Battle of the Boards: Who?s More Bodacious?

New Bank Directors
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Banks in Northwest Arkansas not only hire lenders and tellers. They employ a lot of professionals to sit on their boards and help direct the financial ship.

A board of directors is essentially the bridge between shareholders and management. And the choice of directors can mean the difference between good returns and lackluster performance. So who do banks choose as directors?

The Northwest Arkansas Business Journal decided to look at the market’s three startup banks — Pinnacle Bank, Legacy National Bank, Signature Bank of Arkansas — and the one recent charter relocation — Parkway Bank — in an effort to see what each is doing in the board room to set itself apart from competitors.

Of the four banks, there are a total of 33 board members, though not all the boards are finalized and are some not even started.

Out of those 33 directors, there is only one woman, Dorothy Hanby, a CPA who lives in Springdale. She is a director for Legacy National Bank.

Of course, there are no absolute answers about who has the best board or how those will affect income, asset quality and return on equity. Only time will tell who can shake out the numbers.

But what follows is a glimpse at each bank or holding company’s current board and how much each of them has personally invested in their respective institutions.

The Basics

Randy Dennis is president of DD&F Consulting Group in Little Rock, a firm that helps banks and thrifts with mergers and acquisitions, marketing, compliance training and planning.

Dennis personally trains board directors and he has conducted more than 70 training sessions since 2002, he said.

One of the reasons training is so important, Dennis said, is because many business people who sit on the boards may have experience making a widget or selling a service for profit, but banking can sometimes present an element of confusion.

“A bank is basically like any other business, you just use different wording,” he said. “You sell money — actually you rent money,” and banks make a profit on the management of that rental.

He said a good bank board is usually one that is well-rounded with community business people such as someone who knows real estate, maybe a lawyer and usually someone who is financially savvy, like a CPA. And obviously, people who have a desire to learn about banking in general make good directors.

“A good board will represent the community and the stockholders it serves,” Dennis said.

The aim of a board is to retain management, develop strategic planning, monitor compliance, meet the needs of the community and, of course, make money, he said.

Most boards consist of five to seven people, but can have as many as 14. In Dennis’ experience, the smaller the better, because smaller groups tend to interact more with one another and directors don’t feel like they can skip meetings.

Typical boards meet once a month, and members frequently receive directors fees anywhere from $200 to $1,000 a meeting, he said.

Signature Bank of Arkansas

As of April 21, Fayetteville-based Signature Bank of Arkansas had not received approval from the Federal Deposit Insurance Corp. and therefore was not open for business.

Gary Head, president and CEO of the organization, is also the chairman of Signature’s holding company, White River Bancshares Co. He said a board for the bank has yet to be formed, because technically the business is not a bank.

But, a five-member board for White River Bancshares has been formed and the two will have common membership.

A look at White River’s final stock subscription from the Arkansas State Bank Department shows that all five members are investors in the bank, with personal stakes anywhere from $100,000 to $600,000.

The holding company had a total of 348 investors who chipped in a total of $44.15 million in capital, as of Jan. 4.

The most interesting trend for all of the startups is the number of presidents of other banks that sit on their boards. The trend is the result of other banks investing in the new ventures.

White River Bancshares sold a 20 percent stake in Signature to Community First Bancshares of Harrison and another 20 percent to Home Bancshares of Conway. Harrell Bancshares Inc. of Camden also has a small investment.

Jerry Maland, chairman of Community First Bank in Harrison, was named to the White River board after William King Gladden died on Jan. 12 in a plane crash near his home in Eureka Springs.

Gladden founded Community First in 1997 with $6 million in capital.

Head said the board for Signature will eventually have 12 to 13 individuals from all over Northwest Arkansas and not just the city in which the bank is founded, like competitor Parkway bank has said it will do.

Head has already talked to a few potential candidates about serving, but he said that naming any of them would be premature and speculative.

Signature bought the 71-year-old charter of First Bank of South Arkansas at Camden.

Parkway Bank

Jerry Carmicheal, president of Parkway Bank’s Northwest Arkansas division, said his group has yet to form a local board too.

Parkway is being guided now by its holding company, of which Carmicheal is a director.

Only one director on that board is not a stockholder, and all but Carmicheal are residents of southeast Arkansas because the bank’s charter was originally located in the tiny town of Portland. The ASBD approved a charter relocation to Rogers and the bank changed its name from Portland Bank.

Carmicheal will be the chairman of the Northwest Arkansas board, and he said there will be from 13 to 15 members when the dust settles.

All of those members will be from Benton County, and more specifically, from Rogers if possible, he said.

“It’s really an ’05 project,” he said, because the bank didn’t even open until Nov. 23, and the holding company just had its shareholders meeting in February.

He said he will look for business leaders in the Rogers community who can help him grow the bank, people with different backgrounds.

Ownership in the bank is not a requirement for consideration, he said.

Carmicheal said he has received commitments from some people and he plans to have a board put together by the end of the second quarter.

Parkway Bank’s filing with the Arkansas State Bank Department did not indicate how much each subscriber paid for their shares in the bank. That’s probably because the stock subscription was spread out over a long period of time, said Richard Plotkin, a financial analyst with the ASBD. Therefore, the bank’s entry for the list on Page 25 indicates only the number of shares the directors own.

Pinnacle Bank

Pinnacle Bank of Bentonville has an 11-member board of directors. Six of those directors are bankers.

Joe Mills, president of Pinnacle, and Kevin Beasley, executive vice president, both reside on the board. But there are four members from three other banks as well.

David Estes, president, and Bruce Loftin, executive vice president, are from First State Bank of Lonoke, and Mac McClanahan is president of Cross County Bank in Wynne.

According to documents filed with the ASBD, four members of the board are not direct investors. Members of McClanahan’s family and Cross County Bank are named as shareholders, but not McClanahan himself.

Pinnacle raised $15.1 million in capital from about 145 investors.

One of those shareholders was TrustBanc Financial Group of Mountain Home, which has since sold to Liberty Bancshares Inc. of Jonesboro. Those shares were sold prior to the buyout.

Tom Garrison, chairman and CEO of Garrison Financial Advisors in Fayetteville, is also an investor. He personally has $1 million worth of shares, and the estate of his late father, F.S. Garrison, has a $5 million stake in Pinnacle.

He said he was asked to join the board by Bruce Loftin as the two were settling investment paperwork back in the fall.

Garrison found out about the stock offering through one of his Harrison business partners who was referred to Loftin by the late Gladden of First Community Bank.

Garrison said he has gone through some board training, but that the group has yet to finish it. Acting as a director has given him some insight to the banking world, he said, though he has nurtured a company through a public offering and is currently heading up the Fayetteville-based investment firm.

So far, Pinnacle is “exceeding its financial plans,” Garrison said.

Legacy National Bank

The Springdale institution that was the brainchild of investor Gary George, CEO of George’s Inc., filed for a national charter and is therefore not required to file with the ASBD. The Office of the Comptroller of the Currency, to which Legacy reports, does not track shareholder information and it is too early for filings from the Federal Reserve Bank in St. Louis.

Though officers of the bank readily supplied their list of directors, they declined to release information about the bank’s shareholders.

In the past, the bank has told the Business Journal there are between 10 and 15 investors and documents from the Arkansas Securities Department confirm the bank started with $10 million.

The board of directors includes George as the chairman, and his father, Gene George, who is the chairman of George’s Inc.

Both Georges were longtime board member of First National Bank of Springdale before it sold to First Security Bank in Searcy in 2003.

President of Legacy, Don Gibson, and Executive Vice President, Patrick Swope, are also directors, along with Swope’s father, Loyd Swope, who is the former president of the Bank of Lincoln.

Steve Stafford, president and CEO of the The First National Bank in Green Forest is a director as well, bringing the number of bankers on the eight-person Legacy board to four.

FNB in Green Forest acquired Madison Bank & Trust in 2003. Stafford and Gary George were college roommates at the University of Arkansas.

Hanby, has served as a director for two other banks in the past, Gibson said.

“We looked at people of great character and reputation in Northwest Arkansas,” Gibson said about forming the Legacy board.

He said sound financial advice, a team that reflects the values and character of the bank and the ability to promote and develop the bank are all qualities that make up a good board, and he feels like Legacy’s meets all of those criteria.