March/April Banker OVER A CENTURY: BUILDING BETTER BANKS — Helping Coloradans Realize Dreams SIX WAYS to Effectively Market Your Financial Institution WANT YOUR CONTENT VIEWED? Better Pay Attention to Google Advancing Notarization with RON
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 coe vnetru ar y BUILDING BETTER BANKS — Helping Coloradans Realize Dreams 12 16 4 Bankers in Action 8 Multi-Failure Authentication Finding and Fixing Gaps in MFA By Chris Tuzeneu, VP-Information Security, CivITas Bank Solutions 10 Advancing Notarization with RON By eNotaryLog 12 Six Ways to Effectively Market Your Financial Institution By Adam Lee, President, Techint Labs 14 CBA Centerpoint Going Beyond the Desk to Hear the Stories of Colorado Bankers 16 Want Your Content Viewed? Better Pay Attention to Google By Neal Reynolds, President, BankMarketingCenter.com 18 Why It’s Not Too Late for Interest Rate Swaps By Bob Newman, Chatham Financial 20 The Challenges of Escrow Tax Processing By Info-Pro Lender Services 23 Upcoming CBA Events 24 Malware's Changing Tactics SEO Poisoning in 2023 By SEI Sphere 4 Colorado Bankers Association The March • April 2023 3
BANKERS in ACTION CBA Hosts Events Highlighting the Importance of Connecting with Public Officials February 2: Dinner with Democratic Elected Officials CBA hosted a dinner with Colorado Democratic Officials and enjoyed an evening of great conversations, laughter, and delicious food. Melanie Layton, Rep. Shannon Bird (from left) Brett Wyss, Senate Majority Leader Dominick Moreno, Jenifer Waller, Matthew Propst (from left) Jack Kozlowski, Garin Vorthmann, Rep. Mary Young (from left) Sen. Dylan Roberts, Heidi Wagner Morgan (from left) Rep. Mary Young, Rep. Brianna Titone, Jenifer Waller (from left) www.coloradobankers.org 4
February 6–7: Freshman Fly-In Colorado bankers visited our nation’s capital to welcome newly elected Colorado Congresswomen Brittany Pettersen and Yadira Caraveo. Bankers also met with Congressman Ken Buck and Congresswoman Lauren Boebert. We enjoyed the opportunity to have these face-to-face meetings to get to know the new Colorado delegates and to catch up with familiar faces in D.C. Jenifer Waller, Congresswoman Brittany Pettersen, Mark Hall, Matthew Propst (from left) Matthew Propst, Mark Hall (from left) Jenifer Waller, Matthew Propst, Congresswoman Lauren Boebert, Mark Hall (from left) Jenifer Waller, Congresswoman Yadira Caraveo, Matthew Propst, Mark Hall (from left) Angela Petrucci, Jenifer Waller, Mark Hall, Matthew Propst (from left) Jenifer Waller, Congressman Ken Buck (from left) March • April 2023 5
February 21: CBA Center for Bank Advocacy Class at the Capitol The Colorado Bankers Association Center for Bank Advocacy Program participants visited the State Capitol and were welcomed on the floor of the Colorado General Assembly. The Colorado Bankers Association Center for Bank Advocacy prepares bankers to engage in the legislative and advocacy process on behalf of their banks and bank customers. February 9: Dinner with Republican Elected Officials CBA hosted a dinner with Republican elected officials and had a wonderful evening filled with great food, lively conversation, and fun for all. Speaker of the House Julie McCluskie with Center for Bank Advocacy Class Minority Leader Mike Lynch with Center for Bank Advocacy Class Alison Morgan, Zach Bunney, Rep. Matt Soper (from left) Heidi Wagner Morgan, Zach Bunney, Rep. Don Wilson (from left) Rep. Richard Holtorf, Jenifer Waller (from left) Karrie Fletcher, Brendan Zahl, Sen. Paul Lundeen, Dave Howell (from left) www.coloradobankers.org 6
March 1: Legislative Briefing Colorado bankers and legislators gathered to forge and solidify relationships to ensure a more successful tomorrow for Colorado and its economy. We were proud to honor the 2023 Bankers of Distinction as well as the 2023 Legislators of Distinction. The 2023 Banker of Distinction Award Recipients: Jeff Benson — Bankers’ Bank of the West, Elizabeth Stanley — Vectra Bank, Greg Shields — FirstBank, Lieutenant Governor Dianne Primavera — presented the awards, Sue Wagner — Bank of Colorado, Shawn Cole — BMO/Bank of the West, CBA Chairman Mark Hall (from left) 2023 Legislator of Distinction — President of the Senate Stephen Fenberg, CBA officers: Kevin Erickson, Shawn Osthoff, Mark Hall (from left) The 2023 Legislator of Distinction Award Recipients: Rep. Marc Snyder, Rep. Shannon Bird, CBA’s Alison Morgan, Rep. Mike Lynch, Sen. Dylan Roberts, Sen. Robert Rodriquez, Sen. Paul Lundeen, Rep. Naquetta Ricks (from left) March • April 2023 7
M Multi-Failure Authentication FINDING AND FIXING GAPS IN MFA By Chris Tuzeneu, VP-Information Security, CivITas Bank Solutions Multifactor authentication, or MFA, is widely regarded by security professionals as one of the best tools you can use to keep your accounts safe. By now, you probably already know how it works and how it keeps you more secure than just a username and password alone. But is it good enough to stop all attacks? As with anything, it has its weaknesses. So let’s take a look at some of the attacks used against MFA and how you can keep them from succeeding. Double Compromise Properly implemented, multifactor authentication is great, but a one-time passcode sent to your primary email address is one of the weakest methods. The scenario: In the event of email compromise, the attacker would simply use a “Forgot Password” link to reset the account in question, receiving the reset email to the compromised account. Then, after resetting the password, they would intercept the MFA code that was sent to the email address and would fully take over the account. This is not to mention the fact that these one-time codes are almost always sent unencrypted and could be intercepted by any email server the message passes through on its way to the recipient. The solution: If you have a choice between email and another delivery method for your MFA codes, something else is usually much more secure. Notification Fatigue This is a new tactic that the bad guys are using to try and wear you down so you let them in. This only works for accounts that are protected with Duo or Microsoft Authenticator, any implementation that requires you to tap “Yes” or “Allow” to proceed. The scenario: An attacker has guessed, phished, or bruteforced a password. They try to sign in over, and over, and over again in the hopes that the user will get tired of the notification and just approve it, thinking it’s something necessary for the account to work. Maybe they even do this late at night while the target is trying to sleep. The solution: If your authenticator app starts going nuts, talk to IT and get your password reset for the affected account. This will block any further sign-in attempts and stop the push notification frenzy. Always report any authentication requests that you didn’t initiate. Also, use your smartphone’s scheduled do-not-disturb function to eliminate noncritical notifications while you sleep ... or just keep your phone in another room. Good Timing The scenario: As with the last example, a password has been compromised and a push-based MFA solution is in place. The attacker learns the primary time zone of the company and tries to log in exactly at 8:00 local time (or whenever they learn work starts in the morning). The idea is to time the login attempt to when many employees will be starting their day, making it more likely that the push notification will get answered if it happens to coincide with a legitimate login attempt. The solution: Any push notification should give you some additional details about the login when you click it. Specifically, it should have the IP address and geolocation where the attempt originated. If your business is in the United States and the login is coming from China, that’s one you’ll want to say “No” to and report. Then, a password change will be in order. OTP Phishing The One-Time Passcode (OTP) is usually a six-digit code that is sent to your phone or generated from an authenticator app that you use to verify your login. Generally, the codes rotate every thirty seconds to five minutes, and when they are used once, they become invalid. This attack relies on the attacker capturing that code from you and using it in real time before it expires. www.coloradobankers.org 8
The scenario: After clicking on a well-crafted phishing email, a target is taken to a page that looks identical to a legitimate sign-in page. They enter their username and password and then are presented with a screen that asks for the OTP. At the same time, the attacker is retrieving the stolen credentials and trying to log in as the target on the service’s real login page. When the target receives the OTP, they enter it into the web form, which is also transmitted to the attacker, who then uses it to log in and register their own devices to also receive the OTP. The solution: Almost everyone clicks a phishing link at some point in their lives. Using a password manager is a great way to avoid accidentally entering credentials to be stolen since a good password manager will only autofill the password if the URL in the address bar matches the legitimate website. And a password you don’t know is a password you can’t unintentionally give out. SIM Swap This one is a low likelihood, so I saved it for last, but it’s still worth mentioning as it’s a high-impact attack. The scenario: An attacker obtains a good amount of information about a high-value target, including their username, password, and phone number. Using social engineering techniques, they contact the target’s mobile phone provider and ask to port the phone number to a new SIM card since they “lost their phone.” Security checks are bypassed and the target’s phone stops working as the criminals gain access to their phone number. They log in using the stolen credentials, intercept the text message with the OTP, and compromise the account. The solution: For critical accounts, use an authenticator app or FIDO token, not a text message code. Check with your cell phone provider and set an authorization code with them before they will allow your number to be ported to another SIM card. Chris is the Vice President of Information Security for CivITas Bank Solutions, which exists to help community banks with IT and Information Security needs. You can email info@acivitas.com for more information. Multifactor authentication, or MFA, is widely regarded by security professionals as one of the best tools you can use to keep your accounts safe. 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. March • April 2023 9
D Advancing Notarization with RON By eNotaryLog Digital technology is disrupting traditional documentation processing and paving the way to more convenient and efficient transactions. As paper pushing sunsets, the electronic equivalent is powering secure digital alternatives. Remote Online Notarization (RON) is the process of notarizing a document digitally through the use of audio-visual technology to securely review documents and electronically verify a person’s identity to complete a legally binding notarial act online. RON is leveraged by a myriad of industries including banks, title companies, real estate brokerages, law firms, lending institutions, corporations and small businesses. Simplicity, convenience, and security are the foundation of RON, but other benefits include error reduction, secure transfers, fraud mitigation, affordability, and more. There is no longer a need to meet with a notary in person. No Travel Necessary RON technology is relatively new. The pandemic highlighted the need for remote online notarization, which was initially allowed under Emergency Use Authorization. Efficiency and security have popularized RON, and currently, 44 states have passed remote online notarization laws, including Washington, D.C. Interstate recognition promises the legal honoring of documented transactions and official notarial acts performed from state to state. As long as a RON notary is physically located anywhere within the state in which they are commissioned, the signer and notary satisfy personal appearance requirements by using real-time audio-visual technology. No travel necessary. It’s Secure Remote online notarization uses industry-standard audiovisual technology and Knowledge Based Authentication (KBA), as well as ID Credentialing, to identify the signer while ensuring their privacy. KBA assesses a user’s knowledge by asking questions generated from their public records and credit history before granting access to an account with sensitive digital data. RON solution providers also use fraud and tamperevident encryption along with digital audit trails. States may vary in their RON laws, but RON providers conform to the laws of each state. It is these technologies and conformities that ensure remote online notarization is secure and compliant.
How It Works It’s simple and efficient. Here’s how it works: 1. Documents to be notarized are uploaded to the RON platform and tagged for signatures. 2. The signer receives an email notification that documents are ready to sign — a time can be set to meet with a notary virtually or they can click the link and start the process right away. 3. Once the signer accesses the platform, the authentication process will start. 4. The signer and notary will meet in real-time in the virtual notary room and each session will automatically be recorded. 5. The signer digitally signs the documents. 6. The notary performs an electronic notarization. 7. A link to digital copies of the notarized documents is delivered to the signer(s). 8. A record of the transaction details is uploaded to the digital journal. 9. The RON service provider stores the video recording and related data for compliance. What Is Needed RON requires identification to complete the process. Acceptable forms of identification for RON notarizations include: • State-issued driver’s license • State-issued identification card • United States passport issued by the U.S. Department of State • United States military ID • State, county, and local government IDs • Permanent resident card (green card) issued by the U.S. Citizenship and Immigration Services • Foreign passports Looking Forward with RON Even as COVID-19 has become less of a factor for in-person transactions, the industry has been disrupted, and the pivot Remote online notarization uses industry-standard audio-visual technology and Knowledge Based Authentication (KBA), as well as ID Credentialing, to identify the signer while ensuring their privacy. to meet the signer whenever and wherever they are located is RON. Virtual notarizations are here to stay, and the demand continues to grow! Founded in 2019, eNotaryLog was built as the premier remote online notarization tool combining advanced user experience, security, and compliance all within a scalable solution. Our cloud-based featurerich platform is MISMO-certified, SOC 2 compliant, and audited by a leading global law firm and fintech advisor. With its secure technologies and RON-certified in-house notaries, businesses and consumers can notarize documents anytime, anywhere. Companies can also leverage APIs for direct integration and use their notaries to provide a convenient and seamless client-centric experience. From online notarization of life's essential documents to standalone electronic signature services and other emerging legal technologies, eNotaryLog dominates document execution by simplifying the signing process with our exceptional products so that everyone can notarize with confidence. Learn more at enotarylog.com. March • April 2023 11
W Six Ways to Effectively Market Your Financial Institution By Adam Lee, President, Techint Labs When it comes to life’s most significant purchases, like buying a home or car, consumers don’t go into the process without research, word-of-mouth recommendations, or support from an expert. The same applies when consumers search for a financial institution to keep their money safe, invest, or borrow from. According to Think with Google, 53% of consumers constantly research before buying to ensure they make the best choice possible. NerdWallet even suggests consumers research what types of financial institutions they should work with based on their needs, determining the experience they want and what the “must have” features are to them (e.g., branches available worldwide, excellent customer service, or no checking fees). During the consumer research process, financial institutions need to market themselves effectively. Developing an effective marketing strategy can influence decision-making and ultimately impact their choice. Why Marketing Is an Essential Function for Financial Institutions According to the Federal Deposit Insurance Corporation (FDIC), the reason for consumers to be categorized as “unbanked” is due to a lack of trust (13%) and a lack of privacy (8%). Marketing your financial institution goes beyond attracting new customers and retaining your current customer base — it helps build trust and establish a strong brand reputation. Marketing can help you effectively show your consumer how www.coloradobankers.org 12
you differentiate from the competitors and how you can meet their needs. After all, consumers are more likely to do business with a company they feel is reputable and trustworthy. Six Ways to Effectively Market Your Financial Solution While marketing a financial institution can be challenging, it’s essential to establish credibility and trust with a potential customer. Consider these tips for how you can promote your financial institution effectively: 1. Understand your target audience: Who is your target audience? Conduct market research to understand financial needs, demographics, and behavior. 2. Develop your brand story: Solidify your values, mission, and vision to help stand out. 3. Create a strategic marketing plan: Determine different strategies and tactics to promote your institution to your highest-value prospects at the right place and time. Don’t forget to include your goals, budget, channels, and brand messaging! 4. Leverage digital marketing: You can use various digital platforms to spread the word about your financial institution — from SEO to social media. Identifying your goals and budget will help you determine the product mix to use. 5. Focus on putting your customer first: Emphasizing customer service is essential to build trust and loyalty with your customers. 6. Measure your results: Data will be your best friend in your marketing journey. It will help you track performance and help you gain an understanding of what strategies are or aren’t working. Leveraging a customer-focused approach, a well-defined brand identity, a multi-channel marketing plan, excellent customer service, and a commitment to continuous improvement will help grow your business and drive revenue. Adam’s career centers on creating, building, operating, and leading highly successful media organizations. He helped launch Techint Labs to create a conversion-focused media agency that helps brands utilize emerging advertising technology to earn attributable results. Before Techint Labs, he led digital strategy for national clients at Digital First Media, the United States’ second-largest newspaper publisher. According to Think with Google, 53% of consumers constantly research before buying to ensure they make the best choice possible.
What is the most rewarding aspect of your job? The most rewarding aspect of my job is helping customers reach their financial goals — helping a business grow, a couple buying their first home, or a customer’s child opening their first savings account are just a few examples. I love seeing our local community grow and knowing the bank played an important role in that. What is the most important thing you’ve learned from a career in banking? Relationships are the most important thing in banking. All banks have similar products and services, but it is the people behind those services that can make a big difference, especially as a community bank. Our customers are not just a number. You are a CBA Advocacy Class Alumni, and you will graduate from the Graduate School of Banking (GSB) in July. Can you tell me more about what you’ve learned from these courses? GSB has given me an opportunity to learn a lot about banking and understand the industry better than ever before. The CBA Advocacy program gave me the chance to learn more about what CBA does and the important role of protecting the banking industry and Colorado businesses. I really enjoyed taking what I learned from the Advocacy Program and bringing the knowledge back to my branch. When you were a child, what did you want to be when you grew up? When I was a child, I wanted to either be the President of the United States or a janitor. My mother suggested I be a janitor at the White House. What is the most important thing you’ve learned from a career in banking? The importance of surrounding yourself with mentors, supporters, and allies — mentors to teach you and show you the way, supporters to advocate for your growth and challenge you, and allies to help carry your voice. You recently took on a new role at the bank, can you tell me more about that? In my new role, I assist in properly staffing and scheduling employees in our branches in order to improve our client experience and the communities we serve. We know that having the right people in the right place at the right time is critical to the success of Chase. This starts by understanding how many bankers to hire and when and includes scheduling our team's day-to-day to make sure we can keep up with the client traffic. This is achieved by collaborating with Regional Directors, Market Directors, and Branch Managers. How do you like to give back to the community? Financial literacy is very important to me, and I enjoy working with organizations like CBA and Young Americans. I am also passionate about Diversity, Equity, and Inclusion efforts, and I serve on the American Bankers Association Board for Black Bankers. When you were a child, what did you want to be when you grew up? When I was a young child, I wanted to be a chemical engineer. I was interested in finding ways to provide low-cost energy solutions. Mbiyu Chisholm Regional Planning Lead JP Morgan Chase Jordan Dunn Vice President Bank of Colorado CBA Centerpoint www.coloradobankers.org 14
GOING BEYOND THE DESK TO HEAR THE STORIES OF COLORADO BANKERS How did you get started in the banking industry? Upon graduating from CSU in the mid-80s, I began my career with Federal Land Bank in Southeastern Colorado. It felt like we foreclosed on more farms and ranches than we made new loans during my first year. It was a tough time in agriculture and in lending, but looking back, it was a great experience starting out as a new lender. It allowed me to see and experience first-hand, with my hand actually “in the poop”, the importance of cash flow-based lending vs. collateral or balance sheet-based lending. What is the most rewarding aspect of your job? We make a difference! I can drive down Main Street or around Northeastern Colorado and look at the many successful operations that make N.E. Colorado what it is today. I know we had an impact in making our towns, communities and Northeastern Colorado a better place to live, raise a family, operate a business, and retire. Can you tell us about your involvement in Agricultural Banking? In order to have a successful N.E. Colorado, we have to have a successful agricultural community. Our towns in N.E. Colorado — and for that matter, all of Colorado — would not thrive without the Ag Commerce generated by our farm and ranch families and agricultural business in general. It is extremely important to me that we continue to provide the financial tools and expertise needed for ag operations to be successful. We take agriculture, including water, for granted and without our farm, ranch and agribusiness community, we don’t eat. I like to eat! Tell us something about yourself most people don’t know. I graduated #7 in my class. Although we only had 15 in the graduating class at Peetz High School, we had an extremely sharp class and thus the reason for me graduating #7 in a class of 15. Steve Meier Regional President Bank of Colorado What makes your bank unique? AMG began as a wealth management firm and built banking on top of that to meet our clients’ needs over their lifetimes. Our services are integrated to make life easier for our clients. We consider ourselves a community bank with a national reach, providing wealth management and banking solutions to our clients across the U.S. We are focused on understanding a client’s goals and developing solutions to meet those goals. How do you like to give back to the community? I most enjoy giving back to the community by personally volunteering, which allows me to directly see the impact that a non-profit is having related to its mission. As part of being on the Jr. Achievement board and a volunteer, I love working with students of all ages as they learn something new in every interaction — be it a second grader learning how money moves in a community or a high schooler figuring out what career they would excel at. What is the most important thing you’ve learned from a career in banking? Banks help communities successfully function and grow. Bankers bring people together to innovate, build, and transfer ideas as well as things. Tell us something about yourself most people don’t know. I enjoy preparing tax returns for family members while I watch movie marathons. Sheryl Bollinger President & CEO AMG National Trust March • April 2023 15
Want Your Content Viewed? BETTER PAY ATTENTION TO GOOGLE By Neal Reynolds, President, BankMarketingCenter.com SSEO, as you know, now plays a more critical role than ever in the marketing content that you create to engage your customer. And Google, as you also know, plays a critical role in determining how and when that customer engages with it. It’s important, then, to keep an eye on Google and keep abreast of the changes they may be making to how they rank content in user searches. If you’re a content marketer — and you better be — those changes involve algorithms, which have a profound impact on the type of content you distribute and how it is viewed. Today, we’re going to talk briefly about the content trends driven by the late-last-year algorithm changes at Google: the “Helpful Content Update” and the “Spam Update.” For years, and Google would be the first to admit it, their content ranking algorithm was less than perfect and, as a result, fairly forgiving. As a result, when it came to optimizing content such as websites and web-based articles, blogs, white papers, infographics, ebooks, etc., marketing content developers could get away with things. They’ve been able, for instance, to get away with optimization tactics such as keyword stuffing and link farming (a set of web pages created with the sole aim of linking to a target page in an attempt to improve that page's search engine ranking). In short, writing to the search engines instead of the human being. As of this year, however, the ability to get away with “faking” SEO is no longer an option. This is good news for bank marketers who adapt and bad news for those who don’t. Not surprisingly, Google continues to get smarter over time; artificial intelligence can do that. It’s time for banks to become smarter about creating search engine optimized content that can truly leverage what Google is prioritizing when it comes to the SERP (Search Engine Results Page) and the recent algorithm updates. Why bother with algorithm updates, you ask? Well, Google is a business too, and the path to growing their business is to serve their users the best possible content as quickly as possible. The Helpful Content Update (HCU) and the Spam Update will both enable Google to enhance the search engine’s ability to offer users the best content quickly and, in the end, increase their revenue. Here is what Google’s HCU is intended to do: validate and rank content with a greater emphasis on author authority … and trust. And they’re doing this not only by validating the trustworthiness of sources/authors. So, moving forward as a content marketer developing content for the web, Google suggests that, in order for that content (site page, ebook, whatever) to be recognized as valued content, you should position your author as a subject matter expert, ideally linking the blog to their LinkedIn page where the reader can learn more about the author’s experience and industry credentials. Google is also concerned about the growing popularity of AIgenerated content via providers such as ChatGPT or Longshot. www.coloradobankers.org 16
Industry experts theorize that it won’t be long (potentially) before the internet is flooded with AI content, i.e. websites and blogs crafted by writing “bots.” Google’s updates are the company’s way of protecting what it views as legitimate content, making sure that the content it ranks high in SERPs is developed by individuals who are truly qualified to do so — subject matter experts in their field and not “AI writing assistants.” This is where the Spam Update comes into play. The update is designed to determine whether the content was, in fact, created by a trusted, expert source. If not, the algorithm will identify the content as spam. So, tempting as it may be to use an AI platform such as ChatGPT or Longshot to generate your blogs instead of a trained writer with industry expertise and credibility, you may want to resist that temptation … or face the wrath of Google’s algorithm updates. In addition to the steps that Google is taking to validate content, the company is also taking a less favorable view of “all text content.” In Google’s opinion, there’s much more to content than text … and it’s true. The manner in which people consume information has been changing for quite some time and Google has been watching very closely. Specifically, they’re watching YouTube Shorts, Instagram Reels, and TikTok. And, the fact is all-text content engagement is on the slide while short-format video engagement is on the rise and the numbers prove it. Fun fact: there are roughly 250 million hours of video viewed on YouTube every day and last year; young people globally spent 56 minutes a day on YouTube. According to Forbes, “YouTube Shorts now claims 1.5 billion monthly viewers — more than TikTok has at 1 billion viewers a month — and gets 30 billion views a day.” Instagram Reels has proven to be a powerhouse player as well. “In an October earnings call, Meta reported that Reels gets 140 billion plays a day across Instagram and Facebook.”1 As you look to create engaging content that Google will crawl and rank highly on its SERPs, consider short videos, either standalone or embedded in your text content. So, as you move forward with content creation — keeping in mind that Search Engine Optimization plays a critical role in the effectiveness of that content — it will pay to also keep in mind that Google has an ever-watchful eye on the web. Remember: how, when, and even IF your content will be viewed online is in Google’s hands, not yours. Here at BankMarketingCenter.com, our goal is to help you with that topical, compelling communication with customers; the messaging — developed by banking industry marketing professionals, well trained in the thinking behind effective marketing communication — will help you build trust, relationships, and revenue. In short, build your brand. To view our marketing creative, both print and digital — ranging from product and brand ads to social media and in-branch signage — visit bankmarketingcenter.com. You can also contact me directly by phone at 678-528-6688 or via email at nreynolds@bankmarketingcenter.com. As always, I welcome your thoughts on the subject. 1. Forbes. “In the age of TikTok, YouTube Shorts is a Platform in Limbo.” December 22, 2022. https://www.forbes.com/sites/ richardnieva/2022/12/20/youtube-shorts-monetizationmultiformat/?sh=6ffc04116f41 It’s time for banks to become smarter about creating search engine optimized content that can truly leverage what Google is prioritizing when it comes to the SERP (Search Engine Results Page) and the recent algorithm updates. COAN, PAYTON & PAYNE, LLC IS NAMED A BEST LAW FIRM BY U.S. NEWS & WORLD REPORT IN SEVEN PRACTICE AREAS INCLUDING BANKING, BANKRUPTCY & CREDITOR'S RIGHTS. DID YOU KNOW? March • April 2023 17
H“Has the train left the station? Are we trying to bolt the door after the horse has left the stable?” These are the types of questions community bank Directors are asking in the aftermath of the largest single-year interest rate increase since 1980. Playing catch-up in its fight to control inflation, the Federal Reserve’s rate hikes in 2022 were both unexpected and larger than in any previous decades. One year later, some industry observers have begun to argue that an overly aggressive Fed may soon need to reverse course to prevent a recession. If the worst is truly behind us, this line of argument goes, “Why should a bank executive invest time in 2023 to install interest rate hedging capabilities?” Because, we argue, there will always be uncertainty regarding the direction and speed of change in interest rates. Swaps give institutions enormous power because they have the ability to exchange that uncertainty (floating rate) for certainty (fixed rate). Here are three strategies we think banks with direct access to interest rate derivatives will deploy in 2023. These ideas are timeless but are particularly relevant based on where we are today in the economic cycle: 1. Individual Loans A borrower hedging program enables a bank to retain a floating-rate asset while the borrower secures fixed-rate financing via a swap. With on-balance sheet loan rates jumping from the mid-3% range to as high as 6% to 7%, booking the fixed-rate loan seems like the best thing to do. But weak or negotiable prepayment language often means that a fixed-rate loan really behaves like a one-way floater. For example, a loan booked at 6.5% today will never move higher — but if the market corrects lower, you can expect a call from the borrower looking for a downward rate adjustment. Some banks without access to hedging tools have placed their borrowers into loan-level interest rate swaps by involving an outside party in the loan agreement. These indirect swaps are designed as a convenience product for small banks to get their toe in the water and accommodate larger borrowers with a long-term fixed rate. By keeping the community bank swap-free, indirect Why It’s Not Too Late for Interest Rate Swaps By Bob Newman, Chatham Financial www.coloradobankers.org 18
programs also prevent the bank from considering the following two balance sheet strategies that protect and enhance net interest margin. 2. Securities Portfolio Perhaps the greatest pain point related to interest rates that banks experience in 2022 was marking the securities portfolio to market prices and booking the resulting unrealized losses in the accumulated other comprehensive income, or AOCI, account. Banks without swaps installed were forced to choose between two bad options during the excess liquidity surge of 2020: hold onto cash that earned virtually nothing or purchase low-yielding long-term bonds to pick up maybe 100 basis points. Institutions with access to swaps had a third choice: keep the first two years of the higher-yielding asset and then swap the final eight years to a floating rate. Swaps used to fine-tune the duration of a bond provide the double benefit of converting to a higher floating yield today (handy when the fed funds are around 4.33%) and creating a gain in the AOCI account to offset the losses booked on the bond. While a swap today cannot erase past unrealized losses, it is a game changer for the CFO and treasurer to have the ability to take control of portfolio duration. 3. Wholesale Funding Higher interest rates have also led depositors to move their funds, leading banks to grow their wholesale funding from sources. Banks without access to swaps will often ladder out term fixed-rate advances to longer maturity dates, using a product that includes both a yield curve premium and a liquidity premium. A bank with hedging capabilities can accomplish the same objective by keeping the actual funding position short and floating. From there, the funding manager can conserve the liquidity premium and achieve a more efficient all-in borrowing cost by using pay-fixed swaps to create the ladder. Additionally, the swap always provides a two-way make-whole, where a traditional fixedadvance includes a down-rate penalty but no benefit when rates rise. While some bankers still view interest rate derivatives as risky, the rapidly changing conditions experienced in 2022 suggest that the greater risk may be attempting to manage the balance sheet without access to these powerful tools. Today, more than 40 years since their creation, one thing is certain: it’s not too late for any bank to start using interest rate derivatives. Learn more about Bob Newman at www.chathamfinancial.com/team/bob-newman. March • April 2023 19
The Challenges of Escrow Tax Processing By Info-Pro Lender Services Introduction Even in cases where escrow is not required, many borrowers find convenience in having their financial institution take care of paying the property taxes and insurance on their property. Banks can also find escrowing beneficial as they can be sure the property taxes and insurance are being paid on time. However, tracking and gathering the property tax data needed to make these payments correctly, then actually making those payments, can be a massive undertaking. Banks that do not currently deal with any escrowed loans, or only have a few, can be caught off guard when it comes to mergers and acquisitions. An institution may only have mortgages in one or two states. However, after acquiring another institution, that bank can suddenly be faced with mortgages in new geographical areas where they have no experience in gathering and paying property taxes. Going through an acquisition can also drastically increase the number of escrowed loans in the organization’s portfolio, requiring more staff and resources to keep up with tracking and processing escrow amounts. The prevalence of escrowed mortgages appears to be increasing as well, based on data from Info-Pro Lender Services. Over the past five years, Info-Pro has seen escrowed loans being added to their system increase at a 40% higher rate than non-escrowed loans. The increase in first-time homebuyers coupled with an increase in government-backed mortgages is a likely driver of this increase. Furthermore, as millennials enter the homebuying market, it can be expected that many of them will require escrow due to having smaller down payments. This means that banks will need to have a robust property tax tracking and escrow processing solution in place to make sure they stay compliant and manage risk. Property Tax Nuances There are currently over 26,000 taxing agencies in the United States. Each one of these taxing agencies can have wildly differing nuances for gathering property tax data as well as how to make property tax payments. If a bank has escrows, they are the ones responsible for making sure the property tax amounts are accurately researched and payments to the correct taxing agency are made on time. Doing so can become even more complicated when tax bills are required for payment. Let’s look at some of the property tax nuances banks may encounter: Due Dates Property tax due dates are extremely important for banks to understand. They inform them as to when property taxes are due, how early an institution needs to start looking for www.coloradobankers.org 20
tax amounts, at what point funds for payment will need to be certified, and when the institution’s servicing department will be busiest. What makes due dates challenging is that they vary from agency to agency, by the number of installments, and in certain locations, can change from year to year. Let’s look at some examples: • Installments Some tax agencies vary between offering one, two, or more installments for property tax payments. With twoinstallment agencies, these due dates can either be in the same calendar year or straddle two years. When reaching out to these agencies to get tax amounts, it’s important that institutions understand which tax year to refer to. While some states’ due dates seem straightforward, as soon as you start crossing into other states the complexity can grow. For example, in Colorado, there are typically just one or two installments, but different counties can set their own due dates and installments. It is important for banks to keep up with researching and making sure to stay on top of changes in installments. Moving to other areas of the country where there are municipality level payments, a financial institution might encounter one city with two installment dates and another with ten. • Due Date Variation A perfect example of an area where due dates change from year to year is the state of Texas. Texas is a municipality level state, meaning that each city or township sets their own due dates and discount dates. Often the only way for a financial institution to know what the new dates are is to call the agency or check their website (if they have one) every couple of weeks until the local government has set the new dates. Another due date variation is discount dates. These are essentially due dates that come a month or two ahead of the normal due date, and by paying by this date, the financial institution or homeowner will get a percent discount on their property tax amount. Understanding these discount dates and making timely payments can save a substantial amount of money on high-valued properties. Gathering Property Tax Data Once the bank understands the due dates and installment rules for where they have mortgages, the next step is finding and gathering the property tax data for each property. Each taxing agency may offer one or several of the following methods for gathering tax info, each with its own pros and cons: • Websites: Many larger agencies will have property tax portals that allow anyone to search for property tax information by a range of criteria. ◦ The benefits of websites are that they are typically more up-to-date, allow on-demand access, and often offer the ability to see historical data for the property. ◦ The downsides to websites include the possibility of per-parcel search fees, the site not being updated regularly (old data), only displaying the billed or due amount, downtime for maintenance, and data errors. • Tax Rolls (Excel file, PDF scan, Paper Reports): Agencies of all sizes can offer some form of tax roll. These vary from Excel files to scans of paper reports or, in some instances, physical paper reports that must be mailed to you. ◦ Benefits of tax rolls include being able to easily search the entire agency’s database on one screen, easy copy/pasting of data from the tax roll to another database, custom sorting, and the fact that most employees are familiar with using Microsoft Excel. ◦ Cons of tax rolls are that they can sometimes cost thousands of dollars for a single tax roll, may come unformatted, have large file sizes, don’t contain all the data needed, or are out of date. • Fax, Email, or Phone: More common amongst smaller taxing agencies, banks may have to request property tax data via fax, email, or a phone call and then receive the results via that same method. ◦ Benefits of these methods are limited. Email is typically the best of these options as there is a digital record of the information and it can be copied/pasted from the email into a database. ◦ Cons of fax/email/phone are that the data can contain mistakes by the person at the agency providing the information. When it comes to phone calls, both the financial institution employee and the tax agency employee must be accurate in communicating and recording the data they’re looking for. These methods also require connecting with the right person at the agency, which can be especially difficult when an agency has odd office hours. • In-person (becoming increasingly rare): Luckily, there are only a handful of these agencies left in the country. There are really no pros to this approach, and it is recommended that banks find other means of getting tax data whenever possible. Regardless of which method a bank uses to get the data, the timing of when that data will become available can be tricky. In some cases, tax amounts may not be made available until as short as 2–3 weeks before the due date. Once the data is made available, agencies can and do make mistakes, resulting in adjustments to tax amounts well after they’ve been “certified.” When this happens, institutions will need to reach back out to the tax agency to gather updated amounts and communicate this to their borrowers. Lastly, gathering the tax data needed to make escrow tax payments includes one final hurdle: the human element. Smaller tax agencies often use local collectors. These individuals are sometimes collecting taxes out of their homes, many times with limited or no technological systems to support the data collection process. In addition, in some March • April 2023 21
cases, the collector may only be open for a couple of hours per week. Making Payments Now that the bank has learned about the due dates, discount dates, installment information for all the agencies where they have parcels, and gathered the relevant tax information, it’s time to make the tax payments to each agency. Payment collection can be one of the more difficult aspects of escrow tax processing. Texas, for example, has multiple districts that may or may not collect their own portion of property taxes, often requiring the financial institution to go to multiple departments to get the entire tax amount owed. Special districts include central appraisal districts, drainage districts, municipal utility districts, etc. Sometimes the county will collect for all entities, sometimes the Central Appraisal District collects for all entities, and in some instances the County and the CAD split the collection, meaning the financial institution needs to cut separate checks to each. When the financial institution goes to make the payment(s) to the taxing agency, there will be different options for how to pay based on the discretion of the agency. Some of the common methods include: • Excel list of all parcels to be paid along with individual checks for each property • Excel list of all parcels to be paid along with one check that covers all properties • Electronic submission of payments via an intermediary such as GovTech or Autoagent • Submission of property tax bills with a check for each individual property Tax Bills, Rules & Fees Another area of complexity is taxing agency guidelines around tax bill rules and fees. These also vary from region to region, but there are some common themes financial institutions will encounter. Duplicate bill fees are common throughout the country. These occur in agencies where the tax bill must be submitted along with payment. Tax offices can charge high duplicate bill fees that can reach as high as $25 per tax bill. When requesting tax bills, it is possible to encounter tax offices that will outright refuse to provide duplicate tax bills to any third party — including the financial institution that holds the mortgage. In these cases, the property owner, and only the property owner, will receive the tax bill information. Banks must coordinate with their borrowers to get the tax bill to remit payment to the taxing agency. Fees aren’t just limited to duplicate tax bills. Other common fees include per-parcel payment fees, wire fees, pay file fees, etc. Whether or not an institution will have to pay these fees depends on the agency and the method of payment. Conclusion The complexities of escrow tax processing are immense, especially when you have mortgage portfolios that cross state lines. The key to making timely and accurate payments while keeping both the borrowers and taxing agencies happy is research. Learning the nuances in each area a bank has parcels and keeping a detailed record of those nuances year-over-year will help ensure that property tax season goes smoothly for any financial institution, and that costs and penalties are kept to a minimum. An institution’s portfolio size and how far it stretches geographically will inform how much of an undertaking this will be, and how much staff will be needed. If all of this seems like a bit too much to manage, there are third-party escrow tax servicing vendors that can take this off a bank’s plate. Finding a vendor to outsource escrow tax processes will decrease workload, reduce missed payments, and streamline the payment and refund process so staff can focus on other key tasks while ensuring the mortgage portfolio is up to date. Info-Pro takes the complex and makes it easy. We collect and integrate data from the 26,000+ property tax authorities nationwide into a user-friendly software platform, enabling financial institutions to easily identify property tax delinquencies and pay escrow taxes. www.coloradobankers.org 22
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