Jack Hartings
Photo by Michael Nemeth
Thoughtful lending and an open mind keep profits strong for incoming ICBA chairman Jack Hartings
By Kelly Pike
The Peoples Bank Co.
Coldwater, Ohio
Assets: $450 million
Retail locations: Seven
Employees: 80
Shareholders: 260
Founded: 1905
Website: www.pbcbank.com
Jack Hartings may not always have been the most popular man in town during the run up to the mortgage crisis, but he was certainly one of the wisest.
While out-of-town lenders gave money to customers requiring no down payments to buy overpriced homes that they couldn’t afford, Hartings, the president and CEO of The Peoples Bank Co. in Coldwater, Ohio, and ICBA’s incoming chairman, held fast to his community bank’s conservative lending practices.
Hartings required down payments for the bank’s home mortgage borrowers. He didn’t allow sellers to increase home prices to refund a down payment to buyers. And he disregarded home appraisals based on temporarily inflated selling prices, which required more buyers to put more money down.
It was a prescient move for Hartings and the $450 million-asset community bank, which comfortably weathered the downturn even though residential mortgages are its biggest business line—but not everyone appreciated Hartings’ common-sense approach at the time. Some customers, frustrated that The Peoples Bank wouldn’t give them or their child an easy mortgage, worried Hartings by taking their business elsewhere.
Jack Hartings and Mindy Kremer, marketing director for Mercer Health Hospital in Coldwater, talk in a patient care unit. Hartings and The Peoples Bank Co. have been big supporters of the nonprofit hospital serving Mercer County since 1950, one of the first cooperative hospitals formed in the country.
Jack Hartings talks with V.J. Westerheide, owner of S&K Products, a customized metal stamping manufacturer in Coldwater. The Peoples Bank Co. provided the initial loan that allowed Westerheide and his wife Marilyn to purchase the plant 26 years ago. Westerheide is now a director at the bank.
Jack Hartings stops to see Gary Bruns, proprietor of The Mr. Shoppe, a clothing store a few doors down from The Peoples Bank Co.’s main office in Coldwater. Bruns is one of Hartings’ many longtime business customers and friends.
“What concerned me most wasn’t that the customer was upset with me,” recalls Hartings of the homebuyers who ignored his community bank’s cautiously pragmatic approach. “I was more upset that I could see the customer getting in trouble—the customer putting himself in a position where he would lose his house, equity or credit.”
Fortunately, most did listen. When the economy came crashing down in 2009, The Peoples Bank was able to work with customers facing hard times. With few underwater credits on its books, the bank continued to lend as others left the market—though it still faced the challenge of distressed sales depressing market values.
“It was definitely a time for patting ourselves on the back for making wise decisions,” Lynn Hoyng, executive assistant at The Peoples Bank, recalls of the Wall Street financial crisis. “Jack got us through that just fine. Those were very profitable years.”
Most recently, The Peoples Bank landed on ICBA’s annual list of best-performing community banks, ranking among the top 25 most profitable community banks in the country with assets of $300 million to $500 million for achieving a 12.78 percent return on equity in 2013. Equally impressive, the bank has maintained an efficiency ratio of less than 50 percent for the past six years.
Today, The Peoples Bank is the leading local mortgage lender in Mercer County, Ohio’s number one agricultural county by receipts. The bank sells and services fixed-rate loans to the Federal Home Loan Bank and to Freddie Mac, and has more than $40 million in residential mortgages as assets on its books.
“Community banking is a balancing act,” says Hartings, who can often be found at the Friday night football games of the reigning back-to-back-to-back state champions Coldwater High School Cavaliers with his wife, JoAnn. “It’s taking care of your customer, taking care of your community, and still getting a safe and sound return for your shareholders.”
In Hartings’ case, he answers to 260 shareholders—none with more than a 5 percent stake in the bank. Many can trace their ownership to the bank’s founding in 1905.
Thoughtful action
Those who know Jack Hartings describe him as an even-keeled, hardworking and conservative banker who makes thoughtful decisions. Yet his steady leadership is paired with a willingness to challenge the status quo cautiously to keep up with an evolving marketplace—a quality that appealed to the bank’s board when it promoted him from loan officer to bank president 25 years ago. He was 36 at the time.
“Jack has a combination of energy and open-mindedness, yet is both honest and conservative,” says Steve Lefeld, a director for The Peoples Bank since 1998 and part-owner of 10 John Deere agricultural equipment stores. His father was on the board when Hartings became president. “He’s always trying new things, but trying them in a sensible way.”
Twenty years ago, every residential mortgage the community bank made stayed on its books. Today the bank originates almost three times as many secondary market loans as portfolio mortgages. To combat the decline in the bank’s loan-to-deposit ratio, Hartings actively sought out new opportunities in lending. Ten years ago, he tested out participation loans, carefully partnering with like-minded community banks to find good matches for The Peoples Bank’s portfolio. The effort has significantly boosted earnings while diversifying the bank’s lending beyond its Mercer County market.
In the last five to eight years, The Peoples Bank has profited with loans issued to the developers of large apartment complexes and hotels. More recently, it has begun offering student loans for people within a 100-mile radius around Coldwater—and it is considering expanding that lending to an even larger market.
“With student loans, we saw that our customers were going elsewhere for private student loans and felt there is a need for a good alternative,” Hartings says of tapping the ICBA Service Provider program with iHELP Private Student Loan Program. “Although it’s starting off slow and won’t be a large part of our portfolio, it will satisfy local customers’ needs.”
“We’re an older bank but somewhat aggressive if it makes sense for the bank to do it,” says Lefeld of Hartings’ approach to make decisions cautiously and then power forward.
Get to Know Jack Hartings
Jack Hartings
President and CEO
The Peoples Bank Co.
Coldwater, Ohio
Family
Wife: JoAnn
Parents: Ernest and Alfreda
Sons and Daughters-in-Law: Russ and Julie, and Brent and Megan
Grandsons: Everett, Henry and Owen
ICBA service
Executive Committee, member, from 2010-2015
Federal Delegate Board, chairman
Board of Directors, member
Policy Development
Committee, chairman
Congressional Affairs Committee, member
Housing Policy Task Force, member
ICBA Services Network Board of Directors, member
Large Community Bank Council, member
Regulation Review Committee, vice chairman
Membership-Marketing
Committee, member
Other industry service
FDIC Advisory Committee on Community Banking, member
Consumer Financial Protection Bureau Community Bank Advisory Council, member
Federal Reserve Board Small Bank Advisory Board, member
Ohio Banking Commission, board member
Community Bankers Association of Ohio, executive director, chairman and board member
Community Bankers Association of Ohio Legislative and Regulatory Committee, member
Local community service
Wright State University, banking instructor
Grand Lake/Mercer County Development Corp., treasurer
Business Enterprise Center Lake Campus, board member
National Management Association/Grand Lake chapter, treasurer and president
Coldwater Chamber of Commerce, trustee and president
Coldwater Kiwanis Club, president
Community Improvement Corp. of Mercer County, trustee and president
A penny saved
Hartings also strives to keep overhead low. Over the past 25 years, The Peoples Bank, a seven-branch community bank with 80 employees, has boasted a return on equity of 10 percent or better.
Hartings accomplishes this with a low employee-to-branch ratio and by emphasizing process, asking staff for ideas for how to increase capacity and empowering them to make decisions. Last year, the bank centralized much of its mortgage documentation, freeing up loan officers to make 20 to 30 percent more loans without adding more personnel.
“Technology has been one of the biggest assets to our industry in leveling the playing field,” says Hartings, who praises document imaging as one of the best efficiencies his bank has adopted. Adding a mobile banking channel has been the bank’s most recent technology venture.
Frugality is just Hartings’ nature, he admits. As a youngster, he earned extra cash baling hay for farmers. He delighted in counting his earnings and stocking them away in a special place in his corner of the bedroom he shared with his four brothers. He was also inspired by his uncle Jack Romer, who ran nearby St. Henry Bank—today run by Hartings’ cousin David.
Before joining The Peoples Bank at age 30, Hartings worked for several financial institutions, including a finance company and a community bank that was sold four times in six years.
Though Hartings’ days as a farmhand are long over, agriculture plays a role in The Peoples Bank. About 18 percent of the bank’s loan portfolio is in agricultural credit, including farm and farm equipment loans. Then there is manufacturing, particularly companies relying on skilled labor, such as tool makers and fabricators. The area’s unemployment is below the state average, where Hartings has seen some resurgence in home building. Overall the bank serves about 1,000 business accounts.
“From a customer’s perspective, it’s known that we may be a bit on the conservative side at times, but we work with them to get what they need in a timely fashion,” offers Steve Schmidt, vice president of lending and business development, and an employee of The Peoples Bank for more than 30 years. “When we deal with Realtors or when clients deal with us, we’re known for how fast we get it done.”
Of course, fixed-rate mortgage lending isn’t really decision-making—it’s dumping information into underwriting software. What really gets Hartings inspired is the flexibility to help customers and grow businesses.
“Jack grew up in banking back when you had to make that decision based on information you gathered and the relationship with the customer,” Schmidt says. “You look past everything else … to understand what the customer needs and what’s right for the bank. That makes Jack a good leader and makes us better lenders.”
“What I enjoy the most in running a community bank is putting together deals that make sense, but that other banks may not do because their policies or procedures get in the way,” Hartings agrees.
Making It Work
In 2000, the Community Bankers Association of Ohio was faced with the sudden retirement of its executive director. During the six months it took to find a replacement, Jack Hartings—then the association’s chairman—stepped up as interim executive director. His commitment required him to travel 110 miles to Columbus, Ohio, every Thursday morning to do association work, and then back home to Coldwater, Ohio, to work at The Peoples Bank Co. on Friday.
“We didn’t have a lot of money in the association’s treasury to waste on bringing in a temporary outside executive,” Hartings recalls. “As a community banker we do what needs to be done and ask questions later.”
He did a great job for the association and Ohio’s community banks, reports Rick Gillett, president and CEO of Sutton Bank in Attica, Ohio, and the CBAO’s previous chairman.
“I always found Jack to be very inquisitive and looking for a way to constantly make things better,” notes Gillett. “He studies and is a no-nonsense kind of guy with high expectations of himself and others. ICBA selected the right person to lead ICBA from the banker perspective.”
—Kelly Pike
Consider Grady Shaner, owner of Country Truck Sales in St. Marys, Ohio, which sells medium- and heavy-duty trucks all over the United States. Shaner started his business with a $25,000 floor plan with help from Hartings in 1983. A month later, Hartings moved to The Peoples Bank.
Then in 1988, Shaner got a call from his loan officer at 6 p.m. on a Monday telling him that his line of credit expired at 5 p.m., and that he could renew it only if he took out a second mortgage on his wife’s home—something he promised he would never do.
Shaner called Hartings at home and explained the situation. “We’ve got a loan meeting on Wednesday,” he recalls Hartings saying. “’I’ll get it taken care of and pay it off on Thursday.’”
That’s exactly what he did. The only catch: Since Hartings didn’t know much about big trucks, he said he would have to visit Country Truck Sales once a quarter to check inventory and bill $25 for the visit. However, Hartings has yet to bill the company for such a visit, and today it maintains a $1 million line of credit with The Peoples Bank.
More recently, Hartings led the community bank’s effort to finance a 36-person dorm at Wright State University’s Lake Campus through the Western Ohio Education Foundation. With a swelling population of more than 1,000 commuting students and no housing, the foundation’s board wanted to build on land adjacent to the school but had never borrowed money or invested in student housing. Several institutions couldn’t work out the financing. Hartings dove into the details of the deal, which involved ensuring Wright State University would help manage the dorms, finding a legal firm to handle the paperwork and helping get approval for tax-exempt financing from the county.
“We put together a plan we thought would work, took a little leap of faith and did the deal,” says Hartings, who knew the project would be a big step toward elevating the stature of the campus. “We did the financing because we could structure it to limit our risk, and it was the right thing to do for our area.”
With 100 percent occupancy within the first year, The Peoples Bank financed another building housing 32 students that opened this fall.
Jack Hartings and Bonnie Mathies, dean of Wright State University, Lake Campus, in Celina, Ohio, talk with students living in one of the university’s dorm complexes. Careful planning and creative financing by Hartings and The Peoples Bank Co. that paid close attention to details allowed the university to finance the student housing project, an important piece of the university’s overall growth plans.
Photo by Michael Nemeth
Considerate of people
Yet sometimes it’s the low-key efforts that do the most good. Consider the annual community picnic in Coldwater in August. One officer at The Peoples Bank has served as the event’s treasurer for 20 years, shepherding the picnic funds and keeping them secure. It’s a considerable commitment, but something most people in the community aren’t aware of. But, as is his nature, Hartings quietly ensures the necessary job gets done efficiently without fanfare.
Hartings is quick to praise the contributions of his staff stepping up in the community when there is a need, noting with pride that three of his employees, each working at a different branch, had won Citizen of the Year awards recently from their respective communities. He’s also a family man, cooing at babies brought to the bank on visits and often showing off his own photos of his three grandsons, Everett, Henry and Owen—three boys all under the age of 3 who live in Denver and Baltimore with Hartings’ sons and their spouses.
Perhaps that’s why he’s always looking to the future.
“I don’t know if a light bulb went off a couple of years ago, but I realized I was getting older,” Hartings says. “When I was young and coming up, someone gave me the opportunity, so the last several years we’ve been going out and hiring talented, young, well-educated people who have the same passion for our area and then teaching them to be community bankers.”
They are the ones who pushed for The Peoples Bank to create a Facebook page last spring to reach out to younger demographics—which has mirrored Hartings’ industry efforts with ICBA to help keep community banking strong. It’s the same reason he’s stepping up and into the yearlong volunteer position of ICBA chairman this month, a high-profile role he describes as “a little out of my character.”
But if he doesn’t stand up for community banking, Hartings adds matter-of-factly, he can’t expect someone else to do it for him. “I don’t do anything special in running my bank—I just try to do the best job I can for my community,” he says. “And I want others to understand how important our industry is. We are the hub in many communities, and if we’re not there, those communities don’t survive, thrive and grow.”
For Hartings, the best result of the financial crisis wasn’t just the new business The Peoples Bank received or the way he was able to protect so many of his customers—it’s the way the community banking industry has been positively defined to customers, the general public and policymakers in Washington, D.C.
“Both the regulators and Congress respect us for what we stand for,” he observes. “So we need to be real careful sharing our credibility with others.”
But Hartings is ready to share his time with other community bankers—advocating for the industry and showing individual community banks what they have to gain with grassroots lobbying, services and education when they join up with ICBA. “We have built a stellar reputation because of how we treat our customers and what we do for our communities,” he says. “Be proud to call yourself a community banker.”
Kelly Pike is a freelance writer in Virginia.