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BND Transcript, 2/16/11 call with Ed Sather

Center for State Innovation Conference (CSI) call with Ed Sather (Retired Senior Vice President of Treasury and Trust Services, Bank of North Dakota, 35 years experience), 2/16/11

CSI: As you can see have a very diverse group geographically and in terms of interest, but we’re all on this call because we’re all, in one way or another, looking for better ways to put public money to work at home in our states to keep community banks lending and small businesses growing. The Bank of ND has been doing this as you know for decades, and there are several variations of a bill that would in effect recreate a Bank of North Dakota like that in your states.
So we put this call together with Ed Sather, chiefly for bankers, but also for policy makers at the state level to get their questions answered. Ed is a retired Senior Vice President of Treasure Services at the BND. Ed, I think you retired just last summer, is that right?
Ed Sather: Yes, August 1st.
Host: After 38 years at the bank. And Ed’s spent a lot of time in front of state government talking about what the bank does…defending it..advancing it. Maybe Ed will tell us how the bank grew in his 38 years there. But before I give this over to Ed, I wanted to offer a disclaimer. Ed’s not an advocate for any of the proposed banks or the bills, he’s able to talk about what the BND has done over the last 90 years. But as you put your questions, to him try to frame them in terms of what the BND’s experience is because he may not be able to speak to the particulars of the bank bills in your states.
Ed do you want to give us just a minute about your background and then give it back to me, and we’ll start with some questions?
Ed: Ok as was said, I was with the bank for 38 years, I joined it 1972. The bank had total assets of $200 million dollars. When I left last August the bank was $4 billion dollars. I was in charge of Treasury Services, I was in charge of funding, interest rate risk management, asset liability management and liquidity. I served on the executive committee, the investment committee and the asset liability committee.
CSI: So it’s safe to say there isn’t a part of the bank you didn’t get a look at?
Ed: No, from the treasury side we worked with all the divisions in the bank.
CSI: So why don’t we start in Oregon, I know we got a couple of questions that I’d sent on to Ed from Oregon. But why don’t we start there either with bank folks or treasury folks with questions for Ed. Who wants to start?
Participant: Hello, I’m, actually a retired banker. I spent 40 Plus years in banking and now on the city council for …unintelligible….so very interested in what’s happening here. And I sent a couple questions here, just a basic questions…I sent just two or three questions and maybe they’re repetitions. I’m just coming into the picture here, but being you’re the treasury department, there is great interest as to where your funds come from. As I understand you’re not an FDIC insured bank so you’re looking at funds basically from the state government. How did you expand from $200 million to $4 billion? Where does that come from during that period of time primarily?
Ed: Well the bulk of the growth came from the state. The state is the major depositor, the state or state agencies, are about, I’m going to say 90%. North Dakota has been very prosperous the last 10 years with commodity prices and also with the oil revenues, so that the coffers of the state have been increased dramatically. North Dakota, at the end of the last biennium had a surplus of $1.2 billion. So the bulk of our funding in deposits comes from the state.
But also, we provide a secondary market, or primary, market in ND in fed funds for ND banks. So on a daily basis we were buying anywhere between 300 and 800 million dollars a day from the banks. We belong to the Fed. We have a line, a discount window.
We’re also a member of the Federal Home Loan Bank of Des Moines, which we use for some of our interest rate risk management. We have about $400 million borrowed from the Home Loan Bank for hedging purposes. Also, in the past, before we had the growth, since we don’t compete for deposits in ND, we went to the secondary market. We issued CDs in the secondary market which were bought by the Europeans. This was about $400 million of which we have paid off, because of the growth of State deposits.
So we look at the state as our deposit base, but we also look at other funding sources to help us with liquidity and interest rate risk management. We don’t compete for deposits in the State, but we will go out of state for funding purposes.
Participant: It’s a different situation we have here in OR as far as our budget, we have pretty major deficit. I have one other question I don’t want to dominate this but…
Ed: Go ahead …
Paul: I understand you participate in loans quite a bit with the local commercial banks. Is that a reciprocal type of arrangement?
Ed: We’ve not had to sell loan participations because of the tremendous growth we’ve had. But we do participate. To give you an example, the basic asset categories for the bank is diversified in four major areas. The largest being bank participations, which is about $1.1 billion. Student loans is about $900 million, home loans about $500 million and agricultural loans is about $400 million.
So various programs of participations …(unintelligible)… without looking at selling participation. There was a time in around 2001 that we were approaching a very high loan to deposit ratio and we were thinking about selling participations, but the need did not arise.
Participant: Did you have something more? I’d like to jump in here… A number of our community bankers like the idea of buying loans off the, whatever entity we come up with. Call it a State Bank. So if there’s any more that you can speak to on that it would be of interest.
If I could ask a second question? More pressing question. Some of our decision makers are thinking primarily about a revolving loan fund. Call it $200 million to get going. Could you speak to the management of risk? That’s a big driver here, there’s some concern about putting public funds at risk in a banking entity and that’s something that you’ve dealt with directly. So the difference between a $200 million loan fund or capitalizing at a bank and using deposits to have a little bit more size?
Ed: I’m going to have to, because of the banking side. I will say this, I hope I don’t offend anyone, but economic development people, it’s been my experience anyway, have never seen a loan that wasn’t going work. And I don’t think that’s good for public funds.
I think under the banking structure, you’re going to have lending limits, you’re going to have capital, and you’re going to be regulated, or you should be regulated, by state regulators. And you’re going to be looked at as a financial institution. So you’re going to have to have underwriting standards that are acceptable. You’ll have various committees that will go through and approve the loans, and review the loans and, if necessary, create a loan-loss reserve which can impair some of your capital. But banking structure is more <<<<<15 min>>>>> viable in this structure that has more of the safeguards than just a revolving fund run by a state agency.
Participant: Could you articulate some of the safety features? I feel like I have a pretty good sense, but it keeps coming up.
Ed: We were structured this way. It’s a bank, these are loan officers, it’s not economic development people. We have underwriting standards, we have a credit review committee which is independent. The loan officers have a legal lending limit which they can approve loans. Above that limit it went to a Loan Committee made up of major lenders. And everything above that went to the Investment Committee which was made up of senior management. If it was above another limit we had an Advisory Board. It eventually went to the Board of Directors which was our Industrial Commission, who are the Governor, the Attorney General, and the Commissioner of Agriculture. It had to go through all those processes to be approved.
And then we had an annual audit by a CPA firm. And every two years the Department of Financial Institutions would audit the bank. And go through a loan loss provision, look over documentation Just like you would any normal financial institution.
Participant: Does the state banking department provide the audit then for your bank as well as the commercial banks?
Ed: Yes. If it’s a state charter in North Dakota, the state banking dept will rotate with the FDIC every other exam. But since we’re not FDIC insured, the state banking dept audits us every two years and reports to the Industrial Commission.
CSI: That’s very helpful, Ed. Did you have a follow up? You had two parts to your question. The first, Ed, was about buying loans. Was that right?
Participant: That community banks could buy loans. If there’s a reason not to consider that…
Ed: We never had to utilize that. It’s a feature that we looked at. So you could become a conduit where you’re taking in loans and selling out participation which a lot of banker’s banks do. I know that there is some feelings in the banking community that they’ve been stiffed a little bit on the credits. But I look at it saying that if the banks are going to participate on a loan, it should be a credit that they understand, that they can manage and can explain it to their committees, and they know how the finance is going to work. If not you’re familiar with that type of credit, you should not be participating in it just because someone else made the loan. But if it’s part of your program it’s certainly could be something you can do. I mean as a financial institution you are set in place to provide and participate in service, so that definitely could be done.
Participant: Ed, you mentioned in response to the first question the fact that competition for deposits or the fact that the bank does not compete for deposits. You mentioned again in your answer to the last question that you got some flak from bankers. Can you talk a little bit about the bank’s relationship with North Dakota community banks?
Ed: Well we have a strong relationship. There are 94 banks in North Dakota. Through lending as well as treasury and operations, we have a relationship with at least 85 of those institutions. Now the bulk of the bank’s lending programs are not direct. We don’t compete for customers. We partner with the community banks. The lead bank, the community bank, makes the loan. Now whether it’s a legal lending limit issue, or they want to share the credit risk, or for whatever reason, they participate with us.
We don’t compete, and by law, we can do very few loans direct. So we’ve not going to compete for their customer. We’re not going to go out and solicit their customer, try to do home loans, or credit cards, or any of those issues. It’s just transparent. In a lot of cases, the borrower doesn’t even know that the bank is a participant. That’s up to the lead lender. They basically do the servicing and remit payment to us. So we don’t compete.
The only loans that we did direct were student loans, and the reason for that is most banks don’t want to do a fixed rate loan for 15 years. And we offered farm real estate loans subject to collateral for up to 25 years. That’s another long term, fixed rate loan that the bankers did not want to purchase themselves.
And they like the idea that here’s an institution that’s not going to compete with them. That’s not going to get the financials of their customer, and then realize that this very good customer and try to take that customer away.
So smaller banks were able to service their local customers by participating with us. For an example, with input costs as high as they are, to get an operating loan for a farmer that’s $10 million, the lead bank with a lending limit of $1 million, they could participate $9 million of that loan with us. They still service their customer, and retain their customer and deposits and whatever relationship they had with that customer, and we would not compete for that customer. So it’s a very good working relationship. A lot of the comments I got from the banks, the smaller banks were able to stay viable and service the needs of their customers even though their customers’ needs for additional dollars would increase. By participating with BND, they feel comfortable and were able to service that customer.
So, that’s a major concept, that we’re not competing. We are partnering with the financial institutions in the state.
CSI: O.K., that’s helpful. Ed, you said, when you went through your numbers, you said you had about $500 million in home loans. Did the community banks originate those, and do they maintain the servicing on service those as well?
Ed: We have one institution in state that wants to do the servicing because they have the volume. But, all of them are originated by the local lender and they sell to us, most of them sell to us, the servicing release. But, we service those credits at the bank. We don’t pool or securitize those mortgages, sell them to someone else to service. So they are all serviced by the Bank of North Dakota.
We created a secondary market about 15 years ago because they (local banks) didn’t like the idea of selling to the Wells Fargos, or larger regional banks, that were soliciting their customers. So they asked us to provide the secondary market. So we came up with a secondary market. They originate, we purchase, and we service. We have one institution that does their own service.
Participant: Ed, you keep all these on your own books. Have you ever considered securitizing those loans and selling them back North Dakota investors?
Ed: We’ve never had the request. My feel for that is that most of them don’t want to have 30 year mortgages on the books, even if they might have the duration of 10 – 12 years. They just don’t like that interest rate margin on a 30 year fixed rate mortgage.
CSI: O.K., any follow-ups?
Speaker: Nope.
Participant: I have a very basic question. I read a lot of material, but I’m not clear on the election process. The Industrial Commission would seem to be completely elected, but the material has confused me as to whether or not the board of directors or your advisory board are elected. Could you go through that for me? And they are not elected, who appoints them?
Ed: O.K. The Industrial Commission is elected every four years. The Industrial Commission appoints a President and approves all Senior Vice Presidents of the Bank. The Commission, which would be a standard Board of Directors, is chaired by the Governor. The Governor appoints an Advisory Board to oversee the operation and make recommendations or suggestions to the bank or to the Industrial Commission about the operation of the bank.
If you want a cross section, the law requires that of the seven member committee, four of them are bankers. The rest represent agriculture, business and other areas of the state. They are appointed by the governor.
Participant: We just found out about this call yesterday, so I didn’t have a chance to submit some banker questions. Some of them have been answered, but some haven’t. I just have two. Are there quasi state government state agencies in North Dakota that do loan participations with financial institutions for housing and commercial loans, or is it all done through the banks?
Ed: Well they don’t really do participations. North Dakota has a North Dakota Housing Finance Agency. That is a separate agency that issues debt to secondary markets to fund first time home buyers at very attractive rates. They’re a separate agency, they do debt financing. What we’ll do is that we’ll provide them a line of credit so they can warehouse the mortgages before they go to market. So we’re doing short term financing. There’s also an economic development agency in the state that has some funds to do direct loans.
Then we have some other programs that helps compliment some of the loans that economic development does. They might do buildings, something of that nature. We get involved with the bank by providing a participation in the operating line, equipment, or things of that nature.
Participant: O.K. Another question dealt with deposits. We’ve heard that this bank would prop up, or give additional deposit dollars to Maine’s state chartered banks opposed to nationally chartered banks. Do you deposit any money into the 94 banks in North Dakota?
Ed: No we do not. But here’s what we do with the Treasury Service. For liquidity purposes we will establish a line of credit for them that provides fed funds unsecured. So we’ll sell them overnight lending up to the limit we establish. We will also, if they want to secure it, we will give them a secured fed funds line for liquidity purposes. <<<30>>> In North Dakota you can use letters of credit from the BND to pledge for public deposits. So for liquidity reasons, we tell banks to release their securities and use our letters of credit so they can increase their liquidity whether they deal with us, or the home loan bank or the fed discount window. So we provide them additional liquidity and funding mechanisms. We also encourage them to become members of the discount window and to belong to the home loan bank. We want them to have all the liquidity that they can, and have all the avenues available to them, but we do not deposit with them.
Participant: O.K. Well our bankers want to belong to the home loan bank, use the services of the banker’s banks, a lot of them participate with the fed window. We’ve been told that this initiative would take deposits from, Wall Street firms and invest them into local community banks. So you don’t take any of your excess cash and deposit into community banks in North Dakota.
Ed: No, the mechanism they use here is to participate with that lender and either take out some credit risk, or help them with legal lending limit issues and then provide liquidity but it’s provided in the form of a deposit.

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Public Banking in America Series -- Spring, 2012

PURPOSE: To share information about city, county and state-owned banks.

PARTICIPANTS: Anyone involved in the legislative and policy efforts to create public banks.

FRIDAY, FEB 10: BANK OF NORTH DAKOTA RELATIONSHIP TO COMMUNITY BANKERS. Guest Speaker, Ed Sather, SVP Trust and Treasury Services (ret.), BND
Call recording Ed Sather 021012.mp3
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FRIDAY, FEB 17: FORECLOSURE FRAUD. Guest Speaker, Ellen Brown, author of Web of Debt and Chairman, Public Banking Institute
Call recording Ellen Brown 021712.mp3
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FRIDAY, FEB 24: BANK OF NORTH DAKOTA LOAN PORTFOLIO. Guest Speaker, Ed Sather, SVP Trust and Treasury Services (ret.), BND
Call recording Ed Sather 022412.mp3
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FRIDAY, MAR 2: ARGUMENTS AGAINST PUBLIC BANKS AND PBI RESPONSE. Guest Speaker, Marc Armstrong, Executive Director, PBI. Issues to be discussed include:

The government should not be in the banking business.
The government in the banking business is socialistic.
Would you trust your legislators to run a bank?
Leave banking to the professionals.
The capital required to start a public bank is prohibitive.
The payoff would take too long.
Public banks would compete with private banks.
The risk of bad loans with public money is dangerous.
Public banking is unconstitutional.
Call recording Marc Armstrong 030212.mp3
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FRIDAY, MAR 9: FORECLOSURES AND PUBLIC BANKING. Guest Speaker, Micheal Sauvante, Main Street Matters
Call recording Michael Sauvante 030912.mp3
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FRIDAY, MAR 16: PREVIEW -- THE BUCK STARTS HERE. Guest Speaker, Ellen Brown, author of Web of Debt and Chairman, Public Banking Institute
Call recording Ellen Brown on New Book 031612.mp3
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FRIDAY, MAR 23: NORTH DAKOTA BANKERS ROUNDTABLE -- HOW BND HELPS COMMUNITY BANKS SERVE THEIR COMMUNITIES BETTER. Guest Speakers, Rick Clayburgh, ND Bankers Association; Eric Hardmeyer, BND; Karl Bollingburg, Alerus; Gary Peterson, New Bank.
Call recording Bankers Roundtable 032312.mp3
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For NOTES from Bankers Roundtable 3/23/12 call, click here.
Call recording Open Discussion 033012.mp3
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Call Recording NJ Mark Didak 032512.mp3
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Call recording Messaging 051112.mp3
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Notes from call are here.
Call recording Messaging for Banks 051812.mp3
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Call recording County Banks 052512.mp3
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Call recording Banking Ratios 060112.mp3
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Call recording CO Initiative Process 060812.mp3
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Call recording Planning Model 061512.mp3
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BND Transcript, 2/16/11 call with Ed Sather (cont.)

Participant: Thank you. And then I just have one more question, and it might not be a fair question for you so you don’t have to answer. But one of the bankers who is curious, says the state of Maine, for the next two year budget cycle is facing a $1billion budget deficit. And they were just wondering, do you have any suggestions on how Maine would capitalize a bank when they are facing that deficit?
Ed: That’s an issue you’ll really have to look at because if you’re going to start an institution, and let’s make it simple and say that you’re going to use a 10% capital ratio. If you credit a bank for $1billion, you need $100 million capital that’s another deficit that the state is going to have they’re not going to be able to spend. So it kind of compounds the problem. You can go to the secondary if you can issue stock. But, being state owned, we don’t issue stock. So, I don’t really have a good answer for you.
CSI: I think if you look, and maybe the Maine folks can share this with you, studies from the center for state innovation model different ways in which a bank can capitalized. What the costs are in the out years, at 5, 10, 15 and 20, etc. Maybe we can get that to you off the call.
Participant: That would be great. Our bankers deal with this and it’s a big concern. We know that when the bank was established in North Dakota, it was 1919. Most of those banks have relied on that service and you’ve even been able to survive during some tough times, but the economic condition of ND even now is a little bit different than what we have in Maine. Especially relative to your natural resources.
Ed: That’s something I’d like to respond to. That’s an issue that we’ve always looked at as we’ve grown. Our capital ratio was stepping down, and for us to grow capital we have to do it through profits because we don’t issue stock. We have to be cognizant of what our capital ratio is. If we’re growing too much, we need to shrink, so we have to maintain that capital ratio because we’re looked at as an institution safety and soundness. Examiners look at the concentration of credit at community banks that are dealing with the bank of North Dakota. Plus we’re also rated by Standard and Poor’s, we’re rated A plus long term. They come in and review us every year. So it’s performance, capital ratios and everything comes into play. So as an institution especially like the bank of ND you just can’t grow forever because you have to maintain those ratios.
Participant: You said you do some operational services for the bank. Can you elaborate on that?
Ed: From the Treasury side we did provide liquidity, fed funds and letters of credit. We also provide bond accounting, and safe keeping of securities. And then the operational side, is that we basically clear all the checks in North Dakota. We’re like a mini Fed. About 90 banks in the state clear through us. And they use us for coin and currency.
Participant: Did you also do the processing for credit unions as well?
Ed: Yes we will. And matter of fact, recently the corporate issue that’s taken place, they’re leaving corporate and they’re coming to the Bank of North Dakota because the corporate is going to close. Which should make you happy.
Participant: O.K. Thank you very much.
Participant: Can I ask a question on top of what Kathy was asking?
CSI: Sure
Participant: You mentioned as far as the local deposits coming into the smaller community banks, we tried to take a section of the investments from the city and put them into the community banks, but we were not able to without a standby letter of credit. Is that what you’re talking about, Ed? The smaller community banks could place deposits from cites and enhance them with that so they could tap into those funds?
Ed: It depends upon if the community banks, and I think today is a prime example. For a community bank to take a public deposit, and if it’s a pretty good size deposit, and they have to pledge securities, and they have to go out and buy securities, there really is no interest margin for them. So we suggested that, if you can get those funds and lend those funds out. Don’t buy securities, use a letter of credit, I think we charge 1/8 of a percent. Use a letter of credit to pledge for that deposit, and put those funds to work in the community and make good loans with them with better margins and not buy securities you have to pledge.
Participant: So that would make a pretty good deposit base available?
Ed: Yes it would. If they had the loan demand, and they wanted to get public deposits, this is mechanism that can do it and still make the loan.
Participant: What would you take as collateral?
Ed: We take the institution. We will look at the financial performance of the institution and we’ll say we’ll take this amount. This is your credit limit. This is how much you can do letters of credit with. We do an evaluation of the financial institution. Now the letters of credit do not exceed one year, but you can renew it. We review the financial institution every fall.
Participant: Thank you
Participant: Two questions. I introduced a bill to form as a study commission on this question and there has already been a huge backlash from private bankers.
First question the bankers are saying that whatever the success of North Dakota, that all of it was based on the fact that there was no other way to capitalize banks in North Dakota when it started and that’s not the situation here in our state. We’ve got all these other banks.
Second question. The bankers are completely freaking out over this, so do you think there is any way to win them over or are they just going to be implacably opposed to going down this road?
Ed: Well being a banker, and bankers are afraid of anything that’s new, they might perceive it as a threat. I think if you use the North Dakota model and say this is an institution that’s not going to take your deposits away. It’s going to partner with you. It’s going to assist you with participations, liquidity, and you want an ongoing dialog to say we’re here to help the community bankers. We’re here to assist you, you tell us what you need. You hold forums and you meet with them, and you say we’re not going to stand still. What would you like? How can we improve on this? How can we improve on that?
I guess it’s a question of education and stressing the idea that it’s a partnership. It’s here to help the banks. It’s not here to compete with you and take away your customers.
Participant: I have one other question. Does the bank have to follow the state consumer lending laws and the safety and soundness laws that exist and regulations that exist for the community banks? Or are you exempt under state law from those? I was thinking of…could they use you for marginal consumer credit that, maybe, you know, don’t meet the ability to pay provisions, or something like that? Or do you pretty much follow those guidelines?
Ed: That’s the key, and it’s my personal feeling that, you operate as a bank. You don’t operate as a state agency. You don’t make it political. You operate as a financial institution.
The Department of Financial Institutions comes in and examines us as the same way it examines every state chartered bank. They look at loan files, concentrations of credit. They look at everything and examine us the same way they examine another bank because they look at us for safety and soundness.
Participant: O.K. thank you.
Participant: I have one more question. I wasn’t quite clear where the excess cash is parked. I understand it isn’t put into community banks, but I wasn’t clear where you did put it.
Ed: Well that’s the other area that I had, I had the investments. We would invest the funds according to our asset liability models where we would see future funding, to make sure that we had adequate liquidity, and to help with interest margin. But, it’s invested according to our investment policy in treasuries, or government agencies, things of that nature.
Participant: Thank you.
Participant: I attended the conference last summer or spring. At that time, one of the big things for me, was the excitement about the fact that you were able make capital loans to community banks in North Dakota. <<<45>>> With the new regulations, those capital loans are not going to be able to be considered as tier one capital is my understanding. Do you know how they are addressing that? Can the Bank of North Dakota actually buy common stock in community banks or is there any kind of vehicle that allows you to help a bank with capital?
Ed: Yes. If I didn’t mention it, go to the Bank’s web site, which is Now, what we had is legislation authorize the bank to make bank stock. Then the TOPS came out and TOPS became the buzzword. Now since TOPS don’t apply to capital one, we can still do bank stock where we take the stock of the individual. So they can still issue bank stock as a mechanism of growing their capital vs the TOPS because of the regulation are not what they used to be.
Participant: That raises a good question for me. In the state of Maine, we have 32 banks and 20 of those banks are mutuals, and the remaining ones are stock based banks. How do you help with capitalization for mutuals?
Ed: I wouldn’t be able to respond to that. I really don’t know how.
Participant: Are there mutuals in North Dakota?
Ed: Not that I’m familiar with.
Participant: Wouldn’t a credit union be the same thing?
Participant: It would be the same as how do you capitalize a credit union?
Ed: We’ve never capitalized them. They’re treated more as a mutual, more as a co-op?
Participant: Yes. That’s one of the concerns for a lot of my members because when you only have 32 banks and 20 of them are mutuals it’s always an issue for this state. We’re kind of unique that way. Alright thanks.
Ed: What I suggest is to find a mechanism for what you can do, if necessary, in conjunction with the department of financial institutions, what you could do to fund them, to help them raise capital. I really don’t know the restrictions on what you would have.
Participant: It’s very limited for mutuals because they’re actually, by their charter, are not-for profit. We’re very fortunate in Maine where all our banks are well capitalized right now, so it hasn’t been an issue. But thanks, it was a good point on how to get capital.
CSI: We’re at 5 o’clock now, any other questions?
Participant: Ed, in 0regon we’ve had a pretty rough time with the economy here, a lot of business area has gone downhill and it’s had a very significant impact on a lot of the banks. It seems that this is kind of, by forming this bank, this could be an answer to having the community banks being able to be more generous with their lending to try and help small business get back into the picture. You probably haven’t had that because your economy has been so good over there. But, how do you control your lending to small business? I’m assuming that most of your staff are experienced bankers who are using the normal credit criteria.
Ed: That’s true. We have a “one stop shop” that’s located in the bank, that’s what we call it. So we’ve got SBA’s in there, CBC’s in there. We look at economic development. We all work together to try to partner, and come up with ways we can assist in the financing. The model has changed quite a bit over the years and now it’s NO, it’s how can we make this work, but also be cognizant of the fact of safety and soundness. So we’re trying to help the constituents of North Dakota and the bankers, but also do it under prudent underwriting. So we’re always looking for new ways that we can help, that we can assist. We can’t do everything, but we try to be proactive and work with the bankers and the associations and the communities.
Participant: Ed, in terms of economic development, and we talked about this peripherally today. But could you just give us a little overview as to where the input and how the focus gets created? Is this really a grassroots thing? How is the state involved in this? And then where the BND gets active in the process? I’ve not been following the current refinery issue, just wondering in general, what kind of process you see here?
Ed: Well it depends upon where it originates. If it comes through the state economic development agency, they will look at it and generally see what’s proposed. We have a great working relationship with them. They’ll initiate a dialog, or a meeting, and say O.K. “This is what we’re looking at, this is what we can do. Bank, what can you do? Where do we have to go to be the lead lender?” Things of this nature. We work with them. In most cases, new projects that come in, the contact’s going to go to the economic development people. But then they contact us. It’s a variety of fundings that they need, so we can see what we can do and how we can help and assist.
At the same time we meet with the economic development people throughout the state. We tell them about our programs, have an open dialog. If they get a request they’ll contact us. Saying “we’re looking at this. “What do you think? How can you help us? What should we be looking at? What kind of underwriting should we look at? Who do we approach?”
So it’s an open dialog. Even if we don’t make the loan, we’re available to assist them, and help them, make suggestions or recommendations to check SBA, check this, talk to so and so in their community and look at these programs.
Participant: Thank you so much.
CSI: Any final questions?
Ed, your last three answers kept hitting on the same theme of helping and partnering. I was struck that the reaction from the community bankers in some states is sort of panic and I think you’re right that when they get a handle on exactly what the Bank of North Dakota does and recognize this as an opportunity to build an institution that partners with their members and that they can have a hand in shaping it, maybe we’ll be able to move them.
Participant: Perhaps Ed, if you’ve got more time, not today but in the weeks to come, we could get you on the phone with folks in individual states.
Ed: I’d be happy to. Just let me know.
CSI: Special thanks to Ed, for your time. And thanks to everyone for getting on the call today.
All: Thanks Ed