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Thread: Farmers Bank

  1. #1

    Midtown Farmers Bank

    OKC bank facing FDIC and legal scrutiny; high-profile banker ousted

    Less than a year after opening a branch in the Midtown area of Oklahoma City and reporting state-leading growth, Farmers Bank of Carnegie quietly removed its president after a bank examination resulted in a corrective order from Federal Deposit Insurance Corporation (FDIC) and Oklahoma State Banking Department.

    In addition, the bank and its former CEO have been named as defendants in a new lawsuit containing serious allegations, while the bank itself has brought action against its former chief executive.




    Bold new image
    After decades of operating as a small community bank in Carnegie, Farmers opened a branch at 1300 N. Walker Ave. in April of last year, an unusual and high-style facility with custom ping-pong tables, electric scooters, a coffee bar and décor more closely resembling a downtown loft than a traditional bank.

    A full-page story featuring the bank's new CEO, Aaron D. Johnson, graced the front of The Oklahoman's Sunday business section on May 27, 2018 and the same publication posted a video -- a 6-minute monologue delivered by Johnson seated at the new Farmers coffee bar, showcasing the expensive new Midtown bank offices and extolling his ambitious vision -- to its website.


    Aaron Johnson films a video feature for the Oklahoman


    Johnson was featured prominently in Farmers social media promotions and extensive marketing efforts, including a self-produced video of the bank president driving around Carnegie in an expensive Audi and flashing a gold Rolex watch.

    Then suddenly on February 11, 2019, Farmers posted a short video to its Instagram account of Aaron Johnson introducing David Braly as the new president and CEO of the bank. No details were given for the abrupt change or regarding Johnson's future.

    FDIC steps in
    A month later, on March 21, 2019, the FDIC formally disclosed a 25-page Consent Order demanding a long list of corrective actions, including specific restrictions and changes regarding properly qualified management personnel, board supervision, loan policy, reporting of charged-off loans, capital increase and a "realistic, comprehensive budget" as part of a larger profit plan.

    The Consent Order included this as background: “The Bank, by and through its duly elected and acting board of directors, has executed a 'Stipulation to the Issuance of a Consent Order' dated February 21, 2019 that is accepted by the FDIC and the State.” The announcement of the new bank president had been just 10 days prior to the signed stipulation.


    Johnson introducing Braly in a February 11, 2019 Instagram video

    The order indicates the corrective action was the result of a Report of Examination (ROE) dated September 17, 2018. Per FDIC rules, ROE's are not a matter of public record.

    According to Section 15.1 of the FDIC's Manual of Examination Policies, a Consent Order is a type of Cease and Desist Order against an insured bank when facts reasonably support that the bank has engaged in unsafe or unsound practices and/or if it has violated a law, rule or regulation.

    The manual further explains that the purpose of such an order is to remedy unsafe or unsound practices or violations and to correct those conditions.

    Sudden rise, fast fall
    Aaron Johnson became the president and CEO of Farmers Bank at age 34, succeeding his father in that role and becoming the fourth generation of his family to helm the institution.

    Although the bank was based in 1,672-person Carnegie, Johnson lived in Oklahoma City dating back to 2006 when he took his first official role with Farmers.

    County records show that starting in 2014, Farmers began to make a number of multi-million dollar loans for commercial and residential real estate projects, many signed by Johnson. By September of 2015, Johnson was promoted to executive vice president and chief lending officer and in May of 2016, elevated to the role of CEO.

    Dozens of large OKC-area loans followed and Farmers was soon lauded as the fastest growing bank in the entire state for 2017, nearly doubling the growth rates of the second-place finishers in terms of asset, loan and deposit growth and besting all of the state's other 200+ banks.

    In 2017 alone, Farmers reported between 80.29 percent and 86.09 percent increases in all three categories, a remarkable feat for what had been a sleepy small-town bank.



    By mid-2018 the examination had begun that led to the existing Consent Order. By February 2019, Braly had been quietly introduced as the new head of Farmers and Johnson was no longer listed as an officer.

    Public records reveal that new lending activity declined sharply after Johnson left the bank.

    Quarterly reports filed with the FDIC show that after significant declines from 2011 to 2015, for the period between January 1, 2016 and December 31, 2018, Farmers grew its total assets, loans and deposits by 143.4 percent, 177.2 percent and 175.2 percent respectively.

    Yet corresponding net income over the same period took a sharp downturn, culminating in a reported loss of $698,000 in 2018 after recording a bad loan allowance of over $1.2 million.


    Bank files suit against former CEO
    Several months before Farmers replaced Aaron Johnson as its chief executive, the bank engaged an independent accounting firm to investigate staggering sums charged to an American Express card.

    In a lawsuit filed last month, Farmers claims Johnson made personal charges in the amount of $398,389.49 in a twelve-month period beginning in June of 2017 and that the bank paid these charges on behalf of Johnson.

    Although the suit indicates Johnson ultimately repaid $371,000, Farmers claims an unpaid balance of $47,948.13 with interest still accruing.

    The bank also alleges that Johnson breached his fiduciary duty as chief executive officer by utilizing the card for personal use and having those charges paid by Farmers.

    The FDIC's Consent Order contains over a full page devoted to new restrictions regarding expenses paid on behalf of employees and directors, including limitations on spending, complete documentation and proper and timely review.

    In an answer to the filing, Johnson's attorney denies money is owed the bank or that it was damaged in any way by the American Express charges.

    The matter is still pending in Oklahoma County District Court.

    Sued by shareholders
    In addition to the FDIC and state regulatory issues, two existing shareholders in Farmer Bank recently filed a legal claim alleging they had been fraudulently induced into lending money to Aaron Johnson and his father Lawrence. The suit identifies the Johnsons as the majority shareholders of the bank.

    The action filed by brothers Gary S. and Robert D. Smith asserts they were intentionally misled by Aaron Johnson when the pair loaned substantial sums to Farmers Bank, which is also named in the suit. The Smiths claim $1.5 million in promissory notes were executed on July 24, 2018.

    The filing states the original due date was extended at the request of the Johnsons after Aaron offered assurances of bank profitability and full payment in mid-March of this year. The Smiths filed their lawsuit earlier this month after no payment was tendered.



    The suit includes several additional allegations including: 1) bank regulators in early 2018 directed Farmers not to borrow funds without consent, which was not obtained in regard to the subject promissory notes; 2) the Johnsons had misused assets of the bank imperiling its ability to repay the notes; 3) the Johnsons defrauded the Smiths and others in conjunction with the sale of stock in Farmers; and 4) the fraudulent stock sales would be the subject of a separate lawsuit.

    The Smiths are the principals behind Corsair Cattle Company, a real estate investment and development firm that has sold and renovated a great deal of property in and around the Midtown area of OKC.


    Aaron Johnson and David Braly did not return our calls.

    OKCTalk and Oklahoma Gazette will continue to follow this story.

  2. #2

    Default Re: Farmers Bank

    The moral of the story is don't trust executives with beards.

  3. #3

    Default Re: Farmers Bank

    Speaking as an executive in banking, when the FDIC says what they did in this case, it's a bad deal. I'd have to imagine this was not the first time they were written up.

  4. #4

    Default Re: Farmers Bank

    They've been in trouble for awhile and their employees have been jumping at the first opportunity to get out of there. Aaron was incredibly flashy which typically goes against your stereotypical banker. Not that that means anything is wrong, but you're certainly going to draw attention when you're growing at such a high multiple. Spending that much personally on a company card is just careless and stupid.

  5. #5

    Default Re: Farmers Bank

    The FDIC Consent Order was 25 full pages of mandated changes, which should tell you a lot.

    They put on over $60M in new loans in just two years; more than tripling their loans in that time. Some of those have already gone bad.

    Now, their stockholders are suing them.


    I'll let everyone draw their own conclusions and I'm sure this story will continue to play out for quite some time.

  6. #6

    Default Re: Farmers Bank

    the whole transformation seemed slick and very used car salesman to me. will be interesting to see how it all plays out for sure.

  7. #7

    Default Re: Farmers Bank

    I live in the area and have been observing Mr. Johnson for quite some time. I seem to recall a Financing by Farmers Bank sign in from of the home at 524 NW 8th when it was being built.

  8. #8

    Default Re: Farmers Bank

    I wonder if there are similarities as to what happened to Bank of Union. They had similar growth in a short time.

  9. #9

    Default Re: Farmers Bank

    Quote Originally Posted by Pete View Post
    The FDIC Consent Order was 25 full pages of mandated changes, which should tell you a lot.

    They put on over $60M in new loans in just two years; more than tripling their loans in that time. Some of those have already gone bad.

    Now, their stockholders are suing them.


    I'll let everyone draw their own conclusions and I'm sure this story will continue to play out for quite some time.
    Big time. I remember the concern we had when the FDIC gave us an MOU for literally one bad loan for a local guy who was renovating a large apartment complex in Norman who ended up skipping town. That meeting with the FDIC was intense and again we are talking about one loan, one page memorandum. The customer ended up screwing over multiple banks and after a big lawsuit we recouped most of our money. Still the FDIC was not very nice to us, and what I'm talking about pale in comparison to what is being talked about here.

  10. Default Re: Farmers Bank

    Quote Originally Posted by Pete View Post
    The FDIC Consent Order was 25 full pages of mandated changes, which should tell you a lot.

    They put on over $60M in new loans in just two years; more than tripling their loans in that time. Some of those have already gone bad.

    Now, their stockholders are suing them.


    I'll let everyone draw their own conclusions and I'm sure this story will continue to play out for quite some time.
    Its like a mini Penn Square

  11. #11

    Default Re: Farmers Bank

    Remember TEEMCO?

    This Aaron Johnson guy sort of reminds me of a millennial version of Greg Lorsen, who also had a huge article in the Oklahoman about his business which sort of just popped up out of nowhere.

    Very similar story.

  12. #12
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    Default Re: Farmers Bank

    The old saying, give a man a gun, and he can rob a bank, give him the bank and he can rob the world....

  13. #13

    Default Re: Farmers Bank

    Front page -- and full page -- of the 5/27/18 Sunday Oklahoman business section.


  14. #14

    Default Re: Farmers Bank

    Very interesting placement of the MidFirst ad. Seems to describe the situation perfectly.

    Maybe that was a low key warning to the depositors?

  15. #15

    Default Re: Farmers Bank

    Also interesting they run that article, but no word on the recent news...

  16. #16

    Default Re: Farmers Bank

    Quote Originally Posted by sooner88 View Post
    Also interesting they run that article, but no word on the recent news...
    Probably stiffed them on the last half payment on the article.

  17. #17

    Default Re: Farmers Bank

    Quote Originally Posted by sooner88 View Post
    Also interesting they run that article, but no word on the recent news...
    Probably because that article is 14 months old.

  18. #18

    Default Re: Farmers Bank

    Quote Originally Posted by jonny d View Post
    Probably because that article is 14 months old.
    man... if the Oklahoman ran news about 14 months in the future... then it would totally be worth the money!

  19. #19

    Default Re: Farmers Bank

    Quote Originally Posted by jonny d View Post
    Probably because that article is 14 months old.
    I know....

    My point being they run a fluff piece on a bank a year ago, yet when something major happens such as this the FDIC disclosing a 25-page Consent Order, something that is major news in the OKC business community, the Oklahoman is quiet.

  20. #20

    Default Re: Farmers Bank

    https://oklahoman.com/article/563701...cused-of-fraud

    Former Farmers Bank president and CEO Aaron Johnson, left, talks with his father, Larry, at the coffee bar built in their new Midtown branch in this May 15, 2018, photo. A few months later, both men stepped down admid allegations of fraud and a consent order from the FDIC.
    False. As I documented, Aaron Johnson didn't leave his post until February of 2019.

    The consent order, published by the Federal Deposit Insurance Corp. on June 28,
    False, it was issued on March 21st of this year.

    list of required actions to address alleged unsafe banking practices relating to loan procedures, management, expense reimbursement and pay and capital
    This is highly misleading. The order was 25 pages long and contained lots of mandated changes beyond what is listed here.

    Aaron Johnson, who took over as CEO in 2017 at age 34, was gone after little more than a year and just a few months after the opening of the Midtown branch.
    Way false. Johnson started as CEO in 2016 and didn't leave that position until February of 2019. Branch opened in April 2018.

    records show Aaron Johnson stepped down as CEO of Farmers Bank
    False. There are not records that show this or that he stepped down. Just a press release that Braly was the new CEO. We don't know if he was fired, if the FDIC insisted he leave, etc.


    Keep in mind all this happened months ago, apart from the 2 lawsuits; one was filed June 6th, the other July 7th. The Oklahoman also put a very small notice about Braly being the new president in March (a reprint of a bank press release). But they have nothing to say about any of this until I work for months putting it all together, then within a few days they put out a story with nothing new, apart from the "all is well" quotes from the new president, who will only talk to them now to do damage control after my story. He did not return my call at all. And then of course, they can't even get the basic timeline correct even though I did all the work for them.


    This is a sad attempt to try and make it look like they are covering a story out of embarrassment of running a massive PR campaign for this bank while they were right in the middle of serious issues. That whole story and video was orchestrated by a PR firm.

    Sound familiar?

  21. #21

    Default Re: Farmers Bank

    Quote Originally Posted by Pete View Post
    https://oklahoman.com/article/563701...cused-of-fraud



    False. As I documented, Aaron Johnson didn't leave his post until February of 2019.



    False, it was issued on March 21st of this year.


    This is highly misleading. The order was 25 pages long and contained lots of mandated changes beyond what is listed here.



    False. Branch opened in April 2018 and Braly took over in February of 2019.



    False. There are not records that show this or that he stepped down. Just a press release that Braly was the new CEO. We don't know if he was fired, if the FDIC insisted he leave, etc.


    Keep in mind all this happened months ago, apart from the 2 lawsuits; one was filed June 6th, the other July 7th. The Oklahoman also put a very small notice about Braly being the new president in March (a reprint of a bank press release). But they have nothing to say about any of this until I work for months putting it all together, then within a few days they put out a story with nothing new, apart from the "all is well" quotes from the new president, who will only talk to them now to do damage control after my story. He did not return my call when I was seeking comment for my story.


    This is a sad attempt to try and make it look like they are covering a story out of embarrassment of running a massive PR campaign for this bank while they were right in the middle of serious issues.

    Sound familiar?
    This just sounds like semantics. The rest, I agree with you. But this just seems like semantics. The Oklahoman is covering its own butt here. But yeah, it is a bad deal for all involved with that bank, including the DOK, who gave them 2 pages or so of advertising a little over a year ago.

  22. #22

    Default Re: Farmers Bank

    He left 9 months after that photo, not "a few months after".

    Not a huge deal but demonstrates the reporter doesn't even understand the timeline of events although I had already spelled it out in great detail.


    Just so bad for our community in so many ways.

  23. #23

    Default Re: Farmers Bank

    "False. There are not records that show this or that he stepped down. Just a press release that Braly was the new CEO. We don't know if he was fired, if the FDIC insisted he leave, etc."

    The First Order under the FDIC's Cease and Desist is that the bank shall have and retain qualified management strongly suggests that the FDIC was not amenable to the then current CEO -

  24. #24

    Default Re: Farmers Bank

    Quote Originally Posted by RustytheBailiff View Post
    The First Order under the FDIC's Cease and Desist is that the bank shall have and retain qualified management strongly suggests that the FDIC was not amenable to the then current CEO -
    Yes, but the records do not show he 'stepped down'.

    That's a big distinction.

    You can draw all types of inferences from the Consent Order but as a reporter you can't assert something as fact ("records show Aaron Johnson stepped down as CEO of Farmers Bank") when it isn't a fact.

    If you take that leap, then you could also say "Records show the FDIC forced the bank to fire Johnson"; or "Farmers decided to fire Johnson to appease the FDIC". Although those seem like the most plausible scenarios I didn't say that in my report because that's not what the records say and the records simply don't provide enough information.


    It's sloppy reporting on the part of the Oklahoman, plain and simple. You think they could at least get things straight when they are ripping off someone else's work without proper attribution.

  25. #25

    Default Re: Farmers Bank

    I'm hardly one to defend the Oklahoman or the bank, but some questions based on your assertions.

    How are you certain the Oklahoman doesn't have records that you aren't privy to?

    How are you certain the Oklahoman is ripping off your work? Does the fact that "the reporter doesn't even understand the timeline of events although I had already spelled it out in great detail" suggest that maybe they weren't ripping off your work?

    Also, are you certain that, at the Oklahoman, the reporter writes the captions for the photos (real question - don't know the answer)? Seems like this could easily be poor editorial work rather than poor reporting - which still isn't great - but given the specific dig made at Steve here seems to be a relevant distinction.

    While saying "a few months later" is misleading, it's not false. And, at least to me, saying it was "admid allegations of fraud and a consent order with the FDIC" gives context to the timing.

    Also, hardly a substantive point, but issue date and publish date are two different things. Neither you nor the Oklahoman made a false statement - just referring to two different things.

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