Kansas independent bankers push personal responsibility
Now that the Community Bankers Association of Kansas has a new “face person” in place at the top, a new logo, a plan for increased visibility and growth, and a renewed sense of purpose, the only thing that remained for the association to accomplish at its annual meeting in Wichita was to transfer all its momentum to its membership. And that’s just what the association did July 80-10 as it laid out new insurance offerings, examined financial crimes, and touted responsible lending with an indepth look at bankruptcy. Each topic was sewn with a common thread – personal responsibility.
CBA has contracted with health care insurance vendor and associate member, the Woodbury Group, to bring a variety of health care plans, including Health Savings Accounts, to its member banks and, ultimately, to their customers. Health Savings Accounts are designed to lower individual’s insurance premiums as individuals assume the responsibility for managing their own cash outlays for health care expenses. By taking personal responsibility for the costs, it’s presumed individuals will be wiser health care consumers.
Personal responsibility is a favorite talking point for CBA’s President and CEO, Shari Weber. “You have to be responsible for how you eat and sleep and what activities you participate in,” Weber said. “That has a huge impact on the amount of expense you have for your medical health.” CBA contracted with the Woodbury Group a year ago for its staff coverage and Weber viewed partnering with the associate member as a way the association could add value to membership.
“Bankers don’t take it lightly about taking someone’s health insurance and handing it over to someone different,” Weber said. But on the issue of Health Savings Accounts, Weber added, “It does exactly what our bankers do, which is think through the monetary decisions and take on personal responsibility.”
Gregg Lewis, CBA immediate past chairman and chairman of First Option Bank, Osawatomie, anticipates banks will appreciate having more options. “The Kansas Bankers Association has had the lockdown on the medical program with Blue Cross & Blue Shield forever,” Lewis said. The majority of banks in Kansas belong to KBA for their medical insurance, he said.
Steve Handke, CBA chairman and president of Union State Bank, Everest, said rising health insurance premiums take a huge chunk of his bank’s income. “Our bank has 30 fulltime equivalents and my health insurance costs around $225,000,” Handke said. Although his bank and his employees share that cost, Handke is still in awe of the number. “That’s 50 percent of what I hope to earn this year at the bank to return to stockholders.” After an annual payroll of approximately $1.4 million, health insurance premiums amount to one the biggest expenses for Handke’s $77 million institution.
Lewis anticipates the affiliation with the Woodbury Group will be a way for the association to build nondues revenue, a goal that emerged following the association’s strategic planning sessior., which was facilitated by Chris Williston, CEO of the Independent Bankers Association of Texas.
CBA has undergone some restructuring since 2000, when longtime executive Sue Anderson retired. Her replacement, Robert Kennedy, stayed with the association a couple of years before leaving suddenly. That’s when Shari Weber’s, name emerged as a candidate to lead Kansas’ independent banking group. Weber has been tha association’s leader since May 2003. “Shari was hired for this position because of her passion for small towns and her passion for community,” Handke said. “That’s the same passion we have as community bankers.”
That pass:.on became evident when she interviewed for the job, Lewis recalled. “We had the best group of resumes and the final four people we interviewed were unbelievable candidates,” Lewis said. “But her passion for community and our passion for community, when she spoke about community, it was like Yeah! That’s us!'”
“During the restructuring, we saw the resilienc3 of Kansas community bankers,” Handke added. “Hard times distilled down to gold. I think we run hard and execute the plan next year,” he continued. “For me, that’s exciting.”
Weber said CBA is member directed and creating a non-dues revenue stream, increasing visibility and educating members and customers are challenges that are getting top priority. Crime education is shifting from a first-year focus on robbery prevention to an initiative on identity theft and fraud.
Financial crimes update
Brad Bryant of the Wichita Police Department gave bankers an oftentimes chilling accounting of the scope of financial crimes perpetrated in the state. “Most financial crimes are drug driven and thieves have a mercenary attitude toward their victims,” Bryant said. Check fraud, he said, is a crime that doesn’t capture the attention of law enforcement the way it used to, although losses can be staggering. The Kansas legislature, he added, created a revolving door for crooks with a lenient system known as “presumptive probation.” Crooks are often returned to the streets after only a night or two in jail, he said.
Richard Schenk’s institution, Community Bank of Midwest in Great Bend, escaped a huge loss recently with a fraud scheme involving cashier’s checks. “On the last day of November in 2002, we got a call from a bank in California wanting to verify funds on a cashier’s check,” Schenk chronicled. Not in the habit of sending cashier’s checks to California, the banker’s curiosity was piqued. “We did a little investigating and realized it was not a check we’d authorized so we took action right away and closed the account, even though we had a good supply of stock.”
Schenk said that move was the smartest thing they’d ever done. During the next 18 months, counterfeit cashier’s checks continued to flow into his bank, all the while, he and his staff were working with the FBI and the Secret Service. “These checks were coming in from both coasts, England and Canada and they’re very good reproductions,” Schenk said. “I’ve gone back and added up the total dollar amount for all these checks and it comes to $55,602,000. That’s bigger than my bank.”
Banks aren’t the only victims of financial crimes. “Your elderly customers are the most vulnerable,” Bryant said. “It’s not easy to protect them.” Bryant encouraged bankers to take steps to mitigate their own, and their customers’, vulnerability to crime:
* Encourage elderly customers to get a shredder in their home and to use it.
* Speak to local senior citizen groups to educate them on their vulnerability.
* Train the front line staff. Training will pay off in spades, Bryant said. “Tellers know their customers, probably better than customers know themselves.”
* If you see an elderly customer making a large withdrawal, bring them into a separate room and talk to them about it. Thieves often stalk the elderly and watch them while they’re in the bank. Get them out of plain view and call the police if you feel the need.
* Install digital cameras at ATM locations. Cameras utilizing VHS technology will not give law enforcement officers a clear enough image of a criminal. Go digital, Bryant advised, and position the lens so you’ll capture the face of the ATM customer, not the top of his or her head.
* Educate yourself and your local law enforcement officers. Criminals view small town bankers as small town hicks, Bryant said. “Local law enforcement doesn’t always have the resources to help you. I urge you to get with your local sheriff’s office and look at new ideas.”
“You are the front line fighters in the war against fraud,” Bryant said, adding that financial crimes don’t just result in insured monetary losses. “All kinds of horrible crimes occur in conjunction with financial crimes, things like burglary, rape and murder.”
A look at bankruptcy
Nationally, the number of bankruptcy cases is reaching record levels; between March 2003 and March 2004, 1.654 million bankruptcy cases were filed in the United States, 16,353 in Kansas alone, which is an increase of 6.3 percent from the previous year. Taking a break from his bench at the bottom of the economy, Justice Robert Nugent, chief judge of U.S. Bankruptcy Court for Kansas, shared some insights: “We have an abuse of consumer credit and I don’t know whose fault it is.” Nugent split the blame between bad underwriters, aggressive credit card issuers and consumers. “Borrowers are poorly educated,” Nugent preached. “Borrowers don’t understand that you can’t run your $5,000 card to the limit then pay it off $25 bucks a month at 22 percent interest.” Nugent encouraged bankers to educate customers on the “miracle of amortization.”
Only 2 percent of bankruptcy cases nationally are business bankruptcies; the rest are personal. Chapter 7 bankruptcies outnumber Chapter 13 bankruptcies in Kansas four-to-one, a fact Nugent decries. “I know Chapter 13 is a hassle for bankers,” he said. “But, at least the debtors are being required to exercise some discipline to pay something to their creditors as opposed to paying a fee, filing a form, and walking away.” Some people can’t make it in Chapter 13, Nugent added, but a lot of people can.
“There isn’t a better Chapter 13 town in Kansas than Wichita, where everybody pretty much collects an hourly wage at a factory,” Nugent said. “Those are the kinds of people Chapter 13 works for but, for whatever reason, the evolution of the legal culture, Chapter 13 doesn’t happen here and that’s unfortunate.”
Nugent points to the two-income profile as a contributing factor to the increase in personal bankruptcies in America. “When both husband and wife work, that has a significant impact on that couples’ ability to spend and to borrow,” the judge said. “They borrow to the max, live off two incomes, then when somebody gets laid off, they end up in Chapter 7.”
As of July 8, the Federal Reserve reported $2.03 trillion of consumer debt, $750 billion of which is revolving debt. “I see lots of debtors with at least two mortgages on their house and I’d bet the second mortgage was taken out to refinance credit card debt,” Nugent said. “I wonder where we’re headed with this.”
Bankruptcy reform legislation has been unsuccessful for seven or eight years and Nugent pointed to our consumptive society as a factor in reform’s defeat. “If we don’t have bankruptcy, what happens to the 1.6 million people who filed last year?” Nugent asked. “People who don’t want to pay you will find a way not to pay you. So, is it too easy to go bankrupt or is it too easy to get credit?”
Bankruptcy is big business and a big chunk of the Kansas economy. In 2003, Chapter 7 trustees distributed nearly 7 $7 million to secured and unsecured creditors while Chapter 13 trustees distributed nearly $31 million to secured creditors. Bankers have a special role in educating and guiding consumers in their financial education, Nugent concluded. “You are visible in your community. You have a role in financial education. Your customers can get guidance from you.”
By Jackie Hilgert
Copyright NFR Communications Inc Aug 1-Aug 14, 2004
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