Monthly Archives: July 2012

CBI convention speaker urges ag advocacy

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Dr. Jay Lehr urged bankers gathered for the Community Bankers of Iowa meeting last week in Okoboji to spread the word about the importance of agriculture to the economy, our country and the world. Lehr, who said he has been active in agriculture for 55 years, said the average person knows almost nothing about agriculture.

“Devote 10 minutes per month for the rest of your life to tell at least two people who don’t know anything about farming, some of the important contributions agriculture makes to our world,” Lehr challenged. Among the key messages, he said, are: fertilizer drastically reduces the amount of ground space needed for farming; farmers are the best land conservationist, and they are the best environmental stewards.

Lehr predicted the world population will grow to 9 billion people in 50 years and level off. He said China will remain an important trading partner for the United States for the foreseeable future. Because of China’s need for our commodities, Lehr predicted corn, soybeans and wheat prices would remain high. He said he doesn’t expect prices to ever drop below $5 per bushel for corn, $10 for soybeans and $5.50 for wheat.

He said the high price of farm land is not worrisome given that only about 4 percent of the United States’ farmland changes hands every year. He said the number of farms in the country has stabilized at about 2 millions. The average farm in America is 451 acres. Only 2 percent of farms have absentee owners, he said. Eighty-five percent of farms are so small that its owners have off-farm employment to supplement their income.

He said the farm bill is misnamed, in that it is really legislation about food stamps. He said only about 15 percent of the expenditures authorized by the farm bill go to farmers.

Look for complete coverage of the CBI convention in the next edition of NorthWestern Financial Review magazine.

Omaha holding company to buy St. Paul’s Western Bank

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American National Corporation of Omaha, Neb., is purchasing Western Bank of St. Paul, Minn. The two companies announced the transaction earlier today.

Western Bank will continue to operate as a separately chartered bank.  The transaction is expected to close in September 2012.  Julie Sands Causey, chairman of Western Bank will join the ANC board of directors.

ANC also owns American National Bank, Omaha. Both banks will operate within their respective markets as independent banks under the ANC holding company.  With combined assets of $2.5 billion, American National will provide an already strong Western Bank with the infrastructure of products, technology and lending strength to support growth and expansion within the Twin Cities market.

“It’s business as usual, except with more products, technology and capacity to provide our customers an even better banking experience,” said Tony Lemaire, president & CEO of Western Bank.

“Western Bank is very similar to American National Bank in community focus and values.  Both are very strong, healthy community banks, with a mission to support their communities.  Western Bank has a terrific reputation and trusted name in the Twin Cities area,” said Steve Ritzman, president and CEO of American National Bank.

Western Bank was advised by River Branch Capital LLC and the law firm of Fredrikson & Byron, P.A.  American National was advised by McGill, Gotsdiner, Workman & Lepp, P.C., L.L.O.

Founded in 1915, Western Bank is an independent, community bank dedicated to meeting the specialized needs of businesses and offering a full range of services to all customers. The bank has five geographically dispersed locations serving customers throughout the Twin Cities metropolitan area. The corporate office still serves the original St. Paul, Minn., neighborhood in which it started, with other offices in Edina, Maplewood, Mounds View, and Oakdale, Minn. Western Bank has assets of more than $400 million and provides a full line of deposit and loan services to businesses, nonprofit organizations and individuals. Visit www.western-bank.com for more.

American National Bank is a wholly owned subsidiary of American National Corporation.  The Bank has a long and successful history dating back to 1856, with family ties since 1909.  It is the second-largest privately-held local bank in the Omaha/Council Bluffs market area.  With assets of more than $2 billion, American National Bank serves both business and consumer markets.  It operates 32 full service offices, in Omaha/Council Bluffs/Lincoln and other communities in Nebraska and Iowa.  American National Bank is the third-largest leading mortgage lender in the Omaha/Council Bluffs market.  Visit www.anbank.com for more information.

Community Bankers meet in Iowa’s lakes country

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Dale Torpey, Federation Bank, Brighton, Iowa, opened the 41st annual convention and conference of the Community Bankers of Iowa at the Arrowwood Resort in Okoboji. The 2011-12 president called it a “very, very good year for CBI.”

Noting highlights from the year, he said the association conducted six industry “summits” attracting 200 bankers, launched the Iowa version of the “Go Local” campaign, launched a “Hall of Fame” recognition program, conducted a “Money Smart” poster contest that attracted entries from 1,500 school children, and much more. “The best thing,” he said, “is we are just getting started.” He urged members to watch for the announcement of significant new programs in the next year to 18 months.

Torpey recalled the call to action he issued a year ago when he accepted the association’s leadership gavel. Last year he asked members to contact their elected officials about key industry issues, get more involved in the association, and support the association’s Leaders of Tomorrow program. He said all three goals were met although he said he would like to see even greater use of the Leaders of Tomorrow program, stressing that it is a great way to prepare the industry’s future leadership.

Later today, Torpey will transfer association leadership to Erik Skovgard of Lincoln Savings Bank, Reinbeck, Iowa.

How will merchants react to card settlement?

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How will typical merchants react to the settlement reached Friday between Visa/MasterCard and merchants who accept payment by credit card? While the settlement means the credit card companies and card-issuing banks will pay the merchants some $6 billion, the impact on consumers is not so clear.

Here is the Wall Street Journal article about the settlement which ran Saturday. There is a little more information in this statement from Visa, and in this statement from Robins, Kaplan, Miller & Ciresi, the Minneapolis-based law firm that represented the merchants. Here is the statement from the ABA and here is the comment from ICBA. Here is a link to the actual 113-page settlement document.

The settlement will allow merchants to charge more if a customer chooses to pay with a credit card instead of cash, check or debit card. Currently, credit card rules prohibit merchants from charging more, although the rules do allow customers to receive a discount for paying with cash (but few merchants offer the discount). So in 2013, when the new rules become effective, will many merchants add a 2 percent or 3 percent surcharge for using a credit card?

I can see on larger purchases — say on furniture and appliances — that merchants would love to surcharge. Yet, retail marketing is so competitive if even one big retailer refused to charge more for credit card use, virtually all players in the market will feel inhibited about charging more. But I am sure it is only a matter of time before they all end up surcharging.

Surcharges will drive people away from credit card use, with debit cards probably picking up the difference. Debit cards are wildly popular, although I know a lot of people who prefer to use credit cards; they pay off their balance every month and really appreciate the month-long float. No longer will that float be free and my guess is most folks won’t be willing to pay for it.

This agreement settles for now the question of who should pay for the card-based payments system. The candidates are the card issuers, the consumers who use the cards or the businesses that accept payment by cards. Up until now, the business have paid by figuring the cost of the payment system into the price of their products, the same way they figure in the cost of rent, staffing and marketing. They could add a surcharge to every product to cover rent, but no business does that. So why do they want to add a surcharge to cover credit cards?

My guess is it is simply a way to make money. In a perfect world, they would lower their off-the-shelf prices to reflect the fact that they no longer have to cover the cost of credit card usage, and make it up by imposing a surcharge on those buying with plastic. But, in fact, I doubt anyone will lower any prices and all consumers will end up paying prices with payment system factors included, and then paying an additional charge if they choose to use a credit card.

It is similar to the Durbin Amendment fiasco where merchants won a substantial price cut on debit card interchange fees but were not required to lower the price of their products a commensurate amount. The idea was sold as a benefit for consumers but the fact is no consumers have benefited at all. Call me cynical, but I suspect that will be the result of Friday’s settlement, as well.

Need for community banks assures their survival, bright future

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This is a pretty dark view of the community banking industry, published in the American Banker newspaper on June 19. The author cites several factors which may limit the growth — and even contribute to the demise — of community banks.

Cam Fine of the Independent Community Bankers of America followed up quickly with this response. And yesterday, the American Banker published this response from Marty Madden, an EVP at a bank in LaGrange, Ill.

I have been writing about banking since the mid-1980s. Ever since I wrote my first story, I have been hearing from experts that the community banking industry is on the verge of extinction. It is easy to get swept up in the emotion of the current crisis. Certainly if you had talked to an ag banker in 1987, he was likely to tell you that things didn’t look good. Similarly, if you talked to a banker heavy into real estate lending in 2009, he or she might also have had a pessimistic view.

Someone once said that the only way we lose is if we quit. There is a lot of wisdom in that statement. Certainly, if you give up on your bank when times get tough, it isn’t likely to survive. But if you remain determined to stick it out, you may make it. In some cases, of course, the bank still fails or gets sold but if the bank lacks committed management it has no chance of succeeding on its own.

In all small businesses when times get tough, it forces the business owner and manager to take a hard look at his or her own processes, employment practices, marketing and product offerings. This kind of scrutiny, which rarely happens when things are going well, is essential to the long-term survival of any organization. Because markets change, organizations have to change too. Challenging times are often a signal that your company, bank, firm or organization needs to change — usually only modestly, but sometimes substantially. Good mangers recognize what kinds of changes are needed sooner than poor managers.

Community banks will survive as an industry because there are too many small businesses that rely on them for their own survival. Community banks serve the small business sector in a way the very large banks simply cannot. As long as people have entrepreneurial drive, there will be small businesses and, therefore, community banks.

At the same time, significant market forces are working to commoditize all products and homogenize every  sales experience. This is not what people want. Customers want to be treated as humans; most don’t want every sales experience to be reduced to a transaction. Community banks have long been good at relationships. The good banks connect with people, and that’s becoming a more valuable skill every day.

Small business entrepreneurship guarantees the survival of the community banking industry and the relationship skills of community bankers position the industry for a bright future.