SEPTEMBER/OCTOBER 2024 THE OFFICIAL PUBLICATION OF THE INDIANA BANKERS ASSOCIATION Leaders in Banking Excellence CLASS OF 2024
www.GoBaker.com | 800.937.2257 Oklahoma City, OK | Austin, TX | Long Island, NY | Salt Lake City, UT | Springfield, IL | Member: FINRA and SIPC For 45 years, The Baker Group has been customer focused and industry responsive, providing honest and insightful guidance to our partners through strategic balance sheet and investment solutions. FEATURED SPEAKER David Rosenberg – President/Chief Economist & Strategist Rosenberg Research & Associates Inc. CELEBRATION SEMINAR Anniversary In honor of The Baker Group’s 45th anniversary, we invite you to our celebration seminar in Scottsdale, AZ. We are looking forward to celebrating this tremendous accomplishment with our clients and friends. Interest Rate Risk and Investment Strategies Seminar November 7-8, 2024 ACCOMMODATIONS A block of rooms is available at JW Marriott Camelback Inn Scottsdale. The special room rate will be available until October 14, 2024 or until the room block is sold out. Hotel price: $329 + $20 resort fee. There is no cost for this seminar. For more information and to register, visit GoBaker.com/arizona/. Call Skoshi Heron at 888.990.0010 for questions. Scottsdale, AZ JW Marriott Camelback Inn Scottsdale 5402 East Lincoln Drive, Scottsdale, AZ 85253 AGENDA Wednesday, November 6 Welcome Cocktail Reception Thursday, November 7 Breakfast, Economist–David Rosenberg, Seminar, Lunch, Seminar, Adjourn, 45th Anniversary Celebration Cocktails and Dinner Friday, November 8 Breakfast, Seminar, Conclusion, Golf Included at the Padre Golf Course 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. 10 hours of Economics and Finance CPE credits will be earned for your attendance. The Baker Group is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.NASBARegistry.org.
DIRECTORS, STAFF AND CREDITS IBA BOARD OF DIRECTORS OFFICERS Benjamin J. Bochnowski, Chairman Peoples Bank, Munster Matthew W. Howrey, First Vice Chairman North Salem State Bank David M. Findlay, Second Vice Chairman Lake City Bank, Warsaw Jamie R. Shinabarger, Immediate Past Chairman Springs Valley Bank & Trust Company, Jasper Amber R. Van Til, President and CEO Indiana Bankers Association CONSTITUENT DIRECTORS Garry D. Kleer, ABA Membership Council First Bank Richmond Kent A. Liechty, ICBA State Director First Bank of Berne Michael J. Clampitt, IBA Future Leadership Division President North Salem State Bank Karen B. Woods, Non-Indiana Headquartered Banks First Financial Bank, Cincinnati REGIONAL AND AT-LARGE DIRECTORS Mark “Doc” Holt, At-Large First Farmers Bank & Trust Co., Converse Nicole S. Lorch, At-Large First Internet Bank, Fishers J. Daniel Maddox, North Region Citizens State Bank, New Castle Bradley J. Monts, North Region Hoosier Heartland State Bank, Crawfordsville Jacqueline M. Ruge-Perkins, North Region First State Bank of Porter Lisa Arnold, South Region Home Bank, Martinsville Mark E. Bruin, South Region The National Bank of Indianapolis Eric J. Lane, South Region First Federal Savings Bank of Washington IBA FUTURE LEADERSHIP DIVISION ADVISORY BOARD Michael J. Clampitt, President . . . . . . . . . . . . . . . . . NorthSalemStateBank Amanda Morris-Feldman, Vice President . . . . . . First Federal Savings Bank, Rochester Ryan Anderson . . . . . . . . . . . . . . . . The Fountain Trust Company, Covington Greg Barnes Jr. .. .. .. .. .. .. .. .. .. .. .. ..STARBank,FortWayne Jenilee Bransteter .. .. .. .. .. .. .. .. .. .. .. .. .FirstBankofBerne Jordan Briggeman Springs Valley Bank & Trust Company, Jasper Brandi Dunn . . . . . . . . . . . . . . . . . . . . . . .TheFarmersBank,Frankfort Larissa Fox Old National Bank, Evansville Brock C. Goggins German American Bank, Jasper Kyle Goodwin .. .. .. .. .. .. .. .. .. .. .. .. ..DeMotteStateBank Christopher Griffith . . . . . . . . . . . . . . . . . . . FirstHarrisonBank,Corydon Zach Hockersmith Hoosier Heartland State Bank, Crawfordsville Casey Johnson .. .. .. .. .. .. .. .. .. .. .. . HomeBank,Martinsville Jonathon Malin . . . . . . . . . . . . . . . Community First Bank of Indiana, Kokomo Laura Shake . . . . . . . . . . . . . . . . . . . . TheNationalBankofIndianapolis Casey Shireman NWSB, Charlestown IBA STAFF Amber R. Van Til President and CEO Rod Lasley Chief Operating Officer Dax Denton Chief Policy Officer Christina M. Bennett, CMP Vice President – Meetings & Events Evan Hoffmeyer Vice President – Communications Josh Myers Vice President – Member Engagement Laurie A. Rees Vice President – Education & Training Ross Teare Vice President – Government Relations Emily Brooks Digital Media Manager Maria L. Dowers Executive & Government Relations Coordinator Susan Clark Events & Products/Services Assistant Elizabeth DeHaven Education Manager AyZha Hazelwood Education Meeting Coordinator Timothy Fry Staff Accountant Tracy Kubly Technology Manager Silvia Regalado Administrative Assistant OUR ASPIRATION The Indiana Bankers Association strives to grow stronger banks and stronger communities. OUR VALUES In fulfilling our mission, we will: • maintain the highest ethics, integrity and respect for others; • provide service with professionalism, innovation and resourcefulness; • instill passion, a positive attitude and enthusiasm; and • remain mindful that the success of the IBA is judged by the success of its members. indiana.bank Vol. 108 No. 5 INDIANA BANKERS ASSOCIATION 8425 Woodfield Crossing Blvd., Suite 155E Indianapolis, IN 46240-7321 PUBLISHER Amber R. Van Til EDITOR Evan Hoffmeyer ADVERTISING Rod Lasley DESIGN The newsLINK Group SUBMISSIONS HB@indiana.bank ADVERTISING Media kits are available at indiana.bank. Advertising is reserved for members and associate members of the Indiana Bankers Association. DEADLINES Editorial and ad reservations are due the 20th of the month, two months before publication. SUBSCRIPTIONS Subscriptions are provided free of charge to members and associate members of the Indiana Bankers Association. ABOUT The flagship publication of the Indiana Bankers Association, Hoosier Banker is distributed to all banks and thrifts headquartered in Indiana, IBA-member banks headquartered out-of-state and IBA associate members. PUBLICATION DISCLAIMER Hoosier Banker (ISSN 0018 473X) is published bimonthly by the IBA Service Corp., a subsidiary of IBA Holding Company Inc., which is a wholly owned subsidiary of the Indiana Bankers Association. Material published in Hoosier Banker and on the IBA website is the property of the IBA. All rights reserved. CONTACT IBA Email IBA staff using first name initial and last name, plus “@indiana.bank” – example: JDoe@indiana.bank SEPTEMBER/OCTOBER 2024 3
32 Mollie Fry Director of Wellbeing & Total Rewards – First Financial Bank, Cincinnati 28 Remaining Nimble Against a Litany of Regulation By Rebeca Romero Rainey, Independent Community Bankers of America 24 Creating Connection Through Leadership By Josh Myers, Indiana Bankers Association 10 Leaders in Banking Excellence Class of 2024 4 HOOSIERBANKER IN THIS ISSUE
Features 6 Vantage Viewpoint By Amber R. Van Til, Indiana Bankers Association 7 Chairman’s Report By Benjamin J. Bochnowski, Indiana Bankers Association 8 2024 IBA Education Calendar COVER STORY 10 Leaders in Banking Excellence Class of 2024 28 Remaining Nimble Against a Litany of Regulation By Rebeca Romero Rainey, Independent Community Bankers of America 30 The “Other” CRA A Lesser-Known Tool in the Policy Toolbox By Robert S. Nichols, American Bankers Association 43 Lake City Bank Welcomes Summer Intern Class of 2024 44 State Deposits in Indiana Financial Institutions Jan. 1 – June 30, 2024 62 16 Complete IBA Commercial Lending School Articles OPERATIONS & TECHNOLOGY 16 Beyond a Buzzword A Look Into the World of Digital Transformation in Banking By Megan Cummins, Engage fi 53 Branch Closings Requirements and Nuances By Erin Busse, Compliance Alliance SECURITY & FRAUD 18 Faster Payments, Faster Fraud? Not So Fast! By Peter Glick, PCBB COMPLIANCE CONNECTION 20 Indiana Fair Lending Regulations By Brett J. Ashton, Krieg DeVault LLP GR SUMMIT 22 Regional Meetings: New Look, Same Mission By Dax Denton & Ross Teare, Indiana Bankers Association FLD FOCUS 24 Creating Connection Through Leadership By Josh Myers, Indiana Bankers Association BANKER PROFILE 32 Mollie Fry Director of Wellbeing & Total Rewards – First Financial Bank, Cincinnati HUMAN RESOURCES 41 Common FLSA Mistakes and Misconceptions About Overtime Pay By Debra A. Mastrian, Amundsen Davis LLC DIRECTORS & SENIOR MANAGEMENT 46 Interest Rate Risk in 2024 Model Assumptions in a Falling Rate Environment By Luke Mikles, The Baker Group 48 How CFPB’s Rule 1033 Could Affect Data Rights and Open Banking By Bradley Wallace, CSI PRODUCT & SERVICES PROFILE 56 Interest Rate Risk and Liquidity Risk Are Your ALCO and Board Ready for the Next Exam or Falling Rates? By Rod Lasley, Indiana Bankers Association Departments 6 Don’t Miss Out 21 Taking It Easy 34 Bankers on the Move 38 Banking on Community 39 In Memory Of … 50 Honorable Mentions 57 IBA ‘High Five’ Awards 59 Banking Center News 60 Associate Members’ Corner 62 Anniversary Milestones 63 From the Board Room 63 Advertiser Index 38 46 SEPTEMBER/OCTOBER 2024 5 INTERACT WITH IBA
A Amber R. Van Til President and CEO Indiana Bankers Association AVanTil@indiana.bank BY AMBER R. VAN TIL, INDIANA BANKERS ASSOCIATION After a wonderful – and all too short – summer, school is back in session. As students head back to class, the IBA is also gearing back up for its busy fall schedule. There are dozens of opportunities to grow with your fellow bankers through professional development, networking and more over the next two months, including in-person seminars and virtual opportunities. Check out the educational calendar on page 8 to see what will best help you grow in your career path. We started off August honoring both the leaders of today and tomorrow. Three bankers were inducted into the IBA’s distinguished circle of Leaders in Banking Excellence, who you can learn more about on page 10. We also welcomed nearly 100 of our industry’s future leaders at the FLD Leadership Conference on Aug. 1-2. Learn more about that on page 24 of this issue. Looking ahead, I’m excited to see our Banking on Women conference grow into a new venue as we move to Embassy Suites Noblesville on Nov. 6-7. Last year’s conference sold out a month in advance, so be sure to get registered today! I also can’t wait for you to experience our reimagined Regional Meetings. This summer offering has moved to November, after the election, to make it easier for many of our members to attend who previously couldn’t because of summer travel. Dax Denton and Ross Teare from our GR team lay out everything you can expect on page 22. It’s hard to believe the Association is getting ready to wrap up its current three-year strategic plan. We have seen incredible growth in all five of our target areas – Next-Level Government Relations, Next-Level Banking Talent, Next-Level Operational Effectiveness, New Ventures for Indiana Banks and Positioning IBA for Future Opportunities. You can see a copy of the plan at indiana.bank/strategic-plan. If you have any questions about our current plan or comments to offer as we prepare our next strategic initiative, feel free to reach out to me or any member of our Board. 1 Banking on Women Nov. 6-7 Embassy Suites, Noblesville Women in banking gather to unlock potential and own the future. 2 Midwest Ag Banking School Dec. 2-5 Purdue University, West Lafayette Learn the latest about ag credit and finance at Purdue University. 3 Indiana Economic Outlook Luncheon Dec. 6 Ritz Charles, Carmel Learn about what to expect in Indiana’s economic landscape for 2025. As we head into Q4, be sure to reach out to the Association with anything we can do to help you finish out the year strong and set you up for success in 2025. As always, it is a pleasure to serve each of our members. DON’T MISS OUT Vantage VIEWPOINT 6 HOOSIERBANKER
I Chairman’s REPORT BY BENJAMIN J. BOCHNOWSKI, INDIANA BANKERS ASSOCIATION It’s hard to believe that by the time you read my next letter, we’ll hopefully know who the next president of the United States will be. We’ll definitely also know the results of the Federal Home Loan Bank of Indianapolis’ board elections. Ballots are scheduled to be distributed to member banks on Tuesday, Sept. 24, with a deadline to return your completed ballots by Friday, Oct. 25. Results will be calculated and announced in late October or early November. In the past, we have not weighed in on who you should vote for, merely encouraging FHLBI-member institutions to be sure to vote. We changed that this year, though, conducting our own internal primary process so our members could vote on who they wanted to see on the Board, with the understanding that the Association would then endorse whoever our members chose in that process. By the end of our primary, we only had two nominees, so Jamie R. Shinabarger, CEO and director of Springs Valley Bank & Trust Company, Jasper, and Dan L. Moore, executive chairman at Home Bank SB, Martinsville, automatically received the IBA endorsement. When two Michigan seats were open on the Board last year, credit unions won both because they rallied behind their only two nominees while the bank vote was split among five candidates. We encourage all FHLBI-member institutions within the IBA membership to cast your votes for Jamie and Dan to give the industry the best chance possible to secure bankers in both seats. It is also hard to believe that my time as your chair is already coming to an end. By the time you read this, the Annual Convention will be in the books, and we may very well be in D.C. together for the IBA’s Annual Washington Trip, which will be one of my final acts as your chair. It has been one of the great honors of my career to get to lead this incredible association. I plan to finish strong and ask you to join me as we enter the fourth quarter of 2024. It’s crucial that your bank hits its fair share donation goal to BANKPAC. This isn’t just any election year, but one in which we have an open governor’s seat, an open U.S. Senate seat and multiple open congressional seats, on top of all the shifts in the Statehouse. Our government relations team is working tirelessly to stay in touch with our allies at the Statehouse and offering support with donations from BANKPAC – which we can only do with your dedicated help. Use the QR code to make your donation today if you haven’t already, and ensure the banking community’s voice is heard by our elected officials. We need to make sure our political leaders are those who understand what it takes to maintain a healthy banking environment so we can stay focused on what really matters – serving our customers and communities. Benjamin J. Bochnowski Chairman Indiana Bankers Association CEO Peoples Bank, Munster Ben is the CEO of Peoples Bank, Munster, and serves as the CEO and president of its holding company, Finward Bancorp. Additionally, he serves on the board of directors of the Indiana Department of Financial Institutions, a position he was appointed to by Gov. Eric Holcomb in 2019. SEPTEMBER/OCTOBER 2024 7
2024 IBA EDUCATION CALENDAR EDUCATION CALENDAR October Compliance Officer Forum Oct. 9: IBA Center Senior Lender Forum – Group 1 Oct. 9: IBA Center Senior Lender Forum – Group 2 Oct. 10: IBA Center New Account Documentation and Compliance Oct. 10: IBA Center & Virtual Outside Calling School – Part 1 Oct. 10: Virtual BSA Officer Forum Oct. 11: IBA Center IRA School Oct. 15-16: IBA Center BSA Officer Forum Oct. 17: IBA Center Marketing Directors Forum Oct. 22: IBA Center Compliance School – Deposit Compliance Oct. 22-23: Virtual Information/Cybersecurity/IT/ Operations Officer Forum – Group 1 Oct. 23: IBA Center Information/Cybersecurity/IT/ Operations Officer Forum – Group 2 Oct. 24: IBA Center Outside Calling School – Part 2 Oct. 24: Virtual Compliance School – Lending Compliance Oct. 24-25: Virtual Chief Operations Officer Forum Oct. 25: IBA Center Sales Leadership Excellence Oct. 29-30: IBA Center Compliance School – Regulation Z Oct. 31-Nov. 1: Virtual November Banking on Women Conference Nov. 6-7: Embassy Suites, Noblesville Community Bankers for Compliance – Part 4 Nov. 12: IBA Center & Virtual Professional Development/ Education/Training Forum Nov. 13: IBA Center Chief Financial Officer Forum – Group 1 Nov. 14: IBA Center Chief Financial Officer Forum – Group 2 Nov. 15: IBA Center Human Resources Directors Forum Nov. 21: IBA Center Risk Management Forum Nov. 22: IBA Center December Midwest Agricultural Banking School Dec. 2-5: Purdue University, West Lafayette Treasury Management Forum Dec. 3: IBA Center Lending Compliance Update Dec. 4: IBA Center & Virtual Ag Clinic Dec. 5: Purdue University, West Lafayette Economic Outlook Luncheon Dec. 6: Ritz Charles, Carmel Advanced Commercial Lending School Dec. 10-11: IBA Center Loan Operations Manager Forum Dec. 12: IBA Center See all education opportunities at indiana.bank/calendar. 8 HOOSIERBANKER
Leadership you can bank on. Congratulations to Mike Kubacki on being named to the Leaders in Banking Excellence Class of 2024! Mike’s thoughtful and impactful leadership leaves a meaningful legacy. Congratulations from the Lake City Bank Team. lakecitybank.com
Leaders in Banking Excellence CLASS OF 2024 COVER STORY Inductees and dignitaries gathered for the presentation of the Indiana Bankers Association’s 2024 Leaders in Banking Excellence Awards on Friday, Aug. 2, 2024. Shown are, from left, Sen. Travis Holdman, R-Markle; Speaker Todd Huston, R-Fishers; IBA President and CEO Amber R. Van Til; Stephen E. Zahn, First Federal Savings Bank, Huntington; Annette M. Russell, Security Federal Savings Bank, Logansport; Michael L. Kubacki, Lake City Bank, Warsaw; IBA Chairman Benjamin J. Bochnowski, Peoples Bank, Munster; and Thomas C. Fite, Indiana Department of Financial Institutions. 10 HOOSIERBANKER
TThe Indiana Bankers Association created the Leaders in Banking Excellence Awards in 2018 to showcase exceptional individuals who have positively impacted Indiana banks and the communities they serve. This year’s awards were presented on Friday, Aug. 2, at a ceremony at the IBA’s offices in Indianapolis. Dignitaries who honored this year’s three recipients were Rep. Todd Huston, speaker of the Indiana House of Representatives; Sen. Travis Holdman, majority caucus chair of the Indiana State Senate; Director Thomas C. Fite, Indiana Department of Financial Institutions; IBA Chairman Benjamin J. Bochnowski; and Amber R. Van Til, IBA president and CEO. Each honoree was invited to make their own comments and was then presented with an ebony keepsake plaque. The ceremony culminated with a viewing of the honorees’ crystalline plaques within the permanent Wall of Excellence on display at the IBA offices. All inductees were nominated by IBA member organizations and approved by the IBA Board of Directors. Congratulations to the 2024 class of Leaders in Banking Excellence: Michael L. Kubacki, Lake City Bank, Warsaw Annette M. Russell, Security Federal Savings Bank, Logansport Stephen E. Zahn, First Federal Savings Bank, Huntington Class of 2024 Plaque Inscriptions Michael L. Kubacki Lake City Bank Warsaw Annette M. Russell Security Federal Savings Bank Logansport Stephen E. Zahn First Federal Savings Bank Huntington Michael L. Kubacki’s 51-year banking career had an enduring impact at Lake City Bank, Warsaw, and The Northern Trust Company. In 1998, Mike and his wife, Rebecca, returned to their Hoosier roots when he joined Lake City Bank as president and CEO. For the next 26 years, he played a critical role in defining the culture and operational excellence of the bank. During his tenure, the bank grew organically from $1 billion to $6.6 billion, and its market value grew from $104 million to $1.6 billion, an increase of over 1,400%. Kubacki has been active as a board member in many organizations, including The Nature Conservancy, the Indiana Chamber of Commerce, the Indiana Bankers Association, the Federal Reserve Bank of Chicago, Newfields, the Center for the Performing Arts and the Indiana Economic Development Corporation. Kubacki earned a bachelor’s degree from Indiana University and an MBA from the University of Chicago. Annette M. Russell is the president and CEO of Security Federal Savings Bank, Logansport. She graduated from the Stonier Graduate School of Banking and the Graduate School of Bank and Investment and Financial Management. A pioneer for women and diversity in Indiana banking, Russell was the first woman to serve as chair of the Indiana Bankers Association, was appointed by Gov. Mike Pence to serve on the Indiana Board of Depositories in 2016, was honored with the Circle of Corydon by Gov. Eric Holcomb in 2017, has chaired the Ivy Tech Kokomo board of trustees and Logansport/Cass County Economic Development Corporation, and has served on the boards of the Logansport Hospital, Cass County Chamber of Commerce, Special Olympics of Cass County and more. Under her leadership, the bank grew from $170 million with three branches in two markets to nearly $400 million with eight branches serving five markets. Stephen E. Zahn began his career at First Federal Savings Bank, Huntington, in May of 1964. In his role as president, CEO and chairman, he grew the bank and took it public in 1995. Under his leadership, the bank has achieved success and accolades, consistently being named one of the Top 200 Community Banks and being recognized as a Dividend Champion company. Zahn chaired the Indiana League of Savings Institutions in 1996-97, which went on to merge with the IBA in 2000. When he retired from daily duties at the bank, he was honored as a Distinguished Hoosier by Gov. Mitch Daniels. Zahn was also named to the Chiefs of the Flints Springs Tribe, the highest honor an individual can receive for service and dedication to the Huntington community. SEPTEMBER/OCTOBER 2024 11
CONGRATULATIONS, ANNETTE RUSSELL! On behalf of your entire banking family, thank you for your 30 years of leadership and dedication to the Indiana banking industry and our community!
COVER STORY CONT. SEPTEMBER/OCTOBER 2024 13
COVER STORY CONT. 14 HOOSIERBANKER
CONGRATULATIONS, STEVE! Stephen E. Zahn Chairman of the Board 60 years in banking First Federal Savings Bank proudly celebrates Stephen E. Zahn, our esteemed chairman, for being honored with the Indiana Bankers Association's Leaders in Banking Excellence Award.
A Beyond a BUZZWORD A LOOK INTO THE WORLD OF DIGITAL TRANSFORMATION IN BANKING BY MEGAN CUMMINS, ENGAGE FI As technology evolves at a record pace, many regional banks are finding themselves at a pivotal crossroads: embrace innovation or risk obsolescence. Digital transformation is more than a new online banking system or a back-office upgrade. It is a multifaceted process that transforms a bank’s internal and external operations. Such upgrades improve efficiency, transform the customer experience, reduce costs and help the bank to remain competitive. What is Behind This Shift? Digital transformation has quickly evolved from an optional strategic initiative to one of necessity. Many factors are reshaping traditional banking models, including technological advances, changing consumer behaviors and regulatory dynamics. Consumers expect a banking experience that begins and ends with technology. Today’s customer wants to conduct their banking on their terms. They crave self-service options and the ability to communicate with their preferred bank, whether that be in person, over the phone, or via chat or text. The catalyst igniting the speed with which banking technology is evolving is none other than Gen Z (Zoomers). They have grown up in an era defined by smartphones, social media and instant connectivity. This generation expects its preferred financial institution to prioritize the digital experience, beginning with innovation, personalization and a mobile-first mindset. However, Zoomers are not alone: Twenty-seven percent of millennials prefer online chat to ask a question, compared to just 18% of Gen Z.1 Together, millennials and Gen Z make up the largest generational demographics in the U.S. They are not only reshaping consumer behavior, but also reinventing modern society. These two demographics embrace technology in the workforce and advocate for innovation. They crave streamlined systems and processes. Employees and employers seek operational efficiency alike. By automating manual processes, financial institutions can minimize processing times, reduce errors and cut costs. Strengthened risk management processes through innovation offer real-time visibility into potential vulnerabilities. Digital transformation enables banks to enhance cybersecurity measures against cyber threats, data breaches, ransomware attacks and phishing scams. It is also easier to detect fraud on the customer’s behalf. Challenges of Innovation Navigating a digital transformation is not without its challenges. The biggest hurdles to overcome are also the most common and include old systems, cost and resistance from customers and employees. Many organizations find themselves working with multiple systems that do not integrate or are so outdated, they offer little room for upgrades. While investing in advanced technology saves money down the road, upfront costs can be a barrier. Employees and customers who resist change create another obstacle difficult for banks to overcome. Understandably, introducing more technology comes with greater risk. Cybersecurity concerns are always part of the conversation. Regulatory compliance adds another layer of complexity not to be forgotten as well. OPERATIONS & TECHNOLOGY 16 HOOSIERBANKER
Strategies for Success Banks must take a comprehensive approach to executing a successful digital transformation. It is important to examine the customer experience, allow data to be the driver, invest in the right technology and educate employees to leverage system capabilities to deliver best-in-class services. Customers should be at the center of the digital strategy. Knowing and understanding their needs is critical. It is also important to remember the generational gap. What works for some may not work for many. For example, offering a chatbot. While it is both cost-effective and efficient, the option to engage with a live person must always be available. A digital transformation doesn’t take out the human element completely … it simply makes a more seamless experience. Examine the customer experience. Banks must prioritize a user-friendly digital interface across all channels. This includes online and mobile banking, online account opening, loan applications and bill payments, to name a few. Let the data be the driver. A key component of digital transformation is the ability to gather better data and leverage it. Use this data for more personalized experiences, risk mitigation and marketing opportunities. In fact, 70% of customers emphasize the importance of personalized offers in banking.2 Take an in-depth look into all current systems. Do current vendor partners offer modern technology to support digital initiatives? If they do not meet requirements, it may be time to consider other vendors. Every digital transformation strategy should include partners who drive innovation and propel institutional growth. Invest in modern technology solutions that support future success. Embrace cloud computing, open APIs, artificial intelligence and robotic process automation. Finally, do not forget about the employees. Change is hard, there is no doubt about that. However, the team plays a critical role in the success of every technological initiative. Education and training are pivotal in giving employees the knowledge they need to leverage new systems effectively. They will be the biggest advocates when it comes to speaking with customers to convey the positive impact of the new digital solutions. Megan Cummins Strategic Consultant Engage fi Megan.Cummins@Engagefi.com With over 25 years of financial industry experience, Megan is passionate about helping her clients achieve sustainable growth. She advises financial institutions on all facets of strategic thinking and planning by interpreting data and financials to provide insights and actionable recommendations to help financial performance. Engage fi is an associate member of the Indiana Bankers Association. 7 Strategies for Success 1. Take a comprehensive approach. 2. Keep customers at the center. 3. Examine the customer experience. 4.Let data be the driver. 5. Evaluate vendor partnerships. 6. Today’s tech should support tomorrow’s success. 7. Support your employees. FOOTNOTES 1 https://cnb.cx/3AkCg4q 2 https://bit.ly/3X56CRi Conclusion By embracing innovation with modern technology and collaborative partnerships, your bank can navigate a digital transformation with confidence. Remember this transformation is a marathon, not a sprint. With the right technology and partners, every bank will continue to evolve, setting up for future growth and success. SEPTEMBER/OCTOBER 2024 17
I SECURITY & FRAUD Faster Payments, Faster Fraud? NOT SO FAST! BY PETER GLICK, PCBB Is the notion of “faster payments, faster fraud” just a myth? It appears so, at least for two community banks that participated in a recent Federal Reserve online town hall discussing fraud management strategies for the FedNow Service. The $1.3 billion-asset North American Banking Co. in Minnesota allows consumers to use the FedNow Service for instant payments and is now rolling the option out to business customers. The bank deploys controls like velocity, limits and other measures that enable the bank to pull suspect transactions out of the process safely before they are settled via a vendor. “While FedNow does have instant payment capability, the only instant part of it is the actual execution of the payment,” said Ryan McNaughton, vice president of information technology. “The lead time between when somebody wants to execute a payment and when it actually goes through is where we are focusing all of our risk mitigation activities. We are not seeing much in the way of fraud or attempted fraud on the FedNow network.” The $8.7 billion-asset 1st Source Bank, South Bend, first allowed business customers to conduct transactions via the FedNow Service with plans to extend capabilities to consumers. The bank also uses vendors to connect with the FedNow Service, as well as to help the bank stop fraudulent transactions before they are settled using risk mitigation measures that also include Know Your Customer controls. “KYC is everything. We know our clients, and we can put internal controls on each of those clients – on who can approve payments that potentially leave our portals, as well as transaction limits and daily limits,” said Jim Hunt, division head of payment strategy. The bank also partners with vendors to comply with the requirements of the Treasury Department’s Office of Foreign Assets Control to minimize fraud and other illegal activities by sanctioned countries and other bad actors. If transactions are automatically stopped by any of these measures, the goal is to then manually determine as quickly as possible if they are, indeed, fraudulent, according to Hunt. “We really haven’t seen any fraud, and we are definitely scaling transactions quickly,” he said. “However, we always have to be aware that bad actors out there will find ways to exploit. There’s always that next risk. Our concern is that we don’t get complacent, so we try to make sure our solutions are state-of-the-art.” FedNow Service’s Implementation of ISO 20022 The FedNow Service has several built-in capabilities to help banks and their vendors mitigate fraud, including the implementation of ISO 20022, a new messaging standard that enhances communication between financial institutions globally. One of the biggest benefits of ISO 20022 is enhanced fraud and financial crime prevention. The structured and expanded payment format allows for more data to be included with every transaction. With elements like LEI and the purpose code, it’s easier to see where payments are going and why they’re being sent. Structured name and address details for senders and beneficiaries help improve AML and KYC practices, which make screening more efficient and accurate. Unlike traditional Fedwire payments where senders try to fit in data wherever they can, the ISO 20022 format is highly 18 HOOSIERBANKER
structured with certain data restricted to specific fields. This enables artificial intelligence to detect payment anomalies that could indicate fraud or financial crimes. Additional FedNow Service Mitigation Tools The FedNow Service includes additional tools for financial institutions to combat fraud, including: ▶ the ability to establish risk-based transaction value limits; ▶ the ability to specify conditions under which transactions would be rejected, such as by account number (i.e., a “negative list”); ▶ message signing to validate that message contents have not been altered or modified; and ▶ reporting features and functionality, including reports on how many payment messages were rejected based on a participating financial institution’s settings. The Federal Reserve is exploring other features like value limits that could be tailored to certain uses, aggregate value, or volume limits for specific periods (for example, per business day), and/or centralized monitoring performed by the FedNow Service, such as functionality that leverages advanced statistical methods and historical patterns to identify potentially fraudulent payments. Do faster payments automatically lead to faster fraud? Not yet, likely because of the risk mitigation controls financial institutions and their vendors put in place and other built-in risk mitigation measures within the FedNow Service. But don’t become complacent – continue evolving your fraud prevention practices, including educating your customers on how to spot would-be fraudsters from duping them into making instant payments. Peter Glick Senior Vice President, Midwest Regional Manager PCBB PGlick@PCBB.com Peter Glick has over 25 years of experience at financial institutions and finance-related services companies. In his current role, he helps community financial institutions operate safely, soundly and competitively, while meeting their clients’ needs. Glick earned his bachelor’s degree from American University and an MBA from the University of Chicago. PCBB is an associate member of the Indiana Bankers Association. Michael A. Renninger Principal (317) 695-7939 mrenninger@renningerllc.com Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Road Davenport, IA, 52807 (563)326-2064 Member: FINRA, SIPC. Renninger & Associates, LLC and Ausdal Financial Partners, Inc. are independently owned and operated. www.renningerllc.com "For an ObjecƟve Assessment of Your Challenges and Professional ExecuƟon of Your OpportuniƟes" Buy-Side and Sell-side Representa�on involving whole banks, branches, and non-bank affiliates Stock Valua�ons and Fairness Opinions CPA-trained and CFO-experienced Indiana professionals serving Indiana banks. Our services include: SEPTEMBER/OCTOBER 2024 19 With over three decades of serving lenders and millions of flood certificates issued, why trust just any certification provider when you could hire what many would consider the industry leader in accuracy and customer care. SINCE 1991 Craig callahan | 800.945.0246 ccallahan@floodplain.com Ask craig how to experience the Fci difference risk free and learn more about why so many lenders trust floodplain consultants. a preferred vendor of the iba
COMPLIANCE CONNECTION Indiana Fair Lending REGULATIONS BY BRETT J. ASHTON, KRIEG DEVAULT LLP Question: We recently denied an applicant for a mortgage loan based on our established underwriting criteria. The individual is claiming our decision to deny his loan was based on race and is threatening to report us to the Indiana Civil Rights Commission if we don’t re-underwrite the loan and approve his request. While I’m familiar with the federal fair lending laws, is there an Indiana law we should also be complying with in this area? Answer: Yes, the Indiana Fair Housing Act1 provides protections against discrimination in any residential real estate-related transaction. While the IFHA mirrors federal laws against discrimination in lending, it does contain separate remedies and enforcement actions that allow for enforcement by the Indiana Civil Rights Commission. The IFHA defines a “residential real estate-related transaction” to include making or purchasing loans or providing other financial assistance to purchase, construct, improve, repair or maintain a dwelling, or to secure real estate. Selling, brokering or appraising residential real property is also considered to be a residential real estate-related transaction. The IFHA provides that a person whose business includes engaging in residential real estate-related transactions may not discriminate against a person in making a real estate-related transaction available or in the terms or conditions of a real estate-related transaction because of race, color, religion, sex, disability, familial status or national origin. Violators of the IFHA can face an administrative action by the Indiana Civil Rights Commission, or a civil action by any aggrieved person who may seek actual and punitive damages in addition to reasonable attorney’s fees and court costs.2 For the case at hand, you should confirm you have followed your established fair lending policies and procedures, and that the loan application was considered in compliance with all applicable laws. If your review concludes you have followed your established underwriting guidelines and the denial was made in compliance with all applicable laws, you should not change your decision. Making an exception to your standard underwriting policies on an ad hoc basis can create its own fair lending problems. To ensure you are fully protected from future fair lending claims, if your bank doesn’t have a standalone fair lending policy – it should. Further, you should be conducting periodic fair lending assessments by a third party to ensure your compliance with all applicable laws. This review should evaluate not only your compliance, loan and fair lending policies, but also include a statistical analysis of pricing and approval rates for your customers. Federal laws provide a safe harbor for self-testing and, if needed, self-correction when performed in compliance with applicable laws. Remember, fair lending compliance is broader than just the loan approval process – your bank’s fair lending program should include a review of all marketing materials and the markets they are targeted to, including the use of artificial intelligence in the development and distribution of those materials. 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. FOOTNOTES 1 Ind. Code § 22-9.5 2 Ind. Code § 22-9.5-7-2 Brett Ashton Partner Krieg DeVault LLP BAshton@KDLegal.com Brett Ashton is chair of Krieg DeVault’s Financial Institutions Practice. He counsels a wide array of financial institutions on complex bank acquisitions, litigation defense and avoidance strategies, strategic planning, new product development, negotiation and defense of regulatory enforcement actions, and general regulatory compliance issues. Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. 20 HOOSIERBANKER
Steve Holliday retired from First Financial Bank, NA, Terre Haute, after 12 years with the bank, ending as chief credit officer. He joined the bank after 18 years with Old National Bank, Evansville, as a district president then senior vice president, senior commercial lending executive. TAKING IT EASY MIDWEST AG BANKING SCHOOL Learn the latest about ag credit and finance at Purdue University. Click on the icon in HB Digital or go to indiana.bank/calendar. DEC. 2-5 West Lafayette SWITCH TO HB DIGITAL Convert to HB Digital to enjoy: ▶ bonus links to videos, photos and more ▶ portability by smartphone and tablet ▶ early access, averaging two weeks ahead of snail mail Hoosier Banker is available free of charge to all IBA members and associate members. To start your HB Digital subscription or convert from hard copy to digital‑only, email HB@indiana.bank. Brett J. Ashton Kay Dee Baird John B. Baxter Julia A. Carpenter Maria M. Vladimirova Michael J. Messaglia Nicole R. Finelli Michael E. Williams PARTNER PARTNER PARTNER OF COUNSEL PARTNER SENIOR ASSOCIATE PARTNER PARTNER 317.238.6291 bashton@kdlegal.com 317.238.6306 kbaird@kdlegal.com 317.238.6311 jbaxter@kdlegal.com 317.238.6273 jcarpenter@kdlegal.com 317.238.6374 nfinelli@kdlegal.com 317.238.6268 mvladimirova@kdlegal.com 317.238.6249 mmessaglia@kdlegal.com alucas@kdlegal.com 317.238.6220 mwilliams@kdlegal.com Financial Services Team 20+ YEAR PARTNERSHIP WITH INDIANA BANKERS ASSOCIATION Years But Who’s Counting? OVER 20 Krieg DeVault LLP has been involved in every major event that has shaped the evolution of Indiana’s financial institutions. In addition to leading commercial and investment banks, our clients include specialty finance companies, insurance carriers and agents, broker-dealers, and investment advisers. www.kriegdevault.com © 2024 Krieg DeVault LLP. This constitutes attorney advertising. Krieg DeVault LLP, Indianapolis, IN, is responsible for this content. Jeffrey L. Ledbetter OF COUNSEL 317.238.6216 jledbetter@kdlegal.com Alexus D. Lucas ASSOCIATE 317.238.6381 SEPTEMBER/OCTOBER 2024 21
T GR SUMMIT Regional Meetings: NEW LOOK, SAME MISSION BY DAX DENTON & ROSS TEARE, INDIANA BANKERS ASSOCIATION This year, IBA’s Regional Meetings are getting a significant overhaul. Building on last year’s meetings, the IBA Government Relations team has introduced several new features to enhance this key element of our grassroots program. The revamped meetings will offer fresh, valuable content for both members and legislators, ensuring every participant gains meaningful insights and connections. We are excited to announce that Tom Fite, director of the Indiana Department of Financial Institutions, will attend each meeting. Director Fite will provide an insightful update on the state of banking in Indiana, covering current industry forces and key regulatory areas. His expertise on the banking sector’s challenges and opportunities will be invaluable to all attendees, offering a comprehensive look at the trends and issues shaping our industry today. In addition to Director Fite’s presentation, we have invited an economic development expert familiar with the local markets of each meeting location. These experts will give attendees valuable insights into market trends, important projects and other relevant economic development initiatives in their regions. This segment will highlight key development projects, investment opportunities and policy initiatives driving growth and change in each area. We will also present a brief IBA update on current events and key policy initiatives, covering recent legislative developments, regulatory changes and other critical issues impacting the banking industry in Indiana. We will discuss the IBA’s ongoing advocacy efforts and how members can get involved. This update is an excellent opportunity for attendees to stay informed about the latest happenings and understand how the IBA is working to support their interests at the state and national levels. Another significant change this year is the timing and location of the meetings. Each meeting will now take place in mid-November, aiming to provide a more convenient time for legislators to participate and engage with our members after the election. This change reflects our commitment to making these meetings as productive and impactful as possible. Please see the exact dates listed in the box on the next page. Additionally, we have streamlined the number of meetings from eight last year to five this year. This consolidation allows us to focus our resources and efforts on delivering high-quality content and ensuring each meeting is well-attended and effective. We have carefully selected the locations to provide broad geographic coverage, making it easy for members across the state to attend. Despite these changes, the mission of the IBA Regional Meetings remains unchanged. These meetings continue to provide member bankers with the opportunity to connect with their local legislators in a relaxed setting, fostering relationship-building and open dialogue. As a hallmark of IBA grassroots engagement, these meetings are successful only with your participation. We encourage you to prioritize attending, as they offer a unique opportunity to influence policy, network with peers and gain valuable insights. 22 HOOSIERBANKER
While the structure may feel different, we believe the revamped IBA Regional Meetings will be even more informative and impactful than ever before. With high-caliber speakers, a focus on relevant local issues and a strategic scheduling approach, we are confident these meetings will provide significant value to all participants. Please join us for what promises to be a highly engaging and productive series of meetings. Your involvement is crucial to the success of these events and the continued strength of our industry. We look forward to seeing you there! Dax Denton Chief Policy Officer Indiana Bankers Association DDenton@indiana.bank Dax joined the IBA in 2008 and, as of April 2023, also serves as executive director for the Indiana Mortgage Bankers Association. Away from the office, he serves on the Boy Scouts Crossroads of America Council Board. Dax graduated from Indiana University, the IBA Leadership Development Program and the Graduate School of Banking at the University of Wisconsin. Ross Teare Vice President – Government Relations Indiana Bankers Association RTeare@indiana.bank Ross joined the IBA in October 2021. He analyzes issues, reviews legislation, builds relationships with policymakers and enhances IBA’s grassroots advocacy. Ross also heads up the IBA’s BankLEAD internship program and efforts to grow banking programs at Indiana colleges. He graduated from Butler University and the IBA Leadership Development Program. 2024 Regional Meetings Nov. 12 Fair Oaks – Farmhouse Restaurant Nov. 13 Fort Wayne – Biaggi’s Ristorante Italiano Nov. 14 Evansville – Biaggi’s Ristorante Italiano Nov. 15 Jeffersonville – Upland Jeffersonville Nov. 18 Indianapolis – Columbia Club 2024 Commitment to Community Awards The 2024 Indiana Bankers Association C2C (Commitment to Community) Awards will showcase exceptional community bank outreach completed in calendar year 2024. Three awards, based on asset size, will be presented at the 2025 Mega Conference. All nominees are highlighted on IBA social media and in Hoosier Banker. Nominations are due Jan. 31, 2025. SEPTEMBER/OCTOBER 2024 23
N Creating Connection THROUGH LEADERSHIP BY JOSH MYERS, INDIANA BANKERS ASSOCIATION Nearly 100 members of the IBA’s Future Leadership Division gathered Aug. 1-2 at the Renaissance Indianapolis North Hotel for the group’s premier event, the 2024 FLD Leadership Conference. This was the conference’s first year back on the north side of Indianapolis, offering a fresh venue with the added convenience of free parking. IBA President and CEO Amber Van Til welcomed the mix of FLD veterans and first-time attendees to the conference, highlighting the wealth of opportunities available through active involvement with the Association. Amanda Morris-Feldman, the 2024 FLD Advisory Board vice president from First Federal Savings Bank, Rochester, followed with additional remarks and introduced the first speakers. Programming began with Alyce Blum and Lindsay Clarke from Articulated Intelligence, who provided a joint presentation about networking and how to approach it with more confidence and purpose. Attendees then broke up for a networking lunch where they could meet new peers and gear up for the upcoming agenda. One of the conference’s most popular elements, our speed roundtables, kicked off after lunch. Members were grouped randomly to meet new peers and discuss topics ranging from professional development and workplace culture to technology and more. The afternoon continued with Nick Arrigo from Haberfeld speaking about strategies to create value and an environment where people and organizations can succeed and achieve results. Michael Clampitt, the 2024 FLD Advisory Board president from North Salem State Bank, provided an in-depth discussion on the benefits of engaging with the Future Leadership Division and encouraged everyone to sign up for free membership. Clampitt then received a plaque in recognition of his service as president of the advisory board and his commitment to promoting the future of banking. The day proceeded with a second session of roundtables before Lindsay Clarke returned with an insightful conversation on workplace conflict and how viewing conflict as a growth opportunity can enhance productivity and morale. The evening brought a lively reception and buffet dinner, setting the stage for the FLD trivia competition. Teams, FLD FOCUS assembled randomly, engaged in a trivia challenge hosted by professionals from Hambone’s Trivia for two hours of fun competition. After a close battle, the winning trivia team took home a gift basket of assorted goodies, an IBA logo blanket and, most importantly, a 2024 FLD Leadership Conference Trivia Night Champion trophy. The conference continued the next morning with an insightful panel about grassroots advocacy and the importance of engagement. Led by IBA Chief Policy Officer Dax Denton, the panel featured Indiana House Ways and Means Chairman Rep. Jeff Thompson, Michael Clampitt and Amanda Morris-Feldman. Panelists provided personal stories and real-life examples where advocacy made an impact and why it matters to their own lives, but also to their bank Continued on page 26 24 HOOSIERBANKER
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