15 Minutes With…Clayton Legear

When not spending time with his family, Clayton Legear enjoys training for and participating in marathons, triathlons and other endurance sports.
When not spending time with his family, Clayton Legear enjoys training for and participating in marathons, triathlons and other endurance sports.
Senior Vice President
Chief Risk Officer of the $580 Million-Asset
Merchants & Marine Bank in Pascagoula, Miss.

IB: What is your role as a chief risk management officer?

Legear: Basically, I’m responsible for our bank’s overall enterprise risk management program. It’s a new program, and my position was created about a year and a half ago. In addition to overseeing risk management, I also function as our bank’s credit officer and handle. I oversee our compliance department, BSA department, credit department and loan operations department. I also serve as the coordinator for our bank’s overall strategic plan.

I’m pretty involved in most aspects of our bank’s day-to-day operations, and serve on various bank committees.

IB: Why did your bank create your position?

Legear: We found we needed to be a little more thoughtful and disciplined in how we approached banking day-to-day. We wanted to find ways to evaluate all our operations so that we could stay ahead of the curve. For instance, in lending, we wanted to know that we had a credit problem well before a loan became seriously delinquent.

We wanted to have a common means to know what’s going on within each business line and to aggregate our data to help our board and our management team better manage our bank.

IB: How do you approach your responsibilities?

Legear: With any bank, and especially in a community bank setting, you have to exercise a good degree of judgment as a chief risk officer. You can’t afford to waste time by making big issues out of things that really aren’t. So I really try to have a good overall view of what we’re doing as an organization and then focus my efforts where I perceive there to be the greatest risk.

IB: What risk management systems do you use?

Legear: This is one area that I’ve spent a large amount of time on since taking on this role. We’ve spent a tremendous amount of time and energy identifying ways to extract data from our business units so that we can see what’s going on within each area of the bank on a day-to-day or weekly basis.

We also have spent a lot of time training key team members how to write reports and pull data from our computer systems. And we’ve partnered with other firms to get market data to monitor what our peers are doing and broader trends in the economy.

We’re getting more disciplined in pulling the data. Where the real challenge comes in is figuring out what the data means for us as an organization and what steps to take based on that data. That’s where we find ourselves now.

I was a FDIC risk management examiner before joining the bank, and I’ve seen a lot of community banks struggle to get data from their core system, and then struggle to get that data in a meaningful format to make actionable decisions.

IB: How involved are your bank’s senior executives in what you do?

Legear: I have a really great relationship with our CEO. He’s been a really good mentor. We visit very frequently, and I keep him apprised of various things that are popping up, be it operational issues or areas of risk that are popping up throughout the organization. I also serve on our bank’s senior management team, which allows me to understand and provide feedback on most aspects of our operations on an ongoing basis.

We have a level-headed, conservative CEO who’s not very prone to taking major risks. If he does do something new, he’s going to be sure that he’s researched it very well. He does a great job of reaching out to different people before making a move.

IB: How do you communicate about risk to your bank’s board of directors?

Legear: We’ve realized over the last few years that we really need to do a better job as an organization of educating our directors on banking. We’re very fortunate that we have a great board. But our directors come from different business backgrounds, and banking has grown increasingly complex.

So, we have been working through a director training process. It covers the various things that our directors need to know to help them better understand how our bank functions and how the industry as a whole functions.

Another thing that we’ve focused on recently is the quality of our board reports. We’re looking at those to see if they’re effective. We’re also asking our directors for feedback on what they would like to receive or if there’s a more effective way to present information to them.

IB: What’s your advice for other risk officers?

Legear: The best piece of advice I could give is to know your bank inside and out, front to back. Know everything there is to know about your bank—how you operate, why you make the decisions you do, who’s responsible for what and who your team members are.

Without that knowledge there’s really no way to be very effective as a chief risk officer or as a member of management in an organization. You can look at reports and numbers all day long and that’s well and good, but that’s only part of the story. You also need to know the strategy behind the decisions that are made—the why behind those.

A second piece of advice is be realistic in the goals you set for yourself and the goals you set for your bank, particularly if you’re in a community bank where there is no uniform right way of doing things. Enterprise risk management looks different at every organization because each organization is different. It can’t be overly streamlined. You can’t just pick something up off the shelf and say, “This is what we’re going to do.” People will rebel against it, and it may not be the most effective tool for your organization.

IB: So effective risk management strikes a balance?

Legear: Oh, yes, absolutely. There’s definitely a balance. The challenge to being an effective chief risk officer is realizing that, and then really helping your management team and your board make balanced decisions.

Certainly, everybody wants to get everything right every time. That’s our goal. But at the same time you have to understand that just by the virtue of doing business you’re going to take on some risk.

IB: What perspective do you have as a former examiner?

Legear: What I would offer is that examiners are just like bankers in that they are bigger-picture focused. They do not set out to nitpick you on every single thing.

Now, I know some bankers are going to chuckle if they read that and say, “Well, you’ve not met my examiner.” But I think overall examiners are going to focus on the big picture. Does your bank have issues? If your bank has issues, are you aware that it has issues? Do you really understand your bank?

If you prove to them that you understand your bank, that you’re able to identify and correct your own problems, that you get the bigger picture and that you take it seriously, they’ll give you a lot of leeway. They’re really not out to get you.

As an examiner it’s actually a lot harder to handle a bank with many issues. It’s a lot of additional work, and no, they don’t get any bonuses for finding problems. They really want you to run your bank well. That’s their goal.

IB: Can examiners be a safety and soundness resource for community banks?

Legear: Absolutely, they’re a great resource, and we use them for that. At least once every other month I have a conversation with an examiner to get his or her perspective on something. Maybe it’s a problem we’ve encountered at the bank. Maybe it’s a strategy we’re considering. They’re very gracious, and if we just need their perspective they’re always willing to provide that. They can be a great resource.