions of employees.”

A $403,000 gain on the sale of mortgages made the difference for a profitable second quarter of 2015.

One Bank has spent more than $800,000 in legal fees annually 2013-15. Much of that was devoted to recouping money, but ongoing legal expenses aren’t likely to help the bottom line. They include defending against the BHL Financing litigation and a 2015 lawsuit filed by a longtime employee against the bank, Pavlas and its chief financial officer, Jim Schnoes.

Adams v. One Bank et al.

Donna Adams, former senior vice president at One Bank, sued the bank, Pavlas and Schnoes in what amounts to a wrongful termination case.

Adams, who worked 17 years at the bank, claims that Pavlas and Schnoes made her professional life so miserable that she was forced to resign in January 2014.

Adams doesn’t want her job back, but she does want her piece of the bank’s supplemental executive retirement plan. She alleges that benefit was wrongfully taken from her by Pavlas.

The bank, Pavlas and Schnoes denied her allegations and asserted that Adams wasn’t entitled to the SERP benefits because she was terminated for “just cause.”

Under SERP guidelines that means: “Theft, fraud, embezzlement and/or gross negligence, willful misconduct causing significant injury to the bank.”

The bank hasn’t specifically identified what constituted just cause termination for Adams. Unlike several of her former coworkers, Adams wasn’t charged with any criminal conduct.

In their counterclaim, One Bank, Pavlas and Schnoes are seeking $2.7 million in damages.

The July 2015 case has gone quiet since November, with a string of pending motions that await judicial ruling in federal court in Little Rock.

“We’re kind of in a holding pattern until the court rules,” said Danny Crabtree, attorney for Adams.

USA v. Gary Rickenbach et al.

Three former One Bank executive vice presidents remain on the firing line for alleged misdeeds that occurred on Stuart’s watch as owner and CEO:

• Michael Heald, who exited One Bank in July 2011;
• Gary Rickenbach, who left in January 2013; and
• Brad Paul, who was gone before year-end 2014.

A four-count indictment against a fourth One Bank executive, Tom Whitehead, were dismissed on Dec. 10. Whitehead, the bank’s former CFO, was shown the door in December 2012.

The criminal case was tied to one very bad $1.5 million loan and a convoluted game to conceal it from regulators. Given the plea-deal winnowing of charges and long line of continuances, motivation to take the case to trial appears to be lacking for the U.S. Attorney.

Rickenbach had four trial dates in 2014 and 2015 before a conditional plea agreement dropped his seven-count indictment to a single count of misprision of a felony. The agreement, still under judicial review as of Thursday, proposes that Rickenbach receive probation in exchange for conceding guilt for failing to report false entries in the financial reports One Bank submitted to federal regulators.

Heald and Paul are currently scheduled for trial beginning May 31.

Albert Solaroli, the Florida businessman who received the $1.5 million loan in question, was allowed to plead guilty to a single count of money laundering and was sentenced Friday to one year and one day in federal prison. His plea deal, which requires restitution of only $120,000, sidesteps allegations that he submitted a false financial statement to get the loan.

Stuart Family v. Debra Hoag

A civil case that Scooter Stuart’s heirs filed against the trustee of the Stuart Family Trusts was settled earlier this month. Debra Hoag, a Chicago insurance broker, was sued for $1.7 million in what was essentially a breach of fiduciary duty case. Hoag, as trustee of the Stuart Family Trusts, allowed Stuart to borrow $1.7 million against the trust’s lone asset: a $20 million life insurance on Stuart.

Stuart wasn’t legally authorized to seek the loan and even managed to cash the loan check at One Bank although it was in the name of “Stuart Family Trust.”

Hoag claimed she worked in good faith with Stuart, believed he would use the loan for the benefit of the trusts and had no way of knowing otherwise.

A secret settlement was reached less than two weeks before the case was set to go to trial on Feb. 22.

“It’s under a non-disclosure agreement,” said Dick Torti, trustee of the Stuart Family Trusts and executor of Stuart’s estate.

Does the settlement bring a close to the estate’s courtroom battles for Torti?

“We think there may be one other party with liability to the estate,” he said.

Torti declined to name that potential defendant.

Two new members are nominated to join the board of directors at Little Rock's Bank of the Ozarks Inc.

They are Jack Mullen, 66, director of derivatives and market strategy with AgriBank, FCB since November 2004; and Paula Cholmondeley, 68, who most recently served as a private consultant on strategic planning from 2004-09.

Making way for Mullen and Cholmondeley, three directors are set to leave the board: R. L. Qualls, 82, retired president of Baldor Electric Co. of Fort Smith and a director since 1997; Sherece West-Scantlebury, 50, president and CEO of the Winthrop Rockefeller Foundation and a director since 2012; and Tyler Vance, 41, chief operating officer since 2013 and chief banking officer since 2011 and director since 2015.

The change is expected to occur after the Bank of the Ozarks' annual shareholders meeting May 16 at the corporate headquarters in west Little Rock.

The two-for-three switch was put in motion when the board of directors approved reducing its membership from 16 to 15 on Feb. 23.

In its recently released proxy statement Bank of the Ozarks disclosed its three largest shareholders:

• BlackRock Inc. of New York, 7.6 percent worth $270 million.
• The Vanguard Group Inc. of Malvern, Pennsylvania, 6.6 percent worth nearly $235 million.
• George and Linda Gleason of Little Rock, 6.5 percent worth more than $233 million.

Double-digit increases in compensation were the norm among the company's five top executives:

• George Gleason, chairman and CEO, 16.4 percent to more than $5.9 million.
• Dan Thomas, vice chairman and chief lending officer, 31 percent to more than $4 million.
• Greg McKinney, chief financial officer and chief accounting officer, and Tyler Vance, 30 percent to nearly $1.9 million.
• Darrel Russell, chief credit officer, 28 percent to more than $673,000.

LITTLE ROCK - Arkansas revenue officials say a decline in income tax refunds kept the state's revenue above expectations and last year's numbers, despite a drop in tax collections.

The Arkansas Department of Finance and Administration on Wednesday said the state's net available revenue in February totaled $279.9 million. That's $61.6 million above February 2015 and $31.8 million above forecast.

The state's net revenue so far for the fiscal year is $3.4 billion, which is $74.4 million above the same point last year. Officials last month revised the state's forecast, predicting a $35.9 million surplus by year's end. Wednesday's report puts state revenue $31.8 million above that figure.

Individual income tax collections in February were below forecast and last year's figures. Sales tax collections were slightly above last year's figures but below forecast.

(Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

WASHINGTON — The economy was expanding in most of the country in January and February, helped by gains in consumer spending and home sales. But there were also rising headwinds from falling oil prices and a strong dollar that held back some sectors, the Federal Reserve said Wednesday.

The Fed's latest survey of business conditions in its 12 regions found moderate gains in most regions. Two areas — New York and Dallas — described activity as flat. Kansas City, a region hurt by weakness in energy and farming, reported a modest decline.

The Fed survey, known as the 'Beige Book,' will be discussed at the central bank's next meeting on March 16-17. Most economists expect the Fed to leave a key interest rate unchanged.

The Fed survey found that while consumer inflation was holding steady, wage growth varied considerably from flat to strong. The central bank is hoping that rising employment will boost pay, which has lagged since this recovery began in mid-2009. And Fed officials believe that rising wages will help lift inflation closer to the Fed's target of prices increases around 2 percent per year. Inflation has been running below that level for the post three years.

Economists said the findings in the Fed survey supported their view that the economy is avoiding a recession despite the turbulence.

"Trade and energy remain the most significant drags on growth but the positives for the economy are more than enough to offset these," said Stuart Hoffman, chief economist at PNC Financial Services. "Consumer spending, the housing market and commercial construction continue to lead growth in early 2016."

The Fed's survey found that manufacturing was feeling the effects of the stronger dollar, which hurts U.S. export sales, and weakening global activity in key U.S. markets such as Europe and China. Manufacturers also complained about cutbacks in demand coming from weakness in the energy sector.

Manufacturing contacts in eight districts — Boston, Philadelphia, Cleveland, Chicago, St. Louis, Kansas City, Dallas and San Francisco — all reported "significant headwinds" due to weak demand from energy companies. Many districts said manufacturers were also being hurt by the strong dollar and weaker global outlook.

Most economists believe the economy, which slowed to growth of just 1 percent in the October-December quarter, will rebound to growth of around 2 percent in the current January-March quarter.

The Fed approved its first rate hike in nearly a decade at its December meeting, choosing instead to wait and see how global market turbulence at the beginning of the year and weaker U.S. exports affect the overall economy. Many analysts believe the Fed will boost rates only twice this year and will not move until June.

The Fed survey was based on information collected before Feb. 22.

(Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

Arvest Bank in Springdale this week named two new directors to its advisory board: Eddie Cantu, pastor and founder of Centro Cristiano Hispano Assembly of God Church, and Russell Tooley, executive vice president of continuous improvement at Tyson Foods Inc.

"We at Arvest Bank are proud of our community bank status and depend on our local boards to keep important decisions based in the communities where we operate," Lisa Ray, president and CEO for Arvest Bank in Springdale, said in a news release. "Eddie Cantu and Russell Tooley are both men of integrity and leadership in Springdale, which means they are great additions to our Springdale board."

A native of Amarillo, Texas, Cantu founded the church in 1995. He also serves as secretary and treasurer of South Central Hispanic District of the Assemblies of God. He has served on the Ozark Guidance Ethics Steering Committee, as presbyter of Gulf Latin American District for Assemblies of God churches, and was a Springdale school board member from 2008 to 2009.

Tooley has worked for Tyson Foods for 30 years and has held positions in operations and human resources both domestically and internationally. He serves on the boards of directors for Jones Trust and the American Heart Association.

Arvest Bank operates more than 270 bank branches in Arkansas, Oklahoma, Missouri and Kansas.

For the 23rd consecutive year, Arkansas Business is seeking nominations for its 40 Under 40 program, which recognizes 40 professionals under the age of 40 who excel in their profession and are leaving their mark on the Arkansas business and nonprofit community.

"This program provides Arkansas Business with the opportunity to not only honor our state’s up-and-coming professionals, but identify those individuals who are helping shape Arkansas’ business, political and civic landscape," Arkansas Business Publisher Mitch Bettis said.

The 2016 class of 40 Under 40 honorees will be profiled in a future issue of Arkansas Business. Included in this issue will be a listing of their accomplishments within their businesses, organizations and/or community.

The deadline to nominate is March 25. Nominations can be made at ArkansasBusiness.com/40.

For more information, contact Leslie Gordy at (501) 372-1443 or at lgordy@abpg.com.

Tia Shibley has been promoted to manager of the United Federal Credit Union branch inside the Walmart Supercenter on Elm Springs Road in Springdale.

Shibley, a native of Greenwood and a graduate of Carl Albert State College in Poteau, Oklahoma, was previously assistant manager of the branch.

Keith McKinnon, a mortgage originator in Conway, has been recognized by U.S. Bank Home Mortgage’s President’s Circle and President’s Club.

Cindy Winston has joined Bank of Little Rock Mortgage as its branch manager of the Hot Springs location. Winston has more than 25 years of banking experience, with 20 years of experience in the mortgage loan industry.

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

Barry Jackson has been hired to succeed Aaron Gamewell as senior vice president and chief operating officer of the Arkansas Bankers Association in Little Rock. In the position he assumed last week, Jackson will provide oversight to the processes and day-to-day operations of the association, as well as support the professional development, communications, government relations and finance departments.

Jackson has more than 14 years of banking experience. Most recently he was vice president and product manager for Simmons First National Bank, which he joined when it acquired Metropolitan National Bank in Little Rock, where he was senior vice president and marketing manager. He has also worked for AmSouth Bank and Regions Bank in Memphis.

Originally from Jonesboro, Jackson earned a bachelor’s degree in business administration with an emphasis in marketing from the University of Mississippi in 2000.

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