Bank Board Letter — April 2015
Toni Lapp

Love of community comes up frequently in conversation with Jack Hartings, incoming chairman of the Independent Community Bankers of America. He still lives 10 miles from the high school from which he graduated in western Ohio, where the verdant landscape serves as a backdrop for family farms and small towns. Despite a busy travel schedule, he remains active in the community, whether it means serving on the local Kiwanis Club, getting involved in the Chamber of Commerce or attending every home football and basketball game of the local high school. Factors such as these are what keeps community bankers grounded, he says.

He is looking forward to bringing his perspective to his year as ICBA chairman, meeting with bankers across the country, engaging with regulators and Congress, all to support an industry that has the ability to help communities thrive and prosper.

Hartings was 35, serving as vice president of installment loans, senior vice president of lending and compliance officer of The Peoples Bank Co. in 1990, when the current president/ CEO accepted another career opportunity and left with little notice. Hartings was promoted by the board to fill the vacancy.

“Being prepared is sometimes doing your best in your current role that will provide you the greatest opportunity,” he says of the experience.

As a result, nearly all of his training was on the job with little mentoring, he recalls. At that time, the bank had assets of $112 million, 35 employees and four locations. It was a big commitment and opportunity for Hartings, as well as his young family. His wife, JoAnn, and their two sons, Russ and Brent, were very supportive of his promotion. During his tenure, the bank has grown to seven locations, $440 million in assets and 75 employees.

Growing up in a small community gave him many opportunities to explore various fields of study and extracurricular activities, he says. He participated in football, track and baseball, but also found a talent on stage, performing in several plays in high school and college. He credits his confidence in speaking to large crowds at the many ICBA conferences to the time he spent on stage in high school and local community performances.

Due to his busy travel schedule for the ICBA, his 25th anniversary as bank president/CEO in February was a low-key event, but he has no regrets.

“You certainly don’t lobby for the position of chairman, but it’s a great opportunity to represent an honorable association and industry,” he says.

At many of the ICBA events, he likes to discuss the changes the industry has weathered. He recalls that when he first started in banking in the 1980s, “call reports were 20 pages, tops. Now we fill out a call report that’s more than 80 pages long. Do I really need that in my size community bank?”

He has been vocal in discussing the regulatory burden that is jeopardizing the mission of community banks, sending out messages via social media, writing newspaper editorials and testifying before lawmakers. He serves on the Consumer Financial Protection Bureau’s Community Bank Advisory Council and on the FDIC Advisory Committee on Community Banking.

Although agriculture is the leading commercial activity in the area, the economy is diverse, with numerous tool and die shops and equipment dealerships calling the area home. He can point to a number of local businesses that grew from a customer’s garage, thanks to a loan his bank provided.

Despite the rural setting, the bank’s customer base is technologically savvy, says Hartings. When the bank rolled out mobile services in 2014, the staff was surprised at how quickly the customers adopted the technology.

Hartings says mobile has helped “leveled the playing field.”

He would like to see the playing field leveled in other ways. His bank vies for business with competitors that receive significant advantages, he says. While credit unions enjoy tax-free status, his bank supports the community by paying taxes, he notes. The Farm Credit System has grown beyond its stated mission of providing agricultural loans, elbowing in on his mortgage and small-business loan activity. And then there are the “too big to fail” big banks, whose executives are “too big to jail.” He points out that when examiners come to his bank, he meets them personally, whereas a megabank has layers of managers that come between examiners and the corner office.

But he is quick to note the positive developments for community banks. He is encouraged that the idea of tiered regulations is taking hold.

He is keenly interested in educating lawmakers and regulators about the ramifications of Dodd-Frank, particularly with its narrow definition of qualified mortgages with respect to ability to repay, and its effect on communities. He noted that small community banks make up 20 percent of the U.S. mortgage market and represent an outsized share of loans to low-and-moderate income borrowers.

“I don’t make money in my bank if I make an unqualified mortgage,” he says, noting that new guidelines leave little margin for a lender to apply discretion. “Maybe the (borrower’s) income isn’t as high as others are but they have more equity in property, more in retirement accounts. There are compensating factors. You find out that not everyone fits in that tight box,” defined as QM.

He would like to see the QM rule expanded for small lenders, currently defined as having less than $2 billion in assets and which originate fewer than 500 mortgages a year.

“I do close to 500 loans a year, and I know we were not the problem in the lending meltdown of 2005-2009,” he says.

“I think back to (the housing bubble), when we saw a lot of mortgages being made; when you had a lot of players taking advantage of customers. I would feel bad when I’d see a customer being financed at 110 percent of value, and I knew the house price was inflated. The mortgage broker might not be from the area, looking to make a quick profit.”

That’s why he says, “Our communities are our number 1 regulator. Ask any community banker, we care about the community; we’re not going to put people in a product that doesn’t make sense for them.”

He also realizes that there are times that despite his best efforts, he cannot offer a loan. That’s when a community banker can make all the difference, he says.

“You can counsel your customer. Nothing makes me prouder than when I talk to a customer who didn’t qualify Ð they just started a job, or didn’t have a down payment, and they come back after they’ve corrected issues. When they come back and have shown they have discipline to save, I’m very much willing to help out. That’s what’s made me most proud to be in the lending field.”

“As a community banker, I want to make my community better and take care of my customers. If I can do those two things, the rest takes care of itself.”