OVER A CENTURY: BUILDING BETTER BANKS — Helping Coloradans Realize Dreams March/April THE TRUE COST OF FRAUD
contents ©2024 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 CFO & Director of Membership Lindsay Muniz Director of Education Patricia Wells Director of Communications Megan Carruth Executive Assistant Margie Mellenbruch Bookkeeper* 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 BUILDING BETTER BANKS — Helping Coloradans Realize Dreams 14 18 4 MESSAGE FROM THE CEO The Cumulative Cost of Regulation By Jenifer Waller, President & CEO, Colorado Bankers Association 5 “An ll Wind That Blows No Good:” Economic Headwinds and Asset and Liability Management By Elizabeth Madlem, Vice President of Compliance Operations and Deputy General Counsel, Compliance Alliance 7 WASHINGTON UPDATE The Real Losers in the Reg II Fight By Rob Nichols, President and CEO, American Bankers Association 8 Transportation Industry By Glenda Wegener, Equipment Appraisal Liaison, Purple Wave Auction 9 SAFER Banking for Colorado Cannabis Businesses What Banks Need to Know By Mark Bell, Partner, Stinson LLP 12 CBA Centerpoint Going Beyond the Desk To Hear the Stories of Colorado Bankers 14 Gambling Addiction. Is It a Problem for Banks? You Bet It Is. By Neal Reynolds, President, BankMarketingCenter.com 16 More SECURE 2.0 Provisions Take Effect in 2024 By Mike Rahn, CISP, ASCENSUS 18 The True Cost of Fraud By Terri Luttrell, Compliance & Engagement Director, Abrigo 20 Community and Talent Engagement By Jennie Brady, Spry 22 Effective Communication Begins With Speaking the Same Language By Karen Brown, CEO, Exponential Results 2023-2024 Issue 5 3 Colorado Banker
B The Cumulative Cost of Regulation Between regulatory agencies and legislative bodies whose aim is to mitigate risks, thousands of pages of rules are issued each year, often resulting in increased costs associated with compliance, which affects operational decisions from hiring and compensation to capital investments. Regulatory compliance also carries a high societal price tag. Over the last six months, regulatory bodies like the Federal Reserve and the Consumer Financial Protection Bureau have introduced a number of new regulations that impact nearly every facet of the banking industry. Regulations carry the weight of law as they’re established with authority delegated by statutes and entail penalties for non-compliance. From slashing debit interchange revenue by more than a third to reclassifying overdraft services as “credit” subject to the Truth in Lending Act and Regulation Z, these regulations ultimately have far-reaching consequences on the availability of low-cost, full-service deposit accounts, which are meant to enhance financial inclusivity. The Thomson Reuters 2023 Cost of Compliance Report clearly shows that the cost of compliance and risk mitigation over the past eight years has significantly impacted financial institutions. With growing workloads, made worse by the massive array of subject areas that compliance officers must understand, and the rising costs and challenges in hiring qualified compliance personnel, labor costs for financial institutions are skyrocketing. To read the full Cost of Compliance Report, scan the QR code.* The lack of coordination between the Federal Reserve, CFPB and other regulators in imposing strict controls without consideration of potential cumulative consequences could drive consumers towards unregulated nonbank entities, thereby exposing them to heightened risks. For example, requiring too much data collection might make a borrower choose a less regulated entity that doesn’t require as much information. Regulators’ limited viewpoint overlooks the interconnectedness of regulations and how they collectively impact both service providers, like banks, and consumers. A survey conducted by LexisNexis Risk Solutions found that costs have risen for 99% of financial institutions in part due to greater regulatory burden and reporting expectations. 79% of organizations reported increased technology costs related to compliance. Overall, compliance costs have increased by more than 60% compared to pre-financial crisis levels. Banks of all sizes are trying to find their new equilibrium in terms of cost, operations, capital and diversification. For policymakers to establish a regulatory framework that fosters a resilient, equitable and flourishing financial ecosystem, they must conduct a thorough assessment of the combined effects of regulations. CBA will continue to educate and call out policymakers whose agendas negatively impact not just the banking industry but Colorado’s economic well-being. MESSAGE FROM THE CEO By Jenifer Waller, President & CEO, Colorado Bankers Association *https://legal.thomsonreuters.com/ en/insights/reports/cost-ofcompliance-2023/form Colorado Banker 4
F “An Ill Wind That Blows No Good:” ECONOMIC HEADWINDS AND ASSET AND LIABILITY MANAGEMENT By Elizabeth Madlem, Vice President of Compliance Operations and Deputy General Counsel, Compliance Alliance Financial institutions are facing headwinds on account of burgeoning non-performing assets, corporate malfeasance, a slowdown in the economy and a mismatch between the maturity profile of assets and liabilities. Severe liquidity strains caused the failure of Silicon Valley Bank, Signature Bank and First Republic Bank. Yet despite weaker economic conditions, sharply higher interest rates, high inflation, financial market stress and concerns over a potential recession, the banking industry demonstrated resilience. How? Asset and Liability Management (ALM) is a common phrase thrown around a board room when in discussions about the viability and future of a bank. It is the practice of mitigating financial risks resulting from a mismatch of assets and liabilities, a combination of risk management and financial planning. Not only is it vital for the sustainability and longevity of financial institutions within the financial landscape, but it solidifies the important roles that banks play in maintaining the stability and growth of economies. Liquidity risk has become an increasingly important parameter for the assessment of a financial institution. But with a new age of depositor behavior and the evolution of regulations, achieving a dynamic, integrated ALM program is challenging for banks of all sizes. Low interest rates lasted years, resulting in complacency among financial institutions regarding deposit balance behavior. Then, during the past two rising rate cycles, deposit balances grew, coupled with an unusual systemic deposit inflow from 2020-2021 as a result of COVID-19 pandemic-related government fiscal stimulus. But those early 2023 bank failures proved that depository behavior is changing. One of the more important lessons surrounded concentration risk. Prior, deposits were considered one of the safest products in the liability structure of a bank. But, as the industry quickly learned, some types of depositors are more sensitive than others. Large concentrations of a particular type of client create a higher risk of deposit flight, as was the case with SVB. As a result, banks are needing to diversify their funding basis. The ALM function covers a prudential component and an optimization role within the limits of compliance. Prudential meaning the management of all possible risks and rules and regulations, with optimization covering the management of funding costs, generating results on balance sheet position. But the industry is riddled with change: business cycles becoming aggressive, global ecosystems and third-party risks becoming more complex, regulations rapidly changing, more stringent compliance enforcement — financial institutions are going to be forced to adopt an agile ALM framework with a broader perspective scoping out broad objectives of the bank’s asset/liability portfolio, as dictated by the Board in order to address new situations where a policy does not yet exist. With the adverse interest rate environments, it has been found that most ALM systems and processes are not providing accurate and explainable outcomes scaled to meet transaction processing requirements. They lack flexibility to support interest rate risk reporting, scenario modeling requirements and “what if” analysis and are unable to scale to account for a bank’s contract and account volume of deposits and loans. There exists a lack of transparency in the underlying calculation logic, resulting in unexplainable and independently unverified data. It is important for banks to assess the three pillars within an ALM program to include: ALM Information Systems, ALM Organization and ALM Processes. These pillars address the four key components examiners test on: board and senior management oversight policies; procedures and risk limits; management information systems; and internal controls and audit. 5 Colorado Banker
“Over my 16-year tenure with Bankers’ Bank of the West, every minute of our work has been dedicated to bringing solid expertise, services, and products to ensure community banks sustain a competitive edge. We’ve certainly grown strong as partners, looking out for each other—and we look forward to continuing that tradition.” Bankers’ Bank of the West LOAN PARTICIPATIONS|MERCHANT SERVICES|ATM DEBIT|WIRES bbwest.com | 800-873-4722 www.bbwest.com President and CEO Bill Mitchell We Champion Community Banking Member FDIC ALM Information Systems addresses Management Information Systems and information availability, accuracy, adequacy and expediency. Information is the key to ALM strength. ALM organization requires a strong commitment from the board and senior management to integrate basic operations and strategic decision making within risk management. The ALCO decision-making unit monitors market risk levels compared to boardset risk limits, articulates the current interest rate view and view on the future direction of interest rate movements to strategize for future business opportunities, and reviews the results of and progress in implementation of the decisions made. Lastly, the ALM process encompasses a scope of liquidity risk management, management of market risks, trading risk management, funding and capital planning, and profit-planning and growth projection. While the above is not all-encompassing, it does assist financial institutions in knowing that their ALM foundation is robust and agile to respond to evolving needs, and that it is modeling the balance sheet, projecting net interest income and economic value of equity, all while performing scenario analysis and stress testing to assess the impact of key performance indicators. This means also hiring a quality ALM professional who understands the need to replicate the portfolio from a sensitivity point of view when modeling a balance sheet or replicating cash flow, including complex structured products and embedded optionality. It requires accuracy and reliability to demonstrate what is happening right now within a portfolio. As stress testing and scenario analysis demands continue, banks need to be able to respond consistently to multiple scenarios via their credit stress models. It should account for evolving requirements, meaning the bank should be able to run a scenario analysis, including stress testing non-interestbearing checking accounts if there is a move to a higher interest rate. Financial institutions need to recognize that change is necessary for how they tackle managing liquidity and interest rate risks. ALM and liquidity are two essential parts of the bank’s overall model risk management structure. In addition, ensure the board has at least one director with a solid understanding of balance-sheet management concepts; be proactive in identifying risks and updating policies and procedures before implementing new products or activities; and reevaluate and communicate guidance and risk tolerances to bank personnel. With the economic landscape, particularly that of community banks changing significantly, it directly correlates to a heightened need for attention to ALM risk management strategies and processes. Elizabeth is the Vice President of Compliance Operations and Deputy General Counsel at Compliance Alliance. As the Vice President of Compliance Operations, Elizabeth oversees C/A’s Products and Services and plays an important part in all operational areas of C/A. Colorado Banker 6
I WASHINGTON UPDATE By Rob Nichols, President and CEO, American Bankers Association The Real Losers in the Reg II Fight In 2010, the Durbin Amendment was dropped into Dodd-Frank in the dead of night, and without so much as a hearing, the government imposed restrictions and price controls on debit cards and connected checking accounts. Bankers warned that mega-retailers would not pass on any savings at the checkout and that bank customers would ultimately foot the bill in lost rewards. Both predictions have proven true, but for reasons clear only to the Federal Reserve, the government is poised to double down on this misguided policy with another 30% cut in debit interchange followed by an automatic biannual adjustment. This “one-way ratchet” will continue to hack away at debit programs every two years based on data and a formula of the Fed’s choosing without public comment. The Fed is proposing to slash the interchange rate cap from 21 cents to around 14.4 cents — and recent research estimates that this move could reduce interchange revenue for banks by $3 billion annually. That’s essentially the equivalent of the government reaching into banks’ pockets, taking money allocated to ensuring affordable, seamless, secure banking products and services, and handing it over to the very largest retailers. Retailers will claim that they intend to pass those savings on to consumers. But as we’ve seen in the 13 years since the original Durbin price caps took effect, those promises ring hollow. That means that the real losers in this fight will be American consumers. Not only will consumers not gain the advantage of lower prices in stores, but the Fed’s proposed changes to Regulation II will fundamentally affect the economics of what banks do — and that, in turn, affects the products and services they are able to offer their customers and communities. Banks use interchange revenue to fund free or low-cost checking accounts and other services that consumers value. Prior to the enactment of the Durbin amendment, for example, many banks offered debit card rewards programs — but those programs were eliminated when the revenue streams funding them dried up due to government price controls. These new proposed cuts to interchange revenue will have an even more dire consequence: They will undermine banks’ efforts to foster financial inclusion by providing access to the free and low-cost transaction accounts that help unbanked Americans get their foot in the door — a first but necessary step to true inclusion. Our colleagues at the CFE Fund, which oversees the Bank On initiative that ABA has proudly championed, recently wrote to the Fed to emphasize what makes the national account standards work: They were designed to address the needs of low- and moderate-income consumers (bill pay, debit card access, ATM access). They were designed to knock down the barriers that keep so many consumers outside the banking system (minimum balance, credit checks, overdraft fees). And, importantly, they were designed to be economically sustainable for banks offering the accounts. Interchange fees play an important role in that sustainability equation. If banks do not have the revenue streams to support these and other low-cost accounts, they have two options: Pass the costs on to consumers or stop offering and/or marketing the product altogether. Bank On accounts are currently offered by a growing list of banks across the country. And to ensure we can continue that momentum, ABA has been working hard on behalf of its members to elevate these concerns to policymakers. But we can’t do it alone — we need your help. With the Fed recently extending the comment deadline to May 12, ABA is calling on all bankers to share how this change in regulation will affect their bank and their customers. You can send a letter easily through ABA’s grassroots platform, SecureAmericanOpportunity.com. Banks put interchange to work funding low-cost banking services that help consumers find their way into the regulated banking system — enabling them to take advantage of deposit insurance protections, build credit and do so many other things that can only happen with a banking relationship. If the Fed’s Reg II proposal moves ahead, the very largest retailers will pocket that surplus to pad their bottom line — and consumers won’t see a penny of it. That’s a tradeoff that leaves our country poorer. Email Rob at nichols@aba.com. 7 Colorado Banker
Some banks that were heavily into trucking loans have been impacted, resulting in a merger or liquidation of the bank. T Transportation Industry The transportation industry has been heavily impacted since 2020, and it seems that some struggles aren’t yet ready to trend positive. High fuel prices, the cost and availability of parts, increasing pressure to switch to electric vehicles (EV), fewer people wanting a career in transportation and lack of resources to train those who do are causing stress on the industry. In 2020, there was an abundance of products that needed to be transported, and the transportation rate was sufficient to provide companies with a good profit. An increase in production and the need to distribute those products kept trucks and trailers in high demand, resulting in transportation price hikes. With fewer trucks and trailers being manufactured, their cost increased significantly. Trucks were being valued at an all-time high but have been normalizing over the past year. Local production of consumer goods eventually caught up with demand and reduced the need to transport supplies. With fewer loads to haul, driver demand lessened. At the peak of transportation demand, there were roughly six loads available to haul for every driver; now, there are only two. Transportation costs dropped because transporters lowered their cost to get a load to haul. With lower rates and an increase in the cost of fuel and repairs, many truck drivers left the transportation industry as they were sitting idle and still needed to make payments on their trucks. With fewer drivers needed, many companies and independent drivers sold their trucks and trailers. This created a surplus of trucks and trailers to be sold, which impacted equipment values. According to ACT’s data, the value of a truck and trailer in 2023 decreased by 28%, with a slight increase of 1% in December of 2023. The year-over-year showed value decreased by 25%. It may be in the best interest of banks to check the values of the trucks and trailers used as collateral on loans. Some banks that were heavily into trucking loans have been impacted, resulting in a merger or liquidation of the bank. We are still seeing a glut of trucks and trailers on the market. Now is probably a good time to get valuations on this type of equipment in your portfolio to determine if you have sufficient collateral on the loan. Purple Wave Auction operates as a full-service seller agent to remarket agricultural, construction and transportation assets. We provide a personalized, turn-key solution in creating liquidity for borrowers and conducting bank-owned equipment sales. To learn more, visit www.purplewave.com. By Glenda Wegener, Equipment Appraisal Liaison, Purple Wave Auction Colorado Banker 8
C SAFER Banking for Colorado Cannabis Businesses WHAT BANKS NEED TO KNOW By Mark Bell, Partner, Stinson LLP Colorado’s billion-dollar cannabis industry could access bank accounts, payroll services, credit card processing and other basic financial services if Congress passes the Secure and Fair Enforcement Regulation (SAFER) Banking Act. The bill, which the Senate banking committee passed with a bipartisan vote in September 2023, represents a significant step forward for both the cannabis industry and the banking and financial services industry. Seven versions of the SAFER Banking Act have passed the House in the last decade, but this is the first time a version of the bill has made it out of a Senate committee. U.S. Sens. John Hickenlooper and Michael Bennet are co‑sponsors of the bill. “Forcing legal cannabis businesses into cash-only operations creates more opportunity for crime,” Hickenlooper said in a statement issued when the SAFER Banking Act passed out of committee. “This vote brings us one step closer to the entire nation following Colorado’s lead.” Colorado cannabis businesses celebrated the 10th anniversary of legal recreation sales earlier this year. Although medical and retail marijuana sales decreased slightly in 2023, according to the Colorado Department of Revenue, Colorado sales still exceeded $1.5 billion in 2023. Thirty-eight states and the District of Columbia now allow the medical use of cannabis products, while 24 states and D.C. also allow some form of recreational use. But marijuana businesses still cannot access basic financial services because cannabis remains a Schedule I drug under the Controlled Substances Act (CSA). Banks risk violating federal money laundering and forfeiture laws by lending to state-legal cannabis businesses. Beyond the obvious benefits for growers, retailers and others directly involved with the cannabis industry, the SAFER Banking Act would help financial institutions navigate the precarious issues related to banking marijuana-related businesses for the first time. Perils Addressed In Denver, cannabis businesses are as common as coffee shops, but the current all-cash model makes them targets for theft, tax evasion and organized crime. The problem is so prevalent that in 2021, the marijuana lobbying group, Americans for Safe Access, put out a “Robbery Preparedness Guide” for cannabis businesses. In 2022, burglary or attempted burglary constituted 96% of all cannabis industry-related offenses in Denver. For banks, the risks are also significant. According to the American Bankers Association, banks do not have to provide services directly to the cannabis industry to run afoul of federal drug laws. There are also attendant risks to providing banking services to vendors, landlords and employees indirectly related to the cannabis industry 9 Colorado Banker
that are often difficult to identify. For example, if a bank provides a commercial loan on a property that is later rented to a cannabis industry-related business, it could put the bank’s federal deposit insurance at risk. In addition to helping protect cannabis businesses, employees and customers by providing them access to banking services, the SAFER Banking Act would extend protections to banks and financial institutions that do business with the state-legal marijuana industry, including: • Provide a safe harbor for depository institutions who provide financial services to legal cannabisrelated businesses by precluding federal banking regulators from inhibiting those services. • Remove any requirement to treat the proceeds of transactions conducted by cannabis-related businesses, which are operating in accordance with Colorado cannabis laws, as proceeds from an unlawful activity for purposes of taxation. • Protect financial institution employees from being held personally liable under federal law or regulation. • Grant power to the Financial Crimes Enforcement Network (FinCEN) to amend the requirements under which depository institutions are required to provide suspicious activity reports. • Add protections for ancillary businesses providing products or services to legitimate cannabisrelated businesses. Importantly, the SAFER Banking Act would not compel any financial institution or insurer to do business with the cannabis industry. Colorado banks could still choose whether to offer financial products or services to marijuana businesses. How To Prepare Financial institutions currently need significant expertise in state marijuana laws and the marijuana business environment to provide services to the cannabis industry. The only guidance comes from the 2013 and 2014 Cole memorandums, Obama-era Department of Justice (DOJ) communiques to U.S. attorneys deprioritizing federal marijuana prohibitions in legal states, and an attendant FinCEN memorandum. Per these memos, banks that do business with the cannabis industry must perform initial and ongoing customer due diligence, file suspicious activity reporters on marijuana businesses, even in legal states, as well as comply with all currency transaction reporting requirements. If the SAFER Banking Act becomes law, this guidance will be updated within one year of enactment “to ensure consistency with the purpose and intent of the Secure And Fair Enforcement Regulation Banking Act, and the amendments made by that Act, and that such guidance ensures that a financial institution, and any director, officer, employee, or agent of a financial institution, continues to report suspicious transactions pursuant to this subsection, as applicable, relating to State-sanctioned marijuana businesses and service providers to preserve the ability of the Financial Crimes Enforcement Network to prevent and combat illicit activity.” Given that marijuana is big business in Colorado, some banks may not wait for new FinCEN guidelines to begin offering financial services to the cannabis industry in order to get in before market saturation. To mitigate risk, these banks will need to train employees in cannabisrelated business operations, the initial FinCEN memo, the two Cole memo enforcement priorities, applicable state law as well as identification of red flags. Access to Bankruptcy Courts Remains in Question Currently, cannabis-related businesses are denied access to important federal legal rights because they are in violation of the CSA, the most significant of these is federal bankruptcy protection. U.S. bankruptcy courts have uniformly denied relief for these enterprises. As part of the DOJ, the U.S. Trustee is compelled to enforce federal law. Accordingly, the U.S. Trustee will generally move to dismiss any bankruptcy case where a debtor is a cannabis-related business. Furthermore, bankruptcy courts cannot confirm reorganization or liquidation plans that include violations of federal criminal law. The DOJ’s approach in the bankruptcy context contrasts with its relative leniency with respect to prosecuting violations of the CSA that otherwise comply with state law. As such, distressed cannabis companies that seek a structured wind-down or Colorado Banker 10
Is your business in the dark? ADVERTISE IN THIS MAGAZINE AND SHINE A LIGHT ON YOUR COMPANY. QR Code: website /ad-space CONTACT US TO LEARN MORE. 801.676.9722 • 855.747.4003 sales@thenewslinkgroup.com reorganization are forced to find state law alternatives, such as receiverships. There has, however, been some expanding openness to providing relief under the bankruptcy code to ancillary businesses in the cannabis industry and to entities that are no longer directly engaged in the industry. In 2023, the United States Bankruptcy Court for the Central District of California held that The Hacienda Company LLC (Hacienda), a “former” cannabis company that terminated its wholesale manufacturing and packaging business prior to filing its Chapter 11 bankruptcy petition, could sell its ownership interests in an acquiring company to pay creditors (See In re The Hacienda Company LLC, Case No. 2:22-bk-15163NB, 674 B.R. 748, 756 (Bankr. C.D. Cal. 2023)). When the U.S. Trustee then filed a second motion to dismiss, this was again denied by the court. “Congress has shown a willingness to avoid punishing a debtor that may have violated law when ‘the real victims would be innocent creditors,’” per the court. Until potentially reversed on appeal, Hacienda may be cited by other bankruptcy courts to permit debtors to use the Bankruptcy Code to liquidate assets of a nonoperating cannabis business. The SAFER Banking Act does not specifically address the bankruptcy code, nor does it change marijuana’s classification under the federal CSA. However, its passage may continue to soften bankruptcy courts’ view on cannabis-related enterprises as legitimate businesses. Only the First Step As both the cannabis industry and the banking and financial services industry closely watch the progress of the SAFER Banking Act in Congress, it’s important to note that this legislation is not comprehensive cannabis reform. It does not make cannabis federally legal, nor does it address taxation issues that have plagued dispensaries and other marijuana businesses. As such, more cautious financial institutions may opt out entirely. Still, institutions deciding against should nevertheless implement rigorous onboarding and ongoing monitoring protocols to avoid inadvertent failure to identify and avoid cannabis-related customers. But should the SAFER Banking Act become law, there will be an increased recognition of the disconnect between federal laws and services that are currently unavailable to legally-operating cannabis businesses. Though the bill still faces significant hurdles in securing enough votes in the Senate, its progress out of committee represents an increased willingness by Congress to consider issues related to state-legal cannabis businesses. In Colorado and other states where cannabis has become a billion-dollar industry, bankers should closely watch the progress of the SAFER Banking Act. Mark Bell is a partner in the Denver office of Stinson LLP. 11 Colorado Banker
How did you get started in the banking industry? My father was a community bank president and CEO. I grew up in the bank but eventually left and didn’t think banking was in my future. I needed a summer job during graduate school and GSBC was hiring assistants for its summer session. On my first day, former GSBC President Tim Koch commented on the small-town Iowa dealership sticker on the back of my car. I shared that its owner is a board member of my dad’s, and it was our practice as a community banking family to support local businesses. The following February, I received an invitation to interview for the director of marketing vacancy. Tim later joked that I passed the “test” the very first day! What is the most rewarding aspect of your job? My dad’s career is an example of what GSBC fosters nationwide. A banking school was part of his development and had our Executive Development Institute for Community Bankers been in existence, he would have fit the bill for it perfectly during his promotion. One of my favorite quotes about our industry is by Glen Jammaron of Alpine Bank, who said, “I started in banking because I needed a job, and I stayed in banking because I care about the community, and I care about the community I’m in.” The values of our industry are exceptional. Giving back isn’t something community bankers do to measure or justify efforts; it is core to who they are. GSBC’s mission is to equip them with knowledge, ideas and relationships to make a lasting impact on their customers and communities. What topic could you give a 20-minute presentation on without any preparation? The impact of the GSBC experience on a banking career. Tell us something about yourself most people don’t know. I am a former NCAA Division I athlete (and have a Kansas State University letter jacket to prove it!) … in women’s equestrian. Josie Bunch Vice President of Strategy & Experience Graduate School of Banking at Colorado CBA Centerpoint How did you get started in the banking industry? When I was 19 years old, my mentor, Haroun Cowans, insisted I get a thorough understanding of finances and the financial industry to aid me throughout my life. I was afforded an opportunity to work for a great institution and learn many aspects of retail banking. Learning the importance of building relationships both internally and with clients continues to be the base of my personal and professional growth. What makes your bank unique? FirstBank puts a large emphasis on Diversity, Equity and Inclusion (DEI). I am a proud member of our internal Greenwood Community, which is a Black/African American employee resource group. This group provides Black/African Americans and those who support the Black community a platform to speak candidly regarding social issues while personally giving me an opportunity to be a confident professional Black man. While networking is an added benefit, the community aspect of this group vividly shows how an institution can have a successful platform to comfortably be Black. What topic could you give a 20-minute presentation on without any preparation? As someone who loves their job, I can thoroughly speak on mortgage rates and mortgage pricing. I understand and can relay how indexes affect mortgage pricing, how a bank’s funding position can be impacted by liquidity and how margins can impact net profitability. I get excited even thinking about it! What do you geek out about? As a child at heart, I love Nintendo. My friends and I have played a game called Super Smash Brothers since its inception and have played consistently for the last 15 years. For those who know, we are all Elite Smashers, as Smash is life. What do you listen to on your morning commute? I enjoy both classical music and the Morning Edition on NPR. Having both of my children exposed to the dialogue and stimulating conversations continues to develop them academically and socially. I alternate between the two stations, 88.1 and 90.1, to be enlightened, engaged and prepared for the upcoming challenges of the day. Deontae Cowans Lock Desk Supervisor FirstBank — Mortgage Consumer Lending Colorado Banker 12
How did you get started in the banking industry? After graduating from the University of Wyoming, I had the opportunity to participate in Farm Credit’s 9th District Management Training program in Wichita, Kansas. During and after the program, I was based in Limon, Colorado, with the Production Credit Association. Shortly after that, I relocated to Wyoming to start my commercial banking career with Rawlins National Bank. What is the most rewarding aspect of your job? Most definitely it is working with the employees of the bank to mentor them and assist in their career development. Equally rewarding is partnering with our great customers to help them find solutions to grow their businesses while providing the highest standard of service. What are you most proud of in your professional life so far? Over the past 15 years, I have had the opportunity to work with a number of troubled banks, and it was very rewarding to put teams together to bring the institutions back to good financial and regulatory health, where they are now strong contributors to both their respective communities and customers. I must say, though, it is more fun working for a strong family-owned bank now! What is your favorite movie or book, and why? Anything written by C.J. Box. He is a Wyoming author, and the majority of his storylines are based in areas where I was born and raised. Tell us something about yourself most people don’t know. I was the youngest private pilot in the nation for one day! I was fortunate to be able to work for a fixed based operator (FBO) during my high school years, which was a great high school job. Plus, I had the opportunity to learn to fly at a very young age. I took my pilot license “check ride” on my birthday and was the youngest pilot in the nation for that day until some other youngster took their check ride the next day on their birthday, dethroning me of my shortlived honor! Sam Summers Community President — Greeley Mountain Valley Bank GOING BEYOND THE DESK TO HEAR THE STORIES OF COLORADO BANKERS How did you get started in the banking industry? My career began just after I had graduated with an associate’s degree in business. I was looking to take a break from school and wanted a position that offered a regular schedule. I got a job in the customer service department with what was then The Bank of Cherry Creek. Thirty-three years later, I am at the same bank, now known as ANB Bank, and have risen through the ranks to become the director of audit. What are you most proud of in your professional life so far? I am most proud of the progress I have made climbing the ladder within this company. Looking back, I can hardly believe how far I have come from my humble beginnings in customer service. I was able to do this with the support of a couple of great mentors as supervisors and ANB Bank’s propensity to promote from within. The bank giving me those opportunities played no small part in my success. ANB Bank has allowed me to forge a career that I draw a great deal of pride from. What do you enjoy about your job? As an auditor, my responsibility is to dig into almost all facets of the bank’s business. As a result, I get to experience, even if only in a limited capacity, almost every element of the bank’s operations. Doing this allows me the opportunity to not only learn a great deal about everything the bank does, but it has allowed me to facilitate longlasting and productive relationships with co-workers from all areas of the bank. What do you geek out about? Walt Disney World is perhaps the thing I geek out about the most. I could talk at length about the experiences that my family and I have had there over the past two decades. Amy Darnell Senior Vice President, Director of Audit ANB Bank Do you know a deserving Colorado bank employee we should feature? Contact Patricia Wells at patricia@ColoradoBankers.org. 13 Colorado Banker
L GAMBLING ADDICTION. IS IT A PROBLEM FOR BANKS? YOU BET IT IS. By Neal Reynolds, President, BankMarketingCenter.com Let’s face it. An addiction to gambling is a problem for banks. American Banker just ran an article about banks and gambling: “Why Gambling is Suddenly a Problem for Banks.” The timing of this article makes perfect sense as there has been a significant increase in the marketing messaging around gambling, especially during NFL games. Beer ads used to dominate during football games. Now, you see ads from brands like DraftKings and FanDuel. There are sites that regularly hawk these brands, such as Covers. Here’s the kind of stuff you’ll find there: “New bettors that register with the online sportsbook today receive $200 in Bonus Bets, plus any cash winnings, after an initial $5 wager. In other words, make an initial $5 qualifying bet and automatically receive an instant boost to your DraftKings account, regardless of the outcome of the wager and without the use of a DraftKings promo code.” Same as the commercials. These brands are spending big money to hook new customers. How big is this problem? Big. The impact of gambling addiction stretches beyond individuals struggling with it. Gambling addiction also has an inherent “social cost,” experts say, a cost that is paid by American taxpayers. The National Council on Problem Gambling (NCPG) estimates that the annual national social cost of problem gambling is $7 billion. These costs include gambling-related criminal justice and healthcare spending as well as job loss and bankruptcy. This number, the association says, is probably far below the actual cost as numbers are hard to track, and there’s not a whole lot of research being done on the subject. Colorado Banker 14
Also, just as frightening is this: “60-80% of highschool students have gambled in the past year, and 14-19% either fit the criteria of having a gambling problem or are showing ‘signs of losing control.’” A February 2023 article in Money called sports gambling a “ticking time bomb” with “addiction at an all-time high and getting worse.” According to a recent 60 Minutes segment, “Sports betting boom fuels concerns over problem gambling,” 50 million men regularly bet on sports and Americans have spent more than a quarter of a TRILLION dollars on sports betting. An addiction therapist warns that AI-powered sports betting has spurred a public health emergency. A contributing factor? Placing bets has become easier than ever. Who needs a bookie when you can place a bet on just about anything, anywhere, anytime, simply by opening an app on your phone? Much like drug or alcohol abuse, a gambling disorder is a diagnosable, chronic mental health disorder. But studies have shown that society has a greater understanding of, and sympathy for, individuals who struggle with drug and alcohol addiction. Why? A gambling problem is viewed as one that’s far easier to control. In reality, problem gambling and substance abuse are very similar: Both come with higher-than-average rates of depression, anxiety and suicidal behavior. According to the National Association of Addiction Professionals, problem gambling has the highest suicide attempt rate (up to 20%) of all addictions. How does gambling impact banks? Research has shown that excessive gambling and debt are strongly connected. Those with clinical problem gambling often have high levels of debt. The severity of their addiction correlates with the amount of debt. Research indicates that gamblers most often finance their debt with credit cards and unsecured loans — financial tools with higher interest rates. Of course, in order to be profitable, banks need that debt to be paid. The worry right now for the banking community is that it won’t be. Our goal is to help bank marketers with topical, compelling marketing communication — developed by banking industry marketing professionals — that helps them build trust, relationships and revenue. To view our marketing creative — both print and digital — and to learn why over 300 financial institutions have chosen us as their bank marketing partner, visit our website at bankmarketingcenter.com. You can also contact me directly by phone at (678) 528-6688 or via email at nreynolds@bankmarketingcenter.com. 15 Colorado Banker
T More SECURE 2.0 Provisions Take Effect in 2024 By Mike Rahn, CISP, ASCENSUS The SECURE Act of 2022 (SECURE 2.0) made many changes to both individual retirement accounts (IRAs) and retirement plans sponsored by employers. But, like comparable past legislation, not all SECURE 2.0 provisions took effect immediately. One reason is the federal tax impact of some provisions. Tax benefits to individuals and businesses may have the effect of reducing federal tax revenue, which lawmakers may choose to “pay for” over time by delaying the effective date of certain provisions. The following are important provisions of SECURE 2.0 that did not take effect immediately but became effective in 2024. IRA Related Provisions IRA Catch-Up Contributions Now Indexed: Contributioneligible Traditional and Roth IRA owners age 50 and older may make an additional “catch-up” contribution. This contribution — which was formerly fixed by statute at $1,000 — will, in future years, be indexed for inflation in $100 increments. 529 Plan-to-Roth IRA Rollovers: 529 plan designated beneficiaries may roll over certain balances in their 529 plans to a Roth IRA. Amounts rolled over are subject to a lifetime limit of $35,000 and, in any year, may not exceed the lesser of a designated beneficiary’s earned income or that year’s Roth IRA contribution limit (further reduced by any other IRA contributions made for that year). The 529 account must have been in effect for 15 or more years, and amounts rolled over must have resided in the account for at least five years. Employer Plan Related Provisions Mid-Year Switch from SIMPLE IRA to Safe Harbor 401(k)/403(b) Plan: Employers that sponsor a SIMPLE IRA plan may now make a mid-year change to a safe harbor 401(k) or 403(b) plan. Under previous rules, such a change could only be effective as of the next calendar year. Existing amounts in these SIMPLE IRA accounts are immediately eligible for rollover to the successor safe harbor plan, regardless of whether the SIMPLE IRA accounts have received contributions for two or more years, so long as the amount that is rolled over is subject to the distribution restrictions of the 401(k) or 403(b) plan, as applicable. Additional SIMPLE Plan Employer Contributions: In addition to the standard employer matching or nonelective contribution, employers may now make additional nonelective contributions for the year. These contributions may not exceed a uniform percentage of up to 10% of annual compensation or — if less — $5,000 per employee. This amount will be indexed for inflation. Larger SIMPLE Plan Employee Contributions: Certain employers may allow increased salary deferral limits for their employees. Eligible employers are those who did not offer a 401(a), 403(a) or 403(b) plan to the same employees during a three-taxable-year period preceding the year that they established the SIMPLE plan. For such employers, SIMPLE plan salary deferral limits for 2024 may be increased by 10% above the cost-of-living-adjusted limits. The increased limit applies to both the base salary deferral limit, and to the catch-up contribution for employees age 50 or older. The increased limits apply automatically to plans of those employers with no more than 25 employees who earned $5,000 or more for the previous year, regardless of whether they have otherwise met plan eligibility requirements. Employers with more than 25 such employees may elect to have the increased Colorado Banker 16
salary deferral limits apply. If they do, the employer must match salary deferrals up to 4% of compensation (not 3%) or make nonelective contributions to all who are eligible — if this is the chosen form of employer contribution — of 3% (not 2%) of compensation. An employer may revoke an election for this higher deferral limit. Employer Matching Contributions for Student Loan Payments: SECURE 2.0 permits employers with a retirement plan that provides matching contributions for employee salary deferrals to make matching contributions based on qualified student loan payments. If a plan requires nondiscrimination testing of salary deferrals (401(k) plans do; 403(b), governmental 457(b) and SIMPLE IRA plans do not), those receiving such matching contributions may be tested separately. Normal plan vesting rules apply to matching contributions that are linked to student loan payments. Involuntary Cash-outs for Terminated Employees: Plan participants who terminate employment may be involuntarily “cashed out” of their former employer’s plan if their plan balance is small and if they do not specify an alternative distribution option. SECURE 2.0 raises the cash-out limit — formerly $5,000 — to $7,000. “Starter” 401(k) and 403(b) Plans: Employers that do not sponsor a retirement plan under which contributions are made, or benefits accrue, may establish one of these plans, whichever their organizational structure allows. Automatic enrollment at a rate of at least 3% of compensation (not to exceed 15%) is required, no employer contributions are permitted and annual deferrals are limited to $6,000 — $7,000 for those age 50 or older; both amounts are indexed for inflation. Pension-linked Emergency Savings Accounts in Employer Plans: Salary deferral-type employer plans — 401(k), 403(b), and governmental 457(b) plans — may permit participants to allocate up to $2,500 of salary deferrals to an accessible account that is not subject to standard distribution criteria, or the 10% early distribution penalty tax. The employer may set a lower contribution limit or not permit the option at all. Retroactive Amending to Increase Employer Contributions: Beginning with 2024 plan years, employers may amend their plans to increase employer contributions — other than matching contributions — as late as the employer’s tax return deadline, including extensions for the taxable year in which the amendment is effective. Permanence of Safe Harbor for Certain Plan Corrections: SECURE 2.0 makes permanent a temporary safe harbor for correction of certain retirement plan operational failures, which include failures in implementing a plan’s auto-enrollment or auto-escalation provisions, failure to follow an affirmative salary deferral election, or failure to allow an eligible employee to make a deferral election. If its conditions are met, the employer need not make a nonelective contribution for the missed deferral opportunity. Spouse Beneficiary Election to be Treated as the Participant: A spouse who is a plan participant’s sole beneficiary and who retains her inherited benefit in an employer plan may elect to be treated as the plan participant for required minimum distribution (RMD) purposes and — if RMDs are required — be subject to calculations using the Uniform Lifetime Table instead of the beneficiary Single Life Expectancy table. Provisions Affecting Both IRAs and Employer Plans Penalty-Free Distributions for Emergency Expenses: Individuals subject to the 10% early distribution penalty tax may take one penalty-free distribution per year for qualifying emergency events. The eligible distribution amount equals the lesser of $1,000 or an amount that equals the individual’s vested benefit (or IRA balance) minus $1,000. So unless the vested account balance or IRA balance exceeds $1,000, no emergency distribution is available. Such amounts may be repaid within three years. No additional distributions may be taken for emergency expenses within the following three calendar years unless the individual repays the original distribution — or makes contributions to an IRA or employer plan in an amount at least equal to the portion of the original distribution that was not repaid. Penalty-Free Distributions for Domestic Abuse: Domestic abuse victims who would otherwise be subject to the 10% early distribution penalty tax may take up to the lesser of $10,000 or 50% of their IRA or vested employer plan benefit penaltyfree. Amounts may be repaid within three years. (This is a new “triggering event” for employer plans in which a distributable event is not otherwise available.) Substantially Equal Periodic Payment Transferability: Individuals who have elected to receive substantially equal periodic payments from an IRA or employer plan in order to be exempt from the 10% early distribution penalty tax may transfer balances between IRAs and employer plans and remain eligible to take penalty-free distributions if the distributions continue on the previously-calculated schedule. Next Steps The IRS and DOL are expected to release additional guidance on multiple SECURE 2.0 provisions throughout the year. Ascensus will continue to follow any new guidance as it is released. Visit www.ascensus.com for the latest developments. 17 Colorado Banker
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