INSIDE Rep. Marlin Stutzman brings Hoosier values to the nation's capitol. Story on page 10. HOOSIER BANKER JULY 2014
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Call Us or Have Your Broker Get in Touch Now! Drew Tomasik 800.558.6206 ext. 144 dtomasik@capstonebenefits.com Steve James 800.558.6206 ext. 112 sjames@capstonebenefits.com www.ibatrust.org How to get more bang for your buck The IBA Group Insurance Trust offers the best value for group insurance needs: State-of-the-art enrollment management tool Compliancedashboard to help you stay up to date with health care plan regulations Wellness program and credit to help employees improve their health and well-being and better manage healthcare costs W
,QGLDQD %DQNHUV $VVRFLDWLRQ 2IÀFHUV 'LUHFWRUV 6WDII ,%$ 2IÀFHUV Chairman ................................................................ 'DYLG : +HHWHU, MutualBank, Muncie FirstVice Chairman .................................... /DUU\ : 0\HUV, First Savings Bank, FSB, Clarksville SecondVice Chairman ........................... 0LFKDHO + +HDG, First Federal Savings Bank, Evansville Immediate Past Chairman ..................... -DPHV & 0DUFXFFLOOL, STAR Financial Bank, Fort Wayne 3UHVLGHQW DQG &KLHI ([HFXWLYH 2IÀFHU .... 6 -RH 'H+DYHQ, Indiana Bankers Association, Indianapolis &RQVWLWXHQW 'LUHFWRUV ICBA State Director ........................................ 'DYLG 0 *HLV, Jackson County Bank, Seymour ABA Membership Council ....... 0LFKDHO . %DXHU, Community Bank Shares of Indiana, New Albany Future Leadership Division President .......... /XFDV :KLWH,The Fountain Trust Company, Covington 1RUWKHDVW 5HJLRQ 'LUHFWRUV -DPHV * +LDWW, First State Bank of Middlebury 0LFKDHO & 0DUKHQNH iAB Financial Bank, Fort Wayne *UHJRU\ 0D[ZHOO, Farmers State Bank, Mentone 1RUWKZHVW 5HJLRQ 'LUHFWRUV $QQHWWH 0 5XVVHOO, Security Federal Savings Bank, Logansport 3DWULFN 'XIIH\, State Bank of Burnettsville .DUHQ , 0LOOHU,The Farmers Bank, Frankfort 6RXWKHDVW 5HJLRQ 'LUHFWRUV 'HQQLV :D\PDQ, State Bank of Medora *HRUJH : )HUULHOO, Bath State Bank $UFKLH 0 %URZQ, MainSource Financial Group, Greensburg 6RXWKZHVW 5HJLRQ 'LUHFWRUV &OD\ : (ZLQJ, German American, Jasper .XUW ' 5RVHQEHUJHU, Our Community Bank, Spencer 0DWWKHZ +RZUH\, North Salem State Bank ,%$ 6WDII 3UHVLGHQW &KLHI ([HFXWLYH 2IÀFHU ........................................................... 6 -RH 'H+DYHQ ExecutiveVice President .............................................................. 3DXO : )UHHPDQ &$( SeniorVice President–Government Relations ........................................ $PEHU 5 9DQ 7LO -' Vice President–Meetings & Events ............................................ &KULVWLQD 0 %HQQHWW &03 Vice President–Government Relations ........................................................... 'D[ 'HQWRQ Vice President–Products & Services ................................................................. 5RG /DVOH\ Vice President–Education & Training ........................................................... /DXULH $ 5HHV Vice President–Communications .................................................................. /DXUD :LOVRQ Events & Products/Services Assistant .............................................................. 6XVDQ &ODUN Education Meeting Coordinator ................................................................. 0DUOHQH :HOOV Education Meeting Coordinator ................................................................ (OL]DEHWK .LOW\ Staff Accountant ....................................................................................... 7LPRWK\ )U\ IT and Facilities Manager ...................................................................... 7UDF\ :DLQVFRWW Administrative Assistant ........................................................................... 0LFKHOOH /RQJ *RYHUQPHQW 5HODWLRQV &RPPXQLFDWLRQV 2IÀFH 0DQDJHU ............................ -RVKXD $ 0\HUV (PDLO DGGUHVVHV )LUVW LQLWLDO RI WKH VWDII PHPEHU·V ÀUVW QDPH SOXV ODVW QDPH H[DPSOH MGRH#LQGLDQDEDQNHUV RUJ 3OHDVH VHQG QHZV UHOHDVHV WR ,%$FRPPXQLFDWLRQV#LQGLDQDEDQNHUV RUJ 0LVVLRQ To advocate for and sustain an environment in which banks can succeed. 9LVLRQ To provide exemplary service to members as the premier state bank trade association in the country. 9DOXHV ,Q IXOÀOOLQJ RXU PLVVLRQ we will: 0DLQWDLQ WKH KLJKHVW HWKLFV LQWHJULW\ DQG respect for others; 6HUYH ZLWK SURIHVVLRQDOLVP innovation and resourcefulness; ,QVWLOO SDVVLRQ SRVLWLYH attitude and enthusiasm; 5HPDLQ PLQGIXO WKDW the success of the IBA LV MXGJHG E\ WKH VXFFHVV of its members. View Hoosier Banker Digital at www.ourdigitalmags.com/ publication/?m=19522&l=1. 3XEOLFDWLRQ 'LVFODLPHU Hoosier Banker articles are published by the IBA Service Corp., a subsidiary of IBA Holding Company Inc., that is a wholly owned subsidiary of the Indiana Bankers Association. All material published in Hoosier Banker and/or on the IBA website is the property of the Indiana Bankers Association.
5 HOOSIER BANKER TABLE OF CONTENTS VOLUME 98 NO. 7 6925 Parkdale Place Indianapolis IN 46254-4673 Phone: 317-387-9380 Fax: 317-387-9374 ZZZ LQGLDQDEDQNHUV RUJ 3XEOLVKHU 6 -RH 'H+DYHQ Editor: Laura Wilson $GYHUWLVLQJ 5RG /DVOH\ 6HQG QHZV UHOHDVHV WR IBAcommunications #LQGLDQDEDQNHUV RUJ Hoosier Banker (ISSN 0018-473X) is published monthly by the IBA Service Corp., a subsidiary of IBA Holding Company Inc., that is a wholly owned subsidiary of the Indiana Bankers Association. The magazine invites news from IBA ǯȱ ¢ȱDZȱęȱȱ the month preceding publication. $GYHUWLVLQJ 5DWHV DYDLODEOH upon request or online at ZZZ LQGLDQDEDQNHUV RUJ. Advertisers should provide HOHFWURQLF 3')V E\ WKH WK RI WKH PRQWK SUHFHGLQJ SXEOLFDWLRQ Hoosier Banker DGYHUWLVLQJ LV available to members and associate members of the Indiana Bankers Association only. 6XEVFULSWLRQV Hoosier Banker subscriptions are provided free of FKDUJH H[FOXVLYHO\ WR PHPEHUV DQG associate members of the Indiana Bankers Association. Public access to Hoosier Banker Digital is available DW ZZZ LQGLDQDEDQNHUV RUJ $662&,$7,21 83'$7( 6 PRESIDENT’S PONDERINGS S. Joe DeHaven, IBA 9 IBA CALENDAR OF EVENTS &29(5 6725< 10 REP. MARLIN STUTZMAN: RISING STAR IN WASHINGTON, D.C. )($785(6 23 IBA PRESENTS SLATE OF NEW OFFICE CANDIDATES FOR 2015 28 OUR TRAIN IS ROLLING Camden R. Fine, ICBA 29 A RIFLE-SHOT APPROACH TO REG RELIEF Frank Keating,ABA 363 6+2:&$6( 14 INFOTEX:AN IT SERVICE PROVIDER THAT ‘KNOWSYOUR PAIN’ Rod Lasley, IBA ',5(&7256 6(1,25 0$1$*(0(17 16 ASSET/LIABILITY MANAGEMENT AND BALANCE SHEET DYNAMICS Jeffrey F. Caughron,The Baker Group 20 ALTA BEST PRACTICE NO. 2 – ESCROW ACCOUNTS: FOLLOW THE MONEY Johnathan Biggs, Investors Title Insurance Company *5 6327/,*+7 24 BRINGING GRASSROOTS TO FULL POTENTIAL Amber R.Van Til, IBA '(3$570(176 15 FINANCIAL LITERACY DIGEST 18 HONORS 19 BANKING ON COMMUNITY 19 ASSOCIATE MEMBERS' CORNER 26 COMPLIANCE CONNECTION Larry C.Tomlin, Krieg DeVault LLP 26 FROM THE BOARD ROOM 31 BANKERS ON THE MOVE 34 ADVERTISERS INDEX 5 HOOSIER BANKER JULY 2014 Congressman Marlin Stutzman represents the Third Congressional District of Indiana in Washington, D.C.
6 HќќѠіђџȱ юћјђџ ѢљѦ 2014 When my children were growing up, I shared with them some thoughts and sayings that I tried to live by. For instance, I told them that ȱ¢ȱ ȱǰȱ¢ȱȱęȱ work that they thoroughly enjoyed. After all, other than sleeping, we spend more time working than doing anything else. I also told them that anyone can identify problems, but the achievers are those who can identify solutions to those problems. What I did not equate this to, but should have, is that leaders are the people who ȱȱȱȱ¢ȱȱęǯ ȱ ȱȱǰȱ ȱȱ Ĵȱȱ ȱȱ I am of the Indiana Bankers Association board of directors for identifying the development of future banking leaders ȱȱȱȱęȱȱȱȱȱȱȱȱ around. Recently I have been participating in meetings across the country where this issue of future leadership ȱȱȱęȱȱȱȱȱȱȱȱ ȱ¢ǯȱ ¢ȱȱȱȱȱȱȱĴȱ ȱĴȱ ȱȱȱȱȱȱȱȱȱȱ business? Consider this: Most bankers who climb through the leadership ranks reach senior levels in their late 30s or early-to-mid 40s. Those who rise to the position of chief ¡ȱĜȱ¢¢ȱȱȱȱȱ¢ȬȬȱ 50s. Of course, there are many exceptions to this generality, ȱȱȱęȱȱȱ¢ȱǯȱ ȱ CEOs experience about 30 to 35 years total in the banking business. So let’s go back 30 to 35 years – to the time period of 1979 to 1984 – and review what may have happened. At that time, our country was in economic turbulence brought on by gasoline shortages, the deregulation of interest rates and, eventually, the savings and loan crisis. Add to the mix the beginnings of bank consolidation as many states, including Indiana, eliminated prohibitions against interstate banking. The result was that banking did not hire many people, particularly management trainees, from about 1980 to 1995. Fast forward to the present. As today’s CEO prepares to retire, the person who should be next in line was never ȱȱȱęȱǷȱ ȱȱȱȱȱȱ the bank. Sometimes the solution is to turn it over to another banker, about 60 years old, and hope that another candidate will be ready when this person wants to retire. Sometimes the solution is to provide a stellar opportunity to someone in their 40s to become a young CEO. None are right, and none are wrong – it depends on the individual organization. The IBA board understands this dynamic. Bankers ASSOCIATION UPDATE PRESIDENT’S PONDERINGS 6 -RH 'H+DYHQ 3UHVLGHQW &KLHI ([HFXWLYH 2IÀFHU ,QGLDQD %DQNHUV $VVRFLDWLRQ throughout the country understand this conundrum. That is why there is much more emphasis placed on leadership development today than at any other time in my career. It is imperative that we all help prepare banking professionals to take over those senior-level positions, ȱȱȱ ȱǯȱ ȱ ȱȱȱȱĴȱ ahead of the curve with the creation over 20 years ago of the Mega Conference and the creation over 25 years ago of the Future Leadership Division (FLD). Recently we have instituted an intense, eight-month Leadership Development Program that has earned impressive reviews. ȱ ȱȱȱȱȱȱĴȱȱ leadership training at the Mega Conference and in our ȱěȱȱȱ¢ǯȱ ȱ¢ȱ ȱ inaugurated an FLD Bridging Bankers, Building Leaders ǰȱȱȱěȱȱȱǯ IBA has a responsibility to help solve this future leadership problem. Banks may still choose to sell, but they should not be forced to do so due to lack of appropriate leadership succession. While we have ratcheted up what we are doing, we know there is more that we could do. If you have any ideas regarding how we can help prepare the next generation of bank leadership, please let me know personally. While IBA ȱęȱȱǰȱ¢ȱȱ ȱ¡ȱǰȱ ȱȱ ǰȱȱ¢ȱȱ¢ȱęȱǯ I took the advice I gave to my kids and found work that I thoroughly enjoy. Representing bankers, who are the top leaders in every community across this country, is my passion. Let’s sustain this important business by training tomorrow’s leaders. Lure in your prospects through strategic advertising in Hoosier Banker magazine. They won’t bite without the bait ... For details, contact Rod Lasley at 317-387-9380, rlasley@indianabankers.org. Fishing for Prospects?
In today’s environment, Correspondent relationships are more important than ever and you can take advantage of Stock Yards Bank’s position as one of the largest and strongest banks based in this region. We are committed to working with the community banks of Indiana and we want to be your bank’s partner when you have needs around capital, liquidity, acquisition financing, stock buy backs and more, in addition to retirement plans and other trust services. Give James or Jim a call and put our experienced team to work for your bank. Jim McKenzie Correspondent Banking James Brown Correspondent Banking Lending Services Holding Company Shareholder Groups Bank Credit Needs And More! Deposit Services Fed Fund Sweeps Wire Transfer Automated Clearing House And More! International Services Foreign Exchange (CHECKS & WIRES) Letters of Credit And more! NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Wealth Management Services Jim McKenzie has over 40 years of banking experience, 36 years of those years as a correspondent banker. James Brown has over 20 years of banking experience in Retail, Small Business, Corporate and Correspondent Banking. (502) 625-0878 jim.mckenzie@syb.com (502) 625-9330 james.brown@syb.com THE CORRESPONDENT BANKING TEAM Retirement Plans Investment Management Insurance Trust Partnering And More! www.syb.com The good guys.
2014 IBA Annual Washington Trip September 7-9 The IBA Annual Washington Trip gives IBA members the opportunity to talk with legislators and regulators about the issues and concerns of Indiana banks. For more information or to register, visit www.indianabankers.org, or contact Josh Myers at 317-917-8047, email jmyers@ indianabankers.org. Note that the deadline for registration is August 22. Legislative perspective: ´2IÀFH YLVLWV LQ :DVKLQJWRQ DUH H[WUHPHO\ KHOSIXO :H DV OHJLVODWRUV KDYH D ORW RI ¶QRLVH· DURXQG XV LQ :DVKLQJWRQ D ORW RI GLVWUDFWLRQV « $V FRQVWLWXHQWV VRPHWLPHV ZKHQ \RX·UH RXW RI VLJKW \RX·UH RXW RI PLQG ,W·V LPSRUWDQW WR FRPH WR :DVKLQJWRQ WR NHHS \RXU LVVXHV RQ WKH UDGDU VFUHHQ µ ² U.S. Congressman Marlin Stutzman “The IBA Annual Washington Trip provides an opportunity to witness the legislative process as it ¢ȱěȱȱ¢ǯȱ ȱȱȱȱ should be a goal for everyone during their banking ǯȄ — Lisa Arnold, Home Bank, Martinsville ȃ ȱȱěȱȱȱ¢ȱȱȱ meaningful dialogue with the full array of our ǯȱ ȱȱȱȱ ȱȱȱ themselves, their banks and our banking community ȱȱȱȱȱȱȱǯȄ — David M. Geis, Jackson County Bank, Seymour ȃ ȱ ȱ ȱ ȱȱȱȱ¢ǯȱ ȱ gives member bankers a chance to engage fully in the Association’s government relations outreach and to meet with the legislators and regulators who impact ȱ¢ǯȄȱ – Lori S. Heath, The Farmers State Bank, Brookston “It is inspiring to witness banking peers visit with ȱȱȱĜȱȱ ȱ ǯȱ ȱȱ gives us a chance to be a voice not only for our banks, ȱȱȱǰȱȱȱȱȱ ǯȄȱ – Kristin Marcuccilli, STAR Bank, Fort Wayne ȃ ȱ ȱȱȱ ǰȱ ǯ ǯǰȱȱȱȱȱȱ ȱȱ ȱǯȱ ȱȱȱ ȱȱȱȱĜȱȱȱȱȱ ȱǰȱ¢ȱǯȱ ¢ȱȱȱȱǰȱ ȱ ȱȱȱěǯȄȱ — Larry W. Myers, First Savings Bank, FSB, Clarksville “We should not allow our senators and representatives ȱȱȱ ȱȱȱȱȱȱ¢ǯȱ ¢ȱȱȱȱȱȱǯȱ ȱ ȱęȱ ȱȂȱĜȱ ȱ ȱǰȱ¢ȱȱȱ ǯȄ — Larry W. Riggs, Community Bank, Noblesville Past IBA Annual Washington Trip participants share their insights:
ASSOCIATION UPDATE 9 HќќѠіђџȱ юћјђџ ѢљѦ 2014 CALENDAR OF EVENTS Register online at www.indianabankers.org/education-events The IBA Center for Professional Development is located at 6925 Parkdale Place, Indianapolis, 317-387-9380. 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The Fundamentals of Small Business 2FW ,%$ &HQWHU Small Business Banker Development Program Session 2 - Underwriting Small Business Loans 2FW ,%$ &HQWHU ACH Compliance and Processing 2FW ,%$ &HQWHU Community Bankers for Compliance School Lending Module 2FW ,%$ &HQWHU 2014 FDIC Banker College 2FW +LOWRQ ,QGLDQDSROLV 1RUWK +RWHO HMDA - Update and Review 2FW ,%$ &HQWHU CFO Forum - Group 1 2FW ,%$ &HQWHU Lenders Comprehensive Guide to Mortgage Lending 2FW ,%$ &HQWHU Senior Lender Forum - Group 1 2FW ,%$ &HQWHU Senior Lenders Forum - Group 2 2FW ,%$ &HQWHU Small Business Banker Development Program Session 3 - Getting in Front of Your Prospect 2FW ,%$ &HQWHU CFO Forum - Group 2 2FW ,%$ &HQWHU IRA Basics 2FW ,%$ &HQWHU Advanced IRAs 2FW ,%$ &HQWHU Consumer Loan Documentation Oct. 22 - IBA Center 2014 IBA Leadership Development Program Session 4 - Who Dares Wins Oct. 22-24 - Wooded Glenn Executive Retreat and Conference Center, Henryville Commercial Loan Documentation Oct. 23 - IBA Center Lending to Municipalities Oct. 24 - 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10 HќќѠіђџȱ юћјђџ ѢљѦȱ2014 COVER STORY ǯȱ ȱ ĵDZȱ Rising Star in Washington, D.C. The Indiana banking community is fortunate to operate in a state that, for the most part, holds business interests in high esteem. Indiana legislators by and large understand the importance of a strong economy ȱȱęȱȱǯ On the national front, the political climate is not so business-friendly. Ěȱ ȱȱĚ ȱ¢ȱ ȱȱȱȱĚ ȱȱ ȱȱ regulations that increasingly strain the business environment, including the banking industry. With that backdrop, the Indiana Bankers Association is especially grateful for those legislators in Washington, D.C., who take a measured approach and consider the merits of a business perspective. A standout among those statesmen ȱ ȱ ȱ ĵȱȱ Howe, Indiana. ȱ ǯȱ ĵǰȱȱřŝǰȱȱȱ serving as representative of the Third Congressional District of Indiana since November 2010. In his brief time in Congress, he has emerged ȱȱĚȱȱȱȱ ǯȱ ĵȱȱȱȱ ǯ ǯȱ ȱ Ĵȱȱ ȱ Services, a.k.a. the House banking ĴDzȱȱȱȱ Ȃȱ ȱȱȱȱ Dzȱ and as founding chairman of the ȱ ¢ȱ ĴȂȱ Second Amendment Initiative. ȱȱ ȱ Ĵȱȱ Financial Services, he sits on both the Financial Institutions and ȱ ȱ Ĵȱȱ on the Monetary Policy and Trade Ĵǯ ȱ ȱ ȱ ȱ ĵȱȱ additional prominence when he ran for the recently vacated position of majority whip. Though he did not win the race, he did gain the distinction of being one of only three ȱȱȱęȱȱŘřřȱ - licans in the House caucus. ȱ ĵȂȱȱȱȱ in 2002, when he was elected to the Indiana House of Representatives at age 26, making him the youngest member of the Indiana legislature. He continued to serve in the House until 2008, then served in the Indiana State Senate from 2008 to 2010. A fourthgeneration farmer, ĵȱȬ ȱ ĵȱ ǰȱ along with family members, farming 4,000 acres in northern Indiana. He resides in his hometown of Howe, where he and his wife Christy are raising their two sons. ȱ ¢ȱ ĵȱȱȱ ȱ ȱȱĜȱȱ shed insight on banking issues as discussed in the nation’s capitol. Please describe your responsibilities as a member of the U.S. House Ĵȱȱ ȱ ǯ “It is my responsibility to learn about the impact that monetary policy has on banks, insurance companies and related entities in ȱęȱȱ¢ǯȱ Ȃȱ learned a great deal about how policies of the Treasury, Federal ȱȱȱȱěȱ ęȱȱȱǯ “Banking issues are not at all simple. They’re challenging and complex. “Banking also is highly regulated. Since the passage of the Dodd-Frank Act, it has been just about our entire focus. “As agencies implement the law, the consequences are not always clear. Having bankers testify at ȱȱȱĴȱȱ ȱ ȱȱ¢ȱěȱ ȱęȱ¢ȱǯȱ ȱ testimony is vital, because it gives us ȱȱȱȱȱ¢ȱě¢ǯ “One story that really hit me was from a 25-year-old banker from a ęȬȱ¢ȱȱȱȱ ¢ǯȱ ȱęȱȱȱ- Ĵȱȱȱȱȱȱȱ Civil War, had survived the Great Depression and had survived the reAt a visit to the Indiana Bankers Association, Congressman Marlin Stutzman explained that he welcomes banker communication:“It helps me to hear from people who care about the policies that affect their industries.”
11 HќќѠіђџȱ юћјђџ ѢљѦ 2014 &RQWLQXHG RQ SDJH cession. ‘But we don’t know if we’re going to survive Dodd-Frank,’ he said. “To me, something is seriously wrong if banks that have survived war and economic volatility can’t survive our own policy. It shows that Washington is passing policy that has serious consequences. “That’s why it’s so important that bankers’ voices are heard, especially at a time when Washington continues to hand down more regulations than ever before.” What would you like for fellow legislators to understand about banking? “I would like for them to know that I shared their perspective before I joined the House banking commit- ǯȱ ȱȱȱȱDzȱ I didn’t realize how complicated the industry is. “I would also share with colleagues that the policies that are passed, and the rules and regulations banks have to comply with, have huge impact. Sharing this perspective leads to understanding. “We in Congress have to understand that forcing banks to hire ȱȱěȱȱȱ with more paperwork demands their time, and time is money. The more we create directives and regulations, the less capital is available to consumers.” What would you like for bankers ȱȱȱȱȱ process? “Relationship-building goes a long way. Whatever amount of education can be shared with members of Congress and state legislators is always helpful. “There’s never enough. It’s just a Ĵȱȱȱȱȱȱȱȱ and to understand it. “Pick a congressman, and establish a relationship. Share your experience. Explain how the consequences of congressional decisions impact your ability to help a small business owner, or a single mother, or your other customers. “Tell your legislator that too much regulation hurts, and explain why. Let them know that banking works best when you are allowed to do your job.” How does it impact federal legislators when Indiana bankers ȱȱȱȱ Washington, D.C.? ȱ ȃ Ĝȱȱȱ Washington are extremely helpful. We as legislators have a lot of ‘noise’ around us in Washington, a lot of distractions. “There are multiple issues to deal with — whether military or Ȃȱěȱȱ energy or transportation — and we need reminders of issues at home. “Those visits in D.C. help bring us back around to what our constituents are dealing with. They help us to stay focused. “As constituents, sometimes when you’re out of sight, you’re out of mind. It's important to come to Washington to keep your issues on the radar screen.” What aspect of being on the ȱĴȱ has surprised you the most? “It was surprising to see ȱěȱȱ the banking world. ȱĴȱȱ a national bank ȱȱěȱ compared to a small community bank. Yet too often, the same policies are applied broadly to all banks, regardless of how they operate. “It has been surprising to see the volume of regulations that keep coming out since Dodd-Frank passed. We’re seeing the ȱęǰȱȱȱ- ęȱĴȱȱȱ¢ȱ are tremendous. “I’ve also learned that Washington policies are allowing governmentsponsored enterprises to compete against the private sectors. An example is the Farm Credit System, which has been a wonderful tool for agriculture. But now FCS is expandOf his position on the U.S. House Committee on Financial Services, Rep. Marlin Stutzman notes:“I see my role as advancing good policy that helps our economy.” +RVWLQJ 5HS 0DUOLQ 6WXW]PDQ FHQWHU LQ WKH RIÀFHV RI WKH ,QGLDQD %DQNHUV Association are Amber Van Til, IBA senior vice president-government relations, and Joe DeHaven, IBA president and CEO.
12 HќќѠіђџȱ юћјђџ ѢљѦȱ2014 Continued from page 11. ing beyond its original mission to compete against the private sector in a way that was never intended. “The result is that the banking world is now competing against its own government. That’s not healthy. My next project is to bring these government-sponsored enterprises back into line. “I also have been surprised to learn how much the largest banks control deposits. About 80 percent — it’s substantial. And it’s been a surprise to learn how powerful New York is. “A lot of policymakers look at Wall Street, but not at Indianapolis or Fort Wayne or LaGrange or any rural community. We need to drive the message that economic opportunity goes beyond large cities. There’s much opportunity throughout the rest of the country to tap into. “Finally, I have learned that we can ȱȱěǯȱ ȱȱȬ preferred securities issue came out last December — which was going to ěȱȱȱȱ¢ȱȱ ¢ȱ at a very bad time — the banking community went to work, and we went to work. In the end, we were able to get a favorable decision.” How did you enter politics? “I never expected to be in politics. I enjoy my life in agriculture. We also own a trucking operation, and my wife Christy has operated a small retail business. ȱȱȱȱȃ ȱęȱȱȱȱ politics on Sept. 11, 2001. Christy and I were in Florida with our oldest son Payton, who was three weeks old at the time. As we were driving back home, we talked about 9/11 and wondered what America would look like for our son in 25 years. “Christy and I felt that we had to do something, so we started Ĵȱȱ ȱĴȱ meetings. Before we knew it, we were ȱȱĜȱǰȱ ȱȱĴȱ encouragement and a lot of hard work, we won in 2002. “I began my term in the Indiana House of Representatives. Being in our part-time legislature worked well with farming. I could be in Indianapolis January through April, then return to farm life. “One year of sine die, I was in the Statehouse casting last votes one night, then driving a tractor back in Howe the next morning. I liked that schedule. It’s important that our state legislators stay involved in the private sector to understand the challenges that business owners face when government gets too heavily involved in our economy.” How has your rural agricultural background shaped you? “Growing up on a farm teaches a lot of values — the value of money, the value of hard work and the value managing half a billion 16 years in business, worth of assets Managing Your Wealth, Securing Your Future 5 2HY^PJR 9VHK 4PJOPNHU *P[` ^^^ OHYIV\Y[Y\Z[ JVT >L Z[YP]L [V WYV]PKL [Y\S` WLYZVUHS ZLY]PJL WY\KLU[ PU]LZ[TLU[ N\PKHUJL HUK HZ[\[L YL[PYLTLU[ HUK LZ[H[L WSHUUPUN HK]PJL MVY V\Y JSPLU[Z >L YLZWLJ[ [OL [Y\Z[ JVUÄKLUJL HUK SV`HS[` WSHJLK PU \Z I` V\Y L_PZ[PUN JSPLU[Z HUK SVVR MVY^HYK [V VMMLYPUN V\Y WYVMLZZPVUHS HK]PJL HUK JV\UZLS [V [OL UL^ JSPLU[Z ^L TLL[ More than 200 years of combined experience in: ;Y\Z[ HUK ÄUHUJPHS ZLY]PJLZ >LHS[O THUHNLTLU[ 9L[PYLTLU[ M\UKPUN ,Z[H[L HUK [H_ WSHUUPUN We look forward to helping you make the most of your financial future. Rep. Marlin Stutzman pitches for victory at a congressional baseball game.The annual event is an historic matchup, with Democrats on one team and Republicans on the other.
13 HќќѠіђџȱ юћјђџ ѢљѦ 2014 Bankers gather for a mid-week banquet during the Commercial Lending School in Indianapolis, held June 8-13. Shown are (front row, left to right): -RH %UDPPHU, Merchants Bank & Trust Company,West Harrison; )UDQN 7LMHULQD, Farmers State Bank, LaGrange; *HRIIUH\ 2GOH, Community Bank, Noblesville; (OOLRWW 6RPHUV, Citizens State Bank, Fishers; %LOO /XGZLFN, Merchants Bank & Trust Company,West Harrison; (row two, left to right): $QVOH\ +ROW, Springs Valley Bank & Trust Company, Jasper; $OLVD 0RUHKRXVH,The Fountain Trust Company, Lafayette; 0LNH %DVV,TIB-The Independent BankersBank, Indianapolis; (OL]DEHWK 0HDG, Merchants National Bank, London, Ohio; .HOVH\ +HWULFN, Farmers & Merchants Bank,West Lebanon; 5HJLQD /DX[,The National Bank of Indianapolis; $OGLV .RUH, MainSource Bank, Greensburg; -DPLH 0DWWKHZV, First Merchants Bank, NA, Muncie; (YHUHWW / 0HW]JHU,The Fountain Trust Company, Lafayette; %UDQGRQ 7KRPSVRQ, Kentland Bank, Roselawn; and (back row, left to right): -RQ & 3LHUFH, German American,Washington; &KULVWRSKHU +HDG, First Federal Savings Bank, Evansville; 6KDURQ ( 0LOOHU,The Napoleon State Bank; -HVVLFD %URGRFN, Farmers State Bank, Fremont; 6KHLOD ) 6LHUDG]NL, Centier Bank, Mishawaka; %ODLU 0 6WDQRMORYLF, 1st Source Bank, Chesterton; /DXUL $ (DVK, Farmers State Bank, Howe; -RVK .HLSSHU, Farmers State Bank, LaGrange; &KULVWRSKHU 6FKHLGOHU,The Napoleon State Bank; : /HH 7KRPDV, The New Washington State Bank, Charlestown; $GDP 6FKXOW] *UHHQÀHOG %DQNLQJ Company; and (ULF 0 &DYH, First Financial Bank, Columbus. *UDGXDWHV RI ,%$ &RPPHUFLDO /HQGLQJ 6FKRRO The Stutzmans reside in Howe, Indiana. Shown are (left to right): Christy Stutzman, sons Payton and Preston, and Congressman Marlin Stutzman. of relationships. Agriculture also creates an understanding of how ȱȱȱȱěȱ your business, and the importance of being active and engaged to make your voice heard. “I was a Farm Bureau board member, and whether it’s Farm Bureau or IBA, being active and visiting with your legislators goes a long way. “Farming is also a lesson in managing money. In agriculture, you can never completely determine your income. It’s an estimate, and that window is wide. “Plus you don’t always have control over your expenses and the ȱȱĴȱȱ crop out. Finally, you can’t control the environment that the crop is raised in, so farming teaches us to be conservative and to manage our risk appropriately. “I still get back to the farm as often as I can. It’s home, and it helps keep me grounded. The family values that I learned on the farm remain very important to me.” TOMORROW’S FUTURE BEING BUILT TODAY Raleigh Marriott Crabtree Valley September 8 - 10 For More Information Contact Brianna Karmi, 800/662-7044 or bkarmi@ncbankers.org AMERICAN MORTGAGE CONFERENCE
14 HќќѠіђџȱ юћјђџ ѢљѦȱ2014 PSP SHOWCASE ¡DZȱ ȱ ȱ ȱ ȱ ȱȁ ȱ ȱ Ȃ M¢ȱȱȱȱĜȱȱ explain what the regulatory examination process is like. Bankers face multiple exams, internal audits, external audits, loan reviews and information technology audits, to name a few. When a bank tries to select which service provider can best assist in preparing for these various reviews, it would be ideal to work with a provider that understands the examination process thoroughly … by being examined by the same regulators. Infotex, an Indiana Bankers Association Diamond Associate Member, has been an IBA Preferred Service Provider for years, assisting banks in many IT areas. In addition to providing audit and assessment services, consulting services and assistance with IT policies and procedures, the company also provides monitoring services. These services cause Infotex to be in the examination program of the Federal Financial Institutions ¡ȱ ǰȱĴȱȱȱ the receiving end of examinations and audits on a regular basis. As a result, Infotex understands the ȱȱęȱ¡ǰȱ helping it to provide quality risk assessments, IT management practices reviews and Internet banking controls reviews to the banking community. Banks enjoy peace-of-mind assurance that Infotex knows what needs to be reviewed to be prepared for any IT-related examination. Within the area of audit and ȱǰȱ ¡ȱěȱ services covering IT audit services, external penetration testing/internal network scanning, social engineering testing, Gramm-Leach-Bliley Act risk assessment, IT governance, Internet banking controls review, physical security and environmental controls review, business continuity plan ǰȱ ȱęȱǰȱ vendor due diligence review and Web application security review. IT assessment and audit, for example, address both the nontechnical and technical aspects of clients’ ǰȱ ȱęȱȱ systems auditors providing a comprehensive approach to IT audit. Additional considerations include social engineering, IT management practices, security procedures in accordance with regulatory requirements, and industry best practices. Dan Hadaway, Infotex managing ȱȱȱĜǰȱȱ his team also can assist with various areas of consulting services and awareness training. They will prepare presentations centered around the bank’s acceptable use policy, help boards of directors understand their responsibilities for IT governance and information security, and customize training to the bank’s ęȱȱȱȱȱȱ vendor due diligence, technology risk management, incident response ȱȱȱęǯȱ ¡ȱ¢ȱěȱȱ and procedure templates and can ȱȱȱȱȱęǯ ȱ ȱěȱȱ ¡ȱȱ an event log management system, providing 24/7 monitoring of all logs for critical and noncritical events, ęȱȱ ȱȱȱ events. The company responds in real time to critical events per clients’ customized business rules, with templates simplifying the process. Daily interactive reports, intrusion prevention/detection service and change detection round out the layers of security. Monthly scans of external networks seek open ports to detect ǰȱȱȱĴȱ changes to the perimeter security stance. When making your next decision regarding IT-related services, consider a company that knows the яќѢѡȱѡѕђȱ Ѣѡѕќџ ȱ ¢ is vice president-products & services of the ȱ ȱ , and also serves ȱȱȱȱȬęȱȱ ȱ¢ȱ the IBA. He can be reached at 317-387-9380, email: rlasley@indianabankers.org.
15 HќќѠіђџȱ юћјђџ ѢљѦ 2014 regulatory environment and knows Indiana banking. Let Infotex help get your bank through the ongoing IT challenges of the industry. To learn more about Infotex, contact Rod Lasley at 317-387- 9380, email: rlasley@indianabankers.org. Infotex can be reached directly at 800-466-9939, www.Infotex.com, Consultants to the Financial Industry Young & Associates, Inc. Liquidity Planning Strategic Planning Regulatory Assistance Stock Valuations Capital Markets Expansion & De Novo Bank Charters Internal Audit Information Technology Recruitment & Human Resources Lending & Loan Review Compliance Policy Development Serving Community Banks Since 1978 A primary responsibility of the Indiana Bankers Association is to develop and maintain products ȱȱȱ ȱęȱȱ IBA membership. In discharging this responsibility, there can ȱęȱȱȱȱȱ Preferred Service Provider (PSP) relationship. IBA’s rigorous selection process includes a thorough due diligence review: company history, ęȱȱ¢ǰȱ reference checks and search of business records. Criteria for PSP designation include: % Ȭȱęȱȱ only to IBA members: cost savings and/or income Dz % Business opportunity for the IBA: Each PSP contributes ęȱȱȱȱ Association through marketing fees or royalty payments. For more information about PSP relationships, please contact Rod Lasley at 317-387-9380, email: rlasley@indianabankers.org. :KDW ,V D 3UHIHUUHG 6HUYLFH 3URYLGHU" Dan Hadaway, Infotex, was featured as the August 2013 cover story of Hoosier %DQNHU The article included a video of Hadaway explaining,“How to Secure Your iPad.” To view, click on the red arrow in +RRVLHU %DQNHU 'LJLWDO at www.indianabankers.org. 9LGHR %RQXV ȱ ǰȱ ȱ , partnered with ITT Technical Institute in May to ěȱȱȱȱȱ presentation for its student graduates. Students were given handouts regarding budgeting and participated in discussions on the importance of saving money, establishing ȱȱ¢ȱěȱȱ loans. FINANCIAL LITERACY DIGEST Cathy Blaho, client service counselor for Centier Bank, Northern Indiana, conducts a budgeting and saving presentation for ITT Technical Institute students.
16 HќќѠіђџȱ юћјђџ ѢљѦȱ2014 DIRECTORS / SENIOR MANAGEMENT ȱȱDZȱIt is no surprise that community banks have seen their net interest margin fall in recent years. We know that ȱȱȱĴȱȱȱ ago, while yields on earning assets ȱȱ Ĵȱ ǯȱ ȱ ȱȱȱȱěȱȱȱ and were replaced by newer and much lower-yielding assets. As noted by the Federal Deposit Insurance Corp., margin compression is especially problematic for smaller institutions, since three-quarters of their net operating revenue comes from net interest income. Clearly, community banks have a great incentive to focus on their asset/liability management processes. Dynamic Analysis ȱ ȱęȱȱȱȱ result of dynamic processes. Balance sheets are constantly changing, as ȱȱȱěȱȱȱ liabilities, the rates paid (or earned) ȱȱǰȱȱȱȱĚ ȱ moving into and out of those ac- ȱȱĚȱȱ- able. What we need to know is, given the mix of assets and liabilities and the rates associated with them, how can we expect margins and earnings ȱȱȱěȱȱ- ronments, as the re-pricing assets and ȱęȱȱȱȱ sheet over time? In order to perform this analysis, we must have tools that allow us to make assumptions about rate changes, options risk, curve shifts, prepayments, and sensitivities or betas. The ultimate point of the exercise is to determine how the bank is positioned, and what changes, if any, the bank may wish to make in order to shore up exposures to interest-rate risk. Every Balance Sheet Is Different Each community bank has unique characteristics and ways of doing ȱȱĚȱȱȱ landscape of the market it serves. Some are loan-driven suburban banks that face strong competition for deposits. Others do business in agricultural communities, where loan demand and deposit growth are driven by seasonal factors. The one trait they all have in common is the fact that they operate in the same interest-rate environment at any given point in time. Every bank must assess its exposure to interestrate risk and the interplay of three subcategories of risk: re-pricing risk, yield curve risk and options risk. Re-pricing risk. Re-pricing risk re- ȱȱěȱȱȱȱȱ rate changes and the timing of cash Ě ȱȱȱȱȱȱȱ and maturity structure of a bank’s balance sheet. For most banks, repricing risk is the most visible source of interest-rate risk, and is measured by comparing the volume of a bank’s assets that mature or re-price within a given time period with the volume ȱȱȱȱǯȱ ȱě- tials are then applied to the re-pricing balances, so that income and expense changes can be projected. Yield curve risk. The nature of banking is such that banks borrow short and lend (or invest) long. The shape of the yield curve is dictated by the relationship between shortterm rates and long-term rates. From the bank’s perspective, it’s ȱěȱ ȱȱȱ and earning asset yield. Relative rate changes cause the yield curve to ĚĴǰȱȱȱȱ¢ȱ sloped (inverted) during the course of an interest-rate cycle. Yield curve variation can exacerbate the risk of a bank’s position by magnifying the ěȱȱ¢ȱǯȱ ȱ ȱȱĴǰȱȱ maturity mismatches are often ȱȱĜȱȱǰȱȱ to options risk. Ȧ ¢ȱ ȱ ȱ ȱ ¢ яќѢѡȱѡѕђȱ Ѣѡѕќџ ě¢ȱ ǯȱ is associate partner withȱ ȱ ȱ , Oklahoma City, and works as a market analyst and portfolio strategist. He has worked in ęȱȱȱȱȱ¢ȱȱ more than 20 years. Caughron’s trading experience includes several years on the Treasury desk for an international bank on Wall Street and subsequent positions trading mortgage-backed securities and ȱ¡ȱę¡Ȭȱȱȱȱ broker/dealers. Additionally he managed a $600 million investment ȱȱȱȱȱęȱǯȱ ȱȱȱ numerous articles on risk management topics and frequently is quoted ȱȱęȱǯȱ ȱȱȱȱ¢ȱȱȱ ȱ ȱȱ Community Bankers and the Bank Operations Institute. The author can be reached at 800-937-2257, email: jcaughron@gobaker.com. The Baker Group is a Diamond Associate Member of the Indiana Bankers Association and an IBA Preferred Service Provider. &RQWLQXHG RQ SDJH
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