MARCH/APRIL BUILDING ON THE PAST, BANKING ON THE FUTURE. A PUBLICATION OF THE INDEPENDENT COMMUNITY BANKERS OF COLORADO What Are Bankers’ TOP PRIORITIES FOR 2024
©2024 The Independent Community Bankers of Colorado (ICBC)|The newsLINK Group, LLC. All rights reserved. The Independent Report is published six times per year. The information contained is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the ICBC, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service. ICBC encourages a first-print policy, and every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. 6732 West Coal Mine Avenue, #640 • Littleton, CO 80123 • 303.832.2000 2023-2024 OFFICERS ICBC CHAIRMAN Randy Younger President & CEO First National Bank Hugo-Limon ICBC PRESIDENT Tom Ogaard President & CEO Native American Bank ICBC PRESIDENT-ELECT Mike Hurst President Del Norte Bank ICBC ICBA STATE DIRECTOR PJ Wharton President & CEO Yampa Valley Bank ICBC STAFF EXECUTIVE DIRECTOR Mike Van Norstrand mvannorstrand@icbcolo.org ADMINISTRATION DIRECTOR TREASURER Maelynn Lewis mlewis@icbcolo.org LEGAL COUNSEL Christian Otteson Partner Otteson Shapiro LLP LOBBYIST Mary Marchun Founding Partner The Capstone Group 2023-2024 DISTRICT DIRECTORS DISTRICT A Dan Ebert, Vice President, Evergreen National Bank Bruce Hellbaum, President/CEO, RNB State Bank/Front Range State Bank Robert Holt, Senior Vice President, North Valley Bank Jeff Walker, Senior Vice President & CCO, Redstone Bank DISTRICT B Mark Brase, President, Points West Community Bank Tim Croissant, Market President, Bank of Colorado Travis Goeglein, Senior Vice President, First FarmBank Ed Rarick, President/CFO, High Plains Bank DISTRICT C Sean Lening, President, GN Bank Kathryn Perry, Senior Vice President, Park State Bank & Trust Lora Rose, CFO, The State Bank Andrew Trainor, President, Community Banking, InBank DISTRICT D Wade Gebhardt, Corporate President, Mountain Valley Bank John Stelzriede, Market President — Colorado River Region, Alpine Bank Joe Martinez, President & CLO, San Luis Valley Federal Bank Jeris Romeo, Community Bank President — Avon & Eagle, ANB Bank ICBC ADVISORY BOARD MEMBERS Eric Budreau Partner Eide Bailly Jim Hall Managing Director Bond & Specialty Insurance — Financial Institutions, Travelers Bill Mitchell President & CEO Bankers’ Bank of the West Christian Otteson Partner Otteson Shapiro LLP I C B C 2 | INDEPENDENT REPORT
CONTENTS 04 Support the ICBC’s Associate Members! 06 EXECUTIVE DIRECTOR’S MESSAGE Establishing a Strong Foundation for the Next Generation of Colorado Community Bankers By Michael Van Norstrand, Executive Director, ICBC 08 FLOURISH Putting the Person in Personalized Marketing By Rebeca Romero Rainey, President and CEO, ICBA 09 ICBC Preferred Providers 10 FROM THE TOP Continuing the Community Bank Legacy By Derek Williams, ICBA Chairman, President and CEO of Century Bank & Trust 11 2024 Conference Calendar 12 Steering Banks Towards Future-Ready Banking By Wendi Klein, VP Marketing & Communication, Alogent, ICBC Associate Member 14 What Are Bankers’ Top Priorities for 2024? By Allison Maddock, Chief Product Officer, CSI, ICBC Associate Member 16 ICBC 2024 Roundtables Tour de Colorado 17 What Ghosting Says About You and Your Bank By Theodore A. Rosen, President, Expert Business Development, ICBC Associate Member 19 51st ICBC 2024 Annual Convention 20 Recession Proofing How To Benefit From a Lull in the Economy By Jim Reber, President and CEO, ICBA Securities , ICBC Associate Member 22 ICBA Advocacy Capital Summit 23 The Value of Reimagining Commercial Payments By Matt Helsing, SVP & Northwest Regional Manager, PCBB, ICBC Associate Member 24 Community Bankers School 25 Colorado Bank M&A Briefing An Overview of the Local Banking Landscape By Olsen Palmer, ICBC Associate Member 31 The Power of Inquiry Leadership Success Through Asking Questions By Connie West, Gallup Certified Strengths Coach, Regional Vice President, The James Paul Group, ICBC Associate Member 06 14 17 CONNECT Like us on Facebook ICBColo Connect with us ICBColo Follow us on X ICBColo Give us a call 303.832.2000 Follow us on Instagram ICBColo PUB 3. 2024 ISSUE 2 INDEPENDENT REPORT | 3
SUPPORT THE ICBC’S ASSOCIATE MEMBERS! ACCOUNTING / COMPLIANCE Crowe LLP......................................................................................303-831-5023 Eide Bailly LLP...............................................................................303-770-5700 Fortner Bayens PC......................................................................303-296-6033 FORVIS LLP ....................................................................................303-861-4545 Moss Adams LLP............................................................................ 503-471-1277 **Plante Moran .............................................................. 303-740-9400 ADVERTISING / EQUIPMENT / PRINTING / SUPPLIES Kristopher James Company......................................................800-274-9212 Spry. .................................................................................................303-323-4341 CAREER ADVANCEMENT Graduate School of Banking at Colorado...........................800-272-5138 COMPUTER PRODUCTS / CONSULTING Alogent...........................................................................................719-583-8004 CivITas Bank Solutions...............................................................303-291-3700 (A Bankers’ Bank of the West Bancorp Inc. Subsidiary) Cook Solutions Group...............................................................503-260-8562 Federal Protection Inc..............................................................800-299-5400 *SBS CyberSecurity.........................................................785-594-0503 CONSULTING / HUMAN RESOURCES AND MANAGEMENT/ MARKETING / STRATEGIC PLANNING Bank Strategies LLC ...................................................................303-291-3700 (A Bankers’ Bank of the West Bancorp Inc. Subsidiary) Bell Bank...........................................................................................701-371-3355 Blendification..................................................................................970-274-1723 CD Construction Consulting...................................................... 720-701-2122 Expert Business Development ....................................................610-771-2121 *ICI Consulting Inc............................................................ 316-201-8590 The James Paul Group .............................................................877-584-6468 Kasasa ............................................................................................877-342-2557 Piper Sandler & Co.......................................................................415-978-5057 *S&P Global..................................................................... 434-951-6948 CORRESPONDENT BANKING SERVICE *Bankers’ Bank of the West.............................................303-291-3700 Bell Bank...........................................................................................701-371-3355 Citizens Bank Farmington.........................................................505-599-0100 INTRUST Bank...............................................................................800-732-5120 PCBB................................................................................................888-399-1930 TIB — The Independent BankersBank.................................. 972-650-6000 DATA PROCESSING / EFT / ATM / CARD PROCESSING / MERCHANT SERVICES *Bankers’ Bank of the West.............................................303-291-3700 BluePoint ATM Solutions LLC...................................................540-335-2848 Computer Services Inc.................................................................970-212-7104 Entrust. ........................................................................................... 720-279-3287 *FIS..................................................................................... 513-900-4661 FPS GOLD.........................................................................................801-201-2525 *IBT..................................................................................... 512-606-1100 *ICBA Bancard / TCM Bank.............................................800-242-4770 Jack Henry & Associates.............................................................417-235-6652 SHAZAM..........................................................................................515-288-2828 Visa Inc............................................................................................415-238-3682 INSURANCE / BENEFIT SERVICES Bank Compensation Consulting............................................303-482-1844 First Insurance Services Inc........................................................719-456-2303 *ICBA Reinsurance.......................................................... 888-790-6615 NFP Executive Benefits Company.............................................469-252-1037 *Travelers......................................................................... 720-200-8416 Unitas Financial Services...........................................................800-461-9224 INVESTMENTS / FUNDING AND LENDING PARTNERS B:Side Capital...............................................................................303-657-0010 The Baker Group..........................................................................405-415-7200 BancAlliance.................................................................................. 301-232-5423 *BHG Financial***...........................................................954-263-6399 The Citizens Bank........................................................................505-599-0145 Colorado Enterprise Fund........................................................303-860-0242 Colorado Housing and Finance Authority...........................303-297-7329 D.A. Davidson.............................................................................303-764-6000 FHLBank Topeka — Denver Office............................................720-212-9873 First Bankers’ Banc Securities Inc. (FBBS)................................720-709-7613 Gill Capital Partners...................................................................303-296-6260 Holman Capital...........................................................................949-981-0237 *ICBA Mortgage..............................................................800-253-5356 *ICBA Securities...............................................................800-422-6442 IntraFi Network............................................................................303-706-9265 Northland Securities Inc............................................................303-801-3380 Olsen Palmer LLC........................................................................202-803-2620 West Gate Bank Mortgage........................................................402-434-4116 LAW FIRMS Arnold & Porter...........................................................................303-863-1000 Godfrey Law Group LLC...........................................................303-802-6336 Hoffman Nies Dave & Meyer LLP.............................................303-860-7140 Lewis Roca LLP**.......................................................................303-623-9000 Markus Williams Young & Hunsicker LLC...........................303-830-0800 Moye White LLP...........................................................................303-292-2900 Otteson Shapiro LLP (ICBC Counsel)....................................720-488-0220 Polsinelli......................................................................................... 303-572-9300 Spencer Fane LLP.......................................................................303-839-3838 Stinson LLP....................................................................................303-376-8400 LOAN REVIEW SERVICES Eide Bailly LLP...............................................................................303-770-5700 Fortner Bayens PC......................................................................303-296-6033 ICBC LOBBYING AND PUBLIC RELATIONS The Capstone Group (ICBC Lobbyists)................................303-860-0555 *ICBC Preferred Providers **Silver Associate Member ***Gold Associate Member 4 | INDEPENDENT REPORT
♥ Bankers’ Bank of the West bbwest.com ▪ 800-873-4722 offices in Denver and Lincoln Member FDIC ▪ Equal Housing Lender we champion community banking Bank Stock Loans | Loan Participations | Cash Management | ATM/Debit Proud Legacy Sponsor of ICBC and supporter of Colorado community banks for over 40 years!
Following a successful inaugural year, ICBC’s 2024 Leadership Development Program (LDP) is back and off to a great start. This year, we are excited and appreciative of the returning sponsorship of ICBC associate member FHLBank Topeka, as well as a new associate member sponsor, BHG Financial. Our LDP is a 10-month program based on four main pillars — Leadership, Advocacy, Education and Networking — with each month dedicated to one or several of these pillars. The program is focused less on technical skills and more on essential skills such as self-awareness and confidence, project management, powerful conversing, team building, professional self and company representation. This year, we added a bank-centric challenge for the participants in small groups to research and present their recommended solutions. Each group will have a coach, and we are thrilled that two ICBC board members, Kathryn Perry with Park State Bank & Trust and Dan Ebert with Evergreen National Bank, have stepped up to fill the coach roles. We kicked off the program with A Day at the Capitol on Feb. 28. The goal of the day was to explain the critical role that each person plays in advocating for community banks in their communities and at the Capitol. The day included: • A presentation from Amanda King, a senior research analyst with the Colorado Legislative Council, on the legislative process and the life of a bill. • A regulatory process overview from a panel consisting of Ken Boldt, state bank commissioner; William Kelver, assistant VP Federal Reserve Bank of Kansas City, Denver Branch; and Treana Bennett, council at the OCC in Denver. • A discussion of public participation in the legislative process with Mary Marchun, ICBC’s lobbyist from The Capstone Group. Executive Director’s Message Michael Van Norstrand Executive Director, ICBC ESTABLISHING A STRONG FOUNDATION FOR THE NEXT GENERATION OF COLORADO COMMUNITY BANKERS • Personal meetings with Senator Rod Pelton and Senator Byron Pelton. The group discovered how important it is for legislators to hear directly from their constituents. • A House Business Affairs and Labor Committee meeting. The group also embarked on a private tour of the Capitol … always a favorite! • A communications and outreach briefing from Monica Burton, 76 Group, ICBC’s public relations firm, and Loren Furman, President and CEO of the Colorado Chamber of Commerce, who discussed the current business environment in Colorado. 6 | INDEPENDENT REPORT
The remainder of the year will consist of virtual and inperson educational and leadership presentations from ICBC associate members Connie West with The James Paul Group, Ted Rosen with Expert Business Development, Dan Bruder with Blendification, and ICBC LDP Consultant CJ Juleff with CJ Juleff & Associates. In June, the group will attend one of ICBC’s annual Community Banker Roundtables, where a legislative recap will be presented, as well as a panel from the State Division of Banking, the OCC, the Federal Reserve Bank of Kansas City and the FDIC meets in different parts of Colorado with community bankers to cover topics such as examination trends and the current economic outlook. LDP participants will have the opportunity to attend the Independent Community Bankers of America’s LEAD FWD Summit leadership conference in September and hopefully also attend ICBC’s 51st annual convention later that month in Vail. The program will wrap up in November with the groups presenting their bank-centric challenge and their approach to meeting the challenge head on. We are excited to have a dynamic group of community bankers from across Colorado joining us this year. Thank you to all who support the program! INDEPENDENT REPORT | 7
FLOURISH When it comes to community bank marketing, it’s about the person, not the product. As relationship bankers, the client connection drives community bank decisioning around solutions, promotions and outreach. Through every communication, community banks seek to deepen their customer ties, not merely sell them on the next big thing. With that, we again see how community banks truly differ from their megabank and nonbank counterparts. When I think about how others approach marketing, it’s more about pushing the technology they provide or the products they offer. Others in financial services aren’t stopping to realize individual stories; rather, they are simply in the act of the sell. Community banks embody the polar opposite of that transactional approach and are focused on building connections. While you offer advanced technology and state-of-the-art solutions, you do so in a way that supports what your communities need. You are in the relationship for the long term. For example, today, your customer may need a savings account or a home loan, but you will be there to support their future life goals and evolving needs over time rather than providing a singular product. In short, community banks strive to ensure the people, families, small businesses and communities they serve stand to prosper over time. It takes a lot to convey that fundamental difference. That’s why the ICBA National Campaign is so important. Through these efforts, we’re able to bolster the community bank story on a national platform, and Putting the Person in Personalized Marketing By Rebeca Romero Rainey President and CEO, ICBA individual community banks can amplify it on the ground in their own communities. We want to take what you do, highlight your authentic approach to relationships and demonstrate the community bank difference, so you can leverage the momentum in your communities. It’s working. As we close out year one of the National Campaign, we’ve seen a 2,000% year-over-year jump in organic traffic to banklocally.org. Fifty-five percent of those aware of the campaign indicate they believe community banks are very important to the local economy. In addition, 26% of millennials who recalled the campaign searched online to find a community bank, taking a meaningful step toward banking in a way that makes a difference. So, we will keep supporting you in elevating the visibility of community banks. We’ll stand beside you as you continue to demonstrate the positive impacts you make. We’ll advocate for you to ensure your voice resonates across the U.S. Because as a community bank, it’s about the people you serve, not the products you offer, and in banking, that makes all the difference. 8 | INDEPENDENT REPORT
ICBC PREFERRED PROVIDERS ICBC Preferred Providers are selected by bankers just like you, so give them special consideration when considering their proposals for your bank! To learn more about ICBC’s Preferred Providers contact the ICBC at (303) 832-2000. Please note: ICBC endorses the listed companies but not all products offered by the company. Contact: Scott Wintenburg | swintenburg@bbwest.com | (303) 291-3700 or (800) 601-8630 Merchant services from Bankers’ Bank of the West help you grow customer relationships with mobile payments technology, competitive unbundled pricing, efficient approvals and startups, responsive support and training. Contact: Keith Gruebele | kgruebele@bhginc.com | (954) 263-6399 Creator of the largest community bank loan network in the country. ICBC members can access the BHG Loan Hub, a secure, state-of-art loan delivery platform and the number-one source for professional loans. Contact: Mara Spears | mara.spears@fisglobal.com | (813) 205-9488 Turn your card program into a growth opportunity. With 40 years in payments and card processing, we can quickly relieve you of the regulation and compliance burden. In the end, working with FIS is a low risk, high return proposition because of our payments expertise and proven results. FIS drives the ICBC’s 24 location ATM surcharge-free network. Contact: Phil Layher | phil.layher@ibtapps.com | (512) 616-1188 IBT Apps® is an empowering core partner to community banks nationwide, offering end-to-end core and digital banking solutions that meet today’s customer demands. Their adaptable i2Suite banking system enables your bank to streamline operations, control costs and mitigate risks. Transform your bank with the power of one total solution. Contact: icba.org/solutions | (866) 843-4222 The ICBC supports and recommends the following products and services supplied by our national association, the ICBA: ICBA Bankcard and TCM Bank, N.A.; ICBA Compliance & Risk Management; ICBA Mortgage; ICBA Reinsurance; and ICBA Securities. Contact: Mike Hatch | mike.hatch@ici-consulting.com | (316) 201-8590 Since 1994, ICI Consulting has helped banks and credit unions to assess, cost justify, evaluate, and convert core processing, digital banking, EFT, lending, document imaging, CRM and branch solutions. Contact: Robb Nielsen | robb.nielsen@sbscyber.com | (605) 251-7375 SBS is your cybersecurity partner. Our offerings include: TRAC™ – Cybersecurity risk management software; Cyber‑RISK™ – Automated FFIEC cybersecurity risk assessment software; IT and Network Security Audits; Consulting Services; Full Service Vendor Management; Role-Based Certifications; Vulnerability Assessments; Penetration Testing and More! Contact: Joe Valdez | joseph.valdez@spglobal.com | (213) 549-2281 S&P Global combines exclusive analysis and in-depth data in real time for the banking, financial services and insurance industries. From bank branch data and government assistance programs to executive compensation and league tables, S&P is the final word in business intelligence on financial institutions. Contact: Brandon Tate | btate2@travelers.com | (720) 200-8465 Offering a wide range of customized insurance protection, Travelers SelectOne+® for financial institutions is designed to respond to the most recent trends in banking. INDEPENDENT REPORT | 9
FROM THE TOP CONNECT WITH DEREK ON X @DEREKBWILLIAMS As I reflect on my year as ICBA chairman, I’m proud to say that it’s been a big win for ICBA and for community banks across the country, as our “one mission” has been on full display. From the exemption of community banks from the FDIC’s special assessment to the determined opposition we showed for the CFPB’s Section 1071 rule, our collective work has ensured that community banks and the communities we serve continue to flourish. But serving as chairman has been about far more than industry successes. It’s about the legacy I have been a part of and what we collectively accomplish. I am in complete awe of all the community bankers who have served in this role before me. ICBA has been triumphant in advancing our mission because so many noble people throughout history have given their time, supporting the dedicated staff who carry that same commitment to community banking. Continuing the Community Bank Legacy QUOTE OF THE MONTH “If I have seen further than others, it is by standing on the shoulders of giants.” — Isaac Newton, English mathematician and physicist When I became chairman, I set out to lift up community bankers around the country, reminding them that what they do matters, but as it turns out, I was the one who was inspired. Spending time with warm, gracious and committed community servants, I have seen just how connected we truly are. While the locations and the customs are different, community bankers everywhere are amazing people who put others first and believe that the greatest good comes from the sacrifices of those who care most. My life has been infinitely enriched by the bankers I have met this year and their unparalleled commitment to our field. Through it all, I’ve become even more certain of the importance of the individual bank. Each of us is unique because our communities are unique and our customers are unique — and we can never lose sight of that. If it matters to member banks, it must matter to ICBA. As I close out my time at the helm, I have to say that it has been the single greatest honor By Derek Williams ICBA Chairman, President and CEO of Century Bank & Trust and privilege of my community banking career to serve as ICBA chairman. I believe passionately in the community banking model and the good that we do every day for our customers, our family of employees, our stakeholders and our communities. We must continue to have faith that our banks and our people matter greatly to our communities. We must hold our heads high, knowing we make a true difference in the lives of the people we serve, because for now and always, that is what it means to be a community banker. 10 | INDEPENDENT REPORT
Security Officer Conference Virtual May 2-3 HR Summit Virtual July 18-19 BSA/AML Mile High Summit In-person August 6 Denver Annual Convention In-person September 18-20 Vail Bank Director Summit In-person September 20-21 Vail CONFERENCE CALENDAR 2024 Agriculture Conference In-person April 17-18 Denver
Bank executives confirmed in a July 2023 survey that reducing processing costs through payments modernization was a top priority. With remote and digital banking channels often in the spotlight, it may come as a surprise that brick-and-mortar branches are still a focus. Some of the largest U.S.-based institutions, in fact, are expanding their physical footprints to address a specific clientele of account holders, including small businesses. As technology evolves, so do account holder expectations, proving a strong remote banking strategy that addresses an omni-channel banking experience is needed. Is your bank positioned to meet the growing demand for convenience, security and personalization through digital channels? Here are three ways to ensure you are future-ready: 1. Enhance User Experiences in Mobile Banking Mobile banking and remote capabilities continue to reshape the way financial institutions interact with their customers. Although mobile banking is commonplace, the user experience delivered has become a critical differentiator in user satisfaction and retention. A J.D. Power 2023 study found that account holder satisfaction significantly increases when financial institutions offer mobile banking experiences that are both intuitive and comprehensive. If your 2024 banking strategy focuses on improving user experiences, it may be time to invest in refreshed mobile banking capabilities that ensure a seamless, efficient and personalized user experience. This includes optimizing app design for ease of navigation, ensuring rapid loading times and integrating personalized financial insights. Furthermore, financial institutions who integrate conversational interfaces into their larger online and digital banking platforms, like AI-driven chatbots, can further streamline account holder services. In 2023, more banks began adopting virtual user assistants and chatbots to handle inquiries, offer personalized financial advice and elevate the account holder’s experiences. A study by Juniper Research suggests that chatbots will be responsible for cost savings of over $7 billion globally by 2024 across all sectors, with banking included as a primary beneficiary. By focusing on these areas, financial institutions can enhance customer and member engagement and loyalty, positioning themselves as leaders in mobile and digital banking. 2. Advanced RDC Technology Remote deposit capture technology continues to be an essential feature of the modern banking experience, offering convenience and efficiency in check depositing. By continuing to advance these technologies and deliver more robust capabilities to account holders, deposits increase along with user satisfaction. This includes ensuring your recognition engines deliver the highest results possible with built-in fraud detection — reducing friction, rejections and visits to the branch. STEERING BANKS TOWARDS FUTUREREADY BANKING By Wendi Klein VP Marketing & Communication, Alogent, ICBC Associate Member AS TECHNOLOGY EVOLVES, SO DO ACCOUNT HOLDER EXPECTATIONS, PROVING A STRONG REMOTE BANKING STRATEGY THAT ADDRESSES AN OMNICHANNEL BANKING EXPERIENCE IS NEEDED. 12 | INDEPENDENT REPORT
A significant focus also lies on tackling real-time fraud detection, employing new technologies to preemptively identify and mitigate risks at the point of presentment, such as: • Watermarking and Digital Fingerprinting: Implementation of unique identifiers on checks to ensure authenticity and traceability, reducing the risk of duplication and fraud. • Behavioral Analytics: Advancements that enable banks to detect and prevent unusual activity in real-time through analysis of user behavior patterns. • Biometric Authentication: Growing use of fingerprint and facial recognition technologies to add an additional secure layer to the RDC process. • Cross-Channel Fraud Prevention: Integration of RDC platforms with broader fraud management systems to create a unified and robust defense strategy. 3. Committing to a Future-Ready Approach Embracing these resolutions is more than just about adopting new technologies; it’s about cultivating a mindset geared toward innovation and user-centric services. As financial institutions embark on this journey, Alogent stands as a committed partner, offering solutions that are not only aligned with current trends, but are also paving the way for future advancements. At Alogent, we’re all about innovation. Our automated end-to-end deposit automation platform, Unify, gives financial institutions the efficiency and modernization to lead market innovation and address all in-branch and self-service channels with the same platform. Scan the QR code to learn more. https://www.alogent.com/paymentsolutions/unify?utm_campaign=ICBC%20 Newsletter&utm_source=February%20 Newsletter&utm_medium=email&utm_ content=Unify INDEPENDENT REPORT | 13 SOCIAL ENGINEERING NETWORK MONITORING BY COMMUNITY BANKERS FORCOMMUNITY BANKS CivITas Bank Solutions was born from the needs voiced by community banks for affordable real-world technology and information security solutions. Anne Benigsen President David Philippi VP - Business Development Chris Tuzeneu VP – Information Security PENETRATION TESTING VULNERABILITY SCANS info@acivitas.com www.acivitas.com
To find out how bankers will confront challenges associated with a changing technology landscape, artificial intelligence (AI), cybersecurity, financial crimes and more, CSI surveyed banking executives from across the nation about their strategies and priorities for 2024. We highlight the results of this survey in an interactive executive report and dive into the challenges and emerging opportunities in our industry. This article explores the issues bankers selected as most likely to affect the industry in 2024, along with top technology trends. TOP INDUSTRY ISSUES FOR BANKERS IN 2024 CSI’s survey explored the challenges facing bankers, asking respondents to identify which issue will have the greatest influence on the industry in 2024. Here are the issues bankers identified as their top concerns in the coming year: • Responding to High Interest Rates: Bankers indicated that continued high interest rates will affect the industry most, with 35% of respondents choosing this issue. To cope with this environment, 50% of respondents are offering competitive interest rates on deposits, and 46% plan to shift their investment strategy. Banks must evaluate the opportunities in their existing market and portfolio to offset decreased interest revenue. To find investments with a higher yield, like loans with variable interest rates, some institutions have also begun seeking new interest income opportunities (48%) and diversifying portfolios through resources like lending marketplaces. • Fighting Fraud: Coming in second, fraud was identified by 30% of respondents as the most pressing issue. Specifically, over four in 10 banks identified card fraud (45%) and wire transfer fraud (42%) as the foremost challenges. Fraud remains an ever-present threat, with the Federal Trade Commission estimating $8.8 billion in stolen funds throughout 2022. And the acceleration of AI is only increasing criminals’ ability to execute fraud. Keeping up with changing regulations and investing in the right technology is WHAT ARE BANKERS’ TOP PRIORITIES FOR 2024? By Allison Maddock Chief Product Officer, CSI, ICBC Associate Member 14 | INDEPENDENT REPORT
crucial for financial institutions to stay ahead of scammers and win the war on financial crime. • Keeping Up with Mergers and Acquisitions: Ranking third, mergers and acquisitions gained prominence among bankers, with 14% of the vote. Since this marks an increase from the 5% reported in last year’s survey, rising consideration of mergers and acquisitions could signal increased attention to market consolidation and plans for heightened M&A activity, recovering from the 2022 slowdown and headwinds throughout 2023. • Recruiting and Retaining Employees: Only 11% of bankers selected talent acquisition and retention, a significant decline from last year’s top spot (34%). This result could signal that bankers sense a stabilizing job market or potential to streamline operations, a likely factor contributing to overall optimism. • Navigating Regulatory Change: Contrary to the 27% reported last year, a mere 8% of bankers now view impending regulatory changes as the most pressing issue. However, more than eight in 10 bankers were concerned with all regulatory issues evaluated in the survey, including financial crimes compliance (89%), building a financial services ecosystem (88%) and cybersecurity compliance (87%). WHAT TECHNOLOGY TRENDS DID BANKERS IDENTIFY? Technology’s rapid evolution is reshaping the financial services landscape, introducing new opportunities and prompting banks to reassess their operations. Bankers in our survey generally agreed on the key technology trends driving changes and their potential effects in the coming year: • AI and Machine Learning: With 44% of respondents selecting their transformative potential, AI and machine learning emerged as 2024’s most impactful technologies. This result follows a year of headlines and stories around AI and machine learning’s potential to revolutionize risk management, customer service, fraud detection and personalized financial services. Further, AI and machine learning could potentially support the open banking and BaaS models through methods like API development and help banks better leverage data and automation. • Banking as a Service (BaaS): BaaS emerged as the second most impactful trend, capturing 20% of respondents’ votes. BaaS uses the foundation of open banking to foster collaborations between financial institutions, fintechs and neobanks. With BaaS, banks can seamlessly introduce new, innovative products and explore new markets. Notably, institutions in the $100 million-$250 million asset range expressed particular interest in BaaS, indicating smaller institutions’ growing enthusiasm for leveraging it to enhance operational capabilities and enrich customer offerings. • Digital Transformation: 18% of respondents selected digital transformation as the top trend, highlighting the continued industry-wide shift toward digitalization for improved processes and enhanced customer experiences. • Instant Payments: Since the Fed’s instant payments network made a splash in 2023, instant payments received only 10% of the vote for 2024, a sharp decline from previous years. • APIs/Open Banking: 7% of respondents chose APIs and open banking, a sharp decline compared to last year’s 17% of the vote. However, the lower response does not diminish the critical role of APIs in fostering collaboration in the financial ecosystem. Banks embracing open banking can harness data to streamline processes and continually introduce innovative solutions that can originate outside of their primary technology provider. EXPLORING CYBERSECURITY CONCERNS When asked about the single greatest cybersecurity concern facing the industry, 19% of respondents selected adapting to changes in the cyber insurance market. This result highlights potential uncertainty in forthcoming developments for cyber insurance, whether regarding increasing prices or coverage exceptions, and emphasizes the importance of better controls to mitigate risks. 18% of bankers also expressed concern about being unprepared to respond to a cyberattack, reinforcing the importance of planning responses to cyber incidents. This involves developing and testing robust incident response plans (IRPs) that cover data and system backups, communication plans, business continuity plans and strategies for dealing with attackers. In an era when cyber threats continue to make headlines, it’s critical that institutions remain vigilant and adopt comprehensive cybersecurity protections. GET THE FULL RESULTS OF THE 2024 BANKING PRIORITIES SURVEY Want additional insight into bankers’ priorities and challenges? Scan the QR code to explore the results of the 2024 Banking Priorities Survey and learn about the latest strategies and trends relating to modern banking, cybersecurity, compliance, financial crimes and more. https://www.csiweb.com/ docs/banking-priorities-2024 INDEPENDENT REPORT | 15
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WHAT GHOSTING SAYS ABOUT YOU AND YOUR BANK In spite of the loss of over 6 million souls worldwide, the COVID-19 pandemic did produce some positive outcomes. A few examples are: • The ability to work from home, especially for those with disabilities or who need to be available for child or elder care. • The greatly enhanced ability for those at home to have food, medicine and a host of goods and services delivered quickly. • A myriad of technological solutions to connect people by audio and video for professional as well as personal purposes. This was especially important for families who were separated geographically or where physical location might bring risks (hospitals, senior care facilities or those who are immunocompromised). • The ability to extend health care to those where travel is difficult or impossible. • An enhanced array of educational options, especially for those where attention span and technology are not a challenge. While I’ve never seen a scientific study, my gut tells me, as corroborated by the opinions of many others, that one of the negative outcomes of the pandemic is an increase in “ghosting.” According to the Oxford English Dictionary, the definition of ghosting is “the practice of ending a personal relationship with someone by suddenly and By Theodore A. Rosen President, Expert Business Development, ICBC Associate Member INDEPENDENT REPORT | 17
TRUST IS BUILT BY PEOPLE BUILDING RELATIONSHIPS WITH OTHER PEOPLE, AND THOSE RELATIONSHIPS ARE HEAVILY INFLUENCED BY SEEMINGLY MUNDANE ACTS LIKE RETURNING PHONE CALLS. without explanation withdrawing from all communication.” To be clear, for ghosting to occur, there has to be at least a modicum of a relationship that has been established between two people. For instance, if a random telemarketer leaves a message, not responding to that message would not be considered ghosting. Assuming my suspicion is correct, one possible explanation is that because so much of our communication today is not face-to-face, perhaps it’s easier to ghost someone without feeling guilty. It would be a bit like the little boy who hides from his parents by sticking his head and upper torso under the couch with his legs sticking out into the living room. He thinks that because he can’t see them, they can’t see him. Another explanation might be the general decline in civility that seems to be one of the byproducts of the pandemic. A very concerning manifestation of this trend is the increase in violence against teachers by students, police officers, fellow air travelers and citizens in general, with whom one doesn’t agree politically or philosophically. So the next question is, are bankers more likely to engage in ghosting than others in business? I would say, without a doubt, yes. This is based on a combination of personal experience and countless conversations with others. For 30 years, my firm has made appointments for commercial bankers to meet with small- to mid-size businesses. We primarily interact with owners and chief financial officers. Through our process, we often get a very clear picture of how the prospect feels about his or her current financial institution. One of the regular complaints is a lack of responsiveness on the part of their banker. As a service provider to banks, we talk with our peers in the industry. One of the universal complaints is how often our collective clients don’t return phone calls in spite of what can often be a lengthy relationship. What could explain these bankers’ proclivity to ghost? It may be that portfolios have expanded, as have other nonproductive demands on their time. It may be a throwback to when bankers truly held the “keys to the kingdom,” a time before the repeal of Glass-Steagall, the rise of the internet and new competition from large retailers, affinity groups, fintechs and others. Those times would have allowed for some arrogance, but they are long gone. A fundamental issue that I have observed is that some bankers, especially of the younger persuasion, seem enamored of virtual/electronic communication and somewhat oblivious to the fact that, in commercial banking, relationships are built on trust and credibility, not products or technology. Trust is not engendered by advertising, taglines, mailers and, most especially, not by social media. Trust is built by people building relationships with other people, and those relationships are heavily influenced by seemingly mundane acts like returning phone calls. The real irony here is that bankers, of all people, should be attuned to the fact that virtually everybody they know or interact with can be a customer or a referral source. Every individual and business needs banking services, whether they get them from a bank or an alternative provider. This fact should stimulate bankers to treat everyone with respect. Ghosting may be the ultimate act of disrespect and really says to the ghostee, by deed, not word, that they are unimportant and unworthy of the most basic act of courtesy. And there is no more effective relationship killer than telling a person through one’s deeds that he or she is unimportant and unworthy. In the business world, ghosting can have the multiple effects of damaging both the individual’s as well as the institution’s reputation. In our business, this is evidenced in conversations with prospects who say something like, “I have no interest in meeting with XYZ Bank. A few years ago, I met with one of their bankers who, in spite of his promise to do so, never got back to me and never returned my calls.” In that scenario, perhaps a banker, not wanting to be the bearer of bad news, took the coward’s way out and just ghosted the prospect. This scenario also underscores the importance of a great adage: “How you say ‘no’ is far more important than how you say ‘yes.’” The point is the ghosted prospect is far more likely to remember the institution, not the individual. If I were the CEO of a bank, I would make ghosting a dismissible offense, if nothing else than to deliver a strong message: “If you are going to ruin your reputation, don’t take our institution’s reputation down with it.” Most banks are obsessed with reputation, as they well should be. But reputation is a lot like a house of cards; it takes a lot more time and effort to build it than it does to destroy it. As challenging as it will be to build relationships, ghosting will surely be the path to destroying them. For more information, contact Ted Rosen at tarosen@expertbizdev.com or (610) 937-2199. 18 | INDEPENDENT REPORT
RECESSION PROOFING How To Benefit From a Lull in the Economy Tell me if you’ve heard this: An inverted yield curve is highly correlated with a subsequent recession. And might I point out that the U. S. treasury curve has been upside down for pushing two years now? Since we’re playing master of the obvious, let’s mention that the Fed — while not quite ready to start cutting rates — seems satisfied it’s laid the groundwork for inflation to get back in the 2% box that has proven elusive for several years. The press release following the Jan. 31, 2024, FOMC meeting stated, “The risks to achieving its employment and inflation goals are moving into better balance.” To be sure, the economy still seems to be chugging along quite nicely, thank you. As of this writing, there are “three” handles on several of the more critical economic barometers, which is a pretty good trick to pull off for an economy supposedly being dragged down by a restrictive monetary policy. Fourth quarter gross domestic product has run around 3.2%, the aforementioned inflation (the Fed’s preferred index is “Core PCE”) is sticky at 3.9% and unemployment boasts an impressively low 3.7%. This is not the stuff of an economy that’s about to run off a cliff (probably). ON THE OTHER HAND Of course, we’ve been getting a steady diet of not-so-positive news, too. The U.S. went blowing through the $1 trillion level in credit card debt in December 2023 and continues to pile onto that record. Delinquencies on consumer borrowings, particularly with the younger-aged cohorts, have been running hot as rates are at a generational high. And the mortgage finance industry is a story unto itself. We must go back to the start of the 21st century to see refinance activity this low, and even further to 1995 to see fewer purchase applications. That’s what 7% market rates will do to a borrower base whose average current mortgage is still well below 4%. That differential is the highest in history. Where this leaves us: If community bankers were so inclined, they could find options for their bond portfolios that would look pretty good if rates were to begin trending down. The good folks at Stifel have pointed out that there can be a number of months and even quarters after the final rate hike before the first cut occurs. “Higher for longer” may be in play for 2024, and we’ve seen this movie before. Remember: The last hike was last July. PLENTY TO CHOOSE FROM Buyers can pick just how much recessionproofing they want to build into their By Jim Reber President and CEO, ICBA Securities, ICBC Preferred Provider and ICBC Associate Member YIELD MATURITY INVERTED YIELD CURVE 20 | INDEPENDENT REPORT
balance sheets. Thanks to the inverted curve, something with a four- to five-year average life will look attractive compared to longer options. And since community banks’ interest rate risk positions have returned to nearbalanced postures, most depositories can buy some fixed-rate items without aggravating their asset/liability exposures. One of the simplest options is a deep discount callable agency. These were issued in 2020 or 2021 as rates were buried near zero. The bonds themselves can have minuscule coupons (1% or even less) and prices in the low 90s. Usually, their yields to maturity will beat non-callable “bullets” by 10-12 basis points (.10%-.12%), with an enormous upside if they ever get called, which is less than likely. In the mortgage-backed securities (MBS) space, attractive offerings are plentiful. One generic example: Seasoned 20-year pools with 2.0% coupons have been available around 89 cents on the dollar and will have around 30 basis points more yield than the discount callable mentioned above. As mentioned in this space before, there is now an unusually wide range of coupons and prices in the secondary market, so investors can pick and choose their favorite risk/reward profile. DELAYED RESPONSE As the comments from the Fed members so far in 2024 have pushed back the expectations of actual rate cuts into the future, so have market rates risen modestly this year. At the time of this writing, the treasury curve has added around 40 basis points (.40%) across the maturity spectrum. What this means for buyers is that there is still additional incentive to layer in some purchases into what seems to be the waning periods before a secular shift in the economic cycle. Unless, of course, the strength of the American consumer keeps producing “three” handles in triplicate. In this case, the long-anticipated recession would be on indefinite hiatus, and significant rate cuts a conversation for future periods. And that is something you perhaps haven’t heard before. Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. INDEPENDENT REPORT | 21
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THE VALUE OF REIMAGINING COMMERCIAL PAYMENTS With the value of business-to-business (B2B) payments expected to rise substantially over the next few years, ramping up commercial payments could provide a substantial revenue source for community banks. Though financial institutions have long viewed commercial payments largely as an expense, changing market conditions and a major increase in B2B activity position them to be a significant revenue source. According to data from Research and Markets, global B2B payments totaled just over $88T in 2022 and are expected to climb to more than $111T in 2027, a 26% increase fueled largely by inflation and economic growth within developing markets. By 2027, the average business is expected to make more than 1.4K domestic payments each year. If community banks want to capture this business, now is the time to begin addressing the things business customers are seeking in commercial payment services. Time is of the essence, particularly since fintechs and other nontraditional banks have already begun aggressively courting this business and siphoning off customers. LEVERAGING LOYALTY AND VALUE-ADDED SERVICES According to Accenture, 55% of traditional financial institutions that provide commercial payments say they have lost business to fintechs and major technology providers offering the same services. If community banks don’t take steps to remain competitive on this front, that trend is only likely to continue. Research from Accenture found that four out of 10 customers who use commercial payment services would be willing to switch to a new provider whose offerings include value-added services. Fortunately for community banks, Accenture also found that 51% of businesses would prefer to access value-added services such as credit checks, closed-loop transactions and data dashboards from traditional banks, with that number rising to just shy of 60% for features such as real-time payments and bill payments. In fact, Accenture predicts value-added services are an untapped value proposition for payment providers that could be worth $371B by 2028. Capturing that business necessitates implementing the changes needed to remain competitive now. TARGETED TECHNOLOGY Some strategic moves that can help community banks enact meaningful change in their B2B payment offerings include upgrading legacy platforms and core systems, utilizing developing technologies such as artificial intelligence, tailoring offerings to individual business customers and partnering with third parties to expand their services. As banks begin reimagining their commercial payments, there are a few things they should keep in mind, including the following: • One-stop banking: More than 80% of business customers would prefer to use a single institution for their payment services to manage costs. As of now, however, many businesses feel they are forced to use multiple providers to find everything they are looking for. Community banks have the opportunity to fill this void by identifying and adding the services business customers value most but are currently lacking within their own commercial payment offerings. By Matt Helsing SVP & Northwest Regional Manager, PCBB, ICBC Associate Member INDEPENDENT REPORT | 23
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