ICBM celebrates 50th anniversary, community banking

The Independent Community Bankers of Minnesota hosted its annual convention Aug. 9-11 in Alexandria, Minn., commemorating the association's 50th anniversary. Although two economists painted a sobering picture of the near-term economy, association leadership offered encouragement.."The association is in a very good place," said 2012-13 ICBM Chair Noah Wilcox, Grand Rapids State Bank. "We are very strong and have a terrific staff. The association is stable and serves the membership incredibly well.".Wilcox, a fourth-generation banker, is an experienced association leader, having served on the executive committee of the Independent Community Bankers of America..Nancy Skophammer, who completed her year-long ICBM chairmanship at the convention, concurred with Wilcox. Noting the addition of Tiffany Paine to the ICBM board in the last year, Skophammer said she will continue to encourage women to become active in the association. Skophammer, the association's first female chairman, is president and CEO of Farmers State Bank of Hartland..Terry Jorde, a former North Dakota banker who now holds an executive leadership position with ICBA, acknowledged the national association's Minnesota roots. She explained that 28 bankers meeting in Glenwood, Minn., on May 9, 1930 started an association dedicated to serving the interests of community banks. "It wasn't until the 1960s that the Independent Bankers Association located in Sauk Centre, Minn., changed its name to the Independent Bankers Association of America," Jorde said. "It was then that Minnesota independent bankers, recognizing that they had successfully launched a national organization, decided they needed to have their own state organization. So 50 years ago, the Independent Bankers of Minnesota was formed." .The ballroom at the Arrowwood Resort hosting the meeting featured a display of photos and other association memorabilia dating from the association's early days..Econ outlook.Two economists shared a variety of facts which paint a troubling picture for the economy. While Tom Alexander doesn't see a recession coming, he expects an extended period of slow growth, in the neighborhood of 2 percent per year. Alexander is with J.P. Morgan's fixed income wealth advisory team. Tim Kehoe predicted similar lackluster growth but reminded bankers that any GDP growth figures under 3 percent represent conditions weaker than historical norms going back to the early part of the 20th century. Kehoe is a professor of economics from the University of Minnesota..While Alexander predicted recession for Europe, he said he expects the euro to survive. Alexander said trade with Europe accounts for only 1.5 percent of American GDP, so he said he expects problems in the European economy to pose only minor problems for the United States..Inflation is a concern, Alexander said, noting that central banks around the world hold some $10 trillion in debt. He said about $6 trillion of that needs to be unwound at some point. Since the financial crisis, the U.S. Federal Reserve's balance sheet has ballooned to $3 trillion from about $500 billion. He said inflation rates in the United States could reach 5 percent to 7 percent; the Fed's improved information flow under enhanced communications efforts will help the markets adjust, he said. In the past, inflation has been partially driven by anxiety caused by a lack of information, he commented..Kehoe, who made a name for himself studying the Great Depression, predicted an "unprecedented change in the global economic system" in the next five to 20 years. He said interest rates will be unprecedentedly low for the next 20 years..Kehoe talked about the crash of 2017. "I don't know if it's going to be 2017 but it is going to happen and we better be ready for it," he said..Kehoe said he is concerned about debt. He said European countries are continuing to borrow, even in the midst of crisis. "Governments should be running down their debt, not running it up," he said. He expressed concern that the United States is following the same dangerous course. "As rates have gotten lower, the U.S. has borrowed more and more," he said..Housing prices will decline much further, Kehoe predicted. "Five years from now, we'll be in trouble, but let's be ready," he said..Kehoe counted the country's too big to fail policy among its problems. "If you have too big to fail institutions, then you regulate the hell out of them," he said. "The smaller guys, you don't regulate them so much." (This comment drew hardy applause from the audience.).Uniqueness of community banking.Jorde talked about the differences between the largest banks and the smaller financial institutions. "Community bankers are focused on the long term, on the future and on the success of their community. They are not the same as their Wall Street counterparts," Jorde said. "Community bankers are not driven by stock prices and bonuses and executive compensation plans, and they are not driven by quarterly investor reports and return on equity.".Speaking of her 30-year stint at CountryBank USA in Cando, N.D., Jorde said: "My job was hands on and it was based on relationships. Just like you, I know what it is to sit across the desk at an FDIC exam and plead with them to pass a loan that had never missed a payment because you know your borrower is going to pay you back. I know what it is like to see the excitement in a young man's face when you just helped him start up a new Porta Potty business. I know what it's like to tell a farmer that you can't finance him another year — not because my bank would lose money but because he would. I know what it's like to tell a 70-year-old grandma who has lived in your community her whole life that you have to verify her identity so you can prove to the examiners that she is not a terrorist. And I know what it is like to get that 50-page checklist from the FDIC just before a compliance exam and know that you are going to have to drop everything for the next six weeks just to prepare for that.".Jorde noted that since the financial crisis, Bank of America has faced $23 billion in fines and penalties. She said $23 billion would have been enough to bring every under-capitalized community bank in the country to a well-capitalized position. "The fines alone that Bank of America paid would have prevented every community bank in the country from failure," she said..Jorde also said that CitiBank recently agreed to pay $285 million to settle civil charges that it had defrauded customers during the housing bubble. "As part of the settlement the FTC made Citi promise that never again would they violate one of the main anti-fraud provisions of the nation's securities laws," Jorde explained. "In fact, Citi also promised not to violate the same anti-fraud statutes in July 2012, in May 2006, in March 2005, and in April 2000.."Let me ask you this question. If this had been you and your bank, what would your regulators have done to you?" she asked. "Do you think they would have slapped you on the back of the hand and made you promise to never do it again? Of course not. You'd be in jail.".Jorde urged bankers to work with ICBA to prevent the credit union industry from gaining additional powers, to advocate for an extension beyond year-end on the Transaction Account Guarantee program, and to seek limits on the Basel III capital rules as they pertain to community banks..But ultimately, she said, the country needs to address too big to fail in a meaningful way. "Unless we end too big to fail, which puts the American taxpayer at risk of future bailouts, we will continue to have this regulatory burden that is eating away at your profits," she said. "We must end too big to fail once and for all."