Community banks are known for their personal service and strong customer relationships. They are an important source of working capital for small businesses and act as engines of economic growth for their communities. If they are to continue in these roles, community banks must be able to attract strong, competent management and dedicated, capable staff. However, our examiners have noted a general aging of senior management at many of the banks they visit. In addition, they have noted instances of understaffing at smaller banks. With this anecdotal information, we asked Tenth District bankers if they will be able to meet their management and staff needs and what personnel challenges they see ahead over the next five years, 2001 to 2005.

Looking forward, a significant majority of District community banks believe they can attract and retain the directors, officers, and staff they will need. In those instances where bankers saw problems ahead, invariably it was factors beyond the bank's control, lack of qualified individuals, poor community prospects, or tight labor markets that were seen as stumbling blocks rather than banks? inherent inability to pay a competitive wage. Thus, it is the demographics of the marketplace rather than the competition of the marketplace that weighs more heavily on the future of those that see problems in getting directors, officers, and staff for their banks.

On a more specific matter, management succession may become an increasingly important issue for many banks as time passes. Many executives at survey banks plan to retire, and a good number (as many as 30 percent of chief executive officers) will reach age 65 during the next five years. However, only about 30 percent of survey banks had written succession plans. Even taking into account family ownership and possible succession arrangements within families, nearly 40 percent of survey banks were left without some form of management succession plan in place, leaving them exposed to a potential leadership shortfall at a time when officer turnover may increase. If survey results typify those for banks more generally, succession is an important evolving issue that deserves attention by bank management and bank supervisors before future turnover, expected or unexpected, occurs