As he was preparing himself to be chairman of the American Bankers Association for 2012–2013, Matt Williams was well aware of the daunting challenges facing the industry and was ready to face them following his installation at the ABA convention in mid-October. But for him, the job entails a daunting personal challenge as well. Gothenburg, Neb., home to Gothenburg State Bank, where Williams is president and CEO, lies 200 miles west of Lincoln, the state capital, and 250 miles west of Omaha and the nearest major airport.
“It’s a 3˝ hour drive to get on that airplane,” he notes. And he has been known to describe himself as “that banker who is 1,362 miles from Wall Street.”
Nevertheless, Williams is ready for whatever lies ahead. A former Nebraska Bankers Association chairman, he recalls a great experience on the state level. “And it was at that point I became more involved with the ABA and felt like if I had the expertise to lend to some issues I would want to do that,” he says. A service attitude runs historically in the Williams family, he explains. “And I felt this was my calling, to spend some time and effort committing to the association work, because I think it is so important.”
Topping the list of challenges facing the banking industry are the continued implementation of Dodd-Frank and the Basel III proposals. It has become increasingly clear that Dodd-Frank affects all banks, he points out, and small banks have fewer resources to devote to the compliance issues. He sees Basel III as a way of recognizing that banks need to have capital that is more risk-based on their business models.
“This works very well potentially at large financial institutions,” he says, “but for many smaller banks it is going to be difficult to devote the resources to be able to do the modeling and everything that will be required. Most of our banks, especially smaller banks, are carrying fairly high capital levels anyway.”
Another contentious issue is the National Credit Union Administration’s edict that, because of the widespread drought, more credit unions could qualify as low-income institutions and ignore the business lending cap. “Many credit unions have received this designation that aren’t in a drought area and others that have only a small sliver of their business that would qualify as low-income,” he says.
With the credit unions’ end run around the lending cap coming on top of still-evolving Dodd-Frank regulations and now Basel III, Williams notes that the ABA’s list of priorities is not static, and he quotes a speaker at a recent state association convention, “every night is a lifetime.”
But the ABA chairmanship will have its satisfying moments, too. “I clearly enjoy the social aspect of being with bankers, who I believe are great people and great community leaders,” he says. “I think satisfaction will come from working absolutely as hard as we can on these issues and recognizing that we will have some effect. But we can’t get tied up in wins and losses and we have to just keep pushing the industry forward. I’m less concerned about any personal satisfaction than I am about doing the right thing and the best thing for the industry.”
As an ag banker, with 75 percent of Gothenburg State’s loans directly or indirectly tied to agriculture, Williams is closely attuned to that business. He is convinced that ag faces a bright future as the world population continues to expand and third-world countries emerge that want to feed their people correctly. “The statistics show that our world-class farmers are going to be called upon to feed the world,” he says.
Williams acknowledges that agriculture will continue to have up and down cycles. “We’ve gone through a fairly lengthy cycle of good times right now and those of us who are in ag banking have enjoyed that,” he says. “It is up to us as bankers to monitor the risks in agriculture going forward.” About land values he suggests that each banker look at his own portfolio and see what would happen if there was a significant decline in the underlying value of farmland. “We’ve done that in our shop and I would encourage other bankers to do that.”
Gothenburg is a rural community of 3,800 surrounded by fields of corn, soybeans and alfalfa hay, but thrives in spite of being far from any big cities, 300 miles east of Denver and 250 miles west of Omaha. Four Fortune 500 companies have major facilities there, including Frito Lay and Monsanto. He takes pride in the community’s leadership and his bank’s role in it. “That leadership has recruited new industry, new jobs, new investment capital,” he says. “All of those things have led to continuing population growth in Gothenburg when many rural areas are losing population.”
One of the benefits of the town’s industrial growth has been luring highly educated people who bring their families, serve on the school board and support and use Gothenburg’s educational and medical facilities. “Of all the things that I’m personally proud of in addition to my service to the banking industry, it’s the work that we’ve done to create great community that will be here for the next generation,” he says.
Williams wants to make sure community banks are around for coming generations, too. He is aware that it is often said a bank the size of his — $118 million in assets — can’t survive without merging or expanding. He’s not buying it, nor is he fooling himself that it is going to be easy.
“I think that is a discussion that has been around especially with the advent of Dodd-Frank,” he says. “I’m less concerned about a specific size as I am a bank having a succession plan that allows it to survive and a business model that works in its area. I’m not going to throw out a number that you have to have X dollars of total assets. I look at our size bank and right now we’re doing very well. We’re able to handle the cost of compliance thus far.
“I know that is going to be a challenge going forward,” he continues. “Our spreads are narrowing. But I believe that with our business model, sitting in the location we are with a family succession plan, we will be OK with that.” Williams is the fourth generation of his family to be associated with Gothenburg State, and the fifth generation is strongly involved. A son is on the board, a son-in law is a senior lender and also a stockholder and director, and a daughter plays a role as well.
“What we are seeing happen, though, is many banks are in geographic locations where it is difficult to attract the family back to take over the family bank or other industry,” he says. “The community is shrinking and when the banker reaches my age he gets frustrated with being the chief cook and bottle washer. You just flat get tired.
“I’m not sure of an industry that isn’t on a consolidation trend,” he adds. “We see it with our farmers all the time. We have the same acres of land out there, but they are being farmed by fewer people today than they were 10 or 20 years ago. I think we will continue to have consolidation, and consolidation has probably been quickened by the current regulatory climate.”
On the competitive front, Williams sees technology as an equalizer for community banks with the likes of Wells Fargo Bank, which has a branch 35 miles away. “One of the things that I think that has been so great about our industry is that the technology is there to allow nearly every bank to offer the same suite of products that the very largest banks want to offer,” he says. “We’ve always had a philosophy in our bank that no one should have to take a step backwards in products and services to bank with us versus banking with Wells Fargo or U.S. Bank. Our industry has made that technology affordable enough that most banks can make that choice and we certainly have.”
Gothenburg State has one branch at Brady, a few miles west on Interstate 80. As for additional branches or acquisitions, “That will depend a great deal on what I’ll call the ‘next management team’ wants to do,” he says. “I think we clearly have to have our eyes open for opportunity. But our industry has changed so much with the technology, remote capture, the Internet and all the electronics that are out there today, you can be competitive and expand your market area without necessarily establishing brick and mortar branches.”
Williams would never say community banking is for the faint of heart. “I think people react in one of three ways when they are given difficult situations like we have right now,” he suggests. “They quit, they blame or they step up and they accept responsibility and work for positive change. The plain fact is, we all have to recognize we are custodians of our industry. And it’s our responsibility to step up.”
Banking likely will not be the same in the future as it has been in the past, in his view, but it will surely survive; how and in what form will depend on bankers’ willingness to make a commitment.
“What I would ask bankers to do is step up,” Williams concludes. “Don’t step to the side and don’t step back. Leaders don’t take credit, leaders accept responsibility.”
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) October 2012 by BankNews Media