Nebraska bankers irked by Alumni group's banking offer

Northwestern Financial Review, Feb 15-Feb 28, 2007 by Bengtson, Tom

Members of the board of directors for the Nebraska Bankers Association were set to further discuss the University of Nebraska's Alumni Banking Program at its Feb. 2 meeting. Bankers throughout the industry in Nebraska are expressing disappointment that the university's Alumni Association has teamed with an out-of-state bank to offer financial services.

Furthermore, alumni associations in other states may be gearing up to offer similar services.

George Beattie, president and CEO of the Nebraska Bankers Association, said "The Alumni Association is now competing directly with the Nebraska banking industry, an industry that has aggressively supported the University of Nebraska for countless decades."

Tom Jensen, senior vice president at First National Bank, Omaha, and chairman of the Nebraska Independent Community Bankers, communicated his "surprise and displeasure" that the Alumni Association is getting into banking. Jensen sent a letter to Ed Paquette, executive director of the Nebraska Alumni Association. The letter, dated Jan. 11, was co-signed by Kurt Yost, NICB president/CEO.

"Many of our bankers, both individually and through their institutions are major contributors to the University system, while also supporting your Alumni Association," they wrote. "Non dues income for the Alumni Association should and could come from other means as opposed to competing for deposit dollars with some of your biggest supporters."

The Nebraska Alumni Association began endorsing an online banking program provided by Affinity Financial Corp through Sky Bank of Indianapolis last year.

"We were first approached in 2004 by AFC and waited two years, researching AFC, Sky Bank and giving Nebraska banks time to make a similar proposal," the Alumni Association says on its web site. "Our requirements for a prospective partner were to provide products with rates above the national average and have the technology and legal right to service our alumni nationwide...

"After Nebraska's largest banks declined our request to provide such a service, we signed with Affinity. AFC offers some of the best money market rates, a service we believe our members will appreciate. Thus, after careful consideration by the association and our executive committee, Affinity Financial Corp became a member of our corporate partners program."

"They are providing some misinformation," Beattie commented. "They suggest they have put this out for bid with banks. I have run that down, and they did not. They never talked to one of the banks they mentioned."

Beattie said contacts made to other banks did not involve the right people. He also said an Alumni Association official told him "there are seven or eight other alumni associations getting ready to roll out a similar product." Virginia Tech University's alumni group also offers a "banking center."

The web site further states that 1Ve always prefer to work with Nebraskabased businesses."

Nebraska bankers have donated thousands of dollars to the University of Nebraska through the NBA over the past several years. Last November, the NBA announced its members contributed $140,500 to fund scholarships to the University of Nebraska. The bankers started a fund within the University of Nebraska Foundation in the 1970s with a campaign that raised $1 million, forming the foundation's largest single-industry fund.

"We have done several campaigns, and they are ready to come up with a new one," Beattie explained. "Banks generally step up and support this in a fairly significant way. This is not going to go unnoticed, I can assure you."

Would bankers withhold support for the University of Nebraska? "I don't think we want to play the game that way," Beattie said. "But if that is what it takes to get their attention, it's possible.

"I've got some serious players who are donors and all they have to do is decide to drop a zero off a check and everything they earn from the Alumni Association is gone from the Foundation."

Beattie clarified the thinking of his membership. "It is not right for the Nebraska Alumni Association to be involved in direct competition either as a conduit or as a champion in direct competition with an industry that is a strong supporter of the University of Nebraska. It's ridiculous for them to be in that business."

Huntington Bancshares Inc., of Columbus, Ohio, announced in December it is purchasing Sky Bank of Bowling Green, Ohio. Sky Bank's internet banking operations are in Indiana.

The Alumni Association mailed advertising materials promoting the service to 100,000 households - about half of them in Nebraska - in the Fall, which precipitated discussion among Nebraska bankers at the NBA's Dec. 8 board meeting. At that meeting, directors "expressed their great displeasure with the Nebraska Alumni Association's decision to enter banking and its selection of Indianapolis-based Sky Bank as its conduit into the business, without regard for the banking industry within the state," the NBA said in its newsletter.

"I have not run across anyone in banking or the university, state senators or U.S. senators, who think the Alumni Association is right," Beattie concluded. "The question is will they bow to the pressure and walk away from it. Or are they going to be stubborn and throw it in our face. Until we get that signal from them, we'll probably let it play out a bit."