Harry Wahlquist, chair, president and CEO of Star Bank, Maple Lake, Minn., flanked by his children Andy Wahlquist and Katie Incantalupo.

When Tim Sloan stepped down from Wells Fargo on March 28, the question on everyone’s mind was: Who will lead the bank next? In response, Board Chair Betsy Duke said: “A series of qualities had already been determined and the board simply had to match those qualities to a candidate.”

If only it was that simple.

The person best suited to lead a systemically important (albeit embattled) financial institution would likely fit a complex profile, with complications now including this person’s ability to pass regulatory muster. Given that an announcement by Wells Fargo hasn’t been made as of this writing hints at the monumental challenge its board faces. 

But what of the community bank and its leadership needs? Should community bank boards be any less prescriptive when creating a profile for a next-generation leader? And, are family-owned banks exempted from the fraught uncertainties that come with transition?

In a word: No.

A successful succession plan considers ownership, management, business and family considerations, said consultant Tom Hubler. Add to that bundle the concept of legacy, and you get to what Hubler called, “the last challenge of leadership.”


The family council

Community banker Harry Wahlquist had “fallen in love with the rural Midwest” during his years as a correspondent banker working for Minneapolis-based Northwestern Bank. Wahlquist, who has only lived in the Twin Cities metro, was 50 when his affection spurred him to buy the troubled First National Bank of Bertha-Verndale, which was situated in a north-central Minnesota community with fewer than 500 people. “I wanted to do it for myself,” he said of his desire to own a bank.

With the roles of chair, president and CEO set squarely upon broad shoulders, Wahlquist spent the next 20 years growing his community bank holdings “in an entrepreneurial fashion.” It wasn’t until he turned 70 that he first began to think about who might carry on in his stead. Those thoughts were spurred by a flurry of business succession-planning consultants who pursued Wahlquist “rather heavily,” he said. Their inquiries got the father of four thinking. 

Though two of Wahlquist’s four children, Katie Incantalupo and Andy Wahlquist, had embarked on careers in financial services (Incantalupo at a credit union; her brother at Bank of the West), neither they nor siblings Kip and Charlie had showed interest in joining what had by then become Star Bank, still primarily an ag bank operating in a smattering of outstate communities. The landscape for opportunity at the family bank changed in July 2010, however, when their father opened a branch in the southwest Minneapolis suburb of Eden Prairie. His decision to open a branch in the suburbs was spurred by one thing: business potential. 

Yet once Star Bank offered them proximity to established homes, lives and outside interests, Incantalupo and her older brother looked at the family bank differently. They joined the bank three months later.

The Wahlquists maintain a family council which discusses the issues that impact the $290 million family business. Their council meets quarterly and is slotted on the Star Bank org chart. It was there that the business of succession planning unfolded over the course of several months. 

Wahlquist had initially been worried there’d be sibling rivalries to contend with. “I haven’t detected any,” he said. “It’s a relief.”

Hubler applies the acronym BOSS to the succession process. He suggested that while the needs of the Business are typically the first priority as succession unfolds, equally important are the desires of the Other, the needs of Self, and the goals of all the Stakeholders. It’s important for family businesses in transition to “create win-win solutions that honor the BOSS and to become a vision-driven family-owned business as opposed to problem focused,” Hubler said. Ultimately, the determining factors for deciding, in a family business, who is the right next-generation leader, are competency and commitment, he added. 

Through their family council, the Wahlquists assessed the strengths and passions of its next generation as it prepared for Harry to pare back on his responsibilities. 

“Andy is a no-drama, open-door, tough-love leader,” Incantalupo said. She said she’s empathetic and more willing to invest in listening. While they exhibit disparate leadership styles, they both land on “what’s best for the bank over and above what’s best for ourselves,” she explained.

The first major transformation of the org chart occurred earlier this year. Harry Wahlquist reduced the number of his direct reports from 13 to four — his two children, the chief lending officer and the chief financial officer. In order to accomplish this, Andy Wahlquist was named senior vice president and chief operations officer and placed in charge of six branch offices and operations, while Incantalupo was named senior vice president and chief administrative officer, and put in charge of three branch offices, compliance, marketing and human resources. Branch assignments were based on the size of the office, their locations, personality of the branch manager, and any HR issues or challenges they faced, Incantalupo said. “I know some people related better to Andy than to me,” she said. “We are a small organization; we know these things.”

Star Bank, Maple Lake, Minn., is governed by a family council. Pictured, from left: Mabs, Charlie, Harry and Kip Wahlquist, Katie Incantalupo, and Andy Wahlquist.

Wahlquist, who turned 80 this year, is quick to assure that this change doesn’t mean he’s no longer interested in visiting the branches. “Correspondent banking taught me a lot of things; devotion to the customer base is one of them,” he said. “I take that to include devotion to my people.”

This first stage of succession also means Wahlquist can devote more time to a passion that’s intertwined with the business’s success: advocating for independent community banking. “I need to make sure, for future operations, the regulatory burden doesn’t weigh us down,” he said.

The unintended consequences

Regulators and attorneys who serve the banking industry report that the increase in merger and acquisition activity in recent years is being driven, in part, by the challenge of succession. Sometimes, selling is the path of least resistance. 

When there is no obvious family members to transition into leadership, “you do have to figure out a financial exit strategy to get your money out of the bank,” Hubler acknowledged.

Selling doesn’t always sit well with those who toil down the chain of command. In 2007, Peg Scott, now CEO and chief financial officer of Union State Bank of Greenfield, Iowa, was vice president of operations at the bank when its owners decided to sell. When she learned the deal would likely involve layoffs, she set to work forming a local investor group to submit a competing bid. The goal was continuity, she said in an interview last year with the Iowa Bankers Exchange. Her goal: “The same bank with the same employees, just different owners.”

It’s a testament to her determination that Scott achieved that goal.

Not all changes in ownership prompt leadership transitions though. Community banker Perry Forst was named president of Citizens State Bank Norwood Young America, Minn., in January 1999, to replace the retiring Clinton Kurtz, just about the time the bank changed owners. “When there’s a change in ownership, if you can maintain leadership locally, that helps maintain franchise value,” Forst said. 

Stability is a laudable goal, and a viewpoint that has informed the $84 million Citizens State Bank since 2012 when, sparked by a regulator directive, the board launched into the process of determining succession. “They [regulators] wanted us to start thinking about it,” said Forst, who was only 50 at the time.

Forst called the succession planning process both a challenge and an opportunity. 

The next leader at Citizens State Bank has already been announced: Jason Winter, 41, who joined the bank in 2012 through its now-shuttered mortgage company. There had been 20 employees in that division when Forst closed it. He invited three of them to move over to the bank. 

Winter successfully shifted into commercial and ag lending as part of a team of experienced lenders. But as the board began its discussions on succession, the topic of tenure landed on the table. The board prized seniority, one of the fruits of stability. But Forst emphasized the qualities of leadership that were important in his mind. “You can have a person who is capable, but if their motivations are not on point, it’s probably not going to work,” Forst said. 

He speaks of a deep-rooted, selfless leadership. “There’s a bunch of branches coming up that tree; you serve your shareholders, serve your co-workers, certainly you serve your customers, and the community itself,” Forst said, acknowledging that Winter exhibited an authentic desire to serve those different constituencies while remaining humble. 

Forst said he did not believe the lender with more seniority, whom the board was eyeing, demonstrated such devotion to service.

Facing the prospect of losing a good lender who would be passed over, Forst was resolute. “We were going to lose one or the other of them,” he told the board. “I could live with the other person leaving; I could not live with Jason leaving.”

The impact of choosing a leader always leads to the consequences of decisions about who hasn’t been chosen, Forst said. The bank had to hire a lender to replace Winter as he was groomed for transition; and, the bank had to replace the lender who left after learning he’d been passed over. Therein lies opportunity, Forst said.

How far does it ripple? 

About 60 miles southwest of Norwood Young America, as the crow flies, the leadership at Citizens Bank Minnesota, New Ulm, has also been graying. An analysis of the bank’s “bench strength” by President and CEO Lou Geistfeld revealed a need to develop the next generation of leadership. The bank didn’t want its otherwise competent employees directed into leadership without sufficient training, Geistfeld said.

Some bankers were trained in-house while others were enrolled in a graduate banking program (education also sought out for the next generation at Star Bank). “We had people who we were excited about, but they left because there was no plan,” Geistfeld said. 

So they built a plan and called it the Citizens Leadership Academy. It launched in 2017 and graduated its first cohort of three in 2018. The program is a two-year internal training that blends personal development and professional growth, said Melissa Bergeman, who was part of that inaugural cohort. “We were mentored by senior management as well as others…who encouraged open dialogue and feedback,” she said.

The result of building an internal leadership program has been discovering promising young people and gaining a reputation as a progressive employer.

Back in Norwood Young America, management succession at Citizens State Bank wasn’t focused solely on replacing Forst. The board also had to address an aging senior management team, many people older than Forst — including the assistant cashier, who retired late last year at age 75. 

An offshoot to management succession was a strategic initiative to reassess all of the bank’s core processing and IT functions. For years, the bank maintained in-house core processing and data security, Forst said. In response to its aging workforce, the board decided it should outsource all of those functions because “skill sets are impacted by these decisions. You have to do this right to protect customers’ data,” Forst said.

The bank chose to work with Automated Systems in Lincoln, Neb., as its IT and data processing partner. None of its data processes occur inside the bank any longer, which means none of it is affected by personnel challenges, even the common hiccup of managing around someone’s sick day. The transition, which occurred in late 2018, allowed the bank to streamline operations and resolve its stickiest staffing dilemma: hiring a qualified IT professional. 

Timing this strategic initiative to coincide with leadership succession allowed the bank to set up its outsourcing on favorable terms, Forst said.

Forst, now 57, said the bank’s succession plan calls for Winter to become bank president in January 2022 and Forst to remain at the bank until year-end to help wherever he’s needed. Forst will be 60 when he fully retires. With the weight of leading a community bank shifted to the next generation, Forst said he expects to enjoy his first good night’s sleep in years.