"We're starting to get a more diverse downtown here in Waterloo that would begin to remind you of New York City or of Washington, D.C.," says Vich (pronounced "Vick").

The cause is a steady wave of immigration that has hit Waterloo and its environs over the last 15 years. As immigrants have moved up the economic chain from the entry-level jobs that brought them to Iowa, some have branched into small businesses--bakeries, restaurants, what have you--that provide the kinds of foods they enjoyed in their home countries. A region known not only for growing the grains that make plain white bread, but also for consuming it, has come to know demographic change.

This is a development seen in many parts of the Farm Belt, from the bigger cities to even tiny towns.

In some cases, communities or factions within them haven't been so happy about the changes taking place in areas that have historically been rather homogenous in social, racial, political, and economic makeup. In others, change has either been welcomed as a necessary economic vitamin shot, or, at the least, adapted to. Inevitably, no business can be more central to this evolution than banking.

"If you choose to embrace immigration, it's a benefit in all regards," says Vich, president and CEO of $270 million-assets Community National Bank. Vich is, himself, of Czechoslovakian stock. His grandfather came to this country and the family eventually found itself in Cedar Rapids, Iowa.

Butchering to building to baking
Waterloo, though more an industrial community than a farming town, very much depends on the agricultural sector for its continued survival. Two of the largest employers in the area are farm related.

There's a John Deere factory nearby that makes the top-end tractors, and Tyson Foods took over a slaughterhouse operation nearby from IBP (formerly, Iowa Beef Processors) and has turned it into a high-production, state-of-the-art plant.

Finding local labor for the slaughterhouse proved troublesome over the years, says Vich. The native Iowa population is growing older, as the children of the older generation choose to move to other parts of the country. Of the younger people remaining, there is little enthusiasm for jobs involving killing and butchering.

Thus the slaughterhouse has been bringing in immigrant labor for years. Initially, says Vich, this consisted chiefly of Hispanic and Asian workers, but in the last seven years or so, many more of the new workers have been Bosnians.

All through this period, the immigrant workers have followed a typical pattern. They begin with the less-desirable slaughterhouse jobs and then, as they acquire manual skills, training, and better English, they move into positions at two cabinet factories nearby. In time, some start their own restaurants, groceries, bakeries, and other small businesses.

The Bosnian in-migration began in the latter 1990s and one estimate puts their population in the area at about 3,000. Many have college-level education, but arrived lacking the English skills to work at anything other than routine manual labor and the financial resources to start anything of their own.

Language was a problem. "We had very few people who could translate Bosnian," says Vich.

The local education system stepped in with English training aimed specifically at the new arrivals. Once portions of the Bosnian community had made it through the training, "things progressed quite well," says Vich. He has employed several Bosnians himself, which has helped the bank work with these immigrants.

The Bosnians themselves learned to adapt. Often, they arrive at the bank in groups, bringing a translator with them so they can all take care of their banking needs in one shot.

As is often the case with immigrant groups, Vich says, the Bosnians tend to be net savers. They borrow quite conservatively, and only for absolute necessities such as car loans for transportation and mortgages for homes. They have a strong record of repayment.

All told, says Vich, the Bosnians have been a plus for the community and the bank. Their arrival has helped the town to grow, as a community, and, with competition including the John Deere plant's own community credit union, Vich is grateful for every potential depositor that can be brought to town.

The Hmong of St. Paul, Minn.
The Hmong (pronounced, "Mong") remain a people unknown to many Americans, and yet they, perhaps more than any other group to come to these shores, deserve to be readily recognized. During the Vietnam War, the Hmong were America's allies, Laotian hill people who were secretly fighting alongside U.S. soldiers against communist forces in the border region. Frequently Hmong units rescued U.S. pilots who had been shot down.

Roughly 200,000 Hmong have emigrated to this country, many of them having arrived in the U.S. as refugees due to persecution in Laos in the years following the U.S. withdrawal of forces from Southeast Asia.

Roughly 60,000 of the Hmong in the U.S. live in the Minneapolis-St. Paul area. One of the largest concentrations of Hmong in St. Paul is in the Thomas-Dale community, which happens to be the main market area of University Bank. In Thomas-Dale, Hmong represent 38% of the market, versus 27% for Caucasians, 23% for African Americans, 10% for Hispanics, and 2% for other Asian groups, according to David Reiling, president and CEO. He notes that as recently as the 1990s, Caucasians constituted the majority of the district.

Reiling is a member of a banking family with interests in several Twin Cities banking firms. He says that the family acquired University Bank in 1995 as a troubled institution that not only had financial difficulties, but was also laboring under a memorandum of understanding from the Comptroller's Office after receiving two "Needs to Improve" ratings on Community Reinvestment Act exams.

Under its new management, University Bank has grown from a spindly $14 million in assets to a $114 million bank that has received two "Outstanding" CRA ratings.

A big part of University Bank's comeback was recognizing the ethnic evolution of its market area and tailoring its efforts accordingly. Within the first 18 months under Reiling's control, the previous pattern of lending mainly in the suburbs was turned around. Today, with the market somewhat expanded from the original footprint, 70% of the portfolio comes from the bank's home turf.

Learning to serve the Hmong population was a major element in the turnaround, according to Reiling. "They are our emerging market," he explains, "and they have helped the bank prosper."

Reiling says that, unlike some other immigrant groups, the Hmong are as likely to borrow as they are to save.

"The Hmong are very good savers, but they do want the ability to borrow, in order to acquire assets, particularly real estate. They understand the power of leverage," says Reiling. "However, they are risk-averse, and they will try to pay off debt faster than scheduled by the bank."

An interesting aspect of the Hmong's approach to credit is a modern adaptation of their traditional culture, in which Hmong society--predominantly consisting of subsistence farmers--was divided into 18 traditional clans. Clan connections continue in this country, says Reiling, and the Hmong tend to back each other up, within their clan groupings, when credit is needed. They take turns in approaching banks for credit, the nonborrowers among them standing behind those who borrow.

"There's tremendous power to that," says Reiling, who says this communal cooperation gives the bank considerable assurance it will be paid.

Similarly, there have been some adjustments on the compliance side. It is still not unusual for Hmong to rely on cash, and to save cash in large quantities until they feel ready to participate in the financial system. University Bank employees have learned not to overreact when Hmong arrive at the bank with bags full of money. Necessary government reports are completed, as legally required, but the employees have learned to recognize that the cash bundles are the result of gradual economic assimilation, rather than drug dealing or other illegal activities.

The banks in Laos all went under during the turmoil of the communist takeover, and it has taken the Hmong some time to learn to trust banks as a place to store assets, says Reiling.

Becoming a trusted place to do business has turned on several factors.

One is being willing to hire Hmong to work in the bank. This helps with the language barrier--the Hmong didn't have a written language until the second half of the last century--and helps demonstrate that the bank is open to Hmong customers. Reiling says that out of his FTE of 25, 30% are Hmong or from some other part of Southeast Asia.

"They can see that we reflect the community and speak the language," says Reiling. This is no mean feat. As pointed out in a report by the Minneapolis Federal Reserve Bank, the Hmong language lacked many concepts that are routine for Americans. There was no word for "credit," for instance, and it takes five Hmong words to convey the idea of a "bank."

There are additional factors to be aware of, according to Kim Poam Logan, executive director of the Iowa Asian Alliance. One is the extensive educational effort that may be required, especially for business lending. The concept of developing a business plan prior to seeking credit is very unfamiliar to many Asians, Logan explains, and she finds that too many banks compromise by offering lines of credit, rather than the term loans that fledgling businesses need to get started.

A key cultural factor common to many Asian groups, Logan continues, is a desire to get to know a counterparty in business slowly.

"America is a very fast-paced society and that's not the way most in Asian communities operate," she explains. Asians typically move deliberately, preferring to talk things out in great detail before committing to a course of action.

On the other hand, says Logan, bankers must also be able to adapt to U.S.-born generations of the same group, who learned that the U.S. is a credit-driven society. "It's the American Dream," she says, "that we're all after."

Newcomers in Oklahoma
The Mexican banking system's history has given American bankers a tough road to tread when Mexicans come to work in this country or emigrate here to stay. Mexicans arrive with a distrust of banks, and simple solutions aren't the answer.

"Advertising in Spanish doesn't work," says banker Paul Freeman of Texhoma, Okla. It can take several years of demonstrated good intentions, he has found, before a Mexican prospect will be willing to put trust in a relationship with an American bank.

Texhoma is located in the Oklahoma panhandle region, just north of the Texas line. Immigration began to become an issue for the area in 1995 when Seaboard Farms, Inc., built a hog-slaughtering facility in nearby Guymon, Okla.

Over the past few decades, a growing portion of the population has been Hispanic, workers from Mexico who came in as local farmers found that many young people in the area were unwilling to work on area farms, or even willing to stick around once they had their education.

To this long-term trend, the arrival of the Seaboard pork operation was a booster rocket, substantially increasing the Hispanic population when it became clear that locals didn't want to work in the slaughterhouse. Nowadays, says Freeman, "our area ranges from 30% to 50% Hispanic, depending on the town."

Freeman's bank, The First National Bank of Texhoma, is a closely held family owned bank of $65 million-assets that's served the region for nearly 100 years. Freeman, president and CEO, has learned a great deal about working with the Mexican market.

Speaking the language helps, says Freeman. However, communications is more than just talking Spanish. The bank has found it critical to work at establishing trust with key players in the Hispanic community.

"There's always a kingpin around," says Freeman. Finding out who the opinion leaders are among various Hispanic communities gets the bank's foot in the door.

"Once they trust you, they'll tell everybody around that you're O.K.," says Freeman.

While most banks think in terms of deposits and loans for a new market, payment services have been a key area where the bank has found an opportunity to develop trust with the Mexican community.

"We have a lot of opportunity to send money to Mexico for these people," Freeman explains. The obvious way of sending cash back home--wire transfers--left much to be desired.

The bank found that transfers it sent arrived in Mexican banks--and then just sat in a financial limbo, unavailable to the sender, and not reaching the hands of the intended recipients for weeks.

The bank began encouraging its Mexican customers to send bank money orders to their relatives.

This solution meant a great deal to the local Mexicans, and has often been the key to establishing the necessary trust to convince them that doing business with an American bank pays.

With this leverage, the bank has been able to sell Mexicans on additional services, and the result has been a strong relationship with a market that puts great importance on playing by the bank's rules.

"First-generation arrivals from Mexico are our best customers," says Freeman. "You can throw out the book on debt ratios with them. They won't borrow more than they can pay back. And, because they have such a close culture, their friends will pool money to get a fellow Mexican borrower out of a jam."

Freeman says the two key borrowing needs for this market are car loans and residential mortgages.

Much of the area's available housing is older and in need of repair. The bank makes 100% combined housing and housing improvement loans.

"We have yet to lose a dime on one of these homes," says Freeman. "We finance the goods they need to fix them up and they do most of the labor themselves." In retrospect, says Freeman, this effort has been a clincher in establishing relationships with the Mexican community.

Hispanic mix in Nebraska
Lexington, in south central Nebraska, used to be nearly 100% "anglo" until about 15 years ago, when, as happened in many other Midwestern communities, the arrival of a slaughterhouse and processing plant brought in foreign labor, chiefly from Mexico and Central America, with a smattering of Southeast Asians and Sudanese. Some locals objected to the importing of foreign workers, while others welcomed the influx as an economic shot in the arm.

No matter which way anyone felt, there were adjustments to be made, and Home Federal Savings and Loan had to face them along with the rest of the community. When present President and CEO Richard McGinnis arrived in 1996, he found that the mutual thrift hadn't done all that much adapting. Only one employee was bilingual.

McGinnis saw two immediate priorities: increasing the number of bilingual workers, and generally educating staff to the positive development that the Hispanic immigration, in particular, represented.

This wasn't easy. Some employees were downright hostile towards the newcomers, and there was a widespread attitude that all Hispanics were the same. Griselda Moreno, a teller and the bank's only bilingual employee at the time, says there was little appreciation among employees that speaking Spanish wasn't necessarily anything more of a unifying force than speaking English is in this country.

Moreno, an immigrant herself from the Dominican Republic and now the bank's acting deposit operations manager and an AVP, says most assumed that all the immigrants in town that spoke Spanish were Mexicans.

McGinnis, researching the situation, found that actually the immigrant audience in Lexington accounted for about 20 different nationalities, all with their own cultural backgrounds.

McGinnis began an education effort that stressed the differences in culture among the various Hispanic groups. He wanted to develop some empathy for people who represented a good customer base for Home Federal.

"We had some people here who had already formed their opinions and some of them left," says McGinnis. "They couldn't adjust." And some Anglo customers made it clear, McGinnis adds, that they didn't appreciate the bank's reaching out to the newcomers, either.

McGinnis says these holdouts were resisting an inevitable change in the market. Today, half of the area's population is Hispanic, and three-quarters of the schoolchildren are Hispanic.

Over time, McGinnis increased the bilingual workforce at Home Federal. There are now seven bilingual employees, accounting for about a third of Home Federal's employees.

McGinnis says bridging the language barrier is critical to building trust. "When first-generation Hispanics develop a degree of trust in you, they tell their friends," he adds.

To further build familiarity with this market, the $62 million-assets bank also sponsors certain Hispanic cultural events in the area. Another outreach effort was sending Moreno to the Tysons plant itself to meet with groups of Hispanic employees to discuss American banking and how to work with the system.

All the bank's efforts have paid off in the form of a rising number of consumer loans and mortgage loans to the immigrant Hispanics.

 

Making the car loans was a big step for the bank. McGinnis says the bank had to become comfortable with the risk that their collateral could conceivably wind up in Mexico. However, this has been much less of a risk than initially feared. McGinnis says he can recall only one car that didn't come back after the borrower journeyed back home. And, in the case of that borrower, the mother of the debtor went to Mexico, retrieved the vehicle, and drove it back to Nebraska to ensure that the bank didn't lose its interest in the car and to make sure the Hispanic community didn't suffer a black eye due to a bank loss. BJ 

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