INSIDE David Becker leads explosive innovation as president and CEO of First Internet Bank of Indiana. Story on page 10. Hoosier Banker MARCH 2015
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Indiana Bankers Association Officers, Directors & Staff IBA Officers Chairman ...................................................... Larry W. Myers, First Savings Bank, Clarksville FirstVice Chairman ............................... Michael H. Head, First Federal Savings Bank, Evansville SecondVice Chairman ................. Annette M. Russell, Security Federal Savings Bank, Logansport Immediate Past Chairman ............................................ David W. Heeter, MutualBank, Muncie President and Chief Executive Officer ..... S. Joe DeHaven, Indiana Bankers Association, Indianapolis Constituent Directors ICBA State Director ........................................ David M. Geis, Jackson County Bank, Seymour ABA Membership Council ....................... Michael K. Bauer,Your Community Bank, New Albany Future Leadership Division President .......... Lucas White,The Fountain Trust Company, Covington Non-Indiana Headquartered Bank Director ............... Tim Massey, BMO Harris Bank, Indianapolis Northeast Region Directors Michael C. Marhenke, iAB Financial Bank, Fort Wayne Gregory Maxwell, Farmers State Bank, Mentone Michael S. Zahn, First Federal Savings Bank, Huntington Northwest Region Directors Patrick Duffey, State Bank of Burnettsville Karen I. Miller,The Farmers Bank, Frankfort Arden L. Cramer, Logansport Savings Bank, FSB Southeast Region Directors George W. Ferriell, Bath State Bank Archie M. Brown Jr., MainSource Financial Group, Greensburg Dennis Wayman, State Bank of Medora Southwest Region Directors Kurt D. Rosenberger, Our Community Bank, Spencer Matthew W. Howrey, North Salem State Bank Clay W. Ewing, German American, Jasper IBA Staff President & Chief Executive Officer ........................................................... S. Joe DeHaven ExecutiveVice President .............................................................. Paul W. Freeman, CAE SeniorVice President–Government Relations ........................................ Amber R.VanTil, JD Vice President–Meetings & Events ............................................ Christina M. Bennett, CMP Vice President–Government Relations ........................................................... Dax Denton Vice President–Products & Services ................................................................. Rod Lasley Vice President–Education & Training ........................................................... Laurie A. Rees Vice President–Communications .................................................................. Laura Wilson Events & Products/Services Assistant .............................................................. Susan Clark Education Meeting Coordinator ................................................................ Elizabeth Kilty Education Meeting Coordinator ................................................................. Marlene Wells Staff Accountant ....................................................................................... Timothy Fry IT and Facilities Manager ...................................................................... Tracy Wainscott Administrative Assistant ........................................................................... Michelle Long Government Relations & Communications Office Manager ............................ Joshua A. Myers Email addresses: First initial of the staff member’s first name plus last name; example: jdoe@indianabankers.org Please send news releases to: IBAcommunications@indianabankers.org Mission To advocate for and sustain an environment in which banks can succeed. Vision To provide exemplary service to members as the premier state bank trade association in the country. Values In fulfilling our mission, we will: • Maintain the highest ethics, integrity and respect for others; • Serve with professionalism, innovation and resourcefulness; • Instill passion, positive attitude and enthusiasm; • Remain mindful that the success of the IBA is judged by the success of its members. View Hoosier Banker Digital at www.ourdigitalmags.com/ publication/?m=19522&l=1. Publication Disclaimer 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 99 NO. 3 6925 Parkdale Place Indianapolis IN 46254-4673 Phone: 317-387-9380 Fax: 317-387-9374 Twitter @indianabankers www.indianabankers.org Publisher: S. Joe DeHaven Editor: Laura Wilson Advertising: Rod Lasley Email news releases to: IBAcommunications @indianabankers.org 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 members. Copy deadline: first of the month preceding publication. Advertising: Rates available upon request or online at www.indianabankers.org. Advertisers should provide electronic PDFs by the 15th of the month preceding publication. Hoosier Banker advertising is available to members and associate members of the Indiana Bankers Association only. Subscriptions: Hoosier Banker subscriptions are provided free of charge exclusively to members and associate members of the Indiana Bankers Association. Public access to Hoosier Banker Digital is available at www.indianabankers.org. COVER STORY 10 DAVID BECKER: ENTERPRISING BANKER FEATURES 6 PRESIDENT’S PONDERINGS S. Joe DeHaven, IBA 9 IBA CALENDAR OF EVENTS 20 STATE DEPOSITS IN INDIANA FINANCIAL INSTITUTIONS LENDING / CREDIT 16 LENDER BEWARE: SECURED PARTY HELD ACCOUNTABLE FOR MISTAKEN RELEASE OF FINANCING STATEMENT Whitney L. Mosby, Bingham Greenebaum Doll LLP PSP SHOWCASE 19 SIMPLIFY HEALTH AND WELFARE PLANS WITH IBA GROUP INSURANCE TRUST Rod Lasley, IBA DIRECTORS / SENIOR MANAGEMENT 22 LEVERAGE BOARD DIVERSITY FOR COMPETITIVE ADVANTAGE David Olivencia, Softtek 24 ALTA BEST PRACTICE NO. 7:ADDRESSING CONSUMER COMPLAINTS Jonathan Biggs, Investors Title Insurance Company Cover photo of David Becker at the Fishers office of First Internet Bank courtesy of photographer Brian Brosmer and AtFishers magazine/TownPoste.com. DEPARTMENTS 14 VIDEO BONUS 15 ASSOCIATE MEMBERS' CORNER 17 FROM THE BOARD ROOM 18 COMPLIANCE CONNECTION Larry C.Tomlin, Krieg DeVault LLP 18 IN MEMORY OF 23 BANKING ON COMMUNITY 25 ANNIVERSARY MILESTONE 27 BANKERS ON THE MOVE 30 HONORABLE MENTIONS 30 ADVERTISERS INDEX 5 Hoosier Banker MarcH 2015 David B. Becker is president and chief executive officer of First Internet Bank of Indiana.
6 Hoosier Banker March 2015 In January we were all witness to the first National Collegiate Athletic Association (NCAA) football championship playoff. The Ohio State Buckeyes handily defeated the Oregon Ducks 42-20, in what many considered an upset. While there have been pronouncements in the past of an NCAA football championship team, this was the first time a playoff system was established to crown a champion. We as Hoosiers, of course, are likely more interested in the NCAA basketball championship, now more commonly referred to as March Madness. The NCAA first held a basketball championship tournament in 1939. Surprisingly the teams competing in the first championship games were not Indiana University, Duke, North Carolina, Kentucky, UCLA or Kansas. It was the Oregon Ducks defeating Ohio State 46-33! What are the odds that the same two teams would be competing for the first championship for these two popular sports? Pretty long odds, I would guess. This phenomenon reminds me of the wisdom of French critic Alphonse Karr: “The more things change, the more they stay the same.*” I began my career in banking 45 years ago and have seen an awful lot of change during that time, yet some things have not really changed much. When my career began, the banking business was just beginning to talk about the oppressive regulatory environment in which it had to operate. Today, bankers are talking at length about the oppressive regulatory environment in which they have to operate. It is much more oppressive today than at any time in my long career, but the perspective ‒ that there is too much regulatory scrutiny over banking ‒ has not changed. Also when I was beginning my career, bankers were dismayed by the uneven playing field that existed between banks and credit unions. Regretfully that situation has not changed. In fact credit unions enjoy an even larger advantage today as a result of expanded powers to provide a broader array of services, often with less regulatory requirements than those required of banks. And despite the many academic and independent research studies that indicate that credit unions ironically provide fewer services to low-income persons than banks do, credit unions continue to enjoy a federal tax exemption. Talk about a competitive advantage! When I was starting my career, banks were focused on hiring, training and promoting young people to look at making banking their careers. Today I hear that everywhere I go. The future of our business is dependent upon the development of the leaders who will propel banking into the uncertain future. The Indiana Bankers Association, at the demand of our members, continues to develop more and more programming that will provide leadership training to those bright, young people who will assume senior roles within the next few years. In 1970, banks were beginning to adopt computer systems to replace much of the manual systems that had been in use for decades. Technology has come a long way since 1970 ‒ my cell phone today offers more computing function than the entire bank in 1970 could provide. Technology has always been a disruptor of current processes, and managing it will continue to be an ever more important function for banks as they move into the future. No one knows specifically what the future holds for bank technology, but I am willing to bet that the ability to adapt will be a differentiator for the banks that are the most successful. Another concern back when I was a novice banker was nonbank competition. Credit cards were just beginning to be issued by nonbank companies. Consumer loans were being disrupted from many other sources than credit cards, such as finance companies and the captive automobile financers affiliated with automobile manufacturers. Competition today comes from new technology companies, investment bankers, insurance companies, and many more from throughout the world. Even more so than credit unions, these companies are saddled with less regulatory burden than that required of banks. Yes, the world has changed for bankers in many ways in the past 45 years through consolidation of the industry, the addition of new delivery methods for services and products, technological advances and regulatory burden, to name a few. But as noted above, the more things change, the more they stay the same. If the NCAA starts a new championship for a sport, I am putting my money on Ohio State and Oregon to be in the final game! FEATURE PresiDenT’s PonDerinGs S. Joe DeHaven, President & Chief Executive Officer, Indiana Bankers Association Amplify is a public relations and grassroots tool designed to help rebuild the image of banking. Developed by the American Bankers Association, Amplify is available to all bankers, both ABA members and nonmembers, free of charge. For more information, visit amplifybankers.com, or contact Erin Scheithe at 202-663-5436, email: escheithe@aba.com. t AmplifyYour Outreach and grassroots help rebuild Association, all bankers, and nonmembers, visit * Plus ça change, plus c’est la même chose.
LENDING SERVICES Holding Company Shareholder Groups Bank Credit Needs And More! DEPOSIT SERVICES Fed Fund Sweeps Wire Transfer ACH And More! INTERNATIONAL SERVICES Foreign Exchange (CHECKS & WIRES) Letters of Credit And more! NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE WEALTH MANAGEMENT GROUP Retirement Plans Investment Management Insurance Trust Partnering And More! James Brown Correspondent Banking THE CORRESPONDENT BANKING TEAM JAMES BROWN Count on us. In today’s environment, Correspondent relationships are more important than ever. 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 a call and put our experienced team to work for your bank. James Brown has over 23 years of banking experience in Retail, Small Business, Corporate and Correspondent Banking. (502) 625-9330 james.brown@syb.com
June 7 - 12, 2015 IBA Center for Professional Development 2015 IBA CommerCial lending SChool
CALENDAR UPDATE Calendar of events Register online at indianabankers.org/education-events The IBA Center for Professional Development is located at 6925 Parkdale Place, Indianapolis. Phone: 317-387-9380 Twitter: @IndianaBankers 9 Hoosier Banker March 2015 Alternative Delivery Channels … Available at your convenience via Webinar, CD-ROM or On-Demand Flood Insurance: Key Fundamentals and Flood Compliance by the Case March 26 - IBA Center Trust Officer/Financial Adviser Forum April 7 - IBA Center Home Mortgage Disclosures Act Seminar April 9 - IBA Center Certified Teller Program - Bank Robbery Prevention April 13 - Huntingburg Event Center April 14 - Best Western Plus, New Albany April 15 - Chapman’s Restaurant, Bloomington April 20 - Hotel Fort Wayne April 21 - Best Western Executive Plaza, Lafayette April 22 - Hillcrest Country Club, Batesville Social Media Bootcamp:The Risks and Opportunities of Your Bank’s Online and Social Media Footprint April 14 - IBA Center Certified Community Banking Security Professional: Certification Training April 15-16 - IBA Center Branch Management Series: Session 2 - Growing the Retail Bank April 21 - IBA Center Essentials of Banking: Session 2 - Business Operations and Management April 22 - IBA Center Compliance Administration and Audit April 22 - IBA Center The Customer Onboarding Experience: Increasing Share of Wallet April 23 - IBA Center Auditing BSA April 23 - IBA Center Consumer Lending School April 28-29 - IBA Center Train the Trainer: Plans, Programs and Processes That Work May 5 - IBA Center Senior Retail Lender Forum May 6 - IBA Center Today’s Bank Board Secretary - More Than Just Taking Minutes May 7 - IBA Center IBA Mega Conference May 11-13 - Indiana Convention Center Community Bankers for Compliance Series: Session 2 - Integrated Disclosures May 11 - Courtyard by Marriott, Fort Wayne May 12 - IBA Center May 13 - IBA Center Risk Management Officer Forum May 21 - IBA Center BSA/AML Compliance School June 2-3 - IBA Center IBA Leadership Development Program: Session 2 - Do Something That Scares You June 3-5 - Wooded Glen Executive Retreat & Conference Center, Henryville Building Your Incident Response Program June 4 - IBA Center Commercial Lending School June 7-12 - IBA Center Chief Financial Officer Forum June 16 - Group 1 - IBA Center June 19 - Group 2 - IBA Center Integrated Disclosure Rules for Processors and Lenders June 16 - Hotel Fort Wayne June 17 - IBA Center Senior Lender Forum June 17 - Group 1 - IBA Center June 18 - Group 2 - IBA Center Auditing Operations June 18 - IBA Center Marketing Director Forum June 23 - IBA Center Essential of Banking: Session 3 - Safeguarding the Bank and Customer Service June 24 - IBA Center IT Officer and Operations Officer Forum June 25 - Group 1 - IBA Center June 26 - Group 2 - IBA Center Human Resources Director Forum July 14 - IBA Center Workshop for Loan Assistants and Loan Processors July 15 - IBA Center Introduction to Consumer Loan Origination and Compliance July 16 - IBA Center Analyzing CRE Cash Flow July 21 - IBA Center Administering Construction Loans July 22 - IBA Center Real Estate Lending Compliance July 28-29 - IBA Center Community Bankers for Compliance Series - Session 3 Aug. 10 - Courtyard by Marriott, Fort Wayne Aug. 11 - IBA Center Aug. 12 - IBA Center Trust Officer / Financial Adviser Forum Aug. 13 - IBA Center Regional Bank Director Workshop Aug. 17 - Hotel Fort Wayne Aug. 18 - Wooded Glen Executive Retreat & Conference Center, Henryville Branch Management Series: Session 3 - Leading, Developing and Engaging the Team Aug. 18 - IBA Center Regional Bank Director Workshop Aug. 19 - IBA Center March 26 - Power of Attorney March 31 - New Accounts Series: Opening Trust Accounts - Compliance, Documentation, Signing Authority and Deposit Insurance Issues April 2 - UCC April 2 - Emerging Leader Series: Branch Transformation - Balancing the Trend Toward Virtual Banking,While Enhancing Your Customer’s Experience April 3 - Important SAR Procedure Updates From the Revised BSA/AML Examination Manual: Ensuring Compliance, and Avoiding Violations April 8 - ACH Rules Update 2015 April 9 - Call Report: Lending Schedule for Banks April 9 - Deposit Regulation Update April 9 - Advanced Issues in Dormant Accounts, Unclaimed Property and Escheatment April 14 - The Pitfalls of Vault Security, Disaster and Self-Service Boxes - 2015 Update April 14 - Writing an Effective Credit Memo April 14 - CFPB Real Estate Loan Collection Rules for Mortgage Servicers April 15 - Excel Explained: Introduction to Spreadsheets April 16 - Reg. E: How Expensive Is a Compliance Mistake? April 16 - UpdatingYour Bank’s BSA/AML/OFAC Risk Assessment April 17 - Understanding and Addressing Critical Interest-Rate Risk Issues:The Regulatory Perspective April 21 - The TILA/RESPA Disclosure Line-by-Line Part 2: Closing Disclosure April 22 - Opening New Accounts I: Consumer Accounts April 23 - Analyzing Credit Risk in Agricultural Lending April 28 - EMV and Debit Cards: Preparing for the Oct. 1 Liability Shift April 28 - Understanding Signature Cards and Account Agreements April 29 - Opening New Accounts II: Business Accounts April 30- Current Trends in Cyber Crime and Payments Fraud May 5 - Officer Calling: Prospecting, Preparing and Presenting May 5 - Lending 101 May 5 - Revised Escrow Rules Effective Aug. 1 May 6 - From Prospect to Customer: Skills and Tools for Successful Business Development May 6 - W-8,W-9 and Account Opening Issues May 6 - Opening New Accounts III:Trust and Minor Accounts May 7 - Director Series: Regulator and Industry Hot Buttons for Directors May 7 - What to Do When a Customer Dies May 11 - For Sales Managers:Why Aren’tYour Salespeople Selling? May 13 - Home Equity, HELOC and Second-Lien Risk Management, Including Maturing HELOC Guidance May 14 - IRA Series: IRA Death Distributions - Beneficiary Options and Tax Consequences May 14 - RC-C Loan Codes for Call Report May 19 - Wire Transfer Compliance:Who Is Liable? May 19 - Calculating and Maintaining the Allowance for Loan and Lease Losses May 20 -You’re the New HR Officer ... Now What?
10 Hoosier Banker March 2015 COVER STORY When David B. Becker, 61, president and chief executive officer of First Internet Bank of Indiana (First IB), launched the virtual bank in 1999, he faced formidable odds. An obstacle course of “regulatory hoops and hurdles” took nearly three years to navigate. The startup cost was inflated to three times the capital requirements of a traditional bank. And Becker himself lacked formal training as a banker, though his background success in finance-related software startups would serve him well. Becker had another advantage in his arsenal: He was and remains a true entrepreneur. All the hyperbolic traits that define entrepreneurs readily apply. David Becker is visionary, passionate and creative. He has a photographic memory, requires little sleep and views setbacks as opportunities. “My motivator,” Becker shares, “is the adage, ‘If it can’t be done, the impossible just takes a little bit longer.’” Becker began creating companies in 1981, when he founded re:Member Data Services at the age of 27. “The first three years, I was the youngest employee,” he recalls. “Everybody I hired was older than me.” The company provided electronic data processing services to credit unions nationwide and was acquired in 2004 by Open Solutions Inc. In 1995 Becker founded VIFI, a provider of Internet services to financial institutions and corporations; the company was acquired by Digital Insight Corp. in 2002. Next he founded DyKnow and RICS, and continues to serve as CEO of both companies. DyKnow specializes in interactive educational technology, while RICS provides Web-based inventory control and point-of-sale systems for retailers. Additionally Becker has served in leadership positions with TechPoint, a change agent for the technology industry in Indiana; the TechPoint Foundation for Youth; the Central Indiana Community Foundation (CICF); and the Central Indiana Corporate Partnership. He supports Indiana universities through board activity with the School of Informatics and Computing at Indiana University; Vincennes University; and The Robert C. McDermond Center for Management & Entrepreneurship at DePauw University, his alma mater. Becker was honored as Ernst & Young Entrepreneur of the Year in 2001, as TechPoint Trailblazer in Technology in 2002, as a Sagamore of the Wabash in 2004 and was inducted David Becker: Enterprising Banker Awards on display mix with turning wheels, a knight on a horse and other business metaphors in David Becker’s office.
11 Hoosier Banker March 2015 Continued on page 12. into the Junior Achievementsponsored Central Indiana Business Hall of Fame in 2008. Last month College Mentors for Kids bestowed on Becker a Lifetime Achievement Award in Mentoring. As an extension of Becker’s commitment to mentoring, First Internet Bank participates in a multiyear campaign to increase and enhance local student mentoring programs in the areas of science, technology, engineering and math (STEM). A native of Monrovia, Indiana, David Becker credits his greatgrandfather, a North Dakota homesteader and transplanted Indiana farmer, for sowing the seed of entrepreneurship within him. Hoosier Banker recently interviewed Becker about the origins and growth of First Internet Bank of Indiana. Why did you form First Internet Bank of Indiana? “Prior to starting the bank, I’d been in the software services industry for about 15 years. One day I was making a sales call on a large Indiana institution, explaining how the bank could expand and become a national player electronically, versus brickand-mortar branches. “I made the presentation to the CEO, the board of directors and the senior management team, and it went well. But at the end, the CEO said, ‘It can’t be done. It’s physically impossible to do what you’ve outlined to us.’ “That stoked my entrepreneurial spirit, because the best thing anyone can do is tell me it can’t be done. My VP of sales was in tow with me, and he asked me as we were leaving, ‘What are we going to do now?’ I said, ‘I’ll go start it myself.’ “That was in the summer of 1996. I called the Federal Reserve, and I think the gentleman on the other end of the line fainted. I called the OCC and was told, ‘Buy a thrift and do what you want, and we’ll worry about it when we examine you.’ But that wasn’t what I wanted to do. “Then I called Jim Cooper, who was director of the Indiana Department of Financial Institutions. He was pretty excited about the idea. Indiana had been losing banks, and I think he felt that this was a chance to put Indiana back on the map. “It took almost three years to get through all the regulatory hoops and hurdles. Traditionally you could start a new bank in Indiana for $5 million in capital, plus obtain approval. For our approval, the application had to go all the way to Washington, D.C. Plus, instead of $5 million in capital, I was told I needed $15 million ‒ I think as a polite way of telling me no. “Lo and behold, 45 days later, we had the $15 million in capital. Within 90 days of opening, we had customers in all 50 states. We’ve now been in business for 16 years, and we’re servicing 50,000 accounts of nearly $1 billion in assets, with a strong nationwide distribution. “Timing was everything when we started. The tech bubble was going strong, and everything was booming.” What are your responsibilities as president and CEO? “I’m more of an entrepreneur than a banker, so my responsibility is to look at new opportunities to generate revenue and new ways to provide better services to customers. I’m not a technologist – my degree is in political science – but I understand how things go in one side of the box and come out the other. I’m the sounding board for new programs, new technologies and new ideas. “I keep us not on the bleeding edge of technology, but on the leading edge. We’re an efficient organization. We are running a $1 billion institution with fewer than 40 employees. We have a sales team on the loan side, plus a mortgage team, but the day-to-day banking ‒ the everyday checking, savings and loan administration ‒ is being run by 40 employees. “In our first FDIC exam, the examiners came in and gave us a list of loan files they wanted to see. I said I’d be back in a few minutes. Five minutes later I came back with a CDROM with all the loan files on it. The examiner looked at it and said, ‘No, I want the documents.’ “I said, ‘We don’t have documents. It’s all electronically captured.’ He said, ‘You can’t do that.’ News sources stream continuously into the office of David Becker. David Becker presides over First Internet Bank of Indiana from his high-rise office located on the north side of Indianapolis.
12 Hoosier Banker March 2015 So I produced a letter from the FDIC that said I could. “Technology has been my play. For example another of my companies, re:Member Data Services, brought the first online ATM to the state of Indiana. We performed the first check-clearing for credit unions through the Federal Reserve. We brought the first online, real-time credit/debit card product to market.” Why do you strive for leading edge, not bleeding edge? “The bottom line is that we are a bank. We have the life savings of some of our clients, so we can’t step out too far on the forefront. In today’s technology world, there are processes that work effectively, and others that crash and burn. We don’t want to be so far out that we create security or servicing issues. “Our strength, and the real product we offer, is customer service. Our online/mobile banking service is live 24 hours a day, seven days a week. We advertised in the beginning that we’re the bank that goes wherever you go. “When customers reach out, it’s got to work. We do a lot of piloting, a lot of testing on this side. When we introduced check imaging for deposit capabilities, our employees tested it for a while, then we did a soft rollout. “We put it on our website, but gave no word to customers. We would let them find it, then see if they could figure it out. The first day the service went live, we processed over 100 items, and we hadn’t told anyone it was coming. Customers had just stumbled on it and figured it out. “Our clients are a very computerliterate crowd, which can create challenges on the marketing side. We have to be careful with marketing materials, or their response will be, ‘Don’t spam me. I know what I want.’ It’s kind of a two-edged sword.” How do potential customers learn about First IB? “In the early stages, we spent heavily on marketing and advertising, almost $8 million in the first 18 months, plus we did a lot of road shows. I was living out of a suitcase for a couple of months, doing radio and TV interviews across the country. “We purposely launched the bank in New York City to show that it was a virtual institution. The first transaction took place at a Citibank ATM in the lobby of the Rockefeller building on Wall Street. Our story push was that the bank really did go wherever you went. “I had an interview with the BBC, and the young lady who interviewed me, with her charming English accent, asked, ‘What do traditional banks have that you don’t have?’ I said, ‘Long lines and a lobby.’ That became our catchphrase, and we ran full-page ads in USA Today. “We estimate that, in the first month of launch, 75 million consumers saw, heard or read something about First Internet Bank. There was a lot of interest in the marketplace, and it seemed we were perpetually in Money Magazine and most of the tech magazines. A service rating firm in Boston rated us as the best Internet banking platform in the country. “We think it’s interesting that three or four years ago, the banking community got behind electronic statements, because that was the ‘green’ thing to do. We’ve had electronic statements since 1999. If you wanted a paper statement, you had to pay for it. In that way, we took what was a cost center in most institutions and made it a profit center. “So that’s the play; we were ahead of the game. When we launched in 1999, I told the story that if it’s a Sunday afternoon and I wanted to go to a Colts game, I could go online, make an advance on my credit card, put it in my checking account, and pull the cash from the ATM outside the stadium. “In 1999 most institutions’ credit cards didn’t talk with anything. ATMs were updated at the end of the business day for the next day’s business. If anything happened on a Sunday, nobody would see it until Tuesday. “We had real-time connectivity from day one, and it worked. That’s why our customers got on board. Once customers got on board, they told others. A sign on David Becker’s door reads,“While you debated whether the glass is empty or full, I SOLD IT. – Cheers,The Entrepreneur.” Modular work spaces, instead of teller windows or other traditional banking stations, fill the offices of First Internet Bank of Indiana. Continued from page 11.
13 Hoosier Banker March 2015 “We spent $7.5 million upfront on marketing, but now we only need to spend a fraction of that. Over the last couple of years, we’ve had growth at a compounded annual rate of 30 percent. Viral marketing has really kicked in.” What have been the misconceptions about Internet banks? “Our customers had confidence from the start, but there were some questions driven by traditional banks. In the first couple of years, our customers would try to cash First IB checks and were told that the checks weren’t real. But most of those issues have gone by the wayside. Consumers have become educated over the years to recognize that the Internet is a viable channel. “When we launched, the only drawback to customers was that if they needed coin and currency, we couldn’t provide it at that time. A customer could get cash from ATMs, or could mail us a check. But nowadays, they can snap a photo of a check and email it to us, so even the issue of getting money to us has been electronically solved.” What are the advantages to customers in banking with an Internet bank? “By far the best advantage to the customer is low-to-no fees, high interest rates on deposits and a below-market rate on the loan side. We don’t have the overhead costs that traditional banks have. “Right now our money market account pays 80 basis points, and I think the national average is 10 for banks all across the country, so our customers are getting eight times the return on their money, with no monthly service fee. “Also being able to real-time selfservice is a strength. Our customers see check images. They’ve got realtime transactions. If I go to Sam’s Club on Saturday, as I swipe my debit card, the transaction is posted to my account. “We give consumers immediate access to their funds, because everything is posted in a real-time environment. Our bank has no risk if a customer wipes out an account, because we’re not posting off of balance files. “Customers can move money seamlessly. They become their own private bankers.” What is the profile of your typical customer? “Surprisingly the average customer in the early stages was a career-established, male road warrior who was tech-savvy and who wanted the convenience of banking 24 hours a day, seven days a week, anywhere in the world. “Today most of our customers are still the road warriors ‒ living out of suitcases and not available during traditional banking hours ‒ or the self-employed. We have a lot of doctors, dentists and attorneys who run their own businesses. “Our average credit score per customer is a 770. If we’ve had any kind of Achilles heel with our customer base, it’s that we have the folks who don’t need to borrow money. They already have cars, houses, credit cards and connections. “But we get all their deposits, and most of them have children. We have picked up a phenomenal amount of accounts through their family ties.” How does First Internet Bank address cybersecurity? “We have built in multiple systems that monitor customer activity. For example if my debit card pops up at a gas pump, and I’ve never before used my debit card to make a gasoline Family photos are front and center in David Becker’s work area. Continued on page 14. David Becker and First Internet team members wore corporate-color ties to ring the opening bell on NASDAQ in 2013.“That’s about the only time I’ve worn a tie in 16 years,” says Becker.
14 Hoosier Banker March 2015 transaction, then we’ll put a soft block on the account, due to activity outside normal habits and patterns. “We use a lot of intelligence to track activities on consumers’ accounts. We also conduct extensive external penetration tests and security tests.” First IB has been recognized twice by American Banker magazine as one of the best banks to work for in the nation, and also has been honored as a Top Workplace by The Indianapolis Star. What accounts for these honors? “This company was seeded with great people. They work hard, and we expect a lot of our employees, but we also give a lot of flexibility. That’s what makes us a fun place to work. “Folks who like change and opportunity fit in well here. We give people the opportunity to perform at their best and to rethink how things are being done. We have an onboarding day for new employees, Hear why David Becker, chairman and CEO of First Internet Bank, encourages staff to share STEM expertise (science, technology, engineering and math) face-to-face with underserved students. To view a brief video, go to Hoosier Banker Digital at indianabankers.org, and click on the red YouTube arrow. t Face-to-Face With STEM Opportunities Video Bonus: and I tell them that our only constant is change. We reinvent and rethink, and everything’s up for grabs. “We have a very relaxed work atmosphere. We don’t have much outside customer interaction, apart from loan officers who meet with clients, so for most us the coat and tie isn’t a necessity. You can wear blue jeans five days a week here, if you want to. “We also encourage community activities and fundraising. We participate in the corporate challenge of the Indiana Sports Corporation. We do a lot of the Komen Race for the Cure events. We adopt families at Christmastime. “We’re a big supporter of the STEM mentoring initiative here in Indianapolis, helping expose underprivileged children to science, technology, engineering and math to get their career paths in play. “The community has been very nice to me over the years, and our employees have done fantastic work. I feel it’s my responsibility to give back to the community and to the folks who make me look good. Without them, I wouldn’t be here.” What do you enjoy doing when you are away from work? “I blow away cobwebs by riding motorcycles and shooting photography. I run around the countryside on a two-wheeler and take pictures, and also take photos while traveling with family. “I love to travel, my wife Christy loves to travel, and our children have been all over the world, seeing and experiencing great things. We’ve been fortunate. “Our five children – Christy and I have two, and I have three children from a prior marriage – have sailed along the Turkish coastline and Continued from page 13. David Becker was granted the prestigious Lifetime Achievement Award in Mentoring in February 2015 by College Mentors for Kids. hiked through the mountains of Guatemala. Last spring we went to the Dominican Republic to build a home for a disadvantaged family. “My children loved the mission trip in the Dominican Republic, and they appreciated seeing the other side. When we left, my son gave the neighborhood kids a Frisbee he’d brought along. One little girl had tears in her eyes over the gift, and my son was deeply moved.” How do you define success? “My definition of success is to make people happy. It can be from the customer level to the employee level to the ‘play.’ I get pumped when other folks get pumped. “It’s been that simple for me from the beginning of time. I grew up in Monrovia, Indiana. I went to a rural school with 72 kids in my graduating class. Four of us went to college, and I was the first in my family to go to college. “I feel fortunate to have had a lot of success. I’ve worked, no question about it, but to me the real success is in making others happy and giving them the chance to enjoy what they’re doing. Just seeing a smile on somebody’s face is all the success I need.” t
15 Hoosier Banker March 2015 Jerry Sutherin has joined Young & Associates Inc., Kent, Ohio, as senior consultant, lending and loan review division. He has 28 years of financial services experience. Sutherin earned a bachelor’s degree from Kent State University and an MBA from the University of Steubenville. Additionally he has national loan review certification from the Bank Administration Institute and is a graduate of the Stonier Graduate School of Banking. Thomas Papenthien has retired as president and chief executive officer of Bankers’ Bank, Madison, Wisconsin. He joined the organization in 1992 and was promoted to his most recent position in 2011. Edith Tholo has been named interim president and CEO. She began her banking career in 1971 and joined Bankers’ Bank in 1981. Tholo completed the Graduate School of Banking at the University of Wisconsin. Welcome, New Members The Indiana Bankers Association welcomes the following companies to the IBA network as associate members. For more information about the benefits of associate membership, please contact Rod Lasley at 317-387-9380, email: rlasley@indianabankers.org. Frost Brown Todd LLC Beau Zoeller, 317-237-3983 frostbrowntodd.com Frost Brown Todd represents numerous regional and local bank holding companies, state and national, thrift holding companies, thrifts and other financial institutions. Its lawyers share experience in purchases or divestitures of branches and related assets, and in the development of strategic plans for growth and consolidation. Multiguard Corporation Blake Wallis, 317-844-8116 multiguard.com Multiguard Corporation designs, installs and monitors security and life safety systems. Its systems include intrusion detection, hold-up alarms, fire alarms, video surveillance, access control and mass notification systems. Services include consulting, design and engineering, installation, service, inspection and test, UL/FM monitoring and hosted access control. NetGain Technologies Brendan Jacobson, 859-226-1927 netgainit.com NetGain Technologies helps financial industry organizations with managed IT services by augmenting their IT departments. In business since 1984, NetGain Technologies’ exceptional customer service helps prepare clients to navigate the rapid changes in today’s business landscape. New Independent Insurance Kerriann Barger, 812-256-7100 newwashbank.com New Independent Insurance is a subsidiary of The New Washington State Bank, Charlestown, an IBA-member bank. Through contacts with the Indiana AssociAte MeMbers’ corner News from IBA’s valued associate members Bankers Association, the company’s focus is to be a wholesale agent for crop insurance and forced-place insurance. Other product offerings include life insurance and pet insurance. PIN Financial LLC Tobin Senefeld, 317-819-8440 pinfinancial.com PIN Financial LLC provides investment banking and financial advisory services. RKG Financial Services Inc. Kurt Glore, 317-802-7207 RKG Financial Services Inc. specializes in maximizing the recovery of conventional business loans, SBAguaranteed business loans, commercial real estate loans and bank OREO. The company is a contractually outsourced provider of asset management, liquidation services, litigation services and external reporting services for clients’ troubled assets. t
16 Hoosier Banker March 2015 LENDING / CREDIT Section 9-509(d)(1) of the Uniform Commercial Code (UCC) provides that a UCC-3 termination statement is effective only if “the secured party of record authorizes the filing.” Interpreting this language, the Delaware Supreme Court held that a UCC-3 termination statement was authorized by and effective against a secured party, despite the undisputed fact that the termination statement was prepared by mistake, and the secured party did not intend to release its security interest.* This case presents a cautionary tale to lenders to take great care in the preparation and filing of UCC documents. Factual and Procedural Background The lending institution (Lender), as administrative agent for a syndicate of lenders, made two separate and unrelated loans to an automotive company (Borrower): • The first was a $300 million loan made in October 2001 related to a synthetic lease financing transaction (Loan 1). To perfect its security interest in the collateral granted by the Borrower to secure Loan 1 (primarily real estate), the Lender filed two UCC-1 financing statements with the Delaware Secretary of State. • The second was a $1.5 billion term loan made five years later (Loan 2). To perfect its security interest in the collateral granted by the Borrower to secure Loan 2 (primarily equipment and fixtures at 42 facilities of the automotive company), the Lender filed a third UCC-1 financing statement with the Delaware Secretary of State. In September 2008, the Borrower informed its counsel that it intended to repay Loan 1 and requested its counsel to prepare all documents necessary for the Lender to be repaid and to release the collateral securing Loan 1. A closing checklist was prepared by counsel for the Borrower that erroneously identified all three UCC-1s filed in Delaware, including the UCC-1 for Loan 2, to be terminated as part of the closing. In addition, the Borrower’s counsel prepared draft UCC-3 termination statements for all UCC-1s filed in Delaware, including the UCC-1 for Loan 2. Although copies of the closing checklist and draft UCC-3 termination statements were circulated to the Borrower, the Lender and both of their counsels, the mistake was not discovered. An escrow agreement was drafted as part of the closing authorizing the escrow agent to terminate all three UCC-1s, including the UCC-1 for Loan 2, once the Borrower repaid the amount due on Loan 1. The escrow agreement was approved by the Lender’s counsel and signed. On Oct. 30, 2008, the Borrower repaid Loan 1; all three UCC-1s filed in Delaware, including the UCC-1 for Loan 2, were terminated. The mistake went unnoticed until the Borrower filed a chapter 11 bankruptcy petition in 2009, after which the Lender notified the unsecured creditors’ committee of the Borrower (Committee) that the UCC-3 termination statement related to Loan 2 had been inadvertently filed. The Lender explained that it had intended to terminate only liens related to Loan 1 and stated that the filing was therefore unauthorized and ineffective under the UCC. On July 31, 2009, the Committee commenced an adversary proceeding against the Lender seeking a determination that, despite the error, About the Author Whitney L. Mosby is a partner with Bingham Greenebaum Doll LLP. She joined the firm in 2002 and specializes in bankruptcy and creditor/debtor rights. A volunteer and supporter of Coburn Place, Mosby is a graduate of Indiana University, where she earned undergraduate and JD degrees. The author can be reached at 317-968-5469, email: WMosby@ bgdlegal.com. Bingham Greenebaum Doll LLP is an associate member of the Indiana Bankers Association. Lender Beware: Secured Party Held Accountable for Mistaken Release of Financing Statement
17 Hoosier Banker March 2015 the UCC-3 termination statement was effective and rendered the Lender an unsecured creditor on par with all other unsecured creditors of the Borrower. The Lender countered that the UCC-3 termination statement was unauthorized and therefore ineffective, because neither the Lender, the Borrower, nor their law firms had intended that the UCC-1 for Loan 2 be terminated. The bankruptcy court agreed with the Lender and concluded that the UCC-3 termination statement was unauthorized and therefore not effective to terminate the security interest granted for Loan 2. Appeal to the Second Circuit On appeal to the Second Circuit, the parties offered competing interpretations of the meaning of the term “authorized” under 9-509(d) (1) of the UCC. While the Lender focused on the parties’ subjective intent, the Committee focused on the Lender’s act of authorizing the filing of the UCC-3 – even if by mistake. The Second Circuit identified the two issues before it as: (1) what precisely must a secured lender of record “authorize” for a UCC-3 termination statement to be effective; and (2) whether the Lender had granted such authority. Regarding the first question, the Second Circuit certified the question to the Delaware Supreme Court. The Delaware Supreme Court held that, for a termination statement to become effective, it is enough that the secured party authorizes the filing to be made – the UCC does not require that a secured party that authorizes a filing subjectively intends or otherwise understands the effect of the plain terms of its own filing. The Delaware Supreme Court reasoned that, if parties could be relieved from the legal consequences of their mistaken filings, they would have little incentive to ensure the accuracy of the information contained in their UCC filings. As to the second question, the Second Circuit found that, although *The case discussed in this article is Official Committee of Unsecured Creditors of Motors Liquidation Company v. JPMorgan Chase Bank, N.A., 2015 U.S.App. LEXIS 859 (2nd Cir. Jan. 21, 2015). the Lender had never intended to terminate the UCC-1 securing Loan 2, it indeed authorized the filing of a UCC-3 termination statement that had that effect. The Second Circuit reversed the bankruptcy court’s entry of judgment in favor of the Lender and remanded with instructions to enter judgment in favor of the Committee as to the termination of the UCC-1 securing Loan 2. Practice Pointers The lesson of this case for secured lenders is that great care must be taken in the preparation and filing of UCC forms. Secured parties will be held accountable for authorized filings, even if made by mistake. The best practice for secured lenders is to take sole responsibility for completing and filing all UCC forms to avoid these harsh results. t Martin Padgett, president and chief executive officer of Clark Memorial Hospital, has been appointed to the board of directors of First Savings Bank, Clarksville. He has 23 years of health care administration. Padgett is a fellow in the American College of Health Care Executives, board chairman of the Indiana Hospital Association and YMCA Southern Indiana, and board vice president of Healthcare Financial Management Association. He also serves on the boards of the American Red Cross, Family Health Clinic of Southern Indiana and the American Heart Association. He is a member of the American Institute of CPAs, the American College of Healthcare Executives and Rotary Club of Jeffersonville. Padgett earned a bachelor’s degree from the University of Kentucky and an MBA from Morehead State University. Phillip J. Keller has been appointed to the board of directors of Community Bank Shares of Indiana Inc., holding company for Your Community Bank, New Albany, and The Scott County State Bank, Scottsburg. He has 26 years of finance and accounting experience and previously served as board member for First Financial Service Corp., Elizabethtown, Kentucky. A graduate of Loyola University of Chicago, Keller is senior vice president of finance and chief financial officer of RehabCare, and serves on the board for WellSpring. Daniel H. Ford has been appointed chairman of the board for Crossroads Bank, Wabash, and FFW Corporation. He replaces former chairman J. Stanley Myers, who continues to serve on the board through September. Ford joined the bank board in 2005; he also is a director of Ford Meter Box Company and chairman of the Ford Meter Box Foundation. He is president of the Charley Creek Foundation, a board member of the Wabash County YMCA and past president of the Wabash Rotary Club. Ford is a graduate of Purdue University. t FroM the boArd rooM
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