Jonathan Harrell is the fifth generation of his family to lead the bank now known as Generations Bank. It was founded as Calhoun County Bank in 1907 and kept that name for more than a century. Generations Bank, the name adopted in 2016, relocated its headquarters from Hampton to Rogers in 2019.
Harrell graduated from high school in Camden, then earned a degree from the University of Arkansas at Fayetteville. He is also a graduate of the Graduate School of Banking at Louisiana State University.
Generations Bank’s assets as of March 31 were $535.8 million, making it the 23rd-largest of 86 banks chartered in Arkansas.
Generations Bank has been increasingly profitable, and your first quarter looked promising. Then came the pandemic. What kind of projections are you making?
Second-quarter earnings should be consistent with Q1. Most banks are building up loan loss reserves to prepare for possible loan portfolio deterioration. Also, interest margins will be compressed due to the dramatic Fed drop in March and loan modifications made to certain loan types that have been impacted by COVID.
Paycheck Protection Program fee income and strong mortgage company performance due to low rates will help offset, but I anticipate less profitable third and fourth quarters.
What adjustments have you made to your business plan in response to the coronavirus? What opportunities do you see?
Much of the business plan for 2020 is out the window.
The main focus of the second quarter was working with customers via loan modifications and originating PPP loans. Our growth numbers have exceeded projections based on the $30 million in PPP loans that have been booked and the inflow of deposits due to the PPP loans, stimulus checks, lower consumer spending and a general flight to safety that banks offer.
We are still on schedule to open a new location in Bentonville in the fourth quarter to continue to capture our share of the current and forecasted growth of northwest Arkansas.
I believe the virus has allowed community banks like Generations to show their value to our communities and our customers. While some of the larger regional banks were slow or hesitant about handling PPP loans, community banks jumped in.
Are there changes in law that the Arkansas Bankers Association is lobbying for? What are the top priorities?
The Paycheck Protection Small Business Forgiveness Act. The legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. The 3.7 million PPP loans of $150,000 or less account for 85% of all approved loans but only 26% of the PPP funds delivered. The cost of applying for forgiveness for a loan of this size is $2,000, and the legislation could save small businesses $7.4 billion.
Also, the ILLICIT CASH Act. This bipartisan bill makes long overdue changes to the anti-money laundering and Bank Secrecy Act process. The bill also creates a federal beneficial ownership registry to assist law enforcement, the banking industry and small businesses in tracking the true owners of businesses.
And finally, the SAFE Act. The legislation is a banking-specific solution that would address the reality of the current marketplace and allow banks to serve cannabis-related businesses in states where the activity is legal. Keeping this money out of the banking system raises public safety, tax collection and money laundering issues. In addition, during this time of crisis, putting this industry into the banking system allows banks to release additional credit into their communities that is so desperately needed to keep businesses afloat.
