Winona-based Merchants Financial Group has seen its business- and consumer-loan portfolio profitably grow by more than 10 percent annually since 2012. CEO Greg Evans, a 28-year veteran of the bank, said a history of employee and local ownership has buoyed the company through thick-and-thin times. He said he also would like to see federal regulatory relief for community bankers. Merchants has 21 full-service offices, from Apple Valley to La Crescent in the southeast corner of Minnesota, and 440 employees.
Q: The community banking industry has asked regulators and Congress for relief from the Dodd-Frank law that was a response to the near collapse of the financial system, triggered partly by mortgage industry deceit and Wall Street greed that led to the 2008-10 financial industry bailout by the Feds. Are you overregulated and how does it hamper your mission?
A: No question that there was a need for reform coming out of the Great Recession. Unfortunately, politicians and overzealous regulators don't have a true appreciation of the unintended consequences associated with intense regulatory burden.
Most of the changes coming out of the Dodd-Frank law had tremendous negative impact on consumers, even though politicians would suggest they were motivated by more consumer protection. Getting loans is more cumbersome, more costly and more onerous in terms of documentation today than it has ever been.
The pendulum has swung too far. Consumers and business owners pay the price by having to deal with systems that are far too complicated.
Q: How should Congress proceed and should your bank be treated differently than, say, huge JPMorgan Chase?
A: I'm not sure I am qualified to [discuss] the appropriate regulatory oversight needs to be for the megabanks. I would say … in the community bank space, we are driven to be as customer-centric as we can. Banks like Merchants, with significant presence in outstate markets, are tremendous drivers of the economic vitality of communities we serve.
The work we do each day allows us to have a powerful impact in changing people's lives in positive ways.
Today, even the most basic borrowing transactions result in customers having to provide an overwhelming amount of documentation and being overloaded with so many forms that it is very confusing to many customers. I can't speak to the issues of megabanks and 'too big too fail' but there is too much paperwork around a simple mortgage transaction. And I don't know that it has created a consumer security blanket. It can be really confusing.
Q: What are the most important steps that should be taken?
A: Anything that results in streamlined access to credit for consumers would be a step in the right direction. The amount of information required for a family to complete a residential mortgage loan today is absurd. The amount of paperwork and documentation that consumers are saddled with is confusing and adds complexity. The result of all of this … is that we have absorbed extraordinary expense to comply with the increasing regulatory burden.
Virtually all of our systems have been subject to multiple upgrades. We have increased staff. We have increased the number of engagements with external auditors. We are examined annually by multiple federal agencies. There is real cost that virtually every bank could document. And the hidden costs associated with all of this are an absolute burden. The banking industry has been impacted tremendously.
Q: You run a profitable, growing community bank of more than $1 billion in assets that hit financial records last year. Why are you thriving?
A: Our people. We have made talent acquisition, retention and development a strategic priority. We take time to hire "difference makers." We staff our branch locations with people capable of providing strong community leadership and qualified to embrace our commitment to local decisionmaking. They embrace the responsibility and accountability for performance that comes with that.
Q: You have been a publicly owned company for generations, correct?
A: We were founded 140 years ago as kind of the working man's bank in this community. We were capitalized by a group of business leaders and we probably have 350 or 400 shareholders. We've always been publicly traded on the over-the-counter market. Our employees are the single largest group of shareholders with 18 percent through an Employee Stock Ownership Plan. There are local business people with 5 to 10 percent, and some Winona-area families. We are starting to attract institutional shareholder interest.
Q: Merchants' profitability and share value has risen markedly in recent years. Has local and employee ownership benefited you?
A: Our shareholder support has allowed us to aggressively pursue acquisitions. That's a source of pride for local shareholders. We bought family-owned banks when its time for them to sell. We know those operations. And we have acquired some troubled banks [through regulators].
