Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 29, 1990 TAG: 9007310302
SECTION: BUSINESS PAGE: A9 EDITION: METRO
SOURCE: MAG POFF BUSINESS WRITER
DATELINE: LENGTH: Long
Only a few of Virginia thrifts have been declared insolvent and their operations taken over by federal regulators.
Yet "the spotlight is on us now," Directors of all corporations must hew closer to the fiduciary line these days, but directors of savings and loans say they're bearing a discomforting amount of scrutiny.
Regulators are "more demanding on directors," said Roanoke lawyer John Hart, board chairman of Southwest Virginia Savings and Loan Association.
"There's more chance that, if something goes wrong, they'll try to pin it on the directors," he said.
Hart also acts at the association's lawyer and has his law office in the same downtown Roanoke building with the thrift's headquarters. He's not uncomfortable with the cosy relationship, Hart said.
But, like others who serve on boards of local savings and loans, Hart said he's growing aware that the industry's recent problems with bad loans plus tighter regulation dictate that the associations set high standards for their directors.
The plight of outside directors in the savings and loan business came to the forefront earlier this month. Federal regulators investigating problems of Silverado Banking, Savings and Loan Association alleged that President Bush's son, Neil, was unqualified to serve as a director of that failed Denver-based thrift.
Even though Neil Bush has an MBA degree and runs his own oil company, a regulatory report said, he had no experience in large-scale banking. Federal officials termed Bush "unqualified and untrained" for the post he held for three years until August 1988. He also has been accused of conflicts of interest in arranging loans from Silverado for a business partner.
"Neither am I [qualified], if you want to look at it that way," said Norman Fintel of Salem. The retired president of Roanoke College currently serves as a board member of CorEast Savings Bank. "Ninety-nine percent of directors at all institutions are not `qualified' " under rapidly changing standards, he said.
When he was president of Roanoke College, Fintel noted, "we didn't appoint people who knew how to run a college" to its board.
Rather directors were people knowledgeable in their various fields with "wisdom" that the institution could use, he said.
Similarly, Fintel said he brings knowledge of management and of the community to the CorEast board. "If I don't understand, I ask questions," he said of technical matters related to the thrift.
To Saurs, the problems related to Neil Bush are "politics, pure and simple. "If his name was Harry Morris, you'd never hear of this," he said.
Yet, Saurs said if he were a businessman asked to join a board today, he'd have to consider "what the government is doing and the toughness with which they are running over things."
Although the public scrutiny is new, Saurs said both government regulators and companies that insure directors have been more stringent since the mid-1980s. They demand greater business experience and more time devoted to the job.
As is true with any corporation, he said, relations between a thrift and its directors must be "simon-pure, arms length instead of buddy-buddy."
Thrift directors, he said, have always been chosen because "they have a good head on their shoulders and are well-liked and well-respected in the community. People have confidence in the institution because of their character."
Knowing that Southwest Virginia is "in sound shape," Hart said, makes him satisfied about his service on the board and more comfortable with his close relationship with Southwest Virginia.
Similarly, Glen Combs, whose first term on the Southwest Virginia board is about to end, said he would have no hesitation about accepting another.
Problems at other institutions "have no influence on me at all," said Combs said, who heads a Roanoke food brokerage company. He said he knows Southwest Virginia is in good condition. "We've been a very conservative local institution."
Heywood Fralin, a Roanoke lawyer, said he is "not uncomfortable" about serving on a thirft board, even under tighter standards. He is a director of Virginia First Savings Bank.
Indeed, Fralin said he believes thrifts will benefit in the long run from the regulatory tightening. "If an association is strong, it will have no problem meeting the standards."
Glynn Bradley, board chairman at Bedford Federal Savings Bank, isn't worried either.
"Everything at our place seems to be running real good," and he said his situation as a thrift director "doesn't bother me."
In a day when there was less stress on conflicts of interest and regulation, directors were often chosen - in the words of Bedford Federal executive vice president Harold Neal - as "a sales person to produce new business for the bank."
Often directors chose themselves.
At Investors Savings, for instance, five of the seven current board members are the same people who helped to organize the bank in 1974.
And boards tended to be stable. At most thrifts in Western Virginia, a majority of the members have served a decade or more as directors. Some have been on the same boards for 25 to 30 years.
A survey by the Roanoke Times & World-News shows that 111 directors serve on boards of the 13 thrifts doing business in Western Virginia. That's an average of 8.5 members per board, with the actual number ranging from seven to eleven directors.
Of the total number, 20 directors, or 18 percent, are insiders. That is, they currently hold management positions in their institutions.
Another 14 directors are outsiders whose chief livelihoods are in the professions such as lawyers or doctors. Also, 12 are in the real estate business and 11 are in insurance. Most directors are scattered in a wide variety of business ventures. Several are retired from their main occupations.
Saurs said directors of Virginia thrifts receive an annual fee for their service. Typically is totals $300 to $400 a year, he said.
Depending on the size of the thrift, Saurs said, the fee can range from $25 for each meeting attended up to an annual payment of $1,000 at very large institutions.
Federal regulators have always looked carefully at the reasonableness of the payments, he said. At the same time, Saurs said, "you've got to be realistic in regard to the time and effort. You get what you pay for."
Jane Hickok, president of Community Federal Savings Bank of Staunton, said she seeks people with business savvy, financial expertise and a real interest in the community.
"We are very local," she said.
Hickok also tries to limit her board so as to have only one representative of a single industry.
For Ronald Dietz, chairman and president of CorEast, there are two questions about who should serve on thrift boards. The individual's business credentials and experience they bring to a board involve only one factor.
The other, Dietz said, "is how they behave."
"From what I read," Dietz said, "Neil Bush's credentials are not suspect. The questions concern his behavior on the board."
The president's son has been accused of conflicts that surfaced over loans of millions of dollars to a Bush business associate who never repaid the money.
Dietz said his own CorEast board members offer competence in real estate, banking, finance and regulatory principles.
At the bottom line, though, "character is also an issue," he said, defining character as integrity, wisdom and stewardship.
Bob Johnson, president of Cooperative Savings Bank in Lynchburg, said traditionally he's tried to recruit local business leaders with "a general cross-current of expertise."
Today, however, Johnson also wants people "with a good, sound business logic who will challenge my thinking."
Only a good board, he said, will ensure that his thinking is in the best interest of the company.
Charles Patton, president of Virginia First, sees "an obvious fiduciary responsibility to look closely at the board members.
"Because of the more detailed complexities we're faced with," Patton said, "any well-operated thrift will look closely at the board."
This is especially true for mutual companies, which are owned by the depositors rather than by stockholders.
Patton explained that stock companies have been more conscious of their obligations to shareholders over the years, but directors of mutual companies are accustomed to getting little scrutiny from depositors.
"They are not used to having someone look over their shoulders," he said.
Patton said board members today "realize the kinship they enjoy is not necessarily related to the skills required" for running a thrift. "We will focus on the fiduciary obligation in appointing new members," he said.
"It's going to take some hard slugging," Fintel said of having to cope with the tougher expectations and attitudes - and the public scrutiny.
\ Who's on the board
\ SAVINGS & LOAN BOARDS OF DIRECTORS IN VIRGINIA\ BEDFORD FEDERAL SAVINGS BANK, BEDFORD Hugh H. Bond, president of Scott & Bond Insurance and real estate and president of the bank\ T. Glynn Bradley, retired Bedford County building inspector and chairman of the bank board\ George N. Cooper, State Farm Insurance agent\ Harry W. Garrett Jr., lawyer\ Harold K. Neal, executive vice president and chief executive officer of the bank\ William P. Pickett, executive director of the Elks National Home\ Macon C. Putney, lawyer\ W.H. Walton Jr., real estate broker\ CHARTER FEDERAL SAVINGS BANK, BRISTOL E.L. Byington Jr., board chairman and chief executive officer of the bank\ Lois A. Clarke, president of UC Financial Services\ Clifford R. Quesenberry Sr., an oil distributor in Abingdon\ Robert J. Bartel, professor of economics and business and director of the International Business Institute, King College, Bristol, Tenn.\ L. Lowell Anderson, an architect at Bristol, Tenn.\ William B. Barton Jr., owner of drug stores, of Marion\ Francis L. Leonard, chairman of Line Power Manufacturing Corp.\ Morton W. Lester, president of Lester Corp., a building and contracting business, Martinsville\ COMMUNITY FEDERAL SAVINGS BANK, STAUNTON Robert S. Yeago Jr., president of CFW Communications, which operates as Clifton Forge-Waynesboro Telephone Co., and chairman of the bank board\ Richard Bonin, retired vice president of operations for American Safety Razor Co. and vice chairman of the bank board\ Dr. Charles F. Andersen, an orthopedic surgeon in Waynesboro\ Dr. James R. Cooke, a dentist\ Kenneth L. Elmore, a certified public accountant\ Jane Hickok, president of the bank\ Dale C. Smith, general manager of the Augusta Cooperative Farm Bureau\ COOPERATIVE SAVINGS BANK, LYNCHBURG Allen W. Harvey, real estate developer and Realtor and chairman of the bank board\ William J. Conner, retired chief executive officer of the bank\ Charles K. Saunders, retired assistant superintendent for administration of the Lynchburg public schools\ Edgar J.T. Perrow, a lawyer\ Walter A. Garbee Jr., a Realtor\ William S. Williams, retired executive of Intermet (formerly Lynchburg Foundry)\ C. DuVal Holt Jr., retired personnel director of Babcock & Wilcox\ Bob M. Johnson, president of the bank\ COREAST SAVINGS BANK, ROANOKE W. Ronald Dietz, board chairman and president of the bank, Richmond\ Dr. Norman Fintel, president of the River Foundation and president emeritus of Roanoke College\ James M. Turner Jr., president of J.M. Turner Construction Co.\ Dr. Raymond Smoot, vice president for finance at Virginia Tech, Blacksburg\ Richard Collier, president of R.E. Collier, a residential construction company, Richmond\ Roxanne Coady, president of Woollcott Book Sellers in Branford, Conn., and retired senior tax partner of BDO Seidman\ Kenneth Kaul, managing director of Sandler O'Neil & Partners, an investment firm, and a former employee of the Federal Home Loan Bank Board's capital market operation\ Marvin Tepper, a lawyer, New York City\ Arthur Cohen, president of Arthur G. Cohen Properties, New York. Cohen owns virtually all of the stock of the bank.\ Steven Terk, executive vice president of Arthur G. Cohen Properties, New York \ FIRST FEDERAL SAVINGS BANK, LYNCHBURG William R. Barksdale III, senior vice president of Scott & Stringfellow\ James E. McCausland, president of Snead, Payne & McCausland real estate\ Royston Jester III, a lawyer\ V. Howard Belcher, retired business manager of Virginia Episcopal School\ Charles Schoew, president of Hopkins Brothers real estate\ Thomas P. Whitten, owner of Whitten Funeral Home\ Edward Hunt, senior vice president of First Colony Life\ Thomas Doyle, a florist Jimmy Davidson, president of the bank\ W.R. Thomason, senior vice president of the bank\ J.W. Ferguson, retired executive of the bank\ FIRST FEDERAL SAVINGS & LOAN ASSOCIATION, MARTINSVILLE Terry Mitchell, owner of a Ford dealership\ Shelton Blackwell, retired telephone executive\ Bernard Craig, retired Tultex executive\ Sherman Donovan, retired automobile dealer\ E. Johnson Ingram, retired furniture retailer\ Amon Brodie, retired insurance agent\ Glenn Edwards, account executive with the Donnally Co.\ Wayne Poindexter, an insurance consultant\ IMPERIAL SAVINGS & LOAN ASSOCIATION, MARTINSVILLE Dr. Charles Bethea, a physician\ Grady Brimmer, owner of a construction company\ William Geter, a retired retailer\ Lewis Hairston, a supervisor at DuPont\ The Rev. R.S. Hairston, minister of Greater New Mount Bethel Church\ William Hobson, a retired businessman and a former mayor of Martinsville\ Dr. M.O. Johnson, a dentist and chairman of the association board\ Evelyn R. Mitchell, a retired employee of the Henry County public schools\ W.B. Muse Jr., president and treasurer of the association\ Robert A. Williams, a lawyer\ INVESTORS SAVINGS BANK, RICHMOND Dr. Charles M. Caravati Jr., president of Dermatology Associates\ O. James Peterson III, senior vice president and chief financial officer of Dominion Resources Inc.\ Robert G. Butcher Jr., chief executive officer and board chairman of the bank \ John T. Siegel, managing director of Thompson, Siegal & Walmsley Inc., investment counselors\ W. Wardlaw Thompson Jr., past president of Virginia Tractor Co.\ Richard M. Nelms, president of Bowers, Nelms & Fonville, real estate, Richmond.\ Craig R. Stapleton, president of Marsh & McLennan real estate, Greenwich, Conn.\ MUTUAL SAVINGS BANK, DANVILLE Russell Perkins, board chairman and chief executive officer of the bank\ H. Dan Davis, president and chief operating officer of the bank\ E. Ballou Bagby, retired chief executive officer of First National Bank of Danville (now Sovran)\ Roy L. Connor, retired manager of the local office of Metropolitan Life\ Dr. F. Neal Howard Jr., professor of mathematics at Danville Community College \ Harry R. Link, president of Link-Watson, an appliance and hardware retailer\ C. Miller Vernon, retired executive of Dan River Inc.\ SOUTHWEST VIRGINIA SAVINGS & LOAN ASSOCIATION, ROANOKE John L. Hart, a lawyer and chairman of the association board\ F. Courtney Hoge, an insurance executive and vice chairman of the board\ James H. Brock, president of Rusco Window Co.\ Michael M. Kessler, president of Kessler Color\ Glen C. Combs, president of M&M Brokerage\ B.L. Rakes, president of the association\ Barbara C. Weddle, senior vice president of the association\ TRUSTBANK SAVINGS BANK, McLEAN William L. Walde, chairman of the bank board\ Zalmon J. Chelec, chairman of Zalco Realty in Silver Spring, Md., and vice chairman of the board\ David L. Erickson, president of the bank\ William M. Huey, retired senior technical representative for E-Systems of Arlington\ Harold G. Bowen Jr., retired Navy vice admiral and consultant to E.I. DuPont De Nemours in Wilmington, Del.\ Richard S. Lawton, vice chairman of the bank\ D. Gay Walde, self-employed in the development and management of real estate\ Thomas E. O'Dea, retired secretary, assistant treasurer and associate general counsel for Potomac Electric Power Co.\ Walter W. Rock, president of Door Systems Inc. at Lorton\ VIRGINIA FIRST SAVINGS BANK, PETERSBURG Frasier Brickhouse, chairman of the accounting department at Virginia State University\ R. Stuart Cottrell, vice president of Alexander & Alexander insurance\ William L. Eure, owner of several radio stations\ W. Haywood Fralin of Roanoke, a lawyer\ Benjamin Gill, a real estate investor\ Joseph Gordon, president of Gordon Metal Co.\ George Mercer, president of Mercer Rug Sales, a wholesaler and retailer\ William A. Patton, chief executive officer and board chairman of the bank\ Francis Payne, an obstetrician\ John VanLangingham Jr., president of Building Supply Co.\ Charles A. Patton, president of the bank
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