Back In My Day: Civilized War – Banks Are Like Carter’s Little Liver Pills

There’s an old expression that when things proliferate beyond reason that they are like Carter’s Little Liver Pills. Carter’s had an infinite number of little pills that would cure what ails ya…

Which leads to the following short summary history for those unacquainted with Carter’s.

https://www.southernliving.com/culture/carters-little-liver-pills

The company’s marketing was off the charts great. That many of us still remember them, their slogans, and commercials is a testament to the promotional brilliance.

It was not their only product, however, it was the primary product line of a plain old laxative to make you poop.

Banks Are Like Commodities (and Laxatives)

Sort of like the standard active ingredients in stimulant laxatives, such as Biscodynl (Carter’s) or Senna, it is difficult to discern many differences in commercial banks. They have a perception of added value, much of the time the customer cannot determine why one might suit their needs better than another, and they can make you feel like you have the runs.

In total there are over 4800 federally insured banks. In the mid 1980s the number was 10,000+ higher. So, there has been a steady decline since that point. Why? The federal government and greed of bankers has taken over. Various regulatory and tax acts have made it difficult for smaller banks to survive as well due to government (i.e. politicians) creating financial meltdowns (bubbles and busts) of various segments of the economy. Add in the profit (greed) motive of starting a bank, growing it and then selling out to a larger bank who wants the market presence.

For example, the second largest bank in the nation in asset size is Bank of America at $2.4 trillion. They have 6,314 locations in 38 states and 2005 cities. The vast majority of banks are minuscule in locational presence compared to B of A. However, most all have branch networks to increase access to customers. The global number for bank locations in America is approximately 77,000 in over 9,900 cities. This number of physical locations is not expected to grow significantly due to online banking. However, the number of chartered banks is expected to continue to decline as smaller institutions are acquired or closed by regulators. Why? Same reasons as above; the federal government and greed of bankers takes over. The politicians love to be in the pockets of big banks, so they pass regulations to make it more difficult and costly for small banks to comply. That reduces competition and innovation at the local level. Which turns urban as well as community banks into commodities.

Even with this happening, there are still more locations and methods to deal with banks than Carter’s have little liver pills. The next topic goes into the large presence of credit unions.

Community Banking Evolution

As I was entering the banking industry after graduating from college I was taught one important fact of that time. To the average customer, the teller was the bank. Of course that was nearly 50 years ago and banks were slow on the innovation side and highly regulated and controlled. The vast majority of customers never dealt with anybody else, and when they did it was the teller who directed them to the person(s) who could handle their other needs. So, who do you think were the lowest paid staff in the bank? Yep – the tellers. 🤪 The face of the bank that average customers trusted most were some of the least valued by management and ownership.

Times have changed and with it the relationship aspect of banking. Yes, relationships are still important in rural market community banks and flyover states. However, even in those markets it is becoming a thing to bank electronically and only use local banks for cash, demand deposit accounts, small business services and safe deposit boxes. Mortgages for homes can even be done online now with the better rates and terms coming from mortgage companies dedicated to the purpose. Vehicle loans are generally done through dealership provided indirect financing and credit unions. Credit card applications are everywhere online and in the mail box. Other small loan options are abundant with finance companies for less credit worthy small loan applicants.

Credit unions grew rapidly during the downtrend of community banks. As their regulators agreed to liberalized rules for joining, more and more retail consumer based accounts moved to them as well as small business checking and savings accounts. They returned the relationship aspect of banking of the past and filled the void left by banking industry consolidation. There are currently over 4800 credit unions with 20,000 locations nationwide. They are not involved in commercial lending by regulation. They are regulated by the NCUA and accounts are federally insured in a similar manner as with banks and the FDIC. However, their numbers reduced by around 2500 in the past decade as the economy worsened, cryptocurrency arrived and the regulators tightened down on their practices and capital adequacy.

In reality, nothing has materially changed for customers and members with banking and credit union services in terms of access. It just shifted around changing its shape like an Amoeba, or maybe like a Coronavirus. Where it changed most was within the industry. The one size fits all as well as being all things to all people approaches – died.

The first and overriding principle to understand is that bankers use OPM (Other People’s Money) to make money for themselves and stockholders. To protect OPM (customers), banks are regulated in the manner in which they may invest the OPM. But, who controls the regulators? Ultimately it is politicians in Congress and the administration of the POTUS. Who do they work with to produce the results they seek? The federal government’s privately owned agent – the Federal Reserve.

Enlightening isn’t it? Once again, if you have not read this article by Badlands Media contributor, American Hypnotist, now would be a good time to do so.

https://badlands.substack.com/p/do-we-have-a-contract-with-the-federal?utm_source=post-email-title&publication_id=1135129&post_id=105437643&isFreemail=true&utm_medium=email

With these trends in mind that extended back in my day to the 20-25 years ago timeframe we find ourselves in this story; it finally became increasingly clear to me that to succeed and help customers meet their goals using my abilities and experience, I needed to focus on transactions as compared to relationships. The world was changing and people were becoming more selective as they learned how it all worked. Competition had increased the options they had available. In addition the politicians and federal bureaucracy were beginning to exert more control and influence with the ability to accelerate or throttle lines of business as well as entire industries and segments of the economy in the blink of an eye. As they did so they strongly impacted all aspects of society. Instead of working for We the People, they were openly working for themselves and their cronies. The rest of us were left with the scraps unless we could work harder and smarter than them.

I realized then that when the Lord saved me from my mistakes and sins, He opened the door to a career that fit the trends and my abilities exactly. I just needed to pay attention. His ways and timing are always better. Always.

Imperial

All I can say is if that bank had chosen to stay the course and keep doing what they were doing back in my day, I would have chosen to work there until retirement if that is what the Lord had in store for me. Everything was done win-win. The attitude was to develop and execute your plans, here are the tools. They had the deceased NFL owner Al Davis’ of the Oakland Raiders mantra, “Just win, baby.” The lines of business that won and were more profitable received even more access to capital and tools to grow. Let’s see, where have I read or heard about that approach before? Oh yeah, Matthew 25:14-30 and The Parable of the Talents.

They were not saints to work for, however, they employed the principles of the parable. It was a great place to work, no micromanaging headaches. In general they treated their people well and with respect. You felt valued and appreciated. They were not legalistic. They recognized personal and family needs at times would take precedence. They just asked that you do well at your work and be profitable for the business. Just meet or exceed expectations and all would be fine.

As a result, we were able to build a strong eastern U. S. region credit administration support staff to go with eight experienced production officers. We had become active in all 50 states as a division. Our regional operation would be the core group that stayed together for the next decade. They were the foundation. We all helped grow the Imperial operation toward the Top Ten nationally in loan volume with a plan in place to be #1.

And then one day a couple of years into it, they announced they were selling to a big top twenty in assets bank out of Detroit, Comerica. We were not surprised, but had hoped for a longer run with Imperial. My CEO called and asked me to head to Cali for transition team meetings. It would be him, our division SCO and me working with Comerica’s team with similar roles represented on their side. Our operation was twice as large in scope and annual loan closings. Yet, during the process we learned that they would get the senior leadership roles. To the victor went the spoils. Not very wise on their part, so, oh well…

Here we go again.

The CEO of Comerica’s small business division was a middle aged woman who was a former elementary school teacher for much of her work life. She was based at their regional bank headquarters in San Francisco. Their national sales manager was a leftover from their acquisition of a Dallas based bank previous to ours. Their SCO was a doofus, but located in San Francisco with the schoolmarm wannabe. He was her beta lackey.

At this point my CEO was considered “the” go to expert nationally in the business. Our operation was fine tuned and highly profitable. Theirs was better than BOW, but not nearly on our level. I could tell our CEO was probably not going to be willing to report to schoolmarm, but once again we would have to play along until something better developed.

The transition meetings were filled with some of the silliest school teacher type attempts at bonding I have ever witnessed participation by adults. Absurd. She was also quick to tell the story of how she got into banking by being the teacher of a Comerica bank exec’s child. It was intended to demonstrate how “in” she was with the org. She obviously had no idea she was a minnow in the industry who was swimming with sharks. None of us commented. Didn’t care. Moving right along.

She finally gave up attempting to school her kids and let the rest of us actually do the transition work. I kept my cool, but stayed detached from her attempts to bond. When I returned, I informed my SCO and told him he was next up for credit meetings in Detroit.

Upon my SCO’s return, his first words to me were that they were not a fit at all. He felt he had wasted his time. We learned once again, just like BOW, that the acquisition was about increasing their California banking presence and using our programs to appease politicians and regulators in the the states where they had a presence. Imperial had a strongly profitable division involved in venture capital start-ups in the tech and medical research industries that held an attraction as well.

Our division CEO told me he was already in discussions with three other options. He would keep me informed and to just keep working. To Comerica’s credit, unlike BOW, they did not overstep their authority as it applied to our pipeline of loans being approved or in processing to close in Imperial’s system. Their acquisition of our bank would not close for another 6 months, so we were to continue to operate as is for the time being.

Which was all the time we needed.

Temecula Bound

The winner of the now recurring bank flavor of the month was a small, five year old national bank in Temcula, CA. Since we acted like the wild, wild west in our industry, we might as well join a bank in the old west.

The Chairman/CEO was a highly experienced banker who had been the CEO of another area bank for many years. He had left to start our future employer, Temecula Valley Bank. As the largest stockholder of a publicly traded bank with majority control by a consortium of area stockholder friends and a handpicked Board, he was free to steer the bank into the lines of business for which he had expertise. One of those lines was ours. He understood everything we did as his former bank was a major player with it in CA. A unique opportunity was provided, which included granting stock options to key senior officers in our division. We knew we could manage the balance sheet of the bank with all of the planned growth. Building a deposit base would not be a problem in this high growth area of the country and with the Chairman/CEO’s connections.

The stock options pushed it over the finish line. Our division would be a major driver of profitability, which would enhance stock prices. The Chairman/CEO was wanting to emphasize construction and development financing in single family homes in hot SoCal markets. In so doing it would grow the name and provide places for future branches. The plan was also to be added to the NASDAQ to attract additional capital in the future.

Having significant stock options was a really nice benefit. My role and compensation package were essentially the same – build the eastern U. S. presence. Just keep doing what we do.

Parting Is Unsweet Sorrow

Meanwhile back at Comerica, our new schoolmarm wannabe CEO was making the rounds of her expanded playground. She was trying to build a relationship with us and other regions of our division. You could tell her spidey senses were telling her it was all about to fall apart. After our CEO left to go to Temecula, she and her sales manager were calling me and visiting routinely. During one such visit at one point she ridiculed southern women and the Bible Belt in an informal conversation after lunch. I responded, “Yeah, we all talk slow because we think slow. Jesus understands.” She then apologized profusely and said it was a poor attempt at humor. Nah, she meant what she said. She also knew she stepped in it with me. Later in a phone call she tried dangling a high salaried compensation package to get me to stay, but the inability to keep and attract production officers with the credit constraints and big bank attitudes would eventually kill the operation. So I declined citing the ground floor stock option opportunity at TVB. She attempted to deride that as well, which was about as dumb as it gets. Yeah, be sure and deride the analysis of the senior manager you are trying to retain and just formally offered to highly compensate. Jeez…

Now you know why I cannot stand Nancy Pelosi even without regard to her politics. Schoolmarm and her came from the same mold.

I began working out my notice. After I left, our staff of a dozen employees began leaving one at a time to join me in our new offices a half dozen blocks away. Over about four months they transitioned in until the last one turned out the lights on the Comerica operation for good in TN and the eastern U. S.

More Banking Wars Drama

For the first time in our years of working together, I witnessed my division CEO friend being fooled by his new boss, the Chairman/CEO of Temecula. The old guy pulled off a bait and switch on us. He promised one set of credit policy and parameters pre-employment that he had no intention of delivering. He made it worse on our region by only having our one SCO on the newly formed three person credit committee for the division. That meant that any loan request over $500 K that was real estate secured or $250 K for non-real estate secured must be approved by the committee. This was half the amount of my SCO’s approval authority at Imperial, which was an agreed condition for our joining them. Since the other credit committee members knew nothing about business loans in the eastern U. S., we were placed in an awkward position with our referral sources and customers. The main office could and did begin throttling our volume, making it difficult to get deals done that were never a problem in the past. Our loan collection and default rates had been historically good and well below government agency averages. There was no justification for the tail wagging the dog other than unjustified fear or big egos or both.

I figured it out quickly, especially when our production officers started screaming at us. We had hired the five best from Imperial/Comerica in our region and at this point had added another four. Business was growing and this was throwing a wrench into the machine at exactly the wrong time. It was time to take a stand with my CEO and the bank Chairman/CEO as our eastern U. S. operation had been noticed by other potential employers based on the calls from recruiters.

We had options and did not have to work for con artists.

So I fired off a memo to both that include the “bait and switch” observation. To say the Chairman/CEO got his panties in a wad would be an understatement. My division CEO was placed in an uncomfortable position, which I considered before doing it. However, he was the one who had chosen this employer and was being paid the big bucks. To his credit, he stuck by me and told the Chairman/CEO that if I was terminated, he would also leave. He told the guy that we had other options than working for them, which was true.

Power base established.

The bank’s execs and Board got their heads together and suddenly decided they could modify credit parameters and give my SCO increased authority, doubling the previous levels to what he had at Imperial. This gave the production officers what was necessary to retain them and also incentivized them to prospect for more real estate secured loans that were obviously preferred by the Chairman/CEO and Board. Things settled in and we began doing what we did.

Occasionally we would be brought out to Cali for division meetings with the Chairman/CEO and his execs. The visits were cordial, we were making them good money and the move to the NASDAQ was completed. The last time my SCO and I went, they elected to have it at the Bellagio in Las Vegas. Having meetings previously in Reno with SierraWest brought back memories of that type of environment.

Such a sad environment in Reno during those days in my opinion. Anybody who knows or frequented the mall type enclosed casino district downtown back then understands. It never shut down, at 5 AM it was like 10 PM. No clocks, no sunlight, and very few smiling faces as people sat with drinks in hand at the tables or slot machines to toss in their money on games of chance. This time we would be in the real deal of glitzy Vegas, not the Reno wannabe, and I had been there before with my ex back in the late 1970s. I knew what to expect and I had changed greatly since those days. I just wished this guy was still alive and performing there.

Even in my more rogue days I was never a gambler. For me, life is too big of gamble as it is, much less risk what was so hard to gain. Regardless, I never condemned anybody else for their choices and that included TVB’s choice of venue for the meeting. However, I was not going to change me either. So while the others began eating, drinking and talking; my SCO and I prayed silent prayers of thanks before beginning our meals. At first the others were puzzled, but as the days rolled on they became quieter and even respectful. Our evenings were spent back in our rooms with work and calling home, not out carousing and gambling with the rest of them.

However, one evening the Chairman had all of us head out to one of the popular, high end area steakhouses, Smith and Wollensky, frequented by some of the rich and famous. As we dined we looked across the room and there was this guy.

He was very gracious and spoke briefly to many of us in the restaurant. Folks were reasonably respectful and after quick visits everybody left him alone to enjoy his meal with his companions.

After our return and over time the bank’s execs had begun using our divisional profitability to expand into their desired financing of homes in SoCal as well as adding branches. Over time we began noting slower coordination of funding our closings as well as a subtle tightening of credit approvals on larger projects. It was something I needed to keep my eye on. It was an indication that the bank’s liquidity was drying up from over expansion into SoCal real estate financing.

Conclusion

We had no idea in our region’s offices that our careers were getting ready to dramatically change in a surprising way. We will dive into that next time. Until then be well and be blessed.