Since the advent of Cyber Monday in 2005, online shopping has exploded. According to John Sileo, a leading expert on identity theft, online shopping can be routine and safe as long as you follow a few simple rules. One rule he doesn’t explicitly mention in the above-mentioned article is using Mastercard SecureCode to protect online purchases. SecureCode is a program created by MasterCard that allows debit and credit card holders to register their cards in order to add another layer of protection to online shopping. Once a card is registered, purchases made at participating merchants automatically produce an online receipt and require cardholders to enter their personal “secure” code. If a code isn’t entered, the purchase can not be made.
Spending a few minutes registering your MasterCard debit or credit card can provide significant peace of mind. Visit First National Bank or MasterCard’s website for more information.
Add this step to other precautions mentioned by Sileo, and you’ll be able to shop online with confidence.
…don’t build a new branch, just pay me a higher interest rate!!”
I’ve heard this statement a few times since First National Bank announced it will be building a new branch on Trenton Avenue in Findlay. On the surface, it’s a fair question and there is logic behind the question that might go something like this: “It takes a lot of money to expand and build a new building. First National Bank is building a new building so they must have a lot of money. Wait a minute, if they have all that money, why don’t they just raise my rates so I can actually make something on my deposits? Typical bankers!”
This is a logical question, but it is missing a key ingredient that explains why we’re building and not paying higher interest rates: supply and demand. The interest we pay on CD’s and deposits has a direct correlation to supply and demand. If we have a large demand for loans—in other words people and small businesses are growing and need financing—we also need to have deposits so that we have funds to loan. When we need deposits, we pay higher rates to attract those dollars. At the moment, the Bank (and the rest of the banking industry) does not have a large demand for loans in large part due to the stagnant economy.
We also have a huge supply of deposits right now, in large part because people are saving more, spending less, putting their money somewhere safe, and reducing debt. When we have excess deposits and loan demand is low we can only invest our cash safely at a rate of around .15%. If we’re only earning .15%, our margin is negligible and doesn’t provide much of an incentive to invest in securities or pay a premium on deposits. We would just be losing money on those higher paying deposits: not a good way to run any business. So the short answer to the statement above is that the rates we pay are a reflection of supply and demand and are also reflective of the return we can currently get on our own investments.
Another point to consider is that the new branch is an investment and a use for the Bank’s cash. Instead of taking profits to build a branch, we are taking excess cash and investing in buildings instead of loans. Since the overnight fed funds investments only earn us .15%, and we have plenty of excess cash, we can take some of our dollars and put them into buildings at a relatively low cost considering the alternative is to take those dollars right now and make .15%. It is a very inexpensive way to grow moderately over the next few years and hopefully generate nice income for our shareholders. We do anticipate the branch will create additional demand for loans and will eventually put an upward pressure on deposit rates. So, according to our logic, building a branch should actually cause deposit rates to go up, albeit over a period of time.
Finally, consider our regulatory burden. At this point we have no idea how much the Dodd-Frank bill is going to cost us but we do know it will be expensive. These regulatory costs—and other fixed costs—can be spread over a larger base (with the new branch) and increase our operational efficiency. Being more efficient is another way for us to save money, allowing us to pass savings on to our customers. If we do not become more operationally efficient, it will put additional downward pressure on rates because it will be more expensive for us to operate.
So the 30 second summary of all this is as follows: “Our new branch is an investment in the future. We currently have the excess cash to invest in our future through construction and hopefully spread our fixed costs over a larger base. This should allow us to be more competitive in the future as the economy improves. This will ultimately provide our customer with a better return. The hope is also to better serve our current customer base with the new location and better serve Findlay and the surrounding area with two branches instead of one.”
I was at a bank product conference a couple weeks ago and heard this mantra over and over again: “people feel like they are giving something up in order to bank with a community bank.”
I’ve never really looked at community banking in this light because I work at the Bank. I know which products and services I need and First National has all of them. But, I suppose if you see banking as a commodity and you’re used to seeing ads for Chase/Bank of America/Wells Fargo and all the great products they offer, then perception is reality.
So, help me out. What is your perception of community banking compared with “mega” banks?
This week First National Bank of Pandora is celebrating the 20th anniversary of its Bluffton branch. First National has been around since 1919 in Pandora, and the Bluffton office has been a community staple since 1990. The branch is celebrating all week long by offering various specials, giving away coupons donated by local businesses, and having a cupcake reception on Friday, August 27.
Thanks to all who have supported First National over the years and thanks for making the Bank and the Bluffton office an ongoing success. Please stop by the office anytime this week and celebrate with us.
Given that First National Bank celebrated its 90th Anniversary last year and the Bank’s Bluffton Branch celebrates its 20th Anniversary in August of this year, I thought it would be appropriate to take a look back in time. How did First National get started, and what principles can the Bank point to for its direction and philosophy?
Without getting bogged down with too many details, here are the basics. The idea for a Pandora bank apparently came from two local businessmen, J.A. Huffman and C. Henry Smith. The Bank officially opened its doors on June 19, 1919, in Pandora, OH. The bank had 30 original shareholders and 7 board members. In 1922, the Bank merged with the Farmers Bank Company, also a Pandora institution. 35 years later, Huffman published a booklet celebrating the history of the bank to date. The booklet, “The Story of a Better Bank,” identified Huffman and Smith’s secrets to successful banking. Their three main tenets are as follows:
A good bank must be owned and operated largely by the people of the community, themselves.
A good and successful bank can be organized only where there are strong and constant economic resources.
That the success of a rural bank can only be assured by community loyalty, sustained by a high-grade citizenship, supported by morals and religion.
According to Huffman, the Pandora community satisfied each of these ideas and First National was able to establish itself as a viable community bank. And now, the communities of Findlay and Bluffton also fit the model established by the Pandora community. The Bank is still locally owned by shareholders and all of the Bank’s employees live in the local area. In spite of numerous economic challenges over the years, this corner of northwest Ohio has managed to remain relatively strong and there are constant economic resources—farming, manufacturing, higher education, to name a few—to support the Bank and the community. And finally, the communities of Pandora, Findlay, and Bluffton have been loyal to First National Bank and have supported its growth. Employees and clients alike have sustained the Bank by prescribing to Huffman’s “high-grade citizenship.” This may sound a little old-fashioned, but being old-fashioned may not be all bad.
First, a brief history to get this blog started…I didn’t really plan to be a banker. I stumbled onto the scene and ultimately have a group of angry “soccer moms” to thank for landing my first banking job. My career path can probably be chalked up to poor career planning. Graduating with my undergraduate English degree at Anderson University in Anderson, Indiana, did not steer me in a particular direction, and I didn’t spend enough time in the Career Development Center to come out of school with a good plan. Mike Baker, who was President of Madison Community Bank in Anderson in 2002, saw me surrounded by angry parents at a local soccer tournament I was helping to coordinate. He apparently thought I handled the heated exchange well enough to also calm down potentially disgruntled bank clients and said if I ever needed a job to apply at Madison Community. Because of my aforementioned career planning, I did eventually find my way to the bank during my senior year and the rest really is history.
I spent four years learning the basics of banking. My job titles included teller, customer service representative, Manager in Training, Branch Manager, and Commercial Lender. I accepted customer deposits, opened new accounts, made consumer and commercial loans, and as a manager supervised a modest branch staff. I worked full-time at six different branches in three different towns over the course of four years. I learned from some great community bankers including Mike Baker, Senior Lender Kirk Klabunde, and once retired John May, who will probably never officially retire again.
In 2006, I moved back home to Bluffton, Ohio, and began working at First National Bank of Pandora as a Commercial Lender. I typically serve small businesses in Bluffton and the surrounding communities. It was probably at this point that I began to embrace the mentality of a community banker. I am personally invested in the community and I want to see Bluffton grow and continue to be a great place to live and raise a family. Although my wife, Renee, and I never planned to return to Bluffton, we’re glad we did. I have enjoyed coming back to my hometown and seeing it from a fresh perspective. It is inspiring to see how local entrepreneurs have contributed to the growth and prosperity of Bluffton, and working closely with small business has given me an even greater appreciation for the commitment shown by these individuals. Even though the part I play as a banker was and is relatively small, working with local business owners and seeing them grow and succeed is very rewarding and continues to be one of the best parts of my community banking career.
This weekly blog will hopefully paint an accurate picture of community banking, both locally and across the industry and will give me a chance to share banking insights, helpful tips, First National Bank activities, and hopefully some entertaining reading.