5 Reasons to Bank “Local”: The Benefits of Community Banking or Joining a Credit Union

Why don’t more people bank with credit unions? The answer should be obvious, but having banked with a large regional bank for decades, and after working on behalf of large lending institutions throughout the years, the question only recently arose after an experience I had negotiating a commercial loan agreement or a client, whose loan matured with a gigantic national bank. Let’s just say that I didn’t know that people could have phone extenstions with 12 digits. Here are five reasons to consider banking with a community bank or a credit union.

1. Go Local. Everything is going “local” these days. There is the “farm to table” movement, the “shop local” movement, and now, the “bank local” movement. Credit unions and community banks are formed and managed by local leaders and people who live in your community. Banking is more personal. Compare and contrast this with having to press that 12 digit phone extension belonging to “Mike No Last Name” who sits on the other side of the country. He either does not listen to messages, or chooses not to return phone calls.

2. Smaller hierarchy. Leadership in smaller institutions is closer to their customers / members and therefore business decisions on consumer or business loans can be secured faster and often with more flexibility. There is also more accountability with your local banker. Resolving problems is easier at a local level. Branch managers at large institutions have little authority to make decisions.

3. Technology. With the internet, smaller institutions now have the convenient banking technology once the domain of larger banks. In many communities, credit unions and community banks pool their resources and share in a network of mortgage, ATMs, or on-line banking platforms. Depositors and loan applicants can and do, benefit from a combination of lending technology with flexible and hands- on leadership.

4. Lower fees. Smaller institutions have lower fees. For instance, credit unions are “non- profit” and their members benefit from low cost and lower expenses. where mortgage and loan rates are usually lower. Compare this with a large banks expenses: large compensation plans, extensive bank branch operations, and big advertising budgets that are funded by charging consumers with higher loan rates and fees.

5. Insurance. Member deposits with credit unions are insured by the National Credit Union Share Insurance Fund. Deposits at community banks are insured by the FDIC. Federal and state regulatory oversight is as vigilant as that of larger banks. There is little distinction between the amount of protection and insurance for depositors of either size institution, so depositors at small should have little to worry about provided that their savings and checking accounts are within the insurable limits.

Unique Window of Opportunity Today For Smart Community Banks

The catastrophe brutalizing the banking industry is at the forefront of both the news and main street conversations around the world. A Gallup survey measuring consumer confidence in banks taken in late September showed an unprecedented drop from 40% in mid-July and is the lowest level in thirty years. Only 21% of consumers polled are confident in U.S. banks today. This erosion of confidence extends to the wealthy class as well. Among affluent investors, confidence fell in September to its lowest mark ever, since the Chicago research company Spectrem Group’s monthly survey began. Its Affluent Investor Index fell 9 points to minus 22. The decline in the index, which measures the investment outlook of households with $500,000 or more of investable assets, put it below its previous record low of minus 20, reached six months ago last March [2008].

The Need for Communication.

WealthBriefing’s Weekly Poll for the week of October 13 indicates 83% of respondents believe that during difficult market conditions wealth managers should report more frequently to clients.

Unique Opportunity for Community Banks.

In circumstances like this, we see banks becoming too cautious and complacent. This situation has created a window of opportunity for community banks that have escaped the sub-prime mess. Rarely do they get a situation where they can have a clear advantage competing against the Big Guys. Now is the time to become visible when competing banks are invisible or crippled. This is a unique moment in which they can more easily convince small and mid-sized businesses to switch from troubled banks. But they must be visible and they must inspire confidence. And it will not happen by default.

The good news is that many competing banks have reduced their marketing and advertising investment. Therefore, aggressive advertising in such a market means one thing: Unique Opportunity. Marketing dollars will go further and results will come at a quicker rate during this time. Doing nothing means missing this one-time opportunity.

Now is the time to go the extra mile to make sure consumers know you’re financially sound.

Again, while Gallup’s findings for national bank confidence are down from mid-July, dropping from 40% to 21%, they show that local bank confidence dropped from 80% to a much healthier 66% during that same period.

A local community bank can position itself as the caregiver, “taking care of you and your money.” In times like this, it works to their benefit.

The key is to maintain trust. The whole concept of that moment of ‘wow’ between employees and customers at the local bank level means they have to manage it, believe in it, instill it and train with it in mind. The bank must make sure they’re living at that local level.

The general public has all banks in the same basket.

The general population doesn’t make the distinction between Wall Street investment banks and neighborhood banks or deposit banks. Therefore a local bank with open and direct communication with customers is the right strategy. To be silent is a mistake.

A community bank that’s in good shape should proactively communicate a reassuring message to customers and take advantage of this window of opportunity. The objective should be to establish the bank as a leader in the market, tell our customers the facts and give them solid reassurance. Be the trusted information resource for customers. Time is of the essence. They must act now and what they will see is a significant increase in deposits and loan requests.

Steven Sessions has evaluated and developed successful business strategies based on over 25 years of experience working directly with CEOs and Boards of Directors. He has created and managed distinctive branding and effective marketing materials for industry leading companies as well as start-ups and mid-size companies. And we’ve created effective advertising and marketing materials for those companies as well.

Community Banks Support Local History and Attract New Customers

Banks have been underwriting community events for years. Someone makes the case for support, the bank writes a check, its logo goes on the marketing materials, and they’re done.

But banks really could do more to cement the ties they have with existing customers and attract new ones. Historical community events, especially, provide a low cost opportunity – compared to other forms of marketing and advertising – to win over thousands of people. Lots of people LOVE their local history, and it’s been my experience in New England that businesses benefit when they support that history.

Ipswich, MA
Last year, during 2009, I witnessed two local banks in the small community of Ipswich, Massachusetts, go the extra mile during the town’s 375th anniversary. As the event promoter, I was in a position to observe what they did up close and I paid attention – especially to how people responded to the banks’ efforts.

Remember that in 2009, everyone was livid about Wall Street, bank failures, obscene CEO pay, and bailouts. It was the perfect time for a locally owned bank, with board members and employees who lived in the community, to send very strong messages: “We are YOUR community bank. We can be trusted. You know us. Get away from those failing, impersonal, national banks that have destroyed our economy and put your money HERE where we will take of it and respect you.”

Ipswich’s banks were asked to support the town’s 375th anniversary celebration, and two agreed – but they both insisted on doing more than writing a check. They wanted their people to be involved.

The First National Bank of Ipswich
The First National Bank of Ipswich underwrote the kick-off event for the 375th Anniversary and established their high level of commitment to town history right from the beginning. At the event, their people managed the ticket sales, donations, and the auction, and generally made the evening a success for the Anniversary Committee and all who attended.

The bank also assigned its key community relations person to co-chair the 375th Anniversary Parade – which is a crushing amount of work if you’ve never done it. She persuaded all kinds of groups to participate – schools, town departments, civic clubs, the military, bands, reenactors – you name it. Right there, the bank had an opportunity/excuse to cold call all kinds of people who now know about The First National Bank of Ipswich through a personal, positive interaction and not the usual kind of cold call.

First National also exhibited collection items from the town’s Historical Society in the bank, and encouraged people to visit and support the Society. In fact, that’s something the bank does year-round. They also support the Historical Society’s monthly lecture series – and “everyone” knows it. They happen to own works of art by Ipswich’s most famous native son, the 19th-century artist Arthur Wesley Dow, which people are able to see at any time in the bank. Local history plays a huge role in their branding, marketing, and community outreach.

The Institution for Savings
The other bank that got involved with the 375th Anniversary, the Institution for Savings, underwrote a specific event during the yearlong celebration and formed a community/bank staff committee to plan, promote, and implement their event. It was the first-ever “International Ipswich Day,” allowing the town to celebrate its multi-ethnic history and present-day diverse population with food, music, dance, kids’ activities, and displays. Here again, bank staff had a perfect opportunity to cold call dozens of community groups to put this all together, AND to meet hundreds more people at the event itself.

On the day of the event, bank staff dressed in matching polo shirts to look like a team, and offered free popcorn. They gave out promotional items like reusable water bottles (with their logo), but one thing they did that was just brilliant was to distribute workbooks for kids – fun, colorfully designed books that taught young people why and how they should save money, how to open a bank account, and what banks were all about. The book provided step-by-step instructions and worksheets. What an effective way to attract new customers for, potentially, a lifetime (and their parents)!

The Institution for Savings also sponsored colorful lamppost banners throughout downtown Ipswich, making their support of town history highly visible. The banners were up for at least six months. That’s a whole lot of repeat advertising for very short money, not to mention “warm and fuzzy” feelings from grateful townspeople. Very smart!

For short money…
These are just two examples of local community banks that “get it” history-wise. For a comparatively small amount of marketing and advertising dollars, they received significant visibility throughout 2009 as proud supporters of Ipswich history. Their logos were everywhere. Their people were everywhere. 375th promotional materials were all over their lobbies and street front windows. Residents noticed, appreciated – and in case after case moved their money out of the big national banks.

Wouldn’t you?

Bonnie Hurd Smith is the President and CEO of History Smiths, a marketing company that works with businesses in historical communities to incorporate history into their branding and marketing – their own history, and their community’s. Bonnie is also a cultural tourism professional, historian, and author.

Need Bank Financing? Consider CDCs or Community Banks

Community Development Companies (CDCs).

CDCs provide 40% of the SBA 504 owner-occupied real estate loan program financing to entities that qualify. This is mentioned here because the 504 program is an SBA-guaranteed loan program. The CDC funds 40%, the bank provides 50% of the financing, and the business or its owner typically contributes the remaining 10%. CDCs are regional (multi-state) or community-based (county or counties or state) development organizations licensed by the SBA. To view a list of CDCs in your area, go to the SBA website and search for the CDC member directory. CDCs make loans under the SBA 504 loan program to assist small businesses in acquiring or building owner-occupied real estate. The CDC processes, approves, and closes then loan. After closing, the CDC services the loan.

The SBA 504 program mandates the achievement of certain economic development requirements – typically job and income creation – through the use of its guarantees. Hence, CDCs, whose mission is tied to economic development, administer this program and lends to those businesses that help it achieve its objectives. Economic development and impact requirements vary by CDC. The CDC acts as the direct lender for the loan program and provides the funding through bond issuance.

Community banks.

These banks tend to be more aggressive than national banks in working with small businesses. They generally operate in one region of a state, hence the name “community” bank. They are small, nimble, and generally organized to serve the needs of their communities. Some focus on consumers in the community – providing consumer banking, loans, and mortgages. Others focus on business – providing loans for a number of businesses and projects.

Community banks have a much simpler structure than large conglomerate banks such as Bank of America, Wells Fargo, or Wachovia. They have deposits, loans, and perhaps money market accounts and CDs. They are usually hungry to build assets. A few cater to high net worth individuals but most pursue businesses as a means of building assets. Most corporations bank with the national conglomerates for a number of reasons. As a result, many community banks pursue small businesses and small business loans aggressively.

When to use community banks:

If you are a small business that primarily processes customer payments out of one location and are looking to establish or build upon a strong local presence or local relationships, community banks are for you. Find out the lending limits of the community banks in your area. The best scenario is to identify a community bank at which you can establish and build a relationship that grows as you grow. You may only need a $250,000 loan now, but in two years you may need a $2.5 Million loan. If your bank’s allowed loan size can grow with you, you have room to grow without needing to change banks.

To help build the relationship, you place your deposits with that bank. Make sure you update your banker periodically. The more they know about your business, the higher their comfort level, and the easier it is for you to increase your loan size or navigate financial problems should they arise.

Resources.

The SBA state-by-state list of top 10 lenders to small businesses typically includes a large number of community banks. Read your community business paper such as the Business Chronicle published in most major cities. Community banks that lend significantly to small businesses garner repeated attention in the business press.

Excerpted from Solving the Capital Equation: Financing Solutions for Small Businesses pp 17-18 ©2007 Tiffany C. Wright. Used with permission of Tiffany C. Wright. All rights reserved. Order from Amazon. Tiffany C. Wright is the president of The Resourceful CEO. In the past 5 years she’s helped companies obtain over $31 million in business financing & funding.

Community Banks Offer Several Advantages

Quick credit decisions and local ownership combined with personal service and reinvestment in the community are among the top reasons to choose a community bank over a large, commercial financial institution.

“When it comes to loans, decision makers are on-site, accessible and ready to help customers through the lending process quickly and efficiently,” says one bank representative. “They’re committed to knowing their customers’ personal situations and recommending products or services that are tailored to those specific needs.”

According to the Independent Community Bankers of America (ICBA), there are nearly 7,000 community banks across the United States. Located in small rural towns, suburbia and large-city neighborhoods, they improve this country’s overall economy and communities by lending to local customers and funding nearly 60% of all small businesses under $1 million.

Not only do consumers have a wide array of products and services to choose from when they utilize a smaller bank, but they also benefit from a number of other advantages. These include:

Personal service: When consumers call their local community bank, they won’t be talking to someone halfway around the world. Instead, they’ll be talking to a banker who resides and works in the same community they do. Often, long-term relationships develop between these institutions and their customers. Smaller local banks often serve several generations of families. These long-standing relationships help to cultivate deep bonds of trust between community bankers and their customers.

Positive local economic impact: Community banks lend locally, where their customers live and work, and this helps keep local communities vibrant and growing. Additionally, they channel most of their loans to the neighborhoods where their depositors live. This is another important catalyst for keeping local communities healthy. “A community bank is a microcosm of the health of the community it’s doing business in,” says one local bank vice-president. “If the community bank is struggling, the community is also struggling.”

Tax revenue: Because community banks pay federal, state and local taxes, they are an important supporter of their community’s local infrastructure, according to the ICBA.

Relationships and expertise: Because community bankers live and work in the same localities as their customers, they understand their local marketplace and the ups and downs of economic cycles in their community. Bankers at smaller banks are also more likely to consider good character and family history when making decisions versus making judgments just by looking at numbers on a computer spreadsheet or credit report. At a smaller, local bank, loyalty is highly valued.

Cost savings: According to the ICBA, research has shown that average fees for checking accounts and other depository services are lower at community banks than large, multi-state institutions.

Community involvement: Community banks are often among the first businesses in a community to sponsor a softball team, donate time and money to local charities and causes or to meet other needs as they arise. Bankers at smaller banks are typically committed to helping their neighbors, in turn making their local communities a better place to live.

The next time you’re planning to open a new savings or checking account or need a mortgage, car loan or home-equity loan, consider utilizing a smaller, local bank.

History of Oil and Gas in Nigeria

The early history (1908 – 1960) – The history of oil exploration in Nigeria dates back to 1908 when Nigerian Bitumen Corporation conducted exploratory work in the country; however, the firm left the country at the onset of World War I. Thereafter, license was given to D’Arcy Exploration Company and Whitehall Petroleum. However, both companies did not find oil of commercial value and returned their licenses. In 1923 new license covering 357,000 sq. miles was given to a new firm called Shell D’arcy Petroleum Development Company of Nigeria. The new firm was a consortium of Shell and British Petroleum (then known as Anglo-Iranian). The company began exploratory work in 1937. The consortium was granted license to explore oil all over the territory of Nigeria but in 1951 and then between 1955 and 1957, the acreage allotted to the company in the original license was reduced. Drilling activities started in 1951 and the first test well was drilled in Owerri area. Shell-BP in the pursuit of commercially available petroleum found oil in Oloibiri, Nigeria in 1956 and came on stream producing 5,100 bpd. Production of crude oil began in 1957 and in 1960, a total of 847,000 tonnes of crude oil was exported.

Major Dates in Early History of Nigerian Oil and Gas Industry

1908: Nigerian Bitumen Co. & British Colonial Petroleum commenced operations around Okitipupa.

1938: Shell D’ Arcy granted Exploration license to prospect for oil throughout Nigeria.

1955: Mobil Oil Corporation started operations in Nigeria.

1956: First successful well drilled at Oloibiri by Shell D’Arcy

1956: Changed name to Shell-BP Petroleum Development Company of Nigeria Limited.

1958: First shipment of oil from Nigeria.

1960: Other non-British firms were granted license to explore for oil like Tenneco

The Mid History (1961 – 1990) – at this period, Nigeria was just understanding its latest grounds as an oil exporter and developing its export market. It was during this time that commercial exploitation of the country’s reserves began with the Nigerian Government introducing its first regulations governing the taxation of oil industry profits in which the profits were to be shared 50-50 between the government and the oil companies. By the later part of the 1960s, the Nigerian Government considered ways to utilize the resource being exploited by the western countries to develop the country and with this thought formulated its first agreement for taking equity in one of the producing companies, the Nigerian Agip Oil Company, jointly owned by Agip of Italy and Phillips of the United States. The option to take up an equity stake-in effect the first step toward the creation of the NNPC-was not, however, exercised until April 1971. In 1970, the end of the Biafran war coincided with the rise in the world oil price, and Nigeria was able to reap instant riches from its oil production.

Major Dates in Mid History of Nigerian Oil and Gas Industry

1961: Shell’s Bonny Terminal was commissioned; Texaco Overseas started operations in Nigeria.

1962: Elf started operations in Nigeria. (As Safrap), Nigeria Agip Oil Company started operations in Nigeria

1963: Elf discovered Obagi field and Ubata gas field, Gulf’s first production

1965: Agip found its first oil at Ebocha, Phillips Oil Company started operations in then Bendel State

1966: Elf started production in Rivers State with 12,000 b/d

1967: Phillips drilled its first well (Dry) at Osari -I, Phillips first oil discovery at Gilli-Gilli -I

1968: Mobil Producing Nigeria Limited) was formed, Gulf’s Terminal at Escravos was commissioned

1970: Mobil started production from 4 wells at Idoho Field, Agip started production, Department of Petroleum Resources Inspectorate started.

1971: Shell’s Forcados Terminal Commissioned, Mobil’s terminal at Qua Iboe commissioned

1973: First Participation Agreement; Federal Government acquires 35% shares in the Oil Companies, Ashland started PSC with then NNOC (NNPC), Pan Ocean Corporation drilled its first discovery well at Ogharefe -I

1974: Second Participation Agreement, Federal Government increases equity to 55%, Elf formally changed its name from “Safrap”, Ashland’s first oil discovery at Ossu -I

1975: First Oil lifting from Brass Terminal by Agip, DPR upgraded to Ministry of Petroleum Resources

1976: MPE renamed Ministry of Petroleum Resources (MPR), Pan Ocean commenced production via Shell-BP’s pipeline at a rate of 10,800 b/d

1977: Government established Nigerian National Petroleum Corporation (NNPC) by Decree 33, (NNOC & MPR extinguished).

1979: Third Participation Agreement (throughout NNPC) increases equity to 60%, Fourth Participation Agreement; BP’s shareholding nationalized, leaving NNPC with 80% equity and Shell 20% in the joint Venture, Changed name to Shell Petroleum Development Company of Nigeria (SPDC)

1984: Agreement consolidating NNPC/Shel1 joint Venture.

1986: Signing of Memorandum of Understanding (MOU)

1988: Formation of 12 strategic business units, covering the entire spectrum of oil industry operations: Nigerian Petroleum Development Company (NPDC), Nigerian Gas Company (NGC), Products and Pipelines Marketing Company (PPMC), Integrated Data Services Limited (IDSL), National Engineering and Technical Company Limited (NETCO),Hydrocarbon Services Nigeria Limited (HYSON), Warri Refinery and Petrochemical Co. Limited (WRPC), Kaduna Refinery and Petrochemical Co. Limited (KRPC), Port Harcourt Refining Co. Limited (PHRC), NNPC Retail, Duke Oil

1989: Fifth Participation Agreement; (NNPC=60%, Shell = 30%, Elf=5%, Agip=5%).

Recent History (1991 – date) –

1991: Signing of Memorandum of Understanding & joint Venture Operating Agreement (JOA)

1993: Production Sharing Contracts signed -SNEPCO, Sixth Participation Agreement; (NNPC=55%, Shell=30%, Elf= 10%, Agip=5%), the coming on-stream of Elf’s Odudu blend, offshore OML 100.

1995: SNEPCO starts drilling first Exploration well, NLNG’s Final Investment Decision taken

1999: NLNG’s First shipment of Gas out of Bonny Terminal.

2000: NPDC/NAOC Service Contract signed

2001: Production of Okono offshore field.

2002: New PSCs agreement signed, Liberalization of the downstream oil sector, NNPC commences retail outlet scheme.

The Value Of Investing In Renewable Energy

The success of the Department of Energy’s (DoE) Renewable Energy Independent Power Producers Procurement (REIPPP) Programme is a shining example of South Africa’s ability to undertake large infrastructure programmes to boost the local economy despite the current period of slow growth internationally. This public-private partnership programme has allowed for energy growth and successful private investment, which contrasts with a number of other international renewable energy programmes that have faced difficulties and setbacks.

The renewable energy developers involved in the REIPPP Programme have funded their facilities largely through independently sourced international investors and local banks making these projects viable in the SA market. About R47bn of the programmes awarded bidder status reached financial close in the first round and R28bn in the second round of the REIPPP Programme.

A recent Investec report on renewable energy pointed out that, in terms of contribution to South Africa’s gross fixed capital formation, the first and second round of successful REIPPP bidders accounted for 12.7% and 7.1% of private sector fixed investment respectively. This investment allows for further energy creation and thus enables an environment which will positively contribute to improving growth of the currently constrained GDP (at approximately 3.5%) in South Africa.

In comparison, the building of coal stations such as Eskom’s Medupi and Kusile required government funding and guarantees. In early 2015, the interest bill for Medupi and Kusile amounted to R29.2bn and R48.7bn respectively. The fact that the projects are running years behind schedule also means that this contributes to the countries confined GDP growth, as described above.

The amount invested in the De Aar project totaled R2.2 billion for the first phase and R2.6 billion for the second phase – making an overall investment of R4.8 billion in the development of the facility. Although this involved considerable startup costs, it is budged for an eleven to twelve-year payback term.

It is important to note that the Department of Energy (DoE) is currently taking firm steps to improve financial energy investment models in South Africa. In the Budget Speech on 24 February 2016, it was announced that the REIPPP Programme will be extended to include coal and gas power projects. This is a logical way forward in terms of investment, but is likely not the fastest way to provide further energy to South Africa.

When building its 175MW solar facility in De Aar, 9000 panels were mounted in one day. The farm itself was efficiently constructed in 28 months (inclusive of both phase 1 and 2 of the project). Not only will this allow power to be supplied to 75 000 homes per year, but with the upcoming investment in back-up power storage there will be ability to feed stored electricity into the grid between the 07h30 and 09h00 morning peak demand.

Coal powered stations have traditionally been built to deliver more electricity than solar power. Eskom reports that Medupi and Kusile will have a capacity of 4 800MW each. However, the DoE is invested in providing a well-thought-out electricity mix to the country and, as such, announced in October last year its intention to create a 1 500MW solar facility in the Northern Cape.

According to research, the running costs of Medupi and Kusile, when taking into account externalities such as the cost of water usage and CO2 emissions, are approximately R2.35 and R1.94 per kWh. In comparison solar power in South Africa can now be produced at a cost of under R0.70.

The global electricity produced by solar power has doubled seven times over since 2000. Part of the reason for this is that solar is not a fuel, but a technology. Owing to economies of scale and increasing efficiency, prices of solar technology and supply continue to fall, as does the price of batteries for energy storage. As a result, the need for fossil fuels is falling internationally. It is only developing countries like South Africa that are still adding coal to the energy mix, more as a result of a rapid demand for further energy supply.

Investing in solar power makes sense. It has minimal operation costs, it is environmentally friendly and the source of energy is abundantly free, green and sustainable. It is the way the world is moving and South Africa is fast becoming a leading force in renewable energy programmes.