The Need For Small Banks' Survival - big banks have little stake in small communities - Brief Article

Nation's Business, May, 1999 by Sharon Nelton

A man named David D. Shuster has given me a new sense of urgency about the importance of preserving and strengthening community banks, many of which are family-owned.

When I was researching a story on community-bank start-ups for a forthcoming issue, I talked by phone with Shuster, who runs the National Institute for Community Banking, Inc., in Dallas.

The NICB is a for-profit organization that provides estate-, compensation-, and succession-planning services for bank owners. It was founded five years ago after Christopher Williston, CEO of the Independent Bankers Association of Texas, became concerned that so many community-bank owners were selling their banks, believing they had no alternative.

Many such banks were being bought by larger banks and turned into branches with little stake in the communities they served, according to Shuster. With a community bank, "there just seems to be a lot more concern for the well-being of the community," he maintains. "It's been devastating to many local areas to lose a community bank."

In a survey at the time, local-bank owners said they felt forced to sell for two principal reasons: They needed liquidity to cover future estate-related expenses, and they wanted to establish adequate retirement income for aging shareholders.

Based on those revelations, the NICB was formed to help community bankers meet their estate and retirement goals while they retained ownership so that eventually it could be passed on to future generations.

Community banks are experiencing "an aging shareholder base," says Shuster, who notes that the average age of a major shareholder is in the mid-60s. Shuster says that only about 5 percent of bank owners have comprehensive estate plans. It becomes a vicious cycle, if they haven't done estate planning, they think their only recourse is to sell. And if they think they must sell, then succession planning and strategic planning seem unimportant.

Shuster and his staff want community banks to endure as community banks, and they want to show community-bank shareholders that there are options other than selling. Banks, Shuster points out, have "a major impact on all the businesses in a small community."

And for that reason, he feels, we must do all we can to assure that community banks make it to the next generation with their independence intact.

Education-Program Profiles

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