Surpluses noted at Dakota bankers annual meeting

Northwestern Financial Review, Jul 1-Jul 14, 2003 by Dullum, Justin

The sale of Banclnsure in July of 2002 has given the North and South Dakota Bankers Associations room to stretch, the groups' leaders said during their annual joint convention conducted in Sioux Falls, S.D., June 8-10.

BancInsure is an insurance company selling directors and officers liability insurance to banks. Fifteen state associations capitalized the company in the mid-1980s; the sale of Banclnsure last year realized the associations' investments. The North and South Dakota Bankers Associations did well in the deal, each collecting in excess of $2 million.

The one-time payment is a boon to the state associations' coffers. The NDBA and SDBA plan to use the opportunity to explore potential business relationships and endorsements.

"Looking ahead, we're going to review all of our programs and services, and see what we can do to provide better services to our members," said 2003-2004 NDBA President Bruce Anderson, State Bank of Lakota.

Newly elected SDBA Chairman Dana Dykhouse, First Premier Bank, Sioux Falls, said a task force will reevaluate the association's service offerings. "The sale of BancInsure provided a tremendous financial foundation, but it also raises a challenge. What direction should we go?" Dykhouse asked.

A key component of the BancInsure sale is a five-year royalty and endorsement agreement with its founding associations. Curt Everson, SDBA president, said there is still an incentive for bankers to do business with the company.

"We as an association still receive a two-and-a-half percent endorsement commission on all premiums written in South Dakota," Everson said.

Jim Schlosser, NDBA executive vice president, said NDBA opposed the sale of Banclnsure when the proposal was made. "As we saw the other states agreeing to the sale, we came into agreement as well," Schlosser said. "We were in good shape financially before the sale, so now we are in an even better position."

State issues

NDBA and SDBA leadership laid out similar agendas for the coming year. Both groups said boosting educational efforts, and fighting credit union legislation and the Farm Credit System remain top concerns, in addition to keeping the ag lending industry strong. Anderson and Dykhouse are, however, inheriting other issues unique to their state.

North Dakota bankers recounted recent events surrounding financial privacy. Last year, North Dakotans voted down a public referendum that would have kept the state's privacy law in line with the federal opt-out law enacted under the Gramm-Leach-Bliley Act of 1999. Anderson said that after the vote, bankers expected a cold reception at the capitol. This was not the case in 2003.

"Some of the same legislators who attacked the banks came in and worked with us to enhance the law so that it works better for banks," said Anderson. The change relieves banks of the requirement to apply the optin law to out-of-state activities.

The referendum occurred during Lorren Henke's 2002-2003 term as NDBA president. Henke, Security State Bank, Wishek, was pleased to see state legislators cut the banks some slack. "This is important for banks with, for instance, processing centers that do business with banks outside of the state," Henke said. "It's also important for banks that have facilities outside of North Dakota."

Although the mood has quieted, Anderson said the issue is not fully resolved. "There's movement afoot that North Dakota's law will start taking hold throughout the rest of the nation. California is taking a look at it. That's something we're keeping an eye on."

The SDBA had an eventful year outside of the financial stability provided by the Banclnsure sale. Everson replaced Bob Button, who left SDBA to take a position with Citibank in Sioux Falls. Everson said he was left a big pair of shoes to fill. "And I'm not talking about Bob's size twelve Nikes," Everson said.

Outgoing SDBA Chairman Bruce Rampelberg, First Western Bank, Rapid City, worked closely with Everson during his first year and said the new president met the challenge head on.

"Curt did a great job keeping the wheels on the cart moving," said Rampelberg. "He's done an outstanding job dealing with the issues. He had great ideas. His were better than mine. He certainly didn't need any mothering."

As for the year ahead, Dykhouse said he has a particular interest in getting all of South Dakota's bankers more involved in the legislative process.

"The South Dakota Bankers Association has been a CEO-driven organization," Dykhouse said. "More than 10,000 employees work for the financial institutions in this state. Our challenge is to get all 10,000 employees involved. What makes our industry strong is that large employment base."

The SDBA is also in a good position to increase its educational offerings, Dykhouse said.

"Education helps make our organization and our industry strong. Education, however, is changing. Much more will be done electronically. Much more will be done over the Internet," Dykhouse told bankers.

About 350 people attended this year's joint annual convention. The 2004 convention is scheduled for June 13-15 in Bismarck, N.D.