ABA Banking Journal
By Evan Sparks
In the past, community bankers may have chosen board members primarily because of their leading role in the community, serving as a representative of the bank and helping bring in business.Today, however, directors have in-depth governance responsibilities and must often possess special skills related to such topics as audit, compliance and risk management. They are also expected to be strategic thinkers, helping the bank to develop and drive forward a plan to thrive in challenging times.
Banks also must recruit the next generation of board members—a challenge in some areas as rates of small business entrepreneurship have dipped in recent years. And they must communicate to these potential new directors the value proposition their banks offer to their hometowns, articulating a positive vision of how bank directors can serve their communities.
These new demands require fresh approaches to building a board for the future—a topic that three bankers explored in a panel discussion at ABA’s National Conference for Community Bankers, held Feb. 8-11 in Boca Raton, Fla.
In Sheridan, Wyo., First Federal Savings Bank restructured its board as part of what Kevin Bailey, EVP for mortgage lending, calls “a decade of transition” from 2004 to 2014. The bank nearly doubled its staff to 54, increased its assets by one-third to $225 million, opened a second location and added new portfolios in commercial lending, loan servicing and wealth management.
That kind of change called for a change in the boardroom too. The board in 2004 was made up of six men, many without relevant experience. Bailey says the board was forward-thinking enough to realize its need for new talent categories—especially leaders of small businesses who could bring more commercial business. By 2014, the board had five men and three women, including an attorney, two accountants and four small business owners.
Bailey recommends using outside consultants to help educate the board and maintain objectivity. He also urges bankers to send their boards to national conferences to get ideas and deepen their understanding of the industry.
Brendan Duffey, president of Uwharrie Bank in Albemarle, N.C., also had to thin the board ranks. After a series of mergers, Uwharrie had three bank boards and a board at the holding company level. The total: 51 directors. As Uwharrie consolidated its three charters to one in 2013, the bank selected the “best expertise” from the 51, bringing the total down to a more manageable 21.
To make these decisions, Uwharrie used a “board skills matrix,” a spreadsheet that allows for comparative ranking of directors on several dimensions, such as support for mission, director experience, community affiliations and specific skill sets. The matrix facilitated a strategic discussion on strengths and weaknesses, Duffey says.
Based in affluent Middleburg, Va.—known for its horse breeding and fox hunting—Middleburg Financial Corporation is a $1.2 billion asset firm with a large trust and wealth management operation. President and CEO Gary Shook has a unique approach to cultivating the next generation of board talent, noting that the board of the parent company has four members 65 or older and, except for himself, none 55 or younger.
To help develop this pipeline, Middleburg has regional boards in each of its four principal markets. With five to eight, usually younger, members from diverse backgrounds, the regional boards provide a stream of potential new ambassadors for the bank, Shook says. Each regional board member is expected to have business with Middleburg, buy 100 shares of stock, attend board meetings and serve as representatives of the bank at community events.
With some strategic thinking, practical planning tools and creative organization chart structures, bankers can bring fresh talent into their boardrooms and drive their strategic goals.
