Q&A with Neil Dauby, CEO of German American Bank
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Jasper-based German American Bank last month became one of two southwestern Indiana financial institutions named to Newsweek’s list of America’s Best Regional Banks and Credit Unions.
The magazine’s list was based on several factors, including profitability, risk exposures to financial uncertainties, financial relevance and overall health and stability of the financial institution.
CEO Neil Dauby recently spoke with Inside INdiana Business about his experience with the bank and the Newsweek recognition, which also was bestowed upon Evansville-based Old National Bank.
Tell me about your history with German American Bank.
I’ve been with German American Bank for over 23 years. I’m a [certified public accountant]. The first half of my career was working in public accounting. I served as a partner in various regional CPA firms in Kentucky and Indiana.
My first opportunity with German American … they had a bank in Tell City, me and my wife’s hometown. The opportunity was to be a president at that location. They were trying something different, putting a non-banker in a leadership role. I took that opportunity, and I was fortunate enough to grow that bank to the number one market-share player.
That afforded me other opportunities. I became a regional president. I became head of commercial banking, which got me to the executive C-suite level. I became president and chief operating officer. I became CEO when our long-standing CEO, Mark Schroeder, retired. And about a year ago, I also became chairman.
How does it feel to be named one of America’s Best Regional Banks and Credit Unions by Newsweek?
We’re honored to be included. It’s a pretty prestigious list. My next feeling would be one of pride in our organization and in our people. Our people are pretty passionate. Dedicated, hardworking people who come in each and every day and support each other, our customers and our communities. We’re publicly traded, and they support our shareholders.
It’s a great opportunity to have our team of professionals and our people recognized externally for all the hard work that they do. We try to recognize them internally, but when you get an external recognition like this, it’s an opportunity to say we’ve got some really good people that work really hard here.
Talk about German American’s profitability.
The profitability side of it is part of our culture. We call ourselves a high-performance shop. We want to be the best we can be. We’re recognized pretty consistently as one of the top-performing banks in the country. It’s just how we’re wired.
We’re also a publicly traded stock on the Nasdaq so we have to balance customers, communities and shareholders. The one thing we’ve learned over the years is that if you take care of your customers and communities, and you get that part right, the profitability and the shareholder return follow. You don’t have to sacrifice one for the other.
Our stock price being on the exchange, we trade at a real high premium—compared to most other bank stock prices in the banking industry—and that’s because of our long-standing, high-performance level. If you trade at a high premium, that means people can’t afford to buy you or acquire you. So we get to maintain our independence. That allows us to be the acquirer of other banks, and we get to expand our brand of community banking to other places.
What about the bank’s relevance to its communities?
We’re extremely relevant to all the individuals, families and businesses in our communities in that we provide critical access to credit and different products and services. All that helps them achieve their financial dreams and improves their quality of life and quality of place.
We’re pretty attuned to providing financial awareness and education. We’re very involved with Junior Achievement. We go throughout all the schools and our vast footprint at all levels and teach financial awareness at a very early age.
We also have a lot of financial learning tools, even digital learning tools. If you get on your mobile phone and you go [on our mobile banking app powered by SavvyMoney], we’ve got lots of tools on there to help you improve your credit score. It’s a financial education piece.
Tell me about German American’s risk exposures to financial uncertainties.
When you talk about different risks, what there was 10 years ago versus what there is today just comes at you fast and furious. The banking industry is probably one of the most heavily regulated industries in the country. That in itself affords some accountability and mitigation to all kinds of uncertainties and risks that are out there.
There are credit risks, interest rate risks, operational risks, cyber risks, compliance risks, legal risks. The list goes on and on. Not only are we heavily regulated, but we have a pretty comprehensive risk management structure. It’s the foundational element of our core business at the bank.
We have an enterprise-wide risk management team. They’re employed full-time. We have a chief risk officer. All they do is identify, assess, manage and mitigate all the forms of risk and uncertainties that come at us every day. So we take that and supplement it with technology. We have a lot of [artificial intelligence] to assist us in identifying risks that are out there.
One area of financial uncertainty is when we had the bank failures in 2023: Silicon Valley Bank, Signature Bank and First Republic Bank. A reason they failed is that they didn’t appropriately manage their risk. They didn’t look at the uncertainties that were out in the market, and that uncertainty at that time was high inflation. Interest rates were rising at the steepest, accelerated pace, the fastest in U.S. history. And you had a tight labor market.
If your bank management team isn’t sitting there saying, “Okay, what does this mean for us? Where’s our risk, and how do we position and mitigate against that?” … those banks didn’t do that properly. That’s what’s so critical about that. If you want to be a good bank, and you want to be recognized, you have to have a pretty dedicated framework for identifying risk and uncertainties.
What about the overall health and stability of the bank?
Our financial condition is extremely strong. We’ve got solid liquidity, strong capital. We’ve got a diverse core deposit base. We’ve always been a disciplined, conservative bank, and that’s really important. Our customers, investors, shareholders and communities need to know that we have that strength because when it does manifest itself with these high-rising interest rates and inflation, if you’re not coming from a position of strength, there’s some real risk.
All of that is supported by our strong standing in the investment community and also with our regulatory exams always getting high marks. That’s very important for the long-term viability, and we’re very mindful of that.
Newsweek also used survey responses and social media to come up with this list. Why do customers speak so highly of German American?
That’s the one thing that probably excites me most about the recognition, that our customers find value in us as a financial partner. To have them speak highly of us is a feather in our cap. We pride ourselves on customer service excellence. I know everyone says they’ve got great customer service, but we have formal programs in place to ensure we track data. We’re not just saying it, we’re making sure that the data shows that we’re providing customer service.
Whether you’re in our branch, calling our contact center and there’s a live voice on the phone, in our digital environment, that human touch is important in today’s world. Another thing is that we pride ourselves on having the right people. Our people provide valuable advice in consultation with our customers. We’re just not going to sell you a product or service. We’ve got someone you can talk to when needed and help you through some difficult times.
Why are regional banks and credit unions important to communities?
We’re very different than big-money center banks. If you do it right, it’s a symbiotic kind of relationship, meaning it’s mutually beneficial to all parties. If you’re a good financial institution, you’re investing in people, businesses and the community with donations and resources. Then they invest in you by using your products and services.
If it’s always a take relationship, and some banks and credit unions can fall into that ”just take” category … it’s got to be give and take. That makes for an absolutely great relationship and is why it’s so important to have the right bank because the communities benefit from it and the banks benefit from it as well.
What makes German American stand out from other regional banks and credit unions?
We outperform and we out-local our competition. One key way we do that is we have a community banking model. We use local management teams and professionals who live in the communities they serve, and we empower them. Corporately, we just want to give them resources. We want them to be standing in front of a customer and make a decision right away, 99% of the time. It’s a model that works really well, and it feels local and responsive.
If you just want the highest-yielding deposit account or the lowest loan … we don’t need people to do that. But if you want someone who can help talk through what your need is, help guide you through that and provide you some meaningful advice … it’s all about the people. If you’ve got the right people, you are going to be a differentiator.
Another one is our community involvement. We walk the walk and talk the talk. We just don’t hand out checks from time to time and say, “Hey, we’re a great community partner. Here’s a check for X amount of dollars.” We track, we encourage, we pay our people during company time to go out and get involved. We not only want them involved, we want them in leadership roles to help the community.
Another one is we’re an overall financial service provider. We provide banking, insurance, wealth management. If you’ve got a separate wealth management provider, and they’re giving you one piece of advice, and then the bank is giving you another piece of advice, but those are too contradicting because you got an overall goal, we can provide a more holistic approach.
The other one is high-tech, high-touch. We love that terminology. The high-touch means we’re relationship-driven. We have people who are consultative. The high-tech is that we married the right technology with it. Very robust. We’re big, so we can afford the right technology and apps, but we apply it on a very community relationship basis.