Pub. 7 2019 Issue 1

12 The Community Banker www.mibonline.org Featured Associate Member T wenty-eight years ago, the Montana Independent Bankers made a decision that, at the time, seemed like a favor to a new associate member. MIB agreed to endorse ICBA’s for-profit broker-dealer, which at the time was only two years old. It turns out that the arrange- ment has paid dividends, literally and figuratively, for both parties. ICBA Securities (ICBAS) is an institutional fixed-income broker that ca- ters exclusively to the community banking industry. It is very pleased to be the endorsed broker for 33 state and regional partners, including MIB. Ironically, this endeavor might never have occurred if not for a regulator’s recommendation to (then) IBAA’s Executive Committee in 1986. A senior examiner from the Office of the Comptroller of the Currency had seen enough of brokers lining their pockets from dubi- ous securities trades with community banks. His suggestion that IBAA charter its own broker-dealer to cater to its members was revolution- ary. Eventually, the Bank Services Committee set out to build IBAA’s own investment company. It took several years, but in time Vining Sparks emerged as the winner in the ICBAS sweepstakes. In August 1989, ICBA Securities opened its doors and transacted business with 187 banks in its first 30 days. Of those, forty-three are still ICBAS customers three de- cades later. That includes four banks in Montana: First Security Bank in Bozeman, Peoples Bank of Deer Lodge, Valley Bank of Kalispell, and Three Rivers Bank in Kalispell. The legendary C. J. Pickering was the original ICBAS President, and served with distinction until his retirement in 2005. Business Model ICBA Securities, a wholly-owned subsidiary of the ICBA, operation- ally relies on its exclusive broker Vining Sparks for delivery of goods and services. Vining Sparks, in turn, has grown in scale and is now one of the top 20 underwriters of government agency debt in the world. But that’s not all Vining Sparks offers. While its primary product line is its inventory of agencies, mort- gage-backed securities, SBA securities, municipal and corporate bonds, Vining Sparks has enjoyed a reputation for servicing the wholesale investment needs of the community banking industry for more than 30 years. These services include asset/liability ad- vice, safekeeping, bond accounting, and portfolio analytics. Vining Sparks will transact business with about 1,800 banks this year, making it the largest provider of securities products and services in the country. But something had to be beneficial in the arrangement for MIB to attach its endorsement to ICBA Securities. That difference, which continues today, is actually a three-part story. Unique Relationships The first is how ICBA Securities governs itself. ICBA Securities has a board of directors made up of community bankers. Currently, the chairman of the board is Dennis Doyle of Great Midwest Bank in Brookfield, WI. These bankers establish and enforce policies that are beneficial to the industry. ICBA Securities’ board has long been pop- ulated with leadership bankers. In fact, 17 ICBA chairs have also been on ICBAS’s Board. The second distinction is ICBA Securities’ financial support of the industry. Since its beginning in 1989, ICBA Securities has paid sub- stantial royalties and dividends to its parent. These in turn are used to advocate for MIB members in Washington, benefitting the franchise values of all community banks. The passage of S. 2155 last year is a vivid example. Through 2018, these payments exceed $40 million. The third is the profit-sharing that ICBA Securities has with each of its state partners. Each transaction that a Montana community bank executes with Vining Sparks results in revenue for your association. In 2018 the aggregate revenue sharing with MIB broke through the $500,000 mark. So, thanks, MIB, for the mutually-beneficial partnership! Here’s to the next 30 years of service to the community banks of Montana. Jim Reber is president and CEO of ICBA Securities and can be reached at 800-422-6442 or jreber@icbasecurities.com. WE’RE IN THIS WITH YOU MIB AND ICBA SECURITIES HAVE LONG-TERM TIES By Jim Reber