Industry Snapshot: Learn More About Building Material Suppliers and Construction Managers/Contractors

KendellLumberGordiansKnot-Blog

(l-r) Randy Knutson, Brad Ballard, Jim Vrchota, Travis Buege and Greg Backes

In our second story focusing on industries in 2018, we highlight two related industries, Building Material Dealers and Construction Managers/Contractors. Our goal is to bring you useful information and research for those industries.

Read our first story on food manufacturers and wholesalers here.

Randy Knutson and Greg Backes, of Kendell Lumber of Winona and Rollingstone, and Brad Ballard and Travis Buege, construction managers with Gordian’s Knot, will tell you the outlook for building is good.

Merchants Bank Commercial Banker Jim Vrchota will tell you that he and many other commercial bankers across Merchants Bank’s footprint especially enjoy working with these industries.

“Our bankers especially enjoy helping businesses in these sectors because their success is based on the same elements as ours – exceptional service, competitive products and strong relationships,” Vrchota said.

But what do the numbers say? Let’s take a closer look:

Building Material Dealers

Data from Hoovers and First Research says this about the future for Building Material Dealers:

  • “The value of US residential construction spending, which impacts contractor demand for building materials, rose 4.3% in January 2018 compared to the same period in 2017.”
  • “US retail sales for building material and garden equipment and supplies dealers, a potential measure of building material supply demand, increased 6.0% in the first two months of 2018 compared to the same period in 2017.”
  • “Total US wholesale sales of durable goods, a potential measure of demand for building materials, rose 9.7% in January 2018 compared to the same period in 2017.”

And this about predicted growth through 2022:

“The value of US private and public building construction, which is a driver for building material supply sales, is forecast to grow at an annual compounded rate of 6% between 2018 and 2022.”

Building Material Dealers-2

Residential Construction Contractors/Construction Managers

Data from Hoovers and First Research say this about the future for Residential Construction Contractors:

  • “US personal income, which drives consumer spending on home construction, rose 3.8% in January 2018 compared to the same month in 2017.”
  • “The value of US residential construction spending, an indicator of the health of the residential construction market, rose 4.3% in January 2018 compared to the same period in 2017.”

And this about predicted growth through 2022:

“The value of US new residential home construction and renovation is forecast to grow at an annual compounded rate of 7% between 2018 and 2022.”

Residential Construction Contractors-2

Demand is Cyclical

The numbers show the industry is enthusiastic, but it is a cautious enthusiasm tempered by experience for those who have worked through downturns.

As Hoovers and First Research points out — “Demand for new residential buildings can change rapidly, depending on the economy and interest rates: from 1986 to 1991, annual US home construction dropped 40%; from 1995 to 2005, it increased 75%; and from 2006 to 2011, it fell 65%.”

Both Knutson and Backes and Ballard and Buege understand that first-hand. They point out that one of the reasons they are doing well now is because they are survivors. They said the number of dealers in their market has shrunk since 2008, as did the number of contractors. A result is businesses like Kendell absorbed the customers of other dealers, and the need for Gordian’s Knot’s service has increased because there is less competition and demand is picking up.

Compared to 2008, for example, Kendell is above where they were in terms of business, according to Knutson and Backes. The same is true for the residential construction contractor/construction manager business, according to Ballard and Buege of Gordian’s Knot.

Industry Pressures

“The same house we built last year cost 15% more this year to build and it will continue to grow,” Ballard said.

Another threat is the cost of materials. A lumber tariff on Canadian lumber has driven prices, and steel prices have also risen because of recent tariffs, according to Knutson.

Hoovers and First Research notes that the average margins for “lumber companies selling commodity products primarily to contractors can range from 5 to 20%. Home Depot and Lowe’s, which sell mainly to consumers, have gross margins of about 35%.”

That increases the need for efficiency, and one of the best ways to be efficient for dealers is to provide quality materials where contractors don’t have to come back for better materials or deal with complaints from end use customers down the road, Knutson and Backes pointed out. Ballard and Buege noted Kendell’s top materials save them time because they don’t have to sift for quality.

Another threat is material allocations from producers, according to Knutson. He said it is simply that there may not be enough to go around at times because some of the larger big box stores have ordered the biggest part of the material supplies because of natural disasters.

It’s also difficult to find people to work. The 34-year-old Buege is a bit of an anomaly in the industry where he said the average worker is 55. He said people across the industry are faced with the challenge of finding dedicated and accomplished workers.

“The cost of trade labor has gone up,” Buege said. “But the cost of building is still manageable. The economy is good and people have equity in their current homes.”

While there are things to pay attention to, Gordian’s Knot and Kendell agree they are generally optimistic about the future.

“Everybody is pretty confident in the economy,” Backes said.

It Comes Down to the Relationships

Kendell and Gordian’s Knot both are long-time customers of Merchants. Kendell has been in business since 1957 and Ballard started Gordian’s Knot in 2004.

“Ours is a relationship business,” Backes said.

Ballard agreed.

“We answer our phones and we call people back. If we can’t help them, we get them to someone who can,” Ballard said. “We grow through the service we provide.”

That service and willingness to understand and support their businesses is why both Kendell and Gordian’s Knot partner with Merchants Bank.

“It’s the quality and service experience. There’s a value there that’s hard to put a price on,” Backes said.

Vrchota said it’s that “Start to Finish” attitude that is pervasive with Merchants and is one of the reasons Merchants stands apart from others. Another is how Merchants can help them with their financial needs, especially in a business that is seasonal.

Typically, with suppliers, a bank can partner with them in a number of ways, Vrchota explained. Often, it is with a line of credit so money is available when the business needs it, or with equipment or real estate financing.

With contractors/construction managers, a line of credit is often in place, and there is an emphasis on helping them with financing for construction projects.

“Those are the basics,” Vrchota said, “But every business is different in some way, so it is worthwhile to work with a banker that is knowledgeable, adaptable and will take an interest in your business, like our bankers here.”

 

Q&A with Two Business Banking Experts: Meet Annette Bleninger & Jeff Carter

Q&A-Annette&Jeff

Did you know we have over 40 Commercial Bankers and Treasury Management experts available to help your business? At every local branch, you’ll find a Commercial Banking team ready to get to know your business and provide meaningful financial solutions.

This month we’re meeting two of the team who serve our clients in the South Metro area:

  • Jeff Carter, Commercial Banker in Cottage Grove and Hastings
  • Annette Bleninger, Treasury Management Sales Officer and Certified Treasury Professional (CTP) in Rosemount

Read on to learn more about Jeff, Annette and how they approach working with business customers every day.

Share a little about your background and banking career

Annette: I have worked in financial services for over 20 years, with more than 14 of those years in Treasury Management. I started with Merchants Bank in September of 2017 and am very happy to be with a community bank that really strives to find meaningful, valuable solutions for our business customers.

Jeff: Likewise, I have been in the financial services industry for over 20 years, with 15 years in commercial lending. I joined Merchants in 2013 and have spent most of my career in community banking culture, where my passion lies.

What do you like most about your job?

Annette: I really enjoy the variety of customers that I meet when we go out to visit businesses. It is so interesting to hear about your passion and see your facility. Having that background knowledge and relationship really helps us work together to create the most efficient Treasury management plan for your situation.

Jeff: Getting to know you, our business customer, is one of the most rewarding parts of my job as well. I really enjoy creating relationships with business owners. At the end of the day, I strive to bring you value – whether that’s products, services or counsel – to help you succeed. I hope these relationships are lifelong and meaningful.

What kinds of business do you typically work with and how do you help them?

Jeff: The beautiful thing about community banking is that we can help every business in our community.

Annette: Yes, that’s definitely true. I work with businesses of all sizes and variety every day. Treasury management solutions can be used by any business – big or small. I help businesses like yours come up with plans to make their day-to-day processes more efficient, reduce the potential for check or electronic fraud, while allowing them access to their cash as needed.

Jeff: In addition to Treasury Management services, we also have deposit accounts to help your business with daily financial needs and grow your money. We even offer business checking account analysis, free of charge, whether your account is with us or elsewhere. We know the needs of a business change over time and we want to be sure you’re in the account that best serves your needs.

Then on the loan side, we can provide smart solutions to leverage capital and grow your business. No matter where you are on your business journey, from start-up to expansion, we have the products and expertise to assist you at any stage.

What do smart business owners do?

Annette: Security is a big concern for our customers, so I think smart business owners make information security a priority. You can start small. One of the most important things a business can do is monitor their daily activity in their accounts to catch fraudulent activity early. Whether you are using our fraud management products (like Positive Pay), or managing it on your own through daily monitoring in online banking, it is a critical function.

Jeff: For me, smart business owners understand the value of a relationship with their key financial partners (ie: banker, CPA, attorney, insurance agent, etc) and will learn how we can all work together to assist in their success. Consistent communication and collaboration amongst your key sphere of influence can keep you on track and uncover unforeseen obstacles and opportunities.

What is something not many businesses know about working with Merchants Bank?

Jeff: Merchants is large enough to provide the level of products and services every business needs but is culturally small, meaning, the focus is on local bankers creating local relationships to support the communities that we serve.

Annette: Along the same lines, I think it’s important to note that we are most interested in finding solutions that work for your business and help you succeed. We are not here to pressure you into using and/or paying for products that may not be the best fit for your needs.

How would you describe your team approach to working with businesses?

Annette: I typically work very closely with our Commercial Bankers. As one of our business customers, we try to help you understand each team member’s main area of expertise, but we are always willing to take your call and direct it to the correct person. You will never hear “that’s not my job” at Merchants Bank.

Jeff: The Merchants Commercial Banking team brings you many areas of expertise, which include our lenders, Treasury management experts, lending assistants, credit analysts, and more. We are very supportive of one another and team up to provide assistance and bring more value to you.

What does community banking mean to you?

Annette: Community banking means being a trusted partner for our business customers. We truly get to know you, your business, and your needs and expectations so we can be proactive instead of reactive with our approach.

Jeff: To echo what Annette said, community banking is all about relationships and value. As Bankers, we need to know our customers by building relationships in order to provide the most valuable solutions for their situation so they are successful. We live in the communities we serve and successful businesses build strong communities. We do it together.

Learn more about business and commercial banking at Merchants Bank:

 

Loans are subject to credit approval.

Behind the Scenes with Our Credit Team

 

Startup Stock Photos

If you’ve worked with Merchants on a loan for your business, you know our Commercial Bankers have a team of people assisting them in the loan process. You may have even heard them mention a Credit Analyst, who would review your financial information.

Our Credit Analyst team plays an important part in the loan approval process. So we’re giving you a behind the scenes look at their role and what kind of expertise they bring to our commercial banking team.

How is a Credit Analyst involved in my application for a business loan?
Our team of 11 Credit Analysts assist in determining your credit worthiness and ability to pay back a loan. Upon application, your financial information is given to a Credit Analyst, who reviews all the details and provides a credit presentation to your Commercial Banker.

“Our job is to assess repayment ability of credit obligations and determine overall financial risk. This information helps the Commercial Banker decide on next steps,” said Chris Duellman, SBA Lending and Credit Underwriting Manager. “Our ultimate goal is to help the borrower gain loan approval, but we also need to identify potential risks – that’s why we review so many details about the business and business owners. We look at the full picture to create our report to the Commercial Banker.”

In some instances, you may also meet with one of our Credit Analysts and a Commercial Banker to collect your financial information. A face-to-face conversation is sometimes the best approach to obtaining all the details needed to gain a full understanding of your business.

What expertise does a Credit Analyst bring to the business banking team?
Most of our Credit Analysts have an accounting or finance degree and/or related job experience. In addition, they are well-trained on all different types of credit to be able to fully assess your business’s situation. Day in and day out, they work with the financial details of businesses of every size and industry – their incredible depth of knowledge is an asset to you, your Banker and the entire commercial banking team.

Because Merchants Bank provides many loans for agricultural businesses and farms, three of our Credit Analysts specifically concentrate on ag requests. Having grown up on farms or worked on farms, these Credit Analysts provide an additional level of expertise and insight when reviewing an ag loan.

How do I benefit from a Credit Analyst reviewing my loan application?
Talking with your Commercial Banker and Credit Analysts can give you more insight into the financial side of your business.

While gathering your financial information, the Credit Analysts may ask questions your business might not have ever considered. Or, the Analysts might even pinpoint some financial areas where your business could make improvements by working with your accountant or in-house finance department. In addition, tapping into the Credit Analyst industry-specific knowledge can be a bonus for your business.

“We’re here to provide an additional level of financial understanding and support to both the business and the Commercial Banker,” said Duellman. “It’s our job as part of the commercial banking team to help our business customers thrive.”

To learn more about business financing options at Merchants Bank, visit our website:

Gina Miller Joins Merchants Bank as Vice President and Commercial Banker

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Gina Miller, Commercial Banker

Gina Miller has joined Merchants Bank as a Vice President and Commercial Banker, according to Shawn Sackman, Senior Lending Officer and Senior Vice President for Merchants Bank’s Southeast Region.

“We are excited to have Gina join our team,” Sackman said. “With her experience, ability and connections, as well as our increased presence in the La Crosse area, we know she will contribute to our continued growth.”

Miller had been with the Wells Fargo organization for the past 17 years, most recently as a Business Relationship Manager/Commercial Banker.

“Merchants is a great match for me because it is a community bank that is built on and values the relationships with its customers,” Miller said. “Building and maintaining those relationships has been my goal throughout my career, and I look forward to continuing that career with Merchants as it gains more market share in our area.”

Miller is a graduate of Viterbo University. She is active in the community. She is a member of the Coulee Region Young Professionals, a member of the Women’s Alliance of La Crosse, and a participant in the Chamber of Commerce’s La Crosse Area Community Leadership Program.

Onalaska is one of the fastest growing of all 21 Merchants’ locations. In 2016, Merchants reported record income of $14,154,891. The Onalaska location was one of the leaders in productivity, with nearly $2.2 million in net income.

In addition to Onalaska, Merchants has Minnesota locations in La Crescent, Rushford, Lanesboro, Caledonia, Spring Grove, Winona, St. Charles, Goodview, Rochester, Cannon Falls, Red Wing, Hampton, and the southern Twin Cities metropolitan suburbs of Apple Valley, Cottage Grove, Hastings, Lakeville and Rosemount. Merchants has an additional Wisconsin location in Eau Claire. All banks are FDIC members and equal housing lenders. Loans are subject to approval. Twin Cities-based Merchants Bank Equipment Finance is a division of Merchants Bank, N.A.

Meet John Piscitiello, Commercial Banker

John Piscitiello, Commercial Banker

Get to know John’s commercial banking philosophy and how he helps businesses in the Twin Cities.

Share a little about your background and banking career.

John: I grew up in Winona and went to St. Mary’s University. After graduation, I moved to the Twin Cities, where I currently live with my wife and four boys in Lakeville.

I have been in the lending business my whole career. During the real estate boom years of the 2000s, I was a business owner in the construction lending industry. It was a challenging environment leading up to the economic meltdown. I was fortunate to exit the business before the Great Recession hit, and I learned many great lessons about both the successes and failures of running a business.

What do you like most about your job?

John: When I am able to make a difference helping a client succeed and reach their goals.

What kinds of businesses do you typically work with and how do you help them?

John: My clients are typically family-owned companies located in the Twin Cities market. I help them by providing financing and other banking services where needed, along with ideas and guidance when appropriate.

What is something not many businesses know about work with Merchants Bank?

John: That Merchants is an employee-owned ESOP bank! Being employee-owned has a positive effect on our company culture, and is a nice contrast to the big banks.

How would you describe your partnership with your business customers?

John: It is very much a business partnership. For me to be a good banker for my clients, I need to have a deep understanding of their business and business goals. This helps me to not only provide the services and advice needed, but also allows me to be an advocate for my clients internally within the bank.

What do you hope your customers say about working with you?

John: I hope my customers say that I understand them and that they have a banker they can trust to take care of their needs.

What does community banking mean to you?

John: To me, community banking means strong relationships with our clients and with the local markets we serve. Community banking also means local decision-making, which for many business owners can be the difference between feeling understood and getting the service they need versus feeling like your bank doesn’t get you.

Loans are subject to approval.

Meet Mike Swanson, Commercial Banker

Mike Swanson, Commercial Banker

Get to know Mike, Commercial Banker,  and how he helps businesses – big and small – meet their financial goals.

Share a little about your background and banking career.
Mike: I started in banking as a part time teller in high school at Vermillion State Bank. Two years later, I moved to First Federal Bank (now known as MidCountry Bank) as a Construction Loan Assistant. After college, I moved back to the retail side of the bank as a Personal Banker and eventually became a branch manager there.

In 2012, I started at Merchants Bank as Personal Banker. Since then, I’ve changed office locations and roles a couple of times and eventually was fortunate enough to move to the commercial side of banking, in my current role as a Commercial Banker. It had been a goal of mine to move into a commercial role for many years and I feel very fortunate Merchants has afforded me that opportunity and in my hometown no less!

What do you like most about your job?
Mike: When people hear you are a banker they tend to draw conclusions about number crunching and spreadsheets, but I’m a community banker because I like people! I love building relationships and getting to know my clients, their goals, dreams, and aspirations, and most importantly helping them achieve them.

I also greatly enjoy my community and Merchants Bank’s commitment to the communities we serve allows me to be involved in several organizations. Part of my job is to help make Hastings a great community for all of us who live and work here.

What kinds of businesses do you typically work with and how do you help them?
Mike: That’s one of the great things about Merchants – whether you are a one-man show landscaper or plumber, or have employees in multiple locations – we are going to have products and services to offer you. I’ve work with several one-man operations in landscaping, agriculture, all the trades (plumbing, electrical, etc), as well as real estate investors, accountants, and doctors.

We can help with equipment purchasing and leasing, working line of credits, credit card, and an entire suite of cash management services too. We have something for every kind of business.

What do you hope your customers say about working with you?
Mike: I hope they say “that was such a great experience I’m going to tell everyone I know about Mike at Merchants!” Really, I hope they know I am working for them and that I’m here to offer them options in order to meet their future goals. I hope they say I am a long-term trusted partner to help them reach their goals.

What does community banking mean to you?
Mike: Community banking means that we, the Bank, take care of our community. Decisions are made by people who understand the local needs of families, businesses and farmers.

In today’s world, you can’t walk into just any bank and ask to talk to the president. But at Merchants you can because of our local, market-based leadership. Being a community bank means we partner with you through opening your child’s savings account, financing your first home, or helping you get the business of your dreams started. It means when you walk in the door, we’re going to know your name and you will know ours.

Loans are subject to approval.

Merchants Bank in Eau Claire’s Loan Growth of Nearly 62% Contributes to Merchants Financial Group, Inc. Earnings; Loan Growth Has Been 231% over the Past Year

Merchants Bank Eau Claire

Larry Accola, President of Merchants Bank in Eau Claire

Merchants Bank in Eau Claire experienced loan growth of 61.76% over the first two quarters of 2016. The growth helped Merchants Financial Group, Inc. (MFGI) realize net income of $6,442,991 through the first two quarters of 2016, according to Larry Accola, President of Merchants Bank in Eau Claire.

Accola pointed out that loan growth has been consistent over the past year, with an increase of 231% year over year. MFGI, which purchased the Eau Claire location in 2014, owns 21 Merchants Bank locations in Minnesota and Wisconsin.

“More and more mortgage and commercial customers have discovered our community bank and are sharing their business with us,”said Accola, who has extensive banking experience in the Eau Claire market. “They are becoming customers and learning how Merchants Bank is the right bank for them, whether their banking needs are business or personal.”

In addition to the loan growth, deposits have grown 13.76% over the first two quarters of 2016, Accola said. The bank location, on Mall Drive, kitty-corner from Festival Foods, will be extensively remodeled this Fall to better meet the needs of customers.

“We are looking forward to continued growth in the Eau Claire market,”said MFGI President & CEO Rodney R. Nelson. “Larry and his team are doing an exceptional job sharing our community banking message with people in the Chippewa Valley, and it is clear people are responding.”

MFGI’s net income for the first two quarters of 2016 is nearly $170,000 ahead of Merchants Bank’s 2015 earnings through the same time. Merchants Bank posted record earnings of $13,454,698 in 2015.

MFGI owns Wisconsin locations in Eau Claire and Onalaska. Minnesota locations include Winona, St. Charles, Goodview, Rochester, Rushford, Lanesboro, Caledonia, La Crescent, Spring Grove, Cannon Falls, Red Wing, Hampton, and the southern Twin Cities metropolitan suburbs of Apple Valley, Cottage Grove, Hastings, Lakeville and Rosemount. All banks are FDIC members and equal housing lenders. Additionally, MFGI also owns Twin Cities-based Merchants Bank Equipment Finance, a division of Merchants Bank, N.A. The ownership of Merchants Financial Group is made up of its nearly 450 employees and its shareholders.