Non-Profit Banking is Not an Oxymoron

One of the too-big-to-fail banks, JP Morgan Chase, recently estimated its losses from trading in financial derivatives to be a staggering $5.8 billion. Clearly, those big national bank chains are not the most sustainable model. There is a model that is definitely sustainable and customer friendly. It's called Bremer Bank, and it's headquartered in St. Paul, Minnesota, with over 100 branches in Wisconsin, Minnesota and North Dakota. Founded in 1943 by German immigrant Otto Bremer, Bremer is 92 percent owned by the non-profit charity, The Otto Bremer Foundation. The other eight percent is owned by Bremer bank employees. About 40 percent of the bank's profits are put back into the foundation. The PBS show NOW observes that "Bremer seems to have weathered the banking crisis very well; this might be partly due to the loyalty we find amongst its customers, a level of loyalty that seems unusual for a bank." Perhaps the customer loyalty is due to the fact that Bremer considers itself to be a "true financial partner" with its customers, according to the bank's publication, The Bremer Story.   Otto Bremer is quoted as saying, "Banks should be home banks; not bigger banks, but better banks." Part of being a home bank, Bremer style, is giving part of its profits to the foundation. The Otto Bremer Foundation gives about $25 million in grants a year. The beneficiaries of the grants must reside in Minnesota, Wisconsin or North Dakota, and preference is given to residents of regions with Bremer banks. Otto Bremer once said, "To serve our clients, we must also serve their communities." Bremer encourages its employees to be "heavily involved in neighborhoods and serve on community-based boards of directors." In other words, employees are encouraged to volunteer their time to civic and non-profit organizations within their communities. The reason Bremer wants employees to be so involved in their communities is because it makes the bank "even stronger and allows the bank to be as large or as small as its clients want it to be." That's a rather smart business philosophy. Giving employees an eight percent ownership of the bank is rather unusual, to say the least. The reason The Bremer Story gives for employee ownership is that it "ensures a deep commitment to customer service and client success." There is little chance, according to Bremer, that the ownership structure would change. That's because the ownership structure combined with the bank's commitment to community involvement and providing a living wage and competitive benefits mean that there is "little likelihood of ever seeing a change in Bremer’s vision, mission or ownership." It would definitely be interesting, not to mention beneficial, for banks with similar operating philosophies and ownership structures to pop up all over the U.S. Banks like that could give the too-big-to-fail banks a proverbial run for their money. Photo: Flickr user dno1967b