Little Rock Regional Chamber of Commerce

Banking & Finance

Solid Financial Institutions, Public Finance Spur Economic Development

Tax-Exempt Industrial Development Bonds (IDBs)
Tax-exempt IDBs are debt obligations of state and local governments that are sold on the national capital markets, the proceeds of which are loaned or leased to qualified companies. 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 allows borrowers to pay a lower interest rate on the debt used to finance capital improvements, thereby reducing borrowing costs. To qualify for tax-exempt status, issuers must meet the following qualifications:

• At least 95 percent of the issue must be used for the exempt purpose of the borrowing.
• The acquisition of land is limited to 25 percent of the issue.
• For an existing building, at least 15 percent of proceeds must be spent on renovations.
• For used equipment, an amount equal to 100 percent of the purchase price must be spent on renovation.
• The average maturity of the bonds must not exceed 120 percent of the expected economic life of the facility.
• Capital expenditures for the three years preceding the bond issue and three years following must not exceed $20 million, and the bond issue size cannot exceed $10 million per year.
• Borrowers may not have more than $40 million in bonds outstanding.

Taxable Industrial Development Bonds
If a borrower does not meet the above qualifications for a tax-exempt issue, taxable IDBs may be issued. Taxable IDBs are similar to tax-exempt IDBs, but interest income on these bonds is taxable at the federal level. If purchased by Arkansas residents, state taxes remain exempt. Taxable issues are often privately placed with an institutional investor and have lower up-front costs.

Arkansas Development Finance Authority
The Arkansas Development Finance Authority (ADFA) 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 the bond financing and other sources of financing for new and existing business entities.

Industrial Development Bond Guaranty Programs
The Arkansas Department of Economic Development (ADED) and the ADFA both offer IDB Guaranty Programs that provide credit enhancement for the issuance of taxable and tax-exempt bonds. Through the programs, borrowers are able to secure lower interest rates because bond issues are backed by ADFA and ADED’s Bond Guaranty Reserve Funds. The Reserve Funds serve as the first source of repayment if the borrower is unable to fulfill obligations under the contract.

Central Arkansas Financial Institutions – 1st Quarter 2006
	Assets	Deposits
Allied Bank	$119,947,000	$98,329,000
Bank of England	$165,748,000	$140,559,000
Bank of Little Rock	$128,830,000	$109,806,000
Bank of the Ozarks	$2,229,396,000	$1,758,935,000
Capital Bank (Little Rock)	$125,508,000	$101,343,000
Centennial Bank	$132,084,000	$105,601,000
Community Bank (Cabot)	$332,028,000	$260,722,000
Eagle Bank and Trust (Little Rock)	$115,940,000	$95,158,000
First Arkansas Bank and Trust (Jacksonville)	$500,216,000	$370,601,000
First State Bank	$275,049,000	$208,632,000
Home Bank of Arkansas	$44,901,000	$39,481,000
Metropolitan National Bank (Little Rock)	$1,411,812,000	$1,084,457,000
National Bank of Arkansas (North Little Rock)	$ 174,363,000	$ 141,396,000
Onebanc (Little Rock)	$ 331,448,000	$ 256,308,000
Pulaski Bank and Trust (Little Rock)	$ 482,851,000	$ 397,631,000
Summit Bank	$ 744,292,000	$ 594,631,000
Twin City Bank (North Little Rock)	$ 637,145,000	$ 484,238,000
Union Bank of Benton	$ 214,605,000	$ 174,346,000
Total	$8,166,163,000	$6,422,174,000

		Deposits
Arvest Bank (based in Fayetteville, AR)		$ 7,309,785,000
BancorpSouth (based in Tupelo, MS)		$ 9,826,316,000
Bank of America (based in Charlotte, NC)		$ 570,413,638,000
Delta Trust and Bank (based in Parkdale, AR)		$ 186,146,000
First Security Bank (based in Searcy, AR		$ 1,209,346,000
Regions Bank (based in Birmingham, AL		$ 57,390,683,000
Simmons First National Bank (based in Pine Bluff, AR)		$ 972,240,000
U.S. Bank (based in Cincinnati, OH)		$ 114,033,682,815
Source: FDIC For more information, contact Kristi Barr, 501.377.6017, kbarr@littlerockchamber.com.