Think you face high expectations? Consider, for a moment, Ken Heid's situation. The CEO of Farmers & Mechanics State Bank in tiny Pierz, MN, comes to work every day knowing that his town is a breeding ground for successful, high-profile big-bank executives. Indeed, the parents of two of them are his customers. How do you live up to that?

John Stumpf, president of Wells Fargo & Co., grew up just three miles away on a dairy farm south of town. Jerry Grundhofer, CEO of U.S. Bancorp, also traces his roots here-his parents ran a bar in nearby Buckman back in the 1930s, before moving to Los Angeles. That means Jack Grundhofer, Jerry's brother and his predecessor as head of U.S. Bank, also has close ties to the community.

Grundhofer's parents moved back to Pierz 15 years ago, and today his mother lives a stone's throw from Heid's bank-and just three blocks from Stumpf's parents, who moved to town from the farm at about the same time. This being a close-knit community, the Grundhofer clan-Jerry has other relatives here-and the Stumpfs (the phone book is crawling with them) are good friends. Occasionally, they compare notes about their banker kin. Now that her son is heir apparent to head Wells when CEO Richard Kovacevich retires in 2008, for instance, Elvira Stumpf admits to a bit of clock envy. Both Jack and Jerry worked at the old Wells in the 1980s. Somewhere along the line, their mom, Laura, came into possession of an old clock with a Wells Fargo logo, "and I'm jealous of it," Elvira laughs.

If just one of these guys traced his heritage to Pierz, it wouldn't be all that noteworthy. After all, everyone's got to come from somewhere. When three high-profile industry personalities-including the president of the nation's fifth-largest banking company, and the CEO of the No. 6 bank- come from that same little dot on the map, it's unusual, to say the least. Even so, no one here seems in any way shocked. "It's surprising that you'd have two people climbing to that high of a level from the same small town, I guess. But strange things happen sometimes," Heid says, with stereotypical Midwestern understatement.

As intriguing as it might be for the industry, awareness of the distinction in this town of 1,296 people, about 90 miles north of Minneapolis, is spotty. Older residents are justifiably proud of their native sons, especially Stumpf, who grew up here. When the news of his promotion to president made the business section of the Minneapolis paper last summer, "it was all everyone was talking about over coffee at the restaurant," recalls John Thielen, owner of Thielen Meats in nearby Little Falls. He attended school with Stumpf. "It's a pretty big deal."

The young folk are less impressed. At Red's Auto & Bait a block down Main Street from Heid's bank, a group of teenagers at the register shrugs indifferently when told-apparently for the first time-that their town has a knack for turning out big-bank executives. "The older generation knows about it. The younger people are more proud of the football team," explains Judy Riley, a Red's clerk. "Either way, it's not a huge deal."

It's in the nature of small towns to keep their own in place. Stumpf only returns to town about once a year, and is still viewed more as the orderly, relatively reserved high-school kid with the comb-over than a big-shot corporate executive. That includes mom, who lets on that as a child Stumpf displayed an unusual knack for cleanliness. "When I'd do the laundry, John would pick out his briefs and shorts and stack them immediately in the drawer," recalls Elvira. "And his plate was always so clean, like you could put it back in the cabinet.

"Not like he licked it or anything," she adds with a chuckle. "But he's always been so neat."

The flip side, not spoken of so freely, is the inevitable sense of awe-and a tad bit of resentment-inspired by their success, financial and otherwise. "Don't get me wrong. Most people are very happy about it," Thielen says. "But you're always going to have a certain percentage of people who are envious of their success. That's human nature."

So what about Pierz has made it a hotbed of banking talent? Is it something in the water? The genes? Simply a fluke? Speculation varies, and most likely it's a coincidence. Ask the locals, and most credit it to the German-Catholic work ethic both Stumpf and the Grundhofers were exposed to as kids.

While Minnesota is known by many as the home of Garrison Keillor's fictitious Lake Wobegon and its Norwegian bachelor farmers, Pierz represents the state's other historically dominant ethnic group: Germans. The town was founded in the 1860s by hard-working German homesteaders looking for a better life. They were farmers, and the land was best suited for alfalfa or corn. That made dairy farming a natural.

The heritage was so strong that Stumpf's father Herb, a third-generation American, spoke only German at home as a child. "We prayed German, sang German, talked German. Everything was in German," Herb recalls in thickly accented English. Along the streets of Pierz, the story was much the same. During World War I, anti-German sentiment ran so high that the local bank was forced to change its name from German State Bank to F&M.

John Stumpf wasn't much for farming, his parents say. Even so, he did his chores and schoolwork diligently, as did his 10 siblings. "Everyone worked hard," Herb says, implying that not doing so wasn't really an option. John met his wife, Ruth, in the third grade. Her father, Floribert "Flip" Spanier, was an F&M executive back in the 1970s, when it was housed a couple blocks down Main in a building that's now a restaurant, The Old Bank. "I can see where John might have gotten some interest in banking from his father-in-law," Heid says.

The banking Grundhofers' linkages to Pierz aren't quite as direct. According to Jerry, his parents were listening to the Rose Bowl with some friends in 1938, when everyone agreed to flee to the warmth of southern California. Four months later, "the only people who actually did it were my parents," he recalls. They threw most of their possessions into an old Nash and drove to Los Angeles, where their father, John, ran a restaurant and put the kids through Jesuit school. But the family still visited Jerry's farmer-grandparents back in Pierz during the summers, maintaining close enough ties that Jerry's parents returned in the early-'90s.

Regardless of the ties, Heid doesn't seem overly impressed by Pierz's standing as hometown to the big-guy bosses, nor should he. At $154 million in assets, privately held F&M outperforms both Wells and USB comfortably on metrics such as return on equity (34 percent) and return on assets (3.12 percent). As the biggest bank in Morrison County-and the only one for at least 12 miles in any direction-Heid can't think of many businesses in town that he doesn't bank, or many local farmers.

"Our slogan is, 'The bank with the personal touch.' We've never had to advertise for loans," Heid says. "We know people around here well enough so that, if they want to go buy a car at a weekend auction, we'll give them a verbal OK beforehand. ... We're the bank in town. A lot of that personal service is lost with the big banks."

F&M earned $4.7 million last year, riding a strong local economy. Land values have soared, important to F&M, which has 62 percent of its loan portfolio tied to real estate. A 25-year-old, three-bedroom house on an average-sized lot in town fetches about $125,000, up sharply from a decade ago. When Heid first joined the bank in 1971, he says, surrounding farmland typically was valued at less than $300 per acre. "Today, we're seeing as much as $2,500. That's very high."

As in other rural areas, fewer people are willing to stay on the farm. Some are taking advantage of the higher prices to sell out. Those that remain typically run larger farms, with more automation, and supplement the dairy business with other ventures. "We've got a scattering of hogs, and quite a few chicken barns in the area," Heid explains. Farmers will raise the animals on contracts for larger food companies, such as Golden Plump Poultry or Wakefield Pork. "The farmer does the labor and furnishes the barn; the company supplies the animals and the feed, and guarantees a market for the animals," Heid explains. Such arrangements lower the risks for the farmer-and the bank.

Heid's biggest concern is that continued Federal Reserve rate hikes will slam the brakes on the economy. F&M's profits already looked poised to fall, due to shrinking margins. "Enough is enough," he says. "They're going to choke off housing if they keep raising the rates." On that front, at least, Heid sees eye-to-eye with the big-bank cousins who still consider Pierz home. (c) 2006 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com

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