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ONE-ON-ONE - March 2005
by Ed G. Lane
'Education and Transportation Are the Two Key Economic Engines...'
Central Bank's top executive talks about his company and economic development in Kentucky
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Luther Deaton, Jr.
Luther Deaton is chairman of Commerce Lexington, Inc., and chairman, president and CEO of Central Bank & Trust Co., a Lexington-based bank with locations throughout Central Kentucky, and a new Louisville branch. He was recently recognized by Junior Achievement of the Bluegrass for his career achievements and community service and was named to the organization’s 2004 Bluegrass Business Hall of Fame. He is also a 2001 recipient of the Governor’s Economic Development Leadership Award for the state of Kentucky. In 1997, he was honored with the John R. Wooden Award, an award established by Lexington Theological Seminary to honor a lay person whose life exhibits commitment to and involvement in a faith community, along with evidence of putting one’s faith to work for the welfare of humankind. |
Ed Lane: How long have you worked at Central Bank?
Luther Deaton: It will be 26 years at the end of March. I was named president/CEO in 1995 and chairman in 1999.
EL: Since becoming Central Bank’s CEO, what has been your guiding principle regarding bank operations and expansion?
LD: My vision for the bank has always been to create opportunities for our employees and the communities we serve, and to be a good corporate citizen. When the bank achieves these goals, our employees and the communities we serve all benefit.
EL: Jane and Joan Kincaid are the daughters of entrepreneur and bank founder Garvis Kincaid, who died in 1975. Jane Kincaid serves as vice-chairman of Central Bank and Trust Company, and Joan is vice-chairman of Central Bancshares. Could you describe your working relationship with the Kincaids?
LD: I couldn’t ask to have a better working relationship. Jane and Joan let us run the bank and they support us in anyway they can.
EL: According to recent FDIC data that I’ve reviewed, Central Bancshares is ranked ninth in the state in total assets on deposit. Among banks that have Kentucky ownership, you’re ranked around fifth. Is that correct?
LD: That’s about right. Central Bank, as well as other Kentucky banks, continues to prosper. Central Bancshares consistently ranks as one of the state’s top 10 bank holding companies.
EL: Recently, Central Bank acquired First Bank in Louisville. Can you comment on why you purchased that bank and what the bank’s long-range plans are in the Louisville market?
LD: Our five-year strategic plan has been to have Central Bank locations in Louisville and Northern Kentucky. We’ve been working in both areas; Louisville just happened to come first. First Bank was a great opportunity. We are planning to develop branch operations. Our Louisville location will be operated under a separate charter – Central Bank of Jefferson County. We believe that in five years Louisville can be as big as Lexington.
EL: Although Central Bank hasn’t yet opened a branch in Northern Kentucky, you recently announced that the bank is looking for three or four locations. What is your strategy in this fast-growing market?
LD: Central Bank will not go in to any market unless it’s got the right person to run it and the right board of directors. We’ve been recruiting in Northern Kentucky probably for several years. We have also tried to make acquisitions. As you know, we tried to buy Peoples Bank of Kentucky, but we came in second. If we had finalized that deal, we would have been well on our way. Peoples Bank would have been a good fit for our bank, but that didn’t happen. When we go to Northern Kentucky, we will open branches in all the key counties as soon as possible.
EL: In February, Central Bank announced it had acquired Purdy & Cooke Insurance Agency, Inc. How does insurance fit in with Central Bank’s overall plans?
LD: That was the only piece of the puzzle – insurance services. Central Bank needed to be a full financial services bank. Central Bank can now offer every product that any other bank can offer.
EL: Central Bank is a closely held corporation – its stock is not publicly traded. The bank has been very profitable. Will the bank expand using its cash and earnings or do you see a point in the future when the bank might make a public offering – to create additional capital for expansion purposes?
LD: As of right now, Central Bank has no plans to issue any stock. Our principal owners – Joan and Jane Kincaid – want the bank to grow using its retained earnings.
EL: You have a very interesting relationship with Gov. Ernie Fletcher. You’ve known him since he first ran for public office. Can you discuss what you’ve been able to do to help the governor?
LD: Number one, Ernie is a very good individual. He’s very easy to like – both he and Glenna, our first lady. I truly believe that Ernie is sincere in what he wants to do for this state, but it’s very difficult for the governor, when he has to deal with legislators who have different views. This year, he’s got to bring both the Democrats and Republicans together in a bipartisan way and work for one common cause, and that is to move this state forward.
The first thing that has to happen is for our legislators to change their way of thinking. They can’t think like they did 15 or 20 years ago – times have changed. They have to be creative.
This state is not moving. There is no reason that Kentucky should not have a budget or tax modernization. The leadership in the House and Senate, along with the governor, has to work together in order to get this done. The governor has to be the leader in this effort, and I’ve told him that. If he doesn’t lead and take a leadership role, then Kentucky cannot move forward.
EL: When the General Assembly fails to pass a budget, that drags down the state’s economy and delays construction of schools, research facilities, roads, etc. Do you think the legislators realize how negatively their inactions are affecting Kentuckians?
LD: I would hope they do, but it appears to me that they don’t. I hope that is not the case. When Kentucky doesn’t have a budget, it hurts every person in this state.
It is critical to fund education and transportation – both ground and air. Without a well-educated workforce and excellent transportation, our state won’t attract economic development. Education and transportation are the two key economic engines for Kentucky.
EL: The General Assembly has been operating politically, as they have in the past. What recommendations would you make to Kentucky’s legislators?
LD: Government needs to operate more like business. In business, you have to negotiate. Politicians have to negotiate. Unfortunately, they often get hung up on things that don’t mean anything. They dig their heels in and say, “If I can’t get this then we’re not going to do that.” Legislators have got to change their way of thinking. They need to open their minds and create a vision. You’ve got legislators representing every area of this state. Every county has unique qualities: What might be good for Lexington might not be good for Eastern Kentucky. So, we’ve got to look and see what’s best for each county.
We need to concentrate and build on our strengths. I don’t care who the governor is or who the president of a bank is, if a governor does not have good legislators, he will not succeed. If I, as a banker, don’t have a good board of directors, I can’t succeed. When I sit down and talk with my board of directors I have to have an open mind. I have to listen to what they have to say. I’ve got to incorporate their ideas with mine until we come to a common ground. It appears in Frankfort, our leaders have been unable to do that. But something has to change. Until it does, Kentucky will not move forward.
EL: Allowing research universities to issue their own bonds is new legislation now under consideration. What is your position on this?
LD: If underwriters can bond projects and it doesn’t hurt the colleges, the universities, or the state’s bonding ratings, and they can cash flow the debt service, this legislation should happen. This is a good example of what I mean – we need new innovative thinking in the House and Senate.
EL: The University of Kentucky is planning a $375 million capital investment for a major hospital expansion and renovation. The new facility will probably create about 1,200 to 1,400 high-paying jobs for the Central Kentucky area. Is a hospital expansion critical to the region?
LD: The UK Medical Center project is critical and there should be no discussion about it. I’ve seen the financial projections and the numbers show it will cash flow – it’s a no-brainer. Why a project that is this important is being delayed is hard to understand.
EL: You recently traveled to Jacksonville, Florida with Greater Louisville Inc. You serve as the chairman of Commerce Lexington, Inc. Please comment on how the City of Louisville approaches economic development and compare its efforts to what Lexington is doing.
LD: Louisville has its own ideas; Lexington, Northern Kentucky, Bowling Green, Eastern Kentucky, Western Kentucky – every community has its own strategy. What I learned from the GLI trip is that all communities have the same thinking. “What can we do for infrastructure?” “What can we do to move our cities and counties forward?” We have to all get together and come up with a way to fund infrastructure projects in our cities. That may require a constitutional amendment in order to pay for the things we need to promote the quality of life and economic development, and create jobs. More jobs create a larger tax base. All the chambers in Kentucky should come together and put pressure on the General Assembly for one common purpose, and that is to move every county in Kentucky forward.
EL: You’ve talked about getting a new outlook on the future of Kentucky. Do you think it’s important to put even greater emphasis on technology and knowledge-based, “new economy” type jobs?
LD: We have to create manufacturing jobs, but the “new economy” is very critical to Kentucky’s future. We have a lot of bright people in this state with a lot of great ideas. We educate them, but in many cases they’ve taken their ideas and gone somewhere else. We need to keep those ideas in Kentucky.
EL: Just over a year ago the Greater Lexington Chamber of Commerce, Workforce Development, and Lexington United merged together to create Commerce Lexington, Inc. How is the merger of Lexington’s economic development effort faring? How are things progressing?
LD: CLI has momentum and it is now starting to come together. In the next two or three years, it’s going to be solidified. The ideal way to succeed is for CLI to reach out regionally and ask for help from our neighboring communities. Wherever we create opportunity and jobs, in surrounding counties or anywhere in the state, it benefits all of us.
EL: I have attended CLI meetings, and often mayors and judge executives from the surrounding counties are in attendance. Do they agree that working together is a good idea?
LD: Everyone wants to work together because they know how crucial working together is. The state doesn’t have the money it used to have. We have to create ways to attract economic development. Whether it is in Lexington/Fayette, Woodford, Clark, Scott, Jessamine, Bourbon, Montgomery or Madison County, it makes sense to work together.
EL: Greater Louisville Inc. receives over $1 million annually from the Louisville Metro Government – Commerce Lexington, Inc. receives $50,000 from the Lexington-Fayette Urban County Government. Is CLI planning to ask for a larger allocation of funding, and what types of programs would CLI provide for those funds?
LD: I like the way GLI serves as the economic development arm for the Louisville Metro Government – they’re very successful with that. GLI is successful because it speaks with one voice. Lexington’s Urban County Government should invest more into economic development. CLI needs to be out recruiting, attending conventions and bringing in businesses to look at Lexington and surrounding counties. If CLI does that, it can give local government a good report card. But if CLI isn’t funded, it can’t do that. Lexington needs to go out and proactively recruit like Louisville does.
EL: Legislation is being proposed to adopt a “right to work” law in Kentucky. What is your position on that?
LD: Kentucky should be a “right to work” state. When companies are evaluating new business sites, that is the first issue they look at. If the state had “right to work” legislation it would open up the doors to a lot of opportunities for new companies to locate in Kentucky.
EL: Legislation is pending that increases the minimum wage in Kentucky to $8.15 per hour. Do you think that’s a good idea?
LD: I believe in paying people for what they do. If it’s $8 per hour, that’s fine with me – I don’t have a problem with that. If you’ve got good workers, you need to take care of them. If you do, you are going to reap the benefit from it and so will they.
EL: What are some of Central Kentucky’s strong and weak areas when it comes to economic development?
LD: Central Kentucky has great schools, excellent health care, beautiful residential areas, and a well-educated workforce. I don’t think you have to sell that.
Our weakness is that Lexington is viewed as a business-unfriendly city. We really have to convince companies coming in here that we really want them here. We have to be supportive to help them get here. With existing businesses, it seems like once we get them here we forget about them. Lexington has grown because of the small businesses in our community that have created jobs.
EL: Greater Louisville Inc. has been promoting medical research, innovation, technology creation and health care. Is that an initiative that CLI might look at – promoting Central Kentucky’s health care industry?
LD: We are working very closely with the medical community. CLI needs additional funding to put more emphasis on this segment of our local economy. What is also important to this region is our great colleges and universities. How many communities can you visit that have 10 or 12 colleges within 30 minutes of each other. You have the state’s flagship – the University of Kentucky – Transylvania, Centre, EKU, Berea, Georgetown College, Morehead, Midway – all those great schools. Every one of them has something to offer. There is not a person in this region that cannot get an education if they want one.
EL: In Kentucky and greater Lexington, the long-term demographic trend is for the population to get older. A part of that is because “baby-boomers” are reaching their 60s. But some of that trend is being caused by our young adults not being able to find a good job when they graduate. Also, the lifestyle in our community doesn’t really attract young professionals. What should Lexington do?
LD: Lexington should have a program to create opportunities that start the day a student begins college. You do that in a business-friendly community. You reach out to universities, you reach out to health care industry. We are losing people to other states that we can employ right here. Lexington has a story that is not being told. We have to promote what we’ve got and we’re not doing a good job of it.
EL: Would one of CLI’s new marketing efforts on behalf of Central Kentucky be to come up with a consistent ad campaign that promotes the region, the quality of life and the area’s exceptionally high educational levels?
LD: That’s exactly what Lexington and Central Kentucky have to do. You don’t have to spend a lot of money because people come here and look and see what you have. You just have to get the word out that we live in a great part of this country and that Central Kentucky is a terrific place to do business.
Ed G. Lane is chief executive of Lane Consultants Inc. and publisher
of The Lane Report.
edlane@lanereport.com
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