CBIA is an investor-owned insurance cooperative that allows participating banks to offer commercial and retail customers a complete menu of insurance and investment products. Three years in the making, CBIA was born in the wake of the repeal of the depression-era Glass-Steagall Act, which effectively kept banks, brokerage companies and insurance firms out of one another’s backyards. Last November, President Clinton eliminated the last vestiges of the partition with legislation opening the way for consumers to purchase loans, securities and insurance all under the same roof.

Spencer, who also serves as chairman of the board of CBIA, is bluntly dismissive of the threat posed by some of his new competitors. "State Farm may be able to take deposits, but..." he grimaces and cocks his head, "I don't think so.”

A Financial Supermarket
"People just trust banks," Spencer continues. "[Banks] have a certain credibility with customers [that is] not afforded a broker whom they know is working on commission. I've got 8,000 clients here I know would love a one-stop financial shop. Our typical customer is Mr.Widget Manufacturer, the 100-percent owner of a company with sales between $2 million and $10 million. Now he can come to just one location for investments, succession planning, life insurance, casualty -- all his financial needs." Obviously, Spencer wants that one location to be Redlands Centennial.

The idea of an insurance collective is the brainchild of Gary Findley, a San Diego-based bank consultant, and Harold Schaffer, also of San Diego and president of Nations Insurance Services, LLC. They believe it to be the first program of its kind in the country. According to Findley, CBIA gives small banks a purchasing power they'd find impossible to achieve on their own. "Unless it's a multibillion-dollar company, no one bank would be able to get the same big-name, high-profile providers they can get through us," he says.

Nor could they access them as economically. CBIA's investor banks are splitting fees 60-40 with insurance and brokerage partners, compared with the 50-50 split more typical of individually negotiated contracts. Participating banks that are not owners in the venture will take a slightly smaller cut of commissions.

CBIA has already concluded agreements with Raymond James for securities; the Chubb Group for commercial property and casualty insurance; and Electric Insurance, an affiliate of General Electric Corp., for auto and homeowner policies. As of May 2000 contract talks were still underway with New York Life.

CBIA is eligible to operate in the Federal Reserve's 12th district, with jurisdiction over 1,500 banks in Washington, Idaho, California, Nevada, Utah, New Mexico, Alaska and Hawaii. Findley's target for the venture is to sign up 300 participating banks by the end of the year.

To date, 30 banks (Redlands Centennial among them) have purchased equity in CBIA valued at $20,000 a share. Ten more units, now priced at $50,000 a share, remain unsold. Banks and bank-related institutions are slated for a 40 percent share of the agency. Other shareholders include the Pacific Coast Bankers Bank, 10 percent; The Findley Group, 10 percent; and Schaffer's Nations Insurance Services, which serves as a conduit for the insurance and investment products offered through CBIA, 40 percent.

Compliance Made Easy
Until now, the largest single impediment to community bank sales of non-deposit products has been cost of compliance. Selling insurance and securities automatically puts a bank under the magnifying glass of as many as 30 separate regulatory agencies, from the National Association of Securities Dealers to the State Insurance Commissioner and the Office of the Comptroller. The legal details of crossing t's and dotting i's on the full panoply of policies, procedures and audits could cost as much as $100,000. Through an affiliation with Aldrich & Bonnefin of Irvine, Calif., a law firm specializing in bank compliance issues, CBIA offers participating banks a turnkey program that meets all state and federal requirements at a fraction of the cost.

In mid-April 2000, Redlands Centennial became the first community bank to enable customers to buy auto and homeowners insurance at the bank's Web site, www.redcent.com. Products such as brokerage services and commercial insurance are expected to follow shortly after. Harold Schaffer, who serves as CEO of CBIA, insists that every investor bank will soon be offering at least one of the venture's new products and that CBIA will be in full operation before the end of year 2000.

"Community banks have always made their niche on service," explains Findley. "Sure there are mega-banks but many people are not happy with the quality of service they get or the fees that they pay. CBIA gives [smaller banks] all the products they need to compete with the larger banks. We're providing both an offensive and defensive platform -- helping banks increase their non-interest income and leveling the playing field -- at a time when insurance companies and securities firms are filing for thrift licenses to sell banking products."

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