Arkansas Banks `Under Supervision' Up Sharply, State's CUs Look OK

LITTLE ROCK, Ark. – The economic downturn in Arkansas underscored by rising bankruptcies is taking a bite out of banks here, but so far the state’s problems seem to have spared credit unions. That was the assessment of officials of the Arkansas Credit Union League after the state’s banking commissioner, Frank White, revealed Arkansas has its highest number of banks “under supervision” in 10 years. “We simply have a lot of people unemployed in industries like agriculture, timber, poultry, and catfish farming, and the cumulative effect is hurting us,” White told Credit Union Times. Bankruptcy filings in 2002, he said, are expected to be up sharply after reaching 23,000 in 2001. White said he could count 27 of the 138 state chartered banks as in the “under supervision” category and he said most of the problems were “management related.” The supervisory banks, he said, range in size from $400 million down to the very smallest. There are about 40 national banks. There are no state-chartered CUs in Arkansas, all having converted to federal charters years ago. In trying to reduce the supervision problem, White said his office has encouraged banks to “hire more qualified, experienced people” for executive jobs. As for the condition of CUs, Dwayne Ashcraft, chairman of the Arkansas Credit Union League and president of the $32 million Potlach Federal Credit Union of Warren, said bankruptcies have taken their toll on CUs. However he said he is not aware of any major problems at federal CUs. Ashcraft said a couple of small CUs “did receive permission to waive their dues” to the Arkansas League, and there have been some with very weak loan demand “that have had trouble maintaining positive income.” Conditions within the CU industry are due to come up at a League meeting Jan. 27 with local NCUA examiners. The “open forum” or dialogue Jan. 27, he said, is designed to make the League aware of any CUs “that need help.” Ashcraft said the goal would be to determine whether other CUs “might be able to help,” thus avoiding a merger or a shutdown. The Jan 27 meeting will be with Dennis Smith, NCUA’s Regional Manager, he said. Commissioner White said legislation currently in Congress to provide agriculture aid to pay off farm debt might help alleviate some loan problems at banks. But many sectors of Arkansas remain in a “distressed” condition, he said, adding “I wouldn’t say we’re in a depression, just” individual industries remain “distressed.” Meanwhile, on the bankruptcy front, the League is developing training programs for CUs to deal with a new order from U.S. Bankruptcy Courts requiring electronic document filing, an issue which has become a financial burden to small CUs. A number of the smallest Arkansas CUs lack both hardware and software to meet the filing rules with some having to upgrade computers, purchase scanners or hire attorneys to handle document processing, noted Reta Kahley, League president. George Bujarski, president of the $13 million Baptist Health Federal Credit Union in Little Rock, said he at first was concerned the filing rules would “create great hardship” for us, but now he said he is realizing the need for his CU to modernize and keep up with the times. “We can’t operate in the dark ages,” said Bujarski. -