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Banking & Finance

Solid Financial Institutions, Public Finance Spur Economic Development

Arkansas Development Finance Authority (ADFA)

The Arkansas Development Finance Authority was created in 1985 by ACT 1062 as passed by the Arkansas State Legislature. ADFA is the primary bond issuer for the state and offers several programs that assist with bond financing and other sources of financing for new and existing business entities and nonprofit organizations.

ADFA and the Arkansas Economic Development Commission (AEDC) offer a Guaranty Program that provides credit enhancement for the issuance of tax-exempt and taxable bonds. Reserve funds at each respective agency provide a source of debt service for the bond issues. As a result, borrowers are able to obtain favorable interest rates when obtaining either tax-exempt or taxable funding from each of these agencies. The Guaranty Programs are rated "A" by Standard & Poor.

More information on ADFA and American Recovery & Reinvestment Act (ARRA) programs may be found at www.arkansas.gov/adfa.

Economic Development Bond Issues (EDBs)

Tax-exempt EDBs 

Tax-exempt EDBs are debt obligations of state and local governments. These issues are sold via national capital markets to individuals, mutual funds and trust companies, as well as other investors. The proceeds of these issues are loaned or leased to qualified organizations and companies. EDBs, also known as IDBs, have been available in Arkansas for more than 40 years. Interest income from these securities is exempt from federal taxes, as well as state taxes if purchased by Arkansas residents. This exemption provides borrowers with a lower interest rate on their debt used to make capital improvements reducing borrowing cost. To qualify for tax-exempt financing, issues, issuers must meet the following qualifications:

  • At least 95% of the issue must be used for the exempt purpose of the borrowing.
  • The cost of the acquisition of land is limited to 25% of the bond proceeds.
  • The purchase of an existing building requires that at least 15% of bond proceeds must be spent on renovations of the building.
  • The purchase of used equipment requires that 100% of the bond proceeds must be spent on renovation of the equipment.
  • The average maturity of the bonds must not exceed 120% of the expected economic life of the facility.
  • Capital expenditures by the borrower are restricted to $20 million for the period three years prior to and three years following the issuance of bonds to the borrower, and the bond issue size for the borrower cannot exceed $10 million. The maximum loan to borrow under this program cannot exceed $20 million.
  • Borrowers may not have more than $40 million in bonds outstanding at any given time.

Taxable EDBs

If the borrower does not meet the above qualifications for a tax-exempt issue, taxable EDBs may be issued. Taxable EDBs are similar to tax-exempt EDBs, however, the interest income is taxable to the investor at the federal level. The income is also taxable to the investor at the state level unless the investor is an Arkansas resident, then the interest income is exempt from taxes. Taxable issues are typically placed with institutional investors. These issues can feature higher up-front cost.

Central Arkansas Financial Institutions - 3rd Quarter 2009

Dollar figures in thousands
Arkansas Locations (Chartered)

Assets

Deposits

Arvest Bank (Fayetteville)

$10,463.377

$8,374,707

Bank of England (England)

$97,309

$164,188

Bank of Little Rock (Little Rock)

$194,878

$177,749

Bank of the Ozarks (Little Rock)

$2,874,460

$2,054,153

The Capital Bank (Little Rock)

$185,658

$149,881

Centennial Bank (Little Rock)

$2,622,070

$186,456

Central Bank (Little Rock)

$88,685

$63,990

Delta Trust & Bank (Parkdale)

$273,456

$245,540

First National Bank (Hot Springs)

$712,984

$540,679

First Security Bank (Searcy)

$2,981,850

$2,321,517

HomeBank of Arkansas (Portland)

$80,565

$73,450

iBERIABANK (Little Rock)

$1,502,540

$1,106,745

Metropolitan National Bank (Little Rock)

$1,533,271

$1,255,693

National Bank of Arkansas (North Little Rock)

$199,259

$154,574

One Bank & Trust (Little Rock)

$408,762

$319,818

Simmons First National Bank (Pine Bluff)

$1,449,639

$1,143,951

Summit Bank (Arkadelphia)

$1,014,225

$831,824

Out-of-State Charters
BancorpSouth (Tupelo, MS)

$13,269,633

$10,217,439

Bank of America (Charlotte, NC)

$1,460,147,344

$1,002,708,983

Regions Bank (Birmingham, AL)

$1359,594,440

$98,518,797

U.S. Bank (Cincinnati, OH)

$259,942,982

$180,624,239

Source: FDIC.gov, Institution Directory, Assets & Liabilities, September 30, 2009

For more information, Joey Dean (Vice President, Economic Development; Executive Director, Metro Little Rock Alliance), 501.377.6006.

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