Selling the Value of the Community Bank
Below is the text of comments made by MACB President Christopher W. Pinkham at the Maine Association of Community Banks Annual Directors’ Conference held at the Augusta Civic Center on May 13.
Thank all of you for attending. The role this meeting has played in director education for 29 years is very impressive. This was one of the very first programs of its kind in the nation, begun May 5, 1977. I’m holding a copy of that program and – what a surprise – 29 years ago we had a terrific line-up of speakers. So we’ve had a long history of attracting the very best national speakers and industry topics. You will see that Tom Parliment is no exception to that list.
Now the role of your association is a mix of advocacy, education and joint ventures. Today is a good example of our educational efforts as it joins another 50-plus programs during the year. Our joint ventures range from providing an insurance trust with 3,000 employees who share a group health plan to the publication of our quarterly magazine and law books for banking and consumer laws, to bringing 275 of the best and brightest minds from our banks together in our eight working committees that regularly discuss topics like compliance, operations, bank security and lending practices (just to name a few).
For the next few minutes I want to stress the advocacy component and talk to you about outreach.
I actually have one goal this morning: I’m going to convert Republicans, Democrats and Green Party supporters, those who are unenrolled and even our few Libertarians to bankers.
Ladies and gentlemen, you have the power – the power to look in the mirror and recognize a few realities about Maine’s political landscape:
First, in Maine, political party is not relevant – passion is.
Second, slow economic growth means trouble (with a capital T) for banking in Maine.
And third, you the banking community are the economic engine for Maine.
So for the next few minutes let us collectively drop our platforms from the November 2004 election and all assume the position – as bankers!
Why Party Is Not Relevant
These three issues are not partisan. We all agree on the following (and we need to work together to fix them):
1. Expanding good jobs in Maine is a hard job.
• We are driving our youth, in particular our well-educated youth, from our state.
• We have told everyone, everywhere that we have an atmosphere that is unfriendly to business.
• We support taxes so we will have more taxes and more fees.
2. Health care is a critical component of the world today.
• Giant strides in health care have made better lives and livelihood for all of us.
• But the current system creates social strata – haves and have-nots.
• Requiring business to pay for those who are uninsured hurts everyone. It drives the cost of businessup.
3. Government is the biggest issue.
• Size, scope and interference (over regulation). We do live in highly regulated times.
• Our Legislature is paralyzed. Term limits have eliminated institutional memory – too many issues, too little attention to the ramifications of votes. (For example, we are fighting our third privacy bill in five years.)
• Excessive layers of government best demonstrated by a recentby University of New England President Sandra Featherman at the Fed’s regional meeting: “The greatest difficulty in expanding UNE is getting building plans approved by local, county and state governments!”
A potential for slower economic growth in some regions means trouble for banking – so play to our strengths.
1. We say tourism is big. Then we suggest a higher tax for seasonal homes.
2. We try to attract retirees to Maine. Then we de-couple Maine’s estate tax from the federal tax and drive our highest tax-bracket payers and our potential retirees from Maine to other states.
3. We recognize a shift from a manufacturing economy to a service economy. But we can’t adjust our game plan as distractions like big-box stores, the cost of oil, imports or even base closures dominate the news.
Recognizing all that, you are the economic engine for Maine. You now need to be the economic voice of Maine. We need to tell the citizens, the legislators and each other what is good for Maine.
Banks need to tell and sell your story:
• Everyone has a small-business success story.
• The capital campaign that would never see the light of day except for the bank.
• The positive employer who provides for the staff – benefits, flex schedules and rare layoffs.
Use our legislative experiences to show three examples of what is good for Maine.
First: Bank taxation. As you know, we have just defeated an attempt to double the net income side of the bank franchise tax (116 to 29 in the House, 30 to 2 in the Senate). We learned a lesson. We did not apologize for a low rate on Maine’s franchise tax; rather, we spoke of the growth in jobs in Maine’s financial sector. According to the Maine Department of Labor in 2003:
• Financial activity industries in Maine employed 33,700;
• It paid $1.4 billion in wages;
• It accounted for 5.7 percent of wage and salary employment in Maine (compared to 6.1 percent nationally);
• In the past 10 years (1993-2003), the growth of financial service employees was twice that of all Maine industries (32 percent vs. 14 percent).
• The average financial industry wage was $41,700 in 2003;
• That was 36 percent above all-industries average in Maine.
This is good for Maine.
Second: The Legislature has been reviewing the complex issues of financial privacy, despite the existing Federal guidelines. This session we have at least five bills specifically dealing with privacy: identity theft, file freezing, skimming, opt-in/opt-out of information-sharing and now, information breaches. The natural reaction for your lobbyist is to be defensive, but a better approach has been to demonstrate what we are doing right to protect our customers. No apologies.
• We distribute the notices that say we do not sell our information. Period.
• We spend millions protecting our IT systems, our Web banking portals and our data transmission lines.
• We are very good at shredding documents, identifying customers, filing SARS reports and protecting your money.
So while we are interested in the Legislature’s concerns, we are the experts on privacy – it’s what our business is built on: trust, confidentiality and professionalism.
This is good for Maine.
And Third: Fiscal state of the industry. Banks in Maine are healthy, profitable and are serving their communities as in no other time. Each year we host Bankers’ Day at the Legislature and ask our bankers to shadow their legislator. This year, we distributed a booklet where each participating bank had a page to list its community service projects, financial donations, volunteer hours and outline how it gives back. It was a huge success in opening conversations. They were surprised at how much banks in this room give to their communities. But in return:
• Deposits grew at a 5.6 percent annualized rate in the first quarter 2005;
• Loans grew at a 6.8 percent annual rate;
• And while earnings were lower for the first quarter, they grew by 78 basis points.
This is good for Maine.
The banking industry, all of you – bank directors and bank officers – have the capacity to spread the positives and refute the negative perceptions. You must become the visible advocates.
• Many believe Wall Street will downgrade our state’s bond ratings soon. Should not bankers be the ones to remind elected officials that if our state cannot find ways to expand its sources of income (or, perish the thought, reduce expenses) then investors will perpetuate the negative message of our fiscal plight?
• Bankers and the business community must tell elected officials that taxes, regulations and constant change at the Legislature make it too costly to operate in Maine and more businesses are likely to seek locations in other states where the tax consequences are less.
• Reality is that we have a world economy and Maine is a very small part of that world. But these fiscal issues are of our making.
Improvements in Maine’s outlook will be led by the economic engine that is represented in this room.
Banking is good for Maine.