January/February Banker OVER A CENTURY: BUILDING BETTER BANKS — Helping Coloradans Realize Dreams
contents ©2023 The Colorado Bankers Association is proud to present Colorado Banker as a benefit of membership in the association. No member dues were used in the publishing of this news magazine. All publishing costs were borne by advertising sales. Purchase of any products or services from paid advertisements within this magazine are the sole responsibility of the consumer. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of Colorado Banker or its publisher, The newsLINK Group, LLC. Any legal advice should be regarded as general information. It is strongly recommended that one contact an attorney for counsel regarding specific circumstances. Likewise, the appearance of advertisers does not constitute an endorsement of the products or services featured by The newsLINK Group, LLC. Jenifer Waller President & CEO Alison Morgan Director of State Government Relations Brandon Knudtson Director of Membership Lindsay Muniz Director of Education Rita Fish Communications & Office Manager Margie Mellenbruch Bookkeeper* Craig A. Umbaugh Counsel* Melanie Layton Lobbyist* Garin Vorthmann Lobbyist* Andrew Wood Lobbyist* Caroline Woodhouse Lobbyist* *Outsourced 140 East 19th Avenue, Suite 400 Denver, Colorado 80203 Office: 303.825.1575 Websites: coloradobankers.org smallbizlending.org financialinfo.org colorado-banker.thenewslinkgroup.org over a century BUILDING BETTER BANKS— Helping Coloradans RealizeDreams 20 19 4 Chairman’s Message 2023 Industry Outlook 5 In Memoriam, Charles Snow 6 Washington Update Beating Back a Bad Idea: How Bankers United to Play Defense Against Durbin Expansion 8 Banks Need a Game Plan for Today’s Interest Rate Environment 11 Relationship Do’s and Don’ts for Vendor Contract Negotiation 12 2023 CBA Upcoming Events 14 CBA Centerpoint Going Beyond the Desk to Hear the Stories of Colorado Bankers 16 How to Prepare Consumers for a Recession Three Experts Share Their Advice for the Months Ahead 19 Why Lenders Should Consider SBA Loans During a Recession 20 Money Laundering Through Art and Antiquities 24 Commonly Asked Questions About Writs of Garnishment of Bank Accounts 26 The Society of Bank Executives 8 Colorado Bankers Association The January • February 2023 3
H Happy new year to you and your families! I hope each of you had a wonderful time celebrating the holiday season. I welcome each new year with hope and optimism as we face challenges with renewed energy. Economic Outlook 2023 greets the banking industry with economic uncertainty. Prices are high, but consumer spending is up. Inflation may be easing, but the Federal Reserve is still raising rates. The unemployment rate has settled, but the search for good talent in the workplace remains. If you feel uncertain about the current economic outlook, you are not alone. Experts anticipate that inflation is likely to remain somewhat elevated through the end of this year. While consumer and business balance sheets are strong, it remains to be seen whether inflation will begin to chip away at financial reserves. Either way, FDIC reports show that the banking sector is in a position of strength coming out of 2022, and financial institutions remain well-equipped to weather potential economic headwinds amid elevated inflation, continuing Fed rate hikes, and geopolitical uncertainty. Regulatory Outlook The regulatory landscape presents both new and existing issues to monitor. There has been a lot of discussion regarding Overdraft and Non-Sufficient Funds (NSF) fees. While many financial institutions are changing their consumer policies surrounding overdraft fees, the clearest move for banks is to ensure transparency. Even with a strong policy and transparency, you may be unable to avoid UDAAP violations. Chairman’s Message 2023 Industry Outlook BY MARK HALL, CBA Chairman Cryptocurrency has received much attention in the media due to the collapse of FTX. CBA and the ABA support the Financial Stability Board in establishing a proposed framework for the international regulation of crypto asset activities and are working to help banks safely meet customer demand for digital assets while minimizing any risk novel assets present to consumers or our economy. The current issues surrounding climate change bring a new perspective to banks regarding Environmental, Social, and Governance (ESG) regulations. CBA recognizes the growing concerns from policymakers, investors, customers and others around climate change, including the impact on banks and the communities they serve from efforts to address climate-related financial risks. While there is debate over the role banks can and should play in responding to climaterelated financial risk, CBA believes common-sense, market-based solutions offer the best opportunity for addressing this issue. The Credit Card Competition Act was introduced in the Senate by Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) and in the House by Peter Welch (DVt.) and Lance Gooden (R-Texas). It would create new credit card routing mandates that could affect banks of all sizes that issue credit cards. CBA, along with 50 other state banking and financial services associations, signed onto a letter organized by the ABA that urges lawmakers that the misguided MarshallDurbin proposal will lead to fewer options for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions and the disappearance of card rewards programs that families of all income levels use to stretch their budgets while also transferring wealth to a handful of highvolume, highly profitable large merchants. Bankers must pressure lawmakers to keep the Credit Card Competition Act out of must-pass legislation. Legislative Outlook Colorado Democrats will be entering the 2023 Legislative Session with an unprecedented majority in both chambers with a veto-proof 46-19 majority in the House, a margin of the likes no party has maintained in this century. The previous legislature made compromises to pass some regulatory bills over the past four years, but the environment may be changing. While this new environment may present a new challenge, CBA welcomes this and will continue to do what we have always done – focus on building relationships and lobbying for sound, common-sense solutions. We will greet our new legislators with excitement and strive to educate them on the good work banks perform each day for customers and communities in Colorado. Over the past few years, we have learned that we are nimble and can adapt quickly. We persevered through the roller coaster of the pandemic. We will survive the ups and downs of the economic and regulatory landscape in 2023. The coming year will be crucial for the financial services industry. We are in a strong position with CBA representing our industry, strengthening relationships locally and nationally. www.coloradobankers.org 4
in memoriam The banking community will truly miss Charles E. “Ched” Snow who passed away on December 3, 2022. He began his banking career with Arapahoe County Bank of Littleton. He, his wife and two daughters moved to San Antonio, TX, closer to family, and there he joined the Pan American National Bank of San Antonio. They later moved to Santa Fe and Albuquerque, living there until returning to live and work in Colorado. Back in Denver, Charles’ banking career began to grow. He was employed by the First National Bank of Denver and was promoted to Vice President, overseeing the metropolitan division of correspondent banking. He joined an investment group to acquire the Arvada State Bank and took on the role of Bank President. He was later approached by an investment group to acquire Cherry Creek National Bank, South Denver National Bank and a charter to operate the First National Bank of Westminster. He was a member of the Colorado Bankers Association, serving on several committees. He made a lasting impression with his humor and always had a few jokes in his back pocket. Ched loved to grill and perfected his chicken over the years for his friends and family. Nothing would have made him happier than to have everyone gathered around an old white picnic table that his dad had built. He was very passionate in his advocacy efforts for the banking industry, and Ched will be missed dearly by those who knew him. January • February 2023 5
TThere’s a saying that “everything old is new again,” and that’s certainly an adage you can bank on in Washington, D.C. – especially when it comes to poor public policy proposals. A textbook example of this unfolded during the 117th Congress, when our industry found itself once again facing a bad idea that we thought had been soundly defeated: placing restrictive routing mandates on credit cards, like those imposed on debit cards by the Durbin Amendment over a decade ago. The idea came in the form of a bipartisan bill – the so-called Credit Card Competition Act – introduced in the Senate by Sens. Dick Durbin (D-Ill) and Roger Marshall (R-Kan.) and in the House by Reps. Peter Welch (D-Vt.) and Lance Gooden (R-Texas). Bankers know all too well that the 2010 Durbin Amendment had disastrous consequences for banks and their customers: it increased the costs of checking accounts and debit cards and ultimately led to the elimination of popular debit card rewards programs. The Durbin Amendment’s most damaging provisions apply to banks of all sizes, causing a nearly 25% cut in the per-transaction debit card revenue earned by banks with under $10 billion in assets. At the same time, it helped line the pockets of large retailers who talked a big game about passing savings on to consumers-– but 10 years’ worth of data tells us that simply isn’t what happened. In fact, the Federal Reserve published a study finding that only 1% of merchants lowered prices for consumers since the Durbin price controls took effect. What’s more, the Credit Card Competition Act also goes several steps further than the Durbin amendment – not only would it require banks to add a second network to their customers’ cards, but it would limit them to options set by the Fed, unlike the Durbin Amendment, which allowed banks to choose between any two unaffiliated networks. The Credit Card Competition Act also requires banks to accept virtually any kind of transaction – functionally requiring them to onboard potentially many more than two networks, even networks that don’t meet basic data security standards. Given the potentially catastrophic effect the bill could have on community banks and bank customers – while providing no tangible cost savings or benefits for consumers – the industry sprang into action to set the record straight. Immediately following the bill’s introduction, ABA led a coalition of eight national financial services trade groups in issuing a statement of strong opposition to the bill. We followed this up with numerous letters, op-eds, grassroots calls to action and co-branded ads with the Texas and Kansas bankers associations that ran in their respective districts. The efforts were amplified by an op-ed from the Florida Bankers Association and a creative “Don’t Let Congress Steal Your Credit Card Rewards!” social media campaign from the Missouri Bankers Association. In early December, we then expanded that effort into an all-out media blitz to stave off any last-minute efforts to attach the bill to a must-pass piece of year-end legislation. Beating Back a Bad Idea: How Bankers United to Play Defense Against Durbin Expansion BY ROB NICHOLS CEO & President, American Bankers Association WASHINGTON UPDATE www.coloradobankers.org 6
Every step of the way, our efforts at the national level were complemented by robust advocacy efforts by our partners at the state bankers’ associations, who stepped up to make calls, attend Washington fly-ins, pen letters and columns, and even appear on national TV to address our concerns about the bill. Together, we blanketed Capitol Hill with a succinct, united message: the Credit Card Competition Act is terrible public policy that should not be enacted. Our combined efforts proved the hollowness of this bill – it failed to attract a single cosponsor beyond the initial two in both the House and Senate or gain enough support to advance as a standalone measure and was successfully blocked from any other bills moving through Congress as the lame-duck session came to a close. This win underscores the tremendous value of our state association alliance and demonstrates the power that our industry can have when we unite behind one message. It’s also an important reminder about vigilance. We can’t say for certain whether and how these bad ideas will rear their heads again in Congresses to come. But what we can say is that if they do, our industry will be ready to respond. Email Rob at nichols@aba.com. Superfund Liability and Cost Recovery Litigation Water Quality Permitting and Compliance Environmental Due Diligence Solid and Hazardous Waste and VCUP Oversight Underground Storage Tanks Administrative Enforcement Actions Toxic Tort Litigation Natural Resources Permitting and Compliance NEPA Review DIDYOU KNOW? COAN, PAYTON & PAYNE, LLC PROVIDES ENVIRONMENTAL LAW SERVICES INCLUDING Matthew Chudacoff Fritz Ganz William Garcia Brett Payton WIN! HOW TO WIN: WOMEN IN THE BOARDROOM AND C SUITE LET BANK ON WOMEN, INC. RECRUIT QUALIFIED WOMEN FOR YOU! Bank On Women is a nonprofit organization dedicated to educating the community banking industry on the importance of adding qualified women to their Boards and C-suites, and to developing and promoting women leaders in community banking. To learn more, please contact: Jennifer Docherty, Co-Founder, at jennifer.docherty@psc.com Terrie G. Spiro, Co-Founder, at tgspiro1313@gmail.com 212-466-7796 Bankonwomen.org Bank On Women is an approved Nasdaq partner for community banks.
A Banks Need a Game Plan for Today’s Interest Rate Environment BY ROB BLACKWELL Chief Content Officer, IntraFi As the Federal Reserve aggressively hikes interest rates to tamp down inflation, depositors are starting to demand more for their money. Results from IntraFi’s most recent quarterly survey of bank executives indicate the trend is likely to continue. Ninety-five percent of respondents expect funding costs to go up, and 71% said deposit competition would increase. But this doesn’t mean banks have to let macroeconomic forces or competitors dictate their strategies. Matt Pieniazek, president and CEO of Darling Consulting Group, recently joined me on Banking with Interest to discuss how banks should think about their balance sheets in the current interestrate environment. He explains why all institutions need clearly documented game plans, how to extricate rate from the value proposition, why rising rates are a good thing, and much more. What follows is our conversation, edited for length and clarity: What are you seeing right now vis-a-vis banks and bank balance sheets? The majority of banks aren’t overly concerned about losing relationships. They’re facing deposit pressures in a few areas, but the funds they’ve lost have been mostly discretionary. However, things are about to get interesting. That sounds ominous. What do you mean? During the last rising-rate environment, the Fed took nearly two years to increase rates by 200-225 basis points, and deposit-rate changes were nearly three times as responsive to the second hundred basis points as they were to the first. Similarly, during the period leading up to the Great Recession, we had a 425-basis-point move. Things were pretty tame during www.coloradobankers.org 8
the first 200 basis points, but by the third and fourth hundred, the proverbial gloves came off. Rates have now risen uncharacteristically aggressively in a short period – in fact, the delta between market rates and what banks are paying has never gotten this wide this fast. Even if depositors aren’t looking to move their money, it's hard for them to ignore what's happening. Additionally, during the pandemic, we made it easier to do things electronically and conditioned customers to avoid branches. Today, banking practices are very different than three or four years ago. So the dynamics are about to get really interesting, notwithstanding the excess liquidity still out there. What’s your advice to banks? Have a clearly documented game plan. (Many banks don’t.) Start by figuring out how much money you can, or are willing to, let leave; then determine which deposits are most valuable and prioritize those. Next, divide your deposit base into manageable pieces. Start by rank-ordering your largest-balance relationships (this will help with one-off conversations). Second, review your mass-market, traditional banking relationships. Third, review the “tweeners,” or those that aren’t quite whales but larger discretionary balances that could be at risk (mid-tier balances comingled with operating balances in those traditional accounts). Get your people in a room to assess the elasticity of deposits in each sector and your value proposition for those different consumer types, specifically, whether it’s driven by rate or other factors. Figure out your pricing strategy for each and how much outflow you will accept in each area and why. You recently wrote that all banks have what appear to be core deposits but are actually Trojan Horses. What did you mean? Monies that look like core deposits but have a high potential for disintermediation. Municipal deposits are one kind of Trojan Horse. Large commercial balances are another – many businesses have funds sitting in their banks that dwarf what they need for operations, but they’re also facing cost pressures, and it’s hard to ignore the opportunity to pick up the notably incremental yield on their excess cash. If they do need money, many will “borrow” from themselves. The third kind is CDs. CD balances have contracted notably through this cycle, but much of that is CD-mentality money sitting in savings accounts, now accounts, or money markets that will move back into CDs. What should banks be thinking about if rates keep rising? Everyone seems to get overly fixated on rising rates and how high they might go, but no matter what a bank’s interest rate risk profile is, the worst scenario for this industry would be for rates to do an about-face and head lower for three reasons: 1) Funding costs can only go so low, but assets will keep pounding down until eventually everybody’s margins get squeezed – it's just a matter of how quickly and to what degree; 2) declining rate environments are highly correlated with declining economic environments, which are highly correlated with asset-quality challenges, delinquencies, and elevated reserves; and 3) when economic activity slows, the outlook for loan growth darkens. How is social media adding to deposit pressures? It’s definitely having an effect, but banks need to remember there’s always somebody paying more than them. If rate were the most important variable, every other bank would go out of business, and you’d have one bank paying the highest rates. The point I’m making is if banks fuel conversations about rate to where it becomes the main topic of discussion, then they’re communicating that their value proposition is mainly tied to rate instead of the other things they bring to the table. Conversely, depository institutions that believe in their value propositions will do well during this cycle because they’ll know where they can be proactive. They’ll experiment more, try more things. What are your thoughts on strategies for banks not dealing with excess liquidity? I’ll start by saying there are many banks with concentrations of large balances that don’t want pricing on these to upset the apple cart. They don't want a handful of accounts messing up their core deposit strategies, so they've been paying higher rates than usual. Then they've been selling the money into a deposit network, such as IntraFi’s, through its One-Way Sell program. This enables them to effectively lower their deposit costs and keep the money out of their deposit expenses by moving it off the balance sheet, knowing they can bring it back on if necessary. Banks with valuations that reflect a highly inelastic core deposit base through prior cycles don’t want to Have a clearly documented game plan. (Many banks don’t.) January • February 2023 9
change the Street's perception with beta moves that have nothing to do with their true base of core deposits. They’d prefer to move all their discretionary monies into repos, so they become a borrowing cost, or just sweep them off so they can actually generate some fee income and, in effect, slow the rise in their deposit costs. They’re also starting to worry about reputation risk, which is a first for me (and I’ve been doing this for a long time). Regarding your question, banks borrowing money are actually pushing local market pricing up. They don't match wholesale, but they’ve got a long runway, given the delta between market rates and what other banks are paying. They’ll pay a lot more than other institutions, but they’ll also save a lot. Right now, borrowing banks are facing high opportunity costs, so if they're dealing with a larger account, they're more apt to pay up or negotiate. Otherwise, they’ll just have to replace them with something substantially more expensive. Loan growth was good in the second quarter, but there were signs of it faltering in the third quarter. What have you been hearing? There’s a clear consensus that pipelines have peaked. When we talk to banks about forecasts, many anticipate making half as many loans next year as they will make this year. Hurdle rates are up because of interest rates, there’s lots of uncertainty surrounding any kind of real estate, and businesses aren’t as comfortable making investments right now. Banks themselves are pulling back on some concentrations, asking tougher questions. We've seen a lot of disruption in the past two years from COVID-19 and other factors. How should banks be thinking about ALCOs right now? Way too many ALCOs tend to be more of a reporting function that spends too much time creating detailed decks that do little more than give people headaches. Then, toward the end of meetings, they’ll shoehorn in conversations on what to do. Those institutions have it backward. ALCO should feed strategy. It should be a profit center, not the cost center it tends to be. What are the biggest mistakes banks are making today? One is that they’re not changing loan pricing to levels that represent fair, risk-adjusted returns. They’re letting the liquidity overhang get in the way. The majority of banks – not all – are knowingly doing deals at perhaps the tightest spreads ever. But their business models don’t support FHLB plus 150 to 200. They don’t support SOFR plus 150 to 175. They don’t support prime minus 100 or more. Banks have to get away from all that. They can’t let irrational/ desperate competition dictate their ongoing lending strategies. They need to improve their balancing act. Another is that many banks don’t socialize the logic underpinning their value propositions. They don’t explain how to deflect objections to those who work on the front lines. They don’t institute formal feedback loops, either. Banks should never underestimate the importance of communication, coaching, and guidance. www.coloradobankers.org 10
Relationship Do’s and Don’ts for Vendor Contract Negotiation BY PATRICK GOODWIN President at SRM (Strategic Resource Management) In SRM’s 30 years of experience representing our clients in vendor contract negotiations, we’ve developed deep insights into the best way for financial institutions to approach this process. We recently boiled down several best practices into a timely white paper titled “Rising to the Challenge – SRM’s Seven Rules for Optimizing Vendor Contracts.” https://info.srmcorp.com/srm-sevenrules-for-optimizing-vendor-contracts It’s a perfect time for Colorado banks to revisit third-party relationships. To start, synergies with fintech firms have never been stronger. These service providers are well-equipped to rapidly design and deliver digital solutions sought by customers, often at a lower cost than inhouse development. At the same time, the current inflationary environment has FIs exploring all avenues to control costs, especially given labor expense trends. Consider two of SRM’s proven rules – the need for a disciplined approach and the necessity of tapping into outside relationships. Combining Discipline and Expertise “Keeping it professional” involves more than limiting the role of emotions. A programmatic approach is necessary for the effective management of financial technology contracts. It’s helpful for banks to assign a Project Lead – most likely the CFO, Controller, or, in larger organizations, a delegate from the finance department – as the point person for each agreement. This is not to minimize the procurement department's role if such a function exists. It is an acknowledgment that these types of contracts require specialized knowledge to supplement traditional procurement skill sets. Important perspectives and input exist throughout the organization – customer support, IT, compliance, and other functions. We also recommend that the Project Lead set clear priorities for the relationship – for the negotiation process, as well as a framework for successful ongoing operations. Leverage Outside Relationships Information is power. Much of the imbalance of power inherent in a contract negotiation stems from the vendor’s deep knowledge of the space – precisely the type of expertise the bank aims to leverage through their relationship. Conversations with colleagues at other financial institutions who have tackled similar projects, industry benchmarking data, and other forms of due diligence are all helpful and recommended steps. An even more valuable step is to enlist a partner with similar domain expertise and market insight to assist with vendor selection and contract negotiation. Having someone in your corner who built a cache of benchmarking data and negotiation proficiency can level the playing field. Another excellent resource is the use of contract management software. The vendor contract negotiation process should comprise only a small sliver – albeit very crucial – of a bank’s long-term relationship with a service provider. It can set the stage for operational and financial success and must be approached programmatically and professionally. The assignment of a cross-functional team with clearly defined roles and responsibilities is an essential step in this direction. As mentioned above, you’ll find more on these and our other rules for optimizing vendor contracts in SRM’s new white paper. Patrick Goodwin is President at SRM (Strategic Resource Management) based in Memphis, TN. Patrick oversees the implementation of bottom-line improvement strategies for SRM’s clients. He has 20 years of contract negotiation experience spanning two dozen distinct specialties. To learn more about SRM’s expertise in this area, contact Colorado representative Phillip Foster at pfoster@srmcorp.com or 303-588-1484. Or check out the SRM website at srmcorp.com. “Keeping it professional” involves more than limiting the role of emotions. January • February 2023 11
2023 CBA Upcoming Events Detecting and Dealing with Problem Loans, Including Real Estate Virtual February 1-2 9:00 a.m. – 12:00 p.m. daily The shutdown of the U.S. and global economies during the Pandemic has had lasting repercussions, with some industries and borrowers not clearly back on solid footing. In addition to some lingering supply chain issues and continued labor shortages, now comes inflation of other nonemployment costs, plus higher interest rates and an expected economic recession. Prudent bankers will begin brushing up on how to detect and deal with problem loans. This two-part program provides an overview of four critical areas to understand now before problem borrowers and bankruptcies possibly escalate: 1. What are the early warning signals (EWS) that matter? Most EWS lists are lengthy itemizations of any and all adverse moves in any sort of balance sheet or income statement account and related ratios. How helpful is it to say that a revenue decrease is an EWS? Let’s get more specific. 2. Once the problem is evident, what are the next steps that the banker must consider? What are your options? For instance, what are the pros and cons of having the lender continue to manage things versus a problem loans specialist or even a generalist banker the handles any and all problem credits in the bank’s portfolio? 3. What are the basics (terminology and principles) of bankruptcy? Do you know what “preference items” are? A “341 hearing”? 4. How do lender liability lawsuits arise? How can you avoid them? Fundamentals of Commercial Lending Virtual February 23 7:30 a.m. – 3:00 p.m. Commercial banking can be intimidating because of its complexity and the riskoriented nature of the work. This course is a clear and thorough introduction to the key concepts, terminology, and processes involved in credit and lending. It doesn’t assume much prior knowledge of the topic, so it’s ideal for those in their first year in the industry. Learners will walk away with a clear understanding of their job and how their specific role fits into the bank’s overall profitability goals. Legislative Briefing Denver, CO March 1 9:00 a.m. – 1:00 p.m. Join CBA and fellow Colorado bankers as we begin our day visiting legislators at the state Capitol building. From there, we will travel to the History Colorado Center for a banker briefing on the current legislative session, the economy and the banking industry as a whole. After our briefing, legislators will join us for lunch to focus on building relationships. BSA/AML Conference Virtual April 12-13 9:00 a.m. – 12:00 p.m. daily It is critical to stay up to date on the requirements of BSA/AML. It can be overwhelming to stay abreast of BSA compliance and suspicious activity. This training provides tools and updates for staff to feel more confident in identifying risks and potential violations at their bank. We are providing a full agenda with topics relevant to issues on BSA/AML: • Compliance: The Impact of Remote Workers • AMLA The Culture of Compliance • Preparing for AMLA: Getting Your Bank Ready for the Anti-Money Laundering Act of 2020 • Q&A with Regulatory Agencies Women in Banking Colorado Springs, CO May 15-16 The Women in Banking Conference at The Broadmoor is a moment to recharge and recommit to goals and to make a positive impact on our industry. We have an exciting conference agenda packed with interactive sessions, and opportunities to network and make meaningful connections. Our time will be filled with learning and some laughter. Please join us at The Broadmoor. 2023 Banker Summit Tucson, AZ May 31 – June 3 Join Colorado and Arizona Bankers Association as we collaborate for our third annual Banker Summit at the Ritz Carlton Dove Mountain in Marana, Arizona. Scan the QR code to find out more about upcoming events, register online and purchase tickets. https://www.coloradobankers.org/events/ event_list.asp www.coloradobankers.org 12
» Call Rick Gerber or Ryan Gerber at 1-866-282-3501 or email rickg@chippewavalleybank.com ryang@chippewavalleybank.com 1. Calling us is the first step. 2. You email us the appropriate documents of information. 3. CVB preparing the loan documents generally within 5 to10 days. 4. Meeting the customer. We will come to you to sign loan documents. 5. CVB wires the funds. 6. Wow that was easy. IS YOUR BANK SUFFERING UNREALIZED SECURITY PORTFOLIO LOSSES? ARE YOU IN NEED OF A CAPITAL INJECTION? Bank Stock and Bank Holding Company Stock Loans up to $50 Million Done the Simple Way
You became the CFO at Vectra Bank at just 33 years old. What sets you apart in this role? I don’t mind being super uncomfortable in my career – in fact; I invite it. Every time I have felt uncomfortable in a position, it has given me a fantastic opportunity to learn and grow. I strive to set an example of strength and passion for my three young children. How do you like to give back to the community? I enjoy giving back through organizations that made an impact during my own young adult life. I vividly remember “Young Americans Day” from my own fifth-grade classroom experience and spent some time volunteering through Young Americans Center for Financial Education to educate children on the fundamentals of money management. I also recount “JA (Junior Achievement) Day” and the impact it had on me and my fellow classmates. I enjoy being able to inspire young people for success. What makes your job unique? I think part of what makes my job unique is the local affiliate model. It allows me to work closely with our bankers and work on things like pricing decisions. It’s one of the most exciting parts of my job. What is the sixth picture on your phone’s camera roll, and is there a story behind it? Of course, it is of my girls. I have a 5-yearold and 18-monthold twins. In this photo, they are getting ready for a visit with Santa. They keep me busy, and they keep me humble. How did you get started in the banking industry? I grew up around banking. I was drawn to community banking because the job goes beyond the transaction. Community banks are an integral part of the community in which we live and work. To be able to grow with, and be a part of, something special in the lives of community members is why I decided to begin a career in banking. What is the most rewarding aspect of your job? The most rewarding aspect of my job is the ability to be a part of very meaningful moments – from helping a business to grow or a family buy their first home. Having the opportunity to see the impact at the personal as well as the community level is extremely rewarding. What is the most important thing you’ve learned from a career in banking? People matter. We live in a world that is dominated by technology. Technology and automation are useful tools, but community banks will always have a person on the other end of the phone or screen to help you and guide you. It can make all the difference in the world. What is your favorite book, and what book are you reading now? My favorite book is The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow, and I am currently reading Alexander Hamilton by Ron Chernow. Matthew Propst First Vice President, Commercial Lending, ANB Bank CBA Centerpoint Ashley Comstock Chief Financial Officer, Vectra Bank Going Beyond the Desk to Hear the Stories of Colorado Bankers www.coloradobankers.org 14
You do a lot of volunteer work; what gives you the most satisfaction? Benefiting the community where I work and the impact the nonprofit sector has on those in need and being able to be a part of that. As part of the Five Star Education Foundation, we help kids in grade school that don’t have the resources and access to fundamental things such as food and clothing to achieve academic readiness. The foundation makes sure these children are equipped with these basic needs so they can focus their energy on academics and worry less about where their next meal will come from. I also spend time helping to prepare the future workforce by creating career paths and success for all students, especially those that may not choose to attend a four-year university, and showing them other avenues to career success. What is the most rewarding aspect of your job? My career endeavors evolve around building and sustaining personal relationships. My ability to connect with others on an individual level creates the groundwork for driving change and impacting entire communities. As a father to two young girls, I take pride in helping to build a strong community for them and for future generations to shine. What is the sixth picture on your phone’s camera roll and is there a story behind it? The sixth most recent picture on my phone is the view out of a goose blind as the sun is rising. I’m a pretty big hunting and fishing enthusiast, so my camera roll is a solid mix of hunting and fishing pictures intermingled with pictures of my daughters. Adam Ingersoll Vice President, FirstBank How did you get started in banking? I was in high school, and I loved going to the bank because everyone was dressed nicely and got to play with money all day. So, I decided I wanted to be a banker – I wanted to be a part of the professional world and help people with their money. I have been in banking since I was 18 years old, starting off as a teller, then new accounts, teller manager, and my career grew from there. What is the most rewarding aspect of your job? Building relationships with coworkers as well as clients and customers. I have met so many great people and have built meaningful relationships and friendships with people in many different industries. What makes your bank unique? We are a full-service bank, but the Denver office works mostly with businesses focusing on high-touch customer service. The bank does not advertise; instead, we receive all business through word of mouth. We build our business one relationship at a time. MidWestOne really separates itself by getting back to relationships and customizing solutions based on customer needs. Tell us something about yourself most people don’t know. I am a certified yoga instructor. I initially began my certification process in order to improve my own personal yoga poses and practices. I have been certified for six years but have not had a chance to teach. One of my goals for 2023 is to start teaching yoga, and my long-term goal is to one day be a traveling yoga instructor. What is your favorite yoga pose? Currently, one of my favorite yoga poses is crow because it challenges me the most, both physically and mentally. Jess Klotsche Vice President, Treasury Management, MidWestOne Bank January • February 2023 15
R Rising inflation and interest rates, stock market turmoil, an end of government support during the pandemic, and countless other financial setbacks have coalesced into a bleak economic environment for consumers. While many of these consumers are unprepared for a possible recession, financial institutions have a responsibility – and opportunity – to help educate these consumers on how to weather these storms. Through a panel discussion, we asked experts to weigh in on how financial institutions can use this downturn as an opportunity to strengthen relationships with consumers and commercial partners. EVERFI’s VP of Strategic Partnerships, Ryan Swift, moderated the discussion with our panelists, who included: • Mimi Joy, Head of Partnerships at the Financial Health Network; • Freda Lee, Senior Vice President, Relationship Management at Corebridge Financial (formerly AIG); and • Richard Knight, Co-founder and Managing Partner at Global Leader Group and former executive at HSBC. Here, we’ll share the four key themes that emerged from the discussion and how financial institutions can not only help their audiences survive during these challenging times but also position themselves as a trusted resource and long-term supportive partner. 1. Measure the Financial Health of Your Communities Before crafting a customer outreach strategy, institutions need to gather a clear picture of their communities' current financial health. Financial institutions can use a number of tools to measure financial health, but one format the Financial Health Network utilizes is tiering consumers into three broad categories: • Financially Healthy • Financially Coping • Financially Vulnerable Financially healthy consumers manage their day-to-day expenses, absorb financial shocks, and progress toward meeting their long-term financial goals. Those who are financially coping pay most of their bills on time and have near-prime credit scores, but they may struggle with long-range financial planning or lack adequate insurance products. Financially vulnerable individuals struggle in all categories of their financial health. How to Prepare Consumers for a Recession Three Experts Share Their Advice for the Months Ahead BY EVERFI www.coloradobankers.org 16
According to The Financial Health Network’s annual Pulse research report, 2022 saw the largest shift of healthy respondents moving to the financially coping tier. This data, combined with the trend indicating that people are saving less and spending more, underscores that this downturn has impacted nearly every demographic, no matter a customer’s financial standing. Marginalized communities stand to face measurably worse outcomes as well. Black and Latinx individuals, single-parent households, women, LGBTQIA+ folks, those with disabilities, and those who have faced historic disinvestment or ongoing discrimination are at increased risk of financial adversity. It’s crucial to focus on vulnerable consumers and tailor solutions to their particular pain points. 2. Meet Consumers Where They Are Broadly identifying the trends and financial health of your consumers is an important first step in understanding how to support them. The next step is to assess the specific challenges of each audience and commit to meeting them where they are. Financial institutions often develop consumer-facing tools or support structures without truly understanding their client’s financial literacy or motivations. This leads to time and energy wasted on solutions that aren’t effective or relevant for their intended audiences. Instead, organizations should focus efforts on offering financial education services that are accessible to all – whether that’s online, in person, or through one-to-one consultations. “Providing financial education is critical before you get to a downturn,” says Freda Lee, Senior Vice President, Relationship Management at Corebridge Financial. “Consumers need to be able to have financial plans in place so they can address both expected and unexpected expenses.” Not only should financial institutions provide the tools in an accessible way, but they should also use language that connects their audience instead of alienating them. It’s easy for financial institutions – who live and breathe the importance of financial health – to default to the language they use in their daily work. “But the average consumer doesn’t think about these topics all day, every day”, says Freda. “Consumers need frequent reminders, and in ways they can understand – ways they can identify with as they’re making financial decisions for their households.” Skip the jargon and instead use simple, approachable language and practical reminders that will encourage consumers to build healthy habits. 3. Connect with Consumers in Three Key Ways Since the fallout of the 2008 economic crisis, consumers have expected much more from their financial institutions. Rather than retreating and protecting the bottom line, leaders must step up and support their audiences across the board. This includes employees as well, who will be facing increased challenges in the coming months as this downturn progresses. When communicating with your audiences during difficult times, Co-founder and Managing Partner at Global Leader Group, Richard Knight, recommends following a threestep framework to help individuals feel seen, understood, and supported. 1. Reassure: Acknowledge the struggles of both consumers and employees, and recognize the unique challenges they may be facing due to their background. Offer encouragement that you’ll get through this difficult period together. 2. Educate: The more knowledgeable a customer is, the better for your business. Share how your organization can support them and what’s available to them – either immediately through products and services, or longer-term through education and support. Help them build the muscles of habits like saving and putting money into retirement. WE MAKE IT EASY LET OUR TEAM HELP YOU SECURE THE DEAL AND LOWER YOUR RISK • UP TO 90% OVERALL FINANCING • UP TO 25 YEAR TERM • FIXED-RATE PREFERREDLENDINGPARTNERS.COM | 303.861.4100 Leveraged financing and refinancing of owner occupied real estate and long-term equipment. Most for-profit small businesses eligible. SBA defines businesses with net profit after tax <$5.0 Million and tangible net worth <$15.0 Million as small. January • February 2023 17
3. Deepen: Think about the longer-term relationship. While no one knows exactly how long this downturn will last, we know it will end. The institutions that reach out in times of difficulty will be better prepared when we see the upside again. Communicating with consumers in these three ways will help financial institutions foster trust, establish themselves as a valued long-term partner, and connect with their audiences in meaningful ways during uncertain times. 4. Get Ahead of the Message and Communicate Proactively A strong relationship isn’t just responsive, it’s proactive. Each panelist was emphatic in their recommendations to get in front of consumers in creative, interactive ways. Richard noted that firms using financial tool activity and account analytics to understand how to approach clients most effectively are especially setting themselves apart. To become a trusted resource to consumers, financial institutions need to have more regular, proactive communication. This can take the form of reaching out with timely resources, as well as establishing lines of two-way communication. Here are a few examples of how organizations can reach out and become more trusted in their communities: • Conduct surveys • Host educational webinars • Offer cost-of-living saving guides • Hold in-branch events for customers in marginalized communities Challenging periods are where relationships and reputations are built or broken. Financial institutions can use this downturn as an opportunity to distinguish their services and brand and strengthen their community. “Institutions that offer this level of bespoke support,” says Freda, “will see greater long-term value from their consumers and colleagues – ultimately fortifying their bottom line.” Key Takeaways • Measure the financial health of your customers, employees, and communities. Understand if they are financially healthy, coping, or vulnerable, and adjust your product and service offerings based on what you learn. • Speak the language of your consumers, and meet them where they are. While we, as financial institutions, think about financial health regularly, most consumers aren't, and they need simple language and reminders to help them build the muscles of financially healthy habits. • Reassure, Educate, and Deepen relationships with consumers. Acknowledge the impact of these financial hardships, share what solutions are available to them, and reach out in times of both difficulty and prosperity to build a stronger long-term relationship. • Be proactive in your outreach. Now is not the time to hunker down or run away from consumers. Get out there and run your programs – educational webinars and inbranch events to reach marginalized communities. To learn more about how to support your consumers, watch the full panel discussion at https://learn.everfi.com/webinar-prepare-communities-for-recession. We’ll rock your socks off. capital As a top Certified Development Company and Lender Service Provider, we help our banking partners succeed at SBA 504 and 7(a) lending. bs i decap i ta l . org/co - l ender s | 303 . 657.0010 Check out our library of SBA tools and resources in our Lender Portal. “B:Side Capital allows us to assist business owners through the SBA process with great rates, lower down payments, and an expedited process.”
Why Lenders Should Consider SBA Loans During a Recession BY LAUREN KLOOCK, B:SIDE Capital As 2022 has come to a close, we keep hearing the tune of a particular chorus on repeat across news stations, podcasts and pretty much every media outlet: Will there be an economic recession in 2023? Many analysts, economists, and other experts are largely backing this prediction with mounds of data saying how people might prepare or what we can expect in the face of the looming recession. Our partner lenders may also be wondering if there’s anything they can do in preparation for a recession for their small business clients. Luckily, we have good news in light of the doom and gloom lurking among us. In general, the SBA 504 and SBA 7(a) loan programs are well situated for challenging economic times. SBA financing provides enhancements to banks that are unable to lend conventionally on certain projects. Some of the more obvious reasons why lenders may want to consider SBA financing options: • It lessens the credit risk for lending institutions through the unique equity structure under the SBA 504 program, with the bank at 50% Loan to Value • Under the 7(a) loan program, SBA guarantees up to 85% of the total loan, making it an incredible opportunity for banks to confidently expand their portfolio as we enter 2023. However, looking back on previous recessions, there are several other reasons why SBA financing may be more attractive during a downturn over lending conventionally. Nine reasons lenders can think outside of the box regarding lending during an economic recession include: 1. SBA loans still lessen bank risk during hard economic times. 2. During tougher economies, SBA lending historically increased as commercial credit boxes shrunk. 3. Lenders still serve higher-risk industries during economic hardship by relying on the SBA guarantee on 7(a) loans. 4. Equity injection requirements are typically lower on SBA projects, allowing the borrower to retain cash for business working capital needs. 5. Refinancing is an attractive option for lenders to offer borrowers variable-rate loans tied to prime. In some instances, 504 loans may be used to refinance 7(a) loans. 6. Ability to lend to undercollateralized service businesses for business acquisitions or businesses experiencing a decline in property values. 7. SBA 7(a) loans offer both fixed and variable rate options, while SBA 504 loans offer long-term fixed rates of up to 25 years. 8. This federal fiscal year, SBA 7(a) loans offer fee reductions on loans under $500,000 for both bank and borrower. 9. Selling on the secondary market is available if lenders wish to sell 7(a) loans for a premium (not available for SBA 504 loans). It’s hard to say what this year will bring, but B:Side is here to let you know we’re in this together. Our team of lending experts is happy to set up training to walk you through the nitty‑gritty of SBA financing based on your bank’s needs. Just shoot us a line or give us a call to let us know how we can support you. Lauren Kloock of B:Side can be reached at 303.657.0010, or loanproduction@bside.org. January • February 2023 19
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