The average age of bank board members is 76. And you have some board members who are very, very strong contributors, but you have others who just aren't connected with some of the challenges that banks are facing today. And those can be very difficult conversations and being willing to have those conversations, I think is the first step.
From the American Bankers Association. This is the ABA Banking Journal podcast. Welcome back. I'm Evan Sparks, and I'm delighted to be joined by two distinguished leaders in banking for a conversation on banking governance and how boards can handle some of the tricky challenges that are facing those in positions of leadership in the banking industry in the, in this year and in the years ahead. So first we have Virginia Varela.
Virginia is Head of Community Banking at SoFi, and she's also a Director at Bank on Women and a past board member at several banks. She, and then we also have Jenn Docherty. Jenn is Chair of Bank on Women, Director of Performance Trust and Sunrise Banks. And and so both obviously experts on issues of governance in the community banking space. So, welcome to the show.
Thank you, Evan. Happy to be here. Thank you.
So I'd love it if we could just get started with a little more about your personal backgrounds. I know I introduced, introduced what you're currently doing, but Virginia, if you can tell us a little bit more about your background in banking and your role in in the gut, particularly in the governance side of at banks during your career.
Sure. And thank you for having us. I've been serving in the banking industry for decades. So I have a lot of background and seeing a lot happen over the years. I was a president and CEO of a community bank in Northern California called Golden Pacific Bank where I was on the board. And that bank in 2022 was acquired by SoFi. And With SoFi, I was kept on and I became an officer of SoFi and I'm currently head of community banking at SoFi.
So I've seen a lot of changes between the community banking world and the approach from a FinTech that acquired and became a bank. I've also served on the boards as CEO or COO of three other community banks in California. And my background is mainly going to banks and turning them around for success. So I've been involved in four different sales of banks. And during that period, maneuvered with the board through the sales. So that was very challenging.
I was also on the federal home loan bank board, which was a corporate board position. And served on as lead of the technology committee and the membership committee. And prior to these years in banking in the private industry, I've also was a bank regulator. So I started my career many years ago in the 1980s.
And I served on I served as examiner all the way to lead positions with several different regulatory agencies, including the Federal Home Loan Bank the Office of Comptroller Currency, Office of Threat Supervision. And the Federal Reserve. So I have a very long and interesting background. I also have been on boards of several associations for bankers, and I'm currently a board member of California Bankers Association. And also friends of traditional banking.
Oh, great. And and Jenn, I know you, you, you're no stranger to ABA and our audiences, having spoken at our events before. But if for those of you who don't know your background, could you introduce yourself a little more?
Sure, Evan. And thanks again for having us this morning. So I have sort of a complimentary experience in the banking community to what Virginia brings. I have never worked at or for a bank. Although I've sat on the board of Sunrise Banks for the last couple of years, my career, and I won't count the decades anymore than Virginia wants to, but my career really has come up on the legal and financial advisory side.
So I started out my career doing legal work as a legal advisor for primarily bank strategic initiatives, M& A, capital raising, and bank regulatory work. Shortly after 9 11, I moved over to Sandler who had been a long time client and spent the better part of 20 plus years there, helping to build a capital raising group. Recently, I moved over to Performance Trust to become the Chief Legal Officer.
The entire career though, really has been advising boards on the critical decisions that they have to make. And so it's been interesting for me sitting on a board now having spent the majority of my career advising boards particularly, and I know we're going to talk about this, but with some of the novel challenges a lot has changed in a very short period of time for community banks, especially.
Yeah, absolutely. And I mean, we're here, we're in this environment. I mean, we have someone who's working at a FinTech and bringing that disruptive perspective.
Virginia, I'm just curious if you could kind of help us understand, help our listeners understand a little bit what are some of the challenges that you're seeing and that board members at community banks need to be aware of and keeping in mind as they evaluate what's the future for this institution, what's the, what's the path forward for how we're going to serve our community and customers.
There's so many different dynamics and the banking world has changed so much. And I'll let Jenn talk about the environmental, social and governance issues because she's more, has more expertise in that area, but I'll tell you what's really of concern. I think at every bank board, or it should be of concern is economic I mean, the global economy is facing so many uncertainties.
There's geopolitical tensions, inflation, you know, you have supply chain disruptions that can affect every bank, regardless of size and geography. And you have I'm, I've, I've seen this firsthand. You've got cyber security and. Data privacy concerns that are such that I've never seen in my career before and things are going much more electronic. So you have issues like what will the AI world look like to a community banker today? What's your strategy around crypto?
Technology around technology advancements. I mean board members today are facing challenges that I've never seen before that are really uncharted waters. So I think that's, it's really important to stay abreast of that. Even this year I've been talking with several different of my colleagues and we, we don't know what's ahead. As far as regulatory changes and the world with the new administration is it true that it's going to be easier to do merger and acquisitions?
How will they how will it be impacting any kind of regulatory changes with the payment systems, with loan processing, with privacy? I mean, it's very, a very complicated world today. So I think you have to really look at being really up on a game in a way that you never had to before. And the one last thing I'd like to talk about is the shareholder expectations. I've seen shareholders call board members directly. Your feet are being held to the fire in a way that I've never seen before.
I mean if there's a disaster in your area, even a natural disaster, like, you know Hawaii had You know, a volcano or something like that. It's going to affect and come up at a bank board meeting. Shareholders will call and they'll be expecting you to have a plan, a disaster recovery plan. They'll be expecting you to keep keep the stock price up or have a explanation for why it's gone down. And I don't think you can just sit back and expect the shareholders to go with any pricing.
They're going to want to see. Profitability and they're going to want to see a plan. So the world is changing. It's, it's a, it's funny cause I, I, with Bank On Women, some women have come and they really want the board position, but it's a hard job.
Yeah. And, and, and let's, let's like turn to some of those, those some of those, you know responsible business issues that you alluded to earlier, Jenn, you know, I know that's something that is kind of a hot potato in, Washington these days, a hot potato and a lot of boardrooms. How are, how are you seeing board members tackle ESG issues, DEI any of the kind of responsible business issues that are facing directors at the strategic level?
Yeah, it's a great question, Evan. And I would say the banking industry by and large is I don't know if agnostic is the right word, but the banking industry is driven by the fundamentals of banking, especially community banks, which is what do I need to do to better serve my market? And so, you know, if you think about it, ESG, D&I, these are all kind of flash point acronyms, but the fact is community banking has really always been, I mean, DNA is, is taking care of the community.
That's ESG, you know, said differently. So I don't think the fundamentals of Banking have changed. What has changed are the things that Virginia just mentioned. The complexities of the technology, the complexities on the regulatory side, complexities just of earnings. You know, we've had a really challenging yield curve environment coupled with costs, Of technology and regulatory compliance that have made just making money a lot more difficult.
At the same time, you have a rapidly evolving demographic base of most communities. And so what we're finding is that banks are being drawn more to diverse leadership teams because it serves the business of banking, not because D&I or ESG is something that's in the news, good or bad. But simply because that's what it takes to be successful. So all the skill sets that Virginia mentioned are critical in the boardroom now. Board members historically were sourced through friends and family.
You know, you have, there's a great study that was done by a former economist at the Federal Reserve who found that 62 percent of men on the same bank board had a social connection with other men. That was a wonderful recipe for generating revenue. When all you had to care about was sourcing loans and deposit opportunities in your market. But the needs of a, of a bank board now really involves technological expertise, regulatory expertise, financial expertise.
And so the shift we have seen from banks is really moving towards more diverse leadership teams to be able to address those sorts of novel challenges. You have. Women starting businesses at the rate of two to one small businesses of men now. So you've got to be tied into those ecosystems in your community in order to really support that level of business development. So I would say it's less about the acronyms themselves and more about what it takes to fundamentally be successful in banking.
Which hasn't changed. It's just the level of complexity around doing that has.
So I'm curious if you have any, if either of you have any tips on or successful experiences with how to structure your boards in terms of, you know, you talked about kind of new ways of sourcing board members of bringing, bringing in new talent, how are successful boards that are able to navigate all these challenges with agility, structuring themselves and building pipelines that that ensure their success.
Sure. So, I guess the first thing, Evan, is just starting with a gap analysis, and I think the ABA has some wonderful resources for boards who are thinking about this, but starting with an understanding of what skill sets you have on the board currently and what you need for the future of the bank. Who's going to help you set the right strategic direction? It also starts with a willingness to look outside those you know already.
The biggest challenge we hear very, very often, I'd love to put a woman on the board. I'd love to put a technology expert on the board. I just don't know of anyone. And that is often a true statement. It doesn't mean those people don't exist in your community. So it starts with a willingness to look outside of your conventional friends and family resources to identify those. So successful banks are doing that. They are asking a broader audience. I mean, bank on women.
Is the nonprofit that that Virginia and I serve really came about to try to meet banks where they were at, which is simply to just aggregate the wonderfully talented women that we know who would make for great bank board directors. Because oftentimes I get asked the question is an outside advisor. Do you know anyone who could serve on my board.
The other avenue that boards are starting to take advantage of is talking more broadly in their community, who are the academic leaders, who are the non profit leaders. But it starts with really taking a, a, a tough look at what is your existing board? What are the skill sets? And sometimes having really difficult conversations. The average age, I think of bank board members is 76.
And you have some board members who are very, very strong contributors, but you have others who just aren't connected with some of the challenges that banks are facing today. And those can be very difficult conversations and being willing to have those conversations, I think is the first step.
Virginia, do you have any thoughts on kind of the structure questions around how to help boards navigate these challenges?
Sure so Jenn was talking a lot about, you know, board composition and how to have the right mix and the diverse and skilled composition on the board. And I would also add to that you need to really look at how your board is composed and how they're interacting over time. So you want to ensure the board members have adequate education.
They keep their skills up and you want to have performance metrics and evaluation of board members and sometimes that's hard because the board members are your peers, you don't want to judge each other harshly because you're acting, you know, as a, as a unit, but you also have to look at, you know, Do I have the right skill set in place to move forward in this new environment? And if not, can we train the existing board members or utilize the skills?
The other thing is I've seen boards that may have the right skill set on paper, but unless you have really clear roles, responsibilities, and open lines of communication and kind of foster creativity, there's something lost. And so on paper, a board can be, you know, diverse or have, have the right skill sets, but I've also seen boards where there may be one dominant player or there's a rigidity that doesn't allow for an expression of thought. And one of the reasons I love Bank on Women is.
Because it's looking not only at diversity, but like effectiveness of leadership roles, effectiveness of communication and I think that's really important. It's a skill set plus the interaction and the ability also to have enough humility. To be open to new ideas about how to address the future in a strategic manner, identify risks, not, and be brave about it.
You, you know, we, we've seen a couple of banks in the past few years that have, you know, failed or teetered, teetered on failure that on paper, you know, had the right, The right board set, but something was going on in those board meetings that wasn't really touching the right strategy or, or something was wrong there, so tap into that, the willingness to do that.
Just thinking through those, bringing those unconventional ideas to the table, those trying to surface new thought, new, new approaches and have difficult conversations, what are some of the tactics that y'all have seen work best for directors who want to move their boards in that, in that direction, or for CEOs who want to move their boards in those directions to be able to, to have those kinds of conversations at the board level?
Well, I'll speak to that and then I'll let Jenn chime in. One thing that I made a mistake about as a, a CEO and a board member I, I don't think I always let in enough external experts. If I had invited external experts it might have given the board and myself, you know, new information, new perspectives. And so there was a concern about, you know, maybe drawing new people in or maybe lack of time or expense or something like that.
But I have learned over time that, I have a, you need to really appreciate and embrace experts and you can learn from them. So that's one way to really bring unconventional ideas into the scenario. And also, I would say, create a real safe space for ideas.
So what I was talking about before, which is, you know, it's okay to maybe, you know, have an open dialogue where people say just, Brainstorming just really you know, I think that's really set by the culture of the board to allow a culture that is willing to experiment and then maybe pilot new ideas, experiment, you know, try some things on.
And Know it, it might the board may be holding the management to speak to the fire by asking them to do a pilot program or look into something more, but that's the job of a board member. So those are a few of the ideas I have.
Yeah, I think that's a, a, a great list. The only thing I would add, I think Virginia already touched on, which is training. It is critical.
Even if you have a wonderful board, as Virginia said on paper, to continue to upskill your board members to make sure that they understand, and that can be through the use of outside experts through attending conferences, but to make sure they're really up to speed on what the latest challenges are for banking and understanding in an industry setting as opposed to just in the silo of your individual bank. I think it's really important to understand these things in context.
Well, I feel like we could really continue this conversation for the next half hour or more.
But so if, for our listeners, if you would like to hear more of Virginia and Jenn talking through how to help directors from their own director's eye perspective how to, how, how to help these direct, how to help directors Have these difficult conversations and tackle these really big challenges that are facing community banks banks of all sizes over the coming years you can hear them speaking at the aba conference for community bankers.
It's going to be in phoenix, arizona, february 16th through 18th. You can register at aba. com Ccb i'm looking forward to being there as well and meeting virginia and Jenn in person and hopefully meeting you as well So thanks so much for listening. Virginia, Jenn, thank you very much for being on the show Thanks for having me. And for our listeners, you can find this in previous episodes at aba. com slash banking journal podcast. Thanks so much for listening.
And we'll be back with you again very soon.