Banking Perspectives


August, 2015
Recent Transactions



Success in Succession Planning
by Marcus Faust - Managing Director


A recent FDIC survey found that community banks often sell because of aging executives and directors and a lack of identified qualified successors. While many community banks have written succession plans to address CEO succession, far fewer banks have a comprehensive management succession plan which includes a management development plan. Without developing management expertise to build a hierarchy of potential successors for all key executive positions, there can be no success in succession planning.  So how is this success achieved and how is it tied to strategic planning overall?
  • First, the succession plan should list all key positions that would be difficult to replace. Depending on the size, complexity and location of the community bank, the succession candidate roster should include not only the CEO, President, CLO, CCO, CFO and business line leaders, but also the Compliance Officer, Chief Risk Officer, Internal Auditor, and others with specialized expertise. In essence, anyone who cannot be readily replaced with comparable talent and on short notice with internal or external candidates needs to be on the list.
  • Second, the bank needs to plan for how the incumbent would be replaced: a) upon planned retirement; and, b) in the event of a sudden unanticipated vacancy. Therefore, the succession plan should indicate the planned retirement dates.
  • Third, the plan should identify current employees or avenues to find outside candidates to fill key positions, timing and development needs:
    • For those positions with potential internal succession candidates, it is important to assess the training/development needs and time-frame to prepare them in time for planned retirements. The bank should also analyze how management responsibilities could be reshuffled to compensate for any candidate's weaknesses and play on strengths. This allows the bank to accomplish reorganization to account for anticipated retirements and candidate development.
    • For positions without an internal candidate, the plan should outline steps to identify external candidates. Such steps could include developing or deepening existing relationships with employees of competitors, recruiters or other referral sources.
  • Finally, the succession plan should be reviewed by the Board and updated annually to address necessary changes and assess its overall effectiveness. The Board's review should tie into strategic planning to address (1) the need to attract millennials as customers via modern electronic delivery channels and the implications on the bank's long term branching strategy, and (2) whether rising cyber security threats and the need for social media marketing, mobile banking apps and an overall understanding of future banking customers warrant re-designing the traditional community bank management structure. Such analysis should include a Board self-assessment for its own succession planning, including expanding Board selection criteria to non-traditional areas of expertise. And Board discussions should consider not only directors with expertise in other industries, but also bank managers.
In our advising of community bank clients in succession planning, it has become clear that no "one size fits all" and every community bank's circumstances are different when it comes to succession planning; a robust plan and process will surely leave the bank better prepared for both the expected and unexpected. Our clients often contact us to assist them with their succession planning.

There are no easy answers, and every bank's solution will be different.  For how we can help, please contact me at (703) 647-6553 or

Marcus Faust
Managing Director
(703) 647-6553
William Pommerening
Managing Director
(703) 647-6546
Ronald Riggins
Managing Director
(703) 647-6543
Gregory Dunn
(703) 647-6548
James Hennessey
(703) 647-6544
James Oren
(703) 647-6549

With over 25 years of experience gained by working with more than 1,200 banking companies, RP Financial has become a trusted source for advisory, planning and valuation services. Our expertise and clear vision lead to precise and deliberate action that adds value for our clients. 


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