By Drew Donnelly
ROAA in 2015: 3.28 percent
Assets: $80 million
Retail location: One
The State Bank of Wheaton is located near the borders of Minnesota, North Dakota and South Dakota. It is in a very rural part of the state of Minnesota. Wheaton has a population of 1,400, and our entire county has a population of less than 3,400. Not only is Traverse County one of the most sparsely populated counties in the United States, our population is also among the oldest. Needless to say, the demographics are working against us.
Three factors played significant roles in our community bank’s progress last year: lending, efficiency and recoveries. We were able to increase our net interest margin through a combination of increased loan volume (83 percent loan-asset ratio) and pricing. Pricing our agriculture loans according to risk, while monitoring competition, played an important part in increasing our net interest income by 72 basis points. Our efficiency ratio (36 percent) improved primarily due to a reduction in employee costs and collection expenses.
Two senior officers retired in late 2014. Rather than automatically hire replacements, we carefully looked at what they were doing (and how) and determined our existing officers, consulted and additionally compensated, could handle the work. We have done this with the last four employees who either quit or retired. As long as we simply focus on delivering basic banking products and services, and not try to be everything to everybody, we can become very efficient.
Lastly, our loan collection expenses have finally dropped to a negligible figure as those efforts fractionally paid off through partial recoveries. Never did I imagine that it would take so long to wind down the problem loans of the Great Recession.
Two big industrywide issues we are facing, that are continually becoming ever bigger, are dealing effectively with cybersecurity and (of course) the “one-size-fits-all” regulatory mentality. The overwhelming amount of unnecessary regulation is driving many smaller banks to the breaking/selling point. Another issue, specific to us, is our small and shrinking employee pool. The amenities of life that so many people are accustomed to just do not exist here, and there aren’t too many people willing to live without them.
There are two items that set us apart from the two other banks in town. First, we are Wheaton’s only locally owned bank. It has remained family owned for three generations, beginning in 1937. Second, but by far most important, our bank staff is very friendly, experienced, smart and helpful. They are the reason for our successes and truly know our customers. Our advertising motto, “You know us—We know you,” is more than a motto to them.
As with all locally owned banks, it is the basis of our customer relationships. That still matters in Wheaton, Minn. That is what gives us our edge.
Drew Donnelly (firstname.lastname@example.org) is president and CEO of the State Bank of Wheaton. He has been with the bank since 1983 and owner since 1989.