Independent Banker - June 2017 - 42

" [When growing rapidly,]
far too much emphasis
is placed on making the
financials work and far
less attention is paid to
integration, and that is often the
biggest failing point. "
-JOSEPH H. CADY,
CS CONSULTING GROUP
say, and sometimes that can hinder a bank's performance
as it grows rapidly, " he says. " As banks grow, boards need
to have members with more financial expertise, and there
needs to be more directors who are independent. "
Trust your people
CEOs can only be successful at leading fast-growing community
banks if they hire the right people and trust them
to make good decisions, says John W. Allison, chairman of
Home BancShares Inc. in Conway, Ark., which grew from
a startup in 1998 to its current asset size of $10.7 billion.
" I'm blessed with the people around me, " he says. " I
than the one they helped nurture.
One such CEO was Gary Sirmon of Banner Corp. in
Walla Walla, Wash., who led a series of acquisitions from
1995 to 2002 that turned the $450 million-asset First
Washington Bancorp thrift into a $2.1 billion-asset regional
commercial banking company operating in three states.
The buying spree and subsequent charter conversion
had resulted in myriad growing pains. Back-office integration
issues proved costly, for one thing. Inadequate
monitoring of a check-kiting scheme and credit quality
problems surrounding one Seattle loan officer were other
stumbling blocks; bank employees were wearing too many
hats for the institution's new size and complexity to catch
the problems early.
Sirmon stepped aside and let the board hire D. Michael
Jones, a veteran banker who had more experience running
larger companies.
Jones served as Banner's CEO until he retired in 2010
but remains on the board of the company, which now has
$9.8 billion in assets.
Learning to let go
As community banks grow, the rank-and-file staff-
particularly compliance officers-need to stop wearing
multiple hats, as does the CEO, says Kevin Kane, founder
and president of Financial Regulatory Consulting Inc. in
New York City.
" The CEO has to let go of micromanaging, " Kane says.
" They can't continue to be so intimately involved, sitting
in on the new product committee or deciding which
newspapers the bank is going advertise in. They have to let
other people do that and communicate to them. They have
to become an administrative manager, and that is hard for
many community bankers to do. "
Community bank boards also have to evolve as the
institution grows, Kane says. Many startup directors are
chosen because they invested in the bank or can bring in
business from their particular industry sector, and they're
often friends of the CEO.
" [This] means that in small banks, the CEO has a lot of
42 ICBA IndependentBanker June 2017
have 25 rainmakers in the company and about 15 could run
the company tomorrow. My job is recognizing talent and
putting people in the right slots. "
He also believes strongly that bankers should have experience
running businesses of any type before they become
CEOs of a financial institution-preferably a decade of
" hardcore " experience.
" I grew up in the business world and had a manufacturing
business with 1,000 employees, which gave me a
distinct advantage, " Allison says. " As a bank CEO, I already
knew how to meet payroll, and I ran the bank off a daily
P&L statement. "
Sometimes CEOs who successfully nurtured de novos
have to step aside if they simply can't manage a bigger
bank, particularly when thresholds are hit that trigger
more involved corporate governance and other regulatory
compliance requirements, says Randy Dennis, president of
DD&F Consulting Group in Little Rock, Ark.
" The bank might be a great $250 million-asset bank but
not a great $1.5 billion-asset bank, " Dennis says. " When a
bank gets to $1 billion in assets, the world shifts. "
But if a bank CEO continues to hang on, it often takes
spurring by regulators for board directors to take action.
" That doesn't mean that examiners will say that the
CEO has to go; they very seldom do that, " Dennis says.
" But they will look board directors in the eye and say,
'You're responsible for this institution, not Joe Smith here.
We're looking to you to really start the ball rolling.' "
Jeffrey C. Gerrish, founding director of Gerrish Smith
Tuck Consultants and Attorneys PC in Memphis, says he
likes to lead strategy sessions with bank boards to help
them be better prepared to grow by acquisition.
" One of the things they've got to decide is whether they
have the infrastructure to take it on, and they also have to
have their own culture set in place, and then look for target
banks with a similar culture, " Gerrish says.
For example, one of his community bank clients had a
" family-type " culture. There, he says, " people got along,
everyone pulling in the same direction, not a lot of
internal competition. "
" They were one big happy family for the most part, and
they didn't want to pick up another bank and lose that
Independent Banker - June 2017

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