Navigating the Banking Industry with Ross M. Whipple
This week on the podcast Matt wraps up the Arkansas Business Hall of Fame series with Ross M. Whipple, 2023 Arkansas Business Hall of Fame Inductee, President and CEO - Horizon Capital Partners, LLLP, President - Horizon Timber Services, Inc. and Chairman of the Board - The Ross Foundation. During the episode Ross dives into how he got his start in the banking and timber industry and highlights the importance of his early mentor, Jane Ross, on his career. Ross further discusses how he was able to turn around struggling banks to a positive ROA and they finish the discussion with Ross highlighting one of his favorite business books.
Transcript
In sharing these stories, and I just, you know,
Ross Whipple:hope that someone can take a little piece of this and put
Ross Whipple:toward their career and making them a better not only a better
Ross Whipple:business person to woman, but just maybe a better person as a
Ross Whipple:whole.
Matt Waller:Excellence, professionalism, innovation and
Matt Waller:collegiality. These are the values the Sam M. Walton College
Matt Waller:of Business explores in education, business, and the
Matt Waller:lives of people we meet every day. I'm Matt Waller, Dean of
Matt Waller:the Walton College and welcome to the be epic podcast. I have
Matt Waller:with me today, Ross Whipple, who is being inducted into the
Matt Waller:Arkansas Business Hall of Fame in February. For those of you
Matt Waller:most people are aware of Arkansas Business Hall of Fame,
Matt Waller:but it includes pretty amazing people. We started doing this
Matt Waller:back in 1999, every year for people are inducted. And if you
Matt Waller:look at the list, if you Google Arkansas Business Hall of Fame
Matt Waller:inductees, you'll see the list we have the list of all the
Matt Waller:inductees plus movies about each of them if you want to learn
Matt Waller:more about any person on there, but people like you know, Sam
Matt Waller:Walton, Don Tyson, Murphy, JB Hunt, JB and Johnelle Hunt,
Matt Waller:Warren Stephens. There's a long list, Bill Dillard, there's a
Matt Waller:long list of people and the purpose of the Arkansas Business
Matt Waller:Hall of Fame is to celebrate the business achievements of
Matt Waller:business people, the achievements of business people
Matt Waller:who have done business with high ethics, who have contributed to
Matt Waller:society, and in various ways, and we're really proud to have
Matt Waller:Ross Whipple in the group now, and Ross got his undergraduate
Matt Waller:degree from Henderson State and his MBA from the University of
Matt Waller:Arkansas, we're proud to have another inductee into the
Matt Waller:Arkansas Business Hall of Fame who's an alum of ours. He has
Matt Waller:extensive experience. He is president of Horizon Timbers,
Matt Waller:Inc, and many other things. He's also a member of the executive
Matt Waller:committee, and chair of the risk committee for Bank OZK. We'll be
Matt Waller:talking a little bit more about that. But Ross, thank you so
Matt Waller:much for joining me.
Ross Whipple:Well, Matt, thank you for having me. And, as you
Ross Whipple:said, when when you look back at the roster of the inductees over
Ross Whipple:the last 22, three years, I am so honored and so humbled to be
Ross Whipple:included with these people. I mean, these are folks that I
Ross Whipple:have admired. And to a great degree strive to be like for
Ross Whipple:years. I'm not sure I've gotten there yet, but I keep working at
Ross Whipple:it. But I've just was so surprised at this honor and so
Ross Whipple:humbled. The list is phenomenal. And
Matt Waller:It is
Ross Whipple:and to be included in that is probably the high
Ross Whipple:mark of my business background and business achievement really
Ross Whipple:is.
Matt Waller:So, Ross, you've had over 35 years of experience
Matt Waller:in banking. Is that did you start your career in banking?
Ross Whipple:No, sir, I did not. You know, I kind of fell
Ross Whipple:into banking through the back door. I had a cousin name was
Ross Whipple:Jane Ross. She was 35 years, my senior. I started to work with
Ross Whipple:her when I came to college at Henderson and her family was
Ross Whipple:primarily engaged in the land and timber business. Now there
Ross Whipple:were some banking interests here than there but not anything that
Ross Whipple:would lead to a majority control or anything like that. So like I
Ross Whipple:say, I went to Henderson. After that I spent a little time in
Ross Whipple:the military, which I'm very proud of, and then came to
Ross Whipple:Fayetteville for my MBA.
Matt Waller:What year did you get your MBA?
Ross Whipple:1976
Matt Waller:76 And during the bicentennial year?
Ross Whipple:Oh, what? Yes.
Matt Waller:And what did you do in the military?
Ross Whipple:Well, I was I was commissioned as a Second
Ross Whipple:Lieutenant right out of college, assigned to the First Cavalry
Ross Whipple:Division in Fort Hood, Texas, which had just gotten back from
Ross Whipple:Vietnam, I did miss that and I don't regret missing that. But
Ross Whipple:were certainly prepared to go if need be, but and I spent you
Ross Whipple:know a year, year and a half there, and then got out a little
Ross Whipple:early so I could go to graduate school.
Matt Waller:What made you decide to go to get your MBA?
Ross Whipple:Well, I didn't think I was quite through,
Ross Whipple:didn't think by education was quite where, you know, I would
Ross Whipple:like for it to be. And I thought it offered me a great
Ross Whipple:opportunity to grow and expand my knowledge and to field, you
Ross Whipple:know, basically finance and economics for me.
Matt Waller:So you were working with Jane Ross? And then did you
Matt Waller:continue to work with her even up to that point?
Ross Whipple:Somewhat, I'll be you know, I mean, we stayed in
Ross Whipple:touch, of course you know during my four years of college, I went
Ross Whipple:to school with what I call the Jane Ross work study. And, I
Ross Whipple:mean, she did, she was a great lady, a great mentor to me. But
Ross Whipple:she pushed hard. I mean, she wanted to make sure that I had
Ross Whipple:seen every thing there was to do in the timber business first. I
Ross Whipple:mean, from chainsaws to skidding to, you know, working in the
Ross Whipple:sawmill to marking timber to painting lines, the whole bit,
Ross Whipple:just so I would get a fairly basic understanding of what that
Ross Whipple:business took. And we still haven't gotten around to
Ross Whipple:answering your question about the banking business yet. But
Ross Whipple:after I had been back for about three years about, she went down
Ross Whipple:and purchased a controlling interest in what was merchants
Ross Whipple:and planters bank in Arkadelphia. She had some
Ross Whipple:interest in the bank. Well, I mean, probably the second
Ross Whipple:largest shareholder. You know, I was acquiring some stock, but
Ross Whipple:that like that, yeah, I didn't have much. So anyway, she went
Ross Whipple:down and made the, there wasn't anyone who had absolute control,
Ross Whipple:but made the largest shareholder an offer to buy the stock,
Ross Whipple:basically, because he would not put me on the board. And she
Ross Whipple:said, well, if you're not going to put the boy on the board,
Ross Whipple:sell me the bank. And he did. And I had no idea of this. I
Ross Whipple:mean, she came back as a surprise to me, said, you won't
Ross Whipple:believe what I have just done. And I said, Oh, my gosh, you
Ross Whipple:just did what? And you paid what? And I'm thinking, Oh, I
Ross Whipple:don't know how we're gonna work our way out of this. But we did.
Ross Whipple:I mean, it was a sleepy little bank in a free bank town in
Ross Whipple:Arkadelphia back in the late 70s. You know, not only that she
Ross Whipple:had given up, basically control through a voting trust. She had
Ross Whipple:given the guy who was going to run the bank, a 10 year
Ross Whipple:contract, and I said, I just can't believe you've done this.
Ross Whipple:Well, to make a long story fit a page, we worked through some of
Ross Whipple:those issues, and dissolved the voting trust, we didn't dissolve
Ross Whipple:it, changed the trustee, and she made me the trustee. And anyway,
Ross Whipple:we started working to try and improve the bank. In 1985, you
Ross Whipple:know, I grew up in Malvern. So I had a couple of guys from
Ross Whipple:Malvern, come down and pay us a visit about a potential merger,
Ross Whipple:which sounded good to me cause I'm just trying to get Jane out
Ross Whipple:of this bad investment that I think she's made, and just
Ross Whipple:trying to figure out how we're going to do this. So we did
Ross Whipple:affect a merger with the Bank of Malvern and formed Central
Ross Whipple:Arkansas Bank Shares, it was a pretty creative transaction for
Ross Whipple:her. And to some degree me. You know, the break even on the
Ross Whipple:transaction. You know, I did learn something in graduate
Ross Whipple:school, but the breakeven on the transaction for her given
Ross Whipple:capital performance all ratios was like point five, two. And,
Ross Whipple:you know, so the suggestion was, well, how do we do it? And I
Ross Whipple:said, well, you know, well, I think book to book works very
Ross Whipple:fine, they said whoa, we can't do that. And I said, well, how
Ross Whipple:about point nine five a book. And they agree. So it was a
Ross Whipple:relatively accretive transaction off the bat for her. Now, we
Ross Whipple:went into that merger with equal ownership with another family.
Ross Whipple:And they were again, they were kind of scared of Jane's money.
Ross Whipple:I don't think they were too scared of me at the time.
Ross Whipple:Although, funny story. The gentleman who was the attorney
Ross Whipple:for the bank up there, went into the bank one day, and they were
Ross Whipple:all talking about how they had just acquired merchants and
Ross Whipple:planters bank and they were going to do this and they were
Ross Whipple:going to do that. The attorney for the bank said, you don't
Ross Whipple:know this yet but the guppy has just swallowed the whale. And in
Ross Whipple:the end, that's what it turned out to be, you know, I mean it,
Ross Whipple:it took a lot of maneuvering, I got a lot of scars on my back.
Ross Whipple:But we did the right thing. We finally got control of the bank
Ross Whipple:in the early 90s. I went to merchants and planters bank in
Ross Whipple:1989 as the president CEO, probably the best year of my
Ross Whipple:life professionally. You know, we fixed a lot of things, we
Ross Whipple:changed a lot of things. And I'll never forget, you know,
Ross Whipple:after we decided, well, what do we, what are we going to do? So
Ross Whipple:well, you know, we need to fix this probably time for the other
Ross Whipple:bank president to leave and who's going to do that? And I
Ross Whipple:said, well, you know, if need be, I'll do it. And then the
Ross Whipple:next question was, who in the hell is gonna run it? Okay, get
Ross Whipple:rid of him? And I said, I don't know. They said, well, will you
Ross Whipple:do it? I said, well, you know, I'll do it for 90 days. You
Ross Whipple:know, I got plenty to do. I got lots of things. And I got a lot
Ross Whipple:of balls in the air, but I'll do it for 90 days. So we did. And
Ross Whipple:then they came back and said, hey, we didn't talk about your
Ross Whipple:salary. And I said, well, that's fine. And he said, what do you
Ross Whipple:think you should be paid. And I said well here's what I'll do. I
Ross Whipple:will work I will work for half of what you repay in the former
Ross Whipple:bank president. But I want everything over a 1% return on
Ross Whipple:assets. And they were saying, I can't believe this guy's stupid
Ross Whipple:I mean this bank's never made a 1% return on assets. And he said
Ross Whipple:he was so anyway, to make a long story fit a page. They at the
Ross Whipple:end of the year, they paid me about another $150,000 because
Ross Whipple:we fight we owe we made over 1% return on assets. Now I did
Ross Whipple:split a lot of that with with my senior staff at the time, which
Ross Whipple:I've always felt very important to do. But no they did. The bank
Ross Whipple:never made over a point six ROA and they didn't you know, and
Ross Whipple:when I inherited the bank at the end of February, you know, the
Ross Whipple:bank had lost $30,000 year to date. So they didn't see how we
Ross Whipple:could do that. But we did. And there were just a lot of things
Ross Whipple:that were easy to do. You know when you're running to a bank
Ross Whipple:that's not making any money. Matt, you really don't need a
Ross Whipple:large, tax exempt bond portfolio. And, you know, and
Ross Whipple:the bank was carried about a million dollars in vault cash.
Ross Whipple:Well, it's a $35 million bank at the time that we need about
Ross Whipple:maybe $300,000 in vault cash maybe. And fed funds were like
Ross Whipple:11% I mean you know, so I probably shouldn't have done
Ross Whipple:this. But I got with my executive vice president on a
Ross Whipple:Friday afternoon over a three, three day bank holiday. And we
Ross Whipple:put $750,000 in the back of my car and drove it to the fed. So
Ross Whipple:we could get credit for it over a three day weekend. You know,
Ross Whipple:and those are there's the kinds of things you you have to do and
Ross Whipple:it also shows your staff that you care and that you know you
Ross Whipple:can do it and you know how to do it and they really stepped up
Ross Whipple:stepped in line. And it was everything went very well. After
Ross Whipple:that. We acquired we have acquired control. And I had a
Ross Whipple:few people that were giving me problems. I was spending more
Ross Whipple:time managing a certain group of directors, which was really
Ross Whipple:pulling me back from, I think, doing what we should for the
Ross Whipple:bank. And we solved that problem and really got to you know the
Ross Whipple:bank was doing well. We had four charters, and they were in
Ross Whipple:Malvern, Hot Springs, Arkadelphia and Sheridan, it's
Ross Whipple:like driving across Dallas. So I'm thinking, you know, why do
Ross Whipple:we need to operate four separate charters? Well, in Arkansas
Ross Whipple:state bank department regulations only were, you know,
Ross Whipple:the, you could only branch into a contiguous county. So, okay, I
Ross Whipple:started looking at the map. And Hot Spring County was contiguous
Ross Whipple:to Grant County, Clark County, and Garland County. So then we
Ross Whipple:were able to consolidate the four charters into one I think
Ross Whipple:we were the first to do it not because no one else wanted to,
Ross Whipple:but because we had a geographic situation to be able to pull
Ross Whipple:that off. And, and we did, it was, it was probably the hardest
Ross Whipple:year of my life, you know, from a working relationship and get
Matt Waller:What year was that?
Ross Whipple:Still waste started in July of 1994, and
Ross Whipple:completed the process. And late June, early July of 95. went
Ross Whipple:from four charters to one. And that's interesting, because when
Ross Whipple:you're having your meeting with your senior staff, and you're
Ross Whipple:you're kind of outlining this for them, and they're going
Ross Whipple:yeah, that's a pretty good idea. That makes a lot of sense. And
Ross Whipple:then we had a little barbecue at my lake house at night, and you
Ross Whipple:can see them all potting up. So we didn't have CFOs, back then
Ross Whipple:that we had cashiers, and we had bank presidents, and we had for
Ross Whipple:note departments and four of this and four of that, and you
Ross Whipple:can see them kind of popping up. And they've got to figure it
Ross Whipple:out. There are four of us now, there's only going to be one of
Ross Whipple:us in the end, you know, but it worked out great. We, we kept
Ross Whipple:everybody we needed to keep yeah, they may have had a new
Ross Whipple:job alignment or whatever else. But yes, we did. We did sever
Ross Whipple:about 30 people out of this. But it cost a million four to do all
Ross Whipple:this between signage, excetera, you know, stationary the whole
Ross Whipple:bit. And I was really concerned about FDIC insurance. Because
Ross Whipple:see, previously, each bank had turned $50,000 worth of tension.
Ross Whipple:And now we're just going to one 250,000 Not four. But anyway to
Ross Whipple:make to finish this. It cost 1,000,004 We made $2.2 million
Ross Whipple:in next year. You know, it doesn't sound like a very big
Ross Whipple:bank, but back in the mid-90s, a $550 million bank is a pretty
Ross Whipple:good sized bank. And all of a sudden, I got these people
Ross Whipple:coming to visit me, you know, because I have not really
Ross Whipple:thought about selling the bank. And, you know, they come and
Ross Whipple:they go and I don't talk to them very seriously, then, you know,
Ross Whipple:we've got a group but our St. Louis, Mercantile Bank came and
Ross Whipple:talked to us on pretty serious level. We ended up selling the
Ross Whipple:bank in February of 98. For bout right at 3.25 times book value
Ross Whipple:and a 24 times earnings. Well, you know, I was beginning to get
Ross Whipple:a reputation as a flipper. And I'm really not a flipper. And in
Ross Whipple:my retort to these people was this. You know, if you have a
Ross Whipple:house worth $100,000, and somebody offers you $325,000 for
Ross Whipple:it, and you can build a new house for 100,000. What would
Ross Whipple:you do? And the answer very quickly was we'll have sell it.
Ross Whipple:So that's exactly what we did. You know, we sold horizon bank
Ross Whipple:in February of 98. I had a one year mandatory with Mercantile
Ross Whipple:and their board, I resigned at the year. Then I had a one year
Ross Whipple:covenant not to compete. And we started back with Summit Bank in
Ross Whipple:February of 2000. You know, we I don't know if you've ever seen
Ross Whipple:the movie The Blues Brothers.
Matt Waller:Yeah.
Ross Whipple:Well, we just brought the band back together
Ross Whipple:just kind of what we did, you know, just like and it worked
Ross Whipple:out extremely well. I mean, we were a de novo bank. We never
Ross Whipple:made an acquisition, which I can support because every time we
Ross Whipple:went to a new market, we hired people who wanted to come to
Ross Whipple:work for us, you know, we had just had not been acquired. And
Ross Whipple:when you get acquired, it sometimes doesn't feel good. So
Ross Whipple:anyway, all the people that we went, sought us we saw them and
Ross Whipple:it was it really worked out well. And we had had a good bank
Ross Whipple:performed well, did well. And, and that bank, which was summit
Ross Whipple:by was sold to bank of the Ozarks now BankOZK in May of
Ross Whipple:2014.
Matt Waller:So Ross, has there been a book in your career that
Matt Waller:you've really enjoyed and gone to frequently throughout your
Matt Waller:career?
Ross Whipple:Oh, yes, sir. You know, and I bought it in
Ross Whipple:Fayetteville, Arkansas in 1974. And I used it in our Raymond
Ross Whipple:Rebsamen portfolio class, and it's Security Analysis by
Ross Whipple:Benjamin Graham. I have read it cover to cover a number of
Ross Whipple:times, I still to this day, pull it out. And you know what, I get
Ross Whipple:the feeling, you know, why I don't like preferred stocks or
Ross Whipple:whatever else. I'll pull that book out and read about what
Ross Whipple:Benjamin Graham Warren wrote. And, you know, as we all know,
Ross Whipple:he is a man of value. And I've got the sentiment, the education
Ross Whipple:from Bob Kennedy and Harold Doolin. When I was in
Ross Whipple:Fayetteville, and I still use it today, you can ask my kids, you
Ross Whipple:know, because they know where that book is.
Matt Waller:On behalf of the Sam M Walton College of
Matt Waller:Business, I want to thank everyone for spending time with
Matt Waller:us for another engaging conversation. You can subscribe
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