2009: E. David Locke

By the time he moved to the Wisconsin village of McFarland, E. David Locke already had faced a sawed-off shotgun in a bank vault and prevented the kidnapping of a fellow teller. He had, in another incident, backed away from a pistol and the thug who offered to use it after Locke asked him for directions during a collection call in East St. Louis. Locke's first 10 years in banking were as eventful as they were productive..The day after Locke graduated from high school, he started working at Godfrey State Bank near his home in Alton, Ill. He soon moved on to a national bank in Wood River, Ill., and then to a large savings and loan association where he rose to assistant treasurer. As he turned toward Wisconsin, Locke saw a path leading to bank ownership at McFarland State Bank..It was 1975. He was 27..The village of McFarland sits on the east bank of Lake Waubesa, in a southeast stretch of metro Madison. When Locke arrived, McFarland State Bank was in a 1960s-era building about a mile east of Highway 51, just across from the small storefront where the bank opened in 1904. There were about 3,500 residents in the village at the time, and the single-story, single-location bank had one drive-up window. It had $5 million in assets..Thirty-three years later, when the bank released its third-quarter results for 2008, assets had risen to $349 million. Compared to a year earlier, loans were up by 22 percent, deposits were up by 20 percent, and net income was 5 percent over 2007 at $4.2 million for the nine-month period..McFarland State Bank is now headquartered in a 21,000 square-foot, two-story building with six drive-up lanes, on a busy intersection of Highway 51. In its former location stands the two-year-old E.D. Locke Public Library, erected in large part by the wherewithal of the banker who grew a bank and a community foundation on those grounds..In his second-floor office at the bank, with its wraparound view of a December sunset over the ice-capped Lake Waubesa, David Locke talked about decisions and their consequences—including decisions made during his 43 years of banking. Locke, 60, is NorthWestern Financial Review's Banker of the Year for 2009..Pushing efficiency.What is noticeable as you drive through McFarland today is what's missing. The village is just minutes from Madison itself. Highway 51 teems with traffic flowing to and from the Beltline into the state's capital city, where the nationwide banks compete with strong regional organizations and local-market mavericks. Several of those banks have branches in Monona, just north of McFarland, yet in the village itself, the edifice of McFarland State Bank dominates. A lone branch of a Wisconsin-based regional bank can be seen on Farwell Street as you drive from Locke's bank to the library that bears his name, but no other bank signs are in view.."I like to think we're pretty tough competitors," Locke said, seated at the conference table in his executive board room below the cast plaster coffered ceiling he helped to set.."Well-run community banks are efficient," he said, and efficiency gave his bank a head start against would-be competitors as the population of McFarland doubled and the village slowly merged into metro Madison..With his background in bank operations, Locke was inclined to drive efficiency. Two years after he joined the bank, it opened three drive-up teller lanes and became an early adopter of TYME ATMs, now part of the Pulse network.."It became obvious to me that embracing and utilizing technology helps you in numerous ways—not only on the efficiency side internally, but in attracting and retaining customers," Locke said. "One of the axioms of banking is that the more services you can get customers to use, the less likely they are to leave. Technology is a big help.".Locke, likewise, joined eight other banks that were the first to buy core processing services from Grafton, Wis.-based United Financial Services, Inc. He had used a "big correspondent bank" as a core processing vendor but disliked its "band-aid approach" to technology. He looked into bringing those operations in-house but decided to join the UFS group instead. Today about 30 banks use UFS, Locke said.."What I liked about it was, they were utilizing some of the best technology you could find at that time," he said..Web-based deposit rate marketing has been a boon too. Locke said his single-location bank has attracted depositors from all around metro Madison, from Milwaukee and as far away as England. "Those are non-brokered funds; we deal directly with the clients," he said..Remote deposit capture has also been useful, and the bank is looking into mobile banking, which could attract younger customers from Madison, a consummate college town with a steady stream of students..But efficiency is not solely a consequence of technology, and technology is not the only advantage Locke claims..The difference is execution.Sixty miles north and west of McFarland, off Interstate 90 in Wisconsin Dells, is a clear example of how McFarland State Bank's grasp extended its reach..There sits the Great Wolf Lodge indoor water park. Today, Great Wolf Resorts, Inc. is a public company that runs indoor water resorts in nine states and Canada. But it started with a loan from McFarland State Bank..Locke knew cofounder Bruce Neviaser. McFarland State Bank had helped Neviaser and his business partner Marc Vaccaro finance a Country Inn & Suites hotel before the water park deal in the Dells came up..Neviaser and Vaccaro needed $50 million to buy the Dells location, and McFarland State Bank was able to syndicate the deal through Madison-based Bankers' Bank for which Locke served as a founding director 30 years ago..As the Great Wolf chain began to grow, Neviaser and Vaccaro financed new resorts through "friends and family arrangements, where they would seek out investments on a limited-partnership basis," Locke said. "We got involved initially in lending to some of the limited partners." Neviaser and Vaccaro both resigned from Great Wolf in 2006..The growth of Great Wolf is one instance of the flexibility and speed that sets McFarland State Bank apart from its larger competitors in Madison, Locke said.."The difference is execution," he said, crediting a long-serving and efficient staff of employees who are very interested in and involved with their community and customers.."Our turnaround time is quick. Our decision making is quick, because it's all right here," he said. "Steve Swanson, the bank's president, Jim Walker, the executive vice president of lending, and I can combine our lending authority to approve certain loans. If it goes above that, then of course our board gets involved. But we can make decisions and turn around stuff pretty quick," Locke said.."I've done my share of lending over the years; a lot of lending is character and capacity. Some people have the capacity to pay a loan, but for whatever reason they won't. Character is really important. When you sit down and talk to somebody about a loan, you get some sense of whether this is somebody you want to seriously consider extending a facility to," he said..Madison-based Genesis Development Corp. passed Locke's character and capacity thresholds. The group wanted to buy a 70,000 square-foot building, to start an incubator for minority-owned businesses and to spur hiring of minorities in the South Madison area. It had been turned down by 14 other banks before calling McFarland State Bank.."David's bank, with his support, looked past the cold, hard money facts to the social aspects" of the endeavor, said Richard Harris, executive director of Genesis Development Corp.."I always ask him, what was it? And he talks about the social concern and the responsibility of his bank to meet social concerns. He was the only bank person who really told us that," Harris said.."The city of Madison was very interested in South Madison, in bolstering employment and creating job opportunities; so the opportunity for Genesis Development Corp. to get grant funding, even though they didn't have it upfront, was very strong," Locke said. "It was somewhat of a leap of faith for us, but given the location and the concept that they had—there was nothing like that in the state of Wisconsin—that was the judgment call part of it."."It's the largest nonprofit incubator in the state," Harris said. "He took a chance. There's no doubt about it; he took a tremendous chance.".The big ambassador.At six-foot-five, David Locke could be called conspicuous. And in the last few years Locke has raised his visibility through board participation—including the boards of Genesis Development Corp. and the Federal Home Loan Bank of Chicago—and his advocacy of projects and causes he believes in..Kurt Bauer, president and CEO of the Wisconsin Bankers Association, nicknamed Locke Mr. BIGG, not just for his height but because he is the state coordinator of Bankers Involved in Grassroots and Government, the association's program to communicate to elected officials. Locke has also "been heavily involved" with the American Bankers Association's "Direct Contact" program, and he is frankly forceful on the subject of getting to know state and national legislators.."I think the biggest risk banks face today—and we manage risk all the time; we've got credit risk, we've got liquidity risk, we've got risk in the investment portfolio; we've got all kinds of risk we manage daily—but the one risk bankers don't manage very well is governmental risk," Locke said..He praised the great work associations do on behalf of bankers. There's little doubt that Locke supports associations; not only is he on the WBA board, but he helped to organize Community Bankers of Wisconsin. He has been on the ABA's credit union task force for several years. Nevertheless, "lobbyists and associations are part of the process, not the crux of the process," he said. Bankers have to get involved.."A lot of bankers are intimidated by the process, it seems to me. They don't want to go in front of a legislator and say the wrong thing, or be asked a question they can't answer," Locke said.."Bankers are good at developing relationships in their own banks; that's what we do. So developing relationships with elected officials and helping them understand some pretty basic concepts should come pretty naturally," he said..Locke pointed to widespread misunderstanding about federal attempts at economic stabilization, saying that newspaper reporters have demanded to know why he and other bankers "aren't" lending the $700 billion bailout "they" got from the government..Locke said his bank is not participating in the various Treasury programs, so the bailout taunt is simply misdirected. But there is also the issue of creditworthiness.."I gave them my statistics and said, we're lending—22 percent ahead of last year; we're lending. Problem is, a lot of people can't afford to pay back what they have, so you have to be careful, unless you want to create more loan problems," he said..Bankers can help to dispel confusion or political spin, not just among the public but among lawmakers themselves, he said..Locke said he is active in McFarland and beyond because he feels a duty to repay his good fortune..When McFarland decided to build its new library, Locke agreed to sell the longstanding bank location on scenic Milwaukee Street to the village. His family foundation also donated$1 million to the project.."When I was a kid we spent a lot of time at the library, and I knew how important that was," he said. The library's lobby features an ornate plaque, dedicating the library to "all who gather here, regardless of age, culture or economic standing." It is signed by Locke and his children, Ahren, Brendan and Meredith.."Banking has been very good to me and my family, and what I'm trying to do now is give some back," Locke said.