Cara Lank has joined Stone Bank of Mountain View as vice president and credit officer.
A native of Newport, Lank was previously a vice president and credit officer for First National Bankers Bank in Little Rock and before that spent 14 years as a certified senior bank examiner and financial analyst for the Arkansas State Bank Department.
See more of this week's Movers & Shakers, and submit your own announcement at ArkansasBusiness.com/Movers.
Anstaff Bank of Green Forest (Carroll County) has joined a growing procession of Arkansas lenders in converting their national charter to a state charter.
The $437 million-asset bank is seeking regulatory approval to make the change, as is Bear State Bank (see Bear State Latest Bank Going for State Charter).
Once the two proposals are approved, the number of Arkansas financial institutions regulated by the Office of the Comptroller of the Currency will fall to 18. The roster of banks regulated by the Arkansas State Bank Department will climb to 86.
First NaturalState Bank (formerly First National Bank of McGehee) and Pine Bluff’s Simmons Bank (formerly Simmons First National Bank) started the 2016 national-to-state conversion line.
“It’s something we’ve been thinking about for quite awhile,” said Stephen Stafford, chairman and CEO of Anstaff. “We hated to do it. They’ve been a good regulator to us for 85 years.”
The bank, formed as The First National Bank in Green Forest back on May 4, 1931, adopted the Anstaff moniker less than two years ago.
Stafford said he talked with other bankers who had made the switch and decided it was time to move from the OCC to the State Bank Department.
“They better understand us and how we operate,” he said. “And our customers.”
Is the trend line heading toward who will be the last national bank standing?
“I don’t know if that’s the case or not,” Stafford said with a laugh.
| Total Assets* | ||
| 1 | Bear State Bank, Little Rock** | $1,922,301 |
| 2 | First National Bank of Fort Smith | $1,255,160 |
| 3 | First National Bank, Paragould | $1,033,636 |
| 4 | Relyance Bank, Pine Bluff | $587,432 |
| 5 | Malvern National Bank | $511,553 |
| 6 | Integrity First Bank, Mountain Home | $441,960 |
| 7 | Anstaff Bank, Green Forest** | $437,678 |
| 8 | Fidelity National Bank, West Memphis | $391,933 |
| 9 | First National Bank of Eastern Arkansas, Forrest City | $388,026 |
| 10 | Legacy National Bank, Springdale | $378,163 |
| 11 | One Bank & Trust, Little Rock | $324,365 |
| 12 | First National Bank of Wynne | $282,060 |
| 13 | First National Bank of Lawrence County, Walnut Ridge | $206,645 |
| 14 | First National Bank of North Arkansas, Berryville | $190,892 |
| 15 | Helena National Bank | $187,882 |
| 16 | First National Bank of Izard County, Calico Rock | $160,333 |
| 17 | First National Bank of Crossett | $143,747 |
| 18 | First National Bank at Paris | $134,335 |
| 19 | Priority Bank, Fayetteville | $83,827 |
| 20 | Forrest City Bank | $48,866 |
* In thousands as of March 31, 2016
** Application for conversion to Arkansas state charter pending
The menu of banking options in the state’s largest market is gaining a new entry.
Stone Bank of Mountain View (which converted from a national charter last August) intends to convert its west Little Rock loan production office into a full-service branch.
The move would make the $106 million-asset lender the 27th bank to operate a branch in the Pulaski County market.
The $12.2 billion-deposit market was home to 183 full-service bank branches during the last regulatory census.
The reshuffling of titles at Heartland Bank of Little Rock gave some bank watchers pause.
Why was the position of CEO left vacant?
The short answer is: Because they can.
Under Arkansas law, a bank must have a president.
The same can’t be said for a CEO.
A 224-unit apartment complex in south Little Rock tipped the scales at $3.2 million.
STJ Redevelopment LLC, an affiliate of Cross Equities of Addison, Texas, purchased St. John’s Apartments at 5001 W. 65th St. The seller is the receiver for St. J Apartments Ltd., Carl Schultz.
The deal is financed with a three-year loan of $4.4 million from American Bank of Commerce in Wolfforth, Texas.
The 13.25-acre development previously was tied to a December 2007 bond issue of $7.9 million through the Pulaski County Public Facilities Board.
Originally led by David Henry, St. J Apartments Ltd. bought Westgate Apartments at 5001 W. 65th St. for $2 million in April 2007 and rechristened the project St. John’s.
The seller was Westgate Apartments Inc., led by Claude Carpenter, Maurice Lewis, Gerald Fisher, Nick Bacon, Ralph Sims, Rex Roark and Austin Hanner.
Home Land
Residential property in Maumelle changed hands in a $3.1 million deal.
Maumelle Ridge 223 LLC, led by Todd Witham, acquired 12 lots in the Ridgeview neighborhood and 223 undeveloped adjoining acres.
The seller is Capitol Development BDF III LLC, an affiliate of The Broe Group of Denver.
The land was part of a $3.7 million transaction with Metropolitan National Bank of Little Rock in December 2012.
The bank recovered more than 275 acres and 61 lots at a $3.5 million foreclosure sale in February 2010 from Capitol Development of Arkansas Inc., led by Howard and Ashley Bloom.
Coolwood Purchase
A 16-unit apartment project in Little Rock is under new ownership after a $1 million sale. 1 Coolwood Drive LLC of Cortlandt Manor, New York, bought its namesake project from Coolwood Properties LLC, led by Chris Ligon. The deal is funded with a 20-year loan of $796,000 from BancorpSouth Bank of Tupelo,Mississippi.
The 0.8-acre development was acquired for $800,000 in April 2008 from Edgar Properties LLC, led by Lauraetta Edgar.
Contiguous Buy
Adjoining commercial projects in Jacksonville rang up an $850,000 deal.
SNR Consulting LLC, led by Ryan Kiser, purchased the 1,864-SF Thai Taste restaurant at 1516 W. Main St., the 6,020-SF retail project at 1525 W. Main St. and the 0.77-acre site of the Phillips 66 convenience store at 1501 W. Main St.
The seller is JY Rental LLC, led by Richard Jones. The deal for the 1.63-acre development is backed with a one-year loan of $722,500 from First Arkansas Bank & Trust of Jacksonville.
The Jones family has owned the land since 1948-49.
Site Purchase I
A 2.37-acre commercial site in Sherwood sold for $544,500.
CKP Commercial Properties LLC, led by Paul and Andrea Wilson, acquired the land near the northwest corner of Highway 107 and Oakdale Road. The seller is 107-Oakdale LLC, led by Byron McKimmey.
The deal is financed with a two-year loan of $435,600 from Arvest Bank of Fayetteville.
The land was purchased in February 2006 as part of an $8.3 million transaction with Metropolitan Land Co., representing the heirs of Justin Matthews and his Metropolitan Trust.
Multifamily Sale I
A six-unit apartment project in the Hillcrest area of Little Rock drew a $450,000 transaction.
S. Anne Goodman bought the 501 Ridgeway Drive project from TA Holdings LLC, led by Todd Anderson.
The 0.32-acre development previously was linked with an April 2006 mortgage of $306,450 held by Summit Bank of Arkadelphia.
The property was acquired for $320,000 in April 2003 from Bek Kaiser and Willis Smith.
Multifamily Sale II
Two apartment buildings in southwest Little Rock changed hands in tandem deals totaling $255,000.
Zdunn LLC, led by Bert and Alephina Zinamon, purchased the six-unit building at 5916 Valley Drive for $155,000 and the eight-unit building at 5723 Valley Drive for $100,000.
The respective sellers are Sunflower Valley LLC, led by George Blevins Jr., and Sanchez Brothers Inc., led by Teresa Jiminez. The Sanchez deal is funded with a $175,000 loan from Centennial Bank of Conway.
The 0.34-acre development at 5916 Valley Drive previously was tied to a June 2012 mortgage of $150,000 held by Arvest Bank. It was acquired for $90,000 in March 2010 from Delta Trust & Bank of Little Rock.
The 0.45-acre development at 5723 Valley Drive was bought for an undisclosed sum in October 2009 from the Arkansas Development Finance Authority.
Site Purchase II
A 1.28-acre commercial site in Maumelle is under new ownership after a $345,000 sale.
Child Development Schools Inc. of Columbus, Georgia, acquired the land near the southeast corner of Maumelle Boulevard and Country Club Parkway from CCP Development LLC, led by Skip Davidson.
The property was purchased in December 2006 as part of a $751,000 deal with North Little Rock’s National Bank of Arkansas.
Hickory Creek Manor I
A 5,300-SF home in west Little Rock’s gated Hickory Creek neighborhood weighed in at $1.05 million.
Cindy and Gautam Gandhi bought the house from Andrew and Lindy Smith.
The deal is backed with a 30-year loan of $945,000 from One Bank & Trust of Little Rock.
The residence previously was tied to an August 2015 mortgage of $595,000 held by Centennial Bank.
The Smiths acquired the location for $190,000 in April 2003 from Rack Holdings LLC, led by Joe White.
Hickory Creek Manor II
A 4,433-SF home in west Little Rock’s Hickory Creek neighborhood rang up a $700,000 sale.
Kyle Knott purchased the house from Gary Duke and Jeffery Chapman.
The deal is financed with a nine-year loan of $489,930 from Little Rock’s Bank of the Ozarks.
The residence previously was linked with a November 2015 mortgage of $151,500 held by Bank of Little Rock Mortgage Corp.
The property was bought for $404,000 in February 2015 from Deutsche Bank Trust Co. Americas, as trustee of a portfolio of mortgage-backed securities.
Woodland’s Abode
A 4,209-SF home in west Little Rock’s Woodland’s Edge neighborhood sold for $555,000.
Fuad Habash and Sara Rassam acquired the house from Lamay-O Inc., led by Bill Martin.
The residence previously was tied to a March 2014 mortgage of $380,000 held by Gibsland Bank & Trust of Louisiana.
The location was purchased for $72,000 in May 2013 from Rocket Properties Inc., led by Lisenne Rockefeller and Ron Tyne.
PV Residence
A 4,400-SF home in west Little Rock’s Pleasant Valley neighborhood drew a $530,000 transaction.
Caleb and Denice Bozeman bought the house from Sharon and James Robinson III. The deal is funded with a 30-year loan of $400,000 from IberiaBank of Lafayette, Louisiana.
The location was acquired for $35,000 in November 1982 from Jimmy and Joyce Greenfield.
Martin Knee & Sports Medicine Clinic $2,109,380
5320 W. Markham St., Little Rock
East Harding Inc., Little Rock
CVS Pharmacy $1,400,000
1122 S. University Ave., Little Rock
GLR Inc., Dayton, Ohio
Substation Upgrade $1,173,097
ACH Research Institute
13 Children’s Way, Little Rock
Nabholz Construction Corp., Conway
Simmons First National Corp. of Pine Bluff, the venerable parent company of Simmons Bank, has 11 directors. All 11 are male.
Home BancShares Inc. of Conway, the parent company of Centennial Bank, has 12 directors. All male.
The chairmen of both publicly traded banks recognize that this is not ideal and have plans to add women to their boards.
Sharon Gaber, the former provost of the University of Arkansas, resigned from Simmons’ board when she was hired as president of the University of Toledo in Ohio in early 2015. Since then, according to Chairman and CEO George Makris Jr., Simmons has identified an ideal woman with a strong financial background to join the board. But she isn’t immediately available, so diversifying the board will have to wait.
Similarly, John Allison, chairman of Home BancShares, says his company has picked an ideal woman for its board — his sister-in-law, Donna Townsell, who has been credited with dramatically improving Centennial’s efficiency ratios. But he doesn’t plan to place her on the board until he retires in five years or longer.
With all due respect to Makris, Allison and the 21 other men on their boards of directors, you are thinking about this all wrong. Bringing gender diversity to your board is not like marriage, in which you must find your one and only true love. Identifying one perfect woman does not preclude identifying other women who are plenty qualified. If there are 23 men who are ideally suited to your boards, surely there is more than one woman who would be equally valuable.
Bank of the Ozarks — recognized year after year as one of the best-run banks in the country — has managed to find three women directors at the same time. Believe us on this: Adding more women to your boards will not be unfaithful to the women who are at the top of your list. In fact, more women will make their voices even more meaningful.
The parent company of Mulberry’s Allied Bank marked its second year in bankruptcy last month.
More than six months have come and gone since anything new has hit the court docket in the Chapter 7 bankruptcy case of Acme Holding Co.
Ray Fulmer, court-appointed trustee, couldn’t be reached for comment on the case and provide an update on his efforts to sell Acme’s Allied bank stock.
“The trustee has been running different paths with different folks who have differing levels of interest in acquiring,” said Garland Binns Jr. of Little Rock’s Dover & Dixon law firm, which represents Chambers Bank of Danville.
“We want to give him an opportunity to sell the bank. Maybe a sale can pay off a large part or all of the debt.”
The Allied bank stock is in the physical possession of Acme’s lead creditor, Chambers Bank, and secures two delinquent loans totaling more than $4.5 million.
C Holdings LLC, an affiliate of Chambers Bank, also holds a $1.4 million delinquent loan claim against Acme.
Mixed in with Acme’s pledge of Allied stock are the personal guarantees of Lex and Ellen Golden, whose Little Rock family maintains operational control of the bank.
A third Acme creditor, Hildene Asset Management, represents the holders of trust-preferred securities with a claim of more than $3 million.
During the past six months, the financial fortunes of Acme’s prime asset have continued to spiral downward.
Since Sept. 30, Allied Bank has lost more than $2.5 million as its equity capital deteriorated below $5 million and total assets declined to $72 million.
Lex and Alex Golden, Allied’s father-son executive team, couldn’t shrink Allied’s asset base fast enough to restore regulatory-mandated balance.
They also were unable to stop the losses from bad loans that have battered Allied for more than five years and put the bank under regulatory supervision.
In 2010, the bank reported year-end high-water marks for total assets ($185 million) and equity capital ($18 million).
Acme’s Chapter 11 reorganization was converted to Chapter 7 liquidation last year after the Goldens failed to convince U.S. Bankruptcy Court Judge Ben Barry a turnaround was possible.
With no dividends from Allied, Acme could not service its debt.
The bank’s parent company, Acme Holding, entered bankruptcy court on April 29, 2014. Acme’s prime asset is ownership of Allied Bank.
| Total Assets | Equity Capital | Net Income | ||
| 2014 | 2Q | $122,754 | $8,586 | -$266 |
| 3Q | $119,594 | $8,260 | -$72 | |
| 4Q | $111,538 | $8,096 | -$492 | |
| 2015 | 1Q | $107,187 | $8,097 | $30 |
| 2Q | $98,602 | $7,787 | -$236 | |
| 3Q | $82,581 | $7,529 | -$266 | |
| 4Q | $79,327 | $5,789 | -$1,722 | |
| 2016 | 1Q | $72,378 | $4,973 | -$834 |
Source: Federal Deposit Insurance Corp. All dollars in thousands
The post-recession downward trend in new business activity is showing signs of reversal, according to the 2015 Kauffman Index of Entrepreneurship. In fact, last year the new business sector had the largest year-over-year increase in two decades.
Most startup businesses will require some funding from a bank or other financial institution. As a result, we are often asked what banks and other lenders in offering a business loan to a startup. As entrepreneurs prepare to enter the marketplace, here are some of the important factors that financial institutions want to see in your business plan in order to “green light” your loan application.
Financial institutions rely on business plans to not only decide on lending, but to determine the best mix of banking products and services to benefit their business customers.
Having a business plan is critical for both the business owner and the financial institution. Not only does it provide a road map for research, it drastically increases the chance for success, including consistent growth and investment. A business plan allows entrepreneurs to create a blueprint that includes creation, operation, promotion and success of the company in specific details.
A business plan that extensively states the vision, strategy and future of the company is more likely to sell a lender on the idea. Within the plan, lenders look for details beyond the financials, such as a prospective company’s industry analysis to determine if the mission aligns with the needs of the area and whether there is enough market share to allow profitability.
Entrepreneurs should also undertake comprehensive market analysis that includes demographics of prospective customers and their spending habits, as well as key competitors. Equally important is to clearly explain the point of difference the planned company offers in comparison to its competitors and how that distinction will influence purchases.
Realistic financial projections are a critical point that lenders will review. Do they compare with industry standards and are they in line with the performance of similar businesses? One of the biggest mistakes entrepreneurs make in their business plans is to inflate financials beyond industry averages. Lenders recognize this and, more often than not, will see it as an area of concern.
In addition to profit and loss projections, lenders review anticipated cash flow for the next three to five years. Business owners typically think about costs and expenses compared with sales, but timing and delays play a big role in managing cash. Loan officers look closely at accounts receivable and inventory turnover ratios, which are other indicators of good cash flow cycles. Higher turnover ratios are desirable as they indicate management does not hold onto excess inventories and inventories are highly marketable.
The Arkansas Small Business & Technology Development Center at the University of Arkansas at Little Rock is a valuable resource for business owners in the creation, management and operation of a company. The ASBTDC provides free services to business owners at any stage of development or operation of their businesses, including market research and consulting that strengthen any business plan.
Proof that stakeholders know their business or have a record of success helps a plan stand out under review. Applicants should include extensive profiles of the business partners, management team, investors and any other key players involved. Collaboration or partnerships with individuals who have a history of business acumen bode well for budding and seasoned entrepreneurs alike.
Financial institutions prefer proof of a secondary source of repayment in the event a business struggles financially. Those sources include cash savings, a strong guarantor with liquid assets, excess collateral, etc.
Banks must protect depositors with every loan, so proof of alternate sources for repayment is critical for loan applicants.
A banker’s best advice for prospective business owners is to “do your homework.” Simply put: Know the industry, create a point of difference, outline a solid and realistic balance sheet and assemble a reputable and experienced team.
Lenders want to help small businesses succeed, and the legwork done in the planning stages can be a strong indicator of the success that may follow.
 |
Marcus Guinn is an executive vice president and loan manager for Arvest Bank in central Arkansas. Email him at MGuinn@Arvest.com. For more information on small-business planning and lending, visit the Arvest Business Resource Center at ArvestBiz.com. |
Little Rock’s One Bank & Trust hasn’t generated a normal quarterly profit since the Office of the Comptroller of the Currency ousted Layton “Scooter” Stuart as CEO in September 2012.
That fiscal situation finally could change during the second half of this year. Resolving debts associated with the bank’s troubled parent company, OneFinancial Corp., are in the forefront. Efforts to recapitalize One Bank to enhance its balance sheet capabilities are following close behind.
“We’re stable today, but we would be a whole lot more stable,” said Jerry Pavlas, brought in as CEO after Stuart’s forced exodus. “We’ve done a lot of the base work, and we already have one or two investment bankers lined up. But you really want to get the BHL suit done.”
The $324 million-asset lender is close to wrapping up one more costly legal entanglement left by Stuart: Delinquent debts owed to the J.B. Hunt family’s BHL Financing LLC for purchasing the bank and more.
Finalizing a settlement involving One Bank, the U.S. Treasury, the Department of Justice and trucking heiress Johnelle Hunt appears to be close at hand.
“We hope to accomplish this by the end of May,” Pavlas said. “We don’t see any issues there. We’re just waiting on regulatory approval. Treasury and Justice need to approve it. Everyone’s working toward the settlement, and it’s very, very friendly.”
After landing a $14.7 million default judgment against OneFinancial Corp. in September, Hunt’s BHL Financing sued One Bank. The action represents a second lawsuit to collect on financial guarantees made by 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 late husband, J.B. Hunt, founder of J.B. Hunt Transport Services Inc. of Lowell.
The debt restructuring was orchestrated through various Stuart-controlled ventures, including One Bank and OneFinancial Corp.
A July 2015 lawsuit brought against the bank and Pavlas by former One Bank Senior Vice President Donna Adams is another legal loose end. Jim Schnoes, One Bank’s chief financial officer, also is named as defendant.
Adams is suing to regain her share of the bank’s supplemental executive retirement plan. She claims the benefit was wrongfully taken from her when she left the bank in January 2014 under duress.
In response, the bank claims Adams lost her SERP benefits because of professional misconduct associated with Scooter Stuart mishandling funds that flowed through the bank.
Post-Stuart operations at One Bank have been hampered by extraordinary legal fees, which topped $800,000 annually 2013-15. The pace didn’t slacken this year, with a first-quarter tab of $258,000.
“We have a real good commercial pipeline that we’re being real careful with now because of the capital front,” Pavlas said. “The other thing is mortgage banking. We had to pare that back, and we’re nowhere near the capacity of what we could do. This bank has a track record of not having hardly any repurchases.”
Adding about $13 million to capital would allow One Bank to reach a 9 percent cap and nearly double its legal lending limit to about $4.5 million.
Additional funds from private investors could be used to pay a final settlement with the U.S. Treasury on money that flowed to the bank from its parent company.
At the last reckoning, OneFinancial could owe as little as $9.6 million to Uncle Sam. However, that figure discounts any interest paid or outstanding interest owed on the $17.3 million provided through TARP’s capital purchase program.
The holding company last made a TARP payment in February 2012.
“We’ve been working with Treasury on the TARP obligation and working with them on recapitalization of the bank,” Pavlas said. “We want to remain an independent community bank. That’s what everyone wants, including Treasury.
“I’m happy with the progress we made. We’ve overcome a lot of hurdles to be where we are.”
What happens to the investors in OneFinancial’s trust-preferred securities who hold an $8 million claim?
“That’s up to Treasury,” Pavlas said. “Legally, there won’t be enough money at the holding company level unless Treasury elects to give them something. Then, the holding company pretty much goes away, with a stand-alone bank or a new holding company formed.”
Jerry Pavlas was named CEO after the Office of the Comptroller forced the removal of Layton “Scooter” Stuart on Sept. 28, 2012.
| Total Assets | Equity Capital | Net Income | ||
| 2012 | 3Q | $454,486 | $26,770 | -$1,154 |
| 4Q | $439,726 | $22,872 | -$4,145 | |
| 2013 | 1Q | $423,098 | $19,918 | -$2,954 |
| 2Q | $400,793 | $18,746 | -$707 | |
| 3Q | $393,018 | $16,404 | -$1,306 | |
| 4Q | $378,531 | $14,737 | -$1,686 | |
| 2014 | 1Q | $377,206 | $13,763 | -$1,195 |
| 2Q | $374,964 | $16,792 | $2,399* | |
| 3Q | $358,038 | $16,855 | $106** | |
| 4Q | $343,464 | $15,578 | -$898 | |
| 2015 | 1Q | $332,652 | $14,066 | -$1,474 |
| 2Q | $326,129 | $12,785# | $167## | |
| 3Q | $329,386 | $18,939† | $2,919† | |
| 4Q | $325,945 | $17,599 | -$2,507 | |
| 2016 | 1Q | $324,365 | $16,736 | -$1,356 |
*Reflects a $3 million extraordinary item, money released from seized assets of Layton “Scooter” Stuart held by the U.S. government. The cash came from the life insurance payout on Stuart, One Bank’s former owner and CEO, which reimbursed the bank for premiums paid on the policy.
**Reflects a $1 million settlement the bank received in a lawsuit against Travelers Indemnity Co., an affiliate of St. Paul Mercury Insurance Co. The dispute was tied to One Bank’s efforts to collect $2 million on its financial institution bond for coverage that included “dishonesty of employees.”
#Reflects net unrealized loss of $978,000 on available-for-sale securities.
##Reflects a $403,000 gain on the sale of mortgages on the secondary market.
†Reflects a $6.9 million extraordinary item, money from the final settlement of the life insurance payout on Stuart.
Source: Federal Deposit Insurance Corp. All dollars in thousands.
Technology has changed the relationship between banks and their customers, a change resulting in the decline in the number of bank branches per capita worldwide.
Customers are increasingly using digital and mobile services to meet their banking needs. And that means that consumer banks in the United States and Europe “are at a tipping point in terms of branch distribution,” says a report released March 29 by Citigroup, the global financial services company.
Northern Europe has cut total branches by about 50 percent, says the report, “Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.”
“The U.S. banks have up to now lagged their Nordic and European peers on branch reductions. But with the increased ubiquity of the mobile Internet, increasing FinTech competition, and a sluggish revenue and profitability environment, we expect U.S. banks to follow their EU peers in cutting branches,” the report says.
It quotes Antony Jenkins, the former CEO of Barclays, who has said that banks are at an “Uber moment.” Jenkins says “that pressure from new technology-based competitors ‘will compel banks to significantly automate their business’ and ‘that the number of branches and people may decline by as much as 50% over the next years.’”
Sources: World Bank, Citi Research
Little Rock businessman Phil Herrington’s Chapter 11 bankruptcy reorganization was worse than we originally thought.
In the recently released, more detailed filing, Herrington listed debts of $13.45 million and assets of $5.06 million. When he initially filed for Chapter 11 in March, the real estate developer listed his estimated debts at between $1 million and $10 million.
The new filing shows Herrington’s largest creditor is Gaillardia Investors LLC of Oklahoma City, which is owed $5 million. Herrington also reported a $3.1 million debt tied to a personal judgment from Timberdell Road Group LLC of Oklahoma City.
The judgment was entered in December. He also lists a $1.7 million debt to GCC Lender LLC of Oklahoma City.
If you recall, we told you two years ago about Herrington’s troubled ownership of Gaillardia Golf & Country Club in Oklahoma City, with its 275-acre golfing spread featuring a 7,240-yard championship course. Herrington was booted from operational control of the club after accusations of mismanagement surfaced. Herrington bought the club in December 2002 as part of a $9.1 million deal with OPUBCO Development Co., led by Christine Gaylord Everest.
Herrington’s other debts are family affairs. He also owes his father, Al Herrington of Camden, $470,000 for loans to Phil Herrington’s company, Herrington Inc., in 2009-10. Phil Herrington owes $300,000 to his cousin, Fred Alston of Magnolia, for a loan originated between 2010 and 2011.
Those — like nearly all his debts — are to creditors holding unsecured claims. Herrington listed his gross income as “unknown” for the years 2014 and 2015.
Herrington paid a $50,000 retainer to his attorney, Kevin Keech of the Keech Law Firm in Little Rock. Keech didn’t return a call for comment.
Lisa Ray last week started her big new job as regional executive for Arvest Bank in northwest Arkansas and southwest Missouri.
(You can read more about that in this week's cover feature, Despite Individual Victories, Progress Slow For Women in Arkansas Banking.)
Ray’s first act after succeeding Cliff Gibbs, who retired, was to name her own successor as president of Arvest’s Springdale market.
He is Kent Williamson, who joined Arvest in 1992 and has spent all that time in the Springdale market.
In a civil trial scheduled to start next Monday, the Federal Deposit Insurance Corp. will blame regional accounting firm BKD LLC for failing to uncover the massive fraud that led to the 2010 failure of First Southern Bank of Batesville.
But BKD, in recently released court filings, argues that the bank’s own officers could have shut down former Little Rock attorney Kevin Lewis’ scam almost two years earlier had they simply done their jobs.
At the end of December 2008, Lewis apparently forged the signature of a business partner to obtain a $250,000 loan from First Southern, according to court pleadings by BKD, which is headquartered in Springfield, Missouri, and has a large office in Little Rock.
“Proper due diligence would have led FSB to discover that Lewis was not to be trusted,” BKD said in a court filing in U.S. District Court in Little Rock. “Further, because Lewis’s scheme would have constituted bank fraud, … FSB would not have thereafter had dealings with Kevin Lewis and would have sustained no losses from Lewis’s [improvement district] bonds as a result.”
Lewis, 47, pleaded guilty to one count of bank fraud for a complex, multiyear scheme in which he manufactured phony property owner improvement district bonds, sold them to banks as investments and used them as collateral on bank loans. He is serving a 10-year sentence in federal prison at Memphis.
Scheduled for release in January 2021, Lewis also was ordered to pay $39.5 million in restitution to nine banks in what is considered the largest fraud ever prosecuted in Arkansas.
By the time Lewis’ bond fraud was finally discovered in the fall of 2010, he had become the majority shareholder of First Southern and had sold his own bank $23.3 million worth of fake improvement district bonds. Bank regulators closed the bank in December 2010.
The FDIC, as the bank’s receiver, sued BKD in 2013, saying the firm should have caught the red flags when its accountants audited the bank between June 2009 and June 2010.
The FDIC’s civil suit accuses BKD of negligence and breach of contract and suggests damages of as much as $22.9 million. The trial in U.S. District Court in Little Rock is expected to last up to three weeks.
The FDIC said in its court filings that BKD “failed to detect and report to Bank management possible fraud in connection with millions of dollars of fraudulent Property Owner Improvement District Bonds sold by Kevin Lewis to FSB.”
It was during a routine regulatory examination of First Southern, the lawsuit says, that the Arkansas State Bank Department and the FDIC “identified possible fraud in connection with the POID Bonds after just a few phone calls. … They confirmed that the Bonds were fraudulent and did not exist shortly afterward.”
BKD and the FDIC have participated in two mediations but didn’t settle the case, according to an April 11 filing by the FDIC.
“We can’t comment on the details of the case, but BKD intends to vigorously defend its work at trial,” said Timothy McNamara of Kansas City, Missouri, an attorney for the accounting firm.
The FDIC also said it couldn’t comment on the pending case.
Hundreds of pages of recently filed pleadings give some more insight into Lewis’ fraud. The new documents also reveal that Lewis was generous with the bank’s money, giving some directors secret bonuses of tens of thousands of dollars’ worth of stock and cash.
Their dealings with Lewis left the bank’s former CEO, Woody Castleberry, and director Jennifer Styron with lifetime bans from working in the banking industry.
Styron, who is now the chief financial officer at the Arkansas Heart Hospital in Little Rock, declined to comment.
‘Glaring’ Inconsistencies
BKD said in its court filings that First Southern’s first of many fumbles came in December 2008, when the bank made a $250,000 loan to Michael Hulsey, then of Searcy, who was a business partner of Lewis. The bank made a second loan of $550,000 to Hulsey in February 2009, according to the loan papers filed as exhibits. The proceeds were intended to be used to repay debt.
Hulsey couldn’t be reached for comment, but in a deposition he said he didn’t sign any of the loan documents, according to BKD. “All of the signatures apparently were forged by Lewis,” BKD said.
BKD blamed the First Southern officials for missing the warning signs of dubious loans.
“The loans were collateralized by POID bonds transferred by Lewis to Hulsey at or immediately prior to the loan closing,” BKD said in its filings.
The bank didn’t conduct any due diligence into the collateral, nor did it do any real analysis of Hulsey’s personal financial condition. The officers didn’t investigate any of the “glaring” inconsistencies between Hulsey’s reported finances and what he reported on his income tax returns.
Instead, the loans were made “solely on the representations of Kevin Lewis. The Bank did not know Hulsey,” the filing said. “Castleberry did not explore the nature or basis of the loan but just talked about what a ‘great guy’ Lewis was.”
At Lewis’ request — with no confirmation by Hulsey — the bank gave the proceeds of the first loan directly to a Lewis entity, BKD said. At that point, “Lewis was not a bank employee, officer, director, or owner,” BKD said. “There was no basis for any reliance on Lewis.”
Had First Southern “adhered to even the most basic loan underwriting protocols, it would have discovered the Lewis scheme, thereby avoiding all or virtually all of the losses the Bank ultimately sustained,” the filing said.
Lewis and Hulsey were partners in Benchmark Clothiers Inc., which specialized in custom men’s shirts and suits, according to an Apparel Magazine article in 2004. Separating itself from other retailers, Benchmark planned to use body scanners to measure its customers so the clothes wouldn’t need alterations.
“We feel we don’t have potential customers until they are scanned,” Lewis told the magazine. “Body scanning turns customer suspects into prospects.”
Castleberry told Arkansas Business last week that First Southern’s lending officer in Searcy knew both Hulsey and Lewis.
Castleberry, now working at White River Health System in Batesville as its managed care coordinator, said he didn’t know if the loans were ever repaid.
‘Well-Respected Lawyer’
First Southern was a young bank when Lewis invested in it in 2009. Castleberry had resigned as chairman, president and CEO of Citizens Bank of Batesville in late 2004 and announced plans to start a competing bank in town.
The new bank was chartered in August 2005 with a little more than $9 million in capital, significantly less than the $15 million its founders had hoped to raise.
David Estes, CEO of First State Bank of Lonoke, and a group of business associates invested in the startup bank, Castleberry said in a deposition taken in the FDIC case.
“They had said all along that this was a short-term investment for them, five to seven years,” Castleberry said in the deposition taken on Sept. 1.
Castleberry, who was paid about $190,000 annually at that time, said he understood that he needed to find a buyer for the Estes group’s shares or risk being replaced as president.
In walked Lewis. At that time, BKD said, Lewis was a “prominent and well-respected lawyer” who helped communities pay for improvements by creating property owner improvement districts and issuing POID bonds.
The filings don’t say when or why Lewis started creating fraudulent bonds. One of the banks that accepted them as real was First Southern.
Near the end of 2008, Lewis learned that the controlling interest in First Southern was for sale. Lewis arranged for a family trust, PA Alliance Trust, to buy controlling interest in First Southern. Kevin Lewis’ father had created the trust for his grandchildren.
Lewis took control of the bank in May 2009, and it continued buying his phony bonds.
In an interview with Arkansas Business last week, Castleberry suggested that Lewis might have bought the majority interest in First Southern in order to make it easier to find other banks that would buy his phony bonds. “Because he knew he was going to have to, at some point … find other outlets to keep that scheme going,” Castleberry said.
Lewis also may have wanted to grow the bank so that it would be worth a lot of money, he said. “I really don’t know what he was thinking,” Castleberry said. “It doesn’t make a lot of sense.”
Gives Directors Bonuses
After buying controlling interest, Lewis had set his sights on developing a First Southern branch in Searcy, his hometown.
“He had talked about wanting to grow the bank and specific strategies in different markets we might go into,” Castleberry told Arkansas Business. “Frankly, the kind of stuff any de novo bank would talk about.”
While Lewis was at the bank, he quietly gave some directors bonuses.
Director Jennifer Styron, who at the time used the last name Styron-Ripa, received approximately $143,000 worth of First Southern stock from Lewis, according to the FDIC’s pleadings. Lewis also personally guaranteed her home mortgage.
The filings don’t contain Styron’s complete deposition, and the excerpts that were made public don’t explain why Lewis guaranteed her mortgage or specify where the home was.
Styron declined to comment to Arkansas Business.
In a deposition taken last August, Styron confirmed that Lewis gave her the shares but said she didn’t know who had owned them. “It was supposed to be for retirement,” she said.
Styron’s signature appears on three of Lewis’ fraudulent improvement district bonds, where she is listed as the registrar, the FDIC said in its filings.
In the deposition she confirmed that it was her signature, but she didn’t remember signing them. “I have no clue” what a bond registrar is, Styron added.
In June 2012, Styron, without admitting or denying any unsafe or unsound banking practices or any breaches of fiduciary duty, agreed to a lifetime ban from the banking industry.
Jim Haynes, a director of First Southern and its executive vice president and chief lending officer, said in his Aug. 21 deposition that he didn’t know Lewis had guaranteed Styron’s mortgage and given her other gifts.
Haynes said he received about 150 shares of First Southern from Lewis but couldn’t remember details of the gift.
Also in February or March 2010, Lewis gave Haynes $26,000 in the form of a check from the Lewis Law Firm. Haynes said he considered that money to be a bonus to compensate him for the bonus he missed out on when he left Centennial Bank of Conway to join First Southern in 2009.
“I had made it known when I took the job that, you know, I’m giving up this,” he said.
He didn’t receive any tax forms for the money and he didn’t claim it as taxable income. “I guess the IRS will come back and look for that,” he said.
Haynes, who is now Centennial’s regional president in northwestern Florida, declined to comment.
First Southern’s appetite for Lewis’ investment bonds continued. Castleberry disclosed the purchases on the bank’s monthly balance sheets in 2010.
“None of FSB’s board members questioned the ever-increasing number of POID bond purchases, and indeed, many board members never even noticed, even though the information was presented to them,” BKD said in its filing.
By the time the bank acquired its final POID bond, it had less than $14 million in equity capital but more than $23 million in POID bond holdings, BKD said.
“Had the Bank or its board performed its due diligence on the POID bonds, or at least limited its exposure to the POID bonds, it is highly likely that FSB would have sustained very little, if any, damages,” BKD said.
The trial is scheduled to start at 9:15 a.m. Monday in the federal courthouse in Little Rock before U.S. District Judge James Moody Jr.
Money is one of the most important requirements for the budding startup community in northwest Arkansas.
Jay Amargos of Startup Junkie Consulting said the lack of money is just one of many barriers for the prospective Latino entrepreneur. Amargos leads Startup Junkie’s minority outreach program, which hopes to develop and support northwest Arkansas’ Latino startup community.
Amargos said it won’t be a quick or easy fix but the region is making progress. The first challenge was letting the Latino community know there was a support system for entrepreneurs, a hard sell initially because of language and cultural barriers.
Jeff Amerine of Startup Junkie said the outreach program is important because studies show that Latino entrepreneurs receive approximately 5 percent of startup funding nationally. The answer is to not only generate interest among Latinos to become entrepreneurs but also to support them through the funding process.
“There has been a massive underrepresentation of available equity investment and lending to women and minority-owned businesses,” Amerine said. “It’s hugely important for these underrepresented communities to have access to good funding sources. It isn’t an entitlement to get funding if you have a crappy idea. If you are gender and race neutral and you look at the merits of the idea, that’s the best bet. By the same token, that historically hasn’t always been the case.”
Amargos is in a unique position to help because she is the daughter of local motivational speaker and radio personality Al “Papa Rap” Lopez, she is fluent in Spanish as a native of Puerto Rico, and she worked in commercial lending as a vice president of Arvest Bank. She reached out to Latino community organizations, such as churches, to help bridge the divide.
“It was very important that we partner with somebody who has trust,” Amargos said. “Someone who could say, ‘This is Jay. You can trust her.’ I had a reputation already built with the community with my banking experience. That was my role, I was always extremely engaged with the community, and my dad has a reputation in this community that opened a lot of doors for me. People really love and respect him. A lot of people trusted me because of him.”
Amargos and Startup Junkie aren’t alone in working with minority communities. The Arkansas Small Business & Technology Development Center at the University of Arkansas’ Walton Business College works with the same goal in mind, and even uses Amargos as a translator for the center’s seminars and meetings.
Café Success Story
Mauricio Guerrero always dreamed of owning a coffee shop when he was in Guatemala City. When his wife moved to northwest Arkansas to work in international logistics with Wal-Mart Stores Inc. of Bentonville, Guerrero decided to take the plunge.
The only problem: Guerrero had no idea how to proceed and couldn’t speak English well enough to get the help he needed. That’s where his partnership with the Arkansas Small Business Center proved vital.
“First, I was happy, ‘Yes, I will do my dream,’” Guerrero said. “Then it was, who I can ask something? That’s when I went to ask the procedures and I can barely speak English. No one can help, not because they don’t know what to do and they don’t want to help me; it is because I cannot say I want to start a business here.
“If you find someone who can speak your language, that makes really less painful the process to open your own business.”
Through the Small Business Center, Guerrero was able to get support through the process of starting a business. Guerrero, 32, has a master’s in business administration and worked many years for Citibank, yet it was a daunting task to pursue his dream in America.
“They give me a little push I need when the scare and the fear is up to here and you want to quit,” Guerrero said.
Guerrero opened the 211 Café in Bentonville in November, and business has been solid since the opening. Bill Fox, the director of the Small Business Center, said the center has individual counseling sessions with prospective entrepreneurs and holds group seminars, including one held Tuesday that was solely in Spanish.
“We try to make it just a little easier for people to navigate all the potential pitfalls that are common, especially when you’re just starting up,” Fox said. “For a number of years we’ve had a number of programs with folks who speak Spanish or with translators, so we can reach out to that community. We’re very cognizant of the expanding community in northwest Arkansas, and we want to be a resource for them like we are for everybody else.”
Planting the Seeds
Amargos isn’t deluded in thinking this is going to be a quick fix. Building an entrepreneur ecosystem that encourages and supports women and minorities will not be an overnight process.
Amargos has worked with Startup Junkie for two years and said the progress has made her optimistic. In 10 years, she said, northwest Arkansas should have a different environment.
“Jeff really wanted to make a difference, but the only way he could do that was by making sure the ecosystem represented the entire community and not just white male and technology,” Amargos said. “Two years ago we were struggling to get people in here. I probably see 10-15 Latino customers each week. The thing is people are coming. People are getting the information and they’re curious.”
Organizations such as Startup Junkie and the Small Business Center are making headway by partnering with chambers of commerce, community organizations and banks. Amargos joked that when she started getting the word out, she walked up and down Springdale’s Emma Avenue talking to people about the meetings she was holding.
Amargos said her banking experience also helps. She tells her Latino clients what banks are looking for in loan applications and how doing your homework can improve one’s chances.
“When it’s a minority client it takes a lot of education and holding hands,” Amargos said. “We want to make sure we were getting that side of the community to understand there is an ecosystem, we want you to be a part of it, and there is a ton of resources out there you can use. It’s hard when you’re starting — or wanting to start — and you have no clue how to start sometimes. We do one-on-one advising, coaching and mentoring with aspiring entrepreneurs so we can take them from point A to point Z.”
(A correction has been made in this article. See end for details.)
For women in Arkansas’ banking industry, every encouraging development seems to be matched by discouraging reality.
Last week, for instance, Lisa Ray succeeded retiring Cliff Gibbs as one of Arvest Bank’s three regional executives — a direct report to CEO Kevin Sabin and one of four women on the board of directors of the largest bank chartered in Arkansas. Her five submarkets in northwest Arkansas and southwest Missouri represent some $4.5 billion in assets, $4 billion in deposits and 1,061 employees.
Meanwhile, half as many women (three) have the title of CEO at Arkansas banks as they did a dozen years ago, primarily because the small banks that women were more likely to run are being consolidated out of existence.
Arkansas banks employ three times as many women as men, a survey conducted last fall by the State Bank Department found. But at the vice president level and above, only 44 percent are women, and only one in eight directors is a woman.
Bank of the Ozarks Inc., the largest of the state’s publicly traded bank holding companies, is expected to add a third woman to its 15-member board of directors at next Monday’s shareholders meeting.
But the other three public banks — Simmons First National Corp., Home BancShares Inc. and Bear State Financial Inc. — have no women directors out of a total of 34 seats.
Currently, three of the Arkansas Bankers Association’s 25 officers and directors are women: Treasurer Judy Lawton, who was recently promoted to president at Heartland Bank of Little Rock; Elizabeth Farris, who will be leaving the board because she recently retired as Hot Springs market president for Regions Bank; and Cathy Owen, chairman of Eagle Bank & Trust of Little Rock.
The ABA is “working on diversifying our board and our leadership,” President and CEO Bill Holmes said last week, but so far no woman has occupied the 126-year-old association’s top elected position. (This fall, Dorothy A. Savarese, chairman and CEO of a $3 billion thrift in Massachusetts, will become the American Bankers Association’s second female board chair.)
The Arkansas banking workforce is even more overwhelmingly female (76 percent at the 88 banks that responded to the Bank Department’s survey) than the industry nationally (about 58 percent, according to a 2013 report by the Equal Employment Opportunity Commission). But most of those women work in the public-facing retail side of the business or in the back offices.
The commercial lending side, where the salaries are bigger and executives tend to be groomed, is still dominated by men. And that can be a self-perpetuating handicap, especially in a rural state, said Susie Smith, the former COO of Metropolitan National Bank of Little Rock, who left Metropolitan’s acquirer, Simmons Bank, at the end of 2015.
“I don’t think that as many women are entering the commercial lending side of the bank out of college because they have not seen the development of a fully diverse staff,” Smith said. “I don’t think it looks like an attractive place to go unless it’s in a larger metropolitan area.”
Other industries — insurance, health care, accounting — have embraced diversity, of gender and race, in ways the banking industry has not, Smith said. As a result, she said, talented young women see those as “fields they can be more successful in.”
Holmes said banking has had trouble attracting new talent of either sex in the years since the economic crash of 2008, but the industry has been sensitized to the need to recruit, train, retain and reward more women.
That message was underscored by State Bank Commissioner Candace Franks — who became the first woman to head the Arkansas State Bank Department when she was appointed by Gov. Mike Beebe in 2007 — in a speech at the ABA’s first Women in Banking conference in November 2015.
The ABA will hold its second Women in Banking conference in Little Rock in November.
The Ladder
Women have been involved in the banking industry in Arkansas for more than a century, including in top management positions. The Arkansas Banker, the ABA magazine, reported in 1935 that “there are 42 lady banker presidents, vice president, cashiers, and assistant cashiers” plus “scores of girls working in the banks as stenographers, file clerks, etc.”
At that time, there were three women bank presidents in the state: Roberta Waugh Fulbright, a one-woman business conglomerate who was president of Citizens Bank of Fayetteville and mother of U.S. Sen. J. William Fulbright; Agnes Bass of Security Bank at Harrison; and Mattie Edwards of Citizens Bank at Booneville.
Fulbright and Bass succeeded their late husbands as president of the banks in which they were major owners, and family ownership is still an entree into the industry for women.
Cathy Owen, for instance, is the daughter of Harry Hastings Jr., an original investor in what is now Eagle Bank, which was founded as First State Bank in Sherwood in 1967. A few years later, 16-year-old Cathy Hastings took a summer job shredding paper for the bank and fell in love with banking.
But Owen, whose family still owns almost all of the stock in the $390 million-asset bank, says that path does not mean the job is easier. She is generally at the holding company office in west Little Rock by 7 a.m. and rarely leaves before 7 p.m., and that time commitment may be one reason that women — especially those with younger families — have not embraced management-level banking.
Lisa Ray, newly promoted at Arvest, also suggests that women who do enter banking can be holding themselves back from higher level banking careers. Referring to Facebook COO Sheryl Sandberg’s 2013 bestseller “Lean In,” Ray said, “I feel like I could have written some of that book. Women are making choices that limit their careers more than their bosses ever did.”
At Arvest, which Ray joined 27 years ago, “I’ve never really had a reason to think about my gender.” But she still had to be “pulled kicking and screaming” into leadership opportunities by mentors who helped her overcome self-doubt and other objections.
“Women don’t apply for a job until they feel like they have mastered everything, where men will take a leap three levels up,” she said.
Ray came up through the deposit side of the bank, but as a management trainee she was encouraged to attend loan committee meetings.
In the Springdale market, which Ray ran until her promotion, two of five commercial lenders are women. Others could be if they wanted, she said.
“I have had so many conversations with women over the years who just don’t want to be a commercial banker,” Ray said.
Kevin Sabin, CEO of Arvest, is personally concerned with diversity, Ray said. “He asks about it — ‘Why don’t we have more diversity in this area?’” It is no accident, then, that half of his direct reports are women — including the chief fiancial officer, Karla Payne, whom Ray described as a “very down-to-earth, low-key, brilliant, brilliant person.”
While Ray raves about the management training and encouragement she has received — “I’m in love with Arvest because of all these things.” — the ABA’s Holmes concedes that most banks in Arkansas have not grown their own leaders. Instead, they have hired talent away from each other.
“We haven’t had management training programs and we haven’t had in-house training,” he said. “We just bought the best available talent and brought them in and ran with it.”
Almost needless to say, the best available bank management talent has been overwhelmingly male. When women do take charge, Holmes also conceded, it is sometimes because men have messed things up.
Marnie Oldner was hired as CEO of Ozark Heritage Bank of Mountain View in 2011, when the bank was under strict orders from the Office of the Comptroller of the Currency. In the first quarter of 2015, the bank — now renamed Stone Bank — reported the highest return on assets of any bank chartered in Arkansas at 2.73 percent.
And Judy Lawton, the ABA treasurer, was named president of Heartland Bank in March as the $231 million bank was about to report a $633,000 quarterly loss after losing almost $4.7 million in the fourth quarter of 2015.
(Some in the industry would count Susie Smith in this company for her work in keeping Metropolitan National Bank afloat until it could be acquired by Simmons in 2013.)
Women run banks differently than men do, Holmes said, with a more personal, less rigid decision-making process.
Bankers “do become more human and we don’t make silly errors like when the man’s in charge,” he said.
(Correction, May 9, 2016: Karla Payne is Arvest's chief financial officer. Her title was incorrect in the original story.)
Remember those summary judgments against Little Rock banker Alex Golden and his sister, Amy McCay, the ones we told you about more than a year ago?
We had heard that Golden, president and CEO of Allied Bank, and McCay had reached some sort of financial accommodation with the Federal Deposit Insurance Corp.
Whatever deal was struck by Golden and McCay is no more.
The FDIC locally registered judgments of nearly $900,000 against Golden and more than $324,000 against McCay. Translation: The feds are here to collect.
The awards in U.S. District Court in Atlanta can be traced back to loan defaults and in-clude judgments against the siblings as trustees of their children’s trusts. You might recall the FDIC filed the lawsuit as receiver of $4.1 billion-asset Silverton Bank of Atlanta, closed by the Office of the Comptroller of the Currency on May 1, 2009.
We were told the delinquent loans were tied to the purchase of stock in Acme Holding Co., the now-bankrupt parent company of Allied Bank.
The Silverton loans were originated on Jan. 18, 2008, and matured on Jan. 13, 2013.
Acme Holding is led by its CEO, Lex Golden, father of Alex and Amy.
Gary Hudson is a native of DeWitt and a graduate of Arkansas State University at Jonesboro, the University of Arkansas School of Law at Fayetteville and the Southwestern School of Banking at Southern Methodist University in Dallas. He practiced law in DeWitt before becoming vice president and trust officer of Farmers & Merchants Bank in Stuttgart in December 1980.
In 1988, he became president and CEO of DeWitt Bank & Trust Co. and then returned to F&M as executive vice president and director when F&M built a branch in DeWitt in 2002. He was named president and CEO when Don Pattillo retired in 2009. He is a member of the Arkansas State Banking Board.
Farmers & Merchants Bank is now the 12th-largest bank chartered in Arkansas with assets nearing $1 billion since the acquisition last fall of the Bank of Fayetteville.
What are the advantages and disadvantages of having operated under the radar?
Advantages: It seems that most people outside of the banking world do not really notice a bank in Arkansas until it exceeds $1 billion in asset size. We just haven’t had many until the last few years. We are considered a “farm bank” by some, and that is fine. Farming has been a great business to be associated with, and our farmers and the businesses that serve this industry are the backbone of our nation. That being said, I hope and think that most of our banking and financial service friends see us as a legitimate player statewide.
Disadvantages: Maybe sometimes we are not taken seriously because folks have not heard about us. I really do not think that happens too often. We have a reputation for being a sound institution with highly trained representatives and competitive products.
The Fayetteville purchase was not F&M’s first acquisition outside the Delta — you acquired Chart Bank in Perryville in 2008 — but it’s certainly the biggest and most distant. What does this tell us about your long-range plans for the bank?
Our strategic plan, as developed by our very involved board of directors, instructs management of our institution to search for opportunities that will add value to the investment of our stockholders. We are constantly considering opportunities that fit our community bank business model. We accumulate capital very quickly as a result of our stock dividend program, and our goal is to be ready when the next acquisition opportunity arises. If you are not working on the next deal long before you closed the last one, you are way behind.
How different is banking in the Delta versus banking in northwest Arkansas? What kind of expertise has your bank had to develop for the new markets?
There is a lot more competition and a different economy. The biggest thing about any kind of lending is understanding your own business model and your customers and evaluating and serving their needs. We strive to be a part of our customers’ decision-making process. We want them to involve us when they make everyday as well as the game-changing decisions.
Being in northwest Arkansas and having the privilege of serving the great people of that area is a fabulous opportunity. However, the most prized part of the acquisition is the staff of the Bank of Fayetteville. We have learned that they are highly trained and professional bankers who have a real understanding of the market.
Here’s one of our favorite questions: What was the worst business decision you ever made, and then what was the best?
Worst business decision: Owning a fried chicken and fish restaurant with three friends that was not in the best location. An exceptional product in a bad location has a small chance to succeed. A good to mediocre product in a bad location usually fails. This translates to any kind of business.
Best business decision: Listening to Don Pattillo, former president and CEO of Farmers & Merchants Bank, and taking the job as trust officer of Farmers & Merchants in December 1980. I was a struggling young lawyer in DeWitt. It got me into banking.
Stephens Inc., the Little Rock investment bank, has agreed to a $900,000 fine for failing to supervise use of internal emails concerning analysis of companies and industries.
FINRA, the Financial Industry Regulatory Authority, announced the censure on Wednesday. Stephens Inc. consented to the fine without admitting or denying the findings, and spokesman Frank Thomas told Arkansas Business that Stephens Inc. would not comment on the order.
(See the FINRA order here.)
According to FINRA's announcement, the failure to supervise the "flash" emails sent internally by research analysts created the risk that the contents "could potentially include material nonpublic information that might be misused by sales and trading personnel."
The period covered by the order stretched "from at least August 2013 through January 2016," according to FINRA. The investigation "found instances of firm personnel forwarding flash emails marked 'internal use only' to customers, or cutting and pasting the text of an internal-use email into a separate communication sent to a customer," according to a news release announcing the fine.
"In at least one instance," the release said, "FINRA also found that content from an unapproved, draft research report was cut and pasted into a flash email. Although these practices were contrary to firm policy, FINRA found that the firm lacked effective monitoring or supervisory systems to detect or prevent them."
The order includes four "illustrative scenarios" concerning five companies about which flash emails were circulated. In one case dating to August 2013, Stephens employees and clients who received one of the emails "traded advantageously" in shares of a company whose stock was about to be downgraded by Stephens.
Brad Bennett, FINRA's executive vice president and chief of enforcement, said, "The supervision of internal communications by research analysts to the sales force requires extreme vigilance given the possibility of revealing material nonpublic information in advance of published research. Today's action reminds those firms that permit such communications of the need to supervise and monitor them, and to ensure that their controls protect against trading based on the information."
Three former employees of First National Bank of Lawrence County have pleaded guilty to a 10-year conspiracy to commit bank fraud and will share responsibility for nearly $4 million in restitution.
Brenda Montgomery and Cindy Tate, both 57 and of Walnut Ridge, pleaded guilty on Tuesday, and Peggy Sutton, 61, of Biggers, admitted guilt on Wednesday. They will be sentenced at a later date, and their plea agreements suggest a range of 41 to 57 months in federal prison. If U.S. District Judge Kristine Baker does not agree to the sentence range contemplated by the plea agreement, the defendants reserved the right to withdraw their pleas.
Arkansas Business reported in April that at least one of the three former employees was close to a plea deal.
Under a plea agreement with federal prosecutors, each waived her right to be indicted by a grand jury and agreed to be responsible for almost $1.32 million in restitution to the bank, for a total of $3.95 million.
According to a press release from U.S. Attorney Christopher Thyer's office in Little Rock, Montgomery, Sutton, and Tate were longtime employees of the bank who acted together to conceal the theft of money from the vault of the bank’s main office in Walnut Ridge.
Beginning in 2005, Tate, with advance notice of internal audits, would arrange with Montgomery or Sutton to transfer cash from other branches or banks into the main vault temporarily so the amount of cash on hand would appear to be correct. Once the auditors had completed the count, the defendants would make sure the cash was returned to the other locations.
Managers became suspicious in April 2015, the U.S. Attorney's Office said, and arranged for a surprise cash count of the vault contents. A forensic audit confirmed the theft.
First National revealed the theft in its second-quarter call report, filed in August 2015, but the names of the suspects had not been made known. In February, the bank's CEO, Milton Smith, confirmed that the bank had received an insurance settlement of almost $2.7 million.
Sean Williams was installed Thursday as chairman of the Arkansas Bankers Association for 2016-17, and Dave Dickson was moved up to chairman-elect in preparation for becoming chairman a year from now.
But the 126-year-old organization's new vice chairman will probably steal the spotlight.
That's because, as vice chairman, Cathy Owen is in line to become the first woman elected to the top position in 2018.
Williams is president and CEO of First National Bank in Wynne and a lifelong resident of Woodruff County. He received bachelor and master's degrees in agricultural business and economics from Arkansas State University at Jonesboro, and he is a graduate of the Graduate School of Banking at Louisiana State University.
Dickson is president and CEO of Union Bank & Trust Co. in Monticello. He is a native of Crystal Springs, Mississippi, and has a bachelor’s degree in banking and finance from Mississippi State University. He is also a graduate of Mississippi School of Banking at the University of Mississippi and the Graduate School of Banking at Louisiana State University.
Owen, chairman of the board of Eagle Bank & Trust of Little Rock, was featured on the front page of the May 9 issue of Arkansas Business and in a story about women in the banking industry. In that article, Bill Holmes, the president and CEO of the ABA, said the organization was "working on diversifying our board and our leadership."
The fact that Owen is the ABA's first woman vice chairman and in the normal course of events will become its first woman chairman was not mentioned in the press release announcing her new position.
But in a recent interview, Owen spoke of entering the banking industry 42 years ago next month, when women in executive roles were even rarer than they are now. She started as a 16-year-old intern at the bank — originally First State Bank in Sherwood — that her father, businessman Harry Hastings Jr., had founded and served as chairman.
"My first day in banking, the then-bank president told me he didn't want me there. He knew my father had founded the bank and was chairman of the bank at that point, but he told me he didn't want me there. He felt like I was there to spy on him. He thought I had no work skills and that he was going to have to babysit me all summer."
By the time she finished high school, the bank president tried to talk her out of going to college so she could work at the bank full time.
Instead, she went to the University of Arkansas, where she was "one of few women getting a finance and banking degree" and the only woman in a study group of future bank leaders in Arkansas.
The Eagle Bank board of directors is still made up of Hastings family members — Owen has no sisters — as well as CEO Jeff Lynch and his father, Bill Lynch. But half of the executive officers at Eagle Bank are women, she said, and she has brought her daughter, Sara, as well as her son, Steven, into the business.
Bank of the Ozarks Inc. of Little Rock said Friday that it has received regulatory approval for its previously announced acquisitions of Community & Southern Bank of Atlanta and C1 Financial Inc. of St. Petersburg, Florida.
The company said it received approvals from the Federal Deposit Insurance Corporation and the Arkansas State Bank Department. It is now awaiting the OK from the Federal Reserve Bank, which it expects by the end of the second quarter.
Bank of the Ozarks said it would announce the closing dates for both merger once it received Federal Reserve approval.
Bank of the Ozarks announced both deals last fall. In October, it announced the Community & Southern deal, an all-stock transaction valued at just under $800 million, billed as the single biggest by an Arkansas bank in terms of purchase price and assets acquired.
In November, it announced the C1 deal, another all-stock transaction, valued at $402.5 million. The merger will put Bank of the Ozarks in Miami and Orlando for the first time.
Bank of the Ozarks Inc. is a bank holding company with $11.4 billion in total assets as of March 31.
Michelle Smith has been hired by BancorpSouth Bank as an assistant vice president and manager of the Riley Farm branch in Fort Smith. Smith, who has 26 years of banking experience, was previously with Simmons Bank.
Kelly Williams has joined Stone Bank of Mountain View as senior loan officer in White Hall. Williams, a native of White Hall, was previously Simmons Bank’s community sales manager for the western region of Arkansas. Stone Bank will break ground on a new full-service office in White Hall this year.
Amy Whitehead, director of the Center for Community & Economic Development at the University of Central Arkansas at Conway, has been named to a three-year term on the Community Development Advisory Council of the Federal Reserve Bank of St. Louis. Whitehead was one of six individuals named to the council for a three-year term.
Council members are executives representing nonprofit organizations, financial institutions, universities, government and foundations from across the district.
See more of this week's Movers & Shakers, and submit your own announcement at ArkansasBusiness.com/Movers.