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Bob Rutten, president and CEO of the Citizens State Bank of Arlington, S.D., is the immediate past-chairman of the South Dakota Bankers Association. I had a chance to visit with him at the SDBA/NDBA convention last month in Fargo, N.D. Rutten is the kind of banker you rarely read about in the major newspapers, but he is kind of banker who characterizes the nature of community banking.

The state of South Dakota recently named Arlington, a town of 990 people, Community of the Year. Some of the good things going on in Arlington are the result of involvement by Rutten and his bank. One example is the town’s day care center. A few years ago, the town did an assessment of its needs and many of the families said they needed a day care center for their pre-school-age children.

Bob was among the group of citizens who formed a local corporation to start a day care center. Grant money was obtained, and the bank lent money to be used to upgrade the building identified for the center. Rutten said the business plan had the day care center barely breaking even if everything went right. “People ask, how do you finance that? Well, it was something we just had to do. That was three years ago and the loan is doing fine,” Rutten said.

Recently, the center borrowed a little more money to finish the building’s basement, which would allow the center to expand to host 39 kids. Rutten said everyone in the community benefits from the center, including the parents who use it and the employers who can hire those parents.

A year ago, after Rutten was installed SDBA chairman, the bank hosted an open house in his honor. “During the reception, with the lobby full of people, the doors open and in comes a group of toddlers from the day care center, carrying a banner that says ‘Thank you Mr. Rutten.’ The banner had handprints from the kids all over it,” Rutten shared. He said the banner is still hanging in the bank.

Read more about this enthusiastic community banker in the August 1 edition of NorthWestern Financial Review magazine.

The blogging bankers at Nicolet National Bank in Wisconsin have been on a roll over at The Vault lately. CEO Bob Atwell’s latest post addresses this month’s meeting between President Obama and a few of the country’s biggest bank CEOs. He makes some interesting points on too-big-to-fail, concluding that “centralized and politicized finance is financially and politically profitable for both politicians and financiers.” An excerpt:

“The pressing policy question is whether we are going to enact policies to ‘discourage and eliminate’ systemic risk or whether we are going to develop a ’super-regulator’ to ‘manage’ systemic risk. Policies designed to eliminate systemic risk will foster decentralization and force bubble manufacturers to raise private capital for their reindeer games. They’ll be small self-funded games if the private players have to fund them.  Those who want to ‘manage’ systemic risk will inevitably only further politicize finance. Megabankers and mega regulators will find the ‘management of systemic risk’ model mutually beneficial, to the detriment of the rest of us.”

Atwell mentions the president’s call to banks to lend. I have repeatedly heard bankers answer that saying, we will if a.) there’s a demand and b.) the person making the demand is creditworthy. Atwell notes that loan demand is down and should be. His reasons: 1.) People are deleveraging, not taking on new debt 2.) Bank capital is expensive right now, ergo so are bank loans 3.) Cheap cash is abundant but capital is tight. Check it out here.

Bloomberg profiles an Ohio auctioneer that is very busy after 140 bank failures this year. A repossessed Ferrari 360 Spider F1 from a closed bank in Colorado was among the “other assets” acquired by FDIC in a rash of receivership. FDIC picked up a rapper’s repossessed tour bus after an Atlanta bank failed. The smell of marijuana smoke saturated the upholstery, which had to be removed and replaced before the bus could be sold.

Steve Huston, president and CEO of BankWest in Rockford, Minn., was one of the 10 people who testified Tuesday at the Senate committee hearing conducted at the Minnesota State Capitol. His bank is located in Wright County, west of the Twin Cities where loan problems have been particularly acute given the very robust real estate activity that took place there a few years ago. Huston explained that banks don’t make bad loans, but that loans sometimes go bad.

He gave an example from another bank in his county. The owner of a bar and restaurant wanted to expand his business in 2005. The town had a major employer – a company that employed 1,200 people around the clock. At the end of each shift, many of those employees would stop into the bar/restaurant; business was good. It seemed like a good time to expand. Based on 2005 cash flow and modest growth projections, the owner obtained a loan from a local bank to construct a new building.

Huston explained that since then, the major employer has reduced employment to 200 people. No one stops into the restaurant after their shift anymore. The owner’s cash flow is no longer sufficient to cover the loan payments on the new building. For the bank, it is an impaired loan – a situation made worse by the fact that regulators require the bank to get a new appraisal of the building. The appraisal is partially based on comparables from other buildings in the area, which also have been negatively affected by the layoff of 1,000 people from the area’s major employer.

Huston then gave a second example. This one featured a husband, who worked at the major employer, and a wife, who ran a daycare center in their home. The housing market was strong in 2005 when they decided to move into a new house. The bank qualified them for a loan based on his income and her daycare revenue. Today, Huston explained, the husband is without a job and uncertain about when or if he will be called back to work. The wife’s daycare business is off substantially because many of the children she used to care for had parents at the major employer. They have all been laid off, too, so they no longer have need for daycare services. Huston said the couple can no longer afford to make mortgage payments; for the bank, that means another impaired loan as a new appraisal puts the value of the home at less than the loan amount.

Huston said neither of these loans was bad when it was made. “What I will submit to you is that it was not a risky loan when it was made. This was a good, sound loan. The bank that made these loans went through all the right procedures but it still has a problem today.”

Huston said that the media is really missing the point when it blames bankers for making bad loans.

“Traditional community bankers make loans to their neighbors in the community,” he said. “The problems we are having is because our communities are suffering. My bank will continue to make good loans. We don’t need more regulations or regulators to get our communities back on track.”

Here’s an interesting profile–well, more like a family drama– of Indiana banker Chuck Welter. His father, a car dealer, convinced him to come in on a bank deal in the early 1970s. The article summarizes the father’s vision: he “wouldn’t take no for an answer. He wanted to create a family business that would span the generations.”

After a rough start and then several years of steady success, Chuck Welter was fired “in 2006 by his own younger brother in part for hewing to traditional banking values during the subprime-mortgage mania— a stance that Chuck took in large part because he was old enough to remember the fallout from the last mania, the S&L crisis.” The family sold the bank over Welter’s objections.

Now Welter and his daughter are establishing a new bank.  Key quote from the article: “We used to struggle to explain to people the value of a community bank. I don’t think we’ll have to now.”

Read the whole thing.

Banks do more for their communities than almost any other kind of business. In NorthWestern Financial Review magazine, we regularly write about community outreach efforts conducted by banks. These are the kinds of stories that really don’t get printed elsewhere, so we are very pleased to fulfill this important role.

In the March 1 edition, which will be coming across your desk in about a week if you are a subscriber, you will find a roundup of several community bank initiatives. One is called the “Random Acts of Kindness” program, conducted by Choice Financial in Fargo, N.D. Employees at each of the bank’s locations are empowered to do things for people in their communities, regardless of whether they are bank customers. For example, one employee bought gas for someone they met at the gas station. On another day, bank employees served breakfast to people who showed up at the “Labor Ready” facility in downtown Fargo. Labor Ready is a business where individuals get in line in hopes of securing a job for the day.

We also write about First National Bank of North Platte, Neb., which is donating $250,000 over the next five years to help the local community college construct a new health education complex. The bank considers the community college system to be incredibly important to the area and is making a long-term commitment to it.  These are the kinds of commitments that sometimes get taken for granted, but each one should be highlighted because they all involve careful consideration by bank board members and management.

We highlight several other community bank initiatives in the March 1 edition as well.

At NorthWestern Financial Review, we are grateful for a banking industry which is so engaged in its community.

At least according to this seasonal send-up from Mike Steelman, chairman and CEO of Farmers & Merchants State Bank, Bushnell, Ill. And who could blame the jolly old elf, what with the high cost of reindeer feed, overdue toy payables and mounting expense for his elfin workforce?

If you scroll to the last page on the link you’ll find a fun and timely rendition of the holiday tune “Let it Snow” from bank employee Connie Morrow. Sample:

“Oh it dosen’t show signs of stopping,/With the dollar’s value flopping./We’re aware of your status quo./Yes we know, feeling low, let it go.”

Good fun.