I've been a community bank junkie for a majority of my 30+ year career. I love working with customers, communities and non-profits and helping them succeed in their everyday lives. It has been rewarding and gratifying to do so.
That being said there’s one area of the bank that I’ve not enjoyed over the years and any banker that says they have would be telling a little fib. It’s the compliance area.
First, please allow me to explain a little history. The FDIC was started in 1933 right in the middle of the great depression which lasted from 1929 to 1939. The FDIC stands for "Federal Deposit Insurance Corporation." Yes that is correct, the FDIC is an insurance company. The main purpose for the United States Government to start the FDIC was defined this way: The FDIC's purpose was to provide stability to the economy and the failing banking system. Officially created in the Glass-Steagall Act of 1933 and modeled after the deposit insurance program initially enacted in Massachusetts, the FDIC guaranteed a specific amount of checking and savings deposits for its member banks.
In other words the FDIC's purpose was to "insure" depositors for their money (up to certain limits) held at banks. In the banking world we call that "safety and soundness", meaning the FDIC regulated banks to not get over their skis. It allowed the opportunity to develop a business model that made the bank money and thus helped the community and everybody was happy.
That part of this makes a lot of sense to me. The next part doesn't.
Over the years the regulations grew and it was somehow determined that banks would be responsible for all of the hundreds of compliance agendas. When I started in this business in the 1980's the "compliance officer" was the person who showed up to the meeting late. It was a title, but it didn't require much work. Safety and soundness was the #1 concern.
Jump forward 34 years and now community banks have departments of compliance staff and spend thousands of dollars on top of that hiring outside consultants to make sure we are meeting the agendas of all the regulatory agencies and departments. Some of those rules that we have to track and live by include TILA, RESPA, TRID, FCRA, ECOA, SAFE Act, TISA, EFA, EFT, FLOOD and HMDA just to list a few. Pictured above is a manual from our good friends and the Wisconsin Bankers Association who recently conducted a 2 day training session for Regulations Z... TRID and all of the changes that are happening on August 1st, 2018. To give you a better idea of how in depth these changes are, this manual is 238 pages long. All of the others I have listed above have pretty much the same thing. To be fair, the FDIC’s responsibility is to carry out the laws and regulations set by the US Government, they are the messenger and gate keeper.
I have the honor and privilege of being the President and CEO of a great community bank located in the 3 counties of the lower part of Southeast Wisconsin. This bank has been around since 1898. I would love to be able to ask the first President of this bank if he, in his wildest dreams, would have ever thought it would be like this 120 years later. In fact, I would love to ask the people who started the FDIC in 1933 the same question. I'm guessing that I know the answer.
A generation ago the markets that we serve were dominated by many community banks. Today we are a very small minority in our markets. Gone are the many community driven organizations replaced by the huge corporate banks that are headquartered all over the country and the world. Why has this happened? One big reason is that many community banks have waived the white flag because of what I have just explained.
If all goes well, and I don't screw things up too bad, I hope to be the president of this great bank for the rest of my career. I feel that there’s a need for a community bank that actually gets their hands dirty in the community. One that supports non-profits. One that accepts local deposits and puts those deposits back out in the form of loans in our very own communities. One that when a customer has a problem we get in our cars and go see them. One that doesn't look to be highest earning bank in the world, but the most respected.
It’s correct that there are a lot fewer community banks today, but this guy believes that a strong community bank makes for a stronger community. I hope that many of you believe the same thing.
Scott Huedepohl is the President of Community State Bank, and has been a community banker for over 30 years.