SEPTEMBER/OCTOBER BUILDING ON THE PAST, BANKING ON THE FUTURE. A PUBLICATION OF THE INDEPENDENT COMMUNITY BANKERS OF COLORADO INVESTING FOR THE NEXT RATE CYCLE MASTERING INFORMATION CHAOS
©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 W. Coal Mine Ave., #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 Mark Sheeley, 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 2 | INDEPENDENT REPORT
26 CONTENTS 10 20 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 5 4 Support the ICBC’s Associate Members! FLOURISH 6 Remaining Nimble Against a Litany of Regulation By Rebeca Romero Rainey, President and CEO, ICBA 7 ICBC Preferred Providers ASSOCIATE MEMBER SPOTLIGHT 8 Getting to Know Karen Witt of Lewis Roca Rothgerber Christie FROM THE TOP 9 Getting Comfortable With Fintechs By Lucas White, Chairman, ICBA, President of The Fountain Trust Company 10 Mastering Information Chaos How Enterprise Content and Information Management (ECM/EIM) Platforms Empower Banks To Overcome Data Overload and Drive Innovation By Cameron Marks, Director, Product Management, Alogent, ICBC Associate Member 13 Easing Into the Fall At Long Last, Some Rate Relief By Jim Reber, President and CEO, ICBA Securities, ICBC Preferred Provider and ICBC Associate Member 14 How the SBA 504 Loan Can Help Your Bank Compete on Interest Rates By Jessica Stutz, Lending Director, B:Side Capital, ICBC Associate Member 15 ATM Terminal Security By Levi Daily, CTO, Cook Solutions Group Inc., ICBC Associate Member 16 Welcome New Associate Member 17 Transforming Lending The Role Borrower Portals Can Play in Community Banking Growth By Gerald Leveritt, Director of Enterprise Solutions, FileInvite, ICBC Associate Member 18 6 Strategies To Boost Deposits By Matt Helsing, SVP & Northwest Regional Manager, PCBB, ICBC Associate Member 20 Q2 2024 Compliance Updates for Financial Institutions By Troy Snyder, Brad Birkholz, Peyton Lydigsen, Andrea Pech and Shawn McGuffin, Plante Moran, ICBC Silver Associate Member 23 Forbearance Agreements: Best Practices By Scott C. Sandberg, Partner, Spencer Fane LLP, ICBC Associate Member 24 Congratulations, GSBC Graduates! 25 Leveraging PPC Advertising For Banks By Jennie Brady, Director of Creative Solutions, Spry, ICBC Associate Member 26 Investing for the Next Rate Cycle By Dale Sheller, Associate Partner/Director of FSG, The Baker Group, ICBC Associate Member INDEPENDENT REPORT | 3
SUPPORT THE ICBC’S ASSOCIATE MEMBERS! ACCOUNTING | COMPLIANCE CroweLLP. . . . . . . . . . . . . . . . . . . (303)831‑5023 Eide Bailly LLP (303) 770‑5700 Fortner Bayens PC . . . . . . . . . . . . . . . . (303) 296‑6033 Forvis Mazars . . . . . . . . . . . . . . . . . (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 CONSULTING | HUMAN RESOURCES AND MANAGEMENT | MARKETING | STRATEGIC PLANNING Bank Strategies LLC (303) 291‑3700 (A Bankers’ Bank of the West Bancorp Inc. Subsidiary) Blendification (970) 274‑1723 CD Construction Consulting . . . . . . . . . . . . (720) 701‑2122 Expert Business Development . . . . . . . . . . . (610) 771‑2121 *ICBA CRA Solutions . . . . . . . . . . . . . . (877) 232-0859 *ICI Consulting Inc. . . . . . . . . . . . . . . . (316) 201‑8590 The James Paul Group (877) 584‑6468 MJCPartners . . . . . . . . . . . . . . . . . . (213)278‑0429 The NaviTrust Group . . . . . . . . . . . . . . . (801) 438-1842 Piper Sandler & Co. . . . . . . . . . . . . . . . (415) 978‑5057 *S&P Global . . . . . . . . . . . . . . . . . . (434) 951‑6948 CORRESPONDENT BANKING SERVICE *Bankers’ Bank of the West . . . . . . . . . . . (303) 291‑3700 BellBank.. .. .. .. .. .. .. .. .. .. (701)371‑3355 Citizens Bank Farmington . . . . . . . . . . . . (505) 599‑0100 INTRUSTBank . . . . . . . . . . . . . . . . . (800)732‑5120 PCBB.. .. .. .. .. .. .. .. .. .. .(888)399‑1930 TIB — The Independent BankersBank (972) 650‑6000 CYBERSECURITY | IT CONSULTING AND SERVICES | COMPUTER PRODUCTS Alogent (719) 583‑8004 Botdoc.. .. .. .. .. .. .. .. .. .. .(719)960-4475 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 FileInvite. . . . . . . . . . . . . . . . . . . . (719)771-3586 *SBS CyberSecurity . . . . . . . . . . . . . . .(785) 594‑0503 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 FPSGOLD. . . . . . . . . . . . . . . . . . . .(801)201‑2525 *IBT (512) 606‑1100 *ICBA Bancard / TCM Bank . . . . . . . . . . . (800) 242‑4770 Jack Henry & Associates . . . . . . . . . . . . . (417) 235‑6652 SHAZAM.. .. .. .. .. .. .. .. .. ..(515)288‑2828 VisaInc... .. .. .. .. .. .. .. .. ..(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 Institutional Network*** . . . . . (954) 263‑6399 Citizens Bank Farmington . . . . . . . . . . . . .(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 Performance Trust Capital Partners . . . . . . . . (312) 521-1000 Preferred Lending Partners . . . . . . . . . . . . (303) 861-4100 West Gate Bank Mortgage . . . . . . . . . . . . (402) 434‑4116 LEGAL SERVICES Arnold & Porter (303) 863‑1000 Coan, Payton & Payne LLP . . . . . . . . . . . . (303) 861‑8888 Godfrey Law Group LLC . . . . . . . . . . . . . (303) 802‑6336 Hoffman Nies Dave & Meyer LLP** . . . . . . . . (303) 860‑7140 León Cosgrove Jiménez LLP . . . . . . . . . . . . (720) 689‑7749 Lewis Roca LLP** (303) 623‑9000 Markus Williams Young & Hunsicker LLC (303) 830‑0800 Otteson Shapiro LLP** (ICBC Counsel) . . . . . . . (720) 488‑0220 Spencer Fane LLP . . . . . . . . . . . . . . . (303) 839‑3838 StinsonLLP . . . . . . . . . . . . . . . . . . (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
bbwest.com 800-873-4722 |offices in Denver and Lincoln | Member FDIC Equal Housing Lender we champion community banking Proud Legacy Sponsor of ICBC and supporter of Colorado community banks for 40+ years! Bankers’ Bank of the West • Independent loan review • Loan and credit administration consultation • Strategic planning facilitation • Management, staffing, & succession planning • Acquisition & expansion • BSA/AML compliance • Regulatory risk consultation • Consulting • Phishing Tests • Vulnerability Management • Security Monitoring Cyber/information security, strategic planning, independent loan review, AND MORE. Consulting Services • Bank Stock Loans • Loan Participations • ATM/Debit • International Services • Cash Management • Securities Safekeeping • Merchant Services $ 8.6B assets under management $ 1.9B daily transaction value processed/settled Serving more than 60% of community banks across 7 states Where community banks bank Banking Services
Flexibility: It’s one of the characteristics that sets our community banks apart, enabling us to meet the needs of distinct communities in unique ways. However, the converse of flexibility is rigidity, and unfortunately, regulation fits that definition and hampers the ability of community banks to meet the individual needs of our communities. The more than 7,000 pages of new regulations that have been thrust upon us over the past year enforce a one-size-fits-all approach to banking. Not only do community banks need to ingest and decipher new guidance and then apply it to their business operations; they also must consider halting certain actions or offerings for fear of running afoul of a new regulatory model or requirement. In the end, it is the consumer and small-business owner who lose out because of it. That’s why ICBA continues to fight for tiered regulation. It’s not about trying to buck guidance, but rather seeking to ensure appropriate regulation that provides suitable safeguards while retaining flexibility. Proportionate regulation will allow community banks to continue their strong record of safety, soundness and adherence to compliance standards, while enabling the nimbleness necessary to serve their communities. Fortunately, opportunities exist for us to demonstrate the importance of tiered regulation. Consider the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review process. This effort offers a way for bankers to identify where regulatory burden is disproportionate to the cost of its management, and it opens the opportunity to say, “Here are areas that are impacting our ability to serve our customers.” Whether derived from a regulation’s implementation costs or adverse effect on customers, we must continue to serve up examples so policymakers understand the downstream implications of regulations. So, keep sharing your stories with us as we keep you informed about the EGRPRA process through NewsWatch Today and our social media channels. As you read this issue, I also encourage you to think not just about the cost of compliance in your bank, but how one-size-fits-all constraints negatively affect your ability to serve your communities. Share that feedback with ICBA and your regulators because your voice matters. We continue to see examples of new rules that include exemptions for community banks to allow for greater flexibility, precisely because we have effectively demonstrated the negative impacts of excessive regulatory burden. As we look to the future, we intend to build upon that solid foundation and seek out tiered regulation, one nimble step at a time. IT’S NOT ABOUT TRYING TO BUCK GUIDANCE, BUT RATHER SEEKING TO ENSURE APPROPRIATE REGULATION THAT PROVIDES SUITABLE SAFEGUARDS WHILE RETAINING FLEXIBILITY. FLOURISH Remaining Nimble Against a Litany of Regulation By Rebeca Romero Rainey President and CEO, ICBA 6 | INDEPENDENT REPORT
ICBC PREFERRED PROVIDERS 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: 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: TRACTM — Cybersecurity risk management software; Cyber-RISKTM — 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. 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. INDEPENDENT REPORT | 7
Associate Member Spotlight Getting to Know Karen Witt of Lewis Roca Rothgerber Christie As part of our ongoing series, we spotlight one of our associate members in each issue of the magazine. In this issue, we are getting to know Karen Witt of our long-time associate member, Lewis Roca Rothgerber Christie. Tell us a little bit about yourself and what you do at your law firm. I am a banking lawyer and have been with my firm since the late 1980s when I was in law school. I’m co-chair of our banking industry services group and provide legal services related to securities matters, including offerings, repurchases, tender offers, securities purchase agreements and shareholder ownership issues. I also handle bank merger and acquisition transactions and help form new subsidiaries for banks to expand the type of activities they provide to customers. These matters typically have regulatory components, so I am regularly in contact with federal and state bank regulators. That’s just a little bit of what I do to assist bank directors, officers and shareholders. How have things changed since you started practicing law? Technology has greatly changed how I perform my day-to-day work. The beginning of my career dates back to not quite the mimeograph stage, but there were no such things as emails or cell phones, and computers were large, basic word processors. Transactions were usually closed in person or, on rare occasion, by overnight courier as wet signatures were required versus DocuSign nowadays. Technology has greatly increased the efficiency of providing legal services. One thing that has not changed is the bankers, which is one reason I find my legal practice extremely satisfying. Bankers are just great people to work with on legal issues. I’ve worked with some bankers for decades, and others I’m meeting for the first time, but I really enjoy partnering with them to anticipate, address and resolve legal matters. What makes your law firm unique? Our law firm has been representing banks for more than 100 years, with some name changes during that time. We currently have about 230 attorneys in eight offices throughout the western and southwestern states, and our attorneys are licensed in most states throughout the U.S. Almost all of my clients are banks, financial institutions and bank holding companies and, together with the other attorneys in my firm’s financial institutions industry group, we have someone who can assist when a banker calls with a legal issue. Why is being a member of ICBC important to you and your firm? Our firm is very pleased to have been an associate member of ICBC for many years. Supporting community banks of all sizes is very important to us, and that’s what ICBC does: provide support to, and advocate for, community banks. Community banks are vital to the communities in which they operate. When you go on LinkedIn, for instance, you can see all the activities that ICBC member banks are doing in their communities and how they’re giving back. Community banks regularly put teams together to do volunteer work in their communities and provide funding to special projects. Community banks are also a valuable resource for financial education, whether they are located in rural or urban areas. My children opened accounts at community banks when very young, progressed to credit cards during school, and now my son is in the process of getting his first car loan. What is one fun fact that people don’t know about you? I worked for a small community bank in Lincoln, Nebraska, all through college. I was a teller part-time during the school year and full-time during summers. This was back in the days when you had to manually crank the drive-through drawer out to the cars and back. We gave out lollipops to the children and dog bones if any furry friends were in the car. So that was my first very positive experience with community banks. 8 | INDEPENDENT REPORT
When I first got involved with ICBA’s ThinkTECH Accelerator, I must admit that I believed fintechs were scary. However, what I learned is that “fintech” is a buzzword. Fintech companies are not necessarily different from other solution providers. The “fintech” title serves as a way to designate an innovative company. And don’t we all want modern partners for our banks? So, before I knew it, I was engaging with fintechs at my bank. We do business with two Accelerator alums: BotDoc and Beauceron Security. With BotDoc, we moved from a clunky, secure mail product no one wanted to use to a simple solution that is seamless for both our staff and our customers. Then, Beauceron helped us upgrade our internal fraud-detection training. Both are “fintechs,” and both provide first-class, innovative solutions that meet our needs. We have always tried to do things differently at my community bank, and with modern technology, we wanted to do it ourselves by creating and implementing solutions in-house. We prided ourselves on having the expertise on our team. But in today’s dynamic banking landscape, that perspective has shifted. As things get busier and we get bigger, we realized outsourcing certain functions can help greatly. But as we look for external partners, I depend upon my community bank colleagues to make recommendations. If I don’t know that a banker I trust uses a company, it’s unlikely that I would use it. That’s where ICBA steps in. We can rely on their due diligence to know we’re collaborating with a legitimate company. Any of the providers in ICBA’s Solutions Directory offer peace of mind; community banks know they are vetted by ICBA and can have an initial level of comfort with them. With fintechs, the more you get involved, the more you learn. There’s a whole continuum of fintechs out there that support community bank needs, and you can start by making minor changes before you dive into bigger solutions. So, as you look at your budgets, what’s next for your bank and where you want to go, I encourage you to consider attending — virtually or in person — ICBA’s ThinkTECH Accelerator to get a sense for what’s out there. I can assure you that even if you decide not to employ a fintech solution, it’s worth the time to see what’s possible. It will blow your socks off to see what’s available for community banks. At the very least, your views on what the term “fintech” means will change for the better and open doors to new opportunities. FROM THE TOP TOP 3 TRAVEL ACCESSORIES Here are my must-haves for travel season: 1. AirPods for quiet. 2. iPad for working. 3. Magazine for reading. Getting Comfortable With Fintechs By Lucas White, Chairman, ICBA President of The Fountain Trust Company INDEPENDENT REPORT | 9
MASTERING INFORMATION CHAOS How Enterprise Content and Information Management (ECM/EIM) Platforms Empower Banks To Overcome Data Overload and Drive Innovation By Cameron Marks, Director Product Management, Alogent, ICBC Associate Member In today’s digital age, data is often hailed as the new currency. However, this surge in data production has given rise to a new challenge: information chaos. This phenomenon creates the daunting task of managing both physical and digital data from diverse sources, especially with the reliance on paper-based processes despite the goal of electronic workflows. As a result, banks and credit unions must navigate a landscape where information overload, fragmented data sources and disparate data formats reign supreme. The consequences of improper data management can be dire, exposing privacy breaches that can extend far beyond financial losses, but eroding account holder trust and loyalty, tarnishing reputations and jeopardizing long-term viability in today’s competitive market. A core piece of the solution lies in comprehensive enterprise content and information management (ECM/EIM) platforms, which offer a holistic approach to information governance, inclusive of document capture, storage, retrieval, retention and disposal/purge. Central to the capabilities of today’s ECM/EIM platforms are their ability to tackle data chaos head-on, boost privacy measures and gain the flexibility to allocate resources as needed while simultaneously ensuring business intelligence is readily available. This approach not only reinforces risk mitigation, but also paves the way for a forward-thinking product strategy, with the following benefits: Centralized Repository: Digitizing content into a centralized repository enables easy access and efficient management of institutional and account holder documents, regardless of format. This consolidated approach minimizes the risk of data fragmentation and duplication, ensuring information is stored securely in a single location. Advanced Indexing and Categorization: Intelligent document classification techniques help to organize data effectively and without manual interaction. Metadata tags, or data that provides information about other data, are assigned to each document, allowing for quick and accurate search and retrieval based on key attributes. Users can easily locate the information they need, increasing productivity. Institution-Wide Business Insights: Financial institutions often hold a great deal of account holder information. Robust content management solutions enable banks and credit unions to access trapped 10 | INDEPENDENT REPORT
AS FINANCIAL INSTITUTIONS FACE DATA INUNDATING THEIR OPERATIONS, IT’S ESSENTIAL TO ACKNOWLEDGE THAT INFORMATION VOLUMES ARE EXPANDING EXPONENTIALLY AND BECOMING INCREASINGLY MORE DIVERSE IN NATURE. intelligence within these documents to create more personalized offerings based on trends and intelligence found within. Compliance and Quality Control: Retention policies can be configured based on a predefined criteria for each document class, ensuring document retention is according to institutional policy. Access controls and security groups also allow administrators to define user permissions and restrict access to sensitive documents, ensuring compliance with privacy regulations and improvements over manual tracking and traditional spreadsheets. As financial institutions face data inundating their operations, it’s essential to acknowledge that information volumes are expanding exponentially and becoming increasingly more diverse in nature. Having a robust ECM/EIM solution in place positions banks and credit unions to navigate the challenges of managing varying document types with ease and puts in a structured yet flexible framework that’s able to adapt to the ever-changing data landscape. With the right tools and strategies in place, institutions can harness their potential to drive innovation, insights and growth. FASTdocs, Alogent’s flagship enterprise content and information management suite, offers a tailored solution designed specifically for the demands of banks and credit unions, ensuring operational efficiency with limitless scalability. Scan the QR code to learn more. https://www.alogent.com/process-automation/fastdocs?utm_ campaign=ICBC%20Newsletter&utm_source=September%20 Newsletter&utm_medium=email&utm_content=fastdocs INDEPENDENT REPORT | 11
Available On Or Visit COMMUNITY.ICBA.ORG The national network for community bankers A new ICBA member benefit, this is the only national professional network developed for community bankers like yourself. Connect with your peers, stay up to date, and shape the future of community banking. Introduce yourself to ICBA Community today. MAR_1582A23
EASING INTO THE FALL At Long Last, Some Rate Relief By Jim Reber, President and CEO ICBA Securities, ICBC Preferred Provider and ICBC Associate Member I don’t know about you, but I’ve always looked forward to the early days of autumn. I’m of a certain vintage that remembers when September and October ushered in a break from summer heat (which seems to be later in the calendar these days), and there was a certain excitement around the back-to-school activities. Football fans eagerly await gridiron season, which is now in full swing, and baseball playoffs make their return. And this for 2024: rate cuts by the Fed! It’s been a while, but the tightening cycle that started in early 2022 has finally run its course. It appears the price stability mandate has been met sufficiently for the focus to turn to maximum employment. The rate cut in September marks the first time in 4.5 years that the target rate of fed funds has dropped. This adds still more anticipation for an exciting fall. IS YOUR BANK READY? But maybe we’re getting ahead of ourselves. Let’s first take stock of where most depositories stand as the fourth quarter of 2024 begins. Earnings will not be a record for the community banking industry this year, as margin pressure has taken the froth off bottom lines. Some positives are that credit quality remains outstanding despite some headline warnings. A lot of the consumer/auto/ credit card delinquencies, which are on the rise, seem more to be problems for non-banks. The fear of commercial real estate’s market breakdown hasn’t happened yet either. Another piece of the earnings puzzle is interest rate risk. Community bankers have told me on many occasions since 2022 they’ve had to get current, informed and creative about managing their liabilities, which they admit had been on autopilot for years. Suddenly at the same time the Fed was hiking at its fastest pace in over 40 years, depositors were demanding higher rates, or even worse, moving to non-bank alternatives. Collectively, the industry shifted from being very asset sensitive to about neutral between 2020 and today. WHAT’S NEXT? So earnings are, well, meh, but delinquencies are still very low, and we think rate risk is under control. What to do about all this? If the bond market and the Fed are to be believed, and I’m not saying they are, we will finally see the interest rate curve assume a positive slope. And that’s when the fun should really kick in. But (there’s always a “but” in these columns) be warned: Multiple rate cuts, and a normal yield curve, will probably have less upside this time around for community banks, at least initially. In a “bull steepener,” which is what we’re likely to experience, short rates fall, and longer rates fall less or longer rates rise. Either way, since most community banks’ portfolio’s effective durations are longer than normal, the price appreciation of your current bonds may not be what you’re hoping for. (To put some numbers on it, a typical bank’s duration is now about 4.3 years, versus about 2.5 years back in 2020 according to Stifel). THINGS LOOKING UP In spite of the buzzkill of the previous section, a community bank’s universe just performs better when short rates are below long ones. Regardless of which part of the balance sheet you’re responsible for, it’s easier to price in relative risk/reward. For well over a year, the highest-yielding bank-suitable bonds have been CMO (collateralized mortgage obligation) monthly floaters. That’s fun for a while, but that’s not how financial instruments are supposed to work longer-term. Lower risk (i.e., lower duration) is supposed to produce lower yields. I also suspect that “betas” for community bank deposits will be friendly into 2025. Interest rate models weren’t built for 2022-23, in which overnight rates spiked 525 basis points (5.25%) in just 16 months. The initial bulge in net interest margins (NIMs) started to shrink early in 2023, and are now about where they were before the tightening cycle began. From conversations I’ve had with community bankers, anecdotally and otherwise, cost of funds should begin to retreat. Deposit managers have demonstrated their ability to manage NIMs through plenty of rate cycles, and rate shocks, and I see no reason to doubt their capabilities now. The big picture is the industry has held up remarkably well through a generation-high interest rate environment, that resulted from Fed tightening activity, and inflation, that most of today’s community bankers have never managed through. I’m looking forward to the return of a number of fourth-quarter traditions in 2024: sweatshirts, football, leaves, crisp air and an interest rate environment that supports the community banking model. INDEPENDENT REPORT | 13
There are many advantages to the SBA 504 loan program that can provide you with a competitive advantage and provide the best financing for your small business client. The SBA 504 loan program combines financing from a bank or other financial institution with financing from the SBA to allow for up to 90% financing on commercial real estate. The real estate must be 51% or more occupied by a small business operating company that is the borrower or guarantor on the loan. Key benefits include lower effective interest rates, long-term financing and fully fixed interest rates, with July 2024 rates as low as 6.206%. This program can help offer small business clients a lower effective interest rate compared to conventional or SBA 7(a) rates, which is particularly useful in a competitive financing environment. LOWER EFFECTIVE INTEREST RATES • Many borrowers are very rate sensitive as rates have increased from 2020 and 2021 levels. • In addition, for many owner-occupied commercial real estate financing requests, there can be several financial institutions competing for the same deal. • Using the 504 loan program may help you offer the small business client a lower effective interest rate than your institution’s conventional or SBA 7(a) rates would allow for. For example, let’s say your institution can offer an interest rate of 7.30% for owner occupied commercial real estate. Considering a property purchase price of $2,500,000, your loan to the borrower would be $1,250,000 at 7.30%. The SBA 504 loan would be $1,000,000, assuming 10% equity of $250,000. After SBA fees, the gross SBA 504 loan will be $1,027,000. If you use the SBA 504 loan program, you can offer the client an overall effective interest rate of 6.807%. HOW THE SBA 504 LOAN CAN HELP YOUR BANK COMPETE ON INTEREST RATES By Jessica Stutz, Lending Director B:Side Capital, ICBC Associate Member FIXED INTEREST RATE • The 504 portion of financing has a fixed interest rate for the entire, fully amortizing term. • The interest rate never changes on the 504 portion. • This fixed rate provides payment certainty for the small business owner. LONGER REPAYMENT TERMS • The 504 loan program can offer a loan term up to 25 years. A 20-year or 10-year SBA 504 loan are other options. • The bank portion of the financing typically has an amortization matching the 504 term/amortization, but can have a term as short as 10 years. • Longer repayment terms mean lower monthly payments, which can improve cash flow and reduce the overall cost of borrowing. By spreading the loan payments over a more extended period, the effective interest rate becomes lower, easing the financial burden on small business owners. Want to compare if the SBA 504 or 7(a) loan is the best fit for your borrower? Check out our recent B:Side University Session at bsidecapital.org/ training-resources. Jessica Stutz is the lending director at B:Side Capital, a Denver-based, mission-driven organization dedicated to the success of small businesses, leveraging decades of experience, expertise and a commitment to excellence. Her daily joy is working with an amazing team of SBA experts who provide access to SBA capital. B:Side Capital provides SBA 504 and direct loans to small businesses in Colorado, Utah, New Mexico and Arizona, as well as lender support to SBA 7(a) lenders nationwide. SBA 504 FINANCING STRUCTURE % $ Bank’s Conventional Loan 50% $1,250,000 Net SBA 504 Loan Proceeds 40% $1,000,000 Borrower’s Equity 10% $250,000 Total Project Costs 100% $2,500,000 DEBT SERVICE: BANK LOAN Bank’s Conventional Loan $1,250,000 Amortization (in months — estimated) 300 Interest Rate (estimated) 7.300% Monthly Payment (estimated) $9,075.39 DEBT SERVICE: SBA 504 LOAN SBA 504 Gross Debenture Amount $1,027,000 Term/Amortization (in months) 300 Effective Interest Rate (July 2024) 6.206% Monthly Payment (estimated) $6,746.90 TOTAL DEBT SERVICE: BANK + SBA LOAN Bank Conventional Loan $9,075.39 SBA 504 Loan (2nd Deed of Trust) $6,746.90 Combined Monthly Payment $15,822.29 Combined Interest Rate (estimated) 6.807% SBA 504 PROJECT EXAMPLE 14 | INDEPENDENT REPORT
ATM TERMINAL SECURITY By Levi Daily, CTO Cook Solutions Group Inc., ICBC Associate Member There has been a recent uptick in ATM attacks across the United States, particularly in multiple western states. In many of these attacks, criminals have utilized never-before-seen ATM skimming devices and new methods. In an era where digital transactions are omnipresent, ATM and ITM terminals have become prime targets for sophisticated criminal activities. Fraudulent schemes, including skimming, phishing, physical attacks and software hacking, are on the rise, posing significant threats to the security of financial transactions and personal data. The complexity and variability of these threats demand a security solution that is not only comprehensive, but also adaptable to the evolving landscape of financial crime. There are new and unique approaches against multiple types of ATM fraud. New strategies extend beyond traditional surveillance, incorporating real-time monitoring, intelligent analytics and proactive threat detection. The best approach is based on a layered security strategy that addresses various vulnerabilities, including: • Hook & Chain, Physical Attacks: Fortify terminals against brute force attacks aiming to extract cash. • Reg E Claims: Support compliance with Regulation E by providing evidence and transaction verification to resolve disputes. • Software Vulnerabilities: Utilize AI-based Endpoint Security to shield the ATM operating system from malware and other cyber threats. • Data Compliance: Ensure the confidentiality and integrity of data stored on terminal hard drives using hard drive encryption. • Card Skimming, Deep Insert and Cash Harvesting: Prevent unauthorized data capture and cash removal from terminals. • Terminal Jackpotting: Guard against unauthorized software manipulation aiming to dispense cash fraudulently. • Cash Dispensing and Cash Trapping: Secure dispensing mechanisms from tampering and unauthorized cash-trapping devices. • Transaction Reversal Fraud (TRF): Protect against manipulation techniques that reverse transactions to withdraw cash. • Man-in-the-Middle (MITM) Attacks: By placing a device between the ATM and the host, attackers pursue objectives such as interception, eavesdropping, modification and impersonation. There are even new cellular options available for remote sites and kiosks with secure VPNs. With today’s technology, ATM screen recording, strategic surveillance using overhead and ATM cameras, along with a dedicated cash dispensing camera, collaborate seamlessly to offer robust protection and valuable insights. With ATM fraud up nearly 100%, this problem isn’t going away. The laundry list of types of ATM/ITM fraud above continues to happen across the U.S. and by using new technology, automation, object detection and more, banks can protect themselves with a layered approach. INDEPENDENT REPORT | 15
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TRANSFORMING LENDING The Role Borrower Portals Can Play in Community Banking Growth By Gerald Leveritt, Director of Enterprise Solutions FileInvite, ICBC Associate Member A generation ago, obtaining a commercial loan was a lengthy process involving multiple in-person meetings, extensive paperwork and long waits. Today, the commercial lending landscape has been revolutionized by technology, making the process smoother, more collaborative and less confusing. For example, lending software can reduce processing times by up to 40%, offering significant efficiency gains for you and your customers. One key technology driving this transformation is the borrower portal — an online platform where borrowers can securely provide required documentation, apply for loans, track their status and manage applications. With nearly 89% of U.S. bank account holders using mobile or online banking, borrower portals are becoming essential. The goals of borrower portals are twofold: improving efficiency for lenders through reduced workloads and enhanced productivity and improving the customer experience by making the loan process more user-friendly. Below, we explore three of the most important components of a borrower-friendly portal: 1. Collaborative communication. 2. Seamless customer onboarding. 3. Reduced cybersecurity risks. COLLABORATIVE COMMUNICATION For community banks, a borrower portal is essential for secure and efficient communication with borrowers. In commercial lending, where financial information is frequently exchanged, the portal provides a safe, encrypted space, reducing the risks associated with unsecured emails. This centralized communication hub streamlines the loan process, eliminating the need for phone tag and messy email threads. With digital communication becoming the norm, especially among younger borrowers, a borrower portal meets the growing demand for secure, convenient digital interactions, enhancing the overall experience for both lenders and borrowers. SEAMLESS ONBOARDING Onboarding is a pivotal stage in commercial lending for community banks, setting the foundation for the lender-borrower relationship and ensuring accurate information collection. A user-friendly borrower portal can significantly enhance this process by removing potential frustrations and making the experience smoother for borrowers. For community banks, a well-designed portal simplifies the onboarding process by providing clear instructions and guiding borrowers through each step. This not only improves the borrower’s experience but also reduces the administrative burden on the bank, streamlining the traditionally complex task of gathering and managing documentation, ultimately saving time and resources. REDUCED RISKS Borrower portal security is paramount. The portal must protect sensitive information from unauthorized access, with no intercepted communications or unencrypted data. Encryption is crucial, scrambling data so that only authorized users can access it. As cyberattacks increase, encryption helps shield your bank from these threats. While it’s not foolproof, when combined with multi-factor authentication, it adds a vital layer of security, safeguarding borrower data and maintaining trust in your bank’s digital services. THE POWER OF BORROWER PORTALS By integrating borrower portals, community banks can streamline processes, enhance customer experiences and fortify security measures. Truly friendly portals do not only simplify communication and onboarding but also provide the robust protection necessary in today’s cybersecurity landscape. Embracing such technology is essential for staying competitive, improving efficiency and building stronger relationships with borrowers. INDEPENDENT REPORT | 17
Community banks have been looking for the perfect recipe to attract deposits in a market in which consumers and commercial customers continue to switch institutions in search of better rates. Over the past few years, high interest rates combined with bank failures and accompanying wariness have driven customers to seek better returns on their investments. Despite many financial institutions raising the rates on their deposits to attract and retain customers, deposit rates have been slow to catch up with yields on alternative investments, such as certificates of deposit (CDs) and money market funds. In April of 2023, $1.1 trillion in deposits left U.S. financial institutions. Since then, deposits have started to climb slowly and are set to grow in the second half of 2024. In this climate, growing healthy deposits has become the number one business challenge for bankers, according to BAI’s 2024 Banking Outlook. The strategies to do so vary depending on the type of deposit growth you are seeking. While rates and fees associated with deposits matter greatly, other strategies become key to driving growth once rates are within an acceptable range. We explore three key strategies for both consumer and business deposit growth that have proven successful. STRATEGIES TO ATTRACT CONSUMER DEPOSITS 1. Maximize the use of technology. A good online and mobile offering allows banks to increase their reach to audiences across the country. Moreover, coupled with a personal touch, it is a critical part of a slick customer service offering. Veritex, a Texas-based bank with $12.1 billion in assets, invested in technology to streamline its account opening process. They credit the new technology — and the extensive employee training program that went with it — for the $135 million spike in deposits in the first 90 days after launch. 2. Offer reward checking accounts. For many institutions, reward checking accounts have proven effective in boosting long-term deposits by 4%. Essentially, reward checking offers a high return, around 6%, on a portion of the deposit — perhaps the first $20,000 — in exchange for a minimum level of engagement, such as card usage, online banking usage and so on. Lower engagement leads to a lower rate, with the interest rate dropping on deposits over the initial $20,000. Overall, the 6% peak rate is appealing to customers. What’s more, due 6 STRATEGIES TO BOOST DEPOSITS By Matt Helsing, SVP & Northwest Regional Manager PCBB, ICBC Associate Member 18 | INDEPENDENT REPORT
to the nature of the product, customers are engaged and interact regularly with the institution, making them more likely to stay. 3. Consider promotions and offers. Many financial institutions are now offering free gifts to attract new deposits. Consultants say this can boost new account openings by more than 15%. Other institutions are foregoing the physical gift in favor of a cash bonus, the value of which is often linked to the amount deposited. However, whatever promotions and offers a bank might adopt to woo customers, excellent customer service is key to retaining them. STRATEGIES TO ATTRACT COMMERCIAL DEPOSITS 1. Explore niche markets. Expand your institution’s reach into niche markets to attract more commercial deposit customers and offer specialized services for those markets. For example, property management businesses could benefit from disbursement services and property management software integration. Homeowners Associations (HOAs) could use automated dues collection and detailed financial reporting tools. Healthcare providers could use secure patient billing and payment processing systems. 2. Institute conditional or incentivized deposit programs. Implement policies that require businesses to maintain deposit accounts, including their primary operating account, as a condition for securing a loan. This not only enhances liquidity, but also fosters a deeper relationship with those commercial business customers. Another option is incentivized deposit programs that may include bundled services to offer fee reduction perks or a limited-time deal on an earnings credit rate (ECR), for example. 3. Increase operating account support. Encourage business customers to grow their deposit accounts by providing services, tools and personalized support. Offering cash management services can help businesses manage their cash flow, forecast expenses and plan for growth. Assign dedicated relationship managers to provide personalized support and help businesses optimize their financial strategies. Growing deposits in a competitive and ever-changing market requires a blend of innovative technology, customer-focused strategies and personalized support. By implementing multiple strategies, community banks can effectively attract and retain both consumer and commercial deposits. To continue this discussion, or for more information, please contact Matt Helsing at mhelsing@pcbb.com. Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management services such as Settlement and Liquidity for the FedNow® Service, international services, lending solutions and risk management advisory services. INDEPENDENT REPORT | 19
q2 2024 COMPLIANCE UPDATES FOR FINANCIAL INSTITUTIONS By Troy Snyder, Brad Birkholz, Peyton Lydigsen, Andrea Pech and Shawn McGuffin Plante Moran, ICBC Silver Associate Member Our experts cover the top headlines each quarter to keep you apprised of regulatory compliance matters impacting community financial institutions. This quarter, we highlight several proposed rulemakings and other supervisory guidance to help navigate the current regulatory environment. ACCURACY PROBLEMS IN THE CREDIT REPORTING SYSTEM The Consumer Financial Protection Bureau (CFPB) issued an edition of Supervisory Highlights on April 8, 2024, that shared findings related to accuracy problems in the credit reporting system. The bureau found the following issues during recent examinations: • Consumer reporting companies failed to block or remove information related to identity theft and human trafficking. • Consumer reporting companies accepted information from unreliable furnishers. • Furnishers provided information to consumer reporting companies they knew was false. • Furnishers didn’t follow requirements to dispute investigations and identity theft. The consumer reporting companies and furnishers involved are taking corrective actions in response to the CFPB’s findings. ACTIONS TO COMBAT JUNK FEES CHARGED BY MORTGAGE SERVICERS The CFPB issued an edition of Supervisory Highlights on April 24, 2024, that shared recent examination findings regarding mortgage servicers. The bureau highlighted the following actions by mortgage servicers: • Charging illegal junk fees to consumers. • Sending deceptive notices to homeowners. • Violating loss mitigation rules that are designed to help struggling borrowers stay in their homes. • Missing deadlines to pay property tax and home insurance. The mortgage servicers involved are taking corrective actions, including changes to their policies and procedures. Refunds and remediations are being provided to homeowners for fee-related findings. THIRD-PARTY RISK MANAGEMENT PRACTICES The Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) collectively issued the “Interagency Guidance on Third-Party Relationships: Risk Management” (TPRM Guidance) on May 3, 2024. This guide supports community banks in managing risks presented by third-party relationships. 20 | INDEPENDENT REPORT
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