Hoosier Banker MAY 2016 INSIDE Gene Miles Leads a Winning Team at First Farmers Bank and Trust Company, Converse. Story on page 8. 1916 - 2016 YEARS
2 Hoosier Banker May 2016 Since 1979, The Baker Group has helped community financial institutions steer through unpredictable economic environments using robust tools and resources for interest rate risk and investment portfolio management. As we encounter 2016’s anticipated financial crossroads, our task is to help financial institutions develop effective processes and strategies that will ensure optimal performance in an uncertain financial environment. Our proven approach of total resource integration utilizing software and products developed by Baker’s Software Solutions* — combined with our solid investment experience and advice — makes us the investment firm of choice for financial institutions. When standing at the financial crossroads, The Baker Group can help you make the right choices for your institution. To find out how The Baker Group can assist your institution in defining and meeting its financial objectives, call your Baker representative or Ryan Hayhurst at 800.937.2257. Member: FINRA and SIPC www.GoBaker.com Oklahoma City, OK | Atlanta, GA | Austin, TX | Indianapolis, IN | Salt Lake City, UT | Springfield, IL | 800.937.2257 *The Baker Group LP is the sole authorized distributor for the products and services developed and provided by The Baker Group Software Solutions, Inc. Education Tailored Board Education Webinars for ALCO Interest Rate Risk Seminars Investment Strategies Develop Quarterly Strategies Determine Optimal Relative Value Manage Risk vs. Reward Tradeoff Asset/Liability Management Evaluate Earnings and Capital at Risk Simulate Stressed Rate Scenarios Analyze Risk Management Strategies BAKER STREET
TABLE OF CONTENTS VOLUME 100 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 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 GENE MILES:WINNING STRATEGIC BANKER FEATURES 5 CEO PONDERINGS S. Joe DeHaven, IBA 6 IBA CALENDAR OF EVENTS 12 HOOSIER BANKER HERITAGE 29 TELLYOUR STORY Rebeca Romero Rainey, ICBA 30 HELP US ‘POWER UP’ Robert S. Nichols,ABA PSP SHOWCASE 15 DON’T LET TELECOMMUNICATIONS BREAK THE BANK Rod Lasley, IBA OPERATIONS / TECHNOLOGY 16 SETTING THE RECORD STRAIGHT ON SAME-DAY ACH COMPLIANCE Jennifer Kirk, EPCOR SECURITY / FRAUD 17 TEACHING OUT-OF-WALLET QUESTIONS Dan Hadaway, Infotex GR SPOTLIGHT 19 BANKERS EXPERIENCE ANOTHER SUCCESSFUL LEGISLATIVEYEAR Dax Denton, IBA DEPARTMENTS 10 VIDEO BONUS 14 COMPLIANCE CONNECTION Brett J.Ashton, Krieg DeVault LLP 14 ASSOCIATE MEMBERS’ CORNER 28 HONORABLE MENTIONS 31 FROM THE BOARD ROOM 31 ANNIVERSARY MILESTONES 32 BANKING ON COMMUNITY 33 NEW BRANCHES, BUILDINGS & OPENINGS 34 BANKERS ON THE MOVE 38 ADVERTISERS INDEX 1916 - 2016 YEARS 3 Hoosier Banker May 2016 Gene Miles is president and CEO of First Farmers Bank and Trust Company, Converse.
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 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 Chief Executive Officer .......................................................................... S. Joe DeHaven President ..................................................................................... Amber R.VanTil, JD ExecutiveVice President .............................................................. Paul W. Freeman, CAE 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 Kubly 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 4 Hoosier Banker May 2016
5 Hoosier Banker May 2016 regulatory relief bill. We have been blessed to have Sen. Joe Donnelly sitting on the Senate Committee on Banking, Housing, and Urban Affairs, and Rep. Marlin Stutzman and Rep. Luke Messer sitting on the House Financial Services Committee. All three of these statesmen have been and remain supportive of bank regulatory relief. All three have led efforts to achieve it. All three have worked with the Indiana banking community in formulating their plans. We appreciate their support and leadership. This year’s IBA Annual Washington Trip, scheduled for Sept. 25-27, may be the most important trip we have had in many years. It will be our last opportunity to collectively impress upon our delegation, prior to the lame-duck session, the need to unshackle banks from the regulatory burdens that prevent them from properly serving their customers and communities. If you have participated in the IBA Annual Washington Trip in the past, thank you, and I hope you will come again this year. If you have not yet participated, please give every consideration to joining us this year. The success of our business model may lie in our ability to communicate our concerns during this upcoming trip. I hope to see all of you many times between now and the end of September, but I especially hope to see you Sept. 2527 in Washington! FEATURE CEO Ponderings S. Joe DeHaven, Chief Executive Officer, Indiana Bankers Association The Indiana Bankers Association presented a PAC check to ICBPAC, the political action committee of the Independent Community Bankers of America, at the ICBA Washington Policy Summit on April 26. Shown at the check presentation are (left to right): S. Joe DeHaven, Indiana Bankers Association; Lucas White, The Fountain Trust Company, Covington; Amber R.VanTil, Indiana Bankers Association; David M. Geis, Jackson County Bank, Seymour; IBA Chairman Michael H. Head, First Federal Savings Bank, Evansville; Camden R. Fine, Independent Community Bankers of America; Joseph G. Pierce, Farmers State Bank, LaGrange; Ryan M.Warner, Bippus State Bank, Huntington; and Mark A. Schroeder, German American, Jasper. IBA Presents PAC Donation to ICBA The March edition of this column highlighted the important reasons to travel to Washington, DC, to call on our congressional delegation. This column also listed three annual opportunities for Indiana bankers to join the IBA Government Relations Team in going to our nation’s capital: the American Bankers Association Government Relations Summit, the Independent Community Bankers of America Washington Policy Summit, and the IBA Annual Washington Trip. The first two of these trips have taken place recently ‒ the ABA Government Relations Summit in March, and the ICBA Policy Summit in April. Following is an update on what our contingent of IBA bankers and staff heard from Indiana’s elected officials, as well as from regulators and bankers from other states. During the trips, we were joined by representatives of the ABA and ICBA, and we appreciate our valued national partners for hosting opportunities for Indiana bankers. With the backdrop of the presidential election, plus all of the other down-ticket elections looming during 2016, there seems to be a consensus that little will happen in Congress prior to the Nov. 8 general election. However, several congressmen expressed the opinion that there will be a lame-duck session following the election until the end of the year. “Lame duck” is the term most often used to describe a legislative body that is about to be unseated following an election, but remains in office until a future date, when the new legislative body will be sworn into office. Legally a lame-duck body has the power to act, but doing so is a delicate matter, since a new group has been elected. In the past several years, there have been several active lame-duck sessions following elections, most likely for the same reason we will probably have one this year: Important issues have been overshadowed by the election year, so quick action is required. Plus, anticipating that the new legislative body will require some time to get organized enough to address critical issues, the lame duck session can get down to business and deal with important matters. From the banking standpoint, we heard repeatedly during the DC trips in March and April that we can expect to see a banking legislative package, delivering some regulatory relief for community banks, presented for consideration. There also was general agreement that it would be a small package, likely to be rolled into a larger bill. There was also some optimism, depending on the election results, that a more comprehensive bank regulatory relief package could be moved in 2017. For the past couple of years, there has been universal support from the Indiana delegation for a significant
6 Hoosier Banker May 2016 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 Train the Trainer: Plans, Programs and Processes That Work May 17 - IBA 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 Consumer and Real Estate Lending Compliance June 15-16 - IBA Center IBA Regional Meetings June 15 - The Columbia Club, Indianapolis June 16 - Cooper’s Hawk Winery and Restaurant, Merrillville June 21 - Biaggi’s Ristorante Italiano, Evansville July 12 - Biaggi’s Ristorante Italiano, Fort Wayne July 26 - Montgomery’s Steakhouse, Spiceland July 27 - Scholars Inn Gourmet Café, Bloomington Aug. 17 - Mountain Jack’s Steakhouse, Lafayette Aug. 18 - Buckhead Mountain Grill, Jeffersonville Same-Day ACH Symposium June 21 - 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 Principles of Loan Documentation July 19 - IBA Center Advanced Loan Documentation July 20 - 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 Annual Directors Workshop Aug. 15 - The Landmark Conference & Reception Centre, Fort Wayne Aug. 16 - Wooded Glen Retreat & Conference Center, Henryville Aug. 17 - 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 - Courtyard by Marriott, West Lafayette IBA Annual Convention Sept. 11-13 - French Lick Springs Hotel Risk Management Officer Forum Sept. 15 - IBA Center Deposit Account Administration Sept. 15 - IBA Center In-Bank Training: How to Train Staff Using Bank Policies, Procedures, Forms and Disclosures Sept. 16 - IBA Center Mortgage Lending School Sept. 20-22 - IBA Center IBA Annual Washington Trip Sept. 25-27 – Washington, D.C. Annual Security Management Seminar Sept. 27 - IBA Center CBC Compliance School - Lending Compliance Module Oct. 3-6 - IBA Center Essentials of Banking: Session 4 - Lending, Bank Investments and Bank Performance Oct. 4 - IBA Center Chief Financial Officer Forum Oct. 11 - Group 1 - IBA Center Oct. 14 - Group 2 - IBA Center Senior Lender Forum Oct. 12- Group 1 - IBA Center Oct. 13- Group 2 - IBA Center Cybersecurity Conference Oct. 13-14 - Renaissance Indianapolis North Hotel, Carmel Marketing Directors Forum Oct. 18 - IBA Center IRA Essentials Oct. 18 - IBA Center Advanced IRAs Oct. 19 - IBA Center Social Strategy Workshop Oct. 19 - IBA Center BSA/AML Compliance Management Oct. 20 - IBA Center Lenders Comprehensive Guide to Mortgage Lending Oct. 25-26 - IBA Center IBA Leadership Development Program - Session 4:Who Dares Wins Oct. 26-28 - Wooded Glen Retreat & Conference Center, Henryville IT and Operations Officer Forum Oct. 27 - Group 1 - IBA Center Oct. 28 - Group 2 - IBA Center Community Bankers for Compliance School - Deposit and Operations Nov. 2-3 - IBA Center IBA Future Leadership Division Annual Conference Nov. 2-3 - Renaissance Indianapolis North Hotel, Carmel HMDA Review and Update Nov. 7 - IBA Center May 18 - Managing the Force-Placed Insurance Process May 19 - Wire Transfer Compliance, Including International Remittances May 20 - Examining Complex TRID Issues, Part 2: Closing Disclosure,Tolerances and Good-Faith Analysis May 24 - Officer Calling: Prospecting, Preparing and Presentation May 24 - Marketing and Advertising Compliance, Including UDAPP Expectations May 24 - Audit Compliance Series: Developing Quality and Efficiency in Your IT Audit May 25 - Debt Collection Series: Real Estate Loan Workouts, Deeds in Lieu, Short Sales, Foreclosures, Deficiency Judgments and Receiverships May 25 - Current Expected Credit Losses: How to Calculate and Maintain a Proper Allowance May 26 - Understanding and Managing the CFPB Complaint Process May 26 - What Bankers Need to Know About Loan Participations May 26 - The Carrot and the Stick: Incentive and Motivation in the Workplace June 2 - Fair Lending June 2 - Business Accounts:Who Is Authorized to Open, Close, Transact? June 7 - Health Savings Accounts: Basics, Rules, Reporting,Tax Consequences and Health Care Reform Considerations June 7 - Basic Underwriting June 8 - Excel Explained: Pivot Tables June 8 - Regulation CC - Check Holds June 8 - Cyber Series: FFIEC Cybersecurity Risk Assessments: Recent Findings and Recommended Actions June 9 - New Federal Rules Target Student Bank Accounts - Top 10 Issues June 9 - Commercial Appraisal Review: Income and Sales Comparison Approach June 14 - How to Analyze the Purchase of an Existing Business June 14 - ACH Rules for Deceased Accountholders and Federal Government Payments June 15 - Comparing Regulation E Requirements With Visa and MasterCard Rules
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8 Hoosier Banker May 2016 COVER STORY Gene Miles has been with First Farmers Bank and Trust Company, Converse, since 1979. Several years ago, leadership of First Farmers Bank and Trust Company, Converse, “made the strategic decision to grow through acquisitions,” explains Gene Miles, 62, president and chief executive officer of the bank. The search stretched across state lines into Illinois which, like Indiana, offers fertile farm ground and productive soil. As Miles recalls, “We felt we would be very successful there over the long haul.” The plan worked. First Farmers Bank and Trust Company now employs nearly 400 people in Indiana and Illinois and serves more than 50,000 clients. Its headquartered hometown, Converse, has fewer than 1,250 residents. Miles is a longtime player in the bank’s success story. He has served in multiple positions, including commercial loan officer, compliance officer, investment officer, marketing officer and accounting officer. Additionally Miles is active in community leadership positions with St. Joseph Hospital, the Miami County Community Foundation, the Northern Indiana Community Foundation and the Miami County Economic Development Committee, among others. He is a graduate of Purdue University and of the Graduate School of Banking at the University of Wisconsin. Hoosier Banker recently interviewed Gene Miles in his Converse office: What are your responsibilities as president and CEO of First Farmers Bank and Trust Company? “I’m in charge of the overall operation of the bank, with a particular interest in mergers and acquisitions. We’ve been very active in that area in the last several years. “The acquisition process starts with strategic planning and identifying a target area that makes sense for you. Second is earning the board’s buy-in. The third step is engaging in conversations with the investment banking community, which acts as the gobetween in most cases. “We are an ag bank, so we extended into Illinois because of the fantastic farm ground. Agriculture has been our strategic focus.” How do you retain your bank’s small-town values as you expand? “We consistently hire people who share the philosophy that the customer is first. I give our board of directors a lot of credit, because they understand the service side of our business, and what it means to be a community bank. ”We’re the largest depository in Miami, Howard and Tipton counties, but we can’t ‘out-technology’ the larger banks. We compete by providing local service and by focusing on our communities.” How is First Farmers addressing succession planning? “We spend a lot of time talking about succession, at both the board level and the management level. We’ve got a strong core of officers who are developing in different stages of their careers. “At the board level, we’ve got the advantage of having been a successful organization for a long time. It has been perhaps a little easier for us to attract skilled directors who are interested in our institution.” What is the history of the bank? “In 1885 a gentleman by the name of Mark Tully founded a bank in Gene Miles: Winning Strategic Banker
9 Hoosier Banker May 2016 Converse called the Mark Tully Exchange Bank. Mr. Tully was a trapper and trader, and a clockmaker, too. In our lobby is a grandfather clock that he built. “The bank became known as the Farmers State Bank in 1907, then went through other name changes as it made acquisitions. In 1995 we became First Farmers Bank and Trust Company, to reflect the diversity of our operations. “Our Amboy branch serves as an unofficial museum of bank memorabilia. We acquired that location in 1975, when we merged with the State Bank of Amboy. The bank had been founded in 1919, and the building housed artifacts from the 1920s and ’30s. “People in town also have brought in their own pictures and artifacts. There are a lot of ‘great-grandpa was on the board’ type of items. I’m a history buff, so I enjoy those connections.” What is your banking background? “I have 37 years of banking experience, all with this bank. I started as a branch manager, back in the days when we had a proof machine in the branch. We did our proof operation every day at the branch, then brought it to the main office. “Later I served as a commercial loan officer. We were sized at $45 million at that time, and we all wore lots of hats. I did a little bit of marketing and human resources on the operations side, while at the same time doing loans, like most small community bankers did back then. “There are a few jobs I’ve not done in the bank through the years, but I’ve had at least a little experience with most. Doing just about every job was a great foundation for learning.” What was your experience growing up? “I grew up on a corn, soybean and livestock farm in southern Miami County. My family also ran a small grain elevator in Bunker Hill. Not everybody gets to work with their father or grandfather every day. There are a lot of rewards with that. “Farm life is different. Most of us who were raised on a farm can remember operating a tractor or pickup truck when we were 10 or 12 years old. Your dad would put you out on a field, where you couldn’t do much harm, and let you work. “I have an older brother who continued the family farming operation. For me, though, it made sense to go into banking. A former president of the bank was a customer of our grain elevator, and he had an opening at the branch. It worked out. “One of my sisters and I still own the family farm, and my twin sister actually lives in the home that our grandfather homesteaded in the early 1900s. It makes you feel grounded to know that your roots go back to grandpa’s ground.” What do you most enjoy about banking? “It is rewarding to look back over years and decades and see families who have worked with us for four or five generations. And it’s rewarding to see how they pass along their farms or companies, and their way of life. “We’ve also got several employees whose parents and preceding generations worked for the bank. Many of our employees have been here a long time. “Recently I attended a retirement celebration in Peru for a lady who retired after 41½ years. She started at Union State Bank in Windfall, which is an organization we bought in 1990, so she’s worked continuously from that institution for 41 years.” Please share a bit about home life. “My wife Cheryl and I have been married for 30 years. She works at the bank as a consultant, providing IT support. Previously Cheryl worked for EDS ‒ Electronic Data Systems ‒ at Delphi for 10 years, but later moved into IT consulting. “Cheryl and I have three children. Our son is married and lives in Saybrook, Illinois, working for Beck’s Hybrids. He’s got farm blood Gene Miles is pictured with Debbie Key, receptionist and administrative assistant of First Farmers Bank and Trust Company, Converse. A framed check dating from 1892 is on display in the office of Gene Miles.The check was issued by the Mark Tully Exchange Bank, the originator bank of First Farmers Bank and Trust Company, Converse. Continued on page 10.
10 Hoosier Banker May 2016 Do you have any advice for young people interested in entering the banking field? “My advice is that there are lots of strong community banks out there, with good opportunities for careerbuilding. I would highly recommend banking as a profession. “Community banking is an outstanding way to learn about all kinds of businesses and meet a variety of interesting people. It’s a great field, and very rewarding.” t Continued from page 10. * United States Tennis Association in him and likes to be out on farm equipment, raising seed corn. “We have two daughters, ages 24 and 23. Our older daughter is a graduate of Indiana University-Purdue University Indianapolis and now works in Grand Rapids, Michigan. Our 23-year-old, Carly, is finishing her first year of a doctoral program in physical therapy at Bradley University in Peoria, Illinois. “Carly is our tennis player. We all play some, but Carly played four years on the varsity team at Bradley, and one year she finished fourth in the state. We’ve spent a lot of time going to tennis matches. “I have been heavily involved in the Howard County Tennis Center, which is a facility on the fairgrounds in Howard County. It has four indoor tennis courts, providing tennis lessons to people of all ages. There are several high school tennis coaches who use the facility to host clinics and give lessons, plus there are activities for us older players. We have some USTA* tournaments there, as well. “Tennis has been a neat family experience. We have visited the US Open in New York about five times, and Cheryl and I have gone to Wimbledon. Now we’re thinking about going to the Australian Open, and then the French Open.” The office of Gene Miles includes tennis-themed décor and photos.“I’m kind of a tennis nut,” he says. Teller stations display the logo of First Farmers Bank and Trust Company, Converse, highlighting agricultural strength. Let the experts at EBN illustrate the advantage of a Short-Term, Deferred Cash Incentive Plan. We can help you financially motivate and retain your key talent with a plan that’s effective, cost-efficient and simple to execute. After all, our best talent is helping you keep yours. Learn more @ www.ebn-design.com Looking For New Ways to Reward Your Best Talent? BOLI & Deferred Compensation Experts 800.780.4EBN ebn-design.com ©2016 EBN Gene Miles, president and CEO of First Farmers Bank and Trust Company, Converse, encourages young professionals to consider banking as a career. To watch a video of his views, click on the red YouTube arrow in Hoosier Banker Digital at indianabankers.org. t Video Bonus: Banking as a Career
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12 Hoosier Banker May 2016 Nicknames for the 1950s ‒ “Eisenhower Era,” “Decade of Prosperity” and “Fifties Boom” ‒ evoke a time of peace and prosperity in the United States. The baby boom was in full swing, the G.I. Bill made college education attainable for veterans, and FHA and VA loans helped Americans realize the dream of homeownership, particularly in the suburbs. Despite the 1950s’ reputation for tranquility, however, sacrifices were made by the Americans who served in the Korean War, 1950-53. Called the “forgotten war,” the conflict claimed the lives of 36,000 Americans and ended in an uneasy stalemate. 1916 - 2016 YEARS HOOSIER BANKER HERITAGE: 1950-1959 The Indiana Bankers Association appreciates the sacrifices of all those who served. Domestically the ’50s marked unprecedented highs in U.S. automobile production; by the end of the decade, Americans owned more cars than all the people of the rest of the world. The ’50s also saw the development of a polio vaccine, construction of the U.S. interstate highway system, advancements in nuclear and rocket power, and emergent computer technology. Politically the nation experienced a watershed moment in 1954, when the Supreme Court ruled unanimously that racial segregation in public schools was unconstitutional. Some cultural landmarks of the decade include the opening of Disneyland, the founding of McDonald’s fast food and the coining of “rock ‘n’ roll” by a Cleveland disk jockey. The impact of youth-oriented music was profound, influencing fashion, leisure and the rise of pop icons, including the late James Dean of Fairmount, Indiana. During this time of prosperity, Americans grew comfortable with a “buy now, pay later” credit economy. The Diners Club® charge card was established in 1950, attracting 10,000 customers in its first year of use. BankAmericard ‒ later called Visa® ‒ also emerged in the ’50s. Yet the U.S. government largely avoided debt, instead experiencing balanced or surplus budgets several times during the decade. In the world of financial services, the Bank Holding Company Act of 1956: (1) specified that the establishment of a bank holding company must be approved by the Federal Reserve Board of Governors, and (2) prohibited bank holding companies from acquiring banks in other states, unless authorized by the other state’s laws. Another industry milestone was the adoption of magnetic ink character recognition in 1959, allowing data printed on checks to be read by computer. t 1950 Hats were in place for both attendees and IBA staff during registration for the 1950 IBA Annual Convention.The event, held mid-May in Indianapolis, drew a crowd of 935 registrants. 1951 A neon clock sign added to the décor of downtown Marion.The sign was installed by First National Bank, Marion, and measured nine feet in diameter. 1952 First Citizens Bank and Trust Company, Greencastle, engaged an artist to design checks depicting the campus of DePauw University.The artist was affiliated with a company that produced customized check designs worldwide.
13 Hoosier Banker May 2016 An advertisement promotes a Rol-Tronic,“the newest, most efficient method of record handling.” The machine was designed to help with bookkeeping functions of posting, filing checks and giving balances. 1958 Fort Wayne National Bank celebrated its 20th anniversary with a cake depicting financial success through the years. Each employee who had been with the bank for 20 years received an extra month’s salary; other staff received similar recognition on a proportionate basis. 1953 Officers of the Camp Followers Association gather for a group photo. Shown are (seated, left to right): Henry J. Frenzel, Merchants National Bank and Trust Company; Indianapolis; Lex B.Wilkinson,American Fletcher National Bank, Indianapolis; and (standing, left to right):Thomas M. Miller, Indiana National Bank, Indianapolis; and Paul E. Jones, Merchants National Bank and Trust Company, Indianapolis. 1957 A fashion show and luncheon were among activities for spouses at the 1954 IBA Annual Convention. 1954 The Annual Winter Agricultural Conference took place in January 1955 at Purdue University. Shown are panelists presenting on the topic of:“Pork Producers Speak.” 1955 The Citizens National Bank of Evansville hosted a women’s finance forum over the course of three Tuesday evenings.Topics included personal financial planning and how women could prepare for service on bank boards of directors. 1956 The main office of the newly designed Owen County State Bank featured a “gracefully sweeping” paneled tellers’ counter. 1959
14 Hoosier Banker May 2016 COMPLIANCE CONNECTION About Compliance Connection In order to address compliance inquiries from members, the 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 jmyers@indianabankers.org. We received several questions about the Compliance Connection article that appeared in a recent edition of the Hoosier Banker,1 providing guidance on the new TILARESPA Integrated Disclosure (TRID) requirements2 that took effect Oct. 3, 2015, with respect to deficiency judgments. The question as to whether Indiana law provides protection for mortgagors from deficiency judgments, and how this is to be disclosed in the context of the new TRID, led to some confusion among bankers. For those who have not seen the October Compliance Connection article, the topic is summarized below: Premise: If your lender forecloses on this property, and the foreclosure does not cover the amount of unpaid balance on this loan, • State law may protect you from liability for the unpaid balance. If you refinance or take on any additional debt on this property, you may lose this protection and have to pay any debt remaining even after foreclosure. You may want to consult a lawyer for more information. • State law does not protect you from liability for the unpaid balance. Explanation: Provided the bank has the borrower sign a promissory note and security agreement, Indiana state law does not protect you from liability for the unpaid balance. The bank should check the second box indicating that state law does not protect the customer from liability for the unpaid balance. Ind. Code § 32-30-10-7 provides: “If there is an express written agreement for the payment of the sum of money that is secured by a mortgage or separate instrument, the court shall direct in the order of sale that the balance due on the mortgage and costs that may remain unsatisfied after the sale of the mortgaged premises be levied on any property of the mortgage-debtor.” In the unlikely event that your bank does not require the borrower to sign an express agreement, then the first box in the Closing Disclosure should be checked. Some confusion existed as to whether the statutory authority provided by Ind. Code § 32-29-7-5 that allows a mortgagee to waive its right to a deficiency judgment in exchange for a mortgagor’s agreement to waive the threemonth statutory “waiting period” required for issuance of process in a foreclosure action (for execution of a judgment or decree of sale, i.e. the “sheriff’s sale”), should be considered a “protection from liability” for a deficiency at the time of closing for purposes of the Closing Disclosure. Similar confusion existed over existing deficiency language with respect to short sales.3 Fortunately, at the request of the Indiana Bankers Association, the Indiana General Assembly recently enacted legislation to eliminate confusion as to how to correctly disclose this issue on the TRID. Senate Bill 3724 added language to Indiana law with respect to deficiency judgments and short sales to several sections of the code that reads, in part: “This section is not intended to provide the owner or real estate subject to the issuance of process under a judgment or decree of foreclosure any protection or defense against a deficiency judgment for purposes of the borrower protections from liability that must be disclosed under 12 CFR 1026.38(p)(3).” This language ensures that banks can disclose the presence or absence of a potential deficiency judgment based on the language in their loan documents. SB 372 was signed into law by Gov. Mike Pence on March 21, 2016, and became effective immediately. t 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. 1 See Compliance Connection, October 2015 Hoosier Banker magazine, page 14. 2 Amendments to the 2013 Integrated Mortgage Disclosures Rule Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) and the 2013 Loan Originator Rule Under the Truth in Lending Act (Regulation Z). 3 See Ind. Code §§ 24-4.4-2-202; 24-4.5-2-209; 244.5-3-209. 4 Similar language was also contained in House Bill 1181 that was signed into law by Gov. Mike Pence on March 21, 2016. Cinnaire Corporation, Lansing Michigan, has been recognized as one of the Best Nonprofits to Work for in 2016 by The NonProfit Times. The company ranked 21st on the list of top 50 best nonprofits overall and ranked eighth out of 27 on the list of the best medium nonprofits. The rankings were based on: leadership and planning; corporate culture and communications; role satisfaction; work environment; relationship with supervisor; training, development and resources; pay and benefits; and overall engagement. t AssociAte MeMbers’ corner
15 Hoosier Banker May 2016 PSP SHOWCASE About the Author Rod Lasley is vice president-products & services of the Indiana Bankers Association, and also serves as president of the for-profit companies owned by the IBA. He can be reached at 317-387-9380, email: rlasley@indianabankers.org. How can your bank focus on creating strong relationships, helping customers succeed and providing quality community assistance, without the telecommunications distractions between your bank and your core provider (or among your various branch offices), while trying to juggle multiple providers for your voice, data and Internet connectivity? The team at BITS Network believes that banks should focus on customers and communities, free of the challenges that come with data and telecommunications. Founded in 2005 by a bankers’ bank cooperative, with some 400 community bank shareholders, BITS (Banking Infrastructure & Technology Services) Network is an expert in bank communications processes. The BITS board of directors consists entirely of community bank chief executive officers, and BITS works exclusively with banks. The company serves more than 100 community banks in 15 states and has been a valued Indiana Bankers Association Preferred Service Provider for six years. The company acts as your partner in providing an integrated approach to managing your technology platform. Unlike a telecommunications carrier with limited vertical expertise, or a core processor which only focuses on one or two telecommunications functions, BITS understands the full range of bank telecommunications. With BITS Network, there is no need to navigate among multiple providers, questioning every next step. BITS figures out your needs for you, allowing you to focus on the banking needs of your clients and community. The company has a regulatory compliant solution designed to meet the security, business continuity and disaster recovery requirements of the industry, and can provide you with all of the necessary documentation to satisfy your regulators. It has established, private-data connectivity to several key business partners, including core processors and providers of automated teller machines. Rest assured that BITS Network can securely transport your bankspecific software application and services, with no service disruption or downtime due to natural or manmade disasters. Its solutions provide full network and data center redundancy, allowing you to fulfill your business continuity requirements and, more importantly, to serve your customer without interruption. BITS Network is standardized on an infrastructure provided by Cisco, the industry leader in voice and network equipment. Because BITS services are managed by certified Cisco engineers, your operational expense will be reduced. You will have access to network engineers to support your ever-changing network infrastructure requirements. When you consider a new phone system, routers or switches, or new voice, data or Internet connectivity, first contact BITS Network for a complimentary, in-depth infrastructure assessment. Even if you are not currently seeking a new solution, a quality assessment provides value by helping you to align contracts and depreciation schedules. This free assessment is offered to IBA members as a benefit. For more information regarding BITS Network or for a complimentary assessment, contact John Hendrich at 765-276-4464, email: john.hendrich@ bitsnetwork.com. You also are welcomed to contact me, Rod Lasley, at the IBA offices at 317-387-9380, email: rlasley@indianabankers.org. t Don’t Let Telecommunications Break the Bank
16 Hoosier Banker May 2016 deadline of 10:30 a.m. Eastern time (1 p.m. settlement), and an afternoon submission deadline of 2:45 p.m. ET (5 p.m. settlement). The same-day ACH rule includes a “same-day fee” on each same-day ACH transaction for RDFIs, in order to recover some of their costs associated with enabling and supporting the process. When Is the Deadline to Comply? Same-day ACH is being implemented in three phases: • Phase 1 begins Sept. 23 of this year, with ACH credits only; • Phase 2 begins Sept. 15, 2017; in this phase, same-day ACH debits may be transmitted through the network; • Phase 3 kicks off on March 16, 2018, mandating that all RDFIs make funds available from sameday ACH credits (such as payroll direct deposits) to their depositors by 5 p.m. of the RDFI’s local time. About the Author Jennifer Kirk is vice president, industry and government relations, for EPCOR, a not-for-profit trade association providing electronic payments and risk management information, education, support and national industry representation to U.S. financial institutions. She joined the organization in 2002 and has served as a member of the NACHA Rules and Operations Committee, NACHA Blue Ribbon Panel, NACHA Arbitration Board and as co-chair of the National ACH Forum Education Committee. Kirk is an accredited ACH professional and earned an MBA from Ohio University. The author can be reached at 800-500-0100, email: jenk@epcor.org. The industry has spoken. Beginning in September, sameday Automated Clearing House (ACH) will be a reality, bringing us one step closer to moving payments faster within the United States. Below are some questions and answers to help banking professionals prepare. Will Same-Day ACH Affect Me? The short answer is yes! All receiving depository financial institutions (RDFIs) are required to receive same-day ACH entries. However the volume your institution will receive remains to be seen. Many ACH transactions will continue to settle within the traditional two-day ACH credit and one-day ACH debit model that exists today. An originating depository financial institution (ODFI) will be able to submit files of same-day ACH payments through two new clearing windows provided by ACH operators: a morning submission Can I Opt-Out? Now that same-day ACH rules have passed, and the Federal Reserve has announced its support, rumors are flying as to who must comply with same-day ACH. The truth is simple: Every single receiving depository financial institution must comply. If you are an ODFI, you have the choice to originate same-day ACH items, but RDFIs must receive them. Who Will Help Me? Your core processor or data processor should already be preparing to support same-day ACH. Your processor most likely is working on ways to help you automate processes to ensure that your accountholders will get their money on time, with minimal impact to your staff. Correspondent banks also are working to make sure that your needs are met, so that you can continue to comply with ACH rules throughout the phases of implementation. Additionally your regional payments association, such as EPCOR, is working diligently to ensure that training and support are easily understood; your payments association also will help you sort out how these rules will impact your financial institution’s internal policies and procedures. t OPERATIONS / TECHNOLOGY Setting the Record Straight on Same-Day ACH Compliance Note: Jennifer Kirk is presenting a “Same-Day ACH Symposium” on June 21 at the Indiana Bankers Association Center for Professional Development. For more information, contact Laurie Rees at 317387-9380, email: lrees@indianabankers.org.
17 Hoosier Banker May 2016 It’s happening. Possibly right now, somebody in one of your branches could be divulging private customer information, setting up your bank for legal issues, compliance violations and lost customers. With all the recent focus on cybersecurity, let’s not lose sight of the most likely threat vector: pretext calling. This is when social engineers call our branches and breach information merely by asking for it. It may seem benign, but it’s actually the most likely threat vector. Banks often find themselves in the middle of domestic disputes, and may even face moral dilemmas, for example in the case of an illegal request for the account information of an ex-spouse in an attempt to force a child support payment. These requests, along with any requests for NPI (non-public information) or PII (personally identifiable information), must be properly authenticated with what the Federal Financial Institutions Examination Council refers to as “out-of-wallet questions.”* Out-of-wallet questions seek information that cannot be found in a lost wallet or purse, or on social media sites, in order to confirm a caller’s identity. But we have to be creative in how we pursue this verification information, and we need to teach our employees how to engage the customer in the process. How do you teach out-of-wallet questions? From three primary principles: 1. Reduce and isolate those needing to ask the questions; 2. Create an appropriate policy (educate); 3. Motivate and activate awareness. Reduce and isolate. While policy should be kept in a document that reaches all users (typically your acceptable use policy), the bank should also consider tactics that will reduce the number of people typically needed to ask out-of-wallet questions. For example banks that funnel all incoming calls through a call center or help desk can focus training and testing on those employees. Create an appropriate policy. A sample policy title is: Authenticating Nonpublic Customer Information Requests.” Below is sample policy language: Confidential client information assets include any information that has any or all of the following: • Name (any name on an account); • Address (any or all addresses for any account); • Phone numbers (any or all, including fax); • Tax ID numbers; • Social Security numbers; • Account numbers (any or all); • Email addresses; • Account balances. When a customer calls asking for any of the above information, you must confirm the identity of the caller prior to giving any of the information listed above. If you do not know the customer, ask the customer to provide “out-of-wallet” authentication information. Outof-wallet questions seek validation information that cannot be found in a person’s lost wallet or purse, or on social media. Rather than rely on a stock list of out-of-wallet questions, be creative as you authenticate callers. Not every customer will know the answer to every out-of-wallet question, and thus you must seek the customer’s help in finding legitimate questions. To enlist the customer’s help, start by explaining: “For your protection, I need to ask some questions to Teaching Out-of-Wallet Questions About the Author Dan Hadaway, CRISC, CISA, CISM, has been working with banks on their security awareness programs since he founded Infotex in 2000. He writes for Hoosier Banker, the American Bankers Association’s Compliance Magazine, BankNotes and other industry publications; speaks regularly at conferences and conventions; and facilitates the Indiana Bankers Association’s annual Cybersecurity Conference. The author can be reached at 800-466-9939, email: dhadaway@infotex.com. Infotex is an IBA Preferred Service Provider. SECURITY / FRAUD Continued on page 18.
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