Notes, news and views on community banking

Northwestern Financial Review, Oct 15-Oct 31, 2004

Bringing the auditor in house

Last month, the Independent Community Bankers of America conducted its twice-a-year internal auditing institute in Bloomington, Minn.

"With banks under increased regulatory burden, the institute is becoming better attended with each session," said Runay Olson, ICBA associate education director. The two-week program attracted 84 bankers during its first week and 68 bankers during its second week.

"Many people extend their education over a year or two because they can't be away from the bank for two consecutive weeks," Olson said. "But, increasingly, regulators are urging banks to have a staff auditor to insure bank processes are in compliance," she added. "That request comes as banks reach a certain asset size."

Attendees for the latest session hailed from banks that range in assets from $30 million to $6 billion, with the largest group from banks with around $125 million in assets. Bankers came from all over the country.

"Few of the people in this room actually volunteer to become a bank's internal auditor," Olson commented. "But once they accept the responsibility and come for the education, they work very hard and when they finish they are very proud of the fact that they've become a Certified Community Bank Internal Auditor.

ICBA's auditing institute is in its 12th year. The curriculum was designed by LarsonAllen, Inc., Minneapolis, and the program is approved by the Institute of Internal Auditors.

Illinois Bankers Association to sit out lawsuit

The Illinois Bankers Association has decided not to participate in the lawsuit against Gov. Rob Blagojevich being filed by the Community Bankers Association of Illinois and two other trade groups. (see page 13). IBA President Linda Koch said the board discussed the possibility but unanimously voted against participating in the suit.

"The problem was caused by a legislative action and we think the solution should come through legislation," Koch said, referring to authorization the legislature gave the Governor's office to transfer money to the state's general fund. Koch also said she believes it is important to maintain a good relationship with her industry's primary regulator.

Lobbying tips

Jeffe Plagge, 2003-2004 president of the Iowa Bankers Association, had the following tips for bankers designed to help make them better lobbyists for industry issues:

* Support your industry's key issues, even if they are not important to your own bank.

* Take time to truly understand the industry's issues. (They may be more pertinent to your bank than you think.)

* Never tell a lawmaker that one of the industry issues doesn't matter to you.

* Speak well of the industry. "We spend way too much time taking shots at one another," Plagge said.

Plagge shared his ideas at the IBA's annual convention Sept. 20 in Des Moines. (see page 10 for convention coverage.)

Upbeat on the economy

Veteran business journalist Stuart Varney shared four observations about the American economy as a speaker at the Iowa Bankers Association convention:

1) There has been a radical shift during the last 20 years in the way the world views the American economy. In the 1980s, the convention wisdom was that the American economy was in decline, poised to be over-taken by the Japanese and Europeans. Today, Japan and Europe are limping along with anemic economies while the American economy is the strongest in the world.

2) The global economy has changed. It used to consist of three pillars: The United States, Japan and Western Europe; today it is bi-polar with the United States and China leading the way.

3) Fertility rates in most developed countries are so low that countries in Europe and Asia will experience radical drops in population over the next 50 years. Although the U.S. fertility rate is just under replacement rate, its population will continue to grow due to immigration.

4) The economy is poised for robust growth in the next six months.

Varney noted both economic positives and negatives. The positives: low inflation, low interest rates, annual productivity gains of 4 percent, high level of government spending, tax cuts, and a residential real estate boom. The negatives: high energy prices, high health care costs which are impeding job growth, the threat of terrorism, a government deficit of $420 billion; a trade deficit of $66 billion per month, and hurricanes in the southeast. "In my opinion, the positives outweigh the negatives," said Varney, who worked at CNN for 20 years and now works for Fox News.

Farming becoming a business of extremes

Dr. David Kohl, the consummate professor of agriculture from Virginia Tech University, warned ag bankers their customers will experience "higher highs, and lower lows" in the future. Speaking at the Iowa Bankers Association's annual ag breakfast Sept. 20, Kohl said the challenge will be to manage at the extremes. "It will be the best managers who will capture the business on the up-tick and mitigate the losses on the downturn," Kohl said.

Kohl said women are increasingly taking a prominent role in agribusiness. He said women make or influence 80 percent of all investment decisions on farms and ranches. The Future Farmers of America, he noted, has a membership that is 38 percent female; its leadership, he said, is 75 percent female.