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Community Developments Investments (August 2013)

  The Cultural Heritage Center of the Citizen Potawatomi Nation, the owner of Shawnee, Okla.-based First National Bank and Trust.  First National Bank & Trust
The Cultural Heritage Center of the Citizen Potawatomi Nation, the owner of Shawnee, Okla.-based First National Bank & Trust.

Lending in Indian Country: Opportunities in Partnerships

Larry Briggs, President and CEO, First National Bank & Trust

There is a misperception among U.S. bankers that doing business in Indian Country is difficult, risky, and unprofitable. We at First National Bank & Trust (FNB) have been doing business in Indian Country for years—profitably and in a safe and sound manner. In this article we would like to share our experiences with fellow bankers in the hope it will encourage them to consider Indian Country as a sound business opportunity.

Founded as the First Oklahoma Bank NA in 1984 and later purchased by the Citizen Potawatomi Nation (CPN), which changed the bank’s name, FNB is a 100 percent tribally owned financial institution based in Shawnee, Okla. FNB has approximately $230 million in assets and seven branches: in Shawnee, Holdenville, Lawton, Mangum, and Granite in central and southwestern Oklahoma (see figure 1).

The communities FNB serves are diverse. Mangum, Granite, and Holdenville are primarily rural agricultural communities. Lawton is a U.S. Census Bureau metropolitan statistical area (MSA) that is home to the Army’s Fort Sill, known as the artillery capital of the world. It is a diversified city, but the military is the largest employer by far.

Figure 1: FNB Branch Locations in Oklahoma

FNB Branch Locations in Oklahoma

Source: First National Bank & Trust

Although Shawnee is not part of the Oklahoma City MSA, the two cities are connected by a heavily traveled interstate highway and the commute is about 30 minutes. Shawnee has a large manufacturing base and is the medical and retail hub for thousands of people in the surrounding small communities and rural areas. It also boasts the only Catholic and Southern Baptist universities in the state of Oklahoma.

FNB’s customer base varies as widely as the communities it serves. The primary customers of FNB are consumer/retail, small business, agricultural, and professionals and executives.

Oklahoma’s Economic Landscape

Oklahoma has been fortunate not to have experienced many of the recent economic and financial challenges faced by a large part of the country. Some of the reasons are as follows:

  • The energy business has been stable.
  • The state’s manufacturing industry has not experienced a major decline.
  • Oklahoma did not experience the housing bubble and bust to the degree other parts of the country did.
  • A large number of the bankers and regulators in Oklahoma experienced the recession of the 1980s and early 1990s and learned valuable lessons. We made a conscious effort not to repeat the problems experienced during those years.

As stated in the 2012 Greater Oklahoma City Economic Forecast, “although Oklahoma was late going into recession, it emerged from the recession at the same time as the nation.” Over the 2007–2010 period, Oklahoma had the eighth-fastest growth in employment as reported by the U.S. Bureau of Economic Analysis. After the recession started, Oklahoma’s unemployment rate reached a high of 7.2 percent in January of 2010 but has declined steadily since, reporting 5 percent in May 2013.1

Recent employment growth in Oklahoma has greatly exceeded that of the nation, and the Oklahoma City MSA is one of 22 metropolitan areas to gain back more than half the jobs lost between the areas’ employment peaks and post-recession low points.

Banking in Oklahoma

For the most part, banks in Oklahoma, including FNB, recorded profits through the recession and recovery. Losses in the loan portfolio were higher than normal but manageable, and banks continued to do reasonably well. There were very few bank failures during and after the recession in Oklahoma, and that trend continues.

The uncertainty surrounding new banking regulations, the state of the economy, the tax system, health care reform, etc., has affected the banking system in general, and Oklahoma banks are no exceptions. In most cases, our loan-to-deposit ratios have decreased, our interest margins continue to fall, and uncertainty is still prevalent among our borrowers and business people.

Our assessment is that until the uncertainty is diminished, our customers and potential customers will be reluctant to expand, borrow, or change business models. Many of our business people are flush with cash and their borrowing needs have diminished because of their liquidity. This is especially the case in the oil and gas industry.

Most of the banks in the state, including FNB, are actively soliciting quality loans. For every quality opportunity, there appear to be 10 to 15 banks chasing that business. Even though the Oklahoma economy is doing well, Oklahoma banks, in line with industry trends, have raised their lending and investment standards, hence eschewing lower-quality loans and investments.

Citizen Potawatomi Nation

Federally recognized since 1938, the CPN is the largest of eight tribes of the Potawatomi language-speaking people. As of September 2011, the nation had 29,788 tribal members, of whom 10,312 resided in Oklahoma.

The CPN has been the largest employer in the city of Shawnee and Pottawatomie County for the last eight years. The 2011 CPN Annual Report indicates that tribal employment totaled 1,922 as of September 2011. During fiscal year 2011, the CPN provided an annual payroll of more than $59.6 million. Additionally, the CPN spent approximately $175.1 million on goods and services. The tribe’s impact on the local community and the state continues to increase.

The activities of the CPN vary from medical assistance for senior tribal members, scholarships for financially challenged students, and genealogical and enrollment assistance to tribal families and their members, to sponsorship of recreational, sports, and economic development activities. Major CPN initiatives include housing, health care, child care, employment and training, wellness, and community and family services.

Given that FNB is owned by the CPN, the bank moved cautiously into a lending relationship with the nation. FNB’s first foray into business with the CPN was on a grocery store. The majority of the funds to build the grocery store were provided from the CPN’s operating income.

FNB was going to take a mortgage on the grocery store real estate as collateral on the loan. Because the property was located on trust land, however, the obstacles the bank faced in securing this collateral were nearly insurmountable. FNB elected instead to make a loan on the equipment in the store.

The bank applied for a guarantee from the U.S. Bureau of Indian Affairs (BIA), because the loan amount would be above the bank’s lending limit. FNB worked closely with the BIA to obtain that guarantee.

The BIA guarantee reassured FNB’s regulators, who were able to observe how the bank and the CPN handled that transaction. We believe that the regulators’ comfort level increased dramatically after this experience. They witnessed the bank’s knowledge and expertise in this area, and saw that the CPN’s financial condition and history of taking care of its finances were excellent.

The loan was a resounding success for FNB and the CPN. In 2011, FireLake Discount Foods produced sales of $53.8 million. The grocery store employs more than 250 people, providing economic benefits to Shawnee and its surrounding communities.

The CPN has been willing to waive sovereign immunity when borrowing money in order to assure the bank that its loan’s collateral is adequately secured. Since the first note was made on the supermarket, the bank and the CPN have partnered on several more successful loan opportunities.

Over the years, FNB has developed relationships with other tribes, and today the bank actively seeks business from them as well as their tribal members. There are 39 federally recognized tribes domiciled in Oklahoma, and a large portion of the state population belongs to one of these tribes. Therefore, a large number of our customers are tribal members.

Successful Business Partnerships

FNB business in Indian Country is enhanced by forging partnerships with other financial institutions and community development organizations. One example of such a partnership is FNB’s relationship with the Citizen Potawatomi Community Development Corporation (CPCDC).

The CPCDC was created by tribal ordinance in 2003 to provide nontraditional financing and commercial lending resources to Native-owned small businesses and other small commercial entities, as well as to small businesses in rural areas. The mission of the CPCDC is to promote, educate, and inspire the entrepreneurial growth and financial well-being of the CPN tribal community through financial education, access to capital, business development services, and innovative capacity-building practices. The CPCDC is a certified community development financial institution. It is not an affiliate of the bank; however, we work hand in hand with the organization.

When making a loan, the CPCDC usually requires less upfront capital from business owners, allows longer amortization periods and more flexible repayment terms, and employs a more lenient credit analysis. The CPCDC provides technical assistance for the borrower to develop the skills needed to keep a business stable and profitable. The CPCDC also provides loans for startup businesses, which FNB rarely does, and actively partners with the Consumer Credit Counseling Service of Central Oklahoma to provide credit consultation and debt management planning.

The CPCDC and FNB have developed a working relationship that has proved beneficial to both. The CPCDC offices are located on the second floor of the bank building. Some of the board members of FNB also serve on the CPCDC board. This has allowed the organizations to familiarize themselves with the products and services offered by each institution to its respective clientele.

This close working relationship has produced successful business ventures. For example, FNB has had the opportunity to sell loan participations to the CPCDC when the bank was faced with lending-limit restrictions or loan concentration issues. FNB was able to refer Native American clients with loan requests that were not considered bankable to the CPCDC. The CPCDC was established to accommodate a different set of criteria for borrowers than the bank’s.

By the same token, when the CPCDC is approached with a loan request that appears to be bankable, the agency refers that borrower to the bank. The CPCDC also recommends that clients develop financial services relationships with FNB.

FNB recently sold a loan participation on a medical facility to the CPCDC. This loan was from our Lawton location. The medical facility provides services to Native Americans, members of the military, and the general population. This participation loan transaction allowed the bank to extend its portion of the loan without exceeding its lending limits.

One example of a loan referral from the CPCDC to FNB was a loan request to build a storage facility in Oklahoma City. The bank provided the construction loan as well as the permanent financing. The facility has been a success and is looking to expand in the near future.

From time to time, the bank has sold participations on tribal loans to other banks. It has been necessary for FNB to educate and explain the process and differences of loans made to Native Americans. We believe that the reputation of our ownership, our bank, and our management team has made this an easier process.


Despite the perception that lending to Native American tribes, businesses, or individuals is difficult, we have found that, for the most part, loan requests from Native Americans are not much different from those coming from the population at large. In addition to the five Cs of credit, some of the items that we review when making a decision on whether to make a loan to a tribal entity or individual are as follows:

  • Willingness to waive tribal immunity.
  • Tribal government stability.
  • Thorough review of documents that could affect the loan, such as the tribe’s constitution, resolutions, laws, etc.
  • Determination of which court system would handle any disagreement.

Good legal counsel can be of help in this endeavor.

We have been extremely pleased with the opportunity to offer banking services to Native American tribes, businesses, and individuals. This type of business is an integral part of our current and future business plan.

It is true that lending in Indian Country can present a few more challenges, but these challenges are manageable. We have found this line of business to be rewarding on several levels. We believe that community banks are missing out on great business prospects if they are not willing to act on these opportunities.

Larry Briggs, President and CEO of First National Bank & Trust, can be contacted at

Community Developments Investments is produced by the OCC’s Community Affairs Department. Articles by non-OCC authors represent their own views and not necessarily the OCC’s.

1Oklahoma Employment Security Commission, seasonally adjusted unemployment rate accessed on June 11, 2013.