How your board becomes your most valued asset

Editor’s Note: Brad Roden is president and CEO of National Bank of Commerce, Superior, Wis., which acquired central Minnesota-based RiverWood Bank in 2025 to become a 21-branch, $2.2 billion community bank. Jenn Docherty is general counsel with Chicago-based Performance Trust. In addition, Docherty is co-founder of the nonprofit Bank on Women and she serves on the board of Sunrise Banks in St. Paul, Minn. The pair took to the stage at the Bank Holding Company Association’s Fall Seminar to talk about the value of board diversity and board succession. Following are excerpts from their conversation..Jenn Docherty: If we take a look at the deposit market share that’s controlled by banks over $250 billion in assets ... in 1997 it was 4 percent; today it’s 45 percent. The competition on the asset side of the balance sheet for lending is coming primarily from non-depositories. No one is surprised that nearly 80 percent of one- to four-family residentials are dominated by nonbank providers. Talk about some of the challenges and opportunities that you face at your institution.Brad Roden: We face a lot of challenges. Capital is obviously a concern. Technology. Innovation. We spent a lot of money on it, and how much of that is spent on security and how much of that is spent on innovation and [finding] the right mix? Because we need to innovate, right? So community banks need to innovate as fast as our competitors but we don’t have endless dollars to do that.The other thing at the bank we do well is succession planning. It’s key, both at the board level and in the bank. Every member of my leadership group has a named successor in the bank. We’ve done gap analysis for where they sit today and when they’ll be ready to hold that position, and then we build development plans around those.You run across a lot of community banks that just lack succession. You know, RiverWood Bank, Paul [Means] was the CEO and he was 68 when I initially started talking to him, with no real defined succession. And the end result is you’re going to need to sell your community bank.Docherty: One thing we hear a lot about is this idea of being thoughtful, intentional. If you don’t plan for it you become a victim of happenstance. I think that’s sort of what you’re talking about. What are some of the expertise and some of the composition you look for in your board to help you address some of these challenges? You mentioned innovation, you mentioned succession, and the competitive environment. Tell us a little bit about your board and the things you look for in board members.Roden: Like most boards, we try to focus on areas that will complement the bank. We like to have an accountant on the board for obvious reasons. Typically we have an attorney on the board. Again, these are very intentional decisions. I like to have some of the major categories that make up our balance sheet. We have a significant hospitality portfolio, and therefore we have the president of a hospitality group on the board to help guide us and give some insight. And he’s certainly got a clearer lens on the hospitality industry than I do.It’s the same with other sectors. Manufacturing. We have some exposure to ag now. As we were looking at RiverWood, we were sure to look at the board and say, “Okay, who do we have that has experience with ag lending?”We’ve done that through our acquisitions as well. I think in the Republic Bank acquisition [2019], they had a bank in Minnesota that was 75 miles north of Duluth. You wouldn’t think that’s a big stretch, but it is a different market. We’ve since added a board member from that market and that’s really helped our growth. I’m not in the market every day. I can get out there maybe once a month, but that board member is able to tell us what’s important in the market, where we are missing, where we are hitting, what they are hearing. That’s invaluable.Docherty: We talk about social issues, and that’s not a small matter. I mean, who sits on your board? Who’s on the management team? Those are really important decisions that can drive a transaction. But I think we make the mistake of not realizing the opportunity that it can present. You’ve had a lot of success bringing in board members who can really help the institution.You are actively thinking, for your institution, “Where are we today? Where do we need to be? And what does that look like at the board level?” I come back to this idea of being intentional. Talk a little bit about how you think about board succession. How do you identify those sorts of directors?Roden: We look at that on an annual basis. You age off our board at 70, and that’s typically what we see. So we have a schedule, we know who’s coming up to age 70 when they’re going to retire off the board. And we start well in advance.We had somebody age off our board at our last annual meeting in April of 2025. We keep a list of our prospective board members. We look at that list annually and we remove people and add people as it makes sense.We had initial discussions with a prospective member in August and we had actually decided to take that person on in September [2024]. That allowed them a couple months to transition ... get familiar with the board and how it operates before she became a true active board member. Again, we didn’t start the process in March and say, “Oh, this person’s going to be retiring next month. Let’s see what we can go and find.” It starts with keeping a list and being intentional about it and being deliberate every year and renewing that. Because things change. People may move out of the market and they’re not on our list anymore.Docherty: Talk about the “boat rule.”Roden: I actually learned that from the CEO of RiverWood Bank. I asked him to tell me about the board members. Who might be a good fit. And he simplified it for me.He said, “Brad, we’ve got what we call a ‘boat rule.’ It’s pretty simple. If you can’t sit in a boat and fish with that person for an entire day, you probably don’t want them on the board.’We use the same thing with prospective board members. Usually, the chair of the board and myself will sit down with someone and get a feel for them. Do we think this is somebody who we can work with?I heard of a CEO who said he asked to meet with a prospective board member every other month for lunch for two years. That was pretty programmatic, but I think it makes the point.Docherty: Historically, our boards were sourced from friends and family. This is the golf club pool, right? I’m bringing people I know from my local country club. I may know them really well, but you probably aren’t getting the best experts. You’re probably not getting the people who are most tied in.I’ve done some analysis over the years about the number of women on a bank board and how that correlates with ROAA, and the returns are consistent over time. And the reason for that is pretty simple. It’s because you’re probably sourcing outside of your normal friends and family network. You’re probably looking for certain expertise and you’re probably getting different life experiences. So when we think about strategic decision-making ... it’s just important to understand how your board operates as a whole.Roden: I think our board probably mirrored a lot of the boards a few years back. It was largely white, male and aging. And we’ve been intentional to try to change that. That just doesn’t happen. Both from a gender position as well as an age position. At this point, we have two women on our board and we have 13 board members. Five [directors] are younger than me. So again, that’s intentional in nature.Docherty: You need to think about the skills you need, and where to go to find them. And yes, age is another big thing.With regard to growth, how many banks have you looked at? Because the analysis [in M&A] is quite extensive, and when your board has developed a versatility and an understanding of the financials, you can get to the culture a whole lot faster with potential transactions. And you can’t say “yes” if you don’t know what you’re saying “no” to.Roden: I don’t know the exact number. I bet that we probably analyzed as a management team 10 different deals with Performance Trust. Not all those get to the board, but there’s probably been three or four that I have wanted their insight. We probably have 10 or 12 things on a list that we evaluate. Now whether any of those are going to make it to the board or not, I can’t tell you at this point. But I do feel that when you do have an opportunity and it does make it to the board, the board is really positioned to use the tools, use the data and come to some quick decision on a lot of these.Docherty: It’s right to position your board to evaluate strategic opportunities prior to the transaction. If the first conversation you’re having with your board about strategic opportunities is when you have one in front of you, it’s probably already put you behind the eight ball. Certainly from a competitive standpoint.We talked about skills assessment, right? What is the gap analysis for your board? We talked about succession planning: who was going to fill those roles, are they the right roles today? And then there’s education. This is the way you want to reorient your thinking.Roden: Annually, our board members fill out a skills assessment. Are there any gaps here? Places that we’re missing and how we address that.In succession planning we talked about that. We have a very defined process for kind of looking at directors, board members as they attrition off the board and who we want to replace them.We use the skills assessment to go back and ask what we’re missing here. Again, we’re very intentional in doing that. And the last one, education: I have a board that is very supportive of my work but also very interested in keeping abreast of all the latest trends. The board has always continued to educate themselves on M&A and what’s changing; this allows them to kind of stay abreast of the industry and be supportive of the work I’m doing.Docherty: If you want to be in a position to be strategic, you’ve got to have a board that is educated. We’ve all been part of boards where board members are not even opening up the board packages. And so you really want the board being active. You have got to have board members who are able to hold management’s feet to the fire.How critical were key board members, both from NBC’s board and RiverWood’s board, during the acquisition?Roden: First, I can assure you that we don’t have directors who don’t open board materials. With RiverWood, I ran out there and had coffee and a conversation with the chair of their board. I probably had a few of those before I even got it to my board and said, “Hey, this is really happening.”The board is supportive of my work. But what I really like is throughout the entire deal, they were not trying to negotiate with me or get involved. I’ve heard stories like that where you have three or four board members who are trying to get involved in the negotiations and that’s just not going to go well.They trusted me to do the negotiating. I kept clear, consistent communication with them. They could always rely on a Friday evening Teams chat. I would tell them what happened during the week. What decisions we made. What points we negotiated. Just knowing they were there to support and not eagerly trying to get involved and do it with me … because that could be a disaster.Docherty: We’ve seen situations where board members go out and try to pre-negotiate the deal. I think it comes back to you actively communicating with your board so they know at all times where they stand.Roden: At our board meeting too, they’ll get to hear from me on a high level if I’m looking at any deals or having conversations with people. We don’t get into the details unless it’s moved down the road quite a bit. But they at least know that I’m having conversations.Docherty: Talk about practices for onboarding board members.Roden: I do the onboarding. It’s usually an entire day where I’ll go through a board packet (typically over 1,000 pages of information) in detail and make sure that they understand what they’re ready for and the volumes of information they’re going to have to look at on a monthly basis. I try to [field] some questions. I’m also trying to see where they work, if they’ll be on the audit committee or a fit for the loan committee, etc.Docherty: If you hadn’t had periodic gap assessments, and succession planning in hiring as part of the board, do you think those conversations would be more difficult?Roden: Definitely. I keep using the word intentional. Looking at the last two board members; the one prior we were more reacting. “Oh boy, we need a board member.” What I noticed when that person came on the board was that it basically took six to nine months before I would get any constructive feedback. And the other, like I said, we brought her on six months prior to placing her on the board. And so she had all that experience, all that knowledge and she hit the ground running. In board meetings, I get a lot of feedback from her and it just puts her way ahead in the process.By being intentional about what we do at the board makes the conversation much easier for sure. As a CEO, that’s important to me.Docherty: Boards are like families; you’ve got to build trust. You invite them into your family and the dynamics of how your family operates can change after that. A “welcome to our home” can go a long way.Roden: I have been in a situation before where the CEO of the institution didn’t want other leadership team members to communicate with the board. And that’s not a healthy place to be. With my leadership team, if there’s an opportunity at board meetings to give them exposure or present to the board, I always ask them to come in and do that. It’s helpful for the organization to know that a leadership team can have access to the board.Docherty: It does foster a tremendous amount of engagement for the board.Roden: The board needs to know these are the individuals doing the majority of the work.