Elizabeth McCoy, Planters Bank (KY)

In episode 5, Planters Bank (KY) Chief Executive Officer Elizabeth McCoy joins the show. Elizabeth, Vin, and Zach delve into her journey growing Planters Bank over the past two decades, what she believes community banks do best, her fascinating time serving the Federal Reserve Bank of St. Louis where she is currently a board member, and her “I'm not in Kansas anymore" moment.

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Transcript

[Vinny, 0:00]: 

Welcome to On the Balance Sheet, season 2, episode 5. And today we've got a great guest, a very accomplished banker who serves in a number of different capacities within the Federal Reserve system, etcetera. Chief executive officer of Planters Bank, Elizabeth McCoy.

[Zach, 0:20]:

Yes sir Vin. We get a very busy kind of agenda here to go through with Elizabeth who's talking about the journey from when she started the Planters Bank about 20 years ago and I think she has some very unique experiences with the Federal Reserve so we're definitely wanting to get into that maybe see if we can ask a question about Jim Bullard and I think the listeners will be really excited to hear what she has to say.

[Vinny, 0:40]:

Agree with you on that Zack. There's no doubt about that. So, without further ado Elizabeth McCoy 

[Zach, 0:49]:

And we are joined today, very excited to have Elizabeth McCoy, chief executive officer of Planters Bank in Hopkinsville, KY, and Elizabeth thank you so much for being with us today! How are you doing?

[Elizabeth McCoy, 1:02]:

I'm great! Thank you for inviting me!

[Zach, 1:05]:

It's a pleasure you know to have you here and per usual I know you've listened to the podcast in the past and usually what we do is just start with your journey, your background, in terms of you know we know you're obviously the CEO of Planters Bank today, but how did you know kind of get into that role over at Planters? Then we're just gonna start in the banking industry, can you give the listeners a little bit of a of your journey through the banking industry?

[Elizabeth McCoy, 1:28]:

I started my professional career in public accounting, and I spent ten years or almost 10 years as a CPA. We did a lot of savings and loan work back in the day, and I went to work for one of our clients who was being sold to Liberty National Bank which at the time was the largest independent bank headquartered in the state of Kentucky, but almost immediately began the rage of the early 80s and I worked for six banks in five years, and I never did leave my office. So, I've been through any number of mergers and during that period of time Planters Bank was a de novo bank, literally across the street from my office. They had a very unfortunate situation a couple of years into their history that their CEO died very unexpectedly at a very young age, and so at that point they called and asked me if I'd be interested in in coming to work and joining their team and I was delighted to do that and that was 23 years ago almost exactly today.

[Zach, 2:34]:

Thank you for that response. And I think it's really interesting, that kind of path and you mentioned the kind of the 80s and the six banks in five years and I mean was there anything that kind of going through that period, Elizabeth, that you learned in some of those spaces and I imagine some of those banks were varying sizes that kind of prepared you know to come with the planters as was it the COO in kind of 2000 becoming the CEO in 2002 do I have my with my research correct? 

[Elizabeth McCoy, 3:00]:

Correct, yes. I mostly learned what not to do in that raging period of time. I found that executives are often very distant from the field and understanding what really happens particularly in community bank size markets where we live, and so being close to our customers is of course what community banking does best and that is not always for national banks do best I don't think. 

[Zach, 3:30]:

I think it's very well said. And one of the things kind of to segue off of that in the community and being close is I know Darnell Canada who works with you closely had a couple things he wanted us to kind of talk about and one of the unique things I think in your background is your experiences with the Federal Reserve and your work with them I know I from what Darnell has kind of let us know you were on the Community Deposit Institutions Advisory Council and you're currently a board member of the Fed in Saint Louis. So, could you also give the listeners maybe a little background of how you got involved you know with the Fed and maybe some of some of the insights in terms of you know what you did on the CDIAC and kind of what you do now as a board member of the Federal Reserve Bank of Saint Louis?

[Elizabeth McCoy, 4:12]:

So, I'll have to say it was a highlight of my professional career. The CDIAC (pronounced see-dee-ack) as it's known, the acronym for the Community Depository Institutions Advisory Council. All 12 federal reserves have that particular council; I was lucky enough to be invited by Maria Hampton who at the time was the lead at the branch board of the Saint Louis Fed in Louisville, and I'd worked with her at Liberty many, many years ago, and so she offered my name up as a recommendation and so I was delighted to be invited to join that particular board, which is all bankers, either community bankers or thrifts, and so that those members come together twice a year in Saint Louis in our particular case and meet with president Bullard and other senior members of the team we're given questions in advance for that particular board that are provided by the Board of Governors and we come prepared to answer all of those questions but we're usually assigned a couple of those questions in particular based on our bank or institutions level of expertise, and so we go around the room and answer those questions and there are minutes from all of those meetings that you can find on the website of your particular Federal Reserve Bank that goes back to the beginning of the history of the CDIAC. So, during my time on that board then I was asked to serve as its chair and then the chair of all 12 CDIACs goes twice a year to Washington and reports directly to the Board of Governors and the Board of Governors boardroom, which is a pinch myself I'm not in Kansas anymore kind of experience and very intimidating; Janet Yellen was the chair at the time, and so that was a fantastic experience but I would observe that those board members are very in tuned and listened to exactly the information that's brought forward from those particular individuals in the room who speak for their board members at the CDIAC. So, when I say that they pay attention, and they listen I mean that genuinely. And then during that period of time, so I'll back up and say it’ll be mostly bankers listening to this I guess but there are twelve Federal Reserve banks in the country all of them have nine board members; three are bankers elected by their peer banks in their particular size category. That's the Class A directors and then there are Class B directors which represent the business community; they also are denominated by and elected by the banks in their particular regions and then there are the Class C directors which also represent the business community; they are appointed by the Board of Governors. So, it's a very diverse group that serves on the headboard, they call it, of the Federal Reserve Bank.

[Vinny, 7:19]:

Elizabeth, this is Vinny. Thank you so much for kind of that overview because even for those of us who do work in the industry, I think sometimes you lose sight of kind of the construct and how important it is, and particularly the role you're in, in giving those who sort of help craft monetary policies some insight into what's going on in the community banking world. I have to ask you a couple of quick questions. One would be, I think it would be crazy if we didn't ask you, if you've had any conversations with Mr. James Bullard and his outlook on interest rates? He always seems to be the first person out there in the public media from the Fed saying interest rates have to be higher. Do you have - he’s been of that ilk for some time now, do you have any insight?

[Elizabeth McCoy, 8:03]:

My opinions do not represent those of the Federal Reserve board St. Louis. I'm a big fan of Jim Bullard’s. Big, big fan, and he has been a leading voice on economic policy for any number of years but the past, especially since the beginning of the pandemic, he's been very vocal about his position on the economy and his position on where interest rates need to go. As everyone knows, the Fed has a dual mandate which is to keep inflation low and stable and to promote maximum employment. So, we might argue that with the current level of unemployment that maybe we are at maximum employment, but I think it's safe to say that we do not have low or stable inflation at this moment. So, we'll see, Jim is not a voting member this particular year on monetary policy, but he does attend the meetings and voices the Saint Louis position on where interest rates need to go but I don't have insight and if I did, I couldn't say what his position will be when they meet not too long from now. I'll be in Saint Louis next week for the regularly scheduled board meeting and then the Fed will meet about two weeks after that I believe.

[Vinny, 9:14]:

Thank you for sharing all that, and you know of course we weren't asking for insider trading here, but I just didn't know if you had any interesting sort of stories. I also have to ask you cause I thought that was kind of interesting, you get up in front of - you're the chairwoman - you get up in front of the Fed; the ones that are basically represented on the dot plot by dots. Tell me about that first experience I said I think you said we're not in Kansas anymore, but do you remember what you actually presented and kind of how the reaction was and maybe any of the feedback you received in that particular situation. 

[Elizabeth McCoy, 9:44]:

So, that's back on the CDIAC. So, there were 12 - the 12 chairs are there we meet the afternoon before, and everyone is sort of assigned what their particular topic should be. It's a very structured meeting you're very limited; I don't recall exactly maybe 2 minutes to say your name and where you're from and answer the question that you've been assigned. So, it's a very intense kind of a situation I guess you'd say. They don't ask a lot of questions because they provided us the questions that they want to hear about, and when you go to the headboard in Saint Louis president Bullard 's board that I serve on now. So, at every board meeting all the board members go around the room and give him perspective on the economy as we see it in our particular footprint in our part of the world because those non directors are from all over you know the seven states that Saint Louis covers. So, it's interesting to hear the different industry perspectives and the different parts of even our footprint on the difference between say Kentucky and Missouri or Mississippi or Arkansas. You know there's a lot of commonality problems, but every region has its own issues as you know and there's never a recession that's in all 50 states and in all regions of the country and so some areas fare better than others in different industries or just in general from their proximity to different industries.

[Zach, 11:21]:

Yeah Elizabeth, I think it's just really fascinating to hear kind of how all these - you know the construct as Vin mentioned, kind of gets put together and I think people may you know, speculating, may underestimate you know how much goes into it how much feedback how much conversation, dialogue, because we all hear the Fed governor speak whether it's formal statements or on Bloomberg or wherever and there's a lot more that goes into it right, which I think you just illuminated very, very nicely, and I think I'm just curious you know in in whether it's your opinion or things that you're hearing and seeing what -  you mentioned talking about challenges and things like that are there - we are a month out of the SVB signature kind of fall out here, are there specific things you know again in your opinion there are the big challenges that in the community banking space that you're concerned about looking you know kind of looking to address or maybe any of your peers, what they're bringing up? Could you give us a little flavor on some of the challenges out there that you're speaking to in in the industry?

[Elizabeth McCoy, 12:17]:

If you had asked me a month ago, the answer would be different than it is today and thank you so much to Silicon Valley bank for throwing a wrench in everybody's world. So, we wouldn't have been having a conversation about excess deposits and uninsured deposits and you know I was fascinated. I listened to Darling’s CEO on his Webex a day or two after the bank failures were announced and he made the point about the banking system cannot operate without the amount of uninsured deposits that are in the system; which is some huge $7 trillion I believe was the number that that he brought forward in that particular conversation but that seems to be a conversation that we're having with a lot of customers. You know the bank can't just operate on people that have $250,000 in their bank and that's it. So, that's an unusual problem that I've never faced in my career before. And then of course the impact on the significant rise in interest rates is an issue that we're all struggling with and dealing with, especially as our commercial customers come up for some kind of renewal or repricing, and I think it comes as - we call it sticker shock around here; when you discuss with the customer, “Well you're all right with 3% but your new rates gonna be 7 1/2, 8%”, you know that's like, what do mean. So, to me that’s just a vanilla challenge that we used to not have to see, but the Saint Louis Fed board still laughs because I say it at every meeting, and I will say it again next week to President Bullard. In the very vanilla world that I live in, we need our borrowers to pay us slightly more than we pay you, our depositors, and this inverted yield curve is a big challenge in that particular aspect of what we do.

[Zach, 14:10];

Elizabeth, there was one other thing I think, talking about the challenges you mentioned with the insured deposits, the rate risk and some of the loan resets here. We've been talking a lot really the last month or so, I think it's awakened a few folks the industry about to deposit piece. You see a lot in the media about large banks, small banks, and when you kind of dig into some of the Fed H8 data they define a small bank as just not in the top 25 in the country, which I think you would probably argue that those are still pretty big banks, the ones that are in there. So, is there a lot of conversation, you know, nuancing in your meetings, whether it’s with the Fed board, or even back with the with the with the CDIAC, about true community banks, maybe 10 billion and under, versus the regionals, super regionals and the large ones. I think sometimes, especially recently, this influx of small versus large, and well I don't know, maybe I'm crazy, but you know a $140 billion bank to me isn't really a small bank. So I'm just curious if there's any nuance there in your conversations and how that plays out?

[Elizabeth McCoy, 15:11]:

Now, the Saint Louis Fed is 100% community banks, so they don't have any of the national banks in their purview, so we are a community banking discussing group.

[Zach, 15:23]:

Terrific! That's just really important to kind of get through that in - I mean, given that it's mostly community banks, kind of, in that space overall, I mean what do you foresee - obviously when we get through SVB, we get through - hopefully we get through SVB, you know kind of this time frame. What are the challenges that you kind of see for, whether it’s Planters Bank, whether it’s the Kentucky, the Tennessee market share, and just in general over the next couple years, what are the issues that you see in the bank space, but also some of the opportunities that you might be excited about, you know, as a leader in those markets.

[Elizabeth McCoy, 15:53]:

Sometimes you just get to be lucky, and part of our bank success is we're just in - our primary market is just absolutely fantastic. Our MSA, which is Christian County Kentucky where I actually live, and we straddle the border into Tennessee and the Montgomery County, just one of the fastest growing MSA's in the country, it actually touches the MSA of Greater Nashville, so where we primarily do business is just a robust market. Now there'll be some challenges. We're seeing things slowing down ever so slightly, which we believe is 100% interest rate driven. So, you know the only thing I know for sure is the people that do the dot plot are always wrong, so that's what we know - that's the only thing we know for sure; whatever they say never turns out to be what it is, but if we could level off and start to see some indicators that these rates might go down in the maybe the not too distant future or even next year I think that would sort of get things going here faster again. Don't expect we'll go back to these historically low interest rates that we've seen for the past dozen years or so anytime soon.

[Zach, 17:03]:

Elizabeth, then again, I want to kind of go back to something you said a moment ago. You said well, we're kind of lucky, and I'm like well you know when you first came on as CEO you folks were at $130 million and I think you now are up over well into the 1 1/2 plus billion-dollar range. I mean, I think that's awfully humble of you to call that lucky because there's plenty of banks that I know over the last 20 years have not went from 130 to 1.6. So, what specifically from a you know - is there a niche? What has made you folks successful in really bringing on you know that that amount of business in a relatively, you know, I guess, a pretty short period of time if you really look at it through that lens. I'm really curious kind of what have you folks focused on, what do you think differentiated you folks over the past two decades call it?

[Elizabeth McCoy, 7:53]:

So, I'm not kidding. There's luck involved because of where the markets that we're in are, and I know a lot of CEOs you would talk to would tell you that it's their team, but I really mean it. We're a commercial bank for sure, and so we've attracted a large amount of talent and grown our own talent and we are a very, very flat organization we have very little - we only have 170 employees. We have a very low efficiency ratio and a very high assets to employee ratio so part of that is because we just don't have a lot of middle management. So, everybody is empowered, they know what they're supposed to do, and we expect them to do that. I feel like it's my job to just remove the obstacles that might be in their way, so that's what I spend most of my time doing. I also still love the customer facing part of the job, so I'd love to go on calls and meet the customers and understand what they do. We do a lot of commercial real estate, and so I look for that to be a big challenge for us going forward. We have this guidance from the regulators as you know, based on percentages of our capital on the amount of commercial real estate we can do and highly volatile commercial real estate, so we'll be challenged a little bit on the next level of our growth because of some of these parameters that are there, but we've been highly successful we have minimal if any bad credit our credit quality, still even in this rising interest rate environment is extremely strong and we're grateful for that. We manage that very, very tightly, very tightly. We have one special assets guy only because we've had to work through a couple of things over time but mostly the person who makes the loan has to collect it, so you have a tendency to do it right on the front end if you know you've got to be taking care of it on the back end. So, that's been a successful piece of our story.

[Vinny, 20:00]:

So, thanks for sort of, you know, giving some color on all that. You know, it's funny as we do more and more of these podcasts it seems like there's two general themes for these successful banks that you know the folks that we speak to that they basically are either in really good markets or they're just really good leaders, and oftentimes you’ve got to be both. You could have great leadership but just be in a terrible market and it doesn't matter, or you know even if you're in a great market you still have to execute and clearly you folks have done that so that's a tribute to you. I was sort of curious, I'm not personally working with anyone in your - you know, you're part of the country, I was wondering about the two really different markets, is there a difference between your you know the Hopkinsville market and the Tennessee market, you know in terms of the types of deposits you're bringing on? I do work with some other folks that had institutions that had been around for some time and were in a smaller area and then sort of branched out into other places and most of the business you know is coming from that area. Is there any differentiations between the two markets that you folks are really kind of operating in?

[Elizabeth McCoy, 21:04]:

So, when I was in public accounting we opened an office in Montgomery County, Tennessee, so I've been involved in business there for the majority of my career. So, when I came to work at Planters Bank we were only in Hopkinsville, we had a new CFO who had also been at a bank in Montgomery County, so we immediately went about expanding our footprint into that county, which was obviously a very rapidly growing community even at that time. Then we hired a number of fantastic people Kelly Workman, who's our CEO, who has also served on the CDIAC, came to us from Bank of America. She had had a large responsibility in Middle Tennessee for a large part of her career and then we were able to hire some other people that came from Bank of America and some other large institutions, some from my previous bank. So we brought together a group of people who knew each other and who had worked together before and then we just went about trying to do what we thought we did best, which was the personal relationship piece of our business in a market - you know in Christian County our pie’s not really getting all that much bigger, but in Tennessee the pie’s getting so much bigger, so you have so much opportunity to bring on new business just through growth and not through refinancing or moving something from another institution. That is a really key point to be in a market where, sort of, the sky’s the limit on what’s going on. Now that success is also spilling over into Kentucky now because we are on the border we also have Fort Campbell KY that overlaps the border into Kentucky and Tennessee, which for most of my career was the largest employer in either state, it's not necessarily the case today, but their influence and the spin off and the support services and the government contracting is a large part of what we do, but that is also a very significant part of the economy and our footprint.

[Zach, 23:10]:

Thank you so much! Though that's for somebody - I don't really have a lot of you know engagement down in that area and I was just kind of curious, I mean, you hear about so many folks kind of moving to a state like Tennessee are the growth prospects still really quite strong in in that area and in those markets or is it - because I have seen articles in the Wall Street Journal about how folks are now sort of quasi getting displaced from a Nashville and maybe moving into some of your other markets, I'm just curious if there's still a lot of runway there or if it's kind of if it's overcooked a little, I’m just wondering what your perspectives are?

[Elizabeth McCoy, 23:43]:

No, no. I mean the runway is long and wide. So, there is a little, of course, - some pandemic holdover where everybody's not back in the office and all these kinds of things that might be slowing some things down, but if you came to Nashville today, there's probably a dozen major cranes on the skyway, so I mean, the construction is wide open. Oracle, who's bringing 3200 jobs to Nashville, hasn't started. So, I mean there's a lot of opportunity in Middle Tennessee for sure, for any anybody that's in business. A lot of people moving to Tennessee, they have a very favorable tax climate as you may well know in the South, so you have some nice weather, a major International Airport is in Nashville now, so it has a lot of things that are attractive to businesses to move and relocate.

[Vinny, 24:38]:

Yeah, as a resident in a northern New England state here I can tell you the tax rates, as we are approaching tax time right now are not all that kind to us, some of us, so I could clearly see –

[Elizabeth McCoy, 24:50]:

Also the snow, yeah.

[Vinny, 24:52]:

Well, there's that as well. So, we always sort of kind of wind these things down and ask a question that sometimes can kind of be a little bit generic, but we're curious. So, what does the next you know 2-5 years hold for you and the bank, I'm curious what that kind of that outlook is?

[Elizabeth McCoy, 25:08]:

So, it's not 100% clear today. I'm gonna be 64 coming up pretty soon, so it'll be my time to move to the back nine I think and continue to bring along my people and give them additional opportunity. I'm not ready to retire just today but just something to be considering, you can overstay, and I have seen that in many times in my career and I don't want to be that person that causes the bank not to progress forward but we'll see, I mean, we'll need to continue to grow and to spread our wings and it is an ongoing challenge to attract talent today, everyone that wants a good job has a good job I believe and so we have to continue to make ourselves as an attractive employer. One of the things we do that I've already said is to enable you to be a decision maker and to influence what happens. I was in Clarksville yesterday with my commercial team discussing some future plans that we're considering, and a couple of the guys emailed me last night last night and said, “well thanks for asking”. Well, I mean, what else would I do but ask them, but I've been in plenty of places where nobody ever asked me what my opinion was about my own market even when they weren't in my own market. So, I do think that having a flat organization where you know your team and you value their opinion, and their feedback has been 100% critical to what we do.

[Zach, 26:46]:

I think that was a really important answer Elizabeth, and overall it sounds like just based on the conversations today, what we know about your bank, and our research, and talking with Darnell a bunch before this, it sounds like, you know, Planters Bank, no matter what you decide personally, is in really good shape given what you've done, and your team has done right over the past two decades. The last, last, last question, this one can be a brief one, is just one that Darnell, I could feel him you know wanted me to ask this is, given your time on the Fed, is there anything, as your term kind of comes to an end later this year, any advice you'd give to people who are thinking about it or maybe want to serve more or have some opportunities, any advice you would give younger or not even younger but just bankers in general on opportunities at the Fed?

[Elizabeth McCoy, 27:30]:

So, first of all I want to say thank you again for inviting me and I can't say enough great things about Darling Consulting and what they've done for our bank is far as our ALCO is concerned, and Darnell’s been an absolutely fantastic person to us, and I consider him a friend now. So, from the Fed’s perspective there is any number of ways to be involved, the majority of the feds, I think nine of them, have branch offices, so the Saint Louis fed has a branch office in Little Rock, Memphis, and Louisville. Those branch offices all have boards, and the Saint Louis Fed board also has any number of councils and advisory councils in addition to CDIAC, we’re going to have an agribusiness committee and a healthcare committee and transportation committee etcetera, etcetera, etcetera. So, there's any number of ways to be involved all the banks have a website that explain what those councils are and what they do, all the branch banks host any number of events and meetings and webinars and so getting to know the people that are on those boards or the managements of those branch offices I would think would be helpful that that's what got me started and then you know as far as service on the CDIAC or the Fed board, which are the two that I understand the best, I mean, also that's a little bit about timing there has to be the right position has to be open in your bank has to fit in the category of the positions that are open, some of that's a little hard to tell from the outside but the advisory committees are I think always looking for people that are knowledgeable in those particular fields to serve, so that would be my advice on how to get involved and you know raise your hand and say you want to.

[Zach, 29:15]:

You know, its terrific advice, and we thank you Elizabeth so much for your time and your color and your candor today and it's really our pleasure having you on and thanks again. 

[Elizabeth McCoy, 29:26]:

Thank you! 

[Zach, 29:34]:

And we are back. Vin what a terrific interview with Elizabeth, and I know we always kind of start with some takeaways here, and I'm not sure if I would define what I'm gonna say as a take away other than I was just fascinated by the Fed experience she's had whether it was on - was it the CDIAC or just being actually on the, you know, the Fed board right now, what all goes into that in terms of the questions, the meetings, the discussions, the folks in the community, it’s just you know it's one of those things, I think you said it, you know, we're in the banking world a lot of folks that are listeners are but I think people don't always see the inside of the baseball, you know, within that I thought she was terrific giving us some color but I was not too much you know overall given her experience and what she has been able to see there. How about you?

[Vinny, 30:16]:

Yeah Zac. No, I really enjoyed that part of the conversation as well but something that stuck out to me, I guess my main take away would be you know her leadership ability, and one of the remarks she made was how they really have a flat org structure and actually she shared a few things with us pre-recording, you know, about how important it is for her to really hear and solicit feedback and take that feedback under advisement as opposed to being, you know, having a structure whereby, you know, it's got to be vetted by a number of different people before the main decision makers really have a shot at it. Couldn't help but think that's kind of how it works here at Carling Consulting Group. If there's an issue or somebody feels like there's a way to improve one thing or another within the organization it gets to where it needs to get and that's how you keep moving forward so you know when she talked about being lucky, people aren't lucky. That's just - the reality is you got to be good to be lucky and she's clearly in a market that is growing but I'm sure there are others in the market that are growing that are not having at that same level as success and or executing on a strategy per se. So, to me I thought that was really quite interesting the fact that they maintain a flat org structure and it's been very beneficial for them so, but that was it for episode 5 of season two. We hope you'll join us next time on On the Balance Sheet.

[Outro, 31:46]:

On the Balance Sheet is a podcast produced by Darling Consulting Group, DCG. All views and opinions expressed by hosts and guests are solely their own and may not represent those of DCG. All third parties are independent entities and are not affiliated with DCG. This podcast is intended for informational and educational purposes only and is not considered as advice. All views and opinions expressed are based on the information available at the time, it may have changed on current market and other conditions. For more information about DCG; please visit www.darlingconsulting.com or email us at info@darlingconsulting.com. Today’s background music is provided by John Sib at Coma-Media and can be found on pixabay.com.       

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