HB HOOSIER BANKER MAGAZINE indianabankers.org Kent Liechty Mission-led leader PLUS! FLD Hosts Third Annual Day at the Statehouse MAY / JUNE 2017
4 MAY / JUNE 2017 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: n Maintain the highest ethics, integrity and respect for others; n Serve with professionalism, innovation and resourcefulness; n Instill passion, positive attitude and enthusiasm; n Remain mindful that the success of the IBA is judged by the success of its members. View HB Digital at indianabankers.org. Publication Disclaimer Hoosier Banker (ISSN 0018 473X) is published bimonthly 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 or on the IBA website is the property of the Indiana Bankers Association. HB DIRECTORS & STAFF IBA BOARD OF DIRECTORS IBA Officers Chair..................................................Annette M. Russell, Security Federal Savings Bank, Logansport First Vice Chair ............................................... Clay W. Ewing, German American Bancorp Inc., Jasper Second Vice Chair..........................................................................Andrew J. Briggs, Bank of Geneva Immediate Past Chair ....................................Michael H. Head, First Federal Savings Bank, Evansville President and Chief Executive Officer ....................Amber R. Van Til, JD, Indiana Bankers Association Constituent Directors ICBA State Director ........................................Michael H. Head, First Federal Savings Bank, Evansville ABA Membership Council ..........................................Michael K. Bauer, WesBanco 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 Jeffrey W. Gump ........................................................................Farmers and Merchants Bank, Laotto Michael C. Marhenke..........................................................................iAB Financial Bank, Fort Wayne Michael S. Zahn .....................................................................First Federal Savings Bank, Huntington Northwest Region Directors Benjamin J. Bochnowski ................................................................................Peoples Bank, Munster Joseph D. Carlson ..................................................................... Community State Bank, Royal Center Arden L. Cramer ......................................................................................... Logansport Savings Bank Southeast Region Directors Archie M. Brown Jr. .............................................................MainSource Financial Group, Greensburg George W. Ferriell ......................................................................................................Bath State Bank Dennis Wayman ................................................................................................State Bank of Medora Southwest Region Directors Michael L. Baker .................................................................................................State Bank of Lizton Matthew W. Howrey .......................................................................................North Salem State Bank Kent L. Parisien ................................................................................ The First National Bank of Odon FUTURE LEADERSHIP DIVISION BOARD Kristin Marcuccilli, President ..........................................................................STAR Bank, Fort Wayne Kirby Drey, Vice President............................................................................................ Kentland Bank Emily Boardman ........................................................................................ Crossroads Bank, Wabash Craig Buse .............................................................Springs Valley Bank & Trust Company, French Lick Michael J. Clampitt .......................................................................................North Salem State Bank Jason L. Ernst ............................................................................First Financial Bank, NA, Terre Haute Ryan Hart ......................................................................................................Lake City Bank, Warsaw J. Daniel Maddox ...............................................................................Citizens State Bank, New Castle Jon-Myckle D. Price .........................................................Security Federal Savings Bank, Logansport 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 President and Chief Executive Officer ................................................................. Amber R. Van Til, JD Executive Vice President ..................................................................................Paul W. Freeman, CAE Senior Vice 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 Assistant Vice President - Government Relations ....................................................Erika L. Hall, Esq. 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: HB@indianabankers.org
Hoosier Banker 5 CONTENTS Vol. 101 No. 3 6925 Parkdale Place Indianapolis IN 46254-4673 Phone: 317-387-9380 Fax: 317-387-9374 Twitter: @indianabankers Publisher: Amber R. Van Til, JD Editor: Laura Wilson Advertising: Rod Lasley Submit materials to: HB@indianabankers.org Copy deadline: First of the month preceding publication. Advertising: Rates available at indianabankers.org. Advertisers should reserve space by the 10th day of the month preceding publication, and submit artwork by the 15th of the month preceding. 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 to members and associate members of the Indiana Bankers Association. Public access to HB Digital is available at indianabankers.org. HOOSIER BANKER MAGAZINE indianabankers.org Kent A. Liechty joined First Bank of Berne in 1997 and was named president and CEO in 2010. FEATURES 6 Vantage Viewpoints Amber R. Van Til, IBA 7 IBA Calendar of Events COVER STORY 8 Kent Liechty: Mission-led leader ARTICLE SPOTLIGHT 14 FLD Hosts Third Annual Day at the Statehouse Dax Denton, IBA DIRECTORS / SENIOR MANAGEMENT 16 GAP Management Lester Murray, The Baker Group HUMAN RESOURCES 18 Retail Banks Being Targeted by Labor Organizations Debra A. Mastrian, SmithAmundsen LLC 28 Six Top Workforce Trends Charlie Tudor, Angott Search Group PRODUCTS & SERVICES PROFILE 20 Social Media Regulations Bill Evers, CSI Regulatory Compliance COMPLIANCE CONNECTION 22 Large Cash Withdrawals Brett J. Ashton, Krieg DeVault LLP PSP SHOWCASE 24 Know That Your Collateral Is Protected Rod Lasley, IBA LENDING / CREDIT 32 Agricultural Loans Under Stress Jim Carlberg, Bose McKinney & Evans LLP DEPARTMENTS 13 Video Bonus 19 From the Board Room 23 Associate Members’ Corner 25 Anniversary Milestones 26 Honorable Mentions 30 Banking Center Updates 36 Banking on Community 38 Bankers on the Move 46 IBA Employees of the Month 46 Advertisers Index
6 MAY / JUNE 2017 Where, then, did that $36 billion windfall go, if not to customers? Better to ask, where did it NOT go? Retailers have not invested funds into adequate resources to put into place policies and procedures to keep consumers’ data private. As a result, consumers have been hit with an onslaught of repeated data breaches, with two new major breaches as of this writing. And no wonder. Every time there is a major retail data breach, the banking industry comes to the rescue. Unfair as it is, banks must cover the fraud costs of data breaches – which are preventable – even though banks are not to blame. Along these lines, banks also cover the fraud costs of ATM skimmers, such as when a convenience store finds it inconvenient to properly secure its ATM. Thus certain retailers have failed their clients, both by withholding promised savings and by neglecting to secure consumer data. Is that any way to run a business? By contrast, the banking industry is the bedrock of the economic strength of the United States, providing for the financial needs of consumers: • The banking industry allows for customers to enjoy a safe, secure, efficient payment system, with the ease of debit cards and other cashless options; • Banks collect interchange fees to fund the infrastructure and technology to make these payment systems possible, and to help defray losses incurred when careless retailers allow for data breaches to happen; • Banks are in the business of building communities. To line their pockets at the expense of those they serve is contrary to the banking business model of supporting community success. I’m not so concerned with one article author’s insult against banking. I’m more concerned that if one prominent business person gets it wrong, who else in the retail industry is disseminating falsehoods? Consumers, fed up with failed promises, are not buying the rhetoric. More than six in 10 consumers, according to data released by Morning Consult, believe the Durbin Amendment should be repealed, as well as a growing contingent on Capitol Hill. Clearly, with inflammatory articles in circulation, the banking community still has much work to do. Your Indiana Bankers Association is working hard on this issue, and we very much appreciate the grassroots support you have provided. Our work is not done, however, until this wrong has been righted, so we continue to reach out to ask for your help. In fact, we ask that you engage your full staff on this all-important issue. When we send action alert requests, please forward them to your associates, so they can take action, too. Their voices are needed, because retailers outnumber bankers 10 to 1. Every banker voice counts. Let’s make it a mighty chorus in urging repeal of the Durbin Amendment. Amber R. Van Til President and CEO Indiana Bankers Association avantil@indianabankers.org Twitter: @grbanker VANTAGE VIEWPOINTS HB Digital: Click to take action in urging repeal of the Durbin Amendment through IBA VoterVoice. It seemed like such a nice start to the day, that Saturday morning in April when I reached for a cup of coffee and the latest Indianapolis Business Journal. I had a few precious moments to myself before beginning the usual weekend whirlwind. By the time I made it to page 10, though, I needed to trade in my coffee for decaf. “How banks got their hands in your pocket,” was the blaring headline of a CEO Perspective article authored by Jay Ricker, chairman of Ricker Oil Co. Inc. Likely you recognize Mr. Ricker’s name, and also recognize that he is a business success, running a thriving enterprise of more than 50 convenience stores throughout Indiana. In the article, he proudly points out that he and his wife built their business from scratch, starting with a single store in 1979. Normally I would not question the business logic of a success such as Mr. Ricker, but I have to wonder what fueled the falsehoods in his article. My larger concern is, if a person as knowledgeable about business as Ricker could have gotten a simple concept so wrong, what are his colleagues saying? Let me back up a moment, and focus on the topic of the article. As the title implies, the article alleges that banks are somehow shortchanging consumers. Specifically, Ricker cites the “swipe fees” – more formally known as interchange fees – that banks may charge merchants when customers use bank debit cards for purchases. In his deriding of these fees, he tosses about colorful phrases like “robber barons” and even writes, “It’s the antithesis of the free-market system.” First, why do banks charge interchange fees? Because as any business person knows – including self-made entrepreneurs – there is a cost associated to providing any sort of product or service, including electronic transactions. Interchange fees cover the cost of providing the needed infrastructure, technology and protections to make debit cards convenient and safe. These fees thus allow for retailers to satisfy consumer demand for the convenience and safety of cash-free transactions. Second, let’s review how these fees have become compromised. Back in 2010, when the Dodd-Frank Act was passed, along with it was enacted the Durbin Amendment, which saddled the Federal Reserve with the task of price-controlling interchange fees. Legislators permitted this anti-free-market amendment, because influential retailers convinced them that they would hold to a promise to take their savings – resulting from unnaturally low interchange fees – and give them back to consumers in the form of lower prices. Only one part of that promise came true: Retailers have profited by the billions. According to the Electronic Payments Coalition, the retail industry has pocketed some $36 billion in savings since inception of the amendment. The second part of the promise – passing along savings to consumers – never materialized. After years of opportunity, many retailers have yet to pass along savings to consumers. For more information about VoterVoice, contact Josh Myers, jmyers@indianabankers.org.
Hoosier Banker 7 View full calendar and register online at indianabankers.org/education-events, or click on the icons above in HB Digital. IBA Center for Professional Development | 6925 Parkdale Place | Indianapolis, IN 46254 | 317-387-9380 & EVENTS CONFERENCES CLASSROOM INSTRUCTION ONLINE LEARNING Convene and connect at signature IBA events. Build knowledge via webinars or on-demand. Learn with peers in a classroom setting. Calendar of Events CALENDAR UPDATE Compliance Roundtable June 1 • IBA Center IBA Regional Meetings June 5 • Merrillville June 19 • Evansville June 26 • Lafayette June 28 • Fort Wayne July 10 • Jeffersonville July 11 • Bloomington July 24 • Indianapolis July 26 • Richmond Auditing TRID June 6-7 • IBA Center Talent Assessment and Succession Planning June 8 • IBA Center Today’s Teller - The Banker: Making a Difference June 12 • Huntingburg Event Center June 13 • The Trails, West Lafayette June 14 • Best Western Plus, New Albany June 15 • Hillcrest Country Club, Batesville Commercial Lending School June 12-16 • IBA Center Train the Trainer June 13 • IBA Center Essentials of Banking: Session 2 – Business Operations and Management June 14 • IBA Center Real Estate Lending Compliance June 15-16 • IBA Center Chief Financial Officer Forum June 20 • IBA Center - Group 1 June 23 • IBA Center - Group 2 Senior Lender Forum June 21 • IBA Center - Group 1 June 22 • IBA Center - Group 2 Marketing Director Forum June 27 • IBA Center IT & Operations Officer Forum June 28 • IBA Center - Group 1 June 29 • IBA Center - Group 2 HR Director Forum July 11 • IBA Center Administering Construction Loans July 11 • IBA Center CRE Appraisals: Reviewing and Interpreting July 12 • IBA Center Responding to Cybersecurity Incidents July 20 • IBA Center Auditing BSA July 20 • IBA Center The High-Performing Private Bank July 25 • IBA Center Community Bankers for Compliance Series - Session 2 Aug. 7 • The Landmark Centre, Fort Wayne Aug. 8 • IBA Center Aug. 9 • IBA Center ACH Seminar Aug. 10 • IBA Center IBA Leadership Development Program Aug. 14-18 • Wooded Glen Retreat, Henryville Social Media Deep Dive Aug. 15 • IBA Center IBA Regional Director Workshops Aug. 15 • The Landmark Center, Fort Wayne Aug. 16 • IBA Center, Indianapolis Aug. 17 • Wooded Glen Retreat and Conference Center, Henryville Branch Management Series: Session 3 - Growing the Retail Branch Aug. 22 • IBA Center Advanced Branch Management Aug. 23 • IBA Center Numbers Talk, and Lenders Need to Listen Aug. 23 • IBA Center Understanding Business Borrowers Aug. 24 • IBA Center Essentials of Banking: Session 3 - Safeguarding the Bank and Customer Service Aug. 24 • IBA Center Compliance for Mortgage Loan Processors Aug. 30 • IBA Center Advanced Agricultural Credit Conference: Successfully Navigating the Repayment Obstacles Ahead Sept. 6-7 • Four Points by Sheraton, West Lafayette Call Report Update Sept. 7-8 • IBA Center IBA Annual Convention Sept. 11-12 • French Lick Resort Employment Law Compliance for Bankers Sept. 14 • IBA Center Advanced Credit Analysis School Sept. 14-15 • IBA Center Deposit Account Administration Sept. 19-20 • IBA Center Mortgage Lending School Sept. 19-21 • IBA Center Risk Management Officer Forum Sept. 21 • IBA Center Navigating and Understanding the UCC for Compliance Professionals Sept. 22 • IBA Center IBA Annual Washington Trip Sept. 24-26 • Washington, DC HMDA Essentials Sept. 26 • IBA Center Security Management Seminar Sept. 27 • IBA Center BSA/AML Compliance Seminar Oct. 3 • IBA Center Essentials of Banking: Session 4 Oct. 4 • IBA Center
8 MAY / JUNE 2017 COVER STORY Kent A. Liechty is president and chief executive officer of First Bank of Berne. KENT Liechty Mission-led leader So devoted is First Bank of Berne to its constituents, that its mission statement consists of four guiding principles, one each for the bank’s customers, employees, communities and shareholders. Additionally, the bank’s president and chief executive officer, Kent A. Liechty, has a mission statement of his own: “To serve God as a leader, husband and a father, and to live my life with integrity in everything that I do and everything that I say.” Inspired by a mentor to draft a mission statement, Liechty observes that his statement serves him as “a guiding principle of what’s important.” He adds: “I would strongly encourage developing a personal mission statement. When you have the noise of everyday distractions, a mission statement can help redirect you.” Long before formalizing his personal mission into a statement, Liechty was a standout as a driven and dedicated banking professional. While serving as a commercial relationship manager with a regional bank, his talents caught the attention of Charles E. Isch, prior president and CEO of First Bank of Berne, who called Liechty in 1997 to invite him to join the bank. When Isch retired in 2010, Liechty was named president and CEO. Engaged in the community, Liechty is president of the board of directors of Swiss Village Retirement Community, board treasurer of Youth for Christ, Berne Rotary president, involved participant in church activities, board member of the Berne Community Development Corp., member of the Berne Storm Water Board, member of the Graduate School of Banking advisory board, committee member of the Adams County Economic Development Corp. and a volunteer for Junior Achievement. He earned a bachelor’s degree from Purdue University, an MBA from Indiana University and has completed the Graduate School of Banking at the University of Wisconsin. Hoosier Banker interviewed Kent Liechty at the recently completed operations building of First Bank of Berne. What are your responsibilities as president and CEO of First Bank of Berne? “My responsibility is to provide leadership, direction and guidance for our bank activities. We want to ensure short-term and long-term profitability. As a leader, I also try to provide opportunities for our bank and employees to be involved in community citizenship.” How do you define leadership? “Leadership is providing people with opportunities to develop themselves. It’s not telling people what to do, but giving them the resources they need to do their jobs better. I also believe that, as a leader, being involved in the community is very important.
Hoosier Banker 9 PHOTO CAPTION: Inspirational sayings and local photos adorn the walls of the First Bank of Berne operations building. “Community involvement provides personal growth opportunity, and it provides satisfaction to be helping others. It also is important for the bank, because when the community does well, our bank does well, too.” You studied agricultural economics at Purdue University. How did your college studies lead to banking as a career? “When I graduated from high school, I farmed for four years in the family farm operation and soon after married my high school sweetheart. I thought that I was going to farm for the rest of my life, but a few years into it, I started to get the inclination to work on more of a professional level. “So I attended Purdue and chose agricultural economics. I took a variety of agribusiness courses, including farm management, agricultural finance, economics and agricultural sales, and started to develop an interest in banking and finance. “As I was nearing graduation, I received a job offer from John Deere that was intriguing, and another from NBD Bank. I accepted the banking position. It was a challenging decision, but NBD gave me the opportunity to stay in Indiana and be closer to family.” What brought you to First Bank of Berne? “I received a call from Charlie Isch, asking me if I’d be interested in joining the team. So after four years in Fort Wayne, working at NBD Bank, I came back home to Berne. “Charlie has been a great mentor and a strong leader to follow. He remained on our board through December of 2015, and he was a pleasure to work with.”
10 MAY / JUNE 2017 COVER STORY How has your agricultural background helped your banking career? “First Bank of Berne has a large agricultural base on the loan and deposit side, and many of our local businesses are dependent upon the agricultural community, so having that background is helpful. We also have many employees who grew up with farming backgrounds, and many still have involvement in agriculture at some level.” You are active in the community. What is your community service philosophy? “My philosophy is that every person, no matter what age, background or physical abilities, needs to be involved in community service. We all need to apply our skills and abilities, whatever they may be, to give back to the people in our communities. We need to give not only financial resources, but also our time. “Involvement can be on the Little League diamond, at a 4-H fair, in church or with the local school system. What is important is being willing to make a difference in the lives of others, especially those who are less fortunate. “I think God designs us for a purpose, and we learn as we go along. Everyone has had experiences that can help somebody else. Maybe it’s helping someone raising their first child or going through a significant health event. “That’s where I feel our philosophy on community service truly comes into play. We all have opportunities, but sometimes we have to look to discover what those God-given opportunities are.” Your bank is a long-time member of Indiana Bankers Association. What is the value to you in being a member? “Charlie Isch was very involved in the IBA and got me involved early in my career, so I have been able to appreciate the IBA from multiple facets. We send a large number of people each year to the Mega Conference, including our board and many on our management team, and I also will be at the Annual Convention this fall. “I appreciate those educational opportunities, because banking changes so rapidly. Getting the opportunity to interact, hear speakers, walk through the exhibitors’ area and talk to vendors is extremely valuable. “We also utilize IBA for numerous webinar opportunities, and I’ve gone on the IBA Annual Washington Trip on several occasions. The trip has helped me gain a greater appreciation for what’s involved in crafting legislation, and what my responsibility is as an IBA member. “The peer groups have also been an excellent resource from the IBA, particularly when I came into my position in the beginning. I was able to talk to leaders and bank presidents at other organizations about shared struggles, concerns and strategies. It’s been great to meet with them and talk about how they are dealing with a challenge or an issue. “The IBA has done a good job of staying ahead of the game. I have a lot of respect for the Association.” What are the biggest challenges to this industry? “The biggest challenge to this industry is maintaining profitability and growth within the highly regulated environment that banks operate in. Complying with increasing regulation, while trying to meet the needs of our customers so that they can still get the products and services they need, is also a challenge. First Bank of Berne opened its operations building in 2015, providing 20,000 square feet of workspace, training areas and meeting spaces. The facility was designed by K4 Architecture + Design. A First Bank of Berne wall mural depicts Berne’s clock tower, a replica of the glockenspiel of Bern, Switzerland. (Continued on page 12.)
Guiding Indiana Community Banks Since 1978 Kent, OH Strategic Planning Capital Planning Liquidity Planning Regulatory Assistance Stock Valuations Capital Markets Internal Audit Information Technology Recruitment & Human Resources Lending & Loan Review Regulatory Compliance Policy Development Young & Associates, Inc. Consultants to the Financial Industry 38 YEARS 1978 - 2016
12 MAY / JUNE 2017 COVER STORY “Another challenge is trying to make banking easy. That’s part of our vision at the bank – we want to make banking easy. Taking complicated processes, with all the regulations and red tape, and making them as easy as possible for customers and businesses is difficult. “Dealing with the ever-changing regulations, interpretations of the Dodd-Frank Act, TRID, new capital requirements, CECL and all the changes that we see happening can be a challenge. Keeping up on compliance and regulation is also a challenge, but we make sure our customers don’t experience the pain of it. “Because of these challenges, it’s important for bankers to interact in many ways, whether it is going to the IBA Day at the Statehouse, Annual Washington Trip or visiting local representatives. We need to be telling our story as bankers.” What do you most enjoy about banking? “Our bank has an employee stock ownership plan, and our ESOP is collectively the largest shareholder of our bank. I enjoy working with our employee-owners to meet the needs of our financial communities, while also benefiting the local community. “What I really enjoy is going out and riding in a combine with one of our customers, or walking with a customer through a local factory or manufacturing facility. It’s satisfying to see a new residence being built, a development in town, or a farmer putting out a field of beans, knowing that we played a part in that. We may have financed the grain bin or the truck that hauled the grain. “It adds value for me, both personally and professionally, to experience the benefits our bank is providing to customers in our communities.” If you were not a banker, what would you be instead? “I would be a college professor, probably teaching finance or economics. I like talking in front of people, and at the college level, for the most part, students want to be there. They realize that they are making an investment in their future. “During my last semester at Purdue, I was strongly considering getting a Ph.D. to work at the university level, but I soon found out that a Ph.D. required extensive research, which I did not enjoy, so I pursued opportunities outside of the university. “Later, I did get my MBA through Indiana University, and I’ve also completed the Graduate School of Banking at the University of Wisconsin. I’ve tried to instill in my own children to get all the education you can, because you will have it for the rest of your life.” Please tell a bit about home life and pastimes. “Teri, my wife of 30 years, is the reason for any success that I’ve had. She’s a great Kent Liechty’s office offers a view of bountiful farmland, Amish buggies and other sights of Adams County. A Purdue frame displays one of many family photos in Kent Liechty’s office.
Hoosier Banker 13 A personal mission statement helps Kent Liechty find direction against “the noise of everyday distractions.” woman and a terrific partner. Teri is a busy individual and is involved in many activities in our community. “Family is very important to us. Our son Evan is at Purdue studying chemical engineering, and our daughter Riley studies logistics and supply chain management at Ball State University. “I also have a great extended family, and we often go out to eat on Sundays with my siblings, nieces and nephews, spouses and family members. Both of my parents passed away within the last few years, but our family still gets together. “As far as hobbies go, I appreciate the outdoors and sports. I run frequently and do a lot of cycling. I enjoy just being outdoors, playing games and doing family activities.” Are there any mentors who have had an influence on you? “I’ve had multiple mentors in my life that I’ve relied upon. I think it’s important to make sure you surround yourself with good people. “You should also pass along the mentoring that you have received onto others, whether it’s your children, a sibling or people in your community. That’s how you develop future leaders.” HB Kent A. Liechty, president and CEO of First Bank of Berne, lives by a personal mission statement: “To serve God as a leader, husband and a father, and to live my life with integrity in everything that I do and everything that I say.” Watch as he explains the development of his statement, and why he encourages others to develop statements of their own. Click on the YouTube arrow above in HB Digital at indianabankers.org. VIDEO BONUS
14 MAY / JUNE 2017 ARTICLE SPOTLIGHT FLD Hosts Dax Denton Senior Vice PresidentGovernment Relations Indiana Bankers Association ddenton@indianabankers.org Twitter: @ibagovrelations Article author Some 50 bankers attended the Indiana Bankers Association Future Leadership Division’s third annual Day at the Statehouse, held March 7 at the Hyatt Regency Indianapolis Hotel. The event opened with a presentation by FLD President Kristin Marcuccilli, STAR Bank, Fort Wayne, who shared insights about the value of the Future Leadership Division and grassroots advocacy. The morning continued with presentations from the IBA Government Relations Team – Dax Denton and Erika Hall – who covered the basics of advocacy and reviewed how bills become law. Additionally Amber Van Til, IBA president and CEO, talked about the value that grassroots advocacy gives to government relations outreach. The mid-day lunch buffet was highlighted by a lively guest discussion panel featuring Michael O’Brien of 1816 Inc. and Michael Leppert of Krieg DeVault LLP. Third annual Day at the Statehouse Following lunch and a review of industryrelated legislation, attendees walked across the street to the Indiana Statehouse. Bankers went to the third-floor House and Senate chambers to visit with legislators and to discuss current bills pertaining to banking. This legislative activity was followed by a tour of the Statehouse. The 2017 FLD Day at the Statehouse gave emerging bank leaders the opportunity to learn more about the legislative process and participate directly in grassroots advocacy. Initiated in 2015, IBA Day at the Statehouse has earned a statewide award for Outstanding Individual Program/Event by the Indiana Society of Association Executives. HB HB Digital: Click to see more photos from the FLD Day at the Statehouse.
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16 MAY / JUNE 2017 Remember eight-track audio tapes? What about VCRs? Typewriters? These innovative products were game-changers when introduced, but the same technological drive to “find a better way” that created them also made them obsolete. Someone is always coming up with a better mousetrap. There seems to be no facet of life or human endeavor that hasn’t been affected by technological advancement. The management of interest rate risk is no exception. Banking deregulation during the 1970s removed governmental restrictions over what banks could pay depositors, allowing for new and innovative deposit products. Modern-day asset/liability management became necessary because, for the first time, the rates paid to depositors would be influenced by market conditions set by management, not by regulatory edict. Banks’ liabilities were now subject to discretionary repricing determined by the vagaries of credit market conditions, competition and managerial strategy. The analytical tools available at the time to help measure and manage the new repricing risk were limited. Technology had some catching up to do. Something Is Better Than Nothing In the meantime, a tool was developed that was easy to use and simple to understand. Pick a time period, for example 12 months, and calculate the dollar amount of earning assets that potentially reprice over that span. We’ll call these “rate-sensitive assets.” Then compare that dollar amount to the dollar amount of rate-sensitive liabilities that could reprice over the same period. The difference came to be known as “the gap”; thus, gap management was born. On the surface, the reasoning behind gap management’s utility seemed pretty sound. If bank management knew that it had a greater volume of assets repricing than it did liabilities – a condition known as “positive gap” – it could conclude that net interest income (NII) would increase in a rising rate environment. Conversely, if the volume of repricing liabilities was greater than the volume of repricing assets, the bank was “negatively gapped,” and earnings would suffer if rates rose. Makes sense, right? It might make sense, if the rates on assets that earn money and the rates on liabilities that cost money all moved at the same time by the same amount. But the world doesn’t work that way, and gap management alone could not, with any degree of precision, account for the differences in magnitude and timing that describe how the interest rates that generate income behave differently than the interest rates that incur expenses. Live in the Now While not totally without use, gap-driven estimates of how earnings might be impacted by changing rate environments have always been inaccurate at best, and downright misleading at worst. Take, for example, the bank that is negatively gapped. Following “gap logic,” management will perceive that NII will be impaired by rising rates and may feel a need to “fix the problem.” However, gap logic ignores the fact that most of the bank’s liabilities are in the form of non-maturing deposits that are rate-insensitive and significantly lag the market in rising rate environments. Under these commonly occurring circumstances, a negatively gapped bank can, and probably will, still benefit from rising rates. Management’s efforts to fix a problem that doesn’t exist can prove costly and counterproductive. Thankfully, there are now computer models that can, account by account, recognize that rates charged to loan customers will behave differently than rates paid to depositors. The ability to factor in pricing betas, along with time lags, gives the whole measurement and management process a greater degree of reliability and precision. If your bank is one of the many holdouts still clinging to those gap reports, think back to that old eighttrack player you might have had in your car. It’s only a matter of time before it eats the tape. HB GAP Management An idea whose time has gone Lester Murray Associate Partner The Baker Group lester@GoBaker.com The Baker Group is a Preferred Service Provider of the Indiana Bankers Association and an IBA Diamond Associate Member. Article author DIRECTORS / SENIOR MANAGEMENT
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18 MAY / JUNE 2017 HUMAN RESOURCES Retail Banks Being targeted by labor organizations Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. Article author The retail banking industry is facing increased efforts by the Communications Workers of America (CWA) and the Committee for Better Banks to unionize bank employees. Earlier this year the CWA announced plans to target retail banks. The CWA claims it has gained over 20,000 bank employees within the past couple of years. This past February the Committee for Better Banks – a coalition of bank employees, community/consumer advocacy groups and labor organizations – targeted Santander Bank, after purportedly having won concessions from other large banks. Unions have been struggling in recent decades and are eager to find new members. The CWA and the Committee for Better Banks claim that unionizing bank tellers and other frontline workers, collections personnel and personal bankers will help protect them from undue pressure to meet performance objectives or to push unwanted financial products on customers, by allowing them to have a say in forming bank policies. The effect of the new administration on labor organizations remains unclear, but unions appear concerned about the possibility of a national right-to-work law. (Note that Indiana is a right-to-work state. Indiana’s right-to-work law provides that no union, employer or person may require an individual to become or remain a union member – or pay dues, fees or assessments – as a condition of new or continued employment.) In the meantime, what can banks do? Human resources directors and management should be alert for union activity. Early signs of union organizing include increased employee complaints about a supervisor or management, employees getting together in an unusual manner, former employees “hanging around” current employees, an increase in “business” talk during breaks, anti-company propaganda, and increased questioning of policies and benefits. For employers, it is advantageous to remain unionfree, in order to avoid: (1) adversarial relationships between management and employees; (2) slanted employment communication by union representatives; and (3) the inability to speak directly to employees about wages, benefits and other conditions of employment. Unions increase administrative costs, and management must spend time dealing with union issues, such as contract negotiation and administration, grievances and discipline. Employers should be proactive before an organizing campaign begins. Key principles of union avoidance include: • Adopt an employee relations policy that states the company’s preference to remain union-free, and explain its rationale; • Provide effective leadership: Ensure that managers are visible and accessible, encourage positive relationships and direct personal contact between employees and managers, and consider adopting an open-door policy; • Provide structure and security: Wages and benefits should be equitable within the company and on par with other companies in the same industry and area; and policies should be clear, comprehensive, and administered consistently and fairly; • Provide a sense of affiliation with the company: Stress working as a team, with shared goals, incentives for achieving team goals and activities; provide company clothing; • Provide opportunities for achievement (rewards, incentives) and personal growth (attainable goals, promotions, education, training), and allow employees to provide input; • Clearly communicate expectations and provide feedback; and • Recognize and address any areas of vulnerability, such as large pay gaps without legitimate business
Hoosier Banker 19 chicago indianapolis st. louis milwaukee A full service business law firm with a simple promise -- put you first 201 North Illinois Street, Suite 1400 Capital Center, South Tower Indianapolis, Indiana 46204-4212 T: 317.464.4100 | F: 317.464.4101 | salawus.com Growing in Indiana to meet your company’s legal needs LARRY TOMLIN | STEPHEN STITLE | JOHN TANSELLE | DEBRA MASTRIAN ANDREW PODGORNY | MARTHA LEHMAN | MARK WENZEL justification, high turnover, poor supervision, and recent layoffs or reductions in pay or benefits. Once employees begin to consider organizing, employers must be extremely cautious. Employers may continue to state their non-union preference and may explain to employees that they are not required to sign union cards or join a union. However, the National Labor Relations Act prohibits employers from taking any action that interferes with, restrains or coerces employees regarding their right to join a union. Examples of prohibited activities include: promising benefits to discourage unionization, interrogating employees or applicants about the campaign or their position on unions, engaging in surveillance to detect union activity, threatening employees regarding the impact of unionization, interfering with the spread of union information during non-working time (including during authorized breaks) or otherwise discriminating against employees for participating in union activities. In the event that your bank is faced with organized activity, it is advisable to seek professional guidance from legal counsel. HB Kerry Sprunger has been elected to the board of directors of Farmers State Bank and FS Bancorp, LaGrange. He serves Farmers State Bank as executive vice president and chief lending officer and has nearly 40 years of banking experience. Sprunger joined the bank in 1996 and has served as chief lending officer since 2002. He is a graduate of the Barret School of Banking. Jeff Baker has been elected chairman of the board of directors for Security Federal Savings Bank, Logansport. He has served on the board since 2006. Baker is president and co-owner of Baker Specialty & Supply Company Inc. and a graduate of Purdue University. Alan M. Applegate has joined The New Washington State Bank, Charlestown, as director for the bank and for New Independent Bancshares Inc. He previously served for more than 20 years with Applegate Fifer Pulliam LLC. A director for New Hope Services Inc., Applegate earned a bachelor’s degree from the University of Florida and a JD from the University of Florida College of Law. HB FROM THE BOARD ROOM
20 MAY / JUNE 2017 Social media provides companies the unique opportunity to create meaningful relationships with customers. During its infancy, such social media sites as Mypace and Facebook were regarded by many as passing trends. Now, in 2017, the idea that social media can still be considered a “phase” is laughable, and more than a few naysayers are scrambling to make up for lost time. Because of its popularity, social media has opened a whole new world to companies hoping to capitalize on the exposure. Financial institutions certainly have not been immune to this digital push. However, certain regulations such as the Social Media Risk Guidance of the Federal Financial Institutions Examination Council, the Truth in Lending Act, the Gramm-Leach-Bliley Act and other regulatory guidelines have tacked on additional requirements for social media activity. This comes as no surprise, as the financial institutions industry is one of the most highly regulated in the United States. While producing content around products and services on social platforms offers proven rewards, complying with the industry regulations surrounding them can be tricky. Promotional product information, lending terms and various other posts – if not carefully reviewed on a regular basis – have the potential to trigger violations, with dire consequences ranging from fines to an enduring negative brand image among customers. Regularly engaging in a social media risk assessment is the most proactive approach to mitigating these compliance liabilities. Yet performing routine assessments can be a costly operational burden. That’s why third-party social compliance software like CSI’s WatchDOG Social Compliance has become an industry standard. WatchDOG Social Compliance enables banks to remain compliant with the various social media restrictions imposed by regulators. Catered to the unique needs of the financial industry, WatchDOG security software allows banks to easily manage and maintain these compliance standards, which saves time, money and concerns regarding potential legal and ethical risks. Banks in particular must pay close attention to what is communicated via social media, for both compliance and brand reputation purposes. In addition, archiving all social media interactions (via Facebook, LinkedIn, Twitter, etc.) is one of the most important regulatory requirements with which to comply. Within the WatchDOG solution, social media data is archived, and institutions have the ability to produce instant reports for managers, auditors, board members and regulators. Further, having the ability to track all social media interactions using a single program not only aids in compliance, but also makes sense from a marketing perspective, as it lets institutions view and chart brand reputation on all social media platforms. WatchDOG allows users to search their brands or products on social media to gauge brand reputation among users from any internet-enabled device. Finally, the software provides for an approval process to ensure all posts meet regulatory guidelines. For those less familiar with social media platforms and the strict regulations that surround them, compliance can be a major, costly operational hardship. Learn how CSI’s WatchDOG Social Compliance automated platform can help your financial institution get the most out of the social media conversation. For more information about WatchDOG Social Compliance, contact Bill Evers at 800-545-4274, bill.evers@csiweb.com. HB Bill Evers Senior Business Development Director CSI Regulatory Compliance bill.evers@csiweb.com CSI WatchDOG Social Compliance is a Preferred Service Provider of the Indiana Bankers Association. Article author PRODUCTS & SERVICES PROFILE SOCIAL MEDIA Regulations Take the headache out
Hoosier Banker 21 866.440.6515 | www.bokfinancial.com/assetliability Securities, insurance and advisory services offered by BOK Financial Securities, Inc., member FINRA/SIPC and a subsidiary of BOK Financial Corporation. Some services offered through our affiliate, Institutional Investments, Bank of Oklahoma which operates as a separately identifiable trading department of BOKF, NA. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE ASSET/LIABILITY MODELING | ASSET/LIABILITY VALIDATION | ASSET/LIABILITY CONSULTING Your asset/liability model is crucial to the success of your financial institution and its ability to help customers. Let us conduct a review of your model to evaluate its interest rate risk and assess its accuracy to ensure that it’s a reliable resource. From there, we can provide you with helpful suggestions to mitigate risk and increase profitability. Let us be your partner for success. Is Your Asset/Liability Model Leaving You Open To Risk?
22 MAY / JUNE 2017 COMPLIANCE CONNECTION Brett J. Ashton Partner Krieg DeVault LLP Submit Compliance Connection questions to Erika Hall, Indiana Bankers Association: ehall@indianabankers.org. Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. Article author Question: Recently an elderly customer received into his account a large wire transfer of over $500,000. The customer came into the branch today, adamant that he wanted to withdraw the funds in cash to take home. If we comply with this request, are we in conflict with any state laws? Answer: While Indiana law does not limit the amount of cash a depositor may withdraw or require specific actions by the bank, there are several potential issues to consider when any customer, especially an elderly customer, withdraws a large amount of cash. Consider the customer request in the context of his or her normal account activity, and evaluate whether you could be dealing with a case of financial exploitation of an elderly consumer. The Indiana Senior Consumer Protection Act1 (ISCPA) provides protections for senior consumers from financial exploitation from persons who, by deception or intimidation, obtain control over the property or assets of a senior consumer. A “senior consumer” is an individual who is at least 60 years of age.2 While the ISCPA does not contain direct liability for banks, it is important to also consider federal interagency guidance3 on this issue, which provides guidance on issues to watch for when dealing with at-risk elderly customers, and clarifies the ability of the bank to share information with law enforcement authorities to prevent financial abuse. Additionally, consider potential safety risks that could exist, not only to the elderly customer who is about to walk out of the branch with a bagful of cash, but also to other bank customers and branch employees who may be present at the time the transaction occurs. While there is no duty to do so, consider hiring an off-duty police officer to be present at the time of pickup and to escort the individual off bank property. As preparation, develop and maintain a cash withdrawal indemnification agreement for customers to sign, which advises in writing of the inherent risks associated with carrying large amounts of cash on their persons, and contains specific indemnification language that protects the bank from any later claims of liability for unexpected losses that could occur. While an indemnification cannot protect you from a lawsuit, if drafted properly, it will provide the protection necessary to have a lawsuit quickly dismissed. HB Large Cash Withdrawals 1 I.C. § 24-4.6-6 2 I.C. § 24-4.6-6-3 3 See Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults: fdic.gov/news/news/press/2013/interagency-guidance-on-privacy-laws-and-reporting-financialabuse-of-older-adults.pdf 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.
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