Wolf Etter Seminar considers tax, banking, employment issues

Northwestern Financial Review, Nov 18, 2000 by Olmsted, Monte

Refresher courses on important tax, legislative, banking and employment issues greeted Minnesota bankers on Nov. 1 in North Mankato at the 20th annual Bankers Seminar sponsored by Mankato-based accounting firm Wolf Etter and Co. The popular seminar has become a must-attend event for many bankers in southern Minnesota.

This year's meeting included an announcement that the Wolf Etter firm is merging with another venerable bankfocused accounting firm, Charles H. Preston & Co. of Plymouth.

About 375 bankers registered for the seminar that included a dinner speech by Robert H. Smith, former chairman of California-based Security Pacific Corp. and author of "Dead Bank Walking." (See page 30)

Robert Whitlock, an attorney with Minneapolis law firm Fredrikson & Byron, opened the seminar with a presentation on the latest developments surrounding sub chapter S incorporation. For small banks, subchapter S will be the most important legislative issue in the coming year, said Whitlock. Minnesota's current law affords only 80 percent conformity with the federal tax law.

"Minnesota is among the few states that imposes a tax at the bank level," Whitlock said.

Bankers want to achieve full conformity on the issue and some have even banned together to create their own single-purpose lobbying group called "Banks for Tax Equality," led by Ray Bentdahl of Excel Bank Corp. in Edina.

Greeting seminar attendees for the first time was James Bernstein, Minnesota's commissioner of commerce. With a private sector background in advertising and marketing, Bernstein said he understands bankers' perspectives on business, and doesn't pretend to be a heavy-handed regulator. He told the group his goals are to regulate with common sense, balance and fairness, adding that he will maintain his accessibility to industry leaders.

Bernstein said his dealings with the banking industry have gone well so far, and stressed that he believes in resolving differences with negotiation not confrontation. "That's how I work. You won't catch me in front of a camera exposing my agenda at the expense of the industry," he said.

The commissioner received applause when he declared that he would not support legislation that places a cap on ATM fees. "ATMs are a convenience. I come from the private sector. It's OK to pay for a convenience," Bernstein said.

Kevin Murphy, deputy commissioner of commerce, reported Minnesota's state-chartered banks remain healthy, with 95 percent of the 361 state-chartered banks maintaining CAMELS ratings of 1 or 2. Fourteen banks have CAMELS ratings of 3. Murphy said the latter number is up from last year, with most of the banks located in northwestern Minnesota, a mostly agricultural region.

For the first six months of the year, return on assets for banks with less than $100 million in assets stood at 1.21 percent, while larger banks had an ROA of 1.43 percent. The ratios are down slightly from a year ago, Murphy said.

Murphy raised asset/liability management concerns as the department has seen increasingly higher loanto-asset levels. The agricultural economy is another area of concern, he said, because of low commodities prices, and farmers have become more dependent upon federal handouts.

Also, Murphy noted that since 1998, sixteen new state banks have been chartered in Minnesota. Most of the de novos opened in metro areas, while the mergers occur in the outstate region, he said.

Other speakers included Ed Krei, of Oklahoma City, Okla.-based James Baker & Associates who discussed the characteristics of high performing banks. Phillip White, a bank consultant from Boulder, Colo., discussed how banks can benefit by retaining and rewarding employees.

He dubbed the more valuable employees as "rain makers," those smart enough to take risks that will earn the bank more money. "A rainmaker has less loyalty because they like opportunity," said White. "A caretaker likes job security."

Rainmakers will enhance revenues and help a bank steam into the future, while caretakers are cost-cutters who stick to stability. "Rainmakers will make you a lot of money," White said.

White advocates banks utilize "phantom stock" as a reward to rainmakers. "Phantom stock" is a form of ownership that gives people equity participation, a receipt of dividends, but no voting rights. White said the phantom stock approach will be most widely used among community banks.

Hosts John Wolf and Linda Koerselman announced the company's plans to merge with Charles H. Preston & Co. The postmerger Wolf Etter will have a staff of more than 100 people.