2016: Tom Beck

The People-first Banker.Tom Beck builds on Northeast Bank's foundation of community service .On a very cold and snowy day some 30 years ago, long before Tom Beck became president and CEO of Northeast Bank in Minneapolis, an old man walked into the bank's headquarters on the corner of Broadway and Marshall, across the street from the Grain Belt Brewery. The man was in despair, his glasses fogged and his nose was running. He had lost all the cash that came from his Social Security check, which he had cashed with Northeast's Sue Sjoselius 20 minutes earlier.."I knew he had walked out the door with a couple hundred dollars," said Sjoselius, now the bank's director of risk management and marketing. "I had given him his money but he didn't know if it had fallen out of his pocket or what had happened to it.".Unsure of how she could help, Sjoselius went to Beck, who was then cashier. "The man kept saying it was all he had to live on for the rest of the month," Sjoselius recalled. "I'll never forget, Tom said 'Sue, let's just do a debit and give him the money he needs.' That experience showed me Tom was a man I could follow and work for.".Northeast Bank, under Beck's leadership, is known for its outreach, both small and large. In 2013, the American Institute of Public Service recognized Northeast Bank with a national honor for community service called the Jefferson Award. The bank was recognized for its financial and volunteer support of more than 60 local, nonprofit organizations. Also, Northeast Bank has been recognized as an "outstanding" lender by the FDIC in its two latest Community Reinvestment Act examinations. Only seven out of the 116 Minnesota banks examined for CRA since 2012 have received that designation..After seeing Beck's compassion for a customer 30 years ago, it's no surprise to peers like Sjoselius that Beck leads Northeast Bank to be a state leader in community service and lending. Tom Beck is NorthWestern Financial Review's 2016 Banker of the Year..Positive functions of profit.Beck was introduced to Peter Drucker, the well-known writer on business management, at St. John's University in central Minnesota. From Drucker, Beck formulated his view of banking. Banks, Beck believes, should bring home the "positive functions of profit" to the community..Beck's philosophy carries on a long tradition of community support at Northeast Bank created by the bank's owners: the Rasmussen family. Chartered in 1947 as the 13th Avenue State Bank, Walter Rasmussen bought it in 1958, changed the name in 1963, and ran the bank until his death in 1991. Rasmussen built a garden and a community room into the bank's headquarters because he wanted the community to be proud of the building. Similar to Rasmussen, who was known for treating residents of northeast Minneapolis to polka parties, food fests and arm-wrestling contests, Beck has led Northeast Bank to continue hosting and feeding the community..Beck also has added a stamp of his own in line with his philosophy of the positive functions of profit: finding ways to invest in the community while also finding attractive earning assets for the bank. Since Beck became president in 1998, Northeast Bank has been working to develop its use of city, non-profit and federal programs to help clients..He moved that project forward substantially in 2010 when he hired Mark Ethan to be the bank's chief credit officer. Ethan is a tenured banker with experience from Twin Cities banks like Riverside Community Bank, Associated Bank and KleinBank. Beck also hired Zach Neuman in 2011 as credit department manager. Neuman came with experience from Commerce Bank and Landmark Community Bank, also of the Twin Cities..The bolstered credit department has focused on finding win-win-win lending scenarios where the bank profits, the customer is strengthened and the community is served. An example is a municipal bond recently purchased by Northeast Bank which provides financing to expand Catholic ElderCare, one of northeast Minneapolis's most prominent non-profits..Catholic ElderCare is a 33-year-old organization that houses some 450 adults per year. Catholic ElderCare offers a nursing home, two assisted living buildings and two independent housing units for seniors. In early 2014, the organization had nearly all it needed to support older adults. It lacked only facilities for transitional care for residents released from the hospital but who are not ready to go home..Beck suggested a financing solution to Catholic ElderCare in which Northeast Bank would orchestrate a tax-advantaged, $18.3 million municipal bond to finance a new $10 million, 40,000-square-foot, 24-bed, transitional care wing. It also would refinance the organizations' outstanding debt to a low, fixed rate..The Catholic ElderCare deal embodies what Beck means when he says Northeast Bank is in the business of "blocking and tackling" for the community. The deal required Northeast Bank to bring to bear municipal bond expertise as it quickly completed the legwork involved in creating and buying the bond..Part of the challenge is timing. Cities can only designate $10 million per year in bonds for bank-qualified, tax-free treatment. And, once that money is used up any pending application for tax-free treatment is null. If Northeast Bank didn't hustle it would miss its opportunity and would fail to provide Catholic ElderCare the timely financing it needed..Beginning in July 2014, Northeast Bank worked with three Minnesota cities: Minneapolis, which provided a tax-free designation for $5 million; Lauderdale, which provided designation for $9.3 million and Mounds View, which provided designation for $4 million. Northeast Bank also orchestrated participants to buy the bond once it was created..By December, with the tax-free designation secured, Northeast Bank purchased Catholic ElderCare's bond with its participant partners. Because of its tax advantages the bond was a very attractive earning asset for the bank. The bank passed on some of that benefit to Catholic ElderCare in the form of a low rate – about 3 percent. Now, in the fall of 2016, Catholic ElderCare will bring a new service to the community.."Northeast Bank has helped bring substantial strength to our organization's finances," said Dan Johnson, CEO of Catholic ElderCare. "That has been this community's experience of that bank under Tom's leadership. They will talk to you without a secondary agenda; they want to strengthen organizations in our community.".People first.One of Northeast Bank's philosophies is that success follows from putting people first, said Gail Mikolich, the bank's chief operating officer. "Tom embodies that philosophy," she said. "He is a leader with a door that's truly open and he naturally excels at mentoring. I have always felt that Tom believes in me more than I believe in myself.".For Sjoselius, encouragement from Beck set her career on a higher trajectory. After a few years as a teller at Northeast Bank, the teller supervisor position opened. "Tom hired me into that job. Right away he encouraged me to think about more education," she said.."I didn't grow up in a home where education was talked about," Sjoselius continued. "In fact, I was the first person to graduate from high school in my family. I was unsure about education. Tom suggested I take some classes through the American Institute of Banking and I received my general banking diploma there.".Sjoselius received her undergraduate and Master's degrees from Concordia University, St. Paul, graduating magna cum laude. "Education opened up new doors for me. If it wasn't for Tom, I might not have gone that far," she said..Dusten Johnson, a senior vice president at the bank, and Mikolich have been honored as Rising Stars by NorthWestern Financial Review. Sjoselius has been honored as an Outstanding Woman in Banking. All have been aided in their careers by graduate degrees financed by Northeast Bank. Johnson and Mikolich have completed study at the Graduate School of Banking at Colorado. Sjoselius has completed the American Bankers Association's Graduate School of Bank Marketing..Beck doesn't think twice about educating his people. "My opinion is that you have to train people," he said. "It could be that what you offer an employee may not be in sync with what they want; that is a risk you have to take. Otherwise over time I think you end up with a less-qualified and less-capable staff. One of the reasons for our success is a focus on education.".Employees also said they appreciated how Beck incorporates nearly all staff in the strategic planning process. In 2015, senior vice presidents, the market presidents and branch managers – about 20 percent of Northeast Bank's staff – attended a strategic planning meeting, along with four of the bank's board members. From that group, Mikolich, who leads the strategic planning process, assigned leaders to create subcommittees from the ranks of the bank. The subcommittees provide input which is then drafted into the final strategic plan.."I want other people to feel heard," Beck said. "To get something done in the best, most efficient and effective way, people need to buy into it. Maybe we can even get them to see themselves as a part of the genesis of the idea.".The most striking thing about the bank's strategic planning process is Beck's role, Mikolich said. "Tom observes in strategic planning. He just listens as much as possible," she said. "He wants the staff to hash things out. He does not want to be the one who dictates.".Leading through the recession.Like many banks, the recession brought some lean years for Northeast Bank. While the bank worked to recover, however, it never suffered a loss year and it never laid off employees. "We were making money and the shareholders were fine," Beck said. "It didn't seem right to point the finger at someone and say 'it's your fault; you need to go.' Why should a teller who's making some $14 an hour lose their job? We took a more humanitarian tone.".Beck's approach to strategic planning has nurtured employee initiatives to improve bank efficiency. Northeast Bank, which has an employee ESOP, rewards employees who come up with ways to save money at the bank. Part of the savings is awarded to the employee. "We want employees to be advocates for the bank," Beck said. "I think we have a lot of that going on here.".When staff saw Beck's commitment to them, they responded by helping where they could. "When people would leave, two or three people would come forward asking how the job could be split up," Beck said. "The recession created that kind of culture and our efficiency ratio and some of our other metrics got better because of it.".When Beck hired Ethan in 2010, he set the stage for the bank to add loans guaranteed by the U.S. Small Business Administration to its offering. Beginning in 2010, Northeast Bank made two SBA loans. It made 10 such loans, amounting to $8.8 million, in 2011. SBA loans, which are less capital intensive because of the government guarantee, were earning assets that aided the bank as it worked through the recession. Today, Northeast Bank is an SBA preferred lender..The Minnesota Department of Commerce, which issued the bank a consent order in January 2010, lifted the order in March 2012..Even during its recession troubles, Northeast Bank didn't stop serving its community. While the bank's staff has dropped through attrition to 60 full-time equivalents from 69 in 2010, it still averages 3,500 volunteer hours per year. It also continues to average more than $100,000 per year in donations to more than 60 local nonprofit organizations..True to his style, Beck doesn't take credit for Northeast Bank's many accomplishments, its continued operation or its steadfast community service. "Any success I have as CEO comes from hiring really talented people," he said. "I just try not to mess them up too badly.".National recognition for community support.When Northeast Bank was recognized with a Jefferson Award in 2013, peers at Northeast Bank saw Beck's considerate leadership style in action..The Jefferson Awards are presented by the American Institute of Public Service, an organization created in 1972 by Sam Beard, an associate of President John F. Kennedy, with Jacqueline Kennedy Onassis and U.S. Senator Robert Taft, Jr. The trio wanted to create a "Nobel Prize for public and community service," according to the organization's website..The Jefferson Awards are presented on two levels: national and local. Northeast Bank won the local, Minnesota award. All recipients of the local award were invited to the national award ceremony in Washington D.C., where the American Institute of Public Service honored 90 recipients from three award categories – businesses, schools and individuals. Northeast Bank was chosen to receive the national award for the business category, which came with the added honor of giving an address to those assembled..It wasn't Beck, however, who walked onstage in Washington D.C., to receive the award or who addressed the crowd. He gave that honor to Sjoselius. "CRA and community support," he said. "is Sue's baby.".Carrying on a legacy.Since Walter Rasmussen purchased Northeast Bank in 1958, community support and service have been the core of the bank's identity. Rasmussen was a gregarious character known for holding arm-wrestling contests at the bank and hosting the community for cookouts, among many other things. After his death in 1991, the Walter C. Rasmussen-Northeast Bank Foundation was formed by Belva Rasmussen, Walter's wife, to carry on her husband's legacy..The foundation continues to support its major gift beneficiaries in Minneapolis like The Rasmussen Center for Cardiovascular Disease Prevention at the University of Minnesota, Neighborhood Health Source, and Eastside Neighborhood Services among other organizations..The second generation is now working at Northeast Bank. Ben Rasmussen, son of Walter and Belva, is a board member. Ben's wife, Eva, is a senior vice president focusing on strategy and eBanking..Tom Beck has lived up to the legacy of Walter and Belva Rasmussen, said Eva Rasmussen, who has been working with Beck to upgrade the bank to mobile banking. "The family values owning a community bank because it gives so much back to the community," she said. "Tom is a leader who has been such a great fit there.".With his banking acumen, Northeast Bank couldn't have had a better leader than Beck, Eva Rasmussen said. "He knows banking and he knows our customers," she said. "He connects with each and every employee and generally cares about the people he interacts with. The family has been blessed to know Tom."