“We are recruiting some of our best customers to serve on our advisory boards. It’s a source of business.
By Debra Cope
Luther Deaton Jr., a veteran Kentucky banker, says even the best boards must be open to change as the banking industry evolves. That’s why he plans to add one or two directors to the board of directors of Central Bancshares Inc., compared to seven currently.
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“We have a great board of directors. I can call them any time of the day or night with any concerns,” says Deaton, chairman and CEO of the holding company and Central Bank and Trust Co., a $3.5 billion-asset bank located in Lexington, KY. But his board of directors is not getting any younger and he wants to supplement it with directors who work and run companies and who can bring new and diverse perspectives. Fortunately, the bank has advisory boards in its key markets, and its last three directors are from its succession system. The advisory board is a great way for the bank and potential future directors to get to know each other better, Deaton says.
“We are recruiting some of our best customers to serve on our advisory boards. It’s business food. They get information from us and help us by recommending us to their friends in the community. It worked really well,” says Deaton. An advisory role is not officially expected to translate into a board seat, but the board has added directors with technological know-how by tapping into that resource.
He did not set a deadline for expanding the board, stressing that “it has to be the right person.” Conversations with future directors also take time, he pointed out. Candidates know that serving on a bank board is an honor, but learning what the position entails can be eye-opening.
“It’s not just a question of status. Administrators need to understand their responsibilities and recognize that this is not window dressing,” says Deaton. “This is a serious matter and board members assume liability risks. Once you tell people what the responsibilities are, they back off a little.
Deaton, who grew up in modest circumstances in Breathitt County, Kentucky, is an example of a breed of banker that is increasingly hard to find. He started at Central Bank and Trust as a teller in 1978. He previously worked for a financial company, but he traveled a lot and missed his growing family. So he applied to the Central Bank and Trust Co. and landed the only job available.
Over the next few years, he says, “I moved from teller to vault teller to assistant manager to retail banking center manager and then moved into commercial lending. Back then, they showed you all the departments of the bank so you could understand everything.
The bank has prospered under his leadership, with its assets growing tenfold since he became president in 1995. He has seen many ups and downs during this period.
Today, he sees deposit competition as one of the major issues facing all banks and directors, as rising interest rates have provided a stark lesson to boards of directors about value of good asset/liability management.
“When the pandemic hit and all banks had liquidity, many of them invested in long-term bonds. We did not do it; instead, we took a much more conservative approach by placing excess funds much shorter in our investment portfolio. The strategy paid off with fewer unrealized losses and more cash flow to meet liquidity needs when rising interest rates undermined the bond market. Initial investment returns, lower than those of its peers, required some explaining to its board of directors to help them understand how the bonds fit into the bank’s overall asset/liability risk structure.
Deaton says transparency is key to maintaining great relationships with the board. “Every year I share my financial statements and tax returns with them, and I do the same with my regulators. »
Accessibility is also a hallmark of her personal style. At a bank with more than 500 employees, he always has lunch with each new employee, sharing his story and philosophy and learning more about the employees, their families and even their pets. And it circulates. Every two years, he spends a year meeting with each bank employee in person, in small groups or individually. The other year, he convened the president’s roundtable to hear in detail from employees.
He’s seen how vibrant communities are when they have a good community bank in their midst – and he’s seen the opposite, too. “A community bank is the heart of the community,” says Deaton. “Our job is to strengthen every community we serve. »