Over the last six years, New Ulm-based Citizens Bank Minnesota has grown by nearly a third and anticipates finishing 2012 among the state’s top 50 earning banks. The difference has come from the dynamic leadership of Luther Henry (Lou) Geistfeld and the unique opportunity afforded him as president of a bank with 400 shareholders and a fun-loving staff that finds new ways to attract customers. Geistfeld, the 59-year-old banker who has been at the helm of the company for the last 25 years, is NorthWestern Financial Review’s 2013 selection for Banker of the Year. The award is sponsored by Bell State Bank & Trust of Fargo, N.D.
“I couldn’t have hoped for better staff,” Geistfeld said. “I have been very blessed; not only are they talented but they are committed. They have an ambition to get things done.” Geistfeld is quick to praise his colleagues for the bank’s growth and earnings. But the one-time examiner who began his career in the black suit, black tie and white oxford uniform of the FDIC could have turned up his nose at a staff that has danced in the bank’s lobby, dressed up as electric guitar playing snowmen in the town parade, and even invented a checking account whose name resembles the screams of someone riding a roller-coaster.
But Geistfeld hasn’t turned up his nose. Instead he has adapted to the bank’s rambunctious culture and has added his own banking skill; the combination has made Citizens the bank it is today.
An examiner at first
A graduate of Mankato State University (now called Minnesota State University), Geistfeld initially was unsure about a career. With a major in business administration, his college adviser suggested in 1975 he take the civil service test to begin a career in public administration. “I felt: no harm, no foul. So I took it,” he said. To his surprise, after a few months, a letter came from the FDIC inviting him to interview for an examiner position. And so, equipped with a new suit and a visit to the barber that removed his 1970s hair-do, Geistfeld made the two-hour drive northeast to Minneapolis.
Soon, the FDIC offered him a job in its Mankato office and Geistfeld began the position that would set the trajectory for his career. Over the next six years, his experience from examinations helped him build a broad knowledge of bank management. “When you work with so many bankers you see those who are much better organized than others. You see what they do well and you see what doesn’t work,” he described. “It’s like running case studies over and over again. Just seeing the effect of disorganized credit files with papers scattered throughout was an education in the advantages of having an organized system.”
Some bankers resented the young examiner’s questions about their operations; others saw that he could help them better manage the bank. And then Bob Eichten, president of Citizens’ State Bank of New Ulm – the bank that became Citizens Bank Minnesota – saw Geistfeld’s potential. The bank president invited Geistfeld to interview for a position on the executive management team of the bank. After the interview, Eichten believed Geistfeld could one day lead the company and decided to welcome him as an assistant vice president, a position that had never before been filled from outside the bank.
A young leader
After starting to work at the bank in the summer of 1981, Geistfeld had an unusual opportunity. Between him and the president’s chair were just four positions and all four were held by bankers who belonged to the same generation.
By the fall, Eichten had retired and another banker had passed away making Geistfeld the third banker-in-command. He advanced to vice president and then, quickly, to senior vice president. He began to work closely with Don Gollnast, the new president of the bank. In Gollnast, Geistfeld found a mentor who helped form him into a well-rounded leader.
When Geistfeld came to Citizens Bank, he had practical banking skill but little faith in marketing. “One of my frustrations when I started here was marketing,” Geistfeld said. “The idea that someone was going to read an ad and come racing down to the bank to open an account seemed unlikely. It didn’t make sense to me.”
Gollnast, a lighthearted marketer and practical joker, changed Geistfeld’s mind. The bank president once ran an ad in which he dressed as the Lone Ranger. The caption read: “I am the loan arranger.” Geistfeld still rolls his eyes at it. “Some of the ads he did were so corny, I am almost embarrassed,” he said. “But Don always said, ‘people don’t remember the normal stuff. You’ve got to get them talking about you in a good way to get their attention’,” Geistfeld recalled.
Geistfeld also was the target of Gollnast’s pranks. In the 1980s, Geistfeld painted his house an earthy orange color. When the day after Halloween came, he found the face of a pumpkin painted on the side of his house. “I’m not sure how long it took him to do that,” Geistfeld chuckled. “Don really helped me loosen up after my regulator days.”
The two worked together until 1987 when Gollnast retired. Then Geistfeld, with the second-in-command in ailing health, became president at the age of 34.
A unique opportunity
The bank and its new president were a good match. With a unique ownership structure that allows the president to use his skill to guide the company, Citizens Bank would grow under Geistfeld’s watch from one branch and $40 million in assets to $318 million and four locations plus an insurance agency.
Chartered in 1876, Citizens Bank Minnesota was capitalized by a group of local businessmen. During the last 136 years, as generation after generation inherited bank stock from its predecessors, the bank’s shareholder numbers have grown to 400. “It’s a common story for the children of stockholders to come to the bank after a parent has passed on and find the bank’s stock in dad’s safe deposit box with a note that tells them not to sell it,” Geistfeld said.
Now, the bank has owners in all parts of New Ulm, a community of almost 14,000 people. Each year the stockholders who attend the bank’s annual meeting elect a board of directors, but they do not hand down a strategic plan to Geistfeld. Instead, they let executive management write the bank’s action plan. Geistfeld feels he has been given a tremendous opportunity.
“Instead of ownership making the plan and passing it down to me, they let us run the bank. I have been given an enormous amount of latitude over the years. They haven’t approved all my ideas but they have agreed with most of them. I don’t know of any other bank where a non-owner gets to do that.”
Geistfeld’s unique power over the bank’s business plan allowed him to grow the bank’s footprint and increase the bank’s ag lending. Having reviewed ag loans at many local banks, Geistfeld had the experience to forge into agriculture.
He also had the connections to find acquisition opportunities. In 1992, the family that owned a bank in Lafayette, Minn., approached him with the suggestion that Citizens Bank buy their bank. The same happened again in LaSalle, Minn., in 1998. Together the acquisitions added $50 million in assets to the bank. “Both of those came from relationships I had made in my FDIC days,” Geistfeld said. “Every one of our acquisitions was a suggestion by management to the board.”
In 1989, Geistfeld took the bank’s dormant insurance agency and hired a customer who had spent his career building his own agency. With new expertise, the bank’s insurance business grew from virtually nothing to a profitable full-service general agency.
In 2010, Geistfeld took a new approach to grow the bank’s ag lending. Instead of investing in bricks and mortar to expand the bank’s footprint, he invested in his staff to go out and develop relationships, even if it didn’t have an office in the area. “We literally looked at our footprint on a map and stuck pins where we didn’t have a presence,” Geistfeld said. Noticing the largest pockets outside the LaSalle branch, the bank hired a lender to work with the two lenders already at that branch. The three pushed into the targeted regions, some of which were as far as 40 miles from the branch.
How did the lenders meet farmers when there was no branch for the farmers to visit? “The local coffee shop is still a very popular place and a very powerful place in a small town,” Geistfeld said. “They had to get to know people and network at baseball games, at town gatherings or even at church.” To aid the lender, the bank also enlisted the help of a few faithful farm customers. “You have to have advocates,” Geistfeld explained. “Farmers want to know you before they will do business with you. If a farmer had a need, it was nice to have other farmers speaking on your behalf. This business is all based on relationships.”
The strategy worked. The LaSalle branch had $30 million in loans when the bank hired the new lender; today that office has $45 million. “That’s 50 percent growth in two years,” Geistfeld said. “Our team has done a very good job.”
An army of advocates
The ownership structure of New Ulm’s only locally-chartered bank also brings another advantage which makes it clear why it has not taken advantage of S-corp election. With 400 stockholders, many of whom are local business owners, the bank’s customer base and marketing reach is vastly expanded. “Stockholders make good clients and good advocates for the bank. It is nice to have an owner of a local trucking company who also owns bank stock think of this bank first, rather than choosing another bank in town,” Geistfeld said.
Staff turnover at the bank is low; Geistfeld says it’s the culture, which he credits to Gollnast. Explaining Gollnast’s cultural influence, Geistfeld recalled a 1999 experience when the bank hired HTG Architects to remodel an office. HTG’s partner on the project was Jon Thorstenson. “Jon always wore bright pink socks,” Geistfeld exclaimed. “Finally I asked him what was up with his socks. He said ‘if I can wear these, then I have broken the ice. People will listen to me in these, I can say anything I want now.’”
At the next strategic planning meeting, Geistfeld brought pink socks for the executive staff and he set the ground rules for the first “pink socks” meeting. “Everyone could share whatever they wanted and no one could criticize it negatively,” Geistfeld explained. “When it went for three hours, I started to wonder what I had done.”
In the wake of the first “pink socks” meeting, the bank began to hold creative events that have ensured local businesses know the bank’s name. What’s more, the bank has no trouble finding staff to participate in the events, even though most events take place after hours. One example is the “reverse spotlight” where as many as 40 bank employees visit a local business to learn what it does. “The idea is that we want to know about them so we can tell people about them,” said Jean Geistfeld, Lou’s wife who is a marketing consultant for the bank.
Local businesses also benefit from the bank’s Main Street cash mobs, an event in which at least 20 of the bank’s employees descend on a store and spend $20 per person. In one case, the bank’s mob spent $1,100 at a local hardware store.
Last December, the bank’s staff staged a flash mob in the lobby of the home office. The 15-member mob performed a three-minute dance. Geistfeld still remembers it turning some heads. “We always laugh, if we are dancing in the lobby, people come in and ask, ‘what’s going on in here?’ We do things people don’t expect a banker to do,” he said.
Eye on the Future
With an ag portfolio that makes up nearly half the bank’s assets, Citizens Bank has weathered the troubled loans resulting from the recent recession. And, with abnormally profitable years in 2011 and 2012 driven by a strong ag economy and from a boom in residential mortgage refinancing, the bank is now looking to continue the growth it has enjoyed for the last six years. “We simply cannot let ourselves shrink,” he said.
The bank’s primary strategy for keeping the loans coming is to regain a clear understanding of its risk appetite. “Before the recession, there were loans we didn’t even bat an eye at,” he said. “Then, all the sudden we were gun-shy. It’s time to pick our heads up again.”
Geistfeld and Citizens Bank Minnesota are poised to have continued growth. With the new limit of 2,000 shareholders before the bank is required to register as a public company, the bank’s army of advocates will only grow. And new customers will continue to take interest.