The Entrepreneurs’ Bank

By: Margaret LeBrun, Insight Magazine

Tim Schneider grew up on a dairy farm.  So, too, did many of the other key people at Investors Community Bank, Manitowoc.

Having grown up as farm kids, feeding and caring of the animals, planting and harvesting crops, they know the passion of being good stewards of the land.  They also know the risks that farmers take with every season. 

They know that every cow is an expensive investment, that tractors and combines and milking machines do not come cheap.

When Schneider and three banking co-workers became disillusioned with the fallout from mergers and acquisitions in their industry and decided to strike out on their own 11 years ago, lending to farmers seemed the most natural way to build their business.

“The ag side is so specialized that all of our people [in agribusiness lending] come from a farm background and can talk the talk and understand what these people do every day,” says Schneider chief operating officer at Investors Community Bank.

Schneider’s family ran a dairy farm in Calumet County, and in the 1970s it was among the most progressive and largest farms in the state.  He’s still comfortable around cows, and he provided it by inviting a farmer to bring a couple of Holsteins into the back yard of the bank to illustrate this story.  (Then he took some good-natured razzing since he hasn’t been around cows since he began to focus on commercial lending a few years back.)

Today, Investors Community Bank is the second largest agribusiness lender in Wisconsin, after M&I Bank.  Total assets are pushing $500 million.  The bank employs 53 people and plans to add 10 more this year.  Their success has been recognized: Investors was named 2007 Business of the Year by The Chamber of Manitowoc County, and last year Schneider received the Wisconsin Small Business Association’s Financial Services Champion Award.

While agribusiness remains a vital part of Investors’ focus, today, half its business is with commercial lending, in line with the original business plan laid out by the founders.  Success of leadership is also in their plans; Investors Chairman and Chief Executive Officer Bill Censky, 57, is grooming Schneider, 42, to one day take his place as CEO.

It’s an understatement to say Schneider is “active in the community;” he’s a familiar face in Manitowoc business and nonprofit groups, is a member of the New North Inc. Board of Directors, and chairs the Wisconsin Business Development Finance Corp.

“He’s definitely a great relationship manager,” says Censky. “He’s a good business generator, a smart lender.”
Sowing the Seeds for Success

Of the four co-founders, President Mark Binversie and Senior Lender Wayne Muller also grew up on farms; Censky grew up in banking.  His dad, Gerald, started Manitowoc County Bank in 1965, which he sold to Security First of Sheboygan.  Later it was sold to First Wisconsin, which sold to Firstar.  The four worked together at the bank under the Firstar name, and as yet another acquisition was underway, they saw decision being made higher up on the corporate chain by people who did not know farming.

“Agriculture goes through very cyclical ups and downs – they have very little control over their input costs, what they get for their product in the market,” says Censky. “They are probably the riskiest business out there.  There’s risk all over the place: From weather to commodity prices, gas prices, fertilizer cost to the price they can sell, to herd health, regulation, whether the neighbors like the smell - -there’s all of that in agriculture.

“The larger institutions like ag when it’s doing well and they don’t like ag when it’s not doing well, Censky explains. “I think Mark, Tim and Wayne saw that need out there.”
When a corporate decision-maker asked Binversie to explain what a “bred heifer” was, he thought he could do better.

“It used to be that everybody knew somebody, a grandfather or a great grandfather who was a farmer, and now less than 1 percent of the population is in farming, so the knowledge isn’t that great,” Binversie explains.

“If you don’t know your client, the answer is always no.”

They chose to say yes to their clients, and in 1997 they left to start a new bank.  Within a month they had raised $6 million in capital.

“We felt we could do it better on our own,” Schneider recalls. “The four of us put in every nickel we could beg, borrow, steal and create, because we felt strongly enough about the business model and our ability to be successful.”

Of course it takes a lot of “i-dotting” and “t-crossing” and answering to regulators to start a bank.  They began by creating a mortgage banking division they day they left, making arrangements with other banks to put the loans on their books.

“It was all about making relationships,” Schneider says.  By the time they got their charter10 months later, they had $20 million in loans already under their management.  Within six months they were profitable – which is almost unheard of with a startup bank, which typically takes two years to get into the black.

Among the first clients to sign on with Investors was the Fond du Lac farmers Linda and Doug Hodorff of Second Look Holsteins, who had a banking relationship with Binversie.  Today, along with their son Corey and his wife Tammy, they run two dairy farms in Wisconsin and one in Nebraska, with about 2,000 head of cattle.

“We’ve wanted to expand our dairy and build a new barn in 1992, and at the time we were young and not as lucrative as some farmers,” says Linda Hodorff. “A couple of other banks said we could add 10 or 20 cows, but if we added a lot more, they weren’t sure if we would be an ag loan or a commercial loan.  Mark was knowledgeable enough about agriculture, and also about lending, that he was able to accommodate our needs.  We were familiar with Wayne and Tim and know they’ve got that same type of knowledge.  It made good sense for us to go with them.”

Mark McCulley, who manages 100 dairy cows on his Manitowoc County farm, was another client who joined Binversie when he left to start Investors.  Binversie took a chance on him when McCulley started his own farm at age 22, and in recent years, he’s been gradually expanding his operation.  (He shared his story via cell phone while plowing fields, and at one point had to put the phone down to make a tight turn into the next row.)

“From the beginning, he was upbeat about it, whereas other bankers might have said ‘You’re nuts!’ I had talked to one other banker before I talked to Mark…let’s just say he didn’t call back.

The Entrepreneur’s Bank

Once the agribusiness lending had proven successful, it was time to diversify.  Investors began ramping up its commercial lending side in 2001, adding three top people, including Tom Detienne, executive vice president of Business Banking.  They quickly built a reputation as a friend for new business start-ups, going so far as to trademark the tagline: “The Entrepreneurs’ Bank.”

“We are bullish on the concept that people want a bank where people can make a decision,” Detienne says.

“It’s not easy to come to a bank and bare your soul…and then wait three weeks to see what they think.  We like to tell them within a couple of days.”
Maintaining client relationships is critical in today’s competitive banking world, and finding creative ways to help each client – even when it means taking a bit less profit for the bank – is one way Investors keeps them coming back, Detienne says.

“Our ultimate goal is to have our customers do very well,” he says. “If you’re with us for 10 or 15 years and you’re doing well, versus five years in which we did well – we know which we would rather have.”
While is core market lies between lakes Winnebago and Michigan, from Milwaukee to Green Bay, Investors has done business in all but 15 counties statewide.  Currently it legal lending limit is $8.5 million, and its average loan size is $400,000.

Investors is also one of the few banks in Wisconsin that is a member of the Mortgage Bankers Association and the Commercial Mortgage Securities Association, two national trade organizations that allow the to access the Wall Street capital markets to finance commercial real estate and development projects.

The bank has avoided the fallout from the recent home mortgage crisis, as state in its recent annual report,

“Investors Community Bank doesn’t do subprime lending and we haven’t bought any high-risk mortgage securities containing subprime loans or that have been insured to produce artificially higher ratings…We are not experiencing unusual foreclosure volume and we do not have any delinquent residential loan clients.”

Owned by shareholders of County Bancorp Inc., in 2007, Investors Community Bank realized its 10th consecutive year of growth in income (23.5 percent0, growth in assets (13.5 percent) and growth in the value of its shares (15 percent).  Nationally, 12.5 percent of all banks lost money in 2007, and fewer than half realized an increase in income. And in Wisconsin, the average bank grew less than 8 percent.

Agribusiness in the New North

As interest rates quickly dropped in the spring, Investors Community Bank felt the squeeze like every other bank, to help its loan customers refinance more favorable rates while interest rates on deposits remained unchanged.

“The challenge is we can’t go back to our depositors that locked in for a year or two and say, ‘We want you to lower your rate now because rates have come down,” Schneider says. “It compresses our margin a bit.  But we will manage through it, and all banks are facing the same challenges today.”
Meanwhile, the bank’s loan values remain “extremely strong” on both the ag and commercial lending sides.

“We’ve been seen virtually no slowdown in that at all,” he adds. “In Manitowoc, the manufacturers are doing very well.  Look at Tower Tech, you look at The Manitowoc Company – you can go almost down the line – I don’t know of many, if any, companies that are talking about any slowdown or layoffs.  For us, that’s obviously good.  It positions us well.”

As a member of the Modernized Agribusiness Committee – part of New North’s initiative to promote advanced manufacturing – Schneider has been involved in discussions about the future of agribusiness in Northeast Wisconsin.

“We have a very competitive advantage here in the dairy industry, across the spectrum, and we’re looking at how we can leverage that here,” Schneider says. “There may be opportunities to bring other end-product makers to Wisconsin, or to create new product makers, like specialized cheese, which is big these days. Or, maybe we can bring in some of the suppliers that are no three states away.”

The committee has identified a half-dozen issues to tackle and will be gathering information on every front, form the supply of feed for cattle and the capacity to produce more milk in the region to environmental and labor issues.

Whether the region can support or should encourage large dairy farms to operate is an issue that Schneider expects the committee to explore.  The issue may heat up as agribusiness moves in from outside the area, including the phenomenon of farmers recently settling here from Canada and the Netherlands.  Regulations in those countries have made it desirable for them to sell their production quotas and bring their capital to start farms in Wisconsin, Schneider explains.

Schneider’s brother, Chris, who works in agricultural lending at Investors, went to the Netherlands last year to tour some of the large farms.

“They’re coming here with millions of dollars in their pockets from their milk quota sales,” Schneider says. “My brother has probably talked to four of five of them that have moved to the states now, and we’ve financed a few of them.”

The partners have set their sights high for Investors Community Bank.  They have just hired a chief financial officer.  Plans call for assets to double – to $1 billion – in the next six years.  It won’t be necessarily including building branch bank locations; since the widespread popularity of online banking and the recent use of remote deposit for business banking, Investors can maintain efficiencies by avoiding more brick and mortar, Detienne says.

Unique from old-fashioned appointment at the bank, Investors’ lenders spend most of their time on the road, visiting farmers and commercial clients on their own turf.

“What I love about my job is you get to hear about peoples’ dreams, their visions and their fears,” says Binversie says during an interview on his cell phone (he was in a farmer’s driveway; you could hear the cows moo in the background).  “And our job is to take all those vision and try to make sense on paper and try to make their life better from where they are today.”

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