Regional lending shows signs of recovery, but state banks trailing

Sparking loan growth is one of the next big challenges facing Arkansas banks and other regional financial institutions for the last two quarters of this year and through 2023. There are encouraging indicators that lending activity may pick up soon for the region as a whole though banks in the state are projected to trail the field.

During the pandemic, financial institutions have tightened lending standards while businesses and consumers have reined in spending and borrowing, factors that have led to loan declines.

At the same time, borrowers with outstanding loans have taken significant steps to increase loan payoffs to further reduce their debt, efforts that have eroded bank profits.

On the plus side, an industry note released by Stephens Inc. this month points out that organic loan growth trends are improving and are projected to expand over the next two years.

Arkansas' three public banks, however, have been lagging behind the region as a whole and that course is projected to continue, according to the Stephens analysis.

The Stephens team examined Southwest regional banks -- including Arkansas-based Bank OZK, Home BancShares and Simmons First Financial Corp.

Overall, Stephens is forecasting continued improvements in organic loan growth and estimates that those loan volumes will have median increases of 6% for the two quarterly reporting periods remaining this year and median increases of 7% in 2022 and 2023 for the regional banks.

Those projections, if achieved, would provide a substantial boost to bank earnings. Median organic loan growth, excluding Paycheck Protection Program loans to small businesses, for the regional banks in the second quarter was 3.7%. Nine of the banks -- including all three in Arkansas -- reported declines while 11 lenders showed double-digit growth.

Stephens reports that OZK was down 4% while both Home BancShares and Simmons dropped by 16% each. Both Home and Simmons were tagged as "laggards" in the report.

The outlook for the Arkansas banks gets a little better looking ahead.

For the remaining two reporting quarters this year, Simmons is projected to have loan growth increase by 27%, though that is fueled by its recent acquisitions of two community banks in Tennessee. OZK is estimated to drop by 3% and Home is projected to fall by 8%.

Lending activity at the Arkansas banks should improve in 2022 and 2023, according to Stephens. At Simmons, loans should be up 3% next year and 5% in 2023. Both Home BancShares and OZK are estimated to have 3% increases in 2022 while Home will climb 4% in 2023 and OZK will step up 5%.

SUPPLY CHAIN

The University of Arkansas is holding a half-day seminar on Sept. 15 focusing on supply chain management and how proper maintenance of the systems that move goods can keep businesses operating efficiently. Participants will learn how supply chains work and how their companies can benefit.

The session is from 11:30 a.m.-3:30 p.m. and lunch will be provided. The course costs $325 and will provide an in-depth look at modern supply chains, examining key trends, innovation efforts and inventory and forecasting.

Participants will be presented the whole supply chain, from end-to-end, and learn how to identify key problems and challenges.

The course will be held at 702 SE Fifth St., Suite 46, in Bentonville. For more information or to register go to execed.uark.edu.

ACCELERATOR APPLICATIONS

The Little Rock Venture Center has opened the application process for financial technology entrepreneurs and startups that want to participate in the next community-banking cohort.

The 2022 ICBA ThinkTech Accelerator program, supported by the Independent Community Bankers of America, will feature virtual and in-person visits in support of community bank collaborations with fintechs.

Oct. 15 is the deadline to apply for the program, which focuses on fintechs that offer products and services to support and advance community banking efforts across the nation.

"As community banks continue to transform to meet the diverse needs of their customers and the broader community, developing key partnerships will be paramount," ICBA Senior Vice President and Chief Innovation Officer Charles Potts said. "ICBA is proud to continue its work helping forge these deeply valuable relationships between innovative entrepreneurs and the community banks we serve."

Since its start in 2018, the accelerator has attracted entrepreneurs from across the globe and has drawn support from more than 1,000 community bankers and industry leaders.

The program speeds participants' go-to-market strategies and provides critical feedback, allowing fintech founders to tailor their solutions to the needs of community banks and their customers.

For more information and to apply, go to venturecenter.co./icbathinktech.

SBA GRANT FOR WOMEN

Women-owned businesses in Arkansas received a financial boost last week when the U.S. Small Business Administration announced it will award grant funding to the Arkansas Women's Business Center.

The Arkansas program will be one of 14 business centers in the nation to receive an SBA Recovery and Resiliency Ascend grant, which was established to improve service delivery, training and other support for women-owned businesses.

"This funding will support existing women-owned businesses negatively affected by covid-19," said Chauncey Pettis, director of the Arkansas center, which is part of Winrock International. "Through three accelerator cohorts, Ascend will increase the resiliency and business capacity of 30 Arkansas-based women-owned companies, leading to their ability to expand their businesses and recover from the devastating impacts of covid-19."

The federal agency was offering a total of $2.7 million in grants to existing SBA-funded women's business centers. The Arkansas center, along with other grant awardees, was recognized for demonstrating innovative approaches to service delivery to address the needs of women business owners battling the pandemic.

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