Independent lowans assess industry challenges

Northwestern Financial Review, Aug 15-Aug 31, 2003 by Bengtson, Tom

"Wal-Mart wants your business," warned Rusty Cloutier, chairman of the Independent Community Bankers of America, as he spoke before an overflow crowd at the 32nd annual convention of the Iowa Independent Bankers in Okoboji, July 17-19. Cloutier, one of the best public speakers the ICBA has had in recent years as a leader, said he didn't even know what an industrial loan company was two years ago, but that the unique charter now poses a real threat to community banking. "Be concerned about them," he warned.

Cloutier, chairman of the $400 million MidSouth Bancorp., Lafayette, La., said Wal-Mart wants to get into the banking business just the way it wanted to get into the pharmacy business. "When Wal-Mart wants to do something, it doesn't hold back," said Cloutier, speaking center-stage without notes at the Village Inn.

"Industrial banks are a big concern to all of us," conceded U.S. Rep. Tom Latham (R-Iowa), speaking to bankers at his ninth UB convention. "Unfortunately, that train is on track, and it will be difficult to stop. It is a real uphill battle. But to have a national bank regulated by the state of Utah is crazy."

The 55-year-old Latham encouraged bankers to remain active in the political process. "If you don't stay active, stuff like this will happen to you," Latham said. "The people pushing this have been active for a long time."

Responding to a question about ILCs, Iowa Superintendent of Banking Thomas Gronstal said: "I don't think you can stop the wave of getting these things made legal because I don't think they would have any trouble getting a federal thrift charter.

"For Wal-Mart, the ILC is not that big of a deal because they will figure out how to do whatever they want," said Gronstal, president of the Carroll County State Bank, Carroll, Iowa. "Our challenge is to be acquiring new customers all the time."

But Gronstal said bankers are not alone in their concern about the impact of bank ownership by the nation's largest company. "If you are opposed to ILCs, you have a real friend in Rep. Jim Leach (R-Iowa)," Gronstal said. "He is very interested in keeping commercial interests from owning them." Leach, who serves on the House Financial Services Committee and was chairman of the committee for six years, did not speak at the UB convention as he has several previous years.

Cloutier said bankers must raise their level of involvement in political issues if they are going to have an impact on legislation. He noted that banks in Florida raised $4 million for a campaign to fight against credit union competition. He encouraged bankers to contribute more money to the industry's political action committees. "Wal-Mart dropped $2.5 million on the day California voted on a bill to prevent it from buying an ILC," Cloutier said. By contrast, Cloutier noted that the entire ICBA political action committee typically raises only $500,000.

"If you don't get involved, you will get rolled," said Latham. "There are a lot of issues out there and there are a lot of people on the other side of your issues."

Iowa Focus

Charles Heischer, IIB president for 2002-2003, encouraged bankers to stay involved in the Iowa Independent Bankers, a group that picked up 21 new members during the previous 12 months. IIB is growing, noted Helscher, the president of Farmers Savings Bank, Keota, Iowa. More than 100 banks, he noted, participated in IIB-sponsored seminars conducted via the world wide web and the telephone during the previous year.

Other association highlights, Helscher said, included the certification of 35 bankers in a new "certified community lender" program, and the emergence of a "Leaders of Tomorrow" division that held its first conference.

The 2003 convention was further evidence of a growing association, with 490 registered attendees, making it the biggest meeting in the group's history. Part of the growth resulted from a pre-convention director's seminar, a first for the event.

"The biggest highlight for me was getting to know so many bankers from around the state," commented Helscher during an interview. "Independent banking is alive and well."

About one month before the convention, Gov. Tom Vilsack signed the Iowa Values Fund bill, which contains provisions for the creation of the Iowa Loan and Credit Guarantee Fund, which was conceived at the 2002 IIB convention. State Sen. Steve Kettering, president of the Farmers State Bank, Lake View, Iowa, explained that the fund is based on a program that has been successful in Oregon. Kettering, who shepherded the idea through the legislature, said $22.5 million has been allocated to the program, which will give bankers the opportunity to leverage SBA and FDA loan guarantees. "It was a tremendous success for IIB," commented Kettering, who spoke at the convention's legislative breakfast. "Larry Winum was absolutely essential for getting this through the state senate," Kettering said. Winum, of the Glenwood State Bank, is in line to become IIB president in 2004-2005.

Gronstal told bankers that the banking industry is in sound shape in Iowa. Although the number of state banks rated with a one on the CAMELS scale has declined in the last year, the number with a two rating have increased, and no banks have a rating of four or five, he said. "Although, I think we are going to get a four soon," he added. "No banks are in danger of failing now. It appears credit quality in the banks is good."