The Independent Community Bankers of America prides itself on how it represents the nation's small-town bankers, and new chairman, Jeff Gerhart, certainly fits the bill.
Gerhart, a fourth-generation banker who took over the ICBA position last month, pulls double duty as the chairman of Bank of Newman Grove, a $37 million-asset bank nestled amid corn and soybean fields and hog farms in eastern Nebraska. Gerhart also manages Gerhart Insurance Agency and Marbu Inc., a family farming operation.
In a wide-ranging interview Thursday with American Banker, Gerhart discussed proposed legislation that would expand small-business lending for credit unions, how small banks can compete with big banks, and collaboration with the American Bankers Association.
What are the most important issues for community bankers?
JEFF GERHART: We need to take the time to mentor the next generation, the folks coming along behind us. I've got two children on my board, and I'm doing my best to make sure that I educate them.
You don't have to be a family bank to mentor someone in your operation. If we're going to have community banks moving forward, we need that next generation of folks. A lot of banks in the Midwest, we've got sons and daughters who might be interested in banking, and we need to keep our eyes open.
What are the ICBA's top legislative issues?
The Communities First Act, [which would reduce regulatory burdens for community banks,] is a priority. We're pleased about the increase of the shareholder threshold from 500 shareholders to 2,000. We'd like to see a five-year extension of [the Transaction Guarantee Program]. That's providing some good relief for community banks. It's an opportunity for money to stay in local communities and be loaned out.
We're looking at trying to improve the bank examiner environment. I'll be at the Kansas City Fed office in May to talk to them about that. Some places in the country have said exams are getting more realistic, but other parts of the country are not. It's a mixed bag. In the Midwest, we've got a good agricultural economy and ag lending, for the most part, is pretty good.
What do you think of the legislation to allow credit unions to offer more business loans?
If credit unions want to do this, they should get a banking charter and convert. There is certainly a disadvantage with them not paying taxes. If you can make loans and don't have to pay taxes, that flies in the face of logic to me.
Should the ICBA and the ABA collaborate more often? If so, how?
I chuckle a little at that, because we have always worked with the ABA where our interests were aligned.
On the level of deposit insurance at $250,000, we were the ones pushing that. The ABA wasn't much help. On the FDIC assessments that helped 98% of the banks in the country, they weren't helpful on that. That was going to hurt their big members, so they weren't there.
People can make what they want to make out of it, but we'll work together where it will benefit community banks. The ABA has a tough row to hoe. It's really difficult, from my understanding, how an organization can keep a bank like the Bank of Newman Grove happy and a Wall Street bank happy. We collaborated on the Durbin amendment. We both would like to see five directors at the Consumer Financial Protection Bureau, instead of one.
If the ICBA was not there, I think the banking environment would look a lot different. You'd see more concentration than you see today, and we've got plenty. A small percentage of the banks in this country control the majority of the assets.
How long have you been in banking?
I graduated from the University of Nebraska in 1975. In 1977, I started working at the bank with my grandfather and father. When I graduated from high school, I wasn't going to be a banker. After college, I changed my mind.
Can you describe the business of Bank of Newman Grove?
Probably 90% of our business is agricultural loans, and the other 10% are local businesses, grocery stores, buffets, repair shops.
Most of the dollars we lend is operating money for farmers to put seed in the ground and harvest it. We also loan on farmland, for machinery, if a guy needs a new pivot [irrigation system], repairs and barns. Our customers are family farms that sell to co-ops. Archer-Daniels-Midland just put in a new grain facility about eight miles from here.
Who are your competitors?
There is a lot of competition with small banks, plus the Farm Credit System. Wells Fargo and U.S. Bancorp are in Norfolk, Neb., about 40 miles away. Farm equipment dealers also provide financing, so we're competing with John Deere Financial and [CNH Capital America].
How do you compete with banks and lenders that are so much larger than you?
We work hard to make sure our customers check with us to see if we can give them a better rate. We can extend credit to a farmer and set him up with a payment plan that fits him. We don't have to cookie-cut what we do. Where we struggle is in the regulatory and compliance area. We can't spread those costs over as many places as Wells Fargo can.
What motivates you to be a banker?
It's the satisfaction that you're helping people with their hopes and dreams. We want to take a young farmer, the son of an existing farmer, and help him finance that operation and help him grow and make money.
It's the chance to keep a local businesses open in town, and we'll work with pretty near anybody to make sure it works. If we weren't there, I don't know whether those loans would be made. We're making loans that the big banks probably wouldn't take a look at out here.
Would you advise others to get into community banking?
Absolutely. We're going through some tough times now, but our future is bright and will be bright as long as we're willing to step in and make it work.
We've seen some dark days, but if you stick with it and mind your P's and Q's, you'll be fine in the end. There is a lot of potential out there. It's an important foundation for any community to have a community bank.