Community banks are facing a growing succession crisis.

A recent wave of high-profile executive departures highlights the need for boards to regularly review succession plans and develop future leaders in an environment where it is getting increasingly difficult to find well-trained talent. Unfortunately, many of those initiatives were put on hold during the financial crisis, executive recruiters say.

"Banks that have gone through the last few years have this bunker mentality," says John Szold, chief executive of Planning for Succession, based in Miami. Ignoring succession "was an easy decision because they didn't have time."

Many banks eliminated formal training programs to cut costs, leading to fewer bankers with the necessary know how in areas such as lending, says Alan Kaplan, CEO of the executive search firm Kaplan & Associates.

"Everyone says it should be so easy to find a new CEO because there are so many unemployed people right now but, in reality, the number of people qualified to run a bank is much more limited," Kaplan says.

Several CEOs have made matters worse with a reluctance to retire, executive recruiters say. Some stay on out of a sense of dedication, Szold says.

Other executives refuse to retire because of concerns about their bank's financial stability and stock price, says Rod Taylor of Taylor & Co.

"If a CEO feels like they can't retire, they won't take any actions that will hasten their departure," Taylor says. "In too many cases, the board pushes the retirement issue ... and starts to look for successors without the incumbent's support."

Longer term, many bankers are worried that there is a stigma to their trade that could convince more young people to avoid banking as a career.

"The industry took a black eye during the financial crisis," Bryan Jordan, the chairman and CEO of First Horizon (FHN), said during a March 5 speech in Greensboro, N.C. "Will little kids still be interested in playing banker? It is incumbent upon us to solve the psychology that banking is bad."

Fortunately, there are steps banks can take to make sure that their best executives stay as they develop a CEO succession plan.

Directors must remember that it is their responsibility to select a new leader, Kaplan says. It must be an "active conversation," with boards discussing succession on a quarterly basis, or monthly if an executive is less than three years from retirement age, he says.

Regulators, analysts, employees and shareholders pay close attention to succession. For instance, it was a virtual nonevent last month when PNC Financial Services Group (PNC) said that William Demchak would replace James Rohr as CEO in April. It had been widely understood for years that Demchak, the $305 billion-asset company's president, was Rohr's eventual heir.

Still, banks need an emergency plan for replacing the CEO. Executive recruiters suggest that First Niagara (FNFG) may have turned to its emergency plan last week when John Koelmel was abruptly ousted as CEO. Gary Crosby, the Buffalo company's chief operating and administrative officer, was immediately named interim CEO.

The absence of a thorough succession could derail a bank's strategy, opening it up to a takeover. Since 2008, the average bank CEO age is roughly 58, while CEOs of banks that have been sold have averaged about 61, according to a study from Morgan Stanley. For the 35 bank deals announced during the first nine months of last year, the average seller's CEO was approaching 65.

So it has become more important than ever to develop talent internally.

"I'd almost rather change the conversation from succession planning to talent development," Szold says. "What banks want to do is develop as many people for as many roles as possible to give themselves strength."

Talent development doesn't have to be complicated or expensive but does require a real commitment, Kaplan says. Cross-training is critical and could involve exposing high-caliber employees to different areas of a bank's operations so they develop a solid understanding of the entire organization.

For small banks with limited staff and resources, it can be difficult to move key people around. Those banks should have rising stars work on special projects or serve on committees to expand their knowledge. Training could also involve sending employees to industry conferences or finding a coach to help them become better managers.

Such steps can help a bank develop better internal candidates. A study by AT Kearney and Indiana University found that companies that promoted from within often outperform those that recruit outsiders. It can also cost up to 65% more to hire an outsider, while 40% of those leaders last just two years, the study found.

Stephen Theroux, vice chairman, president and chief executive of New Hampshire Thrift Bancshares (NHTB) in Newport says he hopes his company will identify an internal candidate before he retires in a few years.

The company has a history of promoting its employees. Theroux joined in 1987 as chief financial officer. The bank's succession plan was clear when he became president in 2008. Last year, he replaced Stephen Ensign, who spent about half of his 40 years at the company as its CEO. Ensign's predecessor also worked his way up through the company, Theroux says.

One of Theroux's top priorities is developing talent at the $1.3 billion-asset bank. "We're concentrating on transferring knowledge and creating opportunities to a wider breadth of managers to get them involved with strategic thinking," he says. "We're exposing a wider group to how the bank ticks."

The thrift company offers professional coaching to senior executives to help them improve their soft skills. It also has a leadership council that includes of about a dozen executives to help expose them to other areas of the thrift, Theroux says.

There are still benefits to talking to outside candidates, Taylor says. It give directors confidence that they have evaluated all the optimal matches. It could also expose banks to new ideas, he says.

The support of the current CEO can greatly help the newcomer settle into the role.

Dan Rollins says he was lucky to have the full support of predecessor Aubrey Patterson when he became BancorpSouth's CEO late last year. Patterson announced his plans to retire from BancorpSouth (BXS) last May, and the company quickly hired an executive search firm to find his successor.

Early on, Rollins spent two days a week traveling with Patterson to various branches to meet with employees and customers. Patterson, who remains the company's chairman, has also been receptive to Rollins' proposals to make the company more efficient.

The transition went so smoothly that Patterson decided to stop working full time in February rather than wait for April, as originally planned. "I give Aubrey a lot of credit for making the process as ... seamless as possible," Rollins says.

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