New chairman Preston Kennedy: A voice for community banks

Preston Kennedy visits Washington, D.C., frequently, often with wife Charel, a small-business owner.

Preston Kennedy, president emeritus and vice chairman of Bank of Zachary in Louisiana, and ICBA’s incoming chairman, has a long history of speaking up for community banks.

By Kelly Pike

The first time Preston Kennedy wrote a letter to the editor, he was hoping to intelligently counter a congressman who thought it would be a good idea to mix banking and commerce. It was believed he thought the theory of “too big to fail” was no longer an issue, as the congressman even suggested eliminating deposit insurance.

Kennedy, president emeritus and vice chairman of $250 million-asset Bank of Zachary in Zachary, La., couldn’t let those claims go unanswered. His response didn’t just help refute the congressman’s argument. It put Kennedy on a trajectory to become ICBA’s chairman two decades later. This month, he will take his place as community banking’s most prominent advocate, speaking up for the industry he loves—and encouraging others to do the same.

“Community banks are a separate and distinct industry that needs a voice. That’s what ICBA is.”

Kennedy visits with past and present leadership of ICBA Securities and Vining Sparks.

“Community banks are a separate and distinct industry that needs a voice. That’s what ICBA is,” says Kennedy, whose bank is a 20-minute drive north of Baton Rouge, La. “More community bankers need to understand that and promote that.”

Kennedy wrote his letter opposing the congressman’s position in 1997, when he was president and CEO of another nearby community bank. Wanting to ensure his letter was factually accurate, he faxed a copy to ICBA, asking if someone could review it. He got a call from none other than Ken Guenther, then ICBA’s president and CEO, who congratulated Kennedy for joining the fight and offered a few suggestions to improve the letter.

The letter was soon published, and Kennedy faxed it to all the community bankers he knew. Though he upset his congressman, Kennedy made his point and was soon invited to serve on ICBA’s board of directors. He has been involved in the association’s leadership ever since.

Kennedy has a day at the ballpark with two of his grandsons.

Growing with the industry

Kennedy’s penchant for facts and details has been an asset over his 40-year career, but it almost drew him down a different path. He’d planned on becoming a lawyer and had already been accepted to law school when he got a job at his then-future father-in-law’s community bank after graduating from Louisiana State University at the end of winter term, where he had worked the summer before. With eight months to fill, he was just looking to make some money and enjoy the air conditioning once Louisiana’s summer heat arrived, but by the time he needed to start planning his big move, he’d realized that he’d rather be a community banker.

“It was an exciting time,” recalls Kennedy, whose first job included collecting delinquent loans at the struggling bank. “We were trying to breathe life back into the bank, making a lot of difficult decisions and working long hours.”

Kennedy also liked the idea of positively affecting the community by having a hand in a variety of projects and industries. Rather than serving just the timber or petrochemical industries that dominate the area, he was able to help people build homes, and start or expand businesses of all kinds.

Kennedy with past ICBA president and CEO Cam Fine and C.R. “Rusty” Cloutier, founder of MidSouth Bank.

“Pay close attention to others”

If Preston Kennedy could go back to an early point in his career and tell himself one thing, it would be to make a conscious effort to study people.

“Pay close attention to others to understand what makes them want to be a part of your organization or in business with you, and what makes them uncomfortable or drives them away,” he’d tell himself. Figure out which words, body language and actions will most positively connect with others, he adds.

“It’s a fascinating subject. The more you know about people, the better friend, husband, father, leader or manager you’ll be,” he says. “Misunderstanding the human element on the other side of the desk is where most problems occur in life.”

“It was very gratifying to know that you had a part in helping so many people,” he says. “They do all the work, but you know you helped people improve their lives.”

Giving people the encouragement to take a good idea and run with it is a specialty of his, Kennedy says. He’s skilled at identifying talented people and giving them the tools to let them do what they do best. Kennedy describes this hands-off approach to leadership as a blend of collaboration and independence.

“Once you have people in position that are capable, my philosophy is to let them do their jobs,” he says. “It’s incumbent on the organization to educate employees and give folks the resources they need to do the job you expect them to do. Once you’ve got those people and they have the tools to do their job, I get out of the way and let them do it.”

Kennedy with Mark Marionneaux, who succeeded him as president and CEO of Bank of Zachary.

That’s exactly what Kennedy has done over the past two years as he’s slowly given control of Bank of Zachary to Mark Marionneaux, his successor as president and CEO. The pair worked closely to round out Marionneaux’s knowledge in the years leading up to the transition, following a defined succession timeline. Kennedy relinquished the role of bank president in early 2017 and the role of CEO in May 2018. He remains president emeritus, as well as president and CEO of Zachary Bancshares.

“I’m here to help Mark through the early years as president and CEO,” says Kennedy, who identified his successor early on and made a succession plan clear. “Day to day, he’s in charge. I’m here as an advisor. … At some point, I’ll step back and let him be the final word.”

The key to this simpatico working arrangement is open-door communication and frequent discussions, Kennedy says. He learned well at his former father-in-law’s bank in nearby Norwood, La., where Kennedy became president and CEO in 1994. By the time he left, Kennedy says, it was a healthy and very profitable community bank. Joining Bank of Zachary as president and CEO was a homecoming for Kennedy. His family has lived in Zachary, a city of 17,000, since its founding in the late 19th century as a busy railroad depot. Today, the town, located 16 miles outside Baton Rouge, boasts the top-rated public school district in the state. That, along with the opportunities that go with a strong petrochemical industry, and proximity to the state’s capital and Louisiana State University, has helped the community grow, Kennedy says.

Bank of Zachary is primarily retail, with its loan portfolio split down the middle between one- to four-family residential mortgages and small-business lending, mostly to mom-and-pop operations and petrochemical plants. The bank has two locations in Zachary and one in central Baton Rouge.

Kennedy with ICBA president and CEO Rebeca Romero Rainey and outgoing ICBA chairman Tim Zimmerman at the White House last April.

A call to advocacy

While the basics of community banking have remained the same over Kennedy’s career, the environment in which community banks operate has changed. Now, between the lack of boundaries and the common bond for credit unions essentially erased, community banks have to do more to keep up—and speak up.

Kennedy has become a pro at doing just that. He’s testified on behalf of ICBA at a Senate Small Business Committee hearing on how the regulatory burden is restricting community bank loans to small businesses and hindering economic growth—a cause that remains a top priority for Kennedy and Bank of Zachary. He and the community bank joined ICBA’s Equifax lawsuit, which was designed to address the long-term damage to community banks posed by the breach of 145.5 million consumer records and 209,000 payment cards. He’s also worked to understand the millennial mindset, finding ways to communicate the bank’s culture of good corporate citizenry to a demographic that values making a difference. He’s demonstrated this local commitment with stints as president of the Feliciana Chamber of Commerce, the Zachary Chamber of Commerce and the Rotary Club of Zachary. He’s served on the boards of the Lane Regional Medical Center Foundation and the Dixie Business Center, a small-business incubator.

Fintech and technology are critical to Kennedy’s community banking agenda. One of Bank of Zachary’s top goals has been expanding and improving its online offerings to reach more customers. Fitting together the pieces isn’t always easy, especially when trying to get third-party products to work with core providers, but Kennedy says there’s no choice but to do it.

Kennedy, fourth from right, at the Louisiana Bankers Association with Louisiana senator Bill Cassidy, center.

“Community bankers need to do whatever it takes to make sure their banks are competing in the areas of technology,” he warns. “If we can’t solve the fintech challenge, then we’re just going to become irrelevant.”

Despite these challenges, Kennedy is filled with optimism for the industry.

“As long as I’ve been in the banking business, there has been the prediction that there would no longer be community banks,” he observes. “I believe people will always want local financial institutions to invest in, be a customer of, and know that they are invested in communities.”

“Our industry is alive and well. I don’t know of any M&A firm that’s 114 years old. We’ve been around for a long time and intend to stay around for a long time.”

Kennedy partly attributes industry consolidation to barriers to entry, noting that even during the savings and loan crisis, new community banks formed regularly. Following the Dodd-Frank Act, just 13 de novos have formed. Meanwhile, many community banks are more than a century old and are often the oldest businesses in their communities. Kennedy believes this is a testament to their vitality.

“Our industry is alive and well,” he says. “I don’t know of any M&A firm that’s 114 years old. We’ve been around for a long time and intend to stay around for a long time.”

Quick-fire Q&A: Preston Kennedy

Q: Who is your personal hero?
A: My former and late father-in-law J.J. Johnson was a self-educated, self-made man in the lumber business who hadn’t known anything about owning a bank except that he wanted to be part of a local community bank. He leveraged all his assets to buy a bank on the brink of failure in 1977. He had enough confidence in the transaction and the community to make it work. He was just a very astute business person and never forgot where he came from.

Q: Where can you be found on weekends?
A: I spend a lot of time in antique shops. My wife, Charel, started a business selling antique and vintage jewelry. She had this idea that ladies would like older jewelry pieces, but not fine jewelry, and she was right. She’s doubled her sales four years in a row. It’s a typical small-business success story.
I also spend a lot of time with my grandchildren. I have six kids, including a stepson and stepdaughter. Between them, I have 12 grandchildren. Everyone is coming to Nashville, Tenn., for ICBA LIVE 2019 except maybe three of the littlest ones.

Q: What gets you excited?
A: I’m a big fan of my alma mater, Louisiana State University, and the LSU Tigers. I live close enough to campus where I can hear the noise from the stadium.

Facing the flood

In August 2016, a stalled storm system poured almost 7 trillion gallons of rain on Louisiana, including Bank of Zachary’s footprint. Nearly everyone living in the area, including bank employees, saw their home or vehicle flooded. And if they weren’t affected, a loved one was, says Preston Kennedy.

It was a devastating disaster, but, looking back, Kennedy says it was his proudest moment as a community banker. He got to see his bank step up and take care of everyone the community bank serves. Here’s how:

  • Community: The bank organized lunches for workers, made monetary donations and filled the expected role of good corporate citizens.
  • Employees: The bank, board and staff rallied around the employees to provide what was needed, whether it was a place to live or a car to drive. Teams of employees were deployed to employee homes to help. The bank also created a relief fund.
  • Customers: Bank of Zachary reached out to find out about gaps in insurance and provide temporary relief. The community bank expedited the process for cashing insurance checks co-written to the bank as lienholder, taking on a little bit of risk to get their customers the money they needed quickly.
  • Shareholders: Bank of Zachary had a strong loan portfolio due to conservative lending. The nightmarish flood had little impact on its balance sheet.

Kelly Pike is a writer in Virginia.