Boards of directors bring diverse views to bank leadership

by Jill Henry

SBJ Reporter

jhenry@sbj.net

Members of the boards of directors at locally owned banks in the Springfield area serve as "the first and last line of defense for the safety and soundness of the bank," according to Dean McCracken, chief bank examiner with Missouri Division of Finance.

"They direct, by policy, all the activities of the institution. They are chosen from their community because of their leadership in that community and their business experience. That's the expectation that we have of the bank to choose those leaders to provide that direction to the bank and its staff," he said.

And the boards are often a who's-who list of business leaders.

Some of the well-known names on locally owned bank boards include Jack Stack and Roseann Bentley at The Bank; Chuck Wooten at The Greene County Bank in Strafford; Robert Roundtree at Village Bank; and Mary Beth O'Reilly, Bruce Swisshelm and Bill Beall at Signature Bank.

Diverse membership

With a variety of career experience, directors can bring fresh viewpoints to the boards on which they serve.

"This is an advantage for us because these people are well-known, highly respected individuals all in the Springfield community," said Signature Bank President/CEO David Kunze.

Directors for The Bank and Signature Bank, almost all of whom, Kunze said, are substantial shareholders, come from areas such as manufacturing, retail, real estate and the financial industry. "We know that the past seven years, since both banks were formed in 1997, these individuals have worked well with the managements of the banks to grow the banks," Kunze said.

The nine directors of Old Missouri National Bank's board, initially picked from its 34 original investors, include business owners, a travel agent, a real estate investor, and an attorney who does not serve as counsel for the bank.

Mid-Missouri Bancshares is the holding company for four banks, three of which are within SBJ's coverage area.

Mid-Missouri Bank has 11 directors, Town and Country Bank has seven directors, and First National Bank of Mt. Vernon has nine directors.

"Good business experience is a good prerequisite being able to manage their own business or financial affairs and having financial expertise," said Eldon Erwin, president of Mid-Missouri Bancshares. "We like for our people to have some sort of finance background in our banks."

The responsibilities of running an institution in "the most heavily regulated industry, probably, in the U.S." is why directors are usually community leaders with experience in the business world, McCracken said.

Tim Rosenbury of Butler Rosenbury & Partners has served on the board of Guaranty Bank for the last two years. "It was something that I found really interesting. I was advised of the expertise I could lend to the board, and I agreed that I might be able to help them in that way," he said. "It has also been really interesting to have an understanding of how banks think when you get to see it from the inside."

While the bank presidents said their directors are compensated for their duties, none would disclose how much pay board members receive.

James Holstein, president of Old Missouri National Bank, said: "They want to make sure the bank's run well because they've got a pretty good chunk of money out of their own pocketbook invested in this place, and they want to make sure it's run right and does give them a good return on that investment."

Responsibilities

Directors' duties have changed through the years, said Holstein. "A lot of people think a lot of bank boards are somewhat of a rubber-stamp type committee and in this day and time, with the liability that these guys expose themselves to, nobody has a rubber-stamp board anymore," he said.

Instead, directors work to understand banking regulations and participate in regulatory reviews. At Old Missouri National Bank's most recent board meeting, for example, Holstein said directors met with representatives of the Office of the Comptroller of the Currency, "actually going over our last examination with our board, which is typical that's how they do it. Our board didn't just sit there quiet. They asked questions, they posed solutions to some of the suggestions, and they are a very active board."

Rosenbury said he and his fellow board members take their responsibilities seriously. "Any time there is disclosure to be made, those disclosures and certifications are not made without a lot of deliberation before we do it. In other words, if we're asked as directors to certify something, we're pretty careful, I think, to make sure we're not just signing another document, (and) that we really understand what it is that we're saying."

Formal training is not required, but board members must stay current on banking laws to keep the bank and themselves out of legal hot water.

"Let's say I start doing something terribly wrong over here and start breaking all kinds of laws and regulations. I report to my board," Holstein said. "I'm the chairman of the board and I'm the chief executive officer of the bank, but they're my boss and they oversee what I do. If they're not paying attention to what I'm doing and I start doing a bunch of illegal things that cause harm to our depositors, you betcha they're liable."

Liability is involved in running any type of business, Kunze said. "But insurance is in place to cover any type of potential lawsuits, and we've never experienced any kind of suits."

Meetings

Erwin, Kunze and Holstein all said directors attend monthly board meetings. In addition, directors attend meetings for the various committees on which they serve.

Holstein said a typical board meeting might include discussion of new loans, large loan pay-offs, borrowers that are not current on payments, concentration of loans made within specific industries, new deposits, overdrafts and cashed-in CDs.

"We talk about the upcoming expansion of the bank, the growth of the bank, the profitability of the bank, the marketing of the bank. There are numerous issues. And we always talk about policies, regulations and compliance. It's an involved meeting," he said.

Time devoted to the board varies each month, Rosenbury said.

"It's probably ranged from six to eight hours on the short end, up to 30 or 40 hours on the long end," Rosenbury said. "In addition to the monthly board meeting of both the bank and the holding company, there may be a committee meeting. There may be some goodwill calls we may be expected to make on behalf of the bank to potential bank customers. There also may be some interim meetings about this where certain officers of the bank may be wanting some input from directors, either individually or as a group or subgroup."

Chosen few

When new bank charters are formed, the proposed directors are required to complete a 14-page application and disclose personal and financial information for evaluation by Missouri Division of Finance.

"It's a federal form that's utilized by this office as well as the FDIC," said Debbie Hardman, senior bank examiner with Missouri Division of Finance, adding that the process includes a background check on each individual.

Once on the board, directors are re-elected annually at stockholders' meetings, per Missouri law. New board members are nominated by either the board or bank officers, and approved by shareholders.

When two banks become one, their boards undergo changes as well. Signature Bank and The Bank, to be merged by July 31 to form The Signature Bank, will have two boards, said Kunze.

"One would be a holding company board, and then after the merger we would also have a bank board of directors," Kunze said. "The holding company board would consist of six members from The Bank's existing board (of 12) and six members of Signature Bank's existing board (of 20), and then one individual who is a new board member that was not from either bank board. The bank board would consist of the remaining board members from The Bank and Signature Bank."