Where community banks are most vulnerable is in their lack of planning for the succession of the business. The failure to address shareholder liquidity needs, aging management and aging boards are the Achilles heel of most community banks. Weaknesses or complete lack of succession planning is the driver behind the majority of community bank acquisitions by larger banks.
While the acquired bank leadership may state reasons like those mentioned above, our experience in working with hundreds of banks over the past thirty years tells a different story. Sound succession planning is a very rare activity in most community banks. We find that community bank leadership is reluctant to add it to the agenda during strategic planning sessions. When added, it receives cursory discussion without any real consideration to what aging management, an aging board and the sale of their bank might mean to their customers, their communities, their employees and their shareholders.
Just as effective strategic planning allows a community bank to effectively deal with competitive, market and regulatory storms, business succession planning can also effectively deal with the challenges of allowing a bank to continue to exist beyond the current board and leadership life span.
If you are a majority shareholder, a Chairman of the Board, or the CEO of a community bank you have a responsibility to the various constituents named above to put a meaningful business succession plan in place. There are excellent examples of where proactive business succession planning has been and is working. Make your bank the next example we can point out.
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