Remarks of Karen Alnes Director, Community Reinvestment Programs, Norwest Corporation, Minneapolis before Banking in Indian Country--Expanding the Horizons A Joint Conference of the U.S. Department of Justice and the Office of the Comptroller of the Currency July 24, 1997 It is exciting to see so many people here to discuss this very important issue, and it is an honor to be asked to talk to you today about banking in Indian country, from a banker's perspective. Norwest has seven banks on Indian reservations -- four on the Navajo reservation, two in South Dakota, and one in New Mexico. We also have banks in many other markets which serve reservations nearby. I would like to start, however, by putting the needs of our American Indian customers into a bigger picture a broader context and that's the context of the growing diversity of all our eight million customers and our 53,000 team members. I've brought a brief video along that tells our story a lot better than I can so I'd like to play that video for you first and then talk to you more about who we are and how we serve American Indians. First, the video, which describes our banking presence on the Navajo reservation in Northern Arizona: ---------- Video --------- In describing banking in Indian country from this bank's perspective, I'd like to talk about two things today. First, Norwest's operating philosophy. How we serve all segments of our communities, and specifically, Native Americans. Second, how Indian tribes, banks, and the federal government can work together more effectively. First, our operating philosophy. As a financial services company, our goal is to earn 100 percent of every creditworthy customer's business. That's a win for our customers -- whom we reward with volume pricing when they buy more services from us -- and it's a win for Norwest, our shareholders, and our communities. We believe we can make any customer relationship profitable, if we can earn all that customer's business. Financial service is a relationship business and our strategy is "depth of relationship." For this reason, we look at under-served markets, regardless of income levels, as opportunities. We've had banks in or near Indian country for a long time. Our roots as a bank go back to the early 1870s -- and back to 1929 as one of the country's first bank-holding companies. So, we have more than a century of experience in working with Indian nations -- first in the Dakotas, Minnesota, and Montana -- the geographic core of our franchise -- and in the last few years in the Southwest and Wisconsin. In the last 10 years, we have acquired 80 banks with assets of over $40 billion dollars. Much of that expansion has been in Texas, New Mexico, Arizona, Colorado, and Nevada and has introduced us to a whole new American Indian market. In our 16- state banking franchise -- from Ohio to Nevada -- there are about three dozen Indian tribes and about 700,000 American Indians. To some extent, we've taken what we've learned over the decades with the Lakota and the Dakota in South Dakota, the Ojibwe in Minnesota and the Blackfeet in Montana and we've applied it to the relationships we're building now with the Navajo in Arizona, the many Pueblos in New Mexico, the Oneida in Wisconsin, the Ute in Colorado, and numerous other tribes. Our relationships with Indian tribes have grown not just because we've grown. Many tribes' economic sophistication and knowledge have grown as well. We look forward to working together as that growth continues. The extent of the poverty and need that still exists in Indian nations is truly humbling. But if you look at the past several decades, there is cause for hope. Education levels are rising. Many tribes have taken revenue they've gained from the gaming industry and used it wisely to diversify their economies into tourism and natural resource recovery, as well as investing in community development and much-needed infrastructure. Just as we share in the growth and development of all our banking communities, we will participate in the economic success of the tribes in our banking markets. All our tribal initiatives, of course, contribute to our strong CRA performances. CRA can be viewed as a "have to do," but at Norwest, we believe CRA should be a "want to do." So, we created a process at Norwest 10 years ago that we call the "community marketing initiative" -- CML. CML is simply a local strategic planning process for our banks. As part of that process, each of our bank presidents meets regularly with a very diverse array of community leaders. We ask lots of questions. We listen. Then we examine what we've heard and create products and services to meet the needs of all segments of our community. If CRA disappeared tomorrow, we'd go right on working just as hard to live up to the very high standards we've set for ourselves with our own internal CML process. Serving the needs of all segments of our communities is good business. And if we do our jobs right -- all segments of our communities benefit and so will we. As part of our CML process in Arizona, many senior Norwest executives have visited on several occasions with leaders of the Navajo nation, and have attended tribal council meetings. They've visited our banks in Window Rock and Tuba City on the Navajo nation and helped create the plans for our two additional banks as you saw in the video -- that we opened in Chicle and Kayenta. Our Arizona bankers met dozens of times with Navajo leaders to listen to their concerns and to understand what types of products and services would best meet the needs of the Navajo. Our meetings and conversations will continue as we learn to work together. Here is the scorecard the last three years for our banks on the Navajo nation in Arizona: o We invested $4 million to build four new banking stores on the Navajo nation, in Kayenta, Chicle, Window Rock, and Tuba City -- each designed by a Navajo architect, each store blessed by a medicine man and 2 of the stores facing east -- the direction from which, in Navajo tradition, all blessings come; o Each of these new banking stores has an ATM; o Over 90 percent of the staff of these banks are Native American and the consumer managers of the stores are Native American; o Our consumer loans on the Navajo nation have quadrupled in four years to $8.2 million; --We created a $22 million partnership with Norwest mortgage and the federal government to build almost 300 homes in the Navajo nation through the HUD 184 program. --(HUD 184 allows banks to make mortgage loans on tribal lands, secured by residences, that can be sold to the secondary market.) --We've launched a similar program on tribal lands in South Dakota. --Since we are in Washington, I would like to give special credit to Congressman Bereuter, our congressman from Lincoln, Nebraska, who was most helpful in making HUD 184 a reality. o We created a program to lend up to $2,500 each to Navajos with little or no credit history -- and we've made $168,000 in loans through this program to date. That may not sound like a lot of money, but it is a large number of very small loans to people who have not borrowed before. This program also incorporates a course in personal money management, which is vital to its success. As you saw in the video, most of the customers opening accounts have never had any type of bank account before. We've still got a lot of work to do. For example, we haven't done nearly enough in lending to small businesses on the Navajo nation. But our banks are making a profit, and perhaps a more important measure, our Tuba City office has had the highest number of "sales per banker per day" of all Norwest banks for the past two months. This shows that the growth is coming because we are serving many, many new customers in that market, introducing banking services to new customers every day. So, what can Indian tribes, banks, and the federal government do to make financial services more accessible -- and improve the quality of life in Indian country? Here are seven suggestions: First, a bank has to want to do business in Indian country. If it doesn't have the desire, if it's paralyzed by fear or ignorance or apathy, then a thousand CRA laws won't make it happen. Second, a bank must have patience. Progress doesn't happen overnight. Tribal officers come and go. Bank officers come and go. Trust takes time and commitment. There has to be continuity. Third, bankers have to understand Indian customers as they would any other customer. Get out and meet them. Get acquainted with tribal leaders. Understand the culture, the history, the religion. Be proactive marketers. A example of this is in South Dakota -- where we have two banking stores on reservations. Our South Dakota bank sponsored the creation of a CD-ROM called "Vision Quest" for schools and libraries. It's the history -- from an American Indian perspective -- of the men, women, and sacred sites of the Dakota nation. Fourth, the staff of our banks in or near Indian country have to reflect the culture of the marketplace. Banks have to commit to hire, train, and retain Indian staff in banks in or near Indian country. In South Dakota, Montana, and Colorado, for instance, we have minority internship and recruiting programs targeted to American Indians. Of course, we've experienced some turnover as many of the bankers we train go back to work on the reservation, but that's an investment worth making as well. Fifth, bankers and Indian tribes have to commit to try to understand each other's laws and regulations. Tribes are justifiably proud of their heritage, their sovereignty, and the sacredness of their land -- but it takes time for a non-Indian to understand the richness and complexity of this heritage. Tribal courts are different from U.S. courts but the tribal court system can be understood by a non-Indian -- it just takes time. For example, in South Dakota, a Norwest lawyer we assigned to collections work is now president of the Tribal Law Association on the Rosebud reservation. In the same way, Native Americans need to take the time to understand how a bank works. Banks are in the business of lending their customers' deposits. What banks value most is safety, soundness, and certainty of payment. One reason the Navajo have made progress with banks and other businesses is they've adopted a commercial code that works for the Navajo, banks, and other businesses. Sixth, Indian tribes, banks, and the federal government all need to be more flexible. Credit standards are important to bankers but sometimes we have to find ways to work around those standards if our local banker -- who's in charge of the relationship and knows it better than anyone else -- believes he or she can make the loan work. Sometimes regulations and government agencies prevent banks from making creative loans we know can work. Banks need elbow room to make creative loans without compromising safety and soundness. We also need cooperation from federal agencies, especially the Bureau of Indian Affairs as we work to structure credits. Seventh, the lack of certainty in laws that apply to reservation land can make it difficult for banks to make home loans and loans to businesses on Indian lands. All parties need to work to build certainty and security into real estate and community development lending in Indian country. The BIA plays a significant role in any real estate transaction, and it is imperative that a strong partnership be established between banks and the BIA to enable the growth and community development that is essential to the economic health of tribal lands. In summary, the challenges are still significant for banks doing business in Indian country -- but there's more cause for optimism than ever before. Smart banks now view Indian tribes not as an after-thought -- or a "have to do" -- but as a tremendous market opportunity. At Norwest, we want to work with tribes, our regulators, and other government agencies, to make this partnership an even greater "win" for everyone. Postscript: If I may have the "privilege of the talking stick" for a moment longer, I'd like to add a couple of points which people asked me about during the conference. First, what product mix are we using to generate the profitability in our offices on tribal lands? The answer is that all Norwest banks offer free checking, with no minimum balance. This is the primary account opened in the reservation offices, as well as all our other offices. The ability to offer such a simple account, at no fee, with no minimum balance, is very helpful in establishing relationships with new customers in a market where many residents have not had previous banking experience. Second, I'd like to tell the story of how and why Norwest opened the offices on the Navajo reservation. When Norwest sought to acquire portions of Citibank, Arizona, the Navajo filed a CRA protest, stating simply that Citibank had had two offices on the reservation, and had closed them. At the time they were closed, the Navajo did not object to, or protest, those closings, and they now regretted the closing of those banks. The protest requested simply, respectfully, and without criticism, that Norwest and the Federal Reserve help restore banking services to the reservation. Working with the tribe -- especially with Rodger Boyd who spoke at this conference -- Norwest evaluated the needs, and decided to open the four offices we have described.