Arkansas
State Bank Department
State Banking Board
Meeting Minutes for
July 21, 2005
(updated October 11, 2005)
A Regular Meeting of the State Banking Board was held in the
conference room of the Arkansas State Bank Department, 400 Hardin Road, Suite
100, Little Rock, Arkansas, at 10:00 a.m. on Thursday, July 21, 2005. The following Board Members were present: Chairman Gus Rusher, Vice Chairman Charles
Mazander, Margie Russ, Richard Mays, and Marcus McCain. Board Member David Short was called by phone
and participated in the meeting by a conference call. Representing the State
Bank Department were Commissioner Bunny Adcock, Deputy Commissioners Luther
Guinn and Candace Franks, Financial
Analyst Susannah Marshall, Administrative Assistants II Barbara Mahoney and
Marilyn Myers. Shane Khoury from the
Governor’s office was also in attendance.
Lynn Perkins from Bushman
Court Reporting was the recording reporter for the
applicants.
Commissioner Bunny Adcock opened the meeting. Secretary Luther Guinn declared a quorum was
present. Commissioner Adcock then asked
the visitors and guest to stand and introduce themselves and state who they
represent. He then turned the meeting
over to Chairman Gus Rusher.
First on
the agenda was consideration of the Minutes of the March 31, 2005, Special
Board Meeting. A motion was made by
Charles Mazander, seconded by Margie Russ, to approve the Minutes as presented. Motion carried and the Commissioner
concurred.
Next
was approval of expenses for the Board.
A motion was made by David Short, seconded by Charles Mazander, to
approve the Board’s expenses. Motion
carried and the Commissioner concurred.
Next
on the agenda was an application for a new bank charter, First Southern Bank,
located at 1583 St. Louis Street,
Batesville, Arkansas. Bob Fegtly with DD&F Consulting Group,
Little Rock, Arkansas, represented and spoke for the group. He stated approximately 150 investors have
raised approximately $8.4 million. He
also said that by the end of the next week, $10 million would be raised and
maybe go as high as $15 million. Mr.
Fegtly went on to say that First State Bank, Lonoke, Arkansas, opened a loan
production office in Batesville to generate loan demand in the market. He further stated that $6 to $9 million of
loans would immediately be put into the bank.
Vice Chairman Mazander stated two other banks are partial stockholders
in First Southern. He questioned if this
was temporary or a long range plan.
David Estes stated that Lonoke Bancshares and Cross County
Bancshares anticipated a long range investment and hoped to be able to supply
some services. Chairman Rusher asked if
Lonoke had the equipment and personnel to provide data processing for First
Southern. David Estes indicated yes and
went on to say Lonoke spent $1 million on technology in 2000 and will not have
to add any more staff. Marcus McCain
asked David Estes if Lonoke had a multi-user license with Fidelity. David Estes responded yes. Chairman Rusher asked if David Estes, Mac
McClanahan, and Joe Mills would have to travel and spend time in Batesville in
regard to their intention to put in an extra 36 hours a month. David stated a video conference is set up in
all of their institutions in order to provide face-to-face meetings. Chairman Rusher asked how many loans had the
loan production office generated. David
Estes stated $6 million funded and a little over $9 million committed. He also stated the loans would be purchased
at par, plus accrued interest. Marcus
McCain asked Woody Castleberry the plans to make sure credit quality is
maintained while growing aggressively.
Mr. Castleberry stated this issue had generated a number of debates and
the entire Board would serve as the credit committee, meeting every Wednesday
morning, and be diligent to make sure they get their act together as far as
presentation. He also stated having been
in the Batesville market for so many years, they have a pretty good handle on
which ones they want and which ones to steer clear of. David Estes stated there are about four banks
that have a loan affiliation. He said
they all run pretty big participations that can assist the new bank in reaching
a break even. The credits are seasoned
and have been reviewed by regulators, DD&F, internal audit, and external
audit. Vice Chairman Mazander asked how
the new bank would establish the loan loss reserve and how it would be funded
on the front end. Woody Castleberry
stated they plan to maintain one percent the first year, one-and-a-quarter
percent the second year, and work up to one-and-a-half percent the third
year. David Estes stated if they ended
up the first month with $15 million in loans, they would take one percent of
the $15 million, charge the expense and then put it in the reserve
account. Chairman Rusher stated the
overriding question is the amount of competition already existing in the market
and the number of banks and branches that are already in Batesville. He also stated the projections were
aggressive and reflected $150 million in five years with all of the
competition. Woody Castleberry stated
the Batesville market was deceiving, it serves a pretty large geographical
area, and the financial market is a lot bigger than the town would
indicate. Also, since they started the
process for a bank in Batesville, a couple of other banks have branched into
Batesville. Mr. Castleberry also stated
they feel like the major players will be the locally owned banks and their bank
would be the third of those. David Estes
stated Batesville also has one of the fastest growing de novas the state of Arkansas has ever
had. He also stated they believe the
projections are attainable. Chairman
Rusher asked if the other two branches had opened for business in
Batesville. Mr. Castleberry stated
Liberty Bank is open but First National Banking Company, Ash Flat, is not quite
open. Chairman Rusher asked Mr.
Castleberry about the timeframe. Mr.
Castleberry stated they would like to open for business August 1st.
Chairman
Rusher asked for comments or questions from the Board. Chairman Rusher asked if the Department had
received any final protests. Deputy
Commissioner Candace Franks stated no.
A
motion was made by Charles Mazander, seconded by David Short, to approve the
application. Motion carried and the
Commissioner concurred.
Next
on the agenda was an application to merge Liberty Bank of Arkansas,
Siloam Springs, Arkansas,
with and into Liberty Bank of Arkansas, Jonesboro, Arkansas. Bob Fegtly with DD&F Consulting Group,
Little Rock, Arkansas, represented and spoke for the application. He explained that Liberty
Bancshares and Russellville Bancshares purchased Arkansas State
Bancshares at Siloam Springs. He also
stated the holding company is currently owned 80 percent by Liberty and 20 percent by Russellville. He further stated as part of the application,
they would like to purchase the 20 percent currently owned by Russellville and
merge the bank into Liberty Bank of Arkansas, Jonesboro.
Chairman
Rusher asked if the overall plan was to have all the banks under one
umbrella. Wallace Fowler stated not
Russellville, not at this time, but yes for the others. Chairman Rusher asked Wallace Fowler if he
would continue to be a stockholder in the Russellville bank. Mr. Fowler stated he or Liberty Bank would
be. Chairman Rusher stated there was prior regulatory concern over some credits
and asked the status of those loans, some of which were on nonaccrual status. Mr. Fowler stated he feels they have a good
handle on the loans and the largest loan had a USDA guarantee. He further stated an internally published
USDA memorandum acknowledges the guarantee.
Mark Fowler stated the loan was on nonaccrual and past due. He also stated they had been working with
USDA and received approval to foreclose.
He further stated the property sold and now the bank has filed a claim
against the guarantors and will collect from the guarantors or file against
USDA. Additionally, the bank has 100
percent reserve established at $2.8 million.
Chairman Rusher asked about data processing at Siloam Springs. Wallace Fowler stated everything is on the
same system. Chairman Rusher asked about
other branches in the area. Wallace
Fowler stated a branch has been opened in Siloam Springs for a month and new
branch sites are either in negotiation stages or property purchased for
Bentonville, Fayetteville, and Rogers.
Vice Chairman Mazander asked if one of the charters would be
surrendered. Mark Fowler responded
yes. Chairman Rusher asked if any
Northwest Arkansas people would be on the Board of Jonesboro.
Wallace Fowler stated Pete Allen, previous chairman of the Siloam
Springs Board and Mark Simmons have agreed to do anything needed of them. Plans
and discussions are in process to determine how to make an effective advisory
board in that area.
A
motion was made my Marcus McCain, seconded by Charles Mazander, to approve the
application. Motion carried and the
Commissioner concurred.
The
next item on the agenda was consideration of a proposed regulation which would
allow applications and other documents to be submitted to the State Bank
Department in electronic format. After
general discussion, a motion was made by Charles Mazander, seconded by Margie
Russ, to approve the allowance of applications and other documents in
electronic format. Motion carried and
the Commissioner concurred.
The
next item on the agenda was a proposed amendment to Regulation 47-401.2 to
repeal a reference to Certificates of Reliance, which use has been repealed by
Act 427 of 2005. After general
discussion, a motion was made by Marcus McCain, seconded by Charles Mazander,
to approve the repeal of the reference.
Motion carried and the Commissioner concurred.
The
next item on the agenda was a proposed amendment to repeal Regulation 47-501.1
regarding the use of Certificates of Reliance, which use has been repealed by
Act 427 of 2005. After general
discussion, a motion was made by Charles Mazander, seconded by David Short, to
approve the repeal of the Regulation.
Motion carried and the Commissioner concurred.
Chairman
Rusher asked if the Commissioner had any comments to share. The Commissioner stated his concern for south
and east Arkansas
banks that are impaired by nongrowth and the weak economy. He stated he had the opportunity to hear a University of Arkansas economist who was very frank
and honest about the economic conditions in the state.
Chairman
Rusher complimented the Commissioner and the Department.
No
further business, the meeting was adjourned.
.
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