Fueled by Passion

Last week the Indiana Bankers Association hosted another highly successful Mega Conference, drawing nearly 1,200 attendees, including 950 bankers and directors. Attendees of the Wednesday luncheon enjoyed the unique insights of keynote speaker Ken Schmidt. As the former director of communications of Harley-Davidson Motor Company, Ken holds primary responsibility for the dramatic turnaround of the world’s most famous motorcycle brand. Harley-Davidson had been in bankruptcy proceedings when the company revamped its approach to doing business by focusing on potential “disciples.”

While Harley-Davidson sells motorcycles and ancillary products, its real business is selling fun. In fact its main competition is not other motorcycle manufacturers, but instead those who seek to fill consumers’ discretionary time. People have precious little discretionary time beyond work and sleep, pitting Harley-Davidson into competition with golf, fishing, boating and other leisure activities.

To compete successfully, Harley-Davidson developed the approach of listening to its potential disciples. Customers who are so happy with their Harley-Davidson products and experiences will spread the word to their friends and family, thus becoming disciples. Harley-Davidson focuses much of its sales effort on allowing potential disciples to talk about what they would like to have or do. We humans like to talk about ourselves, and Harley-Davidson taps into that desire.

Humans also are driven by passion. Whatever we are passionate about, we do well — extremely well. Harley-Davidson enlists its most passionate employees to interact with customers.

Another point Ken made is that there is little product differentiation. A motorcycle is a motorcycle. A deposit account is a deposit account. The only difference from company to company is people. If your company employs talented, passionate people who connect with customers, your company will succeed.

Are your customers disciples, telling their friends and family what a terrific bank or company that you are? Are your employees passionate about your organization? Are your employees passionate about the work they do? If we are honest, most of us would have to answer no to some or all of these questions. If so, it is time to re-evaluate your people, products and sales systems.

Everyone wants to work for a winner. If the people around you exude high performance and high expectations, you will perform better. Unfortunately the reverse also is true. Success hinges on passionate people who turn customers into disciples. It’s the formula that fueled the turnaround of Harley-Davidson.

IBA Mega Success on Every Front

While the final count is not yet tallied, it is likely that the 2013 Mega Conference, hosted by the Indiana Bankers Association, will again set records for attendance, booth spaces sold and gross revenue generated. This event is the largest of its kind in the country and also the largest event hosted by a single bank trade association. That is impressive by any measure, especially considering that the IBA is only about No. 20 to 25 in size range, compared to other states by gross revenue, number of member banks and number of employees.

The creation and honing of Mega into such a successful tradition is testament to the foresight and ability of IBA’s talented staff. The Mega Conference was created more than 20 years ago by Paul Freeman and is superbly managed today by Chris Bennett.

This achievement, though, is not isolated among our staff. Other success shows in the work of Laurie Rees and her team, who provide more educational programming than any other state bankers association nationwide. Additionally IBA generates the most education income per member. We closely monitor the content of our programs and the ratings of the presenters to ensure that we are offering the best of educational opportunities, presented by top-notch instructors.

IBA’s products-and-services area is so strong that it generates about one-fourth of our annual gross income. Rod Lasley is now tasked with growing this area of the Association even further. We have become sticklers for quality, conducting extensive due diligence on those entities that seek our endorsement or partnership. We are constantly exploring ways to use the IBA to deliver the products that otherwise would be difficult for a single bank to deliver. Years ago, one of my counterparts coined a motto: “Independence Through Interdependence.” It describes IBA in many ways, particularly in the products-and-services area.

Our communications department, run by Laura Wilson, features Hoosier Banker magazine as its cornerstone. I review 30 to 40 bank trade magazines each month and – while I am admittedly biased – I rate Hoosier Banker as the best. It focuses more on bankers than on banking, a subtle distinction from most of our peer publications. Complementing our magazine is our e-newsletter, IBA E-News, distributed weekly to keep members abreast of what is happening in their world.

In the government relations arena, IBA has enjoyed a great deal of success for the past several years. The culmination came this year, with a Financial Institutions Tax reduction; legislative agreement to pay back a loan of $50 million to the Public Deposit Insurance Fund (PDIF); reversion of PDIF income to remain in the fund; and codification as to expired mortgage rules changes being only prospective, not retrospective. Amber Van Til and Dax Denton are ranked among the best lobbyists – both in the Indiana Statehouse and among state bankers associations nationwide.

Mega success in Indiana is not something that we take for granted. Our talented and tenured staff work hard and smart to provide bankers with the tools, education and environment they need to succeed. In return, the Indiana banking community has been highly supportive of our efforts through Association engagement. Thank you for another successful Mega Conference and for the continued Mega success of your IBA!

The Intended Purpose of the Farm Credit System

In 1908, President Theodore Roosevelt commissioned a study of agricultural product providers’ access to capital. As a result, the 12 Federal Land Banks were created, thus forming the first government-sponsored entity (GSE) in 1916. GSEs are targeted financial organizations designed to promote credit access where it otherwise may be lacking. Other GSEs are the Federal Home Loan Bank System (FHLB), Fannie Mae and Freddie Mac. Originally Sallie Mae, designed to fund education, had been a GSE, but lost that status when it was fully privatized in 1995.

Three of the remaining GSEs deal with residential mortgage lending. Only the Federal Land Banks, now known as the Farm Credit System (FCS), is not exclusively dealing with housing finance. The three housing-only GSEs — FHLB, Fannie Mae and Freddie Mac — have remained true to their mission. They do not lend directly to consumers. They lend only to or through other retail institutions, including banks, thrifts, credit unions, insurance companies and independent mortgage companies. In other words, they are wholesale providers of capital to those aforementioned retail lenders. They serve a unique, noncompetitive, partnership relationship that finances the bulk of the housing mortgage market.

The Farm Credit System, by contrast, is a retail competitor to companies that lend to the end user, in this case farmers and ranchers. The FCS enjoys the same kind of access to the capital markets as do the three housing GSEs, but it does not use this market advantage to support the for-profit lending marketplace. Consequently FCS is a formidable competitor to banks and other retail lenders. And, as if the access to capital were not enough of an advantage, the Farm Credit System, as a GSE, enjoys a tax rate on its profits equal to about one-tenth that paid by banks!

I do understand that FCS is a member-owned cooperative whose owners are the farmers and ranchers it lends to. But the purpose of GSEs is to create credit access where it might otherwise not be available. That could be done much more efficiently by working with and through traditional financing institutions, such as banks.

The problem has been exacerbated in the past few years, as FCS has expanded its rules and is now making rural mortgages, plus commercial and retail loans for shopping centers and multifamily apartment complexes.

Congress is charged with overseeing all laws it passes. It does a poor job of it. FCS would be a good place for Congress to start. FCS has outlived its intended purpose and should, as Sallie Mae was, be separated from GSE status and subjected to the same regulatory and tax structure as banks.

HB 1018: A Sound Plan for Indiana

Like all children, my son and daughter, when being raised, would get excited about some idea they had and describe it in terms of what they were “going to” accomplish. While trying not to thwart their enthusiasm, I advised them to talk about what they had accomplished, not about what they were going to do.

Recently I heard a speaker, who said that: “A plan without action is a dream, and action without a plan is a nightmare.” Being a plan-focused person, I found that statement to be abundantly clear.

The two concepts mentioned above could be consolidated to: “Plan first, act second, and brag last.” During my lengthy career, I have witnessed and participated in many successful projects …  and in some failures. Rarely have I seen anything of the magnitude of a recent, successful outcome for the Indiana banking community — it truly was planned first, acted on second, and now we can brag. I am referring to last Friday’s passage and enactment of Indiana HB 1018. The process was culminated by a formal signing by Gov. Mike Pence before IBA board members, key staff and the insightful senators and representatives who marshaled HB 1018 through the legislative process. This bill accomplished four goals that have ranked high on banking’s agenda.

First, HB 1018 will lower the Financial Institutions Tax from 8.5 percent of net income to 6.5 percent over a four-year period of time, at the rate of ½ of 1 percent per year. At present levels of net income, when fully phased in, this measure will save Financial Institutions Tax payers, mostly banks and thrifts, about $20 million per year.

Second, the $50 million that was borrowed by the State of Indiana from the Public Deposit Insurance Fund (PDIF) a decade ago will be paid back in increments of $5 million per year for 10 years, beginning in 2013. Third is the reversion of income generated by the PDIF, after expenses of operating the PDIF, back to the fund. A dozen years ago, that income had been diverted to the pre-1977 Police and Firefighters Pension Fund. At current interest rates, this is a couple of million dollars per year. Over the past 12 years, however, it amounted to over $100 million lost to the PDIF.

Finally, HB 1018 strengthens the safely of the PDIF by putting into place further restrictions on legislative access to it.

The IBA government relations team, represented by Amber Van Til, Dax Denton and Josh Myers; past IBA board chairmen Dave Geis and Pat Glotzbach; and current chair Jim Marcuccilli worked diligently over a two-and-a-half-year period of time to develop a plan and execute it to perfection. For the duration, the full IBA board of directors remained united and steadfast in the goals set out. Senators Travis Holdman and Jim Arnold, and Representatives Mark Messmer, Tom Dermody, Dan Leonard and David Neizgodski led the charge by sponsoring and promoting this bill.

Every banker in Indiana owes these people a huge debt of gratitude. I know they will not brag about their accomplishment and their individual contribution to it, so I will brag for them. Thank you, one and all, for this remarkable success!!!

Now Is the Time to Level the Playing Field

One of my elective classes in high school was typing. I was accurate, but slow. No doubt such a class does not even exist today. First, there are no typewriters to be found and, second, preschoolers are already learning to keystroke via personal computers, smart phones and tablets. Fifty years ago, though, typing was a smart skill to have.

In typing class, the first actual sentence we learned after the location of the keys was the classic refrain, “Now is the time for all good men to come to the aid of their country.” Typing this phrase over and over was a drill that tested speed and accuracy.

I have considered modifying the refrain to, “Now is the time for all good bankers to come to the aid of their industry.” In Indiana, at least, many of our good bankers have come to the aid of our industry, but we may need more. We may have to fight for our very existence the next few years. I have seen data that indicates that, within the past five years, banks have grown at a 3 percent rate, while credit unions have grown at a 5 percent rate.

Though credit unions are only about 10 percent the size of banks and thrifts, they pose formidable competition for those community banks that share markets. Credit unions continue to enjoy a federal tax exemption that is worth about $25 billion every 10 years. They also enjoy regulatory advantages, such as exemption from Community Reinvestment Act rules.

Credit unions are continually appealing to Congress to increase their powers and to provide a mechanism, other than retained earnings, for growing their capital. They do so, even though study after study reveal that they are failing in their mission of serving “especially those consumers of modest means.”

From crisis normally comes change. Our country is gripped in a fiscal crisis, as is the entire world. Congress is, or soon will be, scrounging for every penny of tax revenue it can find. Now is the time that we might finally be successful in convincing Congress to revoke the credit union tax exemption.

I sense that the American Bankers Association and the Independent Community Bankers of America both recognize that now is the best opportunity we have to create a level playing field. It will be imperative that ABA and ICBA lead the fight in tandem. When they do, “Now is the time for all good bankers to come to the aid of their industry.”

My hunch is that bankers will respond!

Mega Moves

Guest blog by Christina M. Bennett, CMP, IBA Vice President-Meetings & Events

Preparations are now being made for the 2013 Indiana Bankers Association Mega Conference, scheduled for May 13-15 at the Indiana Convention Center. If you haven’t experienced this event in the past, I urge you to come check it out. Last year we attracted more than 1,200 attendees, and we often tout that Mega is the largest state bank trade association meeting in the country.

The Mega Conference is primarily education-based, with some social events mingled in. This year we are featuring added emphasis on compliance. While we have been offering a Compliance Track for years, with recent increased focus on compliance (compliments of Dodd-Frank), compliance is making an appearance in the Marketing Track, Directors Track and even in the Trust Track.

However by no means is Mega totally compliance-centric. For our Tuesday keynote, for example, I am excited to welcome back Lee Wetherington. A technology futurist, Lee is one of the highest-rated speakers ever to appear at IBA events. He never fails to give audiences something to think about and, with mobile technology increasing exponentially, I cannot wait to hear what he predicts for the future.

I am also eagerly anticipating our Wednesday keynote address. Ken Schmidt, a nationally recognized brand-building consultant, was instrumental in the successful turnaround of Harley-Davidson Motor Company. Ken will be challenging us to consider what we are willing to do differently in our businesses and to take steps to implement positive change.

Speaking of change, the exhibit space for this year’s conference will be dramatically different. We are moving out of our former hallway space to a traditional exhibit hall. This move affords us more classroom space — which we desperately needed — and offers the side benefit of accommodating a larger array of exhibitors. Tasty snacks and other enticements will be encouraging you to visit the exhibit hall. An added bonus will be a tradeshow game featuring fabulous prizes, including iPads and other electronics.

The main reason I encourage you to join us for Mega is that it truly is your event. Topics and speakers are carefully vetted by our dedicated Mega planning committees; it is this banker input that ensures the quality of the Mega experience. We also are indebted to our service providers, who provide the financial support that makes Mega possible.

Please join us for the 2013 IBA Mega Conference. Information is available on the IBA website or by calling 317-387-9380. See you in May!

Scaling the Social Media Mountain

Guest blog by Laura Wilson, IBA Vice President-Communications

“Because it’s there” sums up why humans will tackle a challenge as towering as Mount Everest. It also explains, these days, why businesses of all stripes are positioning to get a foothold on the social media mountain. Mounds of case studies, statistics and anecdotal evidence support social media, but one metric soars above the rest: We embrace social media because it’s there.

And it’s not going away. Social media may morph through time, but it’s here to stay in some form or another. All the more reason to be making the social media climb now because, in the future, handling change will be easier than starting from scratch.

For traditional businesses, like banks, the social media ascent is approached with caution, due to security concerns, compliance issues and appropriate messaging. Of equal concern loom questions of logistics – who is responsible, what needs to be conveyed, where are the best platforms, when should postings be added, how will upkeep be managed? The driver behind all of the above is “why?”

Your Indiana Bankers Association is eagerly taking on the social media challenge – not only “because it’s there,” but because you, our members, are making the climb. We want to be hiking up the mountain with you.

We’re now on our third level. We began the trek a couple of years ago, tiptoeing into base camp, so to speak, by establishing presence on four social media platforms: Twitter, LinkedIn, Facebook and this IBA Desktop blog. At that point, our goal was simply to orient ourselves to the terrain.

In 2012 we went higher by formalizing “like” and “follow” goals for Twitter, LinkedIn and Facebook. We reported regularly on progress of those goals to our board of directors; thanks to your help, those goals were met by year-end.

This year we are reaching further upward. We have increased the number of likes and follows, added a blog subscriber goal and, more significantly, we are now honing in on direction for each IBA social media platform.

Now we seek your input. We invite you to act as our compass to help IBA set pathways. Though some of our messaging will be universal across all platforms, we would like to establish a general direction for each. For example, perhaps we could aim as follows:

• Twitter – financial literacy tips;
• LinkedIn – banking news and articles;
• Facebook – member bank community outreach, including photos;
• IBA Desktop blog – political issues, current events and commentary.

What do you think? If you have suggestions for IBA social media, please enter your ideas into the “comment” area below. We value your guidance.

Meantime, back to the “because it’s there” quote. Some say it was uttered by mountaineer George Leigh Mallory, who died while ascending Mount Everest in 1924. Others attribute it to Sir Edmund Hillary, who reached Everest’s summit in 1953. Either way, another mountain quote also applies to social media — Mr. Mallory compared Mount Everest to “the struggle of life itself, upwards and forever upwards!”