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A Mississippi Business Journal Q&A

MBA president Gene Walker discusses family, banking trends, issues

FOREST — From a powerhouse family of bankers, Thomas E. “Gene” Walker was destined for a career in the banking industry. During the late 1960s and 1970s, four men in the Walker family entered the business: Friend Walker and his three sons, Bucky, Harry and Gene.

“We saw how much our father enjoyed helping others, and banking was a career that was exciting for a young person at that time,” explained Gene Walker, chairman and CEO of the Bank of Forest and First Forest Corporation, who was elected president of the Mississippi Bankers Association at the annual convention in Destin, Fla., last month.

A native of Taylorsville, Walker graduated with honors from Mississippi State University (MSU) in 1974 with an undergraduate degree in banking and finance, and graduated from the banking school at Louisiana State University in 1981. He is a graduate of the American Bankers Association’s Commercial Lending and Funds Management Schools.

After graduating from MSU, Walker joined the Grenada Banking System, and served as branch manager of the Ackerman branch from 1977 to 1979. He then joined the Bank of Forest as executive vice president and was promoted to president and CEO in 1981. Two years later, his role was expanded to include First Forest Corporation. In 1992, he was promoted to his current post.

For the Mississippi Bankers Association, Walker served as president of the Mississippi Young Bankers in 1987, chairman of the state legislative committee in 1998 and federal legislative chairman in 2001. For the American Bankers Association, he served as security and risk executive committee member in 1985, Community Bankers Council member from 1997 to 2000 and government relations council member and Team 21 chairman for Mississippi in 2002.

A member of the College of Business and Industry Senior Advisory Council at MSU, and the advisory board for MSU’s Meridian campus, Walker is also involved in the Forest Area Chamber of Commerce and the Forest Rotary Club.

The Mississippi Business Journal asked Walker about his family and his thoughts on industry trends, tort reform, and the prospect of Mississippi banks getting into the real estate and property management business.

Mississippi Business Journal: How did your family become interested in banking as a career?

Gene Walker: My interest in banking as a profession began developing during my high school years as a result of seeing my father enter the banking industry only a few years earlier. The late Robert M. Hearin, chairman of the board of First National Bank of Jackson, which later changed its name to Trustmark National Bank, hired him in the late 1960s. It’s no doubt that our father had a strong influence in molding us into a people-oriented industry like banking. My father was an old local politician serving as a county chancery clerk and later as a town alderman for the City of Taylorsville for a total of approximately 30 years. During most of that time, he operated a Ford dealership in Taylorsville. My two brothers and I probably changed as much oil and washed as many automobiles as any kid in Mississippi, but even then, my father always loved to be involved in every community activity that was going on in Smith County. He certainly instilled a commitment toward community service to his children, and as we saw him develop his banking career in those early days by working with Mr. Hearin’s young protégé, Frank Day, it became obvious to us that this was a career for young people and an exciting way to help individuals better themselves. We brothers have always said that our father worked daily to live up to the name ‘Friend,’ and I hope a little bit of that rubbed off on his children.

MBJ: What pressing issues affecting Mississippi banks most concerns you?

GW: The threat we see from the unwise policy of allowing credit unions to expand unfairly when they don’t pay any taxes and are not fully regulated. Banks are not opposed to the existence of credit unions as Congress intended in the 1950s. But this is not what is happening today. We now have numerous credit unions in this country with over $1 billion in assets. There’s one here in Mississippi, and I repeat: they pay no taxes. They are also not subject to regulations, such as the Community Reinvestment Act. This is not good government policy for the benefit of all our citizens. Credit unions should be restricted in their use of the common bond rule. Just because you live in a certain county or region, it should not allow you to join a credit union at the expense of others that must pay their fair share of taxes.

MBJ: With the migration of deposits away from banks since the 1980s, how do the banks in the state stand and what success have you had luring deposits back?

GW: Banks do not control anywhere close to the percentage of financial assets they managed in the 1980s. Through disintermediation and others in the financial services industry being allowed to enter banking services that were once part of the banking franchise, our market share has been damaged. Probably we will not recover to the percentage we enjoyed in the 1970s and 1980s. But bankers don’t ask for anything other than a level playing field. The enactment of the Graham-Leach-Bliley Act of 2001 did allow banks to compete competitively with financial brokerage houses and with insurance companies and hopefully with real estate companies. If we are allowed to do so, I’m convinced that banking is alive and well and will be viable for decades to come. We’ve entered into arrangements where we can sell alternative investments to our customers, whether mutual funds, annuities and other insurance products. Also, we have been allowed to enter into the property and casualty insurance business as well as the sale of life insurance and other products. The unfortunate battle with realtors has the potential of damaging this financial trend. It certainly would be harmful to this country and to the consumer in general if the progress under Graham-Leach-Bliley were reversed. I’m optimistic about the success of the Bank of Forest. I’m optimistic about the success of banks in Mississippi. Banking is a great career for young people wanting to serve in an industry that helps people. There is no greater satisfaction in helping a local small businessperson begin a business, become successful and expand while improving your community. That’s just what we bankers enjoy most. I intend to do everything I can to promote the banking industry in Mississippi for the benefit of all its citizens.

MBJ: What positive and negative trends do you see on the horizon for banks in Mississippi?

GW: Obviously, nationally, I think we will continue to see some consolidation of the financial services industry. And, without doubt, this will have an effect on financial service deliverers in our state. It is common knowledge also that Mississippi is not a major expansion market in the Southeast, but we are a very important player in the Mid South. We are fortunate that we have very few banking problems. Practically all of our financial institutions have remained extremely sound financially. With this said, I have a personal desire to see several of our large Mississippi banks remain home owned. I think it is important to Mississippi and to the future economic development of our state. As a matter of fact, we’ve had several Mississippi companies branch outside Mississippi to ensure the fact that we can continue the trends of our large banks remaining Mississippi corporations. In addition, our community banks serve a great purpose in serving many small communities all across the state. I see a decreasing trend of mergers and acquisitions among the smaller community banks, many of which desire to stay independent and remain owned by local investors. You also see a continued trend in startup banking operations in those areas where there is a void in local involvement and ownership in community banks. I think this is the normal progression of the market and a healthy result of local civic leaders wanting to play a part in the destiny of their local economies. The only negative trend I see for banks in Mississippi or nationwide is toward over-regulation. The vast majority of bank regulation is good and necessary, but at times, when you have the responsibility of running a financial institution, it is easy to see that we have become an over-regulated society. The industry has gotten to the point that you need eight to 10 bank forms to make a simple consumer or small-business loan to protect yourself from corporate risk, whether legal or financial. I realize that our regulatory environment is not the total culprit. Many of these problems are caused because our tort system is out of balance and banks continually live in fear of being sued. Hopefully, this trend will not continue, as there have been efforts to solve this in Congress through limiting regulation and through civil justice reform. Also, it is important that we make the point that this is not just a cost to the bank, but it is also a cost to the consumer. Ultimately, the consumer will pay the price for additional cost in any corporation, if that corporation is to remain solvent and viable.

MBJ: How is the legal climate in Mississippi affecting the banking industry and the communities it serves?

GW: In my opinion, changes in our civil justice system are very important to help Mississippi develop economically for the future. Abuses in the recent past, with frivolous lawsuits and/or other civil claims with outrageous judgments, has given us a national recognition of being a state where it is hazardous to your business health to have operations in Mississippi. Our reputation as a business-friendly state has been damaged. We as bankers want an even playing field. We don’t want things that are structured unfairly against some consumers, and we certainly don’t want Mississippi’s small businessmen and large corporations to be put in a situation to be ruined financially over sometimes relatively minor claims, where a jury could lean toward exorbitant noneconomic damages. When you live in a state that has developed the reputation Mississippi has nationally, over what many feel are lawsuit abuses, then I think we all would have to agree that economic development takes a blow. I believe the average Mississippian believes that the pendulum has swung too far to the advantage of the trial lawyers. I know we’ve made progress through some of our recent judicial elections to bring it back more into balance, but there are some statute changes that must take place to help the state forward economically.

MBJ: Describe the importance to the industry and banking customers of continuing to develop new lines of business. Also, what is the status of Mississippi banks getting into real estate and property management?

GW: I think all of us realize that over the last few years, the financial industry has been moving toward a one-stop shop financial network. With the passage of the Graham-Leach-Bliley Act, Congress attempted to keep up-to-date financial services regulations in place for the foreseeable future. With all the turf wars between the different financial services industries prior to Graham-Leach-Bliley, it was harmful to our financial system and our economy. Financial services customers were hurt the most. Graham-Leach-Bliley solved a lot of these problems through allowing an even playing field for the real estate industry, the banking industry, the brokerage industry, and the insurance industry. We at the Bank of Forest are a small community bank with assets of approximately $130 million. It’s our goal to serve the community and our customers in the most efficient and professional way possible. Through that endeavor, in January 2000, we entered the insurance business through Forest Insurance Agency. We have experienced positive results not only for it being a profit enhancement, but also as a continued improvement service for our local market. We’ve spent decades here at the bank gaining the confidence of our customers, and we think that has carried over to assuring them that we will protect them through all of their financial needs, including their insurance needs. In line with that philosophy, there is an interest on the part of some banks across the U.S. of entering the real estate brokerage and management services business. Graham-Leach-Bliley gave the Treasury and Federal Reserve the authority to decide which services banks could offer. However, real estate brokers have challenged the very first decision out of the block. This controversy has been an aggravation to all concerned, in that we thought these issues were solved during the major financial restructuring under Graham-Leach-Bliley. Obviously, if banks could offer real estate services, consumers would have more choices of real estate firms when buying or selling a home. In addition, real estate brokers would have more choices of potential employers, and real estate companies would have more choices of companies to partner with who could provide new sources of capital and technology. Not every bank has an interest to enter the real estate brokerage and management business. As a matter of fact, I suspect very few in Mississippi would. It’s not necessarily a large-bank or small-bank issue. Small banks may be more interested in being able to get into the real estate brokerage business than larger banks. In some cases, smaller institutions that have markets in rural communities underserved by real estate companies would certainly have an advantage. It is a fact that a significant majority of insured depository institutions can already offer real estate brokerage services under the laws of many states and under federal statute. More importantly, many real estate brokerage firms are actively engaging in providing financial services in direct competition with banks now. If real estate companies are allowed to be in the mortgage business, why is it not realistic for banks to be involved in the real estate business? Here again, we must keep the playing field balanced.

MBJ: Tell us about your family and others who influenced your personal life and career.

GW: I have been blessed to have a wife for 31 years that has supported me in my career. My wife, Dianne, has taught piano and has been an organist and pianist for our church for over 30 years. We have two children: Tom recently graduated from law school at Ole Miss and will begin working at Wise Carter Child & Caraway in July, and Christy is an accountant at Deloitte & Touche in Birmingham. My mother lives in Forest, but continues to maintain and visit regularly our old home place in Taylorsville. She taught school for 30 years and helped three boys stay out of trouble. When we were small, one of her favorite words of advice was to “always speak and be courteous to adults because you never know who can be in a position to help you in life.” I still use these words of wisdom to this day but now I speak to children, hoping for the same result. Frank Day, the previous chairman at Trustmark National Bank, deserves some credit for my family’s banking involvement. Frank not only was instrumental in hiring my father and my two brothers for their first banking jobs, but he also set the example for each of us to see what good management and hard work can do toward making you a good banker. I never worked for Mr. Day, but he certainly gave my family the opportunities that helped all of us develop our banking careers. A couple of other people certainly played a great influence in my life early on, as I started my banking career. Obviously, I had already majored in banking and finance at Mississippi State University. I did not have a decision made as to what type of banking I really wanted to pursue. It was at this point that Earl Beck, who was the president and branch manager of the Ackerman branch for Grenada Banking System, gave me an opportunity. He offered me a part-time job during my last semester. Earl was also a community-oriented individual that really set the example for community involvement. I certainly owe much of my early success to the fast progression in my career to Earl as well as to Bob Kennington, who was CEO for the system. Both men were ones you could look up to, and they certainly played a great part in developing my career.

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.

About Lynne W. Jeter

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