COMMUNITYBANKER THE OFFICIAL PUBLICATION OF THE MONTANA INDEPENDENT BANKERS ASSOCIATION SPRING 2023 MONTANA INDEPENDENT BANKERS Convention & Trade Show JULY 26–28, 2023 BIG SKY RESORT
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22 2023 MIB EXECUTIVE OFFICERS Tim Schreiber, President Farmers State Bank tims@farmersebank.com Loren Brown, Vice President Ascent Bank, Helena lbrown@ascentbank.com Amber Brown, Secretary Peoples Bank of Deer Lodge abrown@pbdl.net Clinton Gerst, Treasurer Bank of Bozeman cgerst@bankofbozeman.com Andrew West, Immediate Past President Eagle Bank, Polson awest@eaglebankmt.com Kenny Martin, ICBA State Director First Montana Bank, Helena kmartin@firstmontanabank.com 2023 MIB BOARD OF DIRECTORS Tom Christnacht First Security Bank of Deer Lodge Laura Clark Opportunity Bank, Helena Bill Coffee Stockman Bank, Miles City Daniel Day Bank of Montana, Missoula Shawn Dutton First Security Bank of Roundup Brice Kluth First State Bank of Shelby Scott Mizner American Bank, Bozeman Mike Moore Stockmens Bank, Cascade Joel Rosenberg Three Rivers Bank of Montana, Kalispell Phil Willett Pioneer Federal Savings and Loan, Dillon ASSOCIATE BOARD MEMBER Ryan Fritz Citizens Alliance Bank rfritz@citizensalliancebank.com MIB STAFF Jim Brown Executive Director Montana Independent Bankers jbrown@mibonline.org ©2023 Montana Independent Bankers | The newsLINK Group, LLC. All rights reserved. Community Banker is published four times each year by The newsLINK Group, LLC for the Montana Independent Bankers and is the official publication for this association. The information contained in this publication 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 as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Montana Independent Bankers, 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 advertised. Community Banker is a collective work, and as such, some articles are submitted by authors who are independent of the Montana Independent Bankers. While Community Banker encourages a first-print policy, in cases where this is not possible, 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. Montana Independent Bankers 1812 11th Ave. P.O. Box 4893 Helena, MT 59604-4893 406.449.7444 jbrown@mibonline.org mibonline.org 14 10 6 President’s Message Community Banks Are More Important Than Ever Tim Schreiber 8 Executive Director’s Message MIB Representing the Interests of Montana’s State-Chartered Community Banks James E. Brown, Esq. 10 Save the Date MIB 2023 Convention & Trade Show 12 From The Top By Brad M. Bolton, Chairman, ICBA 14 Flourish By Rebeca Romero Rainey, President and CEO, ICBA 16 Compliance Q&A Spring 2023 By Bill Showalter, Senior Consultant, Young & Associates, Inc. 18 Featured Associate Member Crescent Mortgage 19 2023 AG Conference 20 Beneficial Ownership 2.0 Rules Still Unclear for Financial Institutions By Katie Kennedy, CFE, CUCE, Senior Manager, Wipfli 22 How to Use Data to Drive Bank Growth By Charles Potts, Executive Vice President and Chief Innovation Officer, ICBA 24 2023 MIB Important Dates 26 Member News Bank of Montana Wins Prestigious Award CFPB Announces New Community Bank Council Members 28 Bank Training Webinars 29 2023 MIB Membership Directory 30 MIB Associate Member Resource Guide 31 MIB Associate Member Banks Contents SPRING 2023 4 Community Banker
The U.S. cannabis market is poised for substantial growth, with New Frontier Data estimating it to reach $72 billion annually by 2030. This growth is primarily driven by the legalization of adult-use cannabis programs in 21 states, including Montana, where annual legal sales are expected to grow from $335 million in 2022, the first year of legal adult-use sales, to $560 million by 2030. Lending is part of a holistic approach to providing banking services to the cannabis industry that helps financial institutions attract the best operators, build a strong book of deposits, and unlock higher yield earning assets. It is also an opportunity for banks to go beyond serving retailers and meet the demand for banking and lending by the broader wholesale market as well. The Shield Compliance Cannabis Lending Guide helps bankers navigate the compliance, reputational, and credit risks associated with cannabis operators and cannabis-related collateral, and unlock the financial rewards of this industry. Shield Compliance: A Leader in Cannabis Banking. Since its inception, Shield has partnered with more than 60 financial institutions and monitored 6.3 million transactions including nearly $30 billion in deposit volume. Year to date, Shield’s financial institution customers have earned $8.2 million in non-interest income from service charges, and as of March 31, 2023, have $865 million in deposit balances and $95.3 million in loans outstanding from over 4,800 CRBs representing more than 12,000 active cannabis licenses. Let Shield Compliance help your financial institution unlock the benefits of serving the legal cannabis industry. Shield Compliance transforms how financial institutions manage risk, comply with regulations, and address the operational demands of the legal cannabis industry. Compliance management for financial institution daily operations, including case management and automated reporting. Informed account application process for underwriting and onboarding cannabis business accounts. Compliant mobile payment and payroll solutions to reduce cash transaction dependency. info@shieldbanking.com (425) 276-8235 Earn the benefits of a compliant cannabis banking program with Shield Compliance. DOWNLOAD THE CANNABIS LENDING GUIDE: ShieldBanking.com/cannabis-lending-guide GET THE GUIDE TAP INTO THIS $72 BILLION DOLLAR OPPORTUNITY GAIN EARNING ASSETS WITH CANNABIS LENDING
AAs the snow melts and the days grow longer, the arrival of spring is often seen as a time of renewal and growth. Similarly, the recent meltdown of Silicon Valley Bank and Signature Bank can be viewed as a necessary step in the process of renewal and growth. The community banking industry can be seen as a breath of fresh air, offering a much different banking model that includes personalized service, a deep understanding of the unique needs of our customers, and a focus that is rooted in local relationships with a commitment to support the communities we serve. My message this month will focus on some of the efforts that our MIB board has made to get this word out as well as an exciting and timely national marketing campaign recently announced at ICBA Live in Honolulu to shine a light on the community banking industry. The meltdown of SVB and Signature Bank was a sudden shock to the banking system that received great attention nationally with all the bankers and ICBA staff at the ICBA Live convention in Honolulu (as the meltdown was happening) and in our local markets. To me, the biggest shockwaves were felt twice: first when the government announced it would step in to cover all uninsured deposits in those banks (it can be debated whether this was the right thing to do or not) and second when Secretary Yellen made her statement that uninsured deposits would only be covered if a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.” This second shockwave was the most rattling as a community banker in that it signaled to the nation’s largest depositors that their uninsured deposits would only be safe in banks that were deemed to be a “systemic risk,” in other words, a bank that was too-big-to-fail. It was this second shockwave that prompted several members of the MIB board to collectively draft a letter to Senators Tester and Daines. In that letter, we expressed our significant concern over Secretary Yellen’s damaging remarks. We also suggested that the FDIC may want to revise their ‘insurance’ to resemble more of an actual insurance product, one that would include a base coverage level for everyone but would also have an option for increased coverage limits with additional fees to those depositors over the base coverage. We will see how far that suggestion goes. At the same time all of this was happening, ICBA was unveiling their new “BankLocally.org” national marketing campaign to educate the American public on the benefits of community banking and why their choice of bank matters. The timing of this launch could not be more perfect. I am personally very excited about this as it goes hand-in-hand with the digital marketing campaign MIB ran statewide from May 2021 through April 2022 to promote community banking. I have connected with ICBA’s VP of Marketing to start COMMUNITY BANKS ARE MORE IMPORTANT THAN EVER TIM SCHREIBER, PRESIDENT, MIB PRESIDENT’S MESSAGE 6 Community Banker
Promoting community banking is crucial to the survival of the industry and all the individual banks it comprises. the conversation about how we as MIB can coordinate with their national campaign to rebrand it as “BankLocallyMontana.org” to specifically bring focus to our MIB member banks. In an effort to get the word out locally about community banking and the differences from large institutions, I drafted an op-ed piece that we will be pushing out to the print media throughout the state. The piece mentions, among other things, that deposits held in Montana community banks are backed by a model of generational local ownership, quality leadership, and measured lending and investment practices. It discusses how community banks should be exempt from restoring losses to the Deposit Insurance Fund caused by a culture of “too-big-to-fail.” It also points out that there is no need for new regulatory burdens to be imposed on banks that have not contributed to the issues. It emphasizes that local community banks and their customers should not have to pay for the miscalculations and speculative practices of large financial institutions. There has been a lot happening in our industry in the past few months, events I feel could be a fantastic opportunity for our state’s local community banks if we act. As such, I highly recommend you check out the ICBA marketing website at https://ICBA.org/national-campaign to gain more insight into this national marketing endeavor as well as to gain access to their toolkit, business insights, market research, and customizable marketing assets. Promoting community banking is crucial to the survival of the industry and all the individual banks it comprises. The disappointing response to these devastating events can only be reframed into an opportunity for renewal and growth if we here at the local level meet that call for outreach and evolution. I stand committed to answer the call. Will you join me? Member FDIC 38368 Whether your loan is large or small, get faster turnaround from our experienced correspondent team. Whatever Loan Amount You’re Looking For, We Can Help. Partner with Bell for: • Purchase and selling of participation loans • Bank stock and ownership loans • Holding company loans and lines of credit • Reg. O loans to bank employees, insiders or directors Craig McCandless Call me at 406.850.3790 Based in Billings, Mont. Serving, Montana, Wyoming and Idaho mibonline.org 7
W EXECUTIVE DIRECTOR’S MESSAGE Welcome to the 2023 MIB Annual Convention and Tradeshow issue of the Community Banker magazine. I am writing this article on a beautiful March bluebird day in Montana, one day after the Spring equinox in the Northern Hemisphere. March is always one of my favorite months. This is due to the fact that one day it can be snowing, and the next, it can be 50 degrees and sunny. And, to be able to say, “spring has sprung” is a welcomed opportunity after experiencing another very wintery weather season. The winter months were busy ones for the MIB. In January, the 2023 Montana Legislature convened. As always, the association has been up “On the Hill,” representing Montana’s community banking interests. The association has strongly supported the Division of Banking’s budget. I am pleased to write that the Division’s budget has had smooth sailing. Further, the association has been able to successfully fend off the majority of bills that, if enacted, would do harm to Montana’s community banking industry. At the same time, the association provided its full support to House Bill 371, sponsored by former MIB Board Member Kenny Walsh of Twin Bridges. This bill, if signed into law, would address one of our member’s top priorities, which is for state-chartered banks to own employee housing. Turning now to other matters, early in March, the association hosted its annual Montana Reception during the ICBA National Convention, held in beautiful Hawaii. For the first time in recent memory, Montana cohosted its reception with other state associations. The MIB Board made this decision based on high cost/expense considerations resulting from the Hawaii location. In response to those cost considerations, MIB partnered with the states of Texas, Iowa, Pennsylvania, and others to put on the reception event. The joint event proved to be a success and drew an estimated 300 people, all of whom rubbed elbows and talked about banking issues. During the convention, our association was recognized by outgoing ICBA Chairman Brad Bolton for putting on his most memorable state convention in 2022. Brad’s comments followed those made a year earlier by former ICBA Chairman Bob Fisher. Bob also identified the 2021 MIB convention as his most notable state convention. Given these positive comments two years running, we must be doing something right when it comes to hosting state conventions. But, then again, maybe, just maybe, Montana sells itself. Additionally, the Bank of Montana was honored by the ICBA leadership for being named the Best Community Bank to Work for in 2022 in the asset MIB REPRESENTING THE INTERESTS OF MONTANA’S STATE-CHARTERED COMMUNITY BANKS JAMES E. BROWN, ESQ. 8 Community Banker
category of under $250 million. Congratulations to Tom Swenson, MIB Board Member Danny Day, and the rest of the Bank of Montana team for gaining this prestigious acknowledgment — an honor well deserved. In this issue of the Community Banker, you will find all the information needed to attend MIB’s Annual Convention and Tradeshow. The convention will be held July 26–28 at the Big Sky Resort. We are excited about this year’s quality lineup of speakers. We are pleased to have new ICBA Chairman Derek Williams from the great state of Georgia join us as our keynote speaker. Other great speakers include Melanie Hall of the Montana Division of Banking, Patrick Barkey with the Bureau of Economic Research, and Tom Kennan of Keenan & Partners. The annual golf tournament will be held at the Big Sky Golf Course. And, of course, the ever-popular white water rafting trip will be available for those looking for a bit of extracurricular fun for themselves and their family. Our state convention is known as the biggest little banking convention in the West. We hope to see you, your bank employees, and your family below Lone Mountain this summer. Turning now to industry-related events, community bankers across the country were all hit with the news of the collapse of SVB and the associated receivership of the same by the FDIC. For those involved in Montana’s community banking industry, we were horrified to read the news that Treasury Secretary Janet Yellen appeared to take a position that the FDIC would guarantee deposits above the $250,000 threshold for deposits held in only those banks the Fed itself deemed to be systematically and economically important. Of course, Yellen’s remarks implicitly stated that bank deposits in Montana’s community banks, namely those deposited with MIB’s members, would not be treated the same as those in the too-big-to-fail institutions. And in turn, Montana’s community bankers would not get the same regulatory protections as SVB and its depositors received. In short, Secretary Yellen’s remarks demonstrate that the Fed appears to improperly and concerningly have a list of government-preferred banks. While Secretary Yellen appeared to walk back her comments later in the month, her initial comments once again highlighted the distinction between Montana’s state-chartered community banks and larger, more risky financial institutions. That distinction is, of course, that MIB’s member banks do not need government bailouts or favorable treatment for true community banks “operate under a safe, sound, and relationship-based banking model that has withstood economic cycles,” as ICBA President and CEO Rebeca Romero Rainey stated. Even so, we recognize that main street community banks will likely pick up the tab for SVB’s financial mismanagement through increased FDIC Deposit Insurance Assessment rates. And that is an outcome MIB strongly opposes. MIB will be traveling to Washington, D.C. during the second week of May as part of ICBA’s Capital Summit to speak with Montana’s congressional delegation. You can be assured that one message MIB will be carrying to our nation’s capital is that MIB member banks are not the problem but rather the solution. The SVB discussion reinforces the importance of MIB and the distinction between other state banking trade associations and us. This distinction is that MIB has one mission, and one mission alone — to represent the interests of Montana’s state-chartered community banks, period, and end of story. The membership dues paid by MIB member banks and associate members are the resources by which MIB carries out that simple yet vital mission. So, on behalf of the MIB Board of Directors and association staff, we look forward to serving YOUR unique Montana-based interests today, tomorrow, and well into the future. I hope you have a great spring and summer. I look forward to seeing you at the Big Sky Resort in July for great community banking fun. Sincerely, James Brown, Esq. So, on behalf of the MIB Board of Directors and association staff, we look forward to serving YOUR unique Montana-based interests today, tomorrow, and well into the future. mibonline.org 9
SAVE THE DATE MIB 2023 CONVENTION & TRADE SHOW JULY 26–28, 2023 BIG SKY RESORT JOIN US FOR ANOTHER YEAR OF FUN, NETWORKING, AND GREAT EDUCATIONAL AND RECREATIONAL OPPORTUNITIES. SCAN THE QR CODE TO REGISTER TODAY. https://mibonline.org/convention/ 10 Community Banker
THURSDAY, JULY 27 Exhibitor setup 9:00 am through 5:00 pm in the Missouri Ballroom. 7:15–9:30 am Registration Firehole Lounge 7:30–8:15 am Breakfast and Membership Meeting Melanie Hall, Commissioner MT Division of Banking Missouri Ballroom 8:30–9:30 am SEMINAR: David Shadix, Managing Director, Financial Institutions Group, Stifel Nicolaus Amphitheater 9:40–10:40 am SEMINAR: Christine Gaffney, SVP of for the Minneapolis Fed Amphitheater 10:50 am Boxed lunches are available at the registration table. 11:00 am–5:30 pm Annual MIB Golf Tournament Big Sky Golf Course 12:00–5:00 pm River Raft Trip Meet in the lobby for the bus 4:00–5:30 pm Registration Firehole Lounge 6:00–7:30 pm Vendors on Exhibit Missouri Ballroom Vendors’ Night Cocktail Reception & Awards, PAC Auction* Missouri Ballroom *Pick up auction items Friday 7:15–8:30 am 7:30–9:00 pm Dinner Missouri Ballroom Guest speaker: ICBA Chair Derek Williams Dinner Entertainment with Take Two AGENDA WEDNESDAY, JULY 26 1:00–4:00 pm MIB Board Meeting Lake/Canyon 3:30–5:30 pm Registration Firehole Lounge 5:00–6:30 pm Welcome Cocktail Reception Vista Deck 6:30–9:00 pm Dinner on your own* *Associate members are encouraged to dine with their favorite bankers. MIB recommends making reservations early as Big Sky is a resort town. FRIDAY, JULY 28 7:15–8:15 am Vendor Breakfast Missouri Ballroom 7:15–8:30 am Pick Up PAC Auction items Firehole Lounge 8:30–11:30 am Exhibitor Take Down Missouri Ballroom 8:45–9:45 am SEMINAR: Matthew Smith, Bankers Helping Bankers Amphitheater 9:50–10:40 am SEMINAR: Tom Keenan, Keenan and Partners Amphitheater 10:45–11:45 am SEMINAR: Charles Potts, ICBA Chief Innovation Officer Amphitheater 12:00–1:00 pm Lunch Missouri Ballroom Guest Speaker: Patrick Barkey, UM Director of the Bureau of Business and Economic Research mibonline.org 11
SServing as ICBA Chairman has been one of the highest honors of my life. It’s hard to put into words how special this experience is. The work you’re doing every day puts real faces and names to the communities we’re fighting for, and it has been a privilege to be your representative at the national level. Yet, it takes the voices of many to make a true impact. That’s why I’ve asked community bankers to sacrifice a few minutes every day to advocate for our industry. We are what stands between our customers and an overreaching federal government and regulatory system. We hold the line for Main Street America, which needs us. In today’s environment, that vigilance is critical to staying ahead of emerging threats. Each day brings forward new concerns, and we have to stay focused on who we are and who we represent. So, keep pressing forward in defending this great industry we get the opportunity to serve. For example, every community banker has a primary focus on how they can better serve their customers. It isn’t about making more money, but how we respond to community needs. We should also remind policymakers that community bankers are small business owners, too. And even though we have fiduciary and regulatory responsibilities to remain profitable and provide a return to our shareholders, our focus always comes back to how we can serve our customers better. In maintaining that focus on our relationship-centric mission, we will continue to thrive. That’s why it’s vital for community banks to remain independent, and a big theme for me has been encouraging bank executives to identify their next generation of leaders. There are those within your institution who share your vision and passion. Support their development and groom them to take the reins. Without your bank, your communities are at risk. So, …I am grateful to have had the opportunity to serve as Chairman. I will continue to advocate for community banking and, for the rest of my career, will stand side by side with you to fight our future battles. FROM THE TOP BY BRAD M. BOLTON, CHAIRMAN, ICBA 12 Community Banker
My Top Three Reflections on Community Banking 1. Never take our community bank mission for granted; advocate for it. 2. Keep innovating and implementing new technologies for your customers. 3. Someone at your bank wants to lead it for the next generation. Let them. 38697 Partner with us for: • Loan participation purchases and sales* • Bank stock financing • Bank executive and employee financing *We do not reparticipate loans. Craig McCandless Call me at 406.850.3790 Based in Billings, Mont. Serving Montana, Wyoming and Idaho Our Mission Is to Help You Succeed make a succession plan to ensure your bank remains the lifeblood of the community. With that in mind, I implore you to keep fighting for Main Street. Keep raising your voices to advocate for your customers. Keep engaging with innovative companies to grow, evolve and better serve. Keep identifying future leaders to ensure the longevity of your institution because your communities need you in their corner. I want to close by saying I am grateful to have had the opportunity to serve as Chairman. I will continue to advocate for community banking and, for the rest of my career, will stand side by side with you to fight our future battles. With that passion leading, I’m confident we’ll witness the continued growth and success of our beloved industry. Connect with Brad on Twitter @BradMBolton. mibonline.org 13
TTrue relationships withstand the test of time, ebbing and flowing with the cycles of life, and such is the case with the community bank — customer connection. It’s not unusual to hear about a community bank having served a family or a business for generations, and that’s a testament to the strength of the relationship. As we consider marketing in this month’s issue, I took time to reflect on exactly what differentiates the community banker and how marketing can help in growing and retaining business. I kept coming back to the fact that, for community banks, marketing often points to finding ways to educate, support and grow the community, as well as customer knowledge and awareness. By extension, these promotional efforts assume a natural role in a community bank’s journey, just enhancing what are already missioncritical initiatives. For example, consider ICBA Chairman Brad Bolton’s Community Spirit Bank in Red Bay, Alabama, and its work to share tips for financial resolutions in the local paper. Offering that information to the community helps individuals strengthen their financial savvy and supports a broader story of community bank leadership. Or look to ICBA Past Chairman Bob Fisher’s bank, Tioga State Bank, in Spencer, New York, and how it teams up with local television stations to support cause-related activities, like the No Shave November Cure the Blue 5K. Not only does this event help raise funds for an important program, it also demonstrates the bank’s involvement with and commitment to its community. These examples offer only a snapshot of what community banks all over the country do to support their communities from a mission-based approach. In many cases, the added promotion these efforts deliver is a side benefit to serving the community. That’s precisely why these efforts are successful: they garner attention because they are the right things to do. These stories create a value proposition around For community banks, marketing often points to finding ways to educate, support and grow the community, as well as customer knowledge and awareness. FLOUR I SH BY REBECA ROMERO RAINEY, PRESIDENT AND CEO, ICBA 14 Community Banker
why banking with a community bank is so vital, and the differentiation from megabanks and credit unions happens by leading with the community bank relationship model front and center. So, as you think about your bank’s planned storytelling this year, know that ICBA is standing by to help. And our work won’t stop there. We invite to you join us in this next step of our journey as we continue to tell the community banking story. Because beyond promotion, what you do matters to the customers and communities you serve. You are and will remain a partner through your customers’ lives and financial journeys. From a marketing perspective, that’s an ideal place to be. Rebeca Romero Rainey is President and CEO of the Independent Community Bankers of America. mibonline.org 15
T COMPLIANCE Q&A SPRING 2023 BY BILL SHOWALTER, SENIOR CONSULTANT, YOUNG & ASSOCIATES, INC. TISA. Q: We have recently made a change that our online banking logins will expire after 18 months if a customer has not logged in. This may trigger them to begin being assessed paper statement fees, if they sign up for e-statements (there is no cost), as the paper statement fee is determined by an online account being established and maintained. The $3.00 paper statement fee is listed as one of our fees on our fee chart; however, customers don’t know that they have to log in every 18 months to keep their online account from expiring and therefore start incurring the paper statement fee. I feel that this should be disclosed in some way, but I’m not sure how best to do it. We can push a message to all online account holders. Would that be acceptable? A: Yes, the bank should have been disclosing this all along on its TISA account disclosures for the account affected because Regulation DD requires the financial institution to disclose both the amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed. Failing to log in at least every 18 months, in this case, is the condition under which the fee may be imposed. So, the conservative approach would be to send a corrective disclosure to your existing customers disclosing both the fee and the condition (logging on, etc.). Also, you need to make sure the TISA account disclosures for affected accounts include this information for future customers. ECOA. Q: My understanding of when providing an appraisal to an applicant is that if there is an application that has multiple first-lien dwellings, then the appraisal disclosure and appraisals would not need to be given to the customer. This is because Regulation B provides that this requirement applies to an “Application for credit that is to be secured by a first lien on a dwelling.” Am I correct on this issue? A: No, you are not. I find no exception to this requirement for transactions secured by more than one dwelling. As long as there is at least one dwelling with a first lien (mortgage or deed of trust), the requirement to provide a copy of any appraisal/valuation would apply. FCRA/Privacy Q: We recently made several minor changes to our Privacy Notice, but one more significant change under the section “Reasons we can share your personal information.” In that section, we changed from stating that “we do NOT share information with our affiliates for their everyday business purposes” to “Yes, we do share.” The bank owns 50% of a title agency that we share information with. My question is, do we need to mail the revised privacy notice out to our customers or could we include a statement message letting our customers know where to locate the most recent privacy notice on our website? A: Your question hits on an intersection of two regulations — Regulation V (Fair Credit Reporting) and Regulation P (Privacy). Regulation V lays out the requirements for sharing consumer information among affiliated entities, while Regulation P does the same for sharing consumer information with non-affiliated entities. They are joined to an extent because Regulation V (and the FCRA itself) allow its opt-out notice to be “coordinated and consolidated” with another similar notice — such as the Regulation P privacy notice. Regulation P explicitly provides for including the Regulation V/FCRA notice as an integral part of its model privacy notice. With that said, Regulation V requires that a bank give a consumer appropriate notice — either in writing or, if the consumer has agreed, electronically — before sharing the consumer’s information with an affiliate so that the affiliate may market to the consumer and give the consumer a reasonable opportunity to opt out of this sharing before the sharing occurs. All of this argues against merely using something like a statement message. There would not be room for the required language — and there is nothing in the rules that explicitly allow merely providing a web address (where the full notice may be accessed) as a substitute for the required notice. The best route would be to send revised privacy notices to affected consumers and provide them with the required opportunity to opt out of the sharing before the sharing with any affiliate commences. 16 Community Banker
Follow-up Q: If there is no option to opt-out, could we just post the revised privacy notice on our website? Follow-up A: No, the rules require providing it in a manner that ensures that the consumer/customer actually receives it. Generally, it is not considered reasonable to presume that all customers regularly access the bank’s website. TISA. Q: We are going to migrate customers from their current accounts to our new accounts. In the change letter, do we need to state all the negatives such as maintenance fees increasing, a new paper statement fee, no free checks, and no free cashier’s checks? We will be sending the TISA account disclosure with the letter. A: The bank cannot simply rely on customers reading the account disclosures. Regulation DD provides that if a financial institution provides notice through revised account disclosures, the changed term must be highlighted in some manner. For example, financial institutions may note that a particular fee has been changed (also specifying the new amount) or use an accompanying letter that refers to the changed term. So, your cover letter will need to point customers to the changes that increase their costs (or reduce their earnings — interest rates). RESPA/TILA/Privacy. Q: We are purchasing a small number of residential loans from another financial institution. We have confirmed that the selling bank will be sending out a Notice of Servicing Transfer Letter. Do we have to send out our own Notice of Servicing Transfer Letter as well? In addition, are there any other required notices that have to be sent to the borrowers — for example, our privacy notice, first payment coupons, etc.? A: Either separate mortgage servicing transfer notices, or one combined notice, may be sent — as long as the proper notice is given in the proper time, as required by Regulation X (RESPA). If the seller is not including your bank’s notice information in its notice, then your bank will have to send its own buyer’s notice. There is also a mortgage transfer notice required by Regulation Z since the bank is acquiring the loan itself, as well as the servicing of those loans. The bank’s privacy notice should also be sent since this is the beginning of these borrowers’ customer relationship with a new-to-them bank. Other notices or documents might be required by your state’s laws, but you need to check with your legal counsel on that issue. CRA/Interstate Branching Q: We have one branch in a neighboring state and the loan-to-deposit ratio for that branch was 33% at the end of 2022. The Section 109 Host State Loan to Deposit Ratio for that state, as of June 30, 2021, is 69%. We are supposed to be lending there at a level that is at least one-half of the Host State Loan to Deposit Ratio for that state. Since we failed this first Section 109 test, we have to show the bank is reasonably trying to help meet the credit needs of the communities served by our interstate branches. First off, is this that big of a deal? Second, should the bank be doing additional advertising, outreach, etc. to try and generate more loans? A: Yes, it is a big deal. The regulators could require the bank to close the interstate branch if both tests are failed: LTD ratio is below the threshold (which you say it is) and the branch is not adequately meeting local credit needs. Determining and documenting the latter is what you need to concentrate on. The FDIC’s examination manual has a section on these requirements (as do the examination manuals from the other regulators). TILA. Q: With rates increasing, our adjustable-rate mortgages (ARM) are coming back into play. Is there a rule regarding how to calculate the annual percentage rate (APR) for ARM loans to use for advertising? We want to advertise our 5/1 ARM, with a fixed rate period APR (for five years). We notice that other banks’ APRs seem to be lower than ours. We want to be sure we are advertising correctly but not scaring folks away with a too-high APR number. A: How to compute the APR for an ARM depends on what type of ARM it is. For a plain vanilla ARM (no initial discount/premium), the lender is required to assume that the initial rate will remain in effect for the loan term (since future changes are not known). This is the method to be used for an ARM with an initial fixed-rate period only if that initial rate is computed using the same formula (e.g., index plus margin) that will be used for future rate changes. For an ARM with an initial discounted/premium rate, the lender is required to compute a composite APR based on the initial rate for the time it is to be in effect and the rate for the remaining loan term once the discount/premium goes away (which might take more than one rate change to accomplish depending on the magnitude of the initial discount/premium amount compared to any periodic rate change caps). Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management consulting, loan review, IT consulting, and policy systems. mibonline.org 17
CCrescent Mortgage Company was founded on February 16, 1993, as a “Community Bank” wholesale lender in the Southeastern United States. Thirty-plus years later, now working in 47 states, we continue to assist our partners in navigating the difficulties of mortgage lending, while working to bring the dream of homeownership to their customers. What makes us different? Very simply, number one is our employees. Dawn Cooley has been representing Crescent Mortgage for over 15 years. As Vice President, she has been integral in building out the western half of the United States. She is consistently a top producer with Crescent Mortgage and is always available to help structure financing and train loan originators to ensure the client is receiving the best possible program and rate available for their circumstances. It is people like Dawn and her team that make the difference at Crescent. But that is just the beginning. Our mission statement says it all: “We are totally committed to daily exceeding the expectations of our customers.” At Crescent Mortgage, we have identified the need for community lenders in today’s mortgage environment. We understand the complexity and requirements of mortgage lending in the world today. We are always striving to bring the “big bank” benefits to community bank lending without the costs or the risk. Some of the benefits we offer include: • All the typical mortgage products (FNMA, FHLMC, FHA, VA, USDA). In addition, we offer an array of low downpayment, first-time homebuyer, construction to permanent and renovation loans, Jumbo, Alt-A and much more to meet the needs of virtually every borrower. • “State of the art” technology with our Loan Operating System. The system provides point-of-sale website technology to allow your customer to access their application, electronically sign disclosures, and upload documentation securely, all branded with your company name and information. • Help with reducing risk. We offer an agreement that eliminates repurchase and recourse for everything except institutional fraud. No early payoff, no first payment default penalties! We also warrant the compliance of the documentation we deliver for you. • Our “pay as you go” processing, underwriting, and document preparation. You can take advantage of cutting your costs by using virtually every step to legitimately outsource. Crescent Mortgage can handle it for you. • Exceptional service. We know everyone says this, but we are different. Through the entire last five years of operation, during some of the busiest times in mortgage history, Crescent Mortgage never got to more than 48 hours in our initial underwriting turn times and was always 24 to 48 hours in conditions and closings. We never stop taking self-employed borrowers because their credit score was too low or the loan amount wasn’t sufficient. We will treat every loan as if it was our most important client, just like you do. We will never solicit your customers for anything. After all, they are your bank client! Isn’t it time to rethink your mortgage lending structure and bring your institution into a profitable, competitive, aggressive model that blends personalized service and the latest technology? Call us today at (800) 851-0263 and let’s discuss the options. FEATURED ASSOCIATE MEMBER 18 Community Banker
23 MAY 9 AM-2 PM NORTHERN BROADCASTING SYSTEM SPONSORED BY 2023 AG CONFERENCE LYNN PAULSON DIRECTOR OF AGRIBUSINESS DEVELOPMENT FOR BELL BANK, DIRECTOR AT MONTANA DEPARTMENT OF AGRICULTURE SPEAKERS CHRISTY CLARK Northern Hotel Billings, MT TAYLOR BROWN MELANIE HALL MT COMMISSIONER OF BANKING Events - The Montana Independent Bankers Association (mibonline.org) COURTNEY KIBBLEWHITE NORTHERN BROADCASTING SYSTEM
BENEFICIAL OWNERSHIP 2.0 RULES STILL UNCLEAR FOR FINANCIAL INSTITUTIONS BY KATIE KENNEDY, CFE, CUCE, SENIOR MANAGER, WIPFLI TThe U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) issued a final rule on Sept. 30, 2022, regarding beneficial ownership reporting requirements, implementing Section 6403 of the Corporate Transparency Act. The rule will be effective Jan. 1, 2024. Its intent is to crack down on illicit finance, support law enforcement efforts and increase transparency with regard to the persons who own or control a company. The ruling would require certain corporations and limited liability companies to file beneficial ownership information directly with FinCEN, which will maintain a national beneficial ownership information (BOI) database. The new ruling varies from the requirements currently in place in that it is aimed at collecting beneficial ownership data on U.S. entities with fewer than 20 full-time employees, no more than $5 million in gross annual receipts, and at least one office physically located within the U.S. It is also different in the timing of the data collection. BROADER REQUIREMENTS Under current requirements, beneficial ownership data is collected at the formation of an account with updates based on defined triggering events going forward. The new requirements call for the collection of this data within 30 days of the inception of the business for entities formed after the effective date of the rule and require initial reports for entities formed prior to the effective date to be filed within one year of the effective date. Updates will be required within 30 days of a change to the information that had previously been filed with FinCEN. The final rule defines two components of beneficial ownership (much in the way the current rule does): ownership interest and substantial control. Ownership interest is defined as ownership of at least 25% interest in a reporting company. Under the new rule, there are three components of substantial control: • Serving as a senior officer of a reporting company • Having the authority to appoint or remove a senior officer • Having substantial influence (i.e., the ability to direct, determine or decide important matters affecting the reporting company) Each of the applicable beneficial ownership parties identified would have to provide FinCEN their name, birthdate, address and a unique identifying number from an acceptable document, including the image of the document. Once the required information is provided to FinCEN, the individual reporting their data could obtain a FinCEN identifier that can be used in subsequent BOI reports in lieu of providing the required information to the party completing the report. GUEST ARTICLE 20 Community Banker
Within one year of the effective date of the rule, FinCEN will be required to rescind much of the identification and verification requirements under the current customer due diligence (CDD) rules; however, the general requirement for financial institutions to identify and verify beneficial owners would be retained. In addition, other rulemakings are expected with respect to who may access the BOI, for which purposes it may be accessed, and safeguards to ensure the information maintained is secured and protected. BOI IMPACT ON FINANCIAL INSTITUTIONS For the time being, financial institutions must continue to collect BOI in the same manner they’ve followed since 2018; however, additional rulings are expected within the year that could change those requirements. For now, financial institutions should practice business as usual with respect to the collection of BOI while, at the same time, staying alert for proposed revisions to the customer due diligence rule and the opportunity to provide commentary. (406) 604-4540 NeighborWorks Montana and our network of partners across the state provide homebuyer education and counseling, creating successful, mortgage-ready homebuyers. Reach out today to find out how we can help your buyers be the most successful homebuyers possible! nwmt.org info@nwmt.org mibonline.org 21
IIf you’ve heard it once, you’ve heard it a thousand times: in today’s landscape, data reigns supreme. Working hand in hand with digital transformation, data provides a powerful tool for community banks. Its accessibility, readability and applicability in today’s digital-first environment have enhanced community banks’ ability to serve their customers, creating a heightened experience. But beyond its analysis to help you in your product journey, data can help transform your marketing efforts, offering insights into customer interests and behaviors to better align your offerings with their expectations. In fact, 73% of consumers believe companies should understand their unique needs and expectations, and 56% think offers should always be personalized. Fortunately, your community bank does have the information necessary to do just that. Data analysis and performance marketing do not have to be in-house skillsets. Working with trusted third-party providers to mine your data for opportunities will help you not only grow your business but better serve your customers in the process. For example, ThinkTECH Accelerator alumni FI Works, a data-driven sales and marketing software platform, partnered with a community bank to deepen customer engagement. Through statistical and machine learning techniques, the FI Works platform estimated the probability that a customer would want a specific product. The bank then used that data to create a personalized marketing piece, providing individualized offers based on customers’ predicted preferences. The results? Following the eight-week campaign, the bank captured $25 million in new deposits. Or consider how another Accelerator participant, KlariVis, saved one bank up to 400 hours per month of ad hoc reporting by consolidating and aggregating data from the core and ancillary systems. With data dispersed in multiple places due to acquisitions, this consolidation yielded not only increased bank efficiency but also a way to deliver more targeted product offerings to existing clients. Another ThinkTECH alumni company, Fintel Connect, worked with a bank to extend its brand marketing via HOW TO USE DATA TO DRIVE BANK GROWTH BY CHARLES POTTS, EXECUTIVE VICE PRESIDENT AND CHIEF INNOVATION OFFICER, ICBA GUEST ARTICLE 22 Community Banker
third-party publishers. By brokering an affiliate partner program with 25 publishers whose digital footprints matched bank targets, Fintel Connect was able to help the bank achieve tangible results, including opened deposit accounts. This approach resulted in the bank’s highestperforming marketing initiative to date — with costs significantly less than its previous pay-per-click campaigns. All three of these initiatives achieved impressive outcomes, yet the examples only scratch the surface of performance marketing’s potential. So, as you look to what’s next for your marketing plan, contemplate how partnering with a fintech can help you achieve business objectives. With the strong results we’ve seen, it bears repeating: in marketing, data reigns supreme. Charles Potts (charles.potts@icba.org) is ICBA Executive Vice President and Chief Innovation Officer. Closing SBA loans keeps doors open. Call 800.340.7304 to start www.holtandmon.com Your customers have never needed capital more than they do right now. Plus you need to offset narrowing margins by increasing noninterest fee income. SBA/USDA lending is the perfect answer. And ICBA recommends just one provider to make the process hassle-free: Holtmeyer & Monson. Give customers exactly what they need, at no net cost to your bank. Small businesses count on your expertise. You can count on ours. Working with trusted third-party providers to mine your data for opportunities will help you not only grow your business but better serve your customers in the process. mibonline.org 23
MIB IMPORTANT DATES APRIL 30 Graduate Banking School Scholarship Application Due MAY 14–17 ICBA Washington Policy Summit MAY 23 Ag Conference, Northern Hotel, Billings JUNE 23 Outstanding Young Banker Award Nomination Due JUNE 25 Deadline for Room Reservations at Big Sky JULY 26 Board Meeting, Big Sky JULY 26–28 Annual Convention and Trade Show, Big Sky SEPTEMBER 16 U of M Tailgate — Griz vs. Ferris State OCTOBER 14 MSU Tailgate — Cats vs. Cal Poly NOVEMBER 1–2 Women in Banking Conference Speaker: Dawn Cooley, Crescent Mortgage • Down payment assistance • 30-year, low-interest rate mortgages • Quality in-state servicing • Ask your lender about Montana Housing loans HOUSING.MT.GOV facebook.com/montanahousing Follow Montana Housing on Facebook 2023 24 Community Banker
Get your marketing message into the right hands! Ad space available. Contact us today to get your spot. 801.676.9722 | 855.747.4003 thenewslinkgroup.org sales@thenewslinkgroup.com Check out what we do!
M BANK OF MONTANA WINS PRESTIGIOUS AWARD MIB would like to congratulate Bank of Montana for receiving the award at the ICBA National Convention for the Best Community Banks to Work For in 2022 with assets under $250 million. In addition, they were one of the top-performing and most profitable banks in the United States. This award coincided with the celebration of the bank’s 15 years in business, demonstrating that the positive work environment, compensation, leadership and culture, opportunities for advancement, and recognition have made the Bank of Montana worth recognizing. MEMBER NEWS 26 Community Banker
T CFPB ANNOUNCES NEW COMMUNITY BANK COUNCIL MEMBERS The Consumer Financial Protection Bureau announced the appointment of new members to the Community Bank Advisory Council and other advisory boards. The CBAC advises and consults with the bureau on consumer financial issues related to community banks. The CBAC’s new members are: • Anita Drentlaw of New Market Bank in Elko New Market, MN • Bruce Hoyer of Belt Valley Bank in Belt, MT • Carlos Naudon of Ponce Bank and Ponce Financial Group, Inc. in the Bronx, NY • Ignacio Urrabazo, Jr. of Commerce Bank in Laredo, TX Its existing members are: • Mary Buche of Lead Bank in Kansas City, MO • Barry Anderson of F&M Bank in Crescent, OK • Todd McDonald of Liberty Bank and Trust in New Orleans, LA • Michael Tucker of Greenfield Cooperative Bank in Greenfield, MA MIB extends its congratulations to MIB member Bruce Hoyer for this appointment. Strong foundations for your future. Trusted by Montana financial institutions for over 60 years. (406) 443 . 2340 cwg-architects.com 650 Power St. Helena, MT + OPPORTUNITY BANK | BILLINGS HEIGHTS mibonline.org 27
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