Offering financial services to members of Federally recognized tribes can be a complicated endeavor. In order to meet those needs, different solutions have been created. One group, in Montana, formed a community bank to serve tribal members. Started almost two decades ago, Eagle Bank is still going strong despite recent industry headwinds.
Meeting tribal needs
As many in the financial industry kept an eye on deposit levels in the wake of recent failures, Andrew West presented a calm and collected demeanor. West is president of the $122 million Eagle Bank in Polson, Mont., which is on the Flathead Reservation just south of Flathead Lake and northwest of the Mission Mountains. The bank was founded by the Confederated Salish and Kootenai Tribes in 2006, part of a plan 20 years in the making, and is one of only 18 Native American-owned banks in the United States.
In 1993, the Tribes completed a “self-governance demonstration” which earned it autonomy from the U.S. government. Two years later, the tribal leaders gathered at a retreat to strategize and plan. Through that meeting, “we changed our mission and our vision, and it was apparent to us we needed to become a more self-sufficient Tribe,” said Ralph Goode, bank chair and tribal member who has been part of the bank planning since the beginning. “We knew we needed to have some standalone businesses. We knew we needed to expand. Banking was one of the initial identifications.”
The Tribes had looked into setting up a co-venture with outside financial institutions back in the 1980s but it wasn’t until 2003 that the banking idea really took shape. “We started talking about capitalization, the trade-offs,” Goode said. After a failed bid to get a national charter — “The Feds were a pain in the butt to work with,” he said — the Tribes went to the state of Montana, which was ready to work with them. They capitalized the bank with $3.5 million and opened in a building formerly owned by another bank.
The bank’s holding company was organized under Section 17 of the Indian Reorganization Act of 1934 — making it a nonprofit entity and technically chartered by the Bureau of Indian Affairs — the only bank holding company to do so. “The Tribe does this all the time,” Goode said about working with the provisions created for tribes in that act, a savvy business move which gives tribally-owned businesses significant advantages when bidding for government contracts. The Tribes now have 18 owned and operated businesses, both national and international, including S&K Technologies, S&K Aerospace, and S&K Global Solutions.
“It’s a very progressive Tribe in a very beautiful area,” West said. The Confederated Tribes are “very forward-thinking.”
While the bank is, in general, “no different than any other community bank,” West said, having the same regulations and capital requirements, it differentiates itself by going to “extraordinary efforts” to help tribal members who are underbanked or unbanked. “We’ll do $500 loans,” he said. The bank has eliminated many minimum balances in accounts and service fees, and it does not use ChexSystems. “We’ve tried very hard to make it easy to bank here, to lower barriers,” he said. When people could not get a loan at other banks, “they come here, and we find ways to help them get a loan,” he said.
Diversifying a legacy
Since West succeeded the original CEO, Martin Olsson, he has focused on continuing to grow the bank while also diversifying its loan portfolio, which the bank has done significantly in the last eight years.
The bank offers a wide variety of loans including HUD 184 mortgages. With these loans, West said there can be “a lot of bureaucracy to make that come together smoothly for our customer, but we’re very, very good at that.” The program is specifically for enrolled members of Native American tribes, and the bank will do mortgages on both individual and tribal trust land.
“Trust land is never owned by the person with the mortgage. It’s all held in trust by the government,” West said. The bank has made in-house mortgages on trust land and a few companies, like 1st Tribal Lending, will buy these in the secondary market. At times, there might be uncertainty about recovering collateral, but the bank keeps the mission of working for the underbanked and unbanked in mind.
But, West said, the bank also is careful about how it mitigates risk and uses uniform bank performance reports and peer reviews to provide an idea of where the bank stands, and according to those, Eagle Bank is “one of the better performing banks in its peer group.”
As a result, the bank has grown to three times what it was when West started there. “In fact, one of our problems is that we’ve grown too fast,” he said. “We’ve had a tremendous amount of success in the last few years … [The bank’s] return on assets through March was 1.82 percent, return on equity was 22.87 percent. I’m liking those numbers.”
“Our biggest competitive advantage for right now, the component of banking that is striking fear into the heart of everyone, is liquidity,” West said. “And I really don’t have to worry about that, which gives me great comfort in terms of the bank’s footing.”
“There’s almost zero fear about a run on deposits,” he said. “Our greatest depositor is also our owner, which is the Tribes. So if they pull their money, they sink their own bank.” Eagle Bank also has roughly $50 million in off-balance-sheet deposits. “If I need liquidity, I can bring those off-balance sheet deposits back on the balance sheet to shore up liquidity.
“Statistically, the probability of us having an issue like Silicon Valley Bank is basically zero. Those guys ignored some fundamental safe and sound banking practices,” whereas Eagle Bank has top ratings for safe and sound banking and compliance, and an Outstanding Community Reinvestment Act rating. “The reason we’re that way is because we’re really careful with what we do. And even if we didn’t have this incredible well of liquidity from our owners, we still would be careful. This caution allows us to worry a little less than some of our peers. It’s a blessing.
“I have a really incredible staff in an incredible town,” West said. “We’ve been able to accomplish some pretty amazing things. And the reason we’ve been able to do that is because we have a tremendous focus on helping people and making our customers’ lives better and also our employees’ lives better.
“I’ve always told my staff do the right thing every single time, no matter what it costs. We solve problems. When they come in with a hope and a dream for a business, home, or car, we are a concierge. We work to find a way to help them with whatever their dream is.”
That philosophy and not solely looking at numbers on a spreadsheet has resulted in some great numbers for Eagle Bank. Profit is the result of living right, West said.