Independent Banker - June 2020 - 19

Next: Banks are preparing for a future after LIBOR
Insurance companies are required to keep a large amount
of capital reserves, much of which is typically kept at large
banks. Naylor and his colleagues decided Medica's money
could do more good if it were distributed among community
banks as deposits.
" We did some research through the ICBM [Independent
Community Bankers of Minnesota], and that confi rmed that
the need exists in many parts of our state, " he says. " The
need for loans far outweighs the ability of those banks to
meet them. "
Community banks stepped up
Medica turned to ICBM for guidance on how to best spread
its assets among a large number of community banks across
the state of Minnesota.
" It was certainly a pleasant surprise when they called us, "
says ICBM president and CEO Jim Amundson. " I spent 25
years in community banking, so I had a good idea of what it
would take to pull this off . "
Amundson explained to Medica's leaders that the money
would have a greater impact if the insurer established direct
customer relationships with each bank, rather than having
the $20 million distributed through a brokered deposit relationship.
Medica could also maintain FDIC insurance on the
deposits if it limited each deposit to $250,000.
" Through my conversations with Medica, we established
an 18-month CD with a predetermined rate of 1.25%, "
Amundson says. " They could certainly earn a higher return
in another investment, but it's a favorable rate, and it's an
attractive rate for the banks. "
Medica distributed an application to ICBM members asking
about the economic conditions in their communities and
what they'd do with the deposit.
" The stories we heard would bring you to tears, " Naylor
says. " One community needed to update a day care facility.
Another said their Main Street was going to be closed for a
year due to construction, and this loan would help keep the
local diner and hardware store afl oat. "
Medica received 80 applications and approved every one
of them. " We didn't turn anyone away, " Naylor says. " We felt
the needs were so material. "
When that $20 million in deposits is distributed as loans,
it creates opportunity for local economic growth, Amundson
notes. That's a key goal of the program, but a side benefi t
to Medica is that it furthers the organization's mission of
improving community health.
" Our experience is that in times of need, a lot of folks
in a community turn to their community bank as a source
of funds, " Naylor says. " That's the hope of this program,
that Medica can help our neighbors in these communities.
" We're trying to get [large
organizations] to see the
public relations value and
the economic value, just in
the simple choice of where
you let your money sit. "
-Matt Doff ing, ICBM
And the return on the investment isn't the interest rate on
the CD, but the return on the health and quality of life of
those neighbors. "
'The best kind of donation'
Foresight Bank was one of the recipients. The $260 million-asset
community bank in Plainview, Minn., serves
farmers, as well as small businesses and local residents.
" This enables us to lend to every type of client that a community
bank lends to, " says Cassie Harrington, Foresight
Bank's president. " We're able to put that money to work
close to home. "
But Harrington sees potential benefi ts beyond the immediate
impact of the $250,000 in deposits it received. She
hopes other large organizations follow in Medica's footsteps.
" A lot of big companies and medium-sized companies
have a lot of liquidity, money that often just sits in large
banks, " Harrington says. " As community bankers, we have
to help these businesses and nonprofi ts by giving them an
alternative to keeping that money in big banks. "
Amundson confi rms that ICBM hopes to replicate Medica's
deposit program. While the association's primary focus
lately has been advocacy around community banks' COVID19
response, Amundson plans to ask Medica's leaders to
introduce him to leaders of other large organizations that
might follow suit once the pandemic has eased.
" We are holding this out as an example, " says Matt Doff -
ing, ICBM's vice president and director of marketing. " It's
the best kind of donation. You give your money to your local
community, but it never leaves your account. We're trying
to get them to see the public relations value and the economic
value, just in the simple choice of where you let your
money sit. "
Ed Avis is a writer in Illinois.
independentbanker.org Q 19
http://www.independentbanker.org
Independent Banker - June 2020

Table of Contents for the Digital Edition of Independent Banker - June 2020
