Episode 215: Navigating the Banking Industry with Ross M. Whipple

February 22 , 2023  |  By Matt Waller

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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. 

Episode Transcript

Ross Whipple  0:00  
In sharing these stories, and I just, you know, hope that someone can take a little piece of this and put toward their career and making them a better not only a better business person to woman, but just maybe a better person as a whole.

Matt Waller  0:18  
Excellence, professionalism, innovation and collegiality. These are the values the Sam M. Walton College of Business explores in education, business, and the lives of people we meet every day. I'm Matt Waller, Dean of the Walton College and welcome to the be epic podcast. I have with me today, Ross Whipple, who is being inducted into the Arkansas Business Hall of Fame in February. For those of you most people are aware of Arkansas Business Hall of Fame, but it includes pretty amazing people. We started doing this back in 1999, every year for people are inducted. And if you look at the list, if you Google Arkansas Business Hall of Fame inductees, you'll see the list we have the list of all the inductees plus movies about each of them if you want to learn more about any person on there, but people like you know, Sam Walton, Don Tyson, Murphy, JB Hunt, JB and Johnelle Hunt, Warren Stephens. There's a long list, Bill Dillard, there's a long list of people and the purpose of the Arkansas Business Hall of Fame is to celebrate the business achievements of business people, the achievements of business people who have done business with high ethics, who have contributed to society, and in various ways, and we're really proud to have Ross Whipple in the group now, and Ross got his undergraduate degree from Henderson State and his MBA from the University of Arkansas, we're proud to have another inductee into the Arkansas Business Hall of Fame who's an alum of ours. He has extensive experience. He is president of Horizon Timbers, Inc, and many other things. He's also a member of the executive committee, and chair of the risk committee for Bank OZK. We'll be talking a little bit more about that. But Ross, thank you so much for joining me.

Ross Whipple  2:27  
Well, Matt, thank you for having me. And, as you said, when when you look back at the roster of the inductees over the last 22, three years, I am so honored and so humbled to be included with these people. I mean, these are folks that I have admired. And to a great degree strive to be like for years. I'm not sure I've gotten there yet, but I keep working at it. But I've just was so surprised at this honor and so humbled. The list is phenomenal. And

Matt Waller  3:08  
It is 

Ross Whipple  3:08  
and to be included in that is probably the high mark of my business background and business achievement really is. 

Matt Waller  3:21  
So, Ross, you've had over 35 years of experience in banking. Is that did you start your career in banking?

Ross Whipple  3:31  
No, sir, I did not. You know, I kind of fell into banking through the back door. I had a cousin name was Jane Ross. She was 35 years, my senior. I started to work with her when I came to college at Henderson and her family was primarily engaged in the land and timber business. Now there were some banking interests here than there but not anything that would lead to a majority control or anything like that. So like I say, I went to Henderson. After that I spent a little time in the military, which I'm very proud of, and then came to Fayetteville for my MBA.

Matt Waller  4:26  
What year did you get your MBA?

Ross Whipple  4:28  

Matt Waller  4:31  
76 And during the bicentennial year? 

Ross Whipple  4:35  
Oh, what? Yes. 

Matt Waller  4:37  
And what did you do in the military? 

Ross Whipple  4:40  
Well, I was I was commissioned as a Second Lieutenant right out of college, assigned to the First Cavalry Division in Fort Hood, Texas, which had just gotten back from Vietnam, I did miss that and I don't regret missing that. But were certainly prepared to go if need be, but and I spent you know a year, year and a half there, and then got out a little early so I could go to graduate school.

Matt Waller  5:11  
What made you decide to go to get your MBA?

Ross Whipple  5:15  
Well, I didn't think I was quite through, didn't think by education was quite where, you know, I would like for it to be. And I thought it offered me a great opportunity to grow and expand my knowledge and to field, you know, basically finance and economics for me. 

Matt Waller  5:37  
So you were working with Jane Ross? And then did you continue to work with her even up to that point?

Ross Whipple  5:45  
Somewhat, I'll be you know, I mean, we stayed in touch, of course you know during my four years of college, I went to school with what I call the Jane Ross work study. And, I mean, she did, she was a great lady, a great mentor to me. But she pushed hard. I mean, she wanted to make sure that I had seen every thing there was to do in the timber business first. I mean, from chainsaws to skidding to, you know, working in the sawmill to marking timber to painting lines, the whole bit, just so I would get a fairly basic understanding of what that business took. And we still haven't gotten around to answering your question about the banking business yet. But after I had been back for about three years about, she went down and purchased a controlling interest in what was merchants and planters bank in Arkadelphia. She had some interest in the bank. Well, I mean, probably the second largest shareholder. You know, I was acquiring some stock, but that like that, yeah, I didn't have much. So anyway, she went down and made the, there wasn't anyone who had absolute control, but made the largest shareholder an offer to buy the stock, basically, because he would not put me on the board. And she said, well, if you're not going to put the boy on the board, sell me the bank. And he did. And I had no idea of this. I mean, she came back as a surprise to me, said, you won't believe what I have just done. And I said, Oh, my gosh, you just did what? And you paid what? And I'm thinking, Oh, I don't know how we're gonna work our way out of this. But we did. I mean, it was a sleepy little bank in a free bank town in Arkadelphia back in the late 70s. You know, not only that she had given up, basically control through a voting trust. She had given the guy who was going to run the bank, a 10 year contract, and I said, I just can't believe you've done this. Well, to make a long story fit a page, we worked through some of those issues, and dissolved the voting trust, we didn't dissolve it, changed the trustee, and she made me the trustee. And anyway, we started working to try and improve the bank. In 1985, you know, I grew up in Malvern. So I had a couple of guys from Malvern, come down and pay us a visit about a potential merger, which sounded good to me cause I'm just trying to get Jane out of this bad investment that I think she's made, and just trying to figure out how we're going to do this. So we did affect a merger with the Bank of Malvern and formed Central Arkansas Bank Shares, it was a pretty creative transaction for her. And to some degree me. You know, the break even on the transaction. You know, I did learn something in graduate school, but the breakeven on the transaction for her given capital performance all ratios was like point five, two. And, you know, so the suggestion was, well, how do we do it? And I said, well, you know, well, I think book to book works very fine, they said whoa, we can't do that. And I said, well, how about point nine five a book. And they agree. So it was a relatively accretive transaction off the bat for her. Now, we went into that merger with equal ownership with another family. And they were again, they were kind of scared of Jane's money. I don't think they were too scared of me at the time. Although, funny story. The gentleman who was the attorney for the bank up there, went into the bank one day, and they were all talking about how they had just acquired merchants and planters bank and they were going to do this and they were going to do that. The attorney for the bank said, you don't know this yet but the guppy has just swallowed the whale. And in the end, that's what it turned out to be, you know, I mean it, it took a lot of maneuvering, I got a lot of scars on my back. But we did the right thing. We finally got control of the bank in the early 90s. I went to merchants and planters bank in 1989 as the president CEO, probably the best year of my life professionally. You know, we fixed a lot of things, we changed a lot of things. And I'll never forget, you know, after we decided, well, what do we, what are we going to do? So well, you know, we need to fix this probably time for the other bank president to leave and who's going to do that? And I said, well, you know, if need be, I'll do it. And then the next question was, who in the hell is gonna run it? Okay, get rid of him? And I said, I don't know. They said, well, will you do it? I said, well, you know, I'll do it for 90 days. You know, I got plenty to do. I got lots of things. And I got a lot of balls in the air, but I'll do it for 90 days. So we did. And then they came back and said, hey, we didn't talk about your salary. And I said, well, that's fine. And he said, what do you think you should be paid. And I said well here's what I'll do. I will work I will work for half of what you repay in the former bank president. But I want everything over a 1% return on assets. And they were saying, I can't believe this guy's stupid I mean this bank's never made a 1% return on assets. And he said he was so anyway, to make a long story fit a page. They at the end of the year, they paid me about another $150,000 because we fight we owe we made over 1% return on assets. Now I did split a lot of that with with my senior staff at the time, which I've always felt very important to do. But no they did. The bank never made over a point six ROA and they didn't you know, and when I inherited the bank at the end of February, you know, the bank had lost $30,000 year to date. So they didn't see how we could do that. But we did. And there were just a lot of things that were easy to do. You know when you're running to a bank that's not making any money. Matt, you really don't need a large, tax exempt bond portfolio. And, you know, and the bank was carried about a million dollars in vault cash. Well, it's a $35 million bank at the time that we need about maybe $300,000 in vault cash maybe. And fed funds were like 11% I mean you know, so I probably shouldn't have done this. But I got with my executive vice president on a Friday afternoon over a three, three day bank holiday. And we put $750,000 in the back of my car and drove it to the fed. So we could get credit for it over a three day weekend. You know, and those are there's the kinds of things you you have to do and it also shows your staff that you care and that you know you can do it and you know how to do it and they really stepped up stepped in line. And it was everything went very well. After that. We acquired we have acquired control. And I had a few people that were giving me problems. I was spending more time managing a certain group of directors, which was really pulling me back from, I think, doing what we should for the bank. And we solved that problem and really got to you know the bank was doing well. We had four charters, and they were in Malvern, Hot Springs, Arkadelphia and Sheridan, it's like driving across Dallas. So I'm thinking, you know, why do we need to operate four separate charters? Well, in Arkansas state bank department regulations only were, you know, the, you could only branch into a contiguous county. So, okay, I started looking at the map. And Hot Spring County was contiguous to Grant County, Clark County, and Garland County. So then we were able to consolidate the four charters into one I think we were the first to do it not because no one else wanted to, but because we had a geographic situation to be able to pull that off. And, and we did, it was, it was probably the hardest year of my life, you know, from a working relationship and get 

Matt Waller  16:29  
What year was that? 

Ross Whipple  16:31  
Still waste started in July of 1994, and completed the process. And late June, early July of 95. went from four charters to one. And that's interesting, because when you're having your meeting with your senior staff, and you're you're kind of outlining this for them, and they're going yeah, that's a pretty good idea. That makes a lot of sense. And then we had a little barbecue at my lake house at night, and you can see them all potting up. So we didn't have CFOs, back then that we had cashiers, and we had bank presidents, and we had for note departments and four of this and four of that, and you can see them kind of popping up. And they've got to figure it out. There are four of us now, there's only going to be one of us in the end, you know, but it worked out great. We, we kept everybody we needed to keep yeah, they may have had a new job alignment or whatever else. But yes, we did. We did sever about 30 people out of this. But it cost a million four to do all this between signage, excetera, you know, stationary the whole bit. And I was really concerned about FDIC insurance. Because see, previously, each bank had turned $50,000 worth of tension. And now we're just going to one 250,000 Not four. But anyway to make to finish this. It cost 1,000,004 We made $2.2 million in next year. You know, it doesn't sound like a very big bank, but back in the mid-90s, a $550 million bank is a pretty good sized bank. And all of a sudden, I got these people coming to visit me, you know, because I have not really thought about selling the bank. And, you know, they come and they go and I don't talk to them very seriously, then, you know, we've got a group but our St. Louis, Mercantile Bank came and talked to us on pretty serious level. We ended up selling the bank in February of 98. For bout right at 3.25 times book value and a 24 times earnings. Well, you know, I was beginning to get a reputation as a flipper. And I'm really not a flipper. And in my retort to these people was this. You know, if you have a house worth $100,000, and somebody offers you $325,000 for it, and you can build a new house for 100,000. What would you do? And the answer very quickly was we'll have sell it. So that's exactly what we did. You know, we sold horizon bank in February of 98. I had a one year mandatory with Mercantile and their board, I resigned at the year. Then I had a one year covenant not to compete. And we started back with Summit Bank in February of 2000. You know, we I don't know if you've ever seen the movie The Blues Brothers. 

Matt Waller  20:14  

Ross Whipple  20:15  
Well, we just brought the band back together just kind of what we did, you know, just like and it worked out extremely well. I mean, we were a de novo bank. We never made an acquisition, which I can support because every time we went to a new market, we hired people who wanted to come to work for us, you know, we had just had not been acquired. And when you get acquired, it sometimes doesn't feel good. So anyway, all the people that we went, sought us we saw them and it was it really worked out well. And we had had a good bank performed well, did well. And, and that bank, which was summit by was sold to bank of the Ozarks now BankOZK in May of 2014.

Matt Waller  21:11  
So Ross, has there been a book in your career that you've really enjoyed and gone to frequently throughout your career?

Ross Whipple  21:20  
Oh, yes, sir. You know, and I bought it in Fayetteville, Arkansas in 1974. And I used it in our Raymond Rebsamen portfolio class, and it's Security Analysis by Benjamin Graham. I have read it cover to cover a number of times, I still to this day, pull it out. And you know what, I get the feeling, you know, why I don't like preferred stocks or whatever else. I'll pull that book out and read about what Benjamin Graham Warren wrote. And, you know, as we all know, he is a man of value. And I've got the sentiment, the education from Bob Kennedy and Harold Doolin. When I was in Fayetteville, and I still use it today, you can ask my kids, you know, because they know where that book is.

Matt Waller  22:27  
On behalf of the Sam M Walton College of Business, I want to thank everyone for spending time with us for another engaging conversation. You can subscribe by going to your favorite podcast service and searching Be epic B E E P IC.