NorthWesternFinancialReview.com Blog

Our Feb. 1 print edition of NorthWestern Financial Review features a cover story on the jobs outlook for banks and small businesses. I spoke with a range of recruiters, bank executives and small business contacts, trying to get a read on who may be hiring for what positions. The fourth paragraph of this Wells Fargo news release indicates that default and home-retention specialists are certainly in demand. Meanwhile, a recent survey by the Wisconsin Bankers Association indicates that 13 percent of respondents laid off bank employees in the second half of 2008, and 13.85 percent “plan to eliminate positions in the coming six months.” None of the respondents expected businesses in their respective communities to do much hiring.

Check out next week’s magazine for much more perspective on this topic.

Fourteen bankers met Friday morning with U.S. Rep. Keith Ellison, the congressman from Minneapolis who sits on the House Banking Committee. Marshall MacKay, president/CEO of the Independent Community Bankers of Minnesota, said Ellison is an advocate for the “little guy and he certainly sees community banks as the little guy.”

Tom Mork of Lakeview Bank in Lakeville, Minn., was one of the bankers participating in the 90-minute meeting, which took place in Ellison’s Minneapolis office. Mork is quoted in this article, which ran in Friday’s Washington Post and Saturday’s Minneapolis Star Tribune. Mork’s point about being asked to raise companion capital in order to obtain CPP money is astonishing. Other banks that have received funding have not been asked to raise additional capital in order to get the government money.

In last Thursday’s NorthWestern Financial Review E-news, I criticized this article, which ran in the Star Tribune on Jan. 18. The article paints a totally distorted view of community banking in the Upper Midwest. The assumptions made are completely off base. Anyone familiar with bank call reports knows you cannot make assumptions about the quality of a bank’s assets based on its portfolio of other real estate owned. The call reports do not reveal whether that real estate is generating income for the bank. Without that knowledge, it is impossible to make a meaningful assessment of the condition of the bank.

MacKay also was bothered by the article. He wrote this letter to the editor, which ran in Saturday’s edition of the newspaper.

By the time we get out of this recession, you know TARP is going to be a political quagmire. Many good banks have applied for money through the program, and there are good reasons for seeking additional capital. But I know that if I didn’t have a really good reason for seeking the money, I would avoid the program like the plague. This piece in the Wall Street Journal shows the program already is seriously compromised.

I had a chance to visit recently with Jerry Rossow, one of the premier bank marketers in the upper Midwest. He is president of Northern Lakes Marketing in Minnetonka, Minn. He works with many community banks. We talked about a wide range of marketing issues. Here was his response when I asked him what message a bank should try to communicate to the public, given the current difficult economy:

Bankers will want to make sure their staff can answer the question “is this bank safe?” That’s a question you are going to be getting from customers. We did some mystery shopping where we went into banks and posed that question to the greeter, receptionist or personal banker. None of them had an answer. Some of them said: “Well, I think it’s safe.  I feel my job is secure.”  They brought it down to the level of their own job, a personal level. Customers want a clear answer that their bank is safe and your employees really need to be ready to explain that.

Another thing customers want to hear is optimism. If the bank is full of gloom and doom, that won’t serve the customer very well. Customers already know about doom and gloom; they don’t want to hear that from their bank.  What people want to know is that it is banking as usual and that the bank is eager and ready and waiting. They want to know that the doors are wide open and everything is going along here just fine.  So, keep it bright and try to keep the staff well-trained in terms of having that enthusiasm. 

A lot of our reaction to a recession comes from our attitude. The customer’s sentiments matter a lot. If a customer feels depressed about the future, his behavior often translates into a self-fulfilling prophecy. So you want to show strength, because you can really affect how people feel and how they act.

Be sure to read more from the interview in the February 1 edition of NorthWestern Financial Review magazine.

OCC closed Berkeley, Ill.-based National Bank of Commerce Friday. Oak Brook-based Republic Bank of Chicago agreed to assume $402 million in deposits as well as some $366 million of the failed bank’s assets. Click to the FDIC release for more details.

If you have any doubts about government missteps creating the housing crisis that lead to the current recession, read this New York Times article, published Sept. 30, 1999. The article announces a move by Fannie Mae to ease credit requirements in order to boost home ownership rates among minorities and low-income consumers. The article notes that Fannie Mae was under pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.

I think these two paragraphs from the story are amazing:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

What lesson can we learn from this? Clearly, political pressures should not be applied to credit decisions, unless the politicians are ready to take the credit risk. We know now that even if the government isn’t ready to take the credit risk, it will end up with it.

Note: E. David Locke, chairman and CEO of McFarland State Bank, fronts our Jan. 15 print edition as our Banker of the Year. During a pre-Christmas interview at his bank in McFarland, Wis., Locke recounted several colorful career stories, including this one, in which he faced masked, gun-slinging bank robbers, prevented a kidnapping, shortchanged the thieves — and eventually went to meet one face to face.

Call it the impulsiveness of youth, but when masked gunmen burst into Godfrey State Bank pointing sawed-off shotguns and Tommy guns, David Locke was, as he says now, some 40 years later, a little annoyed.

“Part of you just gets mad,” he said.

Locke was the lead teller and had the keys to the vault that night. He complied when the man with the sawed-off shotgun poked it in Locke’s back and followed him to the vault. But once inside, Locke started by opening the collateral file, then the coin drawer. The thief let it be known that he wanted real money and threatened to “cut down” Locke, who acquiesced — kind of. Locke stalled around, taking his time in unloading a lock box of ones, fives and tens; he never did get to the stash of bigger bills. The thieves fled with more than $67,000, but the unopened lock box contained another $300,000.

“I just elected not to give it to them. How would they know what we had?” Locke said. “Robbers are there to get in and get out.”

But these robbers preferred to leave with a hostage, and they pointed a gun at Locke’s colleague, saying “you’re coming with us.”

“She had me by the arm, holding on for dear life, and she was really crying,” Locke said.

Locke stepped in front of the gun and told the assailants that his coworker wasn’t going anywhere but home that night. They left, and Locke ran out after them in time to see their license number. The car was stolen, but the thieves were eventually caught, tried and convicted.

Locke does not recommend his approach to other tellers. In fact the FBI investigator who first heard Locke’s story shook his head and said, “that was not wise.”

“When you’re young, 18 or 19 years old, you’re invincible; you think you can’t be hurt,” Locke said. “I would never advocate that now, but at that time, with that particular guy, it seemed like the thing to do.”

A few years later Locke was visiting his family in Illinois, near the site of the robbery. His sister said that one of the thieves was out of prison and working at a nearby hardware store. It was the one who had poked Locke with the gun and threatened to cut him in half.

Locke “wanted to see what he looked like without the holdup mask,” so he stopped in the store.

“I walked up behind him in an aisle, poked him in the back and said, hey, remember me?”

Read much more about David Locke’s career highlights in the Jan. 15 edition of NorthWestern Financial Review.

How bad is the recession? Certainly it is serious, but the media tends to make it sound a lot worse than it is. The Federal Reserve Bank of Minneapolis has created this web page to offer some perspective.

Data offered by the Fed show the depth and length of the past 10 recessions. In summary, the data show things are worse than they were in 2001 and 1991, but nearly as bad as they were in 1981 or 1960. Conditions are no where close to the terrible conditions of the 1930s or 1940s.

The Fed promises to keep the web page updated as new data become available.

Tom Herbst worked for Carl Pohlad for more than 40 years, retiring in 2005 as CEO of Pohlad’s Marquette Financial Companies. Herbst, who now lives in Florida, continues to serve on the company’s board of directors.

Herbst said he bought more than 100 banks with Pohlad over the years. “We did a lot of acquisitions,” Herbst explained in a telephone interview. “We liked to go out and meet with bankers; oftentimes we did it on Saturday.” Early in his career, they bought banks in Montana, Iowa, Wisconsin, Illinois and surrounding states.

“Carl and I would fly off to a town and negotiated a deal when we were there, oftentimes right on a sheet of paper. I can even remember a time where we bought a bank where he wrote the deal on the back of a napkin.

“This was back before due diligence was done as it is today,” Herbst said. “Times have changed. You met with the people in the bank, you talked about recent examinations and how things were going. Carl stuck to his word, and when he had a handshake, that was the deal.”

Pohlad was involved with several businesses in addition to banking, including bottling, transportation and real estate. Herbst explained that Pohlad maintained distinct business lines. “Their accounts weren’t even with our banks,” Herbst said.

Herbst said Pohlad had a good relationship with regulators. “That came about in 1982 when he bought the F&M Savings Bank in Minneapolis,” Herbst elaborated. “Here were multi-billion-dollar banks that were trying to buy it and in the end, our Marquette, which was maybe half-a-billion-dollar bank at the time, and we acquired it. We were a fraction of the size of these others and we are the ones that ultimately got it. I don’t know that the regulators initially wanted us to have it, but in the end we were just tenacious enough. We struck the deal and it worked out well. And it worked out well for the regulators.

“From that point, he built a reputation with the regulators in the different agencies. They called upon Carl quite often on transactions that were of significant size. They respected his ability and how he operated businesses. He was proud of that.”

Herbst said their biggest regret was a deal they were working in 1989 to buy two troubled bank holding companies in Texas: Texas American Bancshares, Inc., Fort Worth and National Bancshares Corp., of San Antonio. Pohlad and Herbst thought they had a deal but things fell through in the end. The acquisition would have added more than $7 billion to the Pohlad organization. “Those two organizations we thought we had bought and we didn’t end up getting them. And it wasn’t for anything we did wrong. That was probably my biggest disappointment,” he said.

“He’ll be missed by a lot of people,” Herbst summarized. “He loved banking and he loved people.”

Pohlad was on the cover of Commercial West, the predecessor to NorthWestern Financial Review, on August 4, 1973. He shared the cover with O. Jay Tomson, who was executive vice president at Marquette. The magazine was covering the opening of a new Marquette office in the brand new IDS Tower in the heart of downtown Minneapolis.

Today, Tomson is chairman of First Citizens National Bank in Mason City, Iowa. He worked with Pohlad for nearly five years.

“He was an extremely fair man to work for,” Tomson said. “He was pretty much laissez faire. He expected you to do your job and to consult with him. If I would come to him with something, he would say, ‘is this a policy question or is this something you should be taking care of?’ You learned very early what not to bother him about.

“If you wanted to see him, the best time to see him was 6:30 in the morning at the Minneapolis Athletic Club before his mind got cluttered with the cares of the day.

“He was a nice man to work for. He was helpful to me, when I left he was supportive of me.”

Pohlad was on the cover of November 20, 1993 edition of NorthWestern Financial Review. I remember visiting with Mr. Pohlad as we shot the photo in his office. He was always very gracious to us. My best memories of him, however, were covering some of the conferences the correspondent department at Marquette use to host for community bankers. At one such conference in the 1980s, Pohlad tossed baseballs out into the audience. One shot took out a few pieces of the glass chandelier in the ballroom. Pohlad laughed it off and everyone had a good time.

Carl Pohlad passed away Jan. 5 at the age of 93. His family issued this statement:

The following statement was issued today by Jim, Bob and Bill Pohlad, the three sons of Carl Pohlad:

Earlier today, our father, Carl Pohlad, passed away. We were all with him when he died. He has been resting peacefully in his home for the last several weeks.

Carl was the leader of our family as well as the builder and leader of our family businesses. We’ve loved and respected him and are enormously proud of his accomplishments. We will miss him deeply.

We greatly appreciate the support and prayers of our friends, colleagues, employees and community. We especially appreciate the support of our employees throughout the Pohlad family of companies at this difficult time. We want to reassure everyone that we will go forward – just as Dad would have wanted and as he has prepared us to do.

A complete biographical sketch of Carl Pohlad follows.

Carl Pohlad: Private Man, Public Figure

Carl Pohlad was a born entrepreneur. Throughout his life he combined a strong intuition, keen understanding of people, intense work ethic and abundant patience to become one of Minnesota’s most successful business owners. He was revered by his employees and respected by business colleagues around the country.

The Pohlad businesses encompass banking, financial services, beverage, entertainment, real estate and automotive industries, as well as ownership of the Minnesota Twins. His private companies employ 3,000 people across 33 states. They include: Marquette Financial Companies; Marquette Real Estate Group/United Properties/NorthMarq Real Estate Services/NorthMarq Capital/RJM Construction; River Road Entertainment; Twin Cities Automotive/Twin Cities BMW of Minnetonka/Coon Rapids Chrysler Jeep; Northern Lights Broadcasting/KTTB-FM (B96)/KRBI-AM; JB Hudson Jewelers; Marquette Technology Companies/Inetium/Arcadia Solutions/Avtex (all IT consulting companies); Acclaim Benefits; and the recently sold Stanton Group. The foundation Carl established with his family has given more than $100 million to the community.

Despite his success, Carl was regarded as a “regular guy.” He treated people from all walks of life with respect, retaining a soft spot for the little guy, and never forgetting his humble beginnings.

Carl was born in Valley Junction, Iowa on August 23, 1915. During Carl’s childhood his father was employed as a railroad brakeman and was often away. His mother was always helping others in need and working hard for the things the family of nine required. During the Depression all of the children helped make ends meet. Among his many jobs, Carl delivered the laundry his mother did for wealthy families and swept floors at a local bank.

An average student at best, he nonetheless excelled in history and spelling, leading to his life-long love of reading. An outstanding athlete, he learned from his coaches who were patient, wise, caring and focused. A classroom teacher whose discriminatory practice of separating students — by where they lived, how their parents earned a living, their ethnic heritage or the color of their skin — left a lasting impression on him.

Carl graduated from high school and attended Long Beach City College in Los Angeles and Gonzaga University in Spokane, Washington, both on football scholarships. But his part-time job collecting car loans was so successful he left Gonzaga one semester shy of completing his degree.

After Gonzaga, Carl moved to Dubuque, Iowa, and became a partner with his future brother-in-law Russell Stotesbery in the Federal Discount Corporation (FDC), which operated loan offices in Iowa, Minnesota, Wisconsin and Illinois.

In 1942, Carl’s career at FDC was interrupted when he was drafted into the U.S. Army. After basic training, he fought in France, Germany and Austria as a private and later as a second lieutenant. He was awarded two Bronze Stars, an Oak Leaf Cluster, and three Purple Hearts. After World War II, Carl returned to FDC and was promoted to general supervisor early in 1946, becoming an expert in reorganizing bank departments.

In the fall of 1946 while working in Minneapolis, Russell insisted that Carl and his brother, Harold, take two young women from Dubuque to the University of Iowa vs. University of Minnesota football game. Carl’s blind date with Eloise O’Rourke would last until the wee hours of the morning, long enough to fall in love. On April 22, 1947, they were married and began their married life in a small Dubuque apartment just around the corner from Eloise’s childhood home.

Eloise was the perfect partner for Carl. She enjoyed caring for their home, was very socially adept and completely supportive of her husband’s business interests. Their marriage was blessed with three sons: James O’Rourke, Robert Carl and William Michael in 1953, 1954 and 1955 respectively. While Carl moved in ever-widening circles out into the world, Eloise kept her sons close and unspoiled by their family’s growing notoriety. After Eloise’s death on November 20, 2003, Carl would mourn her for the rest of his life.

Banking and financial services

In 1952, Carl moved to Minneapolis to work at Marquette National Bank. Three years later, after the sudden death of Russell, Carl assumed the presidency of the bank and its holding company, Bank Shares, Inc. During the next three decades under Carl’s leadership, the bank grew through the acquisition of a number of community banks throughout the Midwest.

In 1982, Marquette acquired Farmers & Mechanics Savings and Loan, an unusual merger of a commercial bank and a savings and loan that established Carl as a major player in the independent banking industry. In 1992, he sold Marquette National Bank to First Bank. After the sale, Carl created a new private bank that catered to business owners, Marquette Capital Bank. Marquette also added consumer/commercial branches that offered customers the personal attention of smaller, neighborhood banks combined with big bank products and services.

Carl envisioned a banking enterprise stretching from Minnesota in the north to Texas in the south. Marquette Bancshares acquired several community banks in and around Dallas and Houston. Marquette Bancshares also would diversify by purchasing small commercial, consumer and specialty finance companies under the umbrella organization of Marquette Financial Companies (MFC).

In 2001, Carl was once again approached by an interested buyer. Typical of many of Carl’s deals, the transaction began with a phone call, this time from Jim Campbell, then president of Wells Fargo Minnesota. By August, the deal was finalized to sell Carl’s major bank holdings (108 offices and $5.6 billion in assets) to Wells Fargo.

MFC then expanded in businesses not included in the sale — its specialty finance companies and Meridian Bank in Phoenix, Arizona. MFC also acquired new specialty finance companies that fit its strong risk management and entrepreneurial culture and launched de novo start-ups into market opportunities.

Business diversification

Banking may have been Carl’s first and most important business, but he began to diversify early in his career. Investments in transit followed Carl’s service on a Governor’s Commission charged with saving Twin City Rapid Transit (TCRT). After helping resolve TCRT issues, Carl served on the board of its parent company, Minnesota Enterprises Incorporated (MEI). Carl was instrumental in helping MEI acquire additional transit assets, including the West Towns Bus Company of Chicago and Trans Texas Airlines.

Carl entered the bottling business with a 1962 investment in the Minneapolis/St. Paul Pepsi bottling plant. Carl went on to acquire several bottling plants throughout the U.S., which were later purchased by MEI Corporation.

MEI Corp also would own a wine distribution company, restaurants and snack manufacturing companies, but the bottling business would provide the foundation for its success. In 1983 MEI Corp would become a Fortune 500 company for the first time. A few years later, in 1986, MEI Corp sold and merged most of its bottling assets with PepsiCo, Inc.

A few years later, Carl began to acquire Pepsi bottling businesses again. Those operations, through a series of mergers, grew to later become a highly successful public company, PepsiAmericas, which is a Fortune 500 company with operations in the United States, Central and Eastern Europe and the Caribbean.

In addition to bottling and real estate, Carl had long been interested in professional sports – a natural extension of his own team experience and competitive spirit. With his 1984 purchase of the Minnesota Twins, Carl made a public vow to revitalize the ailing franchise, saying, “I think the Twins can only go one way – up.” In 1986, he told the press, “I don’t find it easy to lose, and I don’t propose to continue.” One year later, the Twins were World Champions – a feat the team repeated again in 1991.

The Pohlad legacy

When all is said and done, Carl Pohlad was a regular guy from the wrong side of the tracks who made it to the big league.

He received many honors throughout his life: an honorary doctor of law degree from his alma mater, Gonzaga University; Minnesota Business Hall of Fame; American Academy of Achievement; Great American Award from B’nai B’rith International; City of Minneapolis, Distinguished Services Award; Minnesota Executive Hall of Fame; and the Horatio Alger Award, to name a few.

Carl certainly will be remembered in different ways. Those closest to him will remember his quiet strength, determination and natural warmth. Those who met him will remember his infectious smile, how he eagerly made their acquaintance and made them feel special in the process.

Baseball fans will remember him as the owner of the only Minnesota professional sports team to win a world championship – twice. Many Minnesotans will view the new Target Field as his legacy, with reactions that run the full spectrum.

Nonprofit community organizations will remember him for generous financial support from both MFC and the Pohlad Family Foundation, and in-kind community support from the Minnesota Twins.

Business leaders will remember him as a man who made banking history, who took pleasure in their accomplishments as well as his own. Those who were involved in negotiations will remember his patience to make the best of every deal. In the words of Don Benson, one of his closest associates, “Carl sees possibilities in a situation that no one else sees.”

The Pohlad business holdings will continue under the stewardship of his three sons: James, director and EVP of Marquette Financial Companies, director and VP of Pohlad Companies, member, executive committee of the Minnesota Twins; Robert, chairman and CEO of PepsiAmericas; and William, CEO of River Road Entertainment and president of Pohlad Family Foundation. Each company’s management team, many comprised of long-term associates, remains in place. And a third generation of Pohlads is beginning to work in the family business.

Carl was preceded in death by his wife of 56 years, Eloise; his parents, Mary and Michael Pohlad, and six of his seven siblings. He is survived by his sons Jim, Bob and Bill Pohlad, their wives Donna, Becky and Michelle respectively, and seven grandchildren Tom (and wife Lindsay), Joe, Chris, Allie, Charlie, Kiki and Oliver.