Hoosier Banker JULY 2016 INSIDE Rep. Luke Messer brings a Hoosier heart to the U.S. House of Representatives. Story on page 8. 1916 - 2016 YEARS
2 Hoosier Banker July 2016 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. S E M I N A R As we encounter 2016’s anticipated financial crossroads, bank managers are equipping themselves with the information they need to face the unique challenges and opportunities that lie before them. Making successful decisions requires the right tools, techniques, and processes. But most importantly, it requires the right partner—The Baker Group—and one very special event. The Baker Group’s Interest Rate Risk and Investment Strategies Seminar is developed specifically for managers of financial institutions. Designed to meet the challenges of 2016, it is an in-depth examination of current topics including: • Bank Performance Trends and Industry Landscape • Asset/Liability Management: Finding Keys to High Performance • Game-Plans for a Shifting Rate Environment • Managing Investment Risk: Strategy and Tactics • Regulatory Expectations for Interest Rate Risk and Investments • Modeling Assumptions and Key Simulations for Interest Rate Risk • Security Selection Decisions: Cash Flow and Relative Value • Sector-Specific Risk Management: MBS Prepays and Municipal Bond Credit Analysis • Liquidity, Cash Flow, and the Bond Portfolio For your convenience, register online at GoBaker.com/ seminars. For more information, call Skoshi Heron at 888.990.0010. October 13-14, 2016 Oklahoma City, OK The Skirvin Hilton One Park Avenue Oklahoma City, OK 73102 405.272.3040 Agenda Thursday, Oct. 13th Golf: Oak Tree National Home of: -US Amateur -PGA -Senior PGA -US Senior Open Dinner — Mickey Mantle’s Guest Speaker Martin H. Barnes — Chief Economist, BCA Research Who Should Attend Financial institutions’ CEOs, CFOs, investment officers, board members, and those who are directly or indirectly responsible for financial management functions will benefit from this seminar. There is no registration fee for this seminar. CPE credits will be earned for your attendance. Friday, Oct. 14th Breakfast Seminar Lunch Conclusion
TABLE OF CONTENTS VOLUME 100 NO. 7 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 REP. LUKE MESSER: LEADING WITH A HOOSIER HEART FEATURES 5 CEO PONDERINGS S. Joe DeHaven, IBA 6 IBA CALENDAR OF EVENTS 7 STAFF SELECTIONS Erika L. Hall, IBA 12 HOOSIER BANKER HERITAGE 14 ASSESSYOUR EXAMINATION PROCESS:TELL US THE GOOD, THE BAD AND THE UGLY! Scott Polakoff and Stephen Brown Klinger, FinPro Inc. 17 IBA PRESENTS SLATE OF NEW OFFICE CANDIDATES FOR 2017 LENDING / CREDIT 18 SBA AND CONGRESS BRING BACK SBA 504 PROGRAM REFINANCING Jean Wojtowicz, Cambridge Capital Management Corporation PSP SHOWCASE 22 TRANSFORMYOUR COMPLIANCE PROGRAM: SIX OBJECTIVES OF COMPLIANCE MANAGEMENT Pam Perdue, Continuity GR SPOTLIGHT 24 THE SEASON OF LEGISLATIVE SUMMER STUDY COMMITTEES CONVENES Dax Denton, IBA HUMAN RESOURCES 26 RECRUITMENT IN THE DIGITAL AGE: LEVERAGING SOCIAL MEDIA IN TODAY’S MARKETPLACE Charlie Tudor,Angott Search Group DEPARTMENTS 5 VIDEO BONUS 10 TAKING IT EASY 16 HONORABLE MENTIONS 19 FINANCIAL LITERACY DIGEST 19 FROM THE BOARD ROOM 20 COMPLIANCE CONNECTION Brett J.Ashton, Krieg DeVault LLP 21 ASSOCIATE MEMBERS’ CORNER 25 NEW BRANCHES, BUILDINGS & OPENINGS 28 ANNIVERSARY MILESTONES 29 BANKING ON COMMUNITY 30 BANKERS ON THE MOVE 34 ADVERTISERS INDEX 1916 - 2016 YEARS 3 Hoosier Banker July 2016 Rep. Luke Messer is serving his second congressional term in the U.S. House of Representatives.
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 President .................................. Amber R.VanTil, JD, 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 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 SeniorVice President–Government Relations ................................................... Dax Denton Vice President–Meetings & Events ............................................ Christina M. Bennett, CMP Vice President–Products & Services ................................................................. Rod Lasley Vice President–Education & Training ........................................................... Laurie A. Rees Vice President–Communications .................................................................. Laura Wilson AssistantVice President–Government Relations ........................................... Erika L. Hall, JD 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 July 2016
5 Hoosier Banker July 2016 FEATURE CEO Ponderings S. Joe DeHaven, Chief Executive Officer, Indiana Bankers Association The latest instalment of the Indiana Bankers Association instructional video series, “Website Overview,” gives a bird’s-eye view in how to maximize use of the IBA website. This custom-created video is available online at indianabankers.org/iba-website-how-instructions. The video also can be accessed by clicking on the red YouTube arrow in this issue of Hoosier Banker Digital at indianabankers.org. For questions or more information about IBA instructional videos, please contact Tracy Kubly, 317-387-9380, email: tkubly@indianabankers.org. t Video Bonus:Website Overview Four years ago, during our last leap year, I wrote in this column about being thankful for being provided an extra day, because so much occurs during leap year. Both the Republican and Democratic national conventions, plus the Summer Olympics, take place each leap year. Admittedly I am a political junkie and have always been a sports fan, so this is nirvana for me. The first event will be the Republican National Convention, to take place July 18-21 in Cleveland. There is speculation that protesters may create civil unrest not seen since the Democratic National Convention in Chicago in 1968. Few actually expected that Donald Trump would be the Republican Party candidate for president of the United States, and many in the GOP establishment are not happy about Mr. Trump’s candidacy. But the people have spoken, as structured in the Constitution, and we’ll see what happens at the convention. Next is the Democratic National Convention, scheduled for July 25-28 in Philadelphia. Fittingly, Philadelphia is where our current government was founded with the Constitutional Convention in 1787, resulting in the negotiation and drafting of our Constitution. History will be made once again, as Hillary Clinton becomes the first female major party candidate in the United States to run for the office of the president. Many questions remain as to what the Democratic platform will look like, since the unexpected support for Bernie Sanders has changed the messaging expected to come from Democrats. I saved the best for last: The XXXI Olympiad will be held in Rio de Janiero, Aug. 5-21. However even this event is not without its controversy. As of this writing, Russia has been banned from participation for being caught in the doping of athletes. Some have questioned whether Brazil will be fully prepared by August to host this monumental event. And many athletes have opted not to participate at all, due to fear of the Zika virus. During the scheduled time of the Olympics, the virus is expected to be circulating in Brazil. For bankers, the Republican and Democratic national conventions are very important. The respective platforms and resultant proposed legislation could have a longlasting impact on how business is done. This industry suffers from a regulatory overload that none of us could have imagined just 10 years ago. Bankers will likely vote in support of the party that commits the most to regulatory relief. Regardless, bankers have learned over the past few years how critical every step of the legislative process is to their business plans and execution. While we are often powerless to control the process, we must remain involved at all levels of government and continue to communicate our concerns and needs. I am proud of the Hoosier bankers who have stepped up and participated in the legislative efforts of the Indiana Bankers Association. The level of member support we receive today is higher than at any point in my career. We cannot let up, however. We must remain vigilant in our pursuit of a fair and equitable regulatory environment for all banks. While the Olympics may not impact our day-to-day business lives, it is a fun and entertaining event to watch. Following the two national conventions, we likely will be ready for some lighter fare. USA! USA! USA!
6 Hoosier Banker July 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 IBA Regional Meetings 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 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 Fair Lending Review and Update July 18 - IBA Center Principles of Loan Documentation July 19 - IBA Center Universal Banker Skills July 19 - IBA Center Advanced Loan Documentation July 20 - IBA Center Auditing Regulation Z Aug. 3 - 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 Workshop for Loan Assistants and Processors Aug. 16 - IBA Center Introduction to Consumer Loan Origination Aug. 17 - IBA Center Branch Management Series: Session 3 - Leading, Developing and Engaging theTeam 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 Real Estate Lending and Consumer Compliance Aug. 25-26 - 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 Resort 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 Call Report Preparation Sept. 20-21 - IBA Center Mortgage Lending School Sept. 20-22 - IBA Center IBA Annual Washington Trip Sept. 25-27 - Washington, D.C. In-Depth Study of Appraisal and Evaluation Compliance Reviews Sept. 27 - IBA Center 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 Internal Audit and Risk Management School Oct. 11-12 - 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 Putting Power Into Prospecting: Successful Trust-Based Acquisition Strategies Oct. 13 - 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 ImplementingThe New HMDA Rules Nov. 7 - IBA Center Branch Management Series: Session 4, Raising the Bar for Sustainable Growth Nov. 8 - IBA Center Human Resources Directors Forum Nov. 9 - IBA Center Fundamentals of Commercial Lending Nov. 9-10 - IBA Center Midwest Agricultural Banking School Nov. 14-17 - Purdue University, West Lafayette July 12 - Privacy Notices Compliance: Content and Delivery July 12 - Call Center Training July 12 - Alert! Implementing New Customer Due Diligence Rules - Legal Entity Customers - Part 1 July 12 - Modifying Existing Product Terms and Fees:Timing, Content and Requirements for Change-in-Term Notices July 13 - Current Hot Issues in Financial Accounting for Community Banks July 13 - Email Security - Oops,You Clicked; Now What? July 13 - Developing a Star Teller - Personal and Technical Skills July 14 - Board Oversight and Responsibility for ACH Risk July 14 - Entering the World of Consumer Loans - Part 2 July 15 - New FFIEC Guidance on Mobile Financial Services: Evolving Delivery Channels vs. Risk Management Expectations July 19 - Analyzing and Managing Escrow Accounts, Including Shortages, Surpluses and Deficiencies July 19 - Financial Forecasting to Determine Repayment Capability on Long-Term Loans July 20 - Countdown to Same-Day ACH: Deadline Sept. 23 July 20 - Creating a Customer Service Experience That Will Sell! July 20 - Best-Ever Checklists for Consumer Loans July 21 - Entering the World of Consumer Loans - Part 3 July 21 - TRID Checkup: Six Months in Areas of Concern and Uncertainty July 21 - Using Credit Risk Ratings to Determine Asset Quality July 21 - Advanced Collection Concepts, Compliance and Risks July 26 - Alert! Implementing New Customer Due Diligence Rules - Legal Entity Customers - Part 2 July 26 - New! Small Creditor Revisions,ATR and QM Requirements July 26 - Understanding Letters of Credit: Rules, Responsibilities and Liabilities July 27 - Audit Report Writing July 27 - Flood Insurance: Latest Updates and Issues That Continue to Plague Lenders July 27 - Risks and Precautions for Endorsements and Other Negotiable Instruments July 28 - Commercial Credit Grading: Methodology, Risk and Examiner Issues Aug. 2 - Quarterly Emerging Leader Series: Establishing New Products and Service Controls Aug. 2 - UCC 3 and 4: Endorsements and Other Legal Check Issues
7 Hoosier Banker July 2016 The month of May was special for me. I completed law school, started my career at the Indiana Bankers Association, and became engaged to my future husband. It happened in that order, but let me begin with the IBA. On May 8, I joined the Association as assistant vice president-government relations. I was hired to help analyze political/ regulatory issues, review existing and proposed legislation, build relationships with the members of the Indiana General Assembly, and assist IBA members in their grassroots lobbying. Additionally, I’ll be doing some legal work for the Association. When I heard about this opening, it sounded perfect for my background and interests. I most recently was employed as deputy legislative director for the Family and Social Services Administration. Prior to that, I served the Indiana House of Representatives as legislative intern director and senior legislative assistant. While working for the Indiana House of Representatives, I got to know Amber Van Til and Dax Denton from the IBA Government Relations Team. They were both so kind, professional and hardworking. I admired how they had built outstanding reputations as advocates for the banking industry. Like many lobbyists, I hadn’t always planned to pursue advocacy. I started college studies at Indiana University as a business major, but then switched to English and political science. Later I found that I could satisfy all of my interests by studying business law, so I enrolled at the I.U. Robert H. McKinney School of Law. I’ve always enjoyed school. While I was an undergraduate, one of my favorite experiences was serving for three years on the Indiana University Union Board. It’s the largest student programming board on the I.U. Bloomington campus, bringing in large-scale lectures, concerts and other events. My student peers and I coordinated locations, negotiated contracts and executed event planning. We were in charge of a $200,000 budget, so it was a large responsibility, but we had excellent guidance from advisers and professors. My Union Board experience helped me hit the ground running when I started my first job. After college, my first legal experience was serving as an intern with a federal judge. The internship mostly involved research and writing, which helped me learn more about the law. During my second year of law school, I decided to join the Indiana House Republican Caucus as a legislative assistant, where I could learn about state government and work in a more social environment. As a legislative assistant, I worked directly with an assigned group of representatives. I researched legislative questions, drafted responses to constituents, tracked bills and prepared committee reports. I enjoyed learning about policy and the legislative process firsthand from legislators, staffers and lobbyists. I knew after working on staff that I had been bitten by the “session bug” and wanted to continue my career working with the Indiana General Assembly. Now, my next step is to take the bar examination later this month. In preparation I am taking a formal bar study class that meets every evening, Monday through Friday, plus some Saturdays. That schedule is similar to when I was working full-time by day, and going to law school at night. In general I like to keep busy. I enjoy running, yoga and recreational sports like volleyball and softball. I also enjoy being involved in the community. Currently I am a member of the Greater Indianapolis Republican Women’s Club, and I’m also a precinct committeeman in Center Township. My fiancé, Adam, is my best friend and biggest supporter. He’s from my hometown of Avon, but we didn’t meet until we were both undergraduates at Indiana University. Go Hoosiers! Adam also studied law, finishing up his degree one year ago with a combined JD-MBA. He now works for a large law firm in downtown Indianapolis. I’m enjoying making plans with him for our wedding in 2017. May certainly was an exciting month for me. It was the end of four long years of law school and the start of two major milestones: my work here at the IBA, and my life’s journey with Adam. Thank you to everyone I have met from the Indiana banking community. You have all been so welcoming to me, and I’m very happy to be on your team. Staff Selections Erika L. Hall, JD,Assistant Vice President-Government Relations Indiana Bankers Association FEATURE Three bankers from member banks of the Indiana Bankers Association have completed the three-year Barret Graduate School of Banking in Memphis, Tennessee. The final session of the coursework took place in May. Congratulations to: Tanya M. Burton and Miranda Howard, Alliance Bank, Francesville; and Mark A. Cowen, Farmers State Bank, LaGrange. t IBA Members Complete Barret Graduate School of Banking
8 Hoosier Banker July 2016 COVER STORY Twenty years ago, on his 27th birthday, Luke Messer came to the realization that “it was time for a different path.” Motivated by an inspirational speaker, Messer determined to devote his life to the public good. Since that time, he has led two not-for-profits as president and CEO, was executive director of the Indiana Republican Party, served in the Indiana House of Representatives, and was a partner in two law firms. Rep. Luke Messer now serves in the U.S. House of Representatives, serving Indiana’s 6th and largest congressional district. He was elected to office in 2012, and was elected freshman class president by his peers. Now serving in his second congressional term, Messer has been named House Republican Policy Chair, the fifth ranking leadership position in the Conference. Additionally he serves on the House Financial Services Committee and on the Education and the Workforce Committee. Messer and his wife Jennifer are “proud parents of two daughters, one son and two dogs,” as Messer’s website states. Luke and Jennifer Messer also have authored a children’s book: Hoosier Heart: A Story About Hoosiers and the Great State of Indiana. Messer is a graduate of Wabash College, for which he played football as a middle linebacker, and he earned his law degree from Vanderbilt University. Recently Hoosier Banker interviewed Congressman Messer about his life as a public servant. What led you to public service? “There are a couple of influences. One is that my grandmother volunteered for Richard Lugar during his early days, when he was on the school board in Marion County. I admired how Dick Lugar helped his community. “Another is that I was raised in a single-parent family by my mother, who taught me that everyone has a responsibility to give back. She also taught me that, if you work hard, anything is possible. “Other positive influences came through a close community of neighbors, teachers, church parishioners and team coaches. Then when I was older, I was inspired by President Ronald Reagan, who restored America’s confidence and painted a bold vision of where America could go with conservative policy. “My first paying job, besides mowing lawns and detassling corn as a kid, was as a young lawyer in the firm of Johnson Smith LLP. Next I worked for Koch Industries, which would bring in guest speakers as part of its corporate culture. “One day we had a speaker named Henry Marsh, whose message could be summarized in one sentence: ‘When I deal in generalities I seldom succeed, but when I deal in specifics I seldom fail.’ “John Wooden quoted a slightly different version of this idea: ‘Inch by inch, life’s a cinch; yard by yard, life is hard.’ The idea is that whatever your goals are, you can get there if you start taking small steps. “That day was my 27th birthday, and later I went bowling. But I kept thinking about the message I heard that day and decided it was time for a different path. So I made a choice to go into public service. “My first effort was to campaign for Virginia Blankenbaker, former state senator, who was running for U.S. Congress. It was an unsuccessful campaign, but a good learning opportunity. Next I went to Washington, D.C., where I served in a variety of positions, eventually as legislative counsel for Congressman David McIntosh. “When David ran for Indiana governor in 2000, I wound up running for his congressional position. In that primary, I placed a ‘close third,’ as they say, with Mike Pence and Jeff Linder placing ahead of me. Out of that experience, I returned to being an attorney, serving at Barnes & Thornburg LLP. “While there, some people in the Indiana Republican Party asked me to consider serving as executive director. I accepted that position in 2000. Then in 2003 I was named a state Rep. Luke Messer: Leading With a Hoosier Heart Rep. Luke Messer, shown at a hearing, serves as House Republican Policy Chair, plus is a member of the House Financial Services Committee and of the Education and the Workforce Committee.
9 Hoosier Banker July 2016 legislator, following the tragic death of state Rep. Roland Stine, who was killed by a drunk driver. “Serving as a state representative was a great opportunity to learn from former Gov. Mitch Daniels and Speaker Brian Bosma. They impressed on me that it’s possible to implement big, bold ideas and still win elections. It’s a lesson I’m trying to take with me to Washington.” You served first in the Indiana House of Representatives, and now in the U.S. House. How does state-level service differ from the national arena? “Probably my biggest surprise in going to Washington was learning that parliamentary procedures there are unlike those of state legislatures. At the Indiana Statehouse, there is a rule book to follow that gives a voice to individual legislators. Those individual members, who represent minority opinion, have the ability to drive amendments and legislation to the floor. “But in Washington, a rule has developed over decades in the House that boils down to: Majority rules. When a controversial bill comes to the floor, we first vote to determine which rules will apply to that bill. The Rules Committee may decide that there will be no amendments on a bill, or that there will be four, or 10. “Imagine being at a basketball game if the referee decides to erase the free-throw line and move it up two feet, then the next game moves it back three feet, plus decides that the red team will play with four members and the blue team will have five. It wouldn’t seem fair, but that’s essentially what we have in Washington. “Virtually every day, the rule book is thrown out by majority rule. It’s been happening for so long and so often that it’s barely noticed. It’s a cultural challenge to awaken the institution to the problem. “This is hurting our country, because the minority opinion isn’t heard. As the House Republican Policy Chair of the Conference, I am trying to drive an effort to normalize our rules, so that each individual member has a voice. When each individual member has a voice, the 700,000 to one million people they represent also have a voice.” What are other concerns? “I’m trying to focus our Conference on a positive agenda for working Americans. A driving source of angst in our country is the shrinking paycheck of middle Americans. “The Bureau of Labor Statistics reports that, from 1964 to 2014, in real-dollar terms the purchasing power of the average American increased by 84 cents. That’s just 84 cents more purchasing power after a span of 50 years. “Last February I addressed this in a speech to the National Press Club, and I talked about five ideas to help make the average American’s paycheck go further. One idea is to change the tax status of healthcare expenses, so that everyone can pay for their healthcare with pre-tax dollars. “Another idea is to incentivize Americans to deal with day-to-day economics by paying out earned income tax credits on a weekly basis, instead as a single, year-end paycheck. Third, we need to promote school choice, which ensures that everyone has an opportunity for highquality education. “Fourth, we have to eliminate marriage penalties. The marriage penalty tax was abolished a generation ago, but penalties still exist through the loss of some federal benefits upon marriage. And finally, I propose that we pass the REINS Act,* through which Congress would have to approve any new regulation with an economic impact of $100 million or more. “Freedom brings opportunity. One of the challenges of federal policy, especially as it applies to financial services, is that we have created unintended consequences. Many of the regulations surrounding the DoddFrank Act and Basel III came about through the best of intentions, but the results are hurting the very consumers we are trying to protect. “Today it’s much harder for a working American to get a loan than it was a decade ago, and free checking has virtually disappeared. These are unintended consequences of Dodd-Frank. “We want to make sure that consumers are treated fairly, and our financial institutions remain fiscally sound, but we’ve got to be sure that the regulations and laws that we bring forth don’t end up unintentionally hurting consumers. In public policy, we’re not accountable for our intentions; we’re accountable for our results.” How can the bankers of Indiana be helpful in that quest? “Stay engaged. In modern life, if you don’t ‘happen’ to government, government’s going to happen to you. We all have a responsibility to make sure our elected leaders know the consequences of their decisions. Family is a priority to Luke and Jennifer Messer.“In life, you find time for what you prioritize,” Messer observes. Continued on page 10.
10 Hoosier Banker July 2016 Continued from page 9. “Just as importantly, we have a responsibility to make sure that our friends and neighbors – the folks who vote at the polls – understand what the true consequences of these laws and regulations are. “Bankers have a great story to tell about how they make America’s economy work. We can’t allow those who want to demonize the industry for political gain to prevail. The vast majority of people within the industry are good actors trying to do the right thing. “One of the lessons of the 2008 economic collapse is that our financial institutions are an important part of the public trust. They are every bit as vital to the functioning of our society as clean water, clean air and electricity. If the financial industry collapses, the American economy collapses with it.” At home, you and your wife, an attorney, have three young children and are known for maintaining a devoted family life, despite time constraints. How do you maintain this balance? “In life, you find time for what you prioritize. I’m very serious about being a member of Congress, but I’m equally serious about being a husband and father. We work to structure our life in a way that all of those priorities are met. “A big event for us occurred recently, when our younger daughter won the seventh grade basketball championship and was named co-MVP of the league. I’m also a coach in youth sports ‒ I coach my son’s basketball and football teams ‒ and all three of our children are active in school. “If you stay focused on the right things, life tends to work out. I’m also very blessed. My wife Jennifer is a strong professional and a great mom. Faith is an important guide in how we try to lead our lives.” You and Mrs. Messer co-wrote a children’s book, Hoosier Heart, which asks the question: “What is a Hoosier?” What is the answer? “First, to explain the genesis of this book, it came about as a family project 10 years ago, when I was a state legislator. I would go read books to kids at schools, but I couldn’t seem to find a book for children about Indiana history. I said to Jennifer, ‘There ought to be a book for this,’ and she said, ‘Let’s write it.’ “So we wrote the book together. Then when we started looking at illustrators and saw how expensive they are, Jennifer became inspired to be the book’s artist. When people ask how she made the pictures so childlike, she laughs and says, ‘It’s because I’m a lawyer, not an artist.’ “But the pictures are great and are even modeled after our oldest two children, who were three and two years old at the time. Our youngest hadn’t been born yet. “Hoosier Heart is the story of what defines a Hoosier. In the book we go through a broad cross section of Indiana history and culture and legend. In the end, we find that being a Hoosier means having a big Hoosier heart. “The book closes with, ‘Hoosiers come in all shapes and sizes, all races and all creeds. Some Hoosiers don’t even live in our state, but no matter where a Hoosier now lives, you’re never far apart, because the key to being a Hoosier is having a big Hoosier heart.’” t Congressman Messer was elected to the U.S. House of Representatives in 2012. James R. Jackson has announced his retirement effective July 1 as vice president and trust officer of TriCounty Bank & Trust Company, Roachdale, after 30 years of banking experience, including 20 years with Tri-County Bank. Jackson began his banking career with Lafayette National Bank before serving in hospital administration in North Carolina and Texas. He is a board member and president for the Mary Allison Children’s Trust and a supporter of Quail Unlimited and Pheasants Forever. Jackson earned a bachelor’s degree from Purdue University. Terry Quinn has retired as chief wealth management officer of Peoples Bank, Munster, after 24 years in the trust and investment industry. He joined the bank in 2006 as senior vice president, wealth management officer, and was promoted to chief wealth management officer in 2010. Quinn previously practiced law in Chicago and operated a manufacturing company. He is a former member of the Munster School Board; serves on six not-for-profit boards; and is a member of the American, Indiana and Lake County bar associations. Quinn earned a bachelor’s degree from Purdue University and MBA and JD degrees from the University of Notre Dame. t Taking iT Easy
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12 Hoosier Banker July 2016 HOOSIER BANKER HERITAGE: 1970-1979 A new economic term was coined in the 1970s: stagflation. Defined as stagnant business activity during a period of high inflation and unemployment, stagflation ‒ once thought impossible ‒ became a harsh reality when outdated U.S. monetary policy collided with oil crises, war expenses and costly social initiatives. Remediation efforts through wage and price controls and increased government spending backfired; by the dawn of the next decade, interest rates were soaring above 14 percent. Other pulse points of the ’70s were the burgeoning conservation movement, kick-started by the first Earth Day held in 1970; growth of the women’s movement, with Indiana as 1916 - 2016 YEARS the final state to ratify the ultimately failed Equal Rights Amendment; a blistering antiwar movement, punctuated by the Kent State shootings; withdrawal of U.S. troops from southeast Asia; the Watergate scandal and ensuing presidential resignation; and the Iran hostage crisis. Another milestone was the nation’s bicentennial celebration on July 4, 1976. On the banking front, multiple developments took place: 1970 - The Bank Secrecy Act passed; - Freddie Mac was established. 1971 - The Fair Credit Reporting Act passed; - The Farm Credit Act grew the powers of the Farm Credit System; - The gold standard for U.S. currency ended. 1973 - In-store bank branches opened; - NOW accounts became available. 1974 - The Basel Committee on Banking Supervision convened; - The Equal Credit Opportunity Act passed; - The Real Estate Settlement Procedures Act passed. 1976 - The Tax Reform Act of 1976 ushered in IRAs. 1977 - The Community Reinvestment Act passed. 1978 - The Electronic Fund Transfer Act passed; - The Uniform Interagency Bank Rating System (CAMEL) was adopted. 1979 - The Federal Financial Institutions Examination Council was established. Also in 1979, Paul A. Volcker was appointed chairman of the Federal Reserve Board. At an October news conference, warning that “some difficult adjustments may lie ahead,” he announced plans for a restrictive monetary policy. Though initially the predicted economic difficulties materialized, by early the next decade the revised policy, coupled with changes in presidential administration, would make the ’70s stagnation a faded memory. 1970 The 1970 IBA Annual Convention featured an Hawaiian theme. 1971 Donna Cole and C.Warren Lundy of First National Bank of Vevay reviewed Cole’s sketches for the bank’s new calendar. 1972 The Indiana Bankers Association celebrated 75 years of service in 1972.The Association was founded in 1897, and Hoosier Banker began circulation in 1916.
13 Hoosier Banker July 2016 Northern Indiana Bank offered patriotic coin banks to its customers in anticipation of the U.S. bicentennial the following year. 1975 Modeling career apparel at American National Bank, South Bend, were (left to right): Lynette Good, Jean Whetstone, Roseann Taelman, Donna Gill and Doris Clauson. 1973 Mrs. John (Susie) Nash, Columbus, was head of the IBA Ladies Convention Program Committee, and Alvin L. Kuehn, Indianapolis, chaired the IBA Investment Committee. 1977 Lafayette National Bank operated an integrated computer system in partnership with Indiana Information Controls Inc. in Valparaiso. 1974 Former Gov. Frank L. O’Bannon (far left), then serving as a state senator, and Judy O’Bannon visited with (left to right):Thomas W. Binford, Indiana National Bank, Indianapolis, and Robert C. Nelson, Indiana Bankers Association. 1979 Bill and Pat Farrell, Crawfordsville, were pictured with their seven children in an article about Mr. Farrell’s election as IBA president. 1976 Reviewing an event registration list were Dan Bincham (left) and Robert Heuchan, Union Bank & Trust Company, Franklin. 1978
14 Hoosier Banker July 2016 Continued on page 16. FEATURE Assess Your Examination Process: Tell Us the Good, the Bad and the Ugly! Bankers operate in a highly regulated environment, and regulatory examinations are a necessary ingredient for maintaining a safe and sound financial system. However, examinations can often go awry for myriad reasons, and recent observations suggest that we are at risk of veering away from the collaborative approach to more of a regulatory “gotcha” mentality. The Regulatory Feedback Initiative (RFI) consists of an anonymous electronic survey for bankers to provide assessments of their most recent examinations or visitations. The information is aggregated and analyzed on a national level to improve the regulatory examination process for banks on two fronts: • Survey results are communicated to bank regulators on a routine basis when unique examination trends are discovered, and; • Custom bank reports are available to banks to aid them in preparing for upcoming exams by identifying trending areas of focus or criticism. RFI was created by The Coalition of Bankers Associations in 2011; to date, banks have provided feedback on more than 3,000 examinations. In 2015 FinPro Inc. joined this important effort to assist with analyzing the data generated by RFI and to provide suggestions for improving the survey. RFI’s leadership, working closely with FinPro’s advanced analytic group and staff of former senior regulators, has streamlined the survey process and improved the relevance of questions. The enhanced survey, rolled out in May, has cut the number of questions by almost 50 percent, which is projected to reduce the average survey completion time from 27 minutes to less than 15 minutes. While this new platform is exciting, its usefulness is determined by banker involvement. Survey results can actually provide actionable feedback. For example, based on survey responses, the regulatory agencies should Start, Stop and Continue as shown in the following paragraphs. Start ‒ Create an appeals process that eliminates concerns of regulatory retaliation. The Riegle Community Development and Regulatory Improvement Act of 1994 required that all regulatory agencies construct an appeals process that attempts to remedy contested filings. RFI data shows a high correlation between banks which reported being “unsatisfied” or “extremely unsatisfied” with their examinations to whether or not the “examination resolved issues and recommended corrective action in a fair and reasonable manner.” Bankers’ comments show that they yearn for a healthy appeals process that is standardized across agencies and void of regulatory retaliation. From an article published in the American Banker on April 8, 2015, titled “Fear of Retaliation Stifles Banks’ Appeals to Regulators,” FinPro’s suggestions for improvement are simple and easy to implement: 1. Examination standards and findings should be the same, regardless of whether the examination team is from the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency or the Federal Reserve. 2. Appeals should be reviewed and resolved by an interagency group of senior executives. 3. Appeals should have all names and identifiable information redacted before submission to the interagency group. Decisions should be made based on the facts of the case. Stop ‒ Only 25 percent of the banks responding to the RFI survey agreed that “examiners applied ‘guidance,’ as opposed to enforceable regulation, appropriately” during examinations. The most common divergences in expectations historically surrounded the application of Appraisal and Evaluation Guidelines (FIL-82-2010), but most recently disagreements regarding the Guidance for Managing Third-Party Risk (FIL-44-2008) have emerged as a trend. Not surprisingly, 51 percent of the bankers who disagreed with the About the Author This article was written by Scott Polakoff, executive vice president, and Stephen Brown Klinger, vice president, of FinPro Inc. For more information on RFI reports or FinPro’s strategic planning, capital planning, regulatory advisory, new director orientation, and board retreat facilitation services, contact them at 908-234-9398 or by emailing finpro@finpro.us.
Let your voice be heard ! Take the RFI* survey at www.allbankers.org *RFI = Regulatory Feedback Initiative By taking our survey you are providing anonymous feedback that will be used to hold regulators accountable. More than 2000 bankers have already participated. Take a stand. Take the survey. (without revealing your identity) Indiana Bankers Association a proud member of
16 Hoosier Banker July 2016 above statement reported the examiner-in-charge had been supervising bank examinations for less than five years. Augmenting the experience of examiners is only one part of the solution, however. Some financial institution letters, such as FIL-44-2008, contain language stating the guidance “should not be considered as a set of required procedures.” However, others contain language that is more ambiguous. For example FIL-82-2010 states that “the Guidelines enhance the requirements for collateral valuation methods.” The mention of requirements is understandably confusing. Changes in staffing must be combined with a clearer communication of expectations from the agencies to banks. Continue ‒ The most polarized results from the current RFI survey data surround exam preparation. Overall, institutions had positive feedback pertaining to the examination staff being “knowledgeable about important issues and regulatory requirements” and “knowledgeable about your institution.” This indicates an adequate level of preparation by staff prior to examinations. However, a significant number of comments pertain to banks being given short notice to prepare themselves for the examinations. Examiners should continue to be vigilant in preparing for examinations, but should be equally proactive in communicating information about schedules and timing as early as possible. In combination with providing examiners feedback, the improved RFI survey and greater bank participation allow for better reports to aid bankers in upcoming examinations. Past survey comments indicate the desire to know such basics as: • “That BSA and IT were growing hot topics” Continued from page 14. • “There is a new focus on detailed policies” • “The examiner was going to spend 75 percent of their time on interest rate risk” • “Application of UDAAP specifically to their bank” • Or generally “when the goal posts moved.” We hear you, and the reports from the new survey will greatly improve your bank’s ability to stay aware of hot topics in preparation for examinations. While it is always incumbent on senior managers and directors to stay educated on current industry issues and regulations, the chart below shows the areas of greatest criticism in examinations conducted over the last two years. Bank participation is paramount to the success of the RFI. We encourage all institutions to visit allbankers.org to share anonymous information about their most recent examinations. t Fifteen member institutions of the Indiana Bankers Association were honored in May as “Top 200 Community Banks” in the country by American Banker magazine. More than 680 institutions nationwide qualified for consideration, from which 200 banks were chosen and ranked by return on equity over the course of the last three years. IBA-member institutions included in the listing were ranked as follows: No. 3 – United Bank, Evansville 7 – First Farmers Bank and Trust Company, Converse 45 – The Farmers Bank, Frankfort 56 – Farmers State Bank, LaGrange 72 – Community First Bank of Indiana, Kokomo 73 – River Valley Financial Bank, Madison 91 – First State Bank of Middlebury 93 – First Federal Savings Bank, Huntington 98 – Crossroads Bank, Wabash 117 – Peoples Bank, Munster 142 – First Harrison Bank, Corydon 165 – The National Bank of Indianapolis 177 – Logansport Savings Bank 180 – First Robinson Savings Bank, Robinson, Illinois 185 – Your Community Bank, New Albany Two individuals of IBA-member institutions were elected board officers of United Way of Central Indiana. Connie Bond Stuart, regional president of central and southern Indiana, PNC Bank, NA, Indianapolis, has been elected chairman of the board. Deborah Daniels, managing partner, Krieg DeVault LLP, Indianapolis, has been elected secretary of the board. t HonorablE MEnTions Safety and Soundess Examination Compliance Examination Exam Area Percent of Institutions Receiving Criticism Exam Area Interest rate risk management approaches 24% Real Estate Settlement Procedures Act 24% Credit administration practices 23% Regulation Z (Truth in Lending Act) 23% Adversely classified asset levels 21% Re HMDA/Regulation C 23% Real estate appraisal and evaluation processes 20% Flood Disaster Protection Act 18% Business Continually Planning 17% Regulation B (Equal Credit Opportunity Act) 16% Percent of Institutions Receiving Criticism
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