Austin Bank of Chicago has come up with some novel answers to the touchy succession questions confronting many community banks.
When Austin promoted its senior loan officer, Colette Loesher, to president, its chairman and chief executive cleared out — literally.
To drive home the point that the guard is changing, Sam Scott, 73, moved his office from Austin’s headquarters building to its newest branch in a gentrifying Chicago neighborhood.
Mr. Scott has not announced a retirement date, but plans to gradually turn over responsibility for day-to-day operations to Ms. Loesher while he scouts out opportunities for expansion — either through building branches or acquisitions.
“It’s better for Ms. Loesher and myself if our offices are somewhat apart so there are no problems with operational direction,” he said.
Geri R. Forehand, the director of strategic services at Brintech Inc., a financial services consulting company in New Smyrna Beach, Fla., said Austin is tackling an issue too many community banks ignore.
Brintech’s research indicates that roughly 45% of community banks do not have a succession plan, even though the average age of community bank CEOs is over 55.
“You should start succession planning at least three to four years before you need a successor,” Mr. Forehand said.
Community banks forced suddenly to deal with succession often wind up selling because they have trouble choosing a qualified new leader. “It is happening out there and it will happen more unless succession planning initiatives are implemented at the board level,” Mr. Forehand said.
Founded in 1891, Austin has grown slowly. It did not open its second branch until 1954, and the one Mr. Scott moved to is only its fifth.
The $242 million-asset bank’s current ownership group, headed by Mr. Scott, acquired control in 1987.
The privately held company has been consistently profitable. It reported net income of $3.6 million for 2004, and for the past five years its return on equity has hovered around 20%. Last year the average for banks its size was about 12%, according to the Federal Deposit Insurance Corp.
Mr. Scott said community banks often are run by entrepreneurs too busy with day-to-day operations to worry about succession planning. “They feel as though they have everything under control, and there is no need for anyone to come along and take their place.”
Austin’s board began succession planning several years ago to ensure the bank’s long-term future — and to shake things up a bit, Mr. Scott said.
“If your organization is functioning well, you become lethargic, satisfied. When you get fresh blood, you get more energy,” he said.
Ms. Loesher, who is 45 and has been at Austin for 16 years, was the board’s clear choice. Mr. Scott said that made the transition easier and prevented ruffled feathers.
“If your person makes sense, generally they accept it and realize that is a good move,” he said.
Ms. Loesher’s duties as the chief lending officer were taken over by Michael Campanile, who had been vice president of commercial loans.
Ms. Loesher said Austin is looking to expand in growing Chicago neighborhoods not already saturated with branches.
One example is the Little Italy district just south and west of the Loop, near the University of Illinois’ Chicago campus. That’s where Austin opened its Taylor Street branch in May. The neighborhood is being redeveloped by the Chicago Housing Authority, which aims to complete construction of 20,000 square feet of retail space and parking this year and to add 1,500 mixed-income housing units by 2009.
