The local board of directors, one of the cornerstones of a community bank, apparently is no longer sacred.

More multibank holding companies are considering doing away with multiple boards, to become more efficient.

First Busey Corp., for example, of Champaign-Urbana, Ill., last month completed an eight-year consolidation of its $850 million-asset organization, which in the late-1980s consisted of eight separately chartered banks, each with its own board.

Last week it announced it took the final step in this overhaul: merging the boards of its four remaining entities - a trust company, securities company, subsidiary bank, and holding company - into one 17-member board that serves all four.

"I'm not aware that it's something that's become predominant in the industry, but I think it will become so," said P. David Kuhl, chief executive of First Busey.

The choice is a more streamlined company versus the business ties that a local board can bring. More community bankers, even some die-hard advocates of decentralized supercommunity banking, appear to be leaning toward more simplified structures.

Mr. Kuhl said the move won't create any cost savings, as most of the directors already served on each of the boards. But it will save time that had been used for holding four separate board meetings each month. It also will make each director aware of all the different facets of the company.

"We are trying to create a seamless organization," Mr. Kuhl said.

There are some downsides to the move, Mr. Kuhl acknowledged. For one, the holding company's separate board was formerly able to focus almost exclusively on strategic planning issues, such as considering potential new businesses. Also, under the previous setup confidential mergers could be contained within a much smaller circle.

Another potential negative, one that Mr. Kuhl dismissed in his case, is the potential loss of business ties. Mr. Kuhl said that advisory boards, without any fiduciary or legal responsibilities, have been established at each of the subsidiaries as substitutes.

Some consultants who specialize in bank director issues said advisory board members are rarely as effective as full-fledged directors.

"Because there's no legal responsibility, advisory directors don't take it as seriously as regular directors do," said Richard Foster, president of Banconsult in Okemos, Mich.

Nevertheless, director consolidation seems to appeal to more community bankers these days. James A. Faulkner, chief executive of Century South Banks Inc., a $720 million-asset supercommunity bank company in Gainesville, Ga., said he prefers to have separate boards at each of his 10 subsidiary banks, but that could change.

"As the industry continues to consolidate, that is something that all banks will have to address," he said. "I would think it's something we would look at again within the next 24 months."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.