First National Banker's Bank's Jim Franks on Why Your Bank Needs a Backup

Jim Franks has worked at First National Banker’s Bank and its predecessor, Arkansas Bankers Bank, for seven years. Franks worked full time at a financial institution while attending night law school. After a stint in private law practice, he spent 24 years with his family’s bank, the Bank of Prescott.

Franks has a bachelor’s degree from Henderson State University at Arkadelphia and a J.D. from the University of Arkansas at Little Rock’s Bowen School of Law. He is also a graduate of the Graduate School of Banking of the South at Louisiana State University in Baton Rouge.

Before being promoted to president at First National Banker’s Bank, Jim Franks was VP, SVP, EVP and chief credit officer.

What does a banker’s bank do and why is it necessary?

Having the words “banker’s bank” in your name tells exactly what your bank does. Every bank has other banks, called correspondent banks, to help perform functions like clearing the checks it takes as deposits from other banks, overnight liquidity needs, etc. Some “regular” banks have correspondent bank departments, while a banker’s bank is a specialized bank that deals in only correspondent bank services.

A banker’s bank is prohibited by law from dealing directly with retail customers, so there is no chance that a banker’s bank will be providing correspondent services to one of its customer banks and at the same time competing for business with one of that customer bank’s customers. This is the reason banker’s banks were created in the 1970s.

There are only about 15 nationwide today. Arkansas Bankers Bank was founded in 1990 and was acquired by First National Banker’s Bankshares Inc. of Baton Rouge in November 2008, with ABB retaining its separate bank charter and name until March 2011.

How does the consolidation of the commercial bank industry affect your bank?

Well, it ultimately caused 100 percent of Arkansas Bankers Bank stockholders to agree with the ABB board and merge with FNBB. The recent mergers among Arkansas banks have been mostly a nonevent to FNBB as the selling and purchasing banks were already FNBB customers. More important have been the large Arkansas banks that have been acquiring out-of-state banks, directly or through the Federal Deposit Insurance Corp. As these purchased banks were rolled into the operations of the Arkansas banks, many of the basic correspondent services for those out-of-state banks are now handled by FNBB. In these purchases/mergers, there are certainly lots of behind-the-scene activities to make all of this happen, and we at FNBB have learned how to do this better just as our customer banks have.

Which banking regulations have caused you the most concerns and why?

As an attorney by education, I fully understand the need for regulations. I would personally prefer to limit them to ones that have some basis in common sense. I am thankful every day that FNBB is not subject to most consumer-specific regulations, but we try to keep abreast of these regulations so that we can carry on a knowledgeable conversation with our customer banks.

Being part of a family that owns a small Arkansas community bank, I am so afraid that these type of banks cannot survive without consolidating with a larger bank, almost exclusively due to the ever-increasing regulatory banking environment. The folks in Congress say they understand, yet they keep piling on more paperwork. And it is not just the financial burden: The educational talent required for some of these regulatory burdens is immense. For the smaller Arkansas community bank, it is a daunting task to attract this type of talent, regardless of the compensation offered.