2016 Vol. 100 No. 3

Hoosier Banker MARCH 2016 INSIDE Randall and Brad Pemberton, LNB Community Bank, Lynnville, continue a family banking legacy. Story on page 8. 1916 - 2016 YEARS

2 Hoosier Banker March 2016 TM

TABLE OF CONTENTS VOLUME 100 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 fifth day 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 8 RANDALL AND BRAD PEMBERTON: FATHER-SON BANKERS FEATURES 5 PRESIDENT’S PONDERINGS S. Joe DeHaven, IBA 6 IBA CALENDAR OF EVENTS 7 IBA BOARD REVIEW Benjamin J. Bochnowski, Peoples Bank, Munster 12 HOOSIER BANKER HERITAGE 22 STATE DEPOSITS IN INDIANA FINANCIAL INSTITUTIONS GR SPOTLIGHT 14 FLD HOSTS SECOND ANNUAL ‘DAY AT THE STATEHOUSE’ Dax Denton, IBA PSP SHOWCASE 18 APPROVAL PAYMENT SOLUTIONS INC. – THE ANSWER FORYOU AND YOUR CLIENT Rod Lasley, IBA DIRECTORS / SENIOR MANAGEMENT 20 BACK TESTING ANDVALIDATION OF A/L REPORTING SYSTEMS Jeffrey F. Caughron and Chris Wilson,The Baker Group DEPARTMENTS 7 VIDEO BONUS 16 COMPLIANCE CONNECTION Brett J.Ashton, Krieg DeVault LLP 16 TAKING IT EASY 24 ASSOCIATE MEMBERS’ CORNER 24 ANNIVERSARY MILESTONES 25 FROM THE BOARD ROOM 26 BANKING ON COMMUNITY 28 HONORABLE MENTIONS 30 BANKERS ON THE MOVE 34 ADVERTISERS INDEX Brad Pemberton (left) and his father Randall work closely together in leadership of LNB CommunityBank, Lynnville. 1916 - 2016 YEARS 3 Hoosier Banker March 2016

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 indianabankers.org 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. Indiana Bankers Association Officers, Directors & Staff IBA Officers Chairman ........................................... Michael H. Head, First Federal Savings Bank, Evansville FirstVice Chairman ..................... Annette M. Russell, Security Federal Savings Bank, Logansport SecondVice Chairman ............................................ Clay W. Ewing, German American, Jasper Immediate Past Chairman .................................. Larry W. Myers, First Savings Bank, Clarksville 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 ...................... Kristin Marcuccilli, STAR Bank, Fort Wayne Non-Indiana Headquartered Bank Director ............... Tim Massey, BMO Harris Bank, Indianapolis Northeast Region Directors Gregory Maxwell, Farmers State Bank, Mentone Michael S. Zahn, First Federal Savings Bank, Huntington Michael C. Marhenke, iAB Financial Bank, Fort Wayne Northwest Region Directors Benjamin J. Bochnowski, Peoples Bank, Munster Arden L. Cramer, Logansport Savings Bank Joseph D. Carlson, Community State Bank, Royal Center Southeast Region Directors Archie M. Brown Jr., MainSource Financial Group Inc., Greensburg Dennis Wayman, State Bank of Medora George W. Ferriell, Bath State Bank Southwest Region Directors Matthew W. Howrey, North Salem State Bank Michael L. Baker, State Bank of Lizton, Brownsburg Kent L. Parisien, The First National Bank of Odon Future Leadership Division Board President - Kristin Marcuccilli, STAR Bank, Fort Wayne Vice President - Kirby Drey, Kentland Bank Emily Boardman, Crossroads Bank,Wabash Craig Buse, Springs Valley Bank & Trust Company, French Lick Jason Ernst, First Financial Bank, NA,Ter re Haute J. Daniel Maddox, Citizens State Bank, New Castle Andrew J. Saner, MainSource Bank, Greensburg Stephanie Schrage, Centier Bank, Northern Indiana Jeremy Siegle, Bank of Wolcott Lucas White,The Fountain Trust Company, Covington Billy Winter, Bippus State Bank, Huntington Melodie K.Yarnell, Jackson County Bank, Seymour IBA Staff President & Chief Executive Officer ........................................................... S. Joe DeHaven ExecutiveVice President .............................................................. Paul W. Freeman, CAE ExecutiveVice President .................................................................. 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 ................................................................. Marcy Borden Education Meeting Coordinator ................................................................ Elizabeth Kilty 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

5 Hoosier Banker March 2016 Annual Washington Trip. This year the trip is scheduled for Sept. 25-27. Again, we will visit with the elected Indiana delegation and call on all of the regulators. At this event, we also will hear presentations from both the ICBA and the ABA, as well as the Conference of State Bank Supervisors, which represents all of the state financial institutions departments from across the country. Last year 57 IBA-member bankers participated in the IBA Annual Washington Trip, for a total delegation size of 88 people strong. Whether you travel to Washington to lobby on behalf of your industry with the ABA in March, the ICBA in April, or the IBA in September, we thank you. Many of you even take part in more than one trip. If you have not yet gone on any of the trips, I urge you to find a time in your schedule this year. You are needed to represent your industry, your bank, your shareholders and your community – and your voice is much stronger when added to a chorus. Just as it takes 50 gallons of sap to yield one gallon of syrup, it may take a roomful of bankers to make a message heard … but it’s worth it. March is an interesting month. It is a transitional time, leading us out of harsh winter weather to the gentleness of spring, the season of hope. As the saying goes, March comes in like a lion and goes out like a lamb. The month of March has always been special for me. When I was growing up, my family had an annual tradition of making maple syrup. We tapped hundreds of maple trees each year to collect the sweet water, or sap, to boil down into syrup. It took about 50 gallons of sweet water to produce a single gallon of maple syrup. We usually started tapping the trees in mid-February. It was the seasonal nighttime freezes and daytime thaws that allowed the sweet water to flow. Tapping all those trees was hard work, but it was worth it. By the end of March, we would pull all of the taps from the trees, shut down operations for another year, and savor our mouthwatering maple syrup. Another fond March memory is that it’s the month of the Indiana High School Athletic Association (IHSAA) basketball tournament and the National Collegiate Athletic Association (NCAA) basketball tournament. Basketball alone would have made March important to a young Hoosier boy, but as a bonus, spring was in the air by the end of the month, with the thermometer on the rise. Today my only connection with maple syrup is the occasional pancake breakfast, but I still pay close attention to the basketball tournaments in March and the rising temperatures. Also in March, the Indiana Bankers Association steps up its federal advocacy, beginning with a lobbying trip to Washington, D.C. The first of three DC trips starts this month, as the IBA Government Relations Team and Indiana bankers join with other bankers from throughout the country for the American Bankers Association Government Relations Summit, March 14-16. Next month the IBA and Indiana bankers will again join with bankers nationwide for the Independent Community Bankers of America Washington Policy Summit, April 24-27. These meetings are important opportunities for Hoosier bankers to join with the IBA and the national trade associations for up-to-the-minute information about the status of legislation important to the banking industry. On these trips, we always visit with our senators and representatives from Indiana to convey the importance of our positions and concerns, relative to our customers and communities. For our third yearly trip to DC, a much larger group of Indiana bankers will travel to Washington for the IBA FEATURE President’s Ponderings S. Joe DeHaven, President & Chief Executive Officer, Indiana Bankers Association Three bankers have completed the Indiana Bankers Association 2015-16 Branch Management Series. Shown are (left to right): Katie Lanham, BloomBank, Bloomfield;Tera Beverly, First Farmers Bank and Trust Company, Converse; and Misty Gano, MutualBank, Muncie. Graduates of the 2015-16 Branch Management Series

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, IN 46254 Phone: 317-387-9380 Twitter: @IndianaBankers Alternative Delivery Channels … Available at your convenience via Webinar, CD-ROM or On-Demand Writing Compliant Real Estate Evaluations Internally March 15 - IBA Center Indiana Deposit Account Administration March 15 - IBA Center March 16 - Fort Wayne Hotel Human Resources Directors Forum March 16 - IBA Center Navigating and Understanding the Indiana Code for Compliance Professionals March 17 - IBA Center Leadership Development Program - Session 1: It’s Simple, But It Isn’t Easy March 22-25 - Wooded Glen Retreat & Conference Center, Henryville Cyber Compliance:The Most Common Cybersecurity Deficiencies, and What to Do About Them March 24 - IBA Center TRID Essentials March 29 - IBA Center Security, Fraud and Risk Management Conference March 29-30 - Indianapolis Marriott North Officer Calling School March 30 - IBA Center 2016 Principles of Loan Documentation April 5 - IBA Center Advanced Loan Documentation April 7 - IBA Center Social Media Bootcamp April 12-13 – IBA Center Certified Teller Program - SafeguardingYour Branch: Steps the Frontline CanTake to Minimize the Impact of PotentialThreats and Current Fraud Schemes April 18 - Huntingburg Event Center April 20 - Courtyard by Marriott Lafayette April 21 - Hillcrest Country Club, Batesville April 26 - Holiday Inn Express, Valparaiso April 27 - Hotel Fort Wayne April 28 - Best Western Plus, New Albany Branch Management Series: Session 2- Growing the Retail Bank April 19 – IBA Center Community Reinvestment Act April 19 – IBA Center Flood Insurance Update and Review April 20 – IBA Center Essentials of Banking: Session 1 - Banking 101 April 20 - IBA Center Loan Review Practices April 21 - IBA Center Consumer Lending School April 26-27 - IBA Center IBA Mega Conference May 3-5 - Indiana Convention Center Community Bankers for Compliance Series - Session 2: Compliance Management Systems and Risk Assessment May 9 - The Landmark Conference & Reception Centre, Fort Wayne May 10 – IBA Center May 11 – IBA Center CRE Appraisals: Reviewing and Interpreting May 11 - IBA Center Leadership Development Program - Session 2: Do SomethingThat Scares You May 11-13 – Wooded Glen Retreat & Conference Center, Henryville CRE Cash Flow:Analyzing IncomeProducing or Rental Real Estate May 12 - IBA Center Train the Trainer: Plans, Programs and Processes That Work May 17 - Indiana Convention Center Senior Retail Banking Forum May 18 – IBA Center Risk Management Officer Forum May 19 – IBA Center Compliance for Loan Processors May 19 – IBA Center Commercial Lending School June 5-10 – IBA Center Chief Financial Officer Forum June 14 - Group 1 – IBA Center June 17 - Group 2 – IBA Center Senior Lender Forum June 15 - Group 1 – IBA Center June 16 - Group 2 – IBA Center Real Estate Lending Compliance June 15-16 - IBA Center Essentials of Banking: Session 2 - Business Operations and Management June 23 - IBA Center IT & Operations Officer Forum June 23 - Group 1 – IBA Center June 24 - Group 2 – IBA Center Marketing Directors Forum June 28 – IBA Center BSA/AML Compliance School June 28-29 – IBA Center Auditing Regulation Z July 12 – IBA Center Human Resources Directors Forum July 12 - IBA Center Analyzing Tax Returns in SelfEmployed and Small Business Situations July 13 – IBA Center BuildingYour Incident Response Program July 14 - IBA Center Analyzing C&I Business Cash Flow July 14 – IBA Center Community Bankers for Compliance Series: Session 3 Aug. 8 - The Landmark Conference & Reception Centre, Fort Wayne Aug. 9 - IBA Center Aug. 10 - IBA Center Branch Management Series: Session 3 - Leading, Developing and Engaging the Team Aug. 23 - IBA Center IBA Leadership Development Program: Session 3 - Limitations Are Self-Imposed Aug. 24-26 - Wooded Glen Retreat & Conference Center, Henryville Essentials of Banking: Session 3 - Safeguarding the Bank and Customer Service Aug. 25 - IBA Center Senior Retail Banking Forum Sept. 7 - IBA Center Advanced Credit Analysis School Sept. 8-9 - IBA Center Advanced Ag Lenders Workshop Sept. 8-9 - Purdue University, West Lafayette IBA Annual Convention Sept. 11-13 - French Lick Springs Hotel March 14 - Call Report for Beginners - Five-Part Webinar March 14 - Auditing for TRID Compliance March 15 - Emerging Leader Series: Developing Executive Presence Skills - Presentations, Poise and Professionalism March 16 - Determining Cash Flow From Personal Tax Returns Part 2: Schedules E and F March 16 - Best-Ever Compliance Checklists for Commercial Loans March 17 - Power of Attorney March 21 - Call Report for Beginners - Five-Part Webinar March 22 - Cyber Series: Outsourcing Tech Services: Regulations, Examiner Expectations and Actions for Vendor Management March 17 - Controlling the Risks of Power of Attorney Documents March 21 - Call Report for Beginners - Five-Part Webinar March 22 - Cyber Series: Outsourcing Tech Services: Regulations, Examiner Expectations and Actions for Vendor Management March 22 - The New HMDA Rule: Implementation Challenges March 23 - Living Trust Documents March 24 - DevelopingYour Same-Day ACH Game Plan March 29 - Debt Collection Series:Your Customer Has Filed Bankruptcy, Now What? March 29 - Limited Liability Companies: Dos and Don’ts March 29 - Call Report - Lending Schedules for Banks March 30 - Online Deposit Accounts Opening: CIP, CDD,W-9, Signature Cards and More March 30 - Hot Topics in Social Media Strategies:Techniques and Trends for Community Banks March 30 - Opening New Accounts 1 - Legal Ownership of Consumer Accounts April 5 - Managing IRA Beneficiary Designations and Distributions April 5 - Uniform Commercial Code:WhatYou Need to Know April 5 - Handling Checks at Death of Account Holder April 6 - Using Personal Tax Returns for Global Cash Flow: What’s Cash Flow, and What Isn’t? April 6 - Completing the SAR Line-by-Line April 7 - Advanced Topics in Commercial Lending April 7 - Audit Compliance Series: Auditing Basel III and the New Capital Planning Guidelines April 11 - The Bank CEO’s Guide - Five Keys to Building a High-Performance Sales Team April 12 - The Top 10 Credit Risk Considerations in Agricultural Lending April 12 - Critical Issues of Certificates of Deposits April 13 - ACH Rules Update 2016 6 Hoosier Banker March 2016

7 Hoosier Banker March 2016 ASSOCIATION UPDATE As president and chief operating officer of Peoples Bank, Munster, my primary duties include strategic planning and overseeing the day-today operations of the bank. Additionally I’m responsible for engaging our stakeholders ‒ our shareholders, employees, customers and communities ‒ to ensure that we fulfill our mission of creating value for them and delivering an exceptional customer experience. How we fulfill that mission is driven by our culture, which is founded on those beliefs and behaviors that we feel are necessary for success. A big part of my role is to ensure that our culture is clearly articulated, embraced by employees at all levels, and that their decisions and actions are rooted in our core beliefs. As our bank has grown in size and footprint, the more we can fortify our culture, the more we can unify our approach to engaging stakeholders. With over 200 colleagues working in 16 banking centers, our strong sense of culture enables us to provide consistent, quality customer service throughout the organization. The vision for an independent community bank started in 1910 when the company was founded by John Bochnowski, my great-grandfather. He came to the United States from Poland as a teenager, determined to be part of the American experience. He worked hard, prospered and helped his community by founding this bank. For me as a fourth-generation banker, it is my privilege ‒ and duty ‒ to uphold his promise to the community. My father, David A. Bochnowski, also serves Peoples Bank as chairman and chief executive officer, and we additionally have a number of multigenerational families who work here in other capacities. This bank was built by the hard work of generations of people. Looking ahead, we recognize the need to continue to attract talent in order for the bank to succeed long-term. I am active with the American Bankers Association as a member of the Membership Council, and I’ve heard Rob Nichols, president and CEO of the ABA, address this issue. All across the nation, banks are facing the challenge of bringing new talent into the system. The Indiana Bankers Association also has been addressing this issue, and part of its solution is the IBA Future Leadership Division. The FLD is a group of emerging bank leaders who gather for networking, professional development, leadership training and grassroots advocacy. A key component is that the FLD gives emerging leaders a chance to form a peer group to continue into the next 20 to 30 years. It is extremely important to be developing these relationships now; preparing leaders for the future is critical to moving the industry forward. The advocacy aspect of the FLD is invaluable, because we need to make our voices heard. In the past, I worked as a policy adviser to U.S. Rep. Pete Visclosky. What I learned from that experience is that legislators are just people, like anyone else, with the same needs, worries and concerns. They are approachable, and they like to hear from their constituents. Public servants share the community banker’s goal of improving the community, so they especially want to know how the policies they shape impact the work that community bankers do. Some more about my background: I went to the University of Michigan for my undergraduate degree, and I attended the ESADE business school in Barcelona, Spain, for my MBA. We live in an increasingly international world, so I wanted an overseas experience. It was while working on my MBA that I took up running as a stress reducer, and I have been running ever since. Running is good for me physically and mentally, and I have now run seven marathons. It connects me with community through fundraising for various not-for-profits. One race that was especially rewarding was to help raise funds for a cancer research organization that specializes in the type of cancer that has affected my father and other veterans of the Vietnam War. My wife Jessica is very supportive of my community volunteer work, which includes the Dunes National Park Association, the Legacy Foundation, the Entrepreneurship Bootcamp for Veterans with Disabilities, and the Volunteer Income Tax Assistance program. Jessica loves her dream job of working in the media industry, yet she finds time in her busy schedule for community involvement, too. All of the good in my life is possible because of the vision of my great-grandfather. When I was living abroad, I made a special trip to visit Brzyska, Poland, where he was born and raised. Brzyska is a tiny town in the foothills of the Carpathian Mountains, so small that it wasn’t even on the map, and being there made me feel deeply connected to my great-grandfather and his legacy. His work continues. Our customers come to us for the same reasons today as 100 years ago. They have families to raise, businesses to build and goals to reach. Our role, and the role of all community banks, is to give people access to the resources they need to live their lives and to realize their dreams. Board Review Benjamin J. Bochnowski, Northwest Region Director Peoples Bank, Munster Ben Bochnowski, Peoples Bank, Munster, shares insights in a video, “Value of the IBA Future Leadership Division.” To view, click on the red arrow in Hoosier Banker Digital at indianabankers.org. t Video Bonus

8 Hoosier Banker March 2016 COVER STORY LNB Community Bank, Lynnville, is a thriving financial institution nestled in southwest Indiana, some 25 miles from Evansville. Lynnville itself is a tidy town of about 1,000 residents. Prominent buildings on its main street are LNB Community Bank and Pemberton-Bradley Funeral Home. The name “Pemberton” figures strongly in Lynnville history. LNB Community Bank was founded in 1907 as The Lynnville National Bank, and Pemberton family ties extend back to 1951, when the late Charles W. Pemberton was named bank president. His son Randall K. Pemberton was elected president in 1976, and his grandson Bradley K. Pemberton became president in 1997. The Pemberton family also owned and operated the local funeral home through four generations. Today Randall Pemberton, 74, is chairman of the board of LNB Community Bank and its holding company. Brad Pemberton, 50, serves the bank as president and chief executive officer. Common traits of Randall and Brad Pemberton are that both have a penchant for science and technology, and both established careers unrelated to banking before joining LNB Community Bank. Randall earned a degree in mechanical engineering from Purdue University. Prior to joining the bank, he worked for 10 years as an engineer, first with Alcoa Warrick Operations in Newburgh, Indiana, then with Eastman Kodak in Kingsport, Tennessee. He also briefly managed the family funeral home parttime while operating an engineering consulting business in Lynnville. Brad studied business and computer information systems at the University of Southern Indiana. He got his career start with Aristokraft, the cabinet manufacturer based in Jasper, Indiana. By the end of his fiveyear tenure with Aristokraft, he was overseeing 100 employees as plant manager in Littlestown, Pennsylvania. Additionally both father and son are dedicated to community. Randall serves as a board member of the Warrick County Economic Development Advisory Council and the Warrick County Redevelopment Commission, and he is a past director of the Warrick County Chamber of Commerce, the Warrick County Community Foundation, the Economic Development Coalition of Southwest Indiana, Warrick Hospital and the Warrick County Council. Brad has coached all three of his children’s sports, including softball, basketball and tennis; is active with his church on the finance committee, as building committee chair, as a youth group leader and as a 24-year Sunday school teacher; and ensures that the bank stays committed to area schools through weekly visits and savings programs designed for children. Both men also are devoted to family. Randall and his wife Jane, a retired teacher, have been married for 53 years. They enjoy all types of travel, from cabin stays at nearby Stanley Lake Lodge to trips abroad to Europe, South Africa and Australia. Brad’s wife Wendy is a Sunday school teacher. Musically gifted, she plays piano, sings and directs the church’s children’s choirs. Brad and Wendy have three children: Kayley, Daniel and Grant, ranging in age Randall and Brad Pemberton: Father-Son Bankers Randall Pemberton applied his engineering talents when he redesigned the LNB Community Bank headquarters 10 years ago to enlarge space, reconfigure the entranceway and add a second-story chairman’s office.

9 Hoosier Banker March 2016 With fond memories of family road trips growing up, Brad Pemberton displays a collection of replicas of cars that his parents have owned through the years. Continued on page 10. from high school to young adult. Family and community are particularly dear to Randall and Brad, as yet another common bond is that both are cancer survivors. Brad was diagnosed with non-Hodgkin’s lymphoma in 1998, and Randall with prostate cancer one year later. Both men have enjoyed full remission for more than 15 years, and both are vocal about the prioritizing effects of cancer. “It magnifies the importance of family and community,” Brad summarizes. Hoosier Banker recently interviewed Randall and Brad Pemberton at the bank’s Lynnville headquarters. The bank also has branches in Chandler, Newburgh and Boonville. Randall K. Pemberton Hoosier Banker: What are your work responsibilities as chairman of LNB Community Bank? Randall: “As chairman of the bank and holding company, I conduct monthly board meetings and the annual meeting of shareholders each April. I also manage most of our renovation and remodeling projects, and the purchase of investments for the bank’s portfolio. “In this role it’s important to stay up-to-date on economic developments, and I find the economy fascinating and challenging. Having been in banking as long as I have, I have seen a lot of cycles and a lot of ups and downs, but nothing like what we’re experiencing now. “We now have a world economy. LNB Community Bank is a small, rural community bank, but we’re influenced by what is going on throughout the world. What is happening in China and other places affects our local economy, and that’s what makes economic issues so different from before. When I first started in banking, it was strictly a local economy.” Prior to your current position, you served as bank president from 1976 through 1997, following the tenure of your late father. What insights can you offer about leadership transition? “My family’s history in banking began in 1951 when my father and a group of local businessmen bought controlling interest in the bank, because they did not believe the bank was serving the best interest of the community. At the time, my father was running the local hardware store and funeral home. Eventually he sold both businesses, which had been in the family for years, to become a full-time banker. “I joined the bank in November 1974 with the intention of becoming president when my father retired in June 1976. The plan was to devote time to learning about banking, since my background was in mechanical engineering. “When I started at the bank, we had one location, total assets of about $6 million and total capital of about $353,000. By contrast, today capital changes more in a few months than what we had accumulated in the history of the bank up until that point. “Back then, our main concern was serving the community and providing jobs for employees; profitability was not a high priority. I remember that my first experience with bank examiners was a rude awakening, but enlightening. “The examiners wanted us to make a few changes, which we did. I also recognized that I needed to learn more, so I attended night classes, and then completed the Graduate School of Banking at the University of Wisconsin. It was a steep learning curve, but over time I figured out how to successfully manage a small community bank. “I have thoroughly enjoyed my career in banking over the years. My Three generations of Pembertons gathered on Aug. 3, 1992, the date that Brad Pemberton joined LNB Community Bank. Shown are (left to right): Randall K., Charles W. and Bradley K. Pemberton.

10 Hoosier Banker March 2016 Continued from page 9. enthusiasm must have been evident when it came time to convince my son Brad to consider a career in banking. By the time he joined the bank in 1992, he had established a successful career with Aristokraft, the cabinet manufacturer. “Brad was able to transition into banking quickly. It is often said that second- and third-generation business are typically not successful. However we found that if the business is operated by people who enjoy what they are doing and apply a strong work ethic, a multigenerational business can be very successful.” How did your career develop? “I began my career in 1964 with Alcoa Warrick Operations, designing equipment for the new rolling mill that had been installed in Newburgh, Indiana. It was an exciting place to work, and at that point I had no intention of being a banker. “After a couple of years, I accepted another engineering position with Eastman Kodak in Kingsport, Tennessee, designing equipment in the fibers division. After a few more years, I decided that working for large corporations was not what I enjoyed, so I returned to Lynnville to manage our family funeral home and start my own engineering consulting business. “By 1974, I finally figured that a career in banking was the best option, and I have stayed ever since. Though I enjoyed my former career as an engineer, I have enjoyed my banking career much more.” Bradley K. Pemberton Hoosier Banker: What are your duties as president and CEO of LNB Community Bank? Brad: “One of my top priorities is to provide an environment that encourages employees to take pride in LNB and what it represents. The best way to create shareholder value is to empower excellent employees with products, services and expertise to exceed customer expectations. Customers then become the bank’s best promoters. “Our senior management team is loaded with experience. My father joined the board of directors in 1971, then the bank in 1974. Betty Sanders, our executive vice president, has been here for 57 years. She has worked with all three generations of Pembertons, starting with my grandfather in 1959. “John Haley, our senior vice president, has been at the bank 37 years. He oversees the complex areas of compliance and audit and is the son-in-law of Charles Pemberton, my grandfather. Brenda Julian joined the bank in 1994; she is our cashier and assistant vice president of deposit operations. “Mark Barclay, senior vice president of retail banking, has been with us since 1999, and Jody Yager, vice president of commercial lending, joined in 2003. Our attorney, Dayd Haley, has only been with us since 2008, but he has been immersed in banking his entire life. Like me, he is a grandson of Charles Pemberton. “We are proud that our bank upholds hometown values. Customers are greeted by a warm smile and the friendliest service they could ever hope to find.” You are a third-generation banker. Why did you decide to continue the family tradition into banking? “It was interesting to grow up around banking, and I always knew that my father and grandfather were doing an excellent job taking care of customers. I didn’t realize, though, that banks are designed to make a profit and deliver value to the shareholders, not just take care of people. “After I started taking business classes in college, I began to appreciate that my dad and granddad were increasing their shareholders’ profitability, while also improving the individual portfolios of people in the community. “After college, I accepted a position in management training for Aristokraft and spent five enjoyable years in manufacturing. Then in 1992, when I was 27, Dad asked me to try banking. “He challenged me to see the satisfaction of helping others achieve their financial goals and fulfill their dreams. After only a short time in banking, I knew this was what I wanted to do for my family and our community.” How did you prepare yourself for your current position? “College helped me develop a work ethic. My first two years, I attended on a basketball scholarship, which taught me teamwork and sacrifice, elements important to both sports and Randall (left) and Brad (seated) Pemberton welcome Brad’s son Daniel for a summer internship in 2014. Daniel represents a possible fourth generation of Pembertons to continue the family banking legacy.

11 Hoosier Banker March 2016 banking. My last two years, I worked the morning preload shift at UPS from 4 a.m. to 8 a.m. That experience taught me time management, discipline and the value of a dollar. “When I finished college, I had a chance to join Aristokraft to learn the trade of manufacturing kitchen cabinets. I went through management training, which provided a foundation in accounting, marketing, purchasing, human resources and manufacturing. “Next I gained experience as a purchasing manager out of the Aristokraft plant in Littlestown, Pennsylvania. Granddad was not too happy about that move, because he was convinced I would find a girl out east. He was right ‒ I met my wife Wendy in Littlestown. “My final experience at Aristokraft was managing the plant, first as a superintendent, then as plant manager. “In 1992 I joined LNB, first as a consumer lender, next in commercial lending and then in financial management. In 1997 I was named president and chief financial officer, and in 2007 I was given additional responsibility as CEO. “During my 24 years in banking, I have found that an excellent way to Historic artifacts, such the bank’s original charter as The Lynnville National Bank, decorate the headquarters of LNB Community Bank. learn and stay informed is through the educational programs of the Indiana Bankers Association. The training classes are excellent, and the annual IBA Mega Conference is especially helpful. It covers every aspect of banking within a short period of time.” What advice would you offer to young bankers beginning their careers? Michael A. Renninger Principal (317) 695‐7939 mrenninger@renningerllc.com Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Road Davenport, IA, 52807 (563)326‐2064 Member: FINRA, SIPC. Renninger & Associates, LLC and Ausdal Financial Partners, Inc. are independently owned and operated. www.renningerllc.com "For an ObjecƟve Assessment of Your Challenges and Professional ExecuƟon of Your OpportuniƟes"  Buy‐Side and Sell‐side Representa�on involving whole banks, branches, and non‐bank affiliates  Stock Liquidity, Capital Development, and Strategic Planning  Stock Valua�ons and Fairness Opinions CPA‐trained and CFO‐experienced Indiana professionals serving Indiana banks. Our services include: “Start with a good education. My career path began when my father encouraged me to go to college and get an education. “Get involved in your local community. You can help people fulfill their dreams, while helping your community economically. Community banking is the economic backbone of our country. “Finally, remember that hard work pays off.” t

HOOSIER BANKER HERITAGE: 1930-1939 The 1930s is most famously known as the decade of the Great Depression. It hit the United States in 1929 and did not completely abate until 1939, as heartening signs of recovery were interrupted by a double-dip recession in 1937. The worst of the Great Depression was from 1932 to 1933, with more than 4,000 U.S. banks failing in 1933 alone. In response, the Emergency Banking Act of 1933 authorized President Franklin D. Roosevelt to declare a national banking holiday. A slew of other acts and agencies also grew out of the Great Depression, including the Federal Deposit Insurance Corp., the Securities and Exchange Commission, and the Federal Home Loan Bank Board and banks. Additionally the decade saw the founding of the Independent Community Bankers of America, the 1916 - 2016 YEARS creation of credit unions and the passage of The Banking Act of 1935. This sweeping act established the FDIC as a permanent government agency, strengthened the Federal Reserve System and reformed the Federal Open Market Committee. Despite the tumultuous nature of the 1930s, perusing the pages of Hoosier Banker from this period does not reveal a sense of panic or defeat. Instead, bankers did then what they continue to do now – they worked methodically and patiently with their customers and communities to make the future brighter. t 12 Hoosier Banker March 2016 1930 An article about Indiana’s first skyscraper, located in Fort Wayne, opened with,“As the Empire State building, now under construction in New York, will be the tallest in the world, so is the Lincoln Bank Tower, now completed, the tallest in Indiana.” Hazel Haase, chief telephone operator of Clinton, was credited for her “cool-headed use of the telephone” in the tracking and capture of a group of bandits who had robbed Citizens’s Bank, Clinton, and led a manhunt to Sidell, Illinois.The robbers were shot and killed, and their loot of $15,000 was recovered.“Miss Haase was not directly on the firing line,” the article read,“but the telephone surely had its important role to play in the stirring drama.” 1931 1932 An advertisement extols the virtues of A.B.A. Cheques,“the official travel cheque of the American Bankers Association.” The ad copy explained,“Her lost purse was never returned – but she got back the $120 which was in A.B.A. Cheques.” The winners of the 1933 “state shoot,” organized to help armed bankers compare their marksmanship, were the members of the Parke County Bankers Association.Annual shoots took place at Fort Benjamin Harrison in central Indiana. 1933

13 Hoosier Banker March 2016 Havana-filled, hand-rolled cigars were available in bulk for 3¢ each, but “guaranteed 15¢ quality.” 1934 Paul V. McNutt, then governor of Indiana, spoke at the1935 IBA Annual Convention banquet. 1935 Hoosier Banker covered federal credit unions in the March 1936 issue, observing that the first federal credit union in the United States was granted a charter on Oct. 1, 1934. By Jan. 31, 1936, a total of 1,000 federal credit unions had been granted charters “in the space of just sixteen months.” 1936 “Why Bankers Are the Way They Are” examined the psychology of banking professionals.“If they weren’t the way they are,” a subtitle to the article read,“then there just wouldn’t be any banks.” 1937 A Central Trust Company advertisement promotes “Calls or Collections: Items in transit must be distributed accurately.” 1938 Bankers en route to the 1939 American Bankers Association convention in Seattle enjoy an excursion to Banff Springs, Canada. 1939

14 Hoosier Banker March 2016 GR SPOTLIGHT Some 50 bankers attended the Future Leadership Division’s second annual “Day at the Statehouse,” held Feb. 9 at the Hilton Indianapolis Hotel and Indiana Statehouse. The event opened with an interactive presentation by FLD President Kristin Marcuccilli, who shared insights about the value of the Indiana Bankers Association FLD and grassroots advocacy. The morning continued with presentations from Amber Van Til, IBA executive vice president, and Dax Denton, IBA vice presidentgovernment relations, regarding the basics of lobbying and a step-by-step view of how bills become law. The mid-day lunch buffet was highlighted by a guest panel hosted by Jim Shella, political reporter for WISH-TV, who moderated a lively discussion between Mike McDaniel of Krieg DeVault LLP and Ann DeLaney of DeLaney & DeLaney LLC. The three 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 Second Annual ‘Day at the Statehouse’ panel participants are regulars on the longstanding “Indiana Week in Review” television broadcast. Following lunch and a review of industry-related legislation, attendees walked across the street to the Indiana Statehouse. The first stop was a visit with Indiana Treasurer Kelly Mitchell, who welcomed the group and spoke about the functions of her office. Bankers then went to the thirdfloor House and Senate chambers to visit with legislators and discuss current banking bills. The 2016 FLD Day at the Statehouse gave emerging bank leaders the opportunity to learn about the legislative process and participate directly in grassroots advocacy. This event follows last year’s inaugural Day at the Statehouse, which won a statewide award for Outstanding Individual Program/Event, presented by the Indiana Society of Association Executives. t

15 Hoosier Banker March 2016

16 Hoosier Banker March 2016 While the bank in that case argued that the customer was required to provide written notice to terminate the HELOC, the court held that, in spite of the fact that the borrower obtained multiple advances after his initial payment in full of the outstanding indebtedness, because the loan documents did not require a written demand to release the mortgage, the bank was required to release the mortgage following the initial payment of outstanding balances, and no subsequent advances would be covered by the mortgage. For those loan documents requiring that a written release must be provided before closing a HELOC, refinancing lenders should ensure that a mortgagee’s process for closing an account is closely followed to protect against unexpected exposure to future advances on still-open HELOCs. Indiana courts also have addressed this issue in Dreibelbiss Title Co. v. Fifth Third Bank, 806 N.E.2d 345 (Ind. Ct. App. 2004), trans. Denied, where a customer paid off a HELOC, but failed to satisfy the lender’s required process to close the account. In Dreibelbiss, the customer paid off a HELOC with a check and the instruction that, if the amount tendered was insufficient to satisfy the existing mortgage, the customer would send additional funds to ensure the existing mortgagee could issue a discharge or satisfaction of the mortgage. Because the customer did not submit a signed letter authorizing the bank to close the HELOC and release the mortgage, the court held the underlying mortgage remained valid. If your bank receives a written demand to release a paid-off mortgage via registered or certified mail with return receipt requested, Indiana law* requires you to do so no later than 15 days after receipt. Failure to comply with this requirement could expose the bank to a civil penalty of up to $500 for the failure to release, discharge and satisfy the mortgage, in addition to costs and reasonable attorney’s fees incurred by the borrowers in enforcing the release. In addition to these penalties, a court also may then appoint a commissioner to release and satisfy the mortgage, mechanic’s lien, judgment or other lien. COMPLIANCE CONNECTION About Compliance Connection In order to address compliance inquiries from members, IBA provides Compliance Connection, an assistance program offering advice on Indianaspecific compliance questions. If the matter requires legal advice, IBA Compliance Connection will refer the bank to a law firm. Acting as IBA’s compliance counsel is Brett J. Ashton, partner with Krieg DeVault LLP, Indianapolis, and chair of the firm’s financial institutions practice group. Submit Compliance Connection questions to IBA’s Amber R. Van Til at avantil@indianabankers. org or Josh Myers at Question: When a customer pays off a home equity line of credit, how quickly do we have to release the mortgage? Can we require the customer to provide written notice of intent to close the account before releasing the mortgage? Answer: The requirements under Indiana law for releasing a mortgage associated with a home equity line of credit (HELOC) will depend upon what is contained in your loan documents, whether the customer submits a written request for release, and if that request complies with the lender’s requirements to close the account. Ind. Code § 32-28-1-1(b) provides, “When a debt or obligation and the interest on the debt or obligation that the mortgage, mechanics lien, judgment or other lien secures has been fully paid, lawfully tendered, and discharged, the owner, holder, or custodian shall release, discharge and satisfy of record the mortgage, mechanics lien, judgment or other lien.” The very nature of a HELOC is to allow the customer the flexibility to access as much or as little home equity as required, including paying all of the outstanding line at any time. While some lenders have specific language in their loan documents requiring the customer to provide written notice of termination in a specific manner in their agreements, others do not, leading to the potential for losses in the event of subsequent draws. Indiana courts have held that, absent specific language requiring written termination of the HELOC, dependent upon other provisions in the loan documents, the lender may still have a duty to release the lender’s lien interest when the borrower pays its loan balance down to zero. The court in In re Tennant, 2012 WL 3778863 (Bankr. S. D. Ind., Aug. 30, 2012), addressed this issue in a bankruptcy case involving a HELOC that contained language providing, “Lender shall discharge the mortgage upon full payment of the indebtedness.” 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. * Ind. Code § 32-28-1-2 George W. Gilbert has retired as president and chief executive officer of First Federal Savings Bank of Angola after 36 years of service. He will continue to serve as chairman of the board, a position he has held since 2014. Gilbert has 40 years of banking experience and is a member of the IBA Forty Year Club. He earned a bachelor’s degree from Tri-State University. t Taking iT Easy

Linda Lease 317.504.2007 Indiana Jeff Niesen 608.577.8081 Midwest Brad Stamper 608.829.5540 Midwest Mark Wade 317.523.4342 Indiana www.BankersBankUSA.com Madison, WI • Des Moines, IA • Indianapolis, IN • Springfield, IL Member FDIC • Equal Housing Lender Always your partner, never your competitor.™ Access your correspondent partner. As the senior management of Bankers’ Bank, an important part of our role is to meet with you, our customers. Your input and insight are key to our mutual success. We invite you to connect with us either at an event, on a visit to your bank, or by phone or email. We look forward to hearing your ideas on how to enhance our mission to be always your partner, never your competitor.™ left to right Jeff Niesen - Correspondent Banking Mike DeLany - Credit Services Brad Stamper - President & CEO Sam Devine - Investment Services Wendy Stanford - Account Services

18 Hoosier Banker March 2016 erchant services is just a product we have in case the customer asks for it. It is not of major importance.” That used to be my view when I worked for a bank, but I was wrong. As times have changed and business has become more competitive, merchant services has become the lifeblood for many of your bank clients. With most payments being made with debit or credit cards, your merchants rely on a dependable, cost-efficient manner of handling payments. Approval Payment Solutions Inc. (APS), a long-time associate member of the Indiana Bankers Association, has been the IBA Preferred Service Provider in this area for nearly three years. APS is based in Boonville, Indiana, and has been in this business for PSP SHOWCASE more than 15 years. Its trained and knowledgeable staff work not only with your bank team to make sure the program is implemented and managed well, but also with your clients to provide for seamless installation and ongoing personal support. The company offers a complete menu of electronic payment solutions to businesses of every size and type. It works with your business clients to ensure that they can accept debit/credit cards and gift cards efficiently. Its senior management Approval Payment Solutions Inc. – The Answer for You and Your Client Topics include: • Introduction to the Business of Banking • Bank Profitability Analysis • Asset/Liability Management • Bank Regulatory & Competitive Environment • IT Project Management • Vendor Management • Leveraging Infrastructure and Emerging Technologies • IT Disaster Recovery & Incident Response Planning • Information Technology Risk Assessment • IT Exam Preparation Hotspots • Hacking 2016 Bank Technology Management School April 17-22, 2016 Graduate School of Banking at the University of Wisconsin – Madison Fluno Center for Executive Education, Madison, Wisconsin Linking Technology Management to Bank Performance The school has been divided into two core areas of study— the business of banking and strategic technology management. Other GSB Programs: Graduate School of Banking Human Resource Management School Bank Technology Security School Financial Managers School Bank Management Forums Online Seminar Series Educating Professionals, Creating Leaders 800-755-6440 | gsb.org

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