OVER A CENTURY: BUILDING BETTER BANKS — Helping Coloradans Realize Dreams July/August A MESSAGE FROM CBA CHAIRMAN KEVIN ERICKSON GROWING OUR COLLECTIVE VOICE
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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 12 14 4 CHAIRMAN’S MESSAGE Growing Our Collective Voice Kevin Erickson, Market President, Independent Financial; Board Chair, Colorado Bankers Association 5 Take a Longer View of Your Critical Vendor Contracts By Ben Mrva, Chief Revenue Officer, SRM 6 Safeguarding New Banking Products From Fraud By Terri Luttrell, CAMSAudit, CFCS, Abrigo 8 Data Analytics A Foundation of Growth for Community Banks By Keith Gruebele, EVP, Institutional Relationships, BHG 10 CBA Centerpoint Going Beyond the Desk To Hear the Stories of Colorado Bankers 12 When Is a Card a Card? By Roger Morris Jr., JD, CIPP, Associate General Counsel, Compliance Alliance 14 Community Reinvestment Act and Section 1071 Adapting To Change in 2024 By Brad Birkholz and Troy Snyder, Plante Moran 16 Ask the IRA Expert 529 Plan-to-Roth IRA Rollovers By Mike Rahn, CISP, Ascensus 18 WASHINGTON UPDATE The ‘Other’ CRA A Lesser-Known Tool in the Policy Toolbox By Rob Nichols, President and CEO, American Bankers Association 20 Upcoming CBA Events 21 The Power of Blogging Enhancing the Community Bank Social Media Marketing Strategy By Neal Reynolds, President, BankMarketingCenter.com 2024-2025 Issue 1 3 Colorado Banker
Growing Our Collective Voice Kevin Erickson, Market President, Independent Financial; Board Chair, Colorado Bankers Association CHAIRMAN’S MESSAGE IImagine for a moment we are living in a state where the political environment is such that there is a super-majority of one political party, and that party is not pro-business and certainly not pro-bank. The odds would be stacked against us to modify a bill, let alone kill one. Of course, this scenario isn’t hard to imagine; we’re living it. This is the current political environment in Colorado. It’s safe to say that the Colorado State Capitol is a rough place for a banker’s association to hang out. Thankfully, the banking industry is well represented by the CBA team and lobbyists. Their hard work, late-night hours and solid relationships with policymakers paid off during the most recent legislative session. We successfully battled yet another aggressive credit union front. During this session, a provision allowing credit unions to purchase a bank was strategically buried in an otherwise mundane Sunset Review. CBA’s team and countless bankers fought tirelessly to have that provision excised. In the last hours of the final day of the session, CBA prevailed, and the revised bill passed without any authority granted to credit unions. It was a huge win, but there’s no doubt the battle will resume next year. The fact that we walked away with not just this win, but several, is a huge testament to the importance of getting bankers involved in advocacy, building relationships, and just showing up and being part of the process. The outcomes of pending regulation over the next 12 months will significantly impact our industry, but I am confident that our leadership team at the CBA and our bankers are up to the challenges we may face. As board chair, I see four areas to prioritize this coming year: Financial Stability It is imperative that we keep CBA’s financial resources in a strong position to continue to protect our banks. While CBA is in a solid financial position, it is our obligation as association members to support continued membership growth and revenue-generating initiatives. Without adequate financial resources we cannot expect to be effective in our efforts. Membership Clearly, membership is our biggest revenue source, but it is also our biggest resource for advocacy in both Colorado and Washington, D.C. CBA staff does an excellent job of developing and maintaining relationships with existing member banks and recruiting new ones. Not only is there an ongoing need to increase bank membership, but we also need to engage more individual bankers from our existing membership. The more bankers we have on board, the louder and stronger our collective voice will be. Advocacy and Government Relations The CBA team works hard to maintain positive relationships with our elected officials, but the challenge is ongoing. Jen and Allison are very well known and respected at the state capitol. I would challenge all Colorado bankers to develop relationships with the legislative representatives for each of our districts. It is these relationships that allow the CBA to be able to defend and protect our industry when the odds are stacked against us. Education/Communication CBA will continue to develop and educate the next generation of bankers so they can carry the torch for advocacy of our industry. The education resources available through the CBA are crucial to banks that may not have the same resources internally and to individuals looking to advance their careers. CBA’s programming includes leadership classes, educational webinars and workshops, and lessons in advocacy. CBA is also a vital source of timely information related to legislative and regulatory activity that could impact both our industry and our communities. CBA staff sifts through hundreds of state and federal bills on our behalf each year to assess the direct and indirect effects on the industry should those bills pass. Bankers, as many of you know, protecting our industry takes a huge lift. It takes all of us. I want to encourage each of us to lean in. Who at your bank should join our team of bankers from across Colorado to participate in committees, legislative hearings, congressional visits and CBA’s advocacy program? It’s time to step up. Help us grow our collective voice for the good of our industry. Together, we can do great things. It is my absolute honor to be your chairman and I look forward to working with all of you this coming year. Colorado Banker 4
A Take a Longer View of Your Critical Vendor Contracts By Ben Mrva, Chief Revenue Officer, SRM Any bank executive who’s taken part in critical vendor contract reviews, RFPs, negotiations and renewals knows that the process can be cumbersome (at best). Contracts, by nature, are challenging to get right, and maintaining your fair share of leverage in the relationship is complex. Arcane terms and clauses are added by attorneys and purchasing teams outside the view of those managing the ongoing relationship. People change roles — and companies — over the term of a multi-year contract, too. This leads to a typical scenario where managers responsible for a platform, product or service procured from an outside party often have no connection to the original agreement. Multiply this complexity across dozens of vendor relationships — each of which may have a handful of amendments — and the challenge intensifies. One foundational building block to a successful vendor contract strategy remains as crucial as ever — and, unfortunately, as elusive. Banks need a clear, long-term view of their vendor contract footprint, including expiration dates and key negotiation windows, and an understanding of critical co- and inter-dependencies across vendors and contract types. Taking the Long View A five-year contract can seem like an eternity at the signature date. Not only does that time pass in a flash, but by the final year, it’s too late to take meaningful action. Most FI vendor contracts include an auto-renewal clause, requiring advance notice of a year or more of intent to terminate. Even if a bank plans to continue with the provider, this loss of flexibility compromises any leverage on pricing or other desired adjustments. For those considering a change in providers, one year is often insufficient lead time for an RFP process and implementation — creating an awkward “lame duck” period. For this reason, developing an eightto-ten-year outlook of your vendor commitments is critical. Given the number of moving parts and the increasing reliance on third-party point solutions to maintain a best-in-breed tech stack and customer experience, all financial institutions should onboard this level of planning to allocate resources to address constantly evolving market demands while knowing their pricing is bespoke and consistent with industry benchmarks. Alignment Is Everything An increasing number of solutions and providers also creates a more complex web of co- and inter-dependencies. Rarely can an operational platform be swapped out without impacting the rest of the stack. There is an apparent domino effect, and while APIs and middleware can smooth this process, unforeseen interactions are still known to crop up. The input of a partner with deep expertise across the entire landscape of market solutions, pricing and benchmarking, negotiations, and technology integration is a critical investment to avoid surprises. A knowledgeable partner can also help identify attractive product options that may have emerged since the last contract cycle, all while keeping a keen eye on achieving maximum cost savings on every contract. The Bottom Line Imagine the power of knowing how all your contracts and commitments impact each other an entire decade out — and being able to act faster than ever to keep your operating costs low while still running a contemporary tech stack that meets all expectations. By choosing the right partner and using a proven, packaged solution like SRM’s ContractMAPSM to visualize your contract horizon, you can finally prioritize competing initiatives and deploy resources in the most meaningful way at your bank. The choice is yours. Ben Mrva is the Chief Revenue Officer at SRM, a trusted advisory firm serving financial institutions across North America and Europe. Ben is a seasoned expert in identifying cost savings and strategic growth opportunities for banks across North America. He oversees a national sales force and maintains relationships with banking influencers far and wide. He is a frequent media contributor on the topics of vendor sourcing and contract optimization for financial institutions. To learn more about SRM’s expertise in payments, banking technology and vendor sourcing, contact Colorado Representative Phillip Foster at pfoster@srmcorp.com or (303) 588-1484. 5 Colorado Banker
IIntroducing new banking products in the financial services industry is an exciting venture and what gives financial institutions a competitive advantage. However, with all innovation comes great responsibility, especially when it comes to safeguarding those new products against fraud. It is no secret that a significant increase in fraud is one of the biggest concerns financial institutions face today. Fraud scams and bank fraud schemes resulted in $485.6 billion in losses globally last year, according to Nasdaq’s “2024 Global Financial Crime Report.” For financial institutions, fraud can cost up to $4 in legal fees and recovery for every dollar lost. Banks of all sizes need practical tools to win the fight against fraud, so it should be no surprise that 31% of financial services organizations plan to add new technology systems to fight fraud, compared to 10% in 2021. What’s more, FinCEN included fraud in its eight anti-money laundering/countering the financing of terrorism (AML/CFT) national priorities in 2021, explicitly linking fraud detection and prevention to AML/CFT responsibilities for the first time. Historically, the operational functions of fraud and AML/CFT have remained wholly or partially siloed. However, AML investigators identify many fraudulent transactions and patterns. Especially when introducing new products at your bank or credit union, AML, fraud and cybersecurity teams must collaborate. Financial crime professionals should insist on a “seat at the table” when new banking products are first introduced. Expertise in fraud and anti-money laundering (AML) must be represented in all new product development and marketing conversations. Financial institutions should consider taking the following steps to mitigate fraud risks associated with new banking products, emphasizing the importance of fraud prevention and detection to lower the cost of fraud. Prepare a Comprehensive Risk Assessment Before launching a new financial product or service, conducting a thorough risk assessment is crucial. Identify potential risks, vulnerabilities and AML deficiencies, and assess the likelihood and impact of different fraud scenarios. For example, many banks and credit unions looking for a competitive edge are considering implementing FedNow services. First, they must evaluate whether their institution is prepared to insert AML risk management procedures into the transaction process to match the speed FedNow can offer. This step sets the foundation for effective risk management by understanding the unique challenges associated with the product. Establish Clear Policies and Procedures Once a new banking product is approved, develop thorough policies and procedures to mitigate any risks identified in the risk assessments. Procedures should address both detection and reporting methods. Staff should be well-trained in procedures and understand the importance of fraud detection to the bottom line. Implement Robust Fraud Detection Software Investing in advanced fraud detection software is a cornerstone of fraud mitigation. These systems utilize cutting-edge technology to analyze patterns, anomalies and unusual behavior. By employing state-of-the-art technology, financial institutions can stay one step ahead of fraudsters, ensuring a proactive approach to safeguarding their new products. Adequate staffing is also essential, as fraud alerts must be worked quickly to protect against hard dollar losses while complying with funds availability requirements. Introduce Proactive Risk Management A dynamic risk management strategy ensures that new financial products are shielded from evolving fraud schemes. Safeguarding New Banking Products From Fraud By Terri Luttrell, CAMS-Audit, CFCS, Abrigo Colorado Banker 6
A proactive approach to risk management involves continuous monitoring and adjustment. The Office of the Comptroller of the Currency (OCC) has said examiners will focus this year on identifying and assessing risk management related to products and services (including those with third parties and especially those involving complex technologies like artificial intelligence) to safeguard against operational, compliance, reputation and financial risks. Regularly update risk assessments based on emerging threats and changes in the financial landscape. In addition, strong internal controls are critical to ensuring that fraud mitigation and detection procedures are followed in practice. Quality control processes and internal audits ensure that all steps are followed to avoid those unexpected losses. In a recent statement to the American Bankers Association, Acting Comptroller of the Currency Michael Hsu pointed out that “the responsible approach to innovation is … by progressing in tightly controlled stages where the risks can be identified, measured and managed at each stage. This takes discipline and time. In short, responsible innovation plays the long game.” Integrate Case Management Systems Efficient fraud case management is essential for investigating and resolving incidents. Integrate case management systems that streamline the process of tracking, analyzing, responding to and reporting fraud cases. A well-organized case management system facilitates collaboration among different departments, leading to quicker and more effective resolution. Educate Staff and Clients Human error remains a significant factor in fraud incidents, so it is imperative to stay current on trending fraud scams, particularly those that exploit the elderly, the lonely or the less-than-tech-savvy. Educate both staff and clients about fraud typologies and potential fraud risks. Provide training on recognizing phishing attempts, social engineering schemes, secure password practices and, for staff, the importance of reporting suspicious activities promptly. An informed and vigilant community is a powerful deterrent against fraud. Stepping Up Your Fraud Mitigation Efforts As financial institutions embark on introducing new products, prioritizing fraud mitigation is paramount. By instilling open communication methods and following these steps, financial institutions can fortify their defenses against fraud and protect clients and their bottom line. As illicit actors evolve with more innovative, complex schemes, financial institutions must be one step ahead. It’s never too late to beef up your fraud detection and prevention program and avoid those hard dollar losses. Terri Luttrell is a seasoned AML professional, former director and AML/OFAC officer with over 20 years in the banking industry. She has successfully worked with institutions to develop AML/OFAC programs, optimizing various automated solutions and streamlining processes while ensuring all regulatory requirements are met. As the compliance and engagement director at Abrigo, Terri provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and certified financial crimes specialist. As financial institutions embark on introducing new products, prioritizing fraud mitigation is paramount. 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. 7 Colorado Banker
Data Analytics A FOUNDATION OF GROWTH FOR COMMUNITY BANKS By Keith Gruebele, EVP, Institutional Relationships, BHG EEmbracing data analytics offers community banks a strategic opportunity to increase revenues and further support their communities. By thoroughly reviewing internal customer data, a bank may enhance customer engagement, improve underwriting, boost marketing results and more. However, smaller banks may not have the resources to audit and interpret customer data as thoroughly as large banks. So, this article explores how local banks can still harness internal information without overtaxing their budgets and staff. Data Analysis Complements Personal Relationships There’s no substitute for the personal connections local banks have with their customers. Local roots, homegrown insights and first-name familiarity are tremendous assets. Still, some level of customer data analysis is advisable for small banks to thrive in the modern financial ecosystem. Banks whose boards and CEOs devote the necessary resources can be better positioned for success. Practical Applications of Data Analytics Data analytics can inform decisionmaking, drive product development, deliver a more personalized customer experience and more. The following is an overview of several practical applications. Lending Incorporating data analysis into loan underwriting can supplement or reveal more than FICO and credit scores. Analyzing behaviors that traditional metrics don’t (e.g., bank deposit history, property ownership, rent and utility payments) may provide clues about an applicant’s ability to manage debt. Data analysis can also supplement or replace traditional measures of credit risk. For example, individuals with short credit histories or recent immigrants often have weak credit scores or none at all. According to the CFPB, roughly one in 10 U.S. adults have no credit record at nationwide credit bureaus. In these cases, data analysis is essential to evaluate creditworthiness. Fraud and Cybersecurity Data analytics can help mitigate fraud and cyber intrusions. According to IBM, the average cost of a data breach in 2023 was $4.45 million. Today’s advanced analytics, such as machine learning and artificial intelligence (AI), can scrutinize real-time data and flag irregularities. Banks using these insights can identify questionable transactions and unauthorized system access. Risk Management Integrating market, economic and internal customer data helps detect changes to underlying conditions and develop timely, efficient response strategies. These insights identify risk factors that may adversely affect information security, operations, compliance and other functions. Target Marketing and Customer Segmentation Data analytics offer a holistic view of customers. This offers the potential for more relevant marketing messages, enhanced acquisition strategies and improved engagement, with personalized offers that align with customers’ specific needs. Operational Efficiency Data analysis can lead to faster, more confident loan decisions, automated internal reporting, lower costs and streamlined processes, letting employees provide more personal attention to customers. Technologies and Techniques Tools for data analysis come in many forms. They vary in cost and sophistication and can be conducted internally or by an external third party. The following are several examples. Surveys Simple customer surveys provide immediate feedback about how to better serve customers. “Surveys are an efficient and cost-effective way for banks to identify policies and practices that may need adjustment,” says Meghan Crawford-Hamlin, institutional division president for BHG Financial. Colorado Banker 8
Open Source Software Open source analytics provide universal and often free access to a product’s design and can be a cost-effective way for smaller banks to launch new products and services quickly. Several popular open source software tools offer data analysis applications for banks. AI AI can synthesize large volumes of data faster than most tools. It identifies nonobvious patterns and inconsistencies, making it ideal for loan underwriting and fraud mitigation. A growing number of open source AI platforms are available for smaller banks. Third-Party Specialists Partnering with a specialized third-party provider can be a cost-effective strategy for banks limited by technology and employee capacity constraints. Starting Small and Other Considerations Experts advise smaller banks to begin data analysis slowly. Take small steps and learn from them. Let one success lead to another and use those victories to fund future efforts. Along the way, weigh these considerations: • Consider hiring a data analyst or data scientist to start analyzing data. • Decide whether to keep data analytics in-house or outsource it. • Consider aggregation tools that combine data from different systems for better insights. • Map out current data sources and systems to understand gaps and opportunities. • Consider roles like chief data officer to oversee data strategy and execution. Community banks have a unique opportunity to thrive by combining local expertise and personalized service with data-driven insights and automation. This combination can help level the playing field against larger competitors. BHG has been supporting community banks across the nation since 2001, providing access to the most super prime borrowers in the nation. Many of your peers in Colorado utilize BHG to create portfolio diversification, increase interest income, and as an alternative to traditional investments. Today, banks are buying the highest credit quality loans BHG has ever produced at incredible yields, making it the perfect time to explore the loan program. Contact Keith Gruebele at (954) 263-6399 or kgruebele@bhg-inc.com for more information. Community banks have a unique opportunity to thrive by combining local expertise and personalized service with data-driven insights and automation. 9 Colorado Banker
What makes your bank unique? At FNBO, we pride ourselves on being a Great Big Small Bank. We have been in business for more than 165 years and are family-owned, so we understand the importance of knowing our communities well. This allows us to provide support and services that collectively strengthen the financial health of the businesses and individuals in the communities that surround us. What do you like to do to give back to the community? Personally, I absolutely love the fact that I get to be involved in all of our communities along the front range. Financial education, especially while partnering with local organizations, is one of my favorite ways to give back. Establishing solid fundamentals when it comes to personal finance is essential in building a strong future, and I find great value in any opportunity to play my part in helping others learn and grow. What is the most important thing you’ve learned from a career in banking? Every person we interact with day-to-day comes from a different background, has different life experiences and will ultimately be at a different point in their life or career when we meet them. Not only do we need to know and understand this, we need to be agile in our ability to walk in our customers’ shoes as we help them navigate their financial future. In my opinion, doing this well and being able to help someone along the path to success is one of the most gratifying things anyone can experience. What do you geek out about? Sports, but more specifically college athletics. Studentathletes are required to multi-task at a very high level, and it’s typically at an early life stage. I thoroughly enjoy watching the best coaches around the country shape and develop strong cultures that will have a lasting positive impact on the lives of the individuals they coach. What do you listen to on your morning commute? I think we can all agree that a good pump-up song will always get your day started right. However, most days, I like to listen to podcasts while commuting. I rotate between my favorite finance and sports podcasts depending on the time of year (and how well my favorite teams are doing, of course). Colby Cochran Director, Branch Banking First National Bank of Omaha CBA Centerpoint How did you get started in the banking industry? I started in the banking industry over 24 years ago, as a teller in Loveland, Colorado. I had planned to go to medical school but enjoyed my experience as a teller and decided to major in business, leaving the door open for multiple career paths. After college, I accepted a management trainee position at a community bank in Alaska. As a management trainee, I had the opportunity to work in all areas of the bank, learn from leaders within the organization, and travel throughout the state, which exposed me to lots of unique experiences, interesting loan requests and diverse economies. My grandfather was a banker in Shickley, Nebraska, so I suppose banking is in my blood. What makes your bank unique? The communities we serve have built and shaped our bank over the years. Each market operates with a sense of unique independence, allowing us to best support our customers and team. This community-centric approach makes Bank of Colorado truly special. What topic could you give a 20-minute presentation on without any preparation? House Bill 24-1351. I’m well-versed on this topic after participating in the CBA Bank Advocacy Program and testifying on behalf of the banking industry against the provision within the Division of Banking Sunset Report, allowing a credit union to buy a bank. Unfortunately, you only get a few minutes to testify so I learned to talk fast and with intention. Alternatively, I could speak about edible and medicinal plants if you’re looking for a more universally entertaining topic! What do you listen to on your morning commute? I’m just the DJ. I have three delightful daughters who take charge of the music selection. Our playlist is usually a loud and lively mix including Disney’s Frozen, Imagine Dragons, Queen and Taylor Swift. Tell us something about yourself most people don’t know. Several years ago, I had the opportunity to join an Employer Support of the Guard and Reserves (ESGR) Boss Lift mission and traveled from Fairbanks, Alaska, to Hickam Air Base in Honolulu, Hawaii, with several community leaders. During the flight to Hickam, I helped refuel an in-flight fighter jet while operating the boom of a KC-135. This trip remains a highlight of my career! Christina Kraft Senior Vice President, Fort Lupton Bank of Colorado Colorado Banker 10
How did you get started in the banking industry? I was introduced to the banking industry by my mother-in-law who worked at Wells Fargo and was very involved with the Colorado Bankers Association. I was pondering a career change when I noticed a job posting for an executive assistant at CBA. I applied and was overthe-moon excited when I was offered the position. After four years in that role, I was honored to be promoted to director of education. With a degree in behavior science, and previous work experience as a florist, I never imagined banking was in my future, but I have loved every day of the last eight years at CBA! What is the most rewarding aspect of your job? I came into my current role with minimal exposure to the world of banking and politics, and I love that I now get to expand and share my knowledge on a daily basis. As director of education, I coordinate/facilitate 30+ webinars and 10 in-person events each year including a 10-month bank advocacy training program. It’s a great feeling when participants walk away from my classes and events with new knowledge, new perspectives and new friends. What are you most proud of in your professional life so far? I am most proud of being asked to join the American Bankers Association’s Emerging Leaders Council — a chair-appointed council composed of bank leaders from all 50 states. The council helps shape and implement ABA’s strategy to attract, connect and develop current and next-generation leaders in the banking industry through leadership training, networking, mentoring and advocacy engagement. What do you geek out about? My kid! I have a five-year-old daughter, Ella, who is my whole world! We like to hike, bake, read, make crafts, play kickball and paint our nails together! What do you listen to on your morning commute? I have lots of time to fill on the morning drive! I usually either listen to non-fiction audio books and podcasts or I catch up with phone calls to my family. Lindsay Muniz Director of Education Colorado Bankers Association GOING BEYOND THE DESK TO HEAR THE STORIES OF COLORADO BANKERS How did you get started in the banking industry? I started my journey in the banking industry through the Bankers Development Program at the prestigious Vectra Bank of Colorado. This program stood out to me with its comprehensive curriculum and promising career trajectory. It offered a structured pathway, starting with foundational training as a credit analyst. This initial phase involved intensive classroom sessions supplemented by practical experiences, including case studies, regulatory training, and interactions with senior management. Following this, I transitioned into the Rotational Phase, gaining hands-on exposure across various banking divisions such as Commercial Lending, Real Estate Lending, Private Banking and Community Banking. What do you like to do to give back to the community? Both personally and as a bank representative, I prioritize giving back to the community through volunteering initiatives. I firmly believe in the importance of contributing to the well-being of the communities we serve. Whether participating in local cleanup drives, volunteering at food banks or engaging in financial literacy programs, I am committed to making a positive impact. As a banker, I strive to align the bank’s resources and expertise with community needs, supporting initiatives that foster economic empowerment and social development. What is the most important thing you’ve learned from a career in banking? One of the most profound lessons I’ve gleaned from my career in banking is the significance of trust and integrity in fostering long-term relationships. Banking is inherently built on trust, whether it’s between clients and financial institutions or among colleagues within the organization. I’ve witnessed firsthand how these values strengthen relationships and contribute to sustainable growth and success in the banking industry. What is your favorite movie or book, and why? My favorite movie series is Star Wars. Its timeless narrative, rich mythology and captivating characters have left an indelible mark on me since childhood. The saga’s ability to transport audiences to a galaxy far, far away while addressing universal truths resonates deeply with me. Moreover, its enduring legacy and cultural impact continue to inspire generations of fans worldwide, making it a cherished favorite for me. Raymond Mendoza Credit Analyst, Corporate Commercial Banking, Vectra Bank Colorado 11 Colorado Banker
AA card is either a credit card or a debit card. What about a home equity line of credit (HELOC) access card? Is that a credit card or a debit card? Or something in between? If it’s in between, does Regulation E apply? Regulation Z? It is easy to talk yourself in circles, but let’s make sense of it once and for all. To begin, why is this a conversation worth having in the first place? You may know the answer to this question and think this was a compliance officer’s version of child’s play. A card’s definition as a debit or credit card has worthwhile implications. It dictates what disclosures are necessary. In the vast alphabet soup of regulations, each has its onerous disclosure requirements, and Regulations E and Z (the two that apply in these areas) have plenty of requirements. Furthermore, it dictates how errors are resolved. Regulation E’s error dispute rules are highly consumer-favorable; not that Regulation Z’s aren’t, but Regulation E has a more formal investigation requirement. These formalities would apply if Regulation E applied to the HELOC’s access card transaction. We could go on and on about what each regulation independently entails, but let’s get back to cards. Debit and credit cards look similar, but there are fundamental differences. A debit card takes funds out of your bank account, while a credit card is linked to a credit line that you pay back later. A HELOC access card blurs the lines. With a HELOC, you may have an account with funds that seem identical to any other asset account. You have to pay those funds back at a later date. So, what exactly is a HELOC access card? To decipher this mystery, let’s look at the regulation. For the regulatory definition of a credit card, we turn to Regulation Z: “(i) Credit card means any card, plate, or other single credit device that may be used occasionally to obtain credit.” This includes HELOC access cards, which may be used to obtain credit from a line of credit. Regulation commentary further supports this point. “i. Examples of credit cards include ... A card that guarantees checks or similar instruments, if the asset account is also tied to an overdraft line or if the instrument directly accesses a line of credit.” When Is a Card a Card? By Roger Morris Jr., JD, CIPP, Associate General Counsel, Compliance Alliance Colorado Banker 12
So, an access card is a credit card under Regulation Z. Regulation Z applies. But this still leaves the question of whether Regulation E also applies. Regulation E applies to “access devices.” These are cards, codes or other means of access to a consumer’s account that may be used to initiate electronic funds transfers. A HELOC access card does initiate electronic funds transfers from a consumer’s HELOC account, so they are seemingly an access device. However, “account” is a specific term in the context of Regulation E and a crucial part of the definition of an access device. “’Account’ means a demand deposit (checking), savings, or other consumer asset account (other than an occasional or incidental credit balance in a credit plan) held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes.” A HELOC can undoubtedly be for personal, family or household purposes, but a loan account is not an asset account. A checking account is an asset account because you wholly own the funds in the account. They add to your net worth. A loan account is a liability. You will have to pay those funds back later, so the withdrawal of those funds subtracts from your net worth. We could call loans a liability account, but that makes them less marketable. So, generally, a HELOC is not an account under Regulation E, even if it can make electronic transfers because it’s a loan account and not an asset account. So, this cannot meet the Regulation E definition of a “debit card” or “access device,” and, in turn, Regulation E is not applicable. An access device initiates transfers from an “account,” and a HELOC is not an “account” for Regulation E purposes. Therefore, the bank wouldn’t be required to give Regulation E disclosures with a HELOC access device, but that doesn’t mean it could not be done. If you’re looking to provide customers with the rights disclosed in Regulation E, you could, but it would be an internal policy decision. It is also worth noting that this is the typical way HELOCs are set up, but there can be other structures that may change the analysis above. Roger Morris serves Compliance Alliance as an Associate General Counsel. Roger brings a combination of unique experiences to C/A that he uses to provide guidance on a wide variety of regulatory and compliance issues. Learn how budgeting for top-tier support and guidance can save your program money. That’s Bankers Alliance. info@bankersalliance.org or (833) 683-0701. Holding Company of Compliance Alliance and Review Alliance Your time is valuable. You deserve an audit firm that provides your team with timely reviews and final reports within 45 days. C M Y CM MY CY CMY K 13 Colorado Banker
T Community Reinvestment Act and Section 1071 ADAPTING TO CHANGE IN 2024 By Brad Birkholz and Troy Snyder, Plante Moran This year brought two important regulatory developments: small business lending data collection requirements under Section 1071 and Community Reinvestment Act (CRA) reform. While these regulatory updates were announced in 2023, the steps required to comply will keep financial institutions busy in 2024 and beyond. As you continue your institution’s compliance action planning, we share key considerations and suggested next steps for staying current with CRA and Sec. 1071 developments. Small Business Data Collection and Sec. 1071 Implementation In October 2023, the U.S. District Court for the Southern District of Texas issued a nationwide injunction prohibiting the Consumer Financial Protection Bureau from implementing and enforcing its small business lending data collection rule. This means financial institutions aren’t required to comply with the rule until further notice. So, what happens next? Financial institutions, regulators and other interested parties will be required to wait until the U.S. Supreme Court reviews the legal arguments surrounding the injunction and makes a ruling. While the case was brought before the Court in October 2023, justices are expected to issue a ruling this summer. Navigating this uncertainty is frustrating for many compliance professionals, but steps should still be taken now to continue to prepare for 1071 implementation. Prudent planning actions include: • Collecting the loan information necessary to understand when your institution will be required to start reporting data. • Ensuring all required parties remain informed about 1071 implementation requirements and additional regulatory developments surrounding the rule. Such parties include but aren’t limited to the board of directors, risk management personnel, IT personnel and key small business lending personnel. • Drafting a 1071 implementation plan. Once your compliance team drafts a plan, it should be reviewed by the key stakeholders required for its implementation. While focusing on commercial loan officers or other stakeholders in the lending function is a natural place to start, don’t underestimate the amount of support you’ll need from your IT function. • Developing a 1071 reporting field summary, indicating where each reporting field can be located within the institution. Data location for each reporting field will vary by institution and will depend in part on how automated (or not) lending processes are. This document will also help identify information that isn’t being captured in current processes. • Determining how data will be obtained going forward. Once you determine what data points are captured in your current lending processes, you’ll need to plan for ongoing data collection. Make sure to include line of business and IT personnel in these efforts to ensure plans are reasonable and actionable. This planning can help drive the strategy you’ll need to implement to ensure everyone involved in small business data collection receives sufficient training prior to your institution’s required collection date. While it could be tempting to put 1071 implementation plans on hold, moving forward with your planning in the meantime helps ensure your institution will be ready to comply once the regulatory dust settles later in 2024. CRA Reform In October 2023, regulators released the final rule designed to modernize the CRA. The final rule took effect on April 1, 2024, with staggered compliance dates of Jan. 1, 2026, and Jan. 1, 2027. The updates to the CRA rules are complex and far-reaching, impacting everything from the number and type of performance tests institutions will be subject to in future CRA exams to asset size thresholds for the rule. Much like your institution’s small business data collection efforts, the key to complying with the reformed CRA regulation is to understand the timeline for compliance and make a comprehensive implementation plan. Key considerations should include: • Whether your institution will be considered small, intermediate or large under the revised asset-size Colorado Banker 14
thresholds in the revised rule. It’s possible for some institutions to change categories between now and Jan. 1, 2026, so it will be important to understand your institution’s growth trajectory. • Once you understand the asset size category your institution will fall into, you’ll want to have the regulatory exam guides available to understand what required tests your institution will be subject to in future regulatory exams and what tests would be optional for compliance. • Once you understand the tests that will apply, you’ll need to understand what geographies your institution will be evaluated on. This is especially important to identify early, since there could be geographies you’re not evaluating for CRA compliance today that you will need to evaluate in the future to understand your institution’s CRA performance. • Once you understand the new tests and geographies, you’ll use the processes you’re likely familiar with today to move forward: Evaluate how your institution is currently performing and use that self-assessment to formulate future action plans for improved CRA compliance. Whether working through Sec. 1071 small business data collection or understanding the revised CRA regulation, plan ahead; the changes are complex. Make sure you engage experts you trust to provide the support and expertise you need to successfully comply. Plante Moran is one of the nation’s largest audit, tax, consulting and wealth management firms. Company founders called Plante Moran a “grand experiment.” And while a lot has changed in 100 years, the culture and values have not. Learn more by visiting www.plantemoran.com. Reliable expertise. We have extensive experience and technical expertise in the financial institutions industry. Our professionals are prepared to help you address any challenge and leverage every opportunity. Ryan Abdoo, partner ryan.abdoo@plantemoran.com Scott Petree, partner scott.petree@plantemoran.com plantemoran.com 15 Colorado Banker
A CBA endorsed provider, Ascensus is the industry’s leading administrator of tax-favored plans for healthcare, retirement and college savings plans for over 6 million Americans. Founded in 1975, Ascensus currently provides products and solutions for HSAs, IRAs and Employer Retirement Plans to more than 7,200 financial institutions nationwide. Our nearly 40 years of experience with retirement plans and our expertise with Health Savings Accounts since their inception nearly a decade ago is unparalleled in the industry. Ask the IRA Expert 529 PLAN-TO-ROTH IRA ROLLOVERS By Mike Rahn, CISP, Ascensus I’ve heard that there’s a new option for savings in 529 plans to be rolled over to an IRA. Is this true? The SECURE Act of 2022 — also known as SECURE 2.0 — made many changes to tax-advantaged savings arrangements. Not all SECURE 2.0 provisions took effect immediately. One new provision that takes effect in 2024 is the option for certain assets in 529 higher education savings plans to be rolled over to Roth IRAs. Does this option apply to all assets in a 529 plan? Unfortunately, no. Only $35,000 — total, lifetime — may be rolled over by a 529 plan designated beneficiary to his own Roth IRA. Furthermore, only an amount up to the annual IRA contribution limit ($7,000 for 2024) may be rolled over in any one year. Finally, the 529 plan designated beneficiary executing such a rollover must have earned income equal to or greater than the amount to be rolled over. It does not appear that the income restrictions that generally apply for Roth IRA contribution eligibility — the so-called phase-out ranges — apply. Are there other restrictions besides this lifetime limit? In addition to these limitations, the account must have been in existence for at least 15 years, and the amount to be rolled over must have been in the account for five years. Does such a 529-to-Roth IRA rollover have any impact on my ability to make regular IRA contributions? Unfortunately, yes. Any annual Traditional or Roth contributions made for the year reduces on a dollar-for-dollar basis the amount eligible for a 529-to-Roth IRA rollover for that year. Or vice versa. Coverdell Education Savings Accounts can be rolled over to 529 plans. Can they, too, be rolled over to a Roth IRA? No. SECURE 2.0 does not allow for Coverdell ESA-to-Roth IRA rollovers. However, Coverdell ESA assets that have been rolled over to a 529 plan could be rolled to a Roth IRA, if the rule requiring assets to be in the 529 account for five years has been met. Has there been any reporting or other IRS guidance on these transactions since the enactment of SECURE 2.0? Limited reporting guidance has been provided in the IRS’s detailed Instructions for Forms 1099-R and 5498. 529-toRoth IRA rollover amounts are to be entered in Box 10 of Form 5498, IRA Contribution Information. Box 10 is normally used to report Roth IRA contributions, not rollovers. This seems consistent with the fact that such rollovers would offset regular IRA contributions for the year. Additional guidance may be forthcoming. Colorado Banker 16
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