The community bank director takes on significant responsibilities upon election to the community bank board. Given those responsibilities, the director would be exposed to various legal and personal liability should the director not fulfill these responsibilities with the duty and care expected of the position. In carrying out the significant responsibilities expected of the position, the directorate of a community bank must exercise sound and objective judgment and follow good governance practices given the special protection accorded the industry in the form of government insurance for bank deposits. Directors must be especially diligent to ensure they thoroughly review materials, request explanations to understand transactions for which they are unfamiliar or unclear, seek expertise or guidance as necessary for unusual transactions, and exercise their independent judgment. It is important that community banks orient new board members regarding the scope of their responsibilities and the extent of liability associated with their position by providing training. The community bank should also provide ongoing and periodic training for all directors to remind them of their responsibilities as well as keep them abreast of regulatory and industry changes. All regulatory agencies provide comprehensive director training programs, many of them online, which can be utilized for this purpose.

To evidence that actions and decisions of the board are considered with the duty and care of the position, a best practice is to prepare adequate documentation of the discussions and decisions of the directorate, both at the board level and in committee minutes, on all key matters facing the directorate. While the organization does not need to overly document all decisions, additional care should be taken to document any discussions regarding issues critical to bank operations and strategy. Those decisions and discussions warranting additional documentation should include, but not be limited to, those transactions associated with affiliates or insiders, actions which could raise potential questions regarding conflicts of interest, or those which could raise future concerns regarding if the transaction is in the best interest of the bank. Although directors and officers liability insurance provides protection under many circumstances, the coverage does not extend to acts of dishonesty and those that are criminal, conflicts of interest issues, or transactions that are undertaken for personal gain.