The Ever-Quotable Johnny Allison (Gwen Moritz Editor’s Note)

Home BancShares CEO John Allison. (Karen E. Segrave)

I hope you read Kyle Massey’s excellent piece last week on optimism among commercial lenders whose 2023 was made miserable by inflation-fighting interest rates. It contains a lot of good information, but it was worth reading just to appreciate the ever-quotable Johnny Allison, chairman and CEO of Home BancShares of Conway, the parent of Centennial Bank.

His message was this: Bankers — including Allison himself — have learned hard lessons over the past couple of decades and aren’t making the same mistakes that contributed to the Great Recession. Of course, Allison said it in a way that was far more interesting:

“Back in ’04, ’05 and ’06, we helped create the problem that happened in ’08, ’09 and 2010. Customers weren’t putting any money in a down payment into the deals. I remember someone telling me so and so is doing a $5 million deal over here, Johnny, and I said tell him we’ll do it for him for 15% down, which was too little.”

The borrower already had financing with almost nothing down, and that came back to bite the lender who was even more generous than Allison.

“Well, when we hit a bad economy, the people that borrowed the money just pitched the keys to the banks. They said, ‘I don’t have any money in it. Just let the banks take over.’ But this cycle is different. Most of the banking space is safer because of the equity contribution from borrowers.”

Allison also said, “There’s no substitute for experience.” I first heard that sentiment from a different banker back in 2000, as the dot-com bubble was bursting and interest rates were creeping up. “The first thing I look for in a lending department is gray hair,” he said back when I didn’t have any.

My favorite quote from Allison dates back almost 20 years. While other central Arkansas banks were rushing to open branches in northwest Arkansas, Home BancShares — not yet publicly traded — decided to invest in Signature Bank of Arkansas, the de novo that Gary Head would open in 2005. “I think someone’s going to be the last person on the chain letter up there… ,” Allison said. A few years later, he was proven right.

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Sometimes Johnny Allison is unquotable and even incomprehensible. I once called him for a scheduled telephone interview, and it took a while to get him on topic because he had just sold some bonds at a significant personal profit. He rattled off, machine-gun style, details of price and yield and explained (or tried to) his thinking when he decided to take the risk. I couldn’t come close to fully appreciating any of it, much less quoting him, but just listening to him was like being invited to a blow-out celebration.

Email Gwen Moritz, interim editor of Arkansas Business, at gmoritz@abpg.com