Hey, cool! A bank

Northwestern Financial Review, Oct 24, 1998 by Olmsted, Monte

Minnesota teens learn the ropes of the banking industry

The unbuffed, unkempt wooden floor doesn't creak so much in the converted storage closet where 16-year-old Caleb Thunem and his classmates count coins, administer loans for prom dresses and hand out an occasional Tootsie Roll.

To Caleb, the cramped quarters for Minnesota's first student-operated bank are just right. "Cozy" is the term the high school junior used to describe the home of the First Student Bank of Bemidji High School, where Caleb and other financial wannabes live out their version of "I Was A Teen-age Banker."

"When we're running the bank, we're very professional," said Caleb, the bank's vice president of savings. "It's a fun atmosphere, but we make sure we're serious. We know it's real money we're handling and can't afford to make any mistakes."

First Student Bank opened in November 1997 and has been a success with students and faculty in this town known for mythical lumberjack Paul Bunyan. The brainchild of the school district and a local bank, First Student Bank is part of a semester-long course known as Model Bank. Among the issues they've studied are inflation, interest rates, loans, mortgages and the Federal Reserve Bank and its chairman, Alan Greenspan.

With help from First National Bank Bemidji, business education faculty member Jane Senger formulated the course, modeling it after a student-run bank in Dickinson, N.D. For Senger, watching her students get enthused about learning is a highlight.

"It's always exciting anytime you can get students involved in learning about the real world with hands-on experience and not just textbook work," Senger said.

Justin Skipton, a 16-year-old junior, is an example of how the course reaches banking novices. Known as "Skip," Justin will be the bank's new marketing director. He said he is curious about banking and believes the class will be a good learning experience "in case I want to go in the banking business."

"I want to learn as much as I can for the future so it's handy," said Justin, a regular bank customer who cashes a $10 check every Monday for lunch money.

The unique aspect of the bank is it's run by students, and like a community bank, its staff knows nearly all customers, which consist of fellow students and faculty. The students make the decisions on loan approvals, marketing budgets and interest rates, handle all transactions, balance the books and secure the money in the school vault at closing time.

The students even set the interest rates. (The interest rate on a loan may be from 11 percent to 18 percent depending on time length; savings accounts usually net a 2.5 percent interest rate.)

Everyone who takes the course (usually about 20) is on First Student Bank's board of directors, which meets weekly.

Although unpaid for their banking duties, the students receive school credit plus the experience of running a business, open during the two student lunch shifts, totaling 90 minutes and providing a new definition for "bankers' hours." So far one Model Bank student has gotten a job at a real bank.

"Kids are proud of the responsibility they're given. It's their bank," Senger said. Several factors led to the establishment of the student-run bank. About the same time First National Bank's customers urged the institution to become more active with younger people, Bemidji School Superintendent Rollie Morud expressed interest in starting a student-run bank, said Tom Welle, president of First National Bank. (Morud was the school superintendent in Dickinson, N.D., when its high school opened The Student Bank in fall 1994.)

By November 1996, a contingent of Bemidji educators and a banker traveled to North Dakota to observe Dickinson's student bank. Soon after, Bemidji High School and First National Bank's executive management committed, said Sue Engel, First National Bank's director of sales and marketing.

Originally, the bank was to open in January 1997 as a companion to the Model Bank course. The classroom course was launched on time, but the bank wasn't because the school needed permission from the Minnesota state legislature.

In April 1997, the legislature amended a banking bill that allowed a pilot banking project at Bemidji High School through June 2000. Among the bank requirements are it must be advised by a state- or federally-chartered bank, but not owned by it; be located on school premises; have written commitment from the school board guaranteeing reimbursement of depositor's funds lost due to insolvency, and file a studentprepared annual report.

With state support, the school started its bank, which has advocates such as Kevin Murphy, Minnesota's deputy commissioner of commerce in St. Paul. Murphy agreed that the bank is a success, saying that the program has provided "an incredibly good experience of the real world on a small scale."

"My impression is that it's been a very worthwhile project. They've had a lot of fun and learned a lot of things," said Murphy. "There's been a high level of enthusiasm and participation by students, teachers and the bank advising them."