Independent Banker - July 2020 - 19

Texas First Bank in Texas City, Texas. " I know a
bank that lost their [chief financial officer, who]
died unexpectedly, and it was a critical time in
their operations to replace him. Without their
succession plan in place, it could have been devastating
to the bank. "
Developing a succession plan helps a bank to
better prepare for varying scenarios. The process
of evaluating staff roles and responsibilities
may also reveal places to bolster existing capabilities
with staff professional development.
With that in mind, conducting succession plan
reviews annually-or more frequently if an executive
departs-provides greater line of sight into
areas of threat or opportunity. Another benefit
of regular assessment is that it can flag areas
where support from outside consultants or
staffing resources may complement a bank's current
planning.
Consider the importance of your
community bank's board and its makeup
in independence planning
A community bank's board of directors plays
a pivotal role in its governance and market
approach. Ensuring diverse representation-but
shared mission and vision-in its makeup assists
in safeguarding a bank's independence. And
forethought is critical to continuity in executing
against this strategic initiative.
" It takes time to find, to train and [to] equip
board members, " says Charles Gullickson, a
partner in the financial services practice of Davenport,
Evans, Hurwitz & Smith, LLP, in Sioux
Falls, S.D. " It's important for board members to
be looking down the road several years in terms
of what's the current composition of the board,
who might be retiring within the next three to five
years [and] what should [the bank] be doing to
recruit new board members.
" And, of course, that board has to make sure
that they are fostering a culture that finds, trains
and engages future management. "
Doyle agrees. " You need to think about not
only your executive and officer-level succession,
but you've got to think about your board succession,
because they are setting policies and driving
strategic decisions that will affect everyone in the
future, " he says. " And one of those decisions is,
'Do you want to remain independent?' "
2
" You want to
make sure that
if you lose a key
member of your team,
you have a fairly efficient
process to replace them. "
-Chris Doyle, Texas First Bank
3
Don't underestimate the impact of your
community bank's legal, financial and
community responsibilities
Beyond the leadership composition of management
and the board, there are the core legal,
financial and community responsibilities of running
the bank to consider in terms of remaining
independent. Each of these factor into a community
bank's decision and therefore need to be
evaluated, particularly if unsolicited offers raise
their heads.
Quick stat
20%
of community
bank CEOs
anticipate a
senior executive
leadership
change in 2020
Source: Independent
Banker Community Bank
CEO Outlook survey,
January 2020
" In those cases where there is overlap between
management, the board and ownership, sometimes
the distinctions for what you need to do for
succession planning get blurred a little bit, " Gullickson
says. " Those in management and on the
board need to be careful not to blur their personal
interests with the interests of shareholders who
may not be part of the management team. Their
core legal obligation is their fiduciary obligation
to their shareholders. "
So, the fiduciary responsibility weighs heavily
for community banks in their decisions, but they
also need to consider that requirement in light of
the bigger picture. Beyond strict dollars and cents
parameters, the community bank's impact on its
community must be evaluated in any decision to
remain an independent institution.
" The thing that you have to think about as an
independent community bank is the financial
commitment you need to make to your community, "
Doyle says. " Our budget-different than
banks that aren't community banks-will certainly
look different in respect to the expenses
independentbanker.org Q 19
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Independent Banker - July 2020

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