INSIDE Greg Maxwell, Farmers State Bank, Mentone, combines banking with boating and fiddling pastimes. Story on page 10. Hoosier Banker MAY 2015
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Indiana Bankers Association Officers, Directors & Staff IBA Officers Chairman ...................................................... Larry W. Myers, First Savings Bank, Clarksville First Vice Chairman ............................... Michael H. Head, First Federal Savings Bank, Evansville Second Vice 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 Executive Vice President .............................................................. Paul W. Freeman, CAE Senior Vice 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. 5 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 GREG MAXWELL: FINE-TUNED BANKER FEATURES 6 PRESIDENT’S PONDERINGS S. Joe DeHaven, IBA 8 BOARD REVIEW Tim Massey, BMO Harris Bank, Indianapolis 9 IBA CALENDAR OF EVENTS GR SPOTLIGHT 14 FLD HOSTS SUCCESSFUL ‘DAY AT THE STATEHOUSE’ Dax Denton, IBA DIRECTORS / SENIOR MANAGEMENT 18 HOW MUCH PORTFOLIO RISK IS TOO MUCH? Lester F. Murray,The Baker Group OPERATIONS / TECHNOLOGY 20 MASTERYOUR .BANK DOMAIN: SIX STEPS TO SUCCESS 26 ISYOUR BANK ON TOP OF CYBERSECURITY? Joseph Oleksak, Plante Moran PSP SHOWCASE 22 BE A PART OF THE COMMUNITY ...THE ELECTRONIC COMMUNITY, SOCIAL MEDIA! Rod Lasley, IBA HUMAN RESOURCES 24 BANKS SHOULD TAKE A CAREFUL LOOK AT EMPLOYMENT CONTRACTS Mark R.Waterfill, Benesch Friedlander Coplan & Aronoff LLP DEPARTMENTS 12 VIDEO BONUS 16 COMPLIANCE CONNECTION Larry C.Tomlin, Krieg DeVault LLP 17 HONORABLE MENTIONS 19 A+ BANKER 19 ANNIVERSARY MILESTONES 23 BANKING ON COMMUNITY 27 ASSOCIATE MEMBERS' CORNER 28 BANKERS ON THE MOVE 30 ADVERTISERS INDEX 5 Hoosier Banker May 2015 Gregory Maxwell is president and chief executive officer of Farmers State Bank, Mentone.
6 Hoosier Banker May 2015 On Feb. 9, Marshall Lux and Robert Greene of the MossavarRahmani Center for Business and Government, John F. Kennedy School of Government, Harvard University, released a working paper titled, “The State and Fate of Community Banking.” It is a fairly short and to-thepoint study of community banking in three distinct timeframes: (1) prior to the financial crisis; (2) during the financial crisis, but before the enactment of the Dodd-Frank Act (DFA); and (3) postDFA. The paper verifies much of what I and many others have written over the past eight years. It delves much deeper than I ever have, due to extensive research to glean ample facts and data, and to break down the data into three time frames. The United States, as I have often stated, is the most powerful economic engine ever on earth. Much of its strength is due to our unique financial services system that provides access to international banks, national banks, regional banks and community banks. I attribute our economic success to this diversified system of financial product delivery and choice, because the United States is the only country on earth to offer such a diversified system. I also have fretted, frequently, that this delicately balanced system is in jeopardy. Years ago I adopted a belief that the community banking system in the United States could and would adapt to anything thrown at it, except for one possible fate … it could be destroyed overnight by a stroke of the pen in Washington, DC. Congress and the presidential administration, I fear, could layer on so many suffocating requirements that community banking, and perhaps all banking, could no longer be conducted profitably. A reading of the Lux/ Greene research paper makes a sound case that DFA may have been the stroke of the pen that make it impossible for community banks to make a profit. It is not too late, however, to make the changes necessary to ease the burden on community banks, so that our unique and delicate balance of financial services can continue to be delivered profitably for all levels of providers. The paper concludes that many provisions in Dodd-Frank should not be applicable to community banks, and it provides excellent data to support this conclusion. The changes needed will require a boldness and leadership from Congress that we have seldom witnessed in the past few years. Leaders are required to look far into the future and guide us onto the appropriate path, so that those values we all share will continue to prevail. What is at stake is the very existence of our system of government and economic success. FEATURE President’s Ponderings S. Joe DeHaven, President & Chief Executive Officer, Indiana Bankers Association Community banks provide over 75 percent of agricultural lending, over half of small business lending and about 25 percent of residential real estate lending. Yet the number of community banks continues to dwindle at an alarming pace ‒ a pace that has quickened since the passage of Dodd-Frank. Community banks serve customers in urban, suburban and rural areas, but it is in the rural and agricultural areas that they are the dominant providers. Access to credit for the businesses in these areas would decline substantially without the presence of community banks. It is past time to review the rules promulgated as a result of DFA. There has only been one new bank charter approved in the United States in the past five years .While I believe it is important for new banks to be adequately capitalized, the restrictive rules ‒ 32 percent of which are from DFA ‒ have gone far beyond what is necessary for a safe and sound system to supply capital that creates jobs and finances dreams. I recommend that you read this excellent paper by Lux and Greene and come to your own conclusions. Let me know what you think, and how the Indiana Bankers Association can help you in your quest to continue to serve your communities. * Available at: www.hks.harvard.edu/centers/mrcbg/publications/awp/awp37 “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.” ‒ U.S. Congressman Marlin Stutzman, July 2014 Hoosier Banker Join your peers Sept. 27-29 to make your voice heard in Washington, D.C.Visit your elected officials in the House and Senate, and benefit from informative briefings by the American Bankers Association, Independent Community Bankers of America and regulatory agencies. Trip details forthcoming. For questions, contact Josh Myers at 317-917-8047, email: jmyers@indianabankers.org. g Save the Dates g 2015 IBA Annual Washington Trip September 27-29
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8 Hoosier Banker May 2015 Dear Fellow Bankers: Thank you for electing me to serve on the Indiana Bankers Association board of directors. Since Jan. 1, it has been my honor to serve as IBA’s first “non-Indiana headquartered bank director,” a seat created to represent IBA-member banks that are domiciled out-of-state. My bank title is regional president/ Indiana of BMO Harris Bank, Indianapolis, headquartered in Chicago. My direct responsibilities are for business banking in the Midwest region — defined as Indiana, Missouri and Kansas — dealing with companies’ credit needs in the range of $1 million to $15 million. Additionally I have resident responsibilities for coordinating all of our in-state lines, including retail, corporate banking, private client group, real estate, etc., so that we can achieve our regional goals. I became a banker 35 years ago, starting in Texas. I had just finished my degree in business administration at Indiana University in 1980, at a time when interest rates were very high … meaning few job prospects in the Midwest. At the same time, Texas was enjoying a strong economy, due to high oil prices. So I searched out west and landed a position with Texas Commerce Bank in Houston. It was a good opportunity and a wonderful learning experience, but I knew I wanted to come back to my home state of Indiana. I stayed in Texas for a couple of years, then joined Merchants National Bank in Indianapolis, thanks to guidance from Don Tanselle, then president of the bank. At Merchants, after some training in management and commercial lending, I gained experience in commercial real estate, private banking and corporate banking. Later I worked with the bank’s group of affiliate banks outside of Marion County. I remained with Merchants for 18 years. Next I joined Irwin Union Bank, where I ran the Indianapolis market for five years. At that point I joined First Indiana Bank as chief lending officer. First Indiana later merged into M&I Bank, which later was sold to BMO Harris Bank, and here I am today. Along the way, I gained some additional education through Butler University, where I completed an MBA, and the ABA Stonier Graduate School of Banking. Banking as a career felt like a natural choice to me. My father, Jim Massey, had been in banking for decades, and he also was with Merchants National Bank. My father retired from banking when Merchants was acquired by National City Bank; he was serving as chief executive officer at the time. What I enjoy most about banking is building relationships with customers and helping them along a bit with their success. Recently some colleagues and I called on a business customer that has grown its sales revenues from $8 million in 2008, at the worst part of the economic downturn, to $30 million today. It felt good to talk about profitability and the number of jobs this company has added to Indiana. Another customer-connection example is a first-time homebuyer who called me not long ago. She had been saving for five years for a house, was getting ready to close, but then felt nervous. She called to ask if her 3.625 percent, 30-year fixed rate was good. I talked her through the details, and she became much more confident. It felt good to help. Of course, a main rule in banking is to give back to the community through service. I believe in what Winston Churchill said: “We make a living by what we get, but we make a life by what we give.” Community outreach is not only the right thing to do, but it helps our industry. Banks are only as vibrant as the communities they serve. Some of the organizations I am active with are the Greater Indianapolis Chamber of Commerce, the Indianapolis Neighborhood Housing Partnership, LYNX Capital Corp. and Downtown Indy. I have also served on the board of Child Advocates, which works with CASA (court-appointed special advocates). My wife Helene volunteers as a child advocate and is very dedicated. Another form of outreach is serving as a member of the IBA board of directors. When Joe DeHaven asked me last year to consider joining the board to represent larger banks, I accepted, because I have a lot of respect for Joe and the IBA. That respect has grown since joining the board; I hadn’t realized before how impactful the IBA is to all the banks statewide, especially compared to other associations around the country. IBA has a significant impact on our banking community. My home life is as pleasant as my work life. Helene and I have been married for 33 years. We have two grown sons, both working as consultants, one in Atlanta and one in Washington, DC. We raised our family in Carmel, where I grew up and both of my parents grew up. Helene, in addition to volunteer work, runs a bridal shop with a partner in Indianapolis. She says the nice thing about her work is that everybody is happy. That makes her happy, too. In my time away from banking, I enjoy relaxing through golf. I have a regular group of friends I golf with, and we play in all kinds of weather. If it’s cold out, we dress warm and walk fast. Aside from home and golf, work is a pleasure, too. I feel privileged to hear how people’s businesses are going, and what business owners are passionate about, especially when they have built their own businesses. I’m happy to be some small part of their work success, and very glad to be serving on the IBA board. FEATURE Board Review Tim Massey, IBA Non-Indiana Headquartered Bank Director BMO Harris Bank, Indianapolis
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 May 2015 Alternative Delivery Channels … Available at your convenience via Webinar, CD-ROM or On-Demand Train the Trainer: Plans, Programs and Processes That Work May 5 - IBA Center Senior Retail Lender Forum May 6 - IBA Center IBA Mega Conference May 11-13 - Indiana Convention Center Community Bankers for Compliance Series: Session 2 - Integrated Disclosures May 18 - Courtyard by Marriott, Fort Wayne May 19 - IBA Center May 20 - 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 What You Should Know About Legal Collections and Bankruptcy June 9 - 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 Essentials 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 IBA Leadership Development Program: Session 3 - Limitations Are Self-Imposed Aug. 19-20 - Wooded Glen Executive Retreat & Conference Center, Henryville Essentials of Banking: Session 4 - Lending, Bank Investments and Bank Performance Aug. 26 – IBA Center Advanced Agricultural Lenders Conference -Strategic Marketing and Planning Sept. 2-3 - Best Western Lafayette Internal Technical Assessments Sept. 3 - IBA Center Senior Retail Banking Forum Sept. 9 - IBA Center State of Indiana Safe Deposit Operations 2015 Guidelines and Update Sept. 10 - IBA Center Call Report Preparation Sept. 17-18 - IBA Center Indiana Deposit Account Administration Sept. 22 - Best Western Plus, New Albany Sept. 23 - IBA Center Annual Security Management Seminar Sept. 22 - IBA Center Risk Management Officer Forum Sept. 24 - IBA Center Advanced Credit Analyst School Sept. 24-25 - IBA Center Mortgage Lending School Sept. 29-Oct. 1 - IBA Center CBC Compliance Schools - Lending Compliance School Oct. 5-8 – IBA Center - Deposit/Operations Compliance School Nov. 4-5 – IBA Center Chief Financial Officer Forum Oct. 6 - Group 1 - IBA Center Oct. 9 - Group 2 - IBA Center Senior Lender Forum Oct. 7 - Group 1 - IBA Center Oct. 8 - Group 2 - IBA Center Annual IT Security and Risk Management Conference Oct. 7-8 – Rising Star Resort, Rising Sun 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 - Bulletproof Your Loan Portfolio May 6 - Opening New Accounts III:Trust and Minor Accounts May 7 - Director Series: Regulator and Industry Hot Buttons for Directors May 7 - Start Coaching, and Stop Hovering Over the Branch May 8 - BSA Series: Part II - GrowingYour CDD Questionnaire for Business Accounts May 11 - For Sales Managers:Why Aren’tYour Salespeople Selling? May 12 - Duties of the Board Secretary: Fundamentals, Best Practices and E-Package Delivery May 12 - Improving Employee Performance in Everyday Work Situations and Reviews May 12 - What to Do When a Customers Dies May 13 - HMDA Reporting Mistakes May 13 - Home Equity, HELOC and Second-Lien Risk Management, Including Maturing HELOC Guidance May 14 - Dealing With Casual Days, Dress Codes and Work Appearance May 14 - IRA Series: IRA Death Distributions - Beneficiary Options and Tax Consequences May 14 - RC-C Loan Codes for Call Report May 15 - Excel Explained: Introduction to Spreadsheets May 15 - The FFIEC’s New Appendix J on Outsourced Technology Services: Required Actions,Vendor Management and Business Continuity Expectations May 18 - Developing and Organizing an Effective Remote Deposit Capture Program (RDC) May 19 - Wire Transfer Compliance:Who Is Liable? May 19 - Calculating and Maintaining the Allowance for Loan and Lease Losses May 20 - Mortgage Loan Originator Required Training Series - Part 1 May 20 -You’re the New HR Officer ... Now What? May 21 - Advanced ACH Specialist Series:ACH Death Notification Entries (DNEs) and Reclamations:Your Bank’s Liability May 27 - The ALLL in Troubled Debt Restructuring: Identifying and Accounting for Impaired Loans May 28 - Handling Difficult Customers: Effectively Dealing with Intimidation, Negativism and Anger May 29 - Testing Loan Audit Procedures for Integrated Disclosure Compliance Before Aug. 1 Deadline June 2 - Collection Call Techniques: Compliant Telephone Scripts and Responses June 2 - CRA Nuts and Bolts June 2 - Seven Habits of Effective Credit Administration in Commercial Banks June 3 - Advanced Business Accounts June 3 - Compliance Rules Lenders Must Know June 4 - Commercial Appraisal Review Part 1: Income Approach June 9 - Basic Underwriting June 9 - Excel Explained: Minimize Spreadsheet Errors June 9 - Mastering the SBA 7a Loan Part 1: Eligibility and Program Requirements June 10 - Teller Compliance Issues: UCC 3 and 4, CTRs and Reg. CC June 10 - Employment Records and How to Keep Them June 11 - Countdown to the Integrated Disclosure, Deadline Aug. 1 June 11 - Ten ThingsYou Should Look for When Analyzing Balance Sheets June 16 - Analyzing Start-up Businesses June 16 - Properly Handling Fiduciary Accounts: Authority, Ownership, Access and Liability June 17 - Using the New Fannie Mae Collateral Underwriter for Mortgages June 18 - Dealing With Appraisals June 18 - When a Borrower Dies: Next Steps and Best Practices June 23 - From Frontline to Teller Supervisor: Developing Skills and Making a Smooth Transition June 23 - Cybersecurity and the FFIEC Expectations June 23 - What If Employee Engagement Actually Mattered?
10 Hoosier Banker May 2015 Gregory Maxwell, 64, is president and chief executive officer of Farmers State Bank, Mentone. He was named to his position in 2006 after 25 years of prior experience in Bluffton, including positions as president of The Old First National Bank and agricultural executive with National City Bank. He began his banking career in 1972 with Rush County National Bank. Currently Maxwell serves as northeast region director of the board of directors of the Indiana Bankers Association. He also is a member of the Warsaw Rotary Club and is immediate past chairman of the Kosciusko Economic Development Corp. He is a graduate of Ball State University and of the Graduate School of Banking at the University of Wisconsin, and a COVER STORY Greg Maxwell works primarily out of the Warsaw office of Farmers State Bank, Mentone. Greg Maxwell: Fine-Tuned Banker member of the IBA Forty Year Club. Hoosier Banker recently interviewed Greg Maxwell in his office in Warsaw. How does your role as president/ CEO of Farmers State Bank mesh with the responsibilities of your management team? “My role is being supportive of our team and keeping the entirety of the group focused on our strategy, with guidance from our board of directors. I am blessed with a great team of executives, each with vast experience and technical knowledge of their areas. “I am supportive mainly through one-on-one communication. Each member of our team has a distinct function, so they don’t necessarily communicate with each other on a regular basis. The IT department has a different focus than the credit department or branch administration, for example. “However they all communicate frequently with me, so I act as the central hub. The first thing I do every Monday morning is make contact with each team member. Then, as needed, we all meet together, often by call-in number. “Even though we’re a small bank, we operate in a geographically dispersed area, with five locations spread throughout Kosciusko County. We have a standard call-in system that we can use for meetings and committees. “Our management team members are: Mike Walters, ag banker and sales manager; Lindy Breeden, chief credit officer and market manager of our Mentone location; Rebecca Woodward, branch administrator and market manager of our east center branch in Warsaw; Mike Shade, information security officer and IT head of operations; and Jim McFadden, our chief financial officer. “Most have more than one role, since we are a small bank. Also as a small bank, we face the profitability challenge of having to provide compliance, IT and all the other regulatory requirements that a much larger bank provides. To justify our cost structure, we make sure we are continuing to grow our financial value. “We are a high-performing bank, thanks to outstanding staff and very strong direction from our board. Out of 120 banks in Indiana, we’re ranked 18th overall, fourth in asset quality. I am very proud of our team.” What drew you to banking as a career? “I was extremely lucky, because I had no particular career plan. Shortly after I came out of Ball State University, I got a call from a friend who worked for Rush County National Bank in Rushville. The bank was looking for someone to help in the installment loan department as a collector. “So I joined the bank and started out in collections, which is where everybody started at that time. I went through general training to gain experience as a bookkeeper and a teller, and then I had the opportunity to start making loans.
11 Hoosier Banker May 2015 Continued on page 12. “I remained with the bank for about five years, then spent five years with Farm Credit Services in Bluffton. Finally, I came here to Farmers State Bank in December 2006. For all intents and purposes, I began in January 2007, with help from a very supportive board of directors. “My entry into banking may not have been planned, but I soon found that I liked dealing with people and helping them with their financial decision-making. There is an intimate nature to the financial relationship bankers have with customers, and it’s very fulfilling. When a customer wants my counsel, nothing makes me happier.” How has your agricultural banking background influenced you? “Ag banking taught me the financial value of a balance sheet. Nothing takes the place of a strong balance sheet for an ag customer, and that translates well to banking. “A good, strong bank can have tough earnings years, but it will still survive based on the strength of its balance sheet. A bank that doesn’t have adequate capital and is not profitable will not last long in hard times. So the more capital you have, the more resilient you can be when times are tough. “Farmers, too, are balance-sheet strong, which they need to be in order to accommodate long economic cycles. Most businesses have an economic cycle of a month. A shoe store, for example, will buy shoes, sell shoes, and measure profits every month. Most businesses, including banks, are the same. How did this month measure up, compared to last month? “But with farmers, especially grain farmers, it’s annual. The cycle of planting, harvesting and selling takes a year. So while most companies can withstand a bad month by making adjustments, they would struggle with a bad year. A farmer might have a bad year, and will need to make adjustments, but also relies on a strong balance sheet to survive. “I was raised in the Rushville area, a farm community. My father was a district sales manager with MoorMan’s Feed Company, where he worked for 40 years.” Why do you devote time to serving on the IBA board of directors? “Other than a few large banks in Indiana, most of the headquartered banks are small and need the functional areas of support the IBA has to offer. Education/training, compliance, are just a few of the areas of the Association we use. Also the networking opportunities, not only for me, but for our other executives, are developed and flourish within the IBA. “While banks of our size, especially, need the Association, I’m glad to see that the large banks in Indiana are returning to membership. Most of them have their own training departments, and their own compliance department and other functionality, but I believe they are coming back to the IBA because of its successful lobbying. “I previously served on the IBA board about 15 years ago, shortly after the merger with the Indiana League of Savings Institutions. The difference that I see in the IBA now is that the IBA is everything that it used to be, but with a much more powerful lobbying presence. “Under the leadership of Joe DeHaven as CEO and Amber Van Til as head of government relations, IBA has become very successful in representing banking in the political arena. I credit that as the reason some of the larger banks are coming back; IBA speaks for the full banking industry. “Personally, I’m not that political, but I understand the importance of advocacy. Last year I went on the Annual IBA Washington Trip, and it was enlightening. I’ll probably go again this year.” Please describe family life, both past and present. “My wife Julie and I have four children and 10 grandchildren, ranging in age from 1 to 21. We enjoy the relationships we have with them and see most of them at least monthly. “My wife is now retired from a teaching career, and we are enjoying Frequent communications keep Greg Maxwell in touch with his “great team of executives.” Shown are (left to right): Jim McFadden, chief financial officer; Mike Shade, information security officer and IT head of operations; Rebecca Woodward, branch administrator and market manager, east center branch, Warsaw; Lindy Breeden, chief credit officer and Mentone location market manager; Mike Walters, ag banker and sales manager; Greg Maxwell. Kristi Manwaring, assistant vice president and market manager, chats with Greg Maxwell.
12 Hoosier Banker May 2015 Video Bonus: A Banker’s Musical Interlude empty nesting. She stays busy visiting grandchildren, and she does a great job taking care of our home.” What other people or influences have shaped you? “My parents, Jim and Margaret Maxwell, have been the strongest influences in my life. By their example, they taught me and my sisters that we could work hard to do what we want. They instilled in us independence and self-reliance. Dad is now 87 and Mom is 85, and they are both doing remarkably well. “I also have been lucky to learn various business models within banking and finance. I learned ag finance while working at Farm Credit. I learned community banking from the best at Old First/ Fort Wayne National. I learned about the business of banking and process management at National City Bank. “Here at Farmers State Bank, I’ve relearned the value of tradition and reliability. I have been positively influenced by many people in my career, but the most gratitude is for the individuals who gave me my banking opportunities: Dean Milligan and Lloyd Griffis at OFNB; Paul Shaffer, Jim Johnston and Mike Eikenberry at FWNC; and the board of directors of Farmers State Bank, who entrusted me to guide their bank.” You have several hobbies, including boating and playing the fiddle. How do these activities fit into your schedule? “My hobbies have always been passions. When I pick something up as a hobby, I’m ‘all-in.’ “Boating started with a 16-foot runabout purchased from my fatherin-law and, with several step-ups in between, we now have a cruising boat named ‘Maxwell House’ on Lake Michigan. I’m delighted to see gas prices going down. “Lake Michigan is our summer weekend place and usually the site of a summer vacation cruise. It’s a nice way to spend time with children and grandchildren. “Fiddling is something I took up when I first came here to Farmers State Bank. Julie was still in Bluffton, finishing up her teaching career, so we were together only on weekends. On weeknights I was by myself. I’m not much for watching TV, so I decided to try to play the fiddle again, at age 56. “I had tried briefly in the early ’80s, but back then we were busy taking care of our family, and it didn’t work out. This time I took lessons and also made use of teaching aids made available through the digital age. I could listen to CDs, watch YouTube and use other teaching aids, in addition to the lessons I took. “Now that I have started playing music, I enjoy it year round, almost every weekend. I’m what you call a ‘jammer.’ I go to jams on weekends, all over the state. “There is not a day that passes that I don’t pick up the fiddle and play a Continued from page 11. tune, usually for an hour or more. I never consider it practice, just fun. Most of all, I enjoy playing with others, because I sound the best when I am playing with the best musicians.” You have said that Kosciusko County is “God’s country.” Why? “When I was interviewing for this position at Farmers State Bank, one of our directors, Stan Pequignot, declared that Kosciusko County was God’s country, and that I would come to agree. The natural beauty of the county is unmatched. “In front of my house is the deepest natural lake in Indiana, Lake Tippecanoe, and behind my house is a 60-acre forest managed by the Nature Conservancy. Sometimes we see a bald eagle soar from that forest down to Lake Tippy. “It’s true. This really is God’s country.” t Greg Maxwell enjoys living and working in Kosciusko County. Greg Maxwell, president and CEO of Farmers State Bank, and John Bauman, owner and operator of Bauman Stoneware, Warsaw, enjoy “jamming” to traditional music. To view their rendition of American folk classic, “Old Joe Clark,” go to Hoosier Banker Digital, and click on the red YouTube arrow above. t Greg Maxwell (left) and John Bauman have forged a friendship through music. A vintage coffee can is an office tribute to “Maxwell House” family boat outings.
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14 Hoosier Banker May 2015 Nearly 50 bankers attended the inaugural “Day at the Statehouse,” hosted by the Future Leadership Division (FLD) of the Indiana Bankers Association on March 16. The purpose was to help FLD members gain firsthand knowledge about the legislative process and a deeper understanding of the importance of grassroots advocacy. The FLD represents emerging leadership in the Indiana banking community. The event, held at the Hilton Downtown Indianapolis and Indiana Statehouse, opened with an introduction from FLD President Lucas White, who welcomed attendees and encouraged future grassroots and FLD involvement. The morning continued with a “Lobbying 101” session, presented by Amber Van Til, IBA’s senior vice president-government relations, and myself, also a lobbyist with the GR Team. We were fortunate to have guest presenters volunteer their time to round out the event. In a panel discussion format, Rep. Dan Forestal, D-District 100, and Sen. Travis Holdman, R-District 19, talked about the educational value of grassroots lobbying from a legislator’s viewpoint. Following the panel discussion, Joe DeHaven, IBA president and CEO, addressed the audience about their importance to the future of the industry. Our guest speaker at the mid-day luncheon was Matt Whetstone, parliamentarian of the House of Representatives, who offered helpful insights into the workings of the General Assembly. After lunch, the GR Team reviewed bills of interest, then attendees and staff walked across the street to the Indiana Statehouse in time for the start of afternoon sessions. It was a busy day on premise, with multiple advocacy groups present and eager to share their various points of view. Throughout the afternoon, FLD members had the opportunity to observe proceedings and meet with legislators. By the end of the day, FLD’s first annual Day at the Statehouse was deemed as a success, having reached a significant portion of IBA’s future leaders. t GR SPOTLIGHT About the Author Dax Denton is vice president-government relations of the Indiana Bankers Association. He can be reached at 317-917-8047, email: ddenton@indianabankers.org. FLD Hosts Successful ‘Day at the Statehouse’
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16 Hoosier Banker May 2015 COMPLIANCE CONNECTION Question: I believe that the daughter of one of our depositors is impermissibly taking money from her elderly father. Do I have an obligation to report my suspicions to the police? Is it a violation of the Gramm-LeachBliley Act (GLBA)1 to report my suspicions to the police? What is my liability for making a report, if my suspicions ultimately prove to be unfounded? Answer: According to the U.S. Department of Health and Human Services Administration on Aging, elder abuse includes, generally, “any knowing, intentional, or negligent act … that causes harm or a serious risk of harm to a vulnerable adult.”2 This broad definition would include the financial exploitation which you have described. Indiana imposes an affirmative obligation on all persons to report elder abuse and provides protection for persons who report elder abuse in the manner prescribed by law. The obligation to report elder abuse arises under the provisions of the Indiana Code relating to “Human Services” in Title 12, and the provisions relating to “Criminal Law and Procedure” in Title 35. Under Title 12, if a person believes, or has reason to believe, that another person is an “endangered adult,” the person has a duty to make a report to the (1) Indiana Adult Protective Services Unit, (2) a law enforcement agency, or (3) the Division of Aging via its statewide toll-free telephone number.3 For this purpose, an endangered adult means an individual who is: • At least 18 years of age; • Incapable by reason of mental illness, mental retardation, dementia, habitual drunkenness, excessive use of drugs, or other physical or mental incapacity of managing or directing the management of the individual’s property or providing or directing the provision of self-care; and • Harmed or threatened with harm as a result of: - Neglect; - Battery; or - Exploitation of the individual’s personal services or property.4 If a person is presented with “evidence that, if presented to an individual of similar background and training, would cause the individual to believe that the adult is an endangered adult,” then the recipient of such evidence has a “reason to believe” that another person is an endangered adult and, thus, has an reporting obligation under Indiana law.5 Title 12 provides immunity from civil and criminal liability for a person reporting elder abuse, provided that the person makes the report in good faith and is not the person committing the abuse.6 Further, Title 12 prohibits employers from taking any adverse action against employees for filing a report of elder abuse, including, without limitation: discharging, demoting, transferring, or providing negative work evaluations for such employees.7 CONTACT BILL UELMEN AT 702.598.3738 OR VISIT WWW.KEY-STATE.COM TO LEARN MORE. THIS INDEPENDENT, COST EFFECTIVE SERVICE INCLUDES: DOES YOUR ASSET LIABILITY PROCESS MEET EFFECTIVE MANAGEMENT STANDARDS? KEY STATE’S ASSET LIABILITY MANAGEMENT PROCESS VALIDATION SERVICE WILL ENSURE THAT IT DOES. • RISK MANAGEMENT AND RELATED POLICY REVIEWS • ASSET LIABILITY COMMITTEE GOVERNANCE EVALUATION • ALM MODEL CONTROL AND ASSUMPTION DEVELOPMENT • REPORTING AND OUTCOME ANALYTICS
17 Hoosier Banker May 2015 1 The Financial Services Modernization Act of 1999, Pub. L. No. 106-102, 113 Stat. 1338. 2 What is Elder Abuse?, U.S. Department of Health and Human Services Admin. on Aging, www.aoa. acl.gov/AoA_Programs/Elder_Rights/EA_Prevention/whatIsEA.aspx (last visited April 10, 2015). 3 Ind. Code § 12-10-3-10(a) (2014) (Toll-free hotline 800-992-6978). 4 Id. § 12-10-3-2(a). 5 Id. § 12-10-3-6. This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. Similarly Title 35 provides that any person who believes or has reason to believe that an endangered adult is the victim of battery, neglect or other exploitation, and knowingly fails to report those facts, commits a Class B misdemeanor.8 Class B misdemeanors may be punished by imprisonment for up to 180 days and a fine of up to $1,000.9 The GLBA “establishes a general rule that a financial institution may not disclose any nonpublic personal information about a consumer to any nonaffiliated third party unless the financial institution first provides the consumer with a notice that describes the disclosure … and a reasonable opportunity to opt out of the disclosure, and the consumer does not opt out.”10 However the GLBA also contains exceptions for disclosures necessary “to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability.”11 The foregoing is a brief summary of your obligations to report suspected elder abuse and the protections from civil and criminal liability provided to you under law. If you have any question as to whether reporting is required in your circumstances, it is recommended to seek the advice of counsel. t aBout CoMplianCe ConneCtion In order to address compliance inquiries from members, IBA provides Compliance Connection, an assistance program offering advice on Indiana-specific compliance questions. If the matter requires legal advice, IBA Compliance Connection will refer the bank to a law firm. The material in this issue was prepared by Larry C. Tomlin, partner with Krieg DeVault LLP, Indianapolis, and IBA compliance consultant. Submit Compliance Connection questions to IBA’s Amber R. Van Til at avantil@indianabankers.org. 6 Id. § 12-10-3-11. 7 Id. § 12-10-11-3-11. 8 Id. § 35-46-1-13(a). 9 Id. § 35-50-3-3. 10 Board of Governors of the Federal Reserve System et al., Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults 3 (2013), available at www.fdic.gov/news/news/ press/2013/Interagency-Guidance-on-PrivacyLaws-and-Reporting-Financial-Abuse-of-OlderAdults.pdf?source=govdelivery. 11 15 U.S.C. § 6802(e)(3)(B) (2014). Christina Daulton, employee benefits administrative assistant, Horizon Bank, NA, Michigan City, has been recognized as a semi-finalist in the 2015 Employee Stock Ownership Plan (ESOP) Association’s employee of the year competition at the association’s annual awards event. She joined the bank in 2000 as a customer service representative before working in the trust department. Daulton earned the award as a result of exceptional work and volunteerism, recently achieving the top local fundraiser for the Relay for Life. Old National Bancorp, Evansville, has been recognized as one of the 2015 World’s Most Ethical Companies by Ethisphere Institute. The bank earned the recognition based on its promotion of ethical business standards and practices, excellence at compliance minimums and its shaping of future industry standards by introducing best practices in the current environment. The recognition was given to 132 companies throughout 21 countries. Honorable MentIons Christina Daulton, Horizon Bank, NA, Michigan City, receives the 2015 ESOP Association’s employee of the year semifinalist award. Todd R. Yarbrough, investment program manager, MutualFinancial Investment Services and Mutual-Bank, Muncie, has been recognized as one of LPL Financial’s 2015 Program Managers of the Year at the LPL Financial Institution Services Program Leadership Conference. He was selected from more than 700 program managers. Yarbrough received the top platform program award. t
18 Hoosier Banker May 2015 DIRECTORS / SENIOR MANAGEMENT Everyone knows that you can’t make an omelet without breaking eggs. And if you want to manage a bond portfolio, you’re going to have to take a little risk — no risk, no reward. For many portfolio managers and boards of directors, the thorny question is: “At what point does this inherent risk become too great?” Or a much less frequently asked question is: “When is this risk not great enough?” Most banks have access to analytical tools that generally do an adequate job of measuring the potential changes in market valuations due to changing rate environments, but this information by itself is incomplete knowledge. The determination of the “right” amount of risk is unique to each financial institution and to the people who manage it. Knowing the dollar amount of potential depreciation that might occur as a byproduct of rising interest rates is not without value, but lacking meaningful context, it may not automatically follow that the measured amount of risk is the appropriate amount. Just as individual investors have various degrees of risk tolerance or avoidance, so it is with community bankers. Some investors never stop looking for ways to roll the dice and take chances, while others never feel safe unless they’re wearing a belt with their suspenders. Apart from the nuances of personality and temperament, how can community bank portfolio managers gain insight into whether their portfolios’ market risk, once measured, is appropriate? Start With the Big Picture The first place to look when trying to gauge the right amount of risk is the overall risk profile of the total balance sheet. For banks challenged by excessive volatility in the economic value of equity, it is important to know the degree to which negative portfolio valuations contribute to that volatility. The mitigation of the overall balance sheet risk may take priority over other considerations affecting the portfolio’s exposure to market risk. In other words, if an inordinate level of capital is already at risk due to the combination of the valuation characteristics of loans and liabilities, the assumption of any additional market risk in the portfolio may not be a prudent option. In fact such a set of circumstances may compel a portfolio manager to reduce overall balance sheet risk by reducing the portfolio’s contribution to that risk. This reflects the priority of total balance sheet risk management, and the portfolio’s role in it, versus other factors influencing investment strategies and tactics. Does This Make my Risk Look Big? If it is determined that the comprehensive risk profile is modest enough to not require portfoliosourced reduction, a different sort of contextual suitability is sought. One lens through which risk may be viewed takes into account the potential effect that unrealized losses might have on capital adequacy if, in fact, those unrealized losses were to become real ones. A common exercise involves estimating how much depreciation would be expected to occur after a significant rate increase, and then projecting damage to capital that would result from the actual realization of those projected losses. If the outcome of such a projection results in capital ratios below which management or ownership is comfortable, that is a good sign the portfolio has too much market risk, and a duration alteration may be in order. Another method for checking risk level is based on the presumption that the portfolio should not be allowed to risk more than its pro rata share of capital in terms of price depreciation. Or, expressed another way, the percentage of total assets represented by the bond account should not be exceeded when potential depreciation is expressed as How Much Portfolio Risk Is Too Much? About the Author Lester F. Murray, associate partner of The Baker Group, joined the firm in 1986. He previously worked for the Office of the Comptroller of the Currency as an assistant national bank examiner and is a frequent speaker at investment conferences and educational seminars. Murray is a graduate of Oklahoma State University. The author can be reached at 800-9372257, email: lester@gobaker.com. The Baker Group is a Diamond Associate Member of the Indiana Bankers Association and an IBA Preferred Service Provider.
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