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Would you like to transform the management of your information security program from a daunting chore to a process that fuels better decisions? SBS can help! ��� empowers �nancial institutions to ma�e informed security decisions and trust the safety of their data based on a valuable information security program. To learn more, visit www.sbscyber.com today! Robb Nielsen robb.nielsen@sbscyber.com 605-251-7375 Would you like to transform the management of your information security program from a daunting chore to a process that fuels better decisions? SBS can help! ��� empowers �nancial institutions to ma�e informed security decisions and trust the safety of their data based on a valuable information security program. To learn more, visit www.sbscyber.com today! Robb Nielsen robb.nielsen@sbscyber.com 605-251-7375 Would you like to transform the management of your information security program from a daunting chore to a process that fuels better decisions? SBS can help! ��� empowers �nancial institutions to ma�e informed security decisions and trust the safety of their data based on a valuable information security program. To learn more, visit www.sbscyber.com today! Robb Nielsen robb.nielsen@sbscyber.com 605-251-7375
233 South 13th Street, Suite 700 Lincoln, NE 68508 Phone: (402) 474-1555 • Fax: (402) 474-2946 nebankers.org RICHARD BAIER President and CEO richard.baier@nebankers.org KARA HEIDEMAN Director of Communications and Marketing kara.heideman@nebankers.org NBA BOARD OF DIRECTORS NBA EDITORIAL STAFF LYDELL WOODBURY NBA Chair (402) 359-2281 First Nebraska Bank Valley BRADLEY KOEHN NBA Chair-Elect (402) 420-0560 Midwest Bank Norfolk/Lincoln KATHRYN BARKER (402) 333-9100 Core Bank Omaha NICHOLAS BAXTER (402) 341-0500 First National Bank of Omaha Omaha CORY BERGT (402) 434-4321 Wells Fargo Bank, N.A. Lincoln JILL DAVIS (402) 434-1690 U.S. Bank Lincoln CURTIS HEAPY (308) 367-4155 Western Nebraska Bank Curtis KRISTA HEISS (308) 534-2877 NebraskaLand Bank North Platte ZACHARY HOLOCH (402) 363-7411 Cornerstone Bank York JEFF KANGER (402) 858-1253 First State Bank Nebraska Lincoln ZAC KARPF (308) 632-7004 Platte Valley Bank Scottsbluff JOHN KOTOUC (402) 399-5088 American National Bank Omaha MARK LINVILLE (402) 337-0323 First State Bank Randolph KRISTEN MARSHALL-MASER (308) 384-5681 Five Points Bank Grand Island BRANDON MASON (402) 918-2332 Bank of the West Omaha JEREMY MCHUGH (402) 867-2141 Corn Growers State Bank Murdock KAYE MONIE (308) 368-5555 Hershey State Bank Hershey AARON OTTEN (402) 371-0722 Elkhorn Valley Bank & Trust Norfolk KEVIN POSTIER (402) 723-4441 Henderson State Bank Henderson JAY PRESTIPINO (402) 392-2616 First Interstate Bank Lincoln LUKE RICKERTSEN (308) 537-7181 Flatwater Bank Gothenburg RYNE SEAMAN (402) 643-3636 Cattle Bank & Trust Seward TRAVIS SEARS (402) 323-1828 Union Bank & Trust Co. Lincoln STEPHEN STULL NBA Past Chair (402) 792-2500 Nebraska Bank Dodge KELLY TRAMBLY (402) 756-8601 South Central State Bank Campbell NICHOLAS VRBA (402) 727-0213 RVR Bank Fremont ANDREW WITT (402) 504-4000 Dundee Bank Omaha Colorectal cancer is the third most common cancer among Nebraskans. Early detection saves lives, so doctors recently lowered the recommended screening age from 50 to 45. BCBSNE health benefits cover screenings and preventive treatments at no extra cost. OVER 45? GET SCREENED Visit NebraskaBlue.com to connect with a coach and schedule a screening today. An independent licensee of the Blue Cross and Blue Shield Association. LINCOLN BRUNING endacotttimmer.com 402-817-1000 Legal advice. Community banking experience. 4 Nebraska Banker
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CONTENTS EDITORIAL: Nebraska Banker seeks to provide news and information relevant to Nebraska and other news and information of direct interest to members of the Nebraska Bankers Association. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the NBA. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the NBA. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, which began bimonthly publication in May 2006, is included in membership fees to the NBA. ©2023 NBA | The NewsLINK Group, LLC. All rights reserved. Nebraska Banker is published six times each year by The newsLINK Group, LLC for the NBA 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 NBA, 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. Nebraska Banker is a collective work, and as such, some articles are submitted by authors who are independent of the NBA. While Nebraska 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. 9 PRESIDENT’S MESSAGE: ENGAGE THE NEXT GENERATION Richard J. Baier, President and CEO Nebraska Bankers Association 12 WASHINGTON UPDATE: AMERICA’S BANKS ARE STRONGER TOGETHER Rob Nichols, President and CEO American Bankers Association 15 COUNSELOR’S CORNER: FEDERAL AGENCY TARGETS SEVERANCE AGREEMENTS Mark McQueen, Baird Holm, LLP 18 SECTION 1071 FINAL RULE — WHAT YOU NEED TO KNOW Victoria E. Stephen, Compliance Alliance 22 SLIP, TRIP AND FALL PREVENTION Travelers 25 2023 EDUCATION CALENDAR 9 15 6 Nebraska Banker
PRESIDENT’S MESSAGE “I always enjoy when Tim Burns visits our bank. The knowledge he has of the banking industry and the services MIB provides to community banks, helps our bank to be able to offer additional products and services to our bank customers. We consider Tim, and MIB, to be an important part of our banking family.” Tim Burns with customer Kurt Pickrel of Fullerton, Nebraska Bank Stock Loans — Acquisition, Capital Injection, and Shareholder Buy Back/Treasury Stock Purchase Officer/Director/Shareholder Loans ( Reg-O) Participation Loans Purchased/Sold — Commercial, Commercial Real Estate, Agricultural, and Special Purpose Loans Leases Midwest Image Exchange – MIE.net™ Electronic Check Clearing Products Information Reporting – CONTROL Electronic Funds Cash Management and Settlement Federal Funds and EBA Certificates of Deposit International Services/Foreign Exchange Safekeeping Directors’ Exams Loan Review Compliance Audits IT Audits Lending Services Operational Services Audit Services WHY ? Kurt Pickrel, President First Bank and Trust of Fullerton mibanc.com MEMBER FDIC Contact Tim Burns 402-480-0075
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PRESIDENT’S MESSAGE Engage the Next Generation Richard J. Baier, President and CEO, Nebraska Bankers Association In March 2022, your NBA Board of Directors utilized NBA/NBISCO 2022 year-end profits, as well as a small portion of cash reserves, to develop a comprehensive workforce development strategy to address the workforce needs of NBA members. Since then, NBA staff and volunteers have been working diligently to conduct extensive research on industry best practices, foster meaningful engagement with stakeholders and establish a strategic roadmap for introducing students to the diverse range of banking career opportunities. The “Bank On Your Future” campaign was unveiled at the 2023 NBA Convention on May 3-5. My personal thanks to NBA Director of Communications and Marketing Kara Heideman, who provided leadership for laying the groundwork for this project with the help and support of numerous other NBA team members. Our initial research included analyzing workforce development efforts in other industries and states and having discussions with K-12 and college educators, Nebraska Department of Education staff, former bank interns, young individuals entering the banking industry, bank human resources teams and training staff, as well as leaders from banks of different sizes. These endeavors were rewarding, enlightening and frightening, all at the same time. Our research indicated students are being exposed to career opportunities as young as in grade school. To be a part of the conversation, the banking industry needs to continue to engage students at a much younger age to discuss banking careers. These efforts must be deliberate and ongoing. Educators expressed a desire to connect with bankers, particularly to help implement financial literacy standards. However, they may not know how or may be nervous about doing so. As one teacher noted, the perception still exists that “bankers are scary.” Similarly, bankers can find interacting with students uncomfortable and can struggle to connect with students on the appropriate personal and grade levels. Internships are a key part of career exploration. In order to keep Nebraska banks competitive in the talent race, they need to provide high-quality internship experiences. Several previous bank interns shared their frustration with the lack of engagement with bank staff, the limited opportunities to engage in meaningful learning experiences during their internship, and the little or nonexistent follow-up and connection with their bank following their internship. The research led to the development of several strategies, many of which are already in progress and are listed below. You will hear and learn more about the campaign in the coming months and years. 1. The NBA engaged Archrival, a Lincoln-based agency specializing in connecting with the next generation, to develop the initiative’s graphics and campaign messaging. The theme that emerged from this work was the importance of highlighting how young people can positively impact their communities with a career in banking. 2. The NBA recently hired Steven Mah as the new NBA Workforce Development Coordinator, and also an intern, who will help Kara lead this work for the foreseeable future. I encourage you and your team to reach out and connect with Steven. 3. Your NBA team recently helped sponsor the Nebraska DECA, FBLA and FFA conferences. We also had a booth at these events which provided opportunities to highlight careers in banking and connect with high school students and educators. 9 Nebraska Banker
4. The NBA Foundation Committee recently approved the allocation of philanthropic dollars to initiatives at the University of Nebraska-Lincoln and the University of Nebraska at Omaha, designed to introduce firstgeneration and minority students to the banking sector. 5. At our recent Annual Convention, two panels, “Learning from Higher Education Leaders” and “Maximizing Your Internship Investment,” provided insights into the mindset of college students and information on how to connect with them. These panels also highlighted banks with successful internship programs. 6. NBA staff is developing an internship toolkit to help member banks build successful intern programs. 7. The creation of a graphic that lays out the many career paths in the banking sector is in progress. We have learned that banking is not a career path but rather a “career jungle gym,” as one Nebraska banker put it. 8. NBA staff are building a website highlighting the important role of banking in the community, the many banking jobs available in the state, an overview of banking salaries and benefits, etc. This site will deliver information targeted to students, teachers and faculty. The NBA Board of Directors and your dedicated team see the items noted above as simply the springboard to successfully showcasing the banking industry as a rewarding, profitable and gratifying career choice. However, for the initiative to be successful, we need every bank and banker to collaborate and actively participate in these activities to engage the next generation. Visit www.nebankers.org/bankonyourfuture to sign up to be notified of Bank On Your Future activities. Please don’t hesitate to reach out to learn more. WALENTINE O’TOOLE, LLP When time is of the essence, experience counts. Walentine O’Toole blends confidence, experience and knowledge with the personal attention you can expect from a regional law firm. www.walentineotoole.com 402.330.6300 11240 Davenport St. • Omaha, NE 68154-0125 In order to keep Nebraska banks competitive in the talent race, they need to provide highquality internship experiences. 10 Nebraska Banker
Member FDIC Traci Oliver Eric Hallman Tara Koester Bankers’ Bank of the West We champion Community Banking bbwest.com | 800-873-4722 www.bbwest.com YOUR NEBRASKA RELATIONSHIP MANAGERS As a bankers’ bank we strive to help with every level of service and expertise. That is why we service anything from loan participations, merchant services, ATM/debit and much more, because we aim to answer your questions with, “…yes, we can do that too!” 11 Nebraska Banker
Rob Nichols, President and CEO, American Bankers Association The U.S. banking system has long been the envy of the world. The reasons for this are many, but at the core, it’s because our nation has cultivated a vibrant, thriving financial services sector made up of banks of all sizes, charters, business models and risk profiles. Each one of these institutions has an important role to play in the overall economic ecosystem: from the community bank guiding a family through the purchase of a first home, to the midsize bank helping a small business manage its cashflows, to the regional bank providing commercial loans to promote the building of new retail centers and office spaces, to the large, globally active institution that supplies credit to multinational firms that provide thousands of jobs in the U.S. The breadth and diversity of our financial services sector is something no one should ever take for granted. That’s why the American Bankers Association joined forces with the nation’s 51 state bankers associations to deliver a powerful message to members of Congress in the aftermath of the Silicon Valley Bank (SVB) and Signature Bank failures in March: the U.S. banking system remains the deepest and most resilient in the world, and policymakers in Washington need to keep it that way for the good of the country. That message continues to hold true in the wake of the unfortunate failure of First Republic Bank in early May. WASHINGTON UPDATE America’s Banks Are Stronger Together 12 Nebraska Banker
The sudden and swift collapse of these institutions is something that both banks and bank policymakers can and must learn from. But in recent days, there have been some in Washington who have seized this opportunity to advance misguided policy proposals — many of which have nothing to do with the failures of these banks. These include proposals that would make it significantly harder for community banks to compete and new capital requirements for larger banks that would limit their ability to lend at a time of economic uncertainty. The policy response to these failures should not place America’s competitive, thriving banking system at risk. Rather, we must seek solutions that preserve that competitive landscape and ensure that banks of all sizes with diverse business models are allowed to compete and succeed in serving the needs of their communities. To achieve that goal, we all must stand together as an industry and resist efforts to divide us. Past experience has taught us that we are stronger and most effective in our advocacy when we speak with one voice and that there can be harmful consequences when we don’t. In the days to come, there will be many conversations about the future of banking regulation, about potential changes to the deposit insurance system and what we can do to preserve the depth and diversity of our banking system. By speaking with a united voice on these and other issues, we can move our industry forward and work with policymakers to understand what happened at SVB, Signature and First Republic. But, even more importantly, we can reinforce the overwhelming strength and resilience of the U.S. banking sector and lift up the work our nation’s banks do every day to make our communities better. Email Rob at rnichols@aba.com. Past experience has taught us that we are stronger and most effective in our advocacy when we speak with one voice and that there can be harmful consequences when we don’t. 13 Nebraska Banker
BankTalentHQ is a premier online career center dedicated to connecting top talent with banking employers across the United States. Our mission is to support the growth and success of the banking industry by facilitating connections and empowering career advancement. The Ultimate Talent Solution for Banks! Recruitment Solutions Training and Certifications Retention Strategies BankTalentHQ provides a comprehensive job board exclusively for the banking industry. Find top talent to drive your banking business forward with BTHQ. Great bankers never stop learning. Reskill, upskill and hone your expertise with training from the American Bankers Association. BankTalentHQ job seekers receive discounted pricing on all ABA online training, certificate programs and professional certification exam prep. BTHQ's newest partner Whistle works to help employers in the industry increase employee engagement, reduce turnover, and improve overall retention. This platform is offered as a discounted solution to complement BTHQ's recruitment offerings. www.BankTalentHQ.com
COUNSELOR’S CORNER Federal Agency Targets Severance Agreements Mark McQueen, Baird Holm, LLP Employees in 2023 have many statutory weapons to challenge employment separations. Civil rights claims are the most common, but employees may also assert disability discrimination, failure to accommodate, or denial of the right to take medical leave due to pregnancy, adoption or serious health conditions. Perhaps the broadest employee protection of all is in the National Labor Relations Act (NLRA), which protects the right to protest working conditions and to engage with coworkers in “mutual aid and protection” (including organizing a union). These new (and old) statutory rights have increased the frequency of employment challenges. At the same time, the cost of defending them has dramatically increased. Legal challenges that proceed to trial are painfully expensive, forcing many employers to purchase costly insurance to protect against that risk. So how do employers protect themselves? Other than sound policies and human resource practices, there’s only one preferred technique: severance agreements. In the simplest terms, severance agreements typically involve an employer paying extra money to departing employees in exchange for a promise not to pursue additional claims. Usually, severance agreements include “confidentiality” and “non-disparagement” provisions. Confidentiality clauses prohibit former employees from advertising either the agreement itself or the severance amount to coworkers or the general public. Nondisparagement clauses prevent departing employees from harming the reputation of the business or individual managers through public ridicule (including social media). There was a time when “confidentiality” and “non-disparagement” clauses were non-controversial. That began changing during the Bush and Obama Administrations when the National Labor Relations Board (NLRB) developed new theories. One new theory was that confidentiality and non-disparagement clauses have the effect of “chilling” an employee’s right to protest working conditions or to help coworkers. Remember, criticizing an employer (or manager) and coworker, “mutual aid and protection,” is protected by the NLRA. In 2020, the NLRB, comprised of a majority of Trump appointees, gave employers relief and additional guidance. The Trump-appointed majority declared that confidentiality 15 Nebraska Banker
and non-disparagement clauses are legal, except in limited circumstances involving other types of unlawful employer conduct.1 Unfortunately for employers, that declaration has now changed again. In late February of 2023, under the NLRB majority appointed by President Biden, confidentiality and nondisparagement clauses are now illegal, again, unless narrowly tailored to the point where they become far less valuable to employers.2 Later, on March 22, 2023, the NLRB’s top lawyer published additional guidance on this subject.3 The guidance from the NLRB’s General Counsel is far more onerous and declares: • The new standard has “retroactive application.” That means, even if a severance agreement was lawful when signed, it can still be challenged when and if employers try to enforce it. • The new standard does “not depend on the existence of an employment relationship between the [former] employee and the employer.” • Severance agreements can waive an employee’s right to pursue additional employment claims only as to claims arising as of the date of the agreement, and only if they do not have “overly broad provisions” that prohibit conduct protected by the NLRA. • Whether an employee actually signs the agreement is irrelevant. “[The mere] proffer itself inherently coerces employees …” • Confidentiality clauses may still be lawful, but only when “narrowly-tailored to restrict dissemination of proprietary or trade secrets … for periods of time based on legitimate business justifications.” In other words, employers cannot prohibit the publication of the existence or amount of the severance agreement. • Also, “confidentiality clauses that have a chilling effect that precludes employees from assisting others about workplace issues and/or from communicating with the [NLRB], a union, legal forums, the media or other third parties are unlawful.” • Non-disparagement clauses are lawful only where the clause is “narrowly-tailored” to prohibit statements that are “maliciously untrue and made with knowledge of their falsity or with reckless disregard for their truth …” It’s important to recognize that the NLRA does not apply to supervisors. It applies only to rank and file employees. Regardless, this development is very disappointing for employers. The new criteria will diminish the value (and perhaps frequency) of severance agreements. That unfortunately means more controversy and legal disputes. 1 Baylor University Medical Center, 369 NLRB No. 43 (2020); IGT d/b/a International Game Technology, 370 NLRB No. 50 (2020). 2 McLaren Macomb, 372 NLRB No. 58 (February, 2023). 3 Memorandum GC 23-05, Guidance in Response to Inquiries about the McLaren Macomb Decision (March 22, 2023). Mark McQueen’s practice focuses primarily on representing management in the areas of traditional labor relations, human resource counseling and training, employment discrimination, wage and hour, wrongful discharge and interpreting the most complex employment legislation. Mark counsels employers in the labor relations arena from the first signs of union organizing to the successful negotiation of operationally effective collective bargaining agreements. 16 Nebraska Banker
nedcoloans.org WE PARTNER WITH BANKS TO HELP BUSINESSES THRIVE IN NEBRASKA. • Partner with NEDCO to provide your customers with down payments as low as 10%. • Lower your exposure while participating in larger projects. • Unlike SBA 7a loans, NEDCO handles all paperwork and processing with the SBA. • NEDCO’s long-term fixed rate helps you compete with other lenders only offering conventional financing. • NEDCO 504 loans provide the bank with a 1st lien at a 50% LTV. JASON CULVER Chief Credit Officer 402-483-4651 jason@nedcoloans.org WILL SAILORS Vice President Lending 402-483-4622 will@nedcoloans.org Single Source is your 1 Partner, 1 Solution, 1 Source for architecture, construction, and furnishing of community banks. We are a proven leader in building design and construction across the upper Midwest. Call Jim today for a free consultation on your project! 319-232-6554 112 W. Park Lane Waterloo, IA 50701 www.Single.Source.Net 1 Integrated team serves all your needs, so you benefit from: Fast Delivery Better Quality Cost Savings Singular Responsibility Reduced Change Orders Reduced Risk 1 Source, Full Service Architecture Construction Interior Design Master Planning Site Development Spacial Planning Budgeting Project Administration Project Management Budgeting Value Added Engineering Nebraska State Bank, Broken Bow 17 Nebraska Banker
Section 1071 Final Rule What You Need To Know Victoria E. Stephen, Compliance Alliance Whether you were counting down the minutes until its release or hoping it would be put off as long as possible, it’s finally here — the Section 1071 Final Rule. The Final Rule caps a more than 10-year wait from the enactment of the original statute which prescribed these requirements in the 2010 DoddFrank Act, and it was released a mere day before the CFPB’s publication deadline. Surprisingly, perhaps, there were several changes from the Proposed Rule to the Final Rule that should provide some much-needed relief to community banks. However, the majority of the rules were finalized as proposed, so for those institutions that fall within the rules’ scope, it will still be quite the mountain to climb until compliance day. What Changed from Proposed to Final? Many were happy to see that the final rule contained some key changes from the proposal issued in September 2021. According to the CFPB, the changes reflect the consideration of more than 2,100 public comments on the Proposed Rule, as well as extensive public input predating the proposal. Threshold Increase Undoubtedly, the biggest and most welcome change from the proposal is the threshold increase. Whereas the Proposed Rule called for institutions to be covered when making as few as 25 covered loans per year, the Final Rule increases this all the way to 100 per year. To be clear, this still covers a large majority of bank small business lending, and those under the threshold should note that the CFPB made clear that “Lenders originating less than 100 loans per year will still be required to adhere to fair lending laws.” Of course, we always knew that banks are subject to fair lending laws regardless of the number of loans originated, but the question will be how the CFPB and/or other regulators may interpret this assertion in this new Section 1071 world. Phased Implementation Probably the second most welcome change is the phased implementation, which means that even for those institutions that are covered, some do not have to collect and report until 2026 and 2027, respectively. Specifically, the Final Rule includes compliance date “tiers” for when a covered financial institution must begin collecting and reporting data: Note that even if your institution originated fewer than 100 covered originations in 2022 or 2023, if you originate at Tier Annual originations in 2022 & 2023 Data collection start date Data reporting start date Tier 1 2,500 or more covered credit transactions Oct. 1, 2024 June 1, 2025 Tier 2 500-2,499 covered credit transactions April 1, 2025 June 1, 2026 Tier 3 100-499 covered credit transactions Jan. 1, 2026 June 1, 2027 18 Nebraska Banker
least 100 covered originations in 2024 and 2025, you still must collect and otherwise comply with the rule starting on Jan. 1, 2026. Additionally, the bank must have a method to determine how many covered credit transactions it originated in order to determine its appropriate compliance tier. If the bank happens to not have readily available information needed to make this determination, the Final Rule says that it can use “any reasonable method to estimate its covered originations” for 2022 and 2023, and provides several examples of this. Visual Observation Requirement A third important change from the Proposed Rule is that the bank will no longer be required (or allowed) to collect a business owners’ demographic information by way of visual observation or surname. This made many breathe a huge sigh of relief as the idea of trying to collect ethnicity and race through these means raised a variety of concerns during the time of the Proposed Rule. So, under the Final Rule, this information will only be able to be collected directly from the applicant(s) and not through any other means. What Data Points Does This Cover? It is interesting that the original 2010 Dodd-Frank statute which enacted the 1071 rule required 13 data points, which have now ballooned in the Final Rule to be reportable through 81 data fields. One notable change in the data points for the final rule is the addition of “LGBTQI+” business status. Whereas in the Proposed Rule there were two separate data points for business status — one for women-owned and one for minority-owned — the Final Rule just includes one data point for business status which encompasses all three of these: … The Bureau notes that proposed § 1002.107(a)(19), “womenowned business status,” has been combined with proposed § 1002.107(a)(18), “minority-owned business status,” and the final § 1002.107(a)(18) 274 data point now addresses “minority-owned, women-owned, and LGBTQI+-owned business statuses.” As a result, the data points in proposed § 1002.107(20) and (21) have been renumbered as final § 1002.107(19) and (20). … p. 274: https://files.consumerfinance.gov/f/documents/ cfpb_1071-final-rule.pdf While we can’t reasonably cover them all here, the remaining data points were similar to the Proposed Rule and may be reviewed in the CFPB’s Data Points Chart. 19 Nebraska Banker
What Transactions Are Covered? Covered Credit Transactions Very generally, a covered credit transaction is an extension of business credit under Regulation B, but with certain exclusions, some specifically for purposes of Section 1071, such as: • Trade credit; • HMDA-reportable transactions; • Insurance premium financing; • Public utilities credit; • Securities credit; • Certain incidental credit; • Factoring; • Leases; • Consumer-designated credit used for business or agricultural purposes; • Purchases of a credit transaction; • Purchases of an interest in a pool of credit transactions; and • Purchases of a partial interest in a credit transaction (such as a loan participation agreement). Despite the length of this list of exclusions, the definition is still extremely broad and covers a wide variety of transactions, including closed-end loans, open-end lines of credit, credit cards, merchant cash advances and various credit products used for agricultural purposes. Covered Originations A very important thing to note in this area is that “covered originations” for purposes of determining institutional coverage and compliance dates is narrower than the above. A common question we have been getting on the hotline is whether extensions and renewals should be counted. For this purpose, extensions, renewals, and certain other loan amendments are not considered covered originations even if they increase the credit line or credit amount of the existing transaction. What Else Should I Be Thinking About? Firewall A very unique aspect of this rule is the so-called “firewall” provision, which bears mentioning here. In general, employees and officers should be prohibited from accessing the following responses if that employee or officer is involved in making any determination about the application: • The applicant’s minority-owned, women-owned, and LGBTQI+-owned business statuses; and • Its principal owners’ ethnicity, race, and sex. There are limited exceptions to this firewall requirement, including a notice allowance, and the Final Rule also prohibits the bank from disclosing this demographic information to other parties, again, with limited exceptions. Safe Harbors Interestingly, the Final Rule has a safe harbor for certain incorrect census tracts, NAICS codes, and application dates. It also has a safe harbor regarding incorrect determinations of small business status, covered credit transactions, and covered applications. For example, if the bank initially determines that an applicant is a small business, but then later concludes the applicant is not a small business, the bank would not be in violation if, at the time the bank collected the demographic data, it had a “reasonable basis for believing that the application was from a small business.” Action Plan Now that the Final Rule has arrived, there are a variety of questions and action steps our members should be considering, such as: • Is my bank covered under the new Final Rule? If so, what is the bank’s mandatory compliance date? • How will this affect the bank’s Compliance Management System (CMS)? What policies, procedures, and other governance documents or materials may need to be amended? • Is everyone well-informed of the changes and their effects, including the Board, senior management, business lines, and other stakeholders? • What type of training is planned and for whom? • What do the bank’s business lending processes look like currently and what change management will be required to implement these changes correctly and in a timely manner? 20 Nebraska Banker
800.228.2581 MHM.INC Now more than ever people want self-service options. With our core integrated ITMs we can make this a reality both in the lobby and in the drive-up of your branch. SELF-SERVICE BANKING • Has the bank established relationships with any vendors? Do the modules or other software offered need to be tailored to meet the bank’s needs? • What will the institution be employing for data integrity purposes? • What does a tailored project implementation plan look like for my institution? Other Resources In addition to the Final Rule itself, the CFPB published a bevy of other accompanying materials. One is a Fact Sheet, which outlines the history of the Section 1071 rulemaking and the various policy objectives driving it. Another is a Policy Statement that indicates “… that the CFPB intends to focus its supervisory and enforcement activities … on ensuring that covered lenders do not discourage small business loan applicants from providing responsive data, including … ECOA-mandated demographic data requests …” The CFPB also published a Filing Instructions Guide which provides an overview of the filing process, instructions for what to enter in each data field, validation requirements that must be met before the register can be filed and additional resources to assist with inquiries. A Data Points Chart provides a visual guide to the various data point fields and their respective regulatory references, along with a brief description and filing instructions for each. An Executive Summary lays out an overview of the main facets of the Final Rule. Compliance Alliance will be publishing its own summary of the Final Rule very soon. Finally, a Key Dates chart provides a visual representation of the three compliance tiers and their respective mandatory compliance collection and reporting dates. Note that there are some additional tools on the CFPB’s resources page, and more may be added in the future. We’re Here to Help! It goes without saying that this is just an extremely brief overview of all the Final Rule entails. As you approach your compliance date, or just work to determine whether your institution may be covered at all, we’re here to help! Feel free to reach out to our compliance hotline by chat, email, or phone and one of our advisors will be happy to walk through your questions with you. Victoria serves as Senior Vice President and Deputy General Counsel for Compliance Alliance. Since joining C/A in 2015, Victoria’s played a role in various facets of the organization, including leading our team of hotline attorneys and compliance officers, developing new products for members, and trainings, both internal and external. She was the first editor of ACCESS magazine and took a leading role in the website development team. Victoria has spoken at a number of compliance conferences and schools, and written for many national and state banker publications. 21 Nebraska Banker
According to the National Safety Council, slips, trips and falls are the third leading cause of injury in the workplace. Some of these incidents occur at banks with employees or customers. While these mishaps might be commonplace, there is a proactive approach banks can take to help reduce the risk of their employees and customers being injured in a slip, trip and fall. A smart place to start: analyze both the physical conditions of the premises and usage and traffic flow patterns, which can often identify potential hazards that should be addressed. Some of the accident causes are well known: wet spots on floors, uneven walking surfaces and dirty doormats. Other factors, such as poor lighting, might not be as noticeable but can be equally dangerous. “Banks should be aware of the potential for people falling and getting injured, and should take steps to ensure the premises are as safe as possible,” said Laura Lundin, Vice President of Financial Institutions P&C at Travelers. “There are many ways to do this — maintain clean floor surfaces, ensure the space is well lit, schedule regular maintenance during low traffic times and conduct periodic walkthroughs to confirm everything looks safe. A little attention can go a long way.” Working with an insurance carrier is also recommended. Insurance providers can work with banks to: • Help identify and assess exposures; • Develop loss control strategies and improvements to minimize the frequency and severity of slip, trip and fall incidents; and • Provide training to help with slip, trip and fall prevention efforts. If an accident does take place, be sure that it is documented and reported. This information can help prevent future incidents and may be essential if a claim is filed against the bank. A standard, printed incident report is helpful in ensuring that all details are recorded. Documenting the details of the incident, collecting the names and a brief statement from the injured party and any witnesses, even taking photographs of the incident site, can help. Slips, trips and falls rarely “just happen.” Implementing effective slip, trip and fall improvements requires the right tools, people and communications. The right insurance carrier can help your slip, trip and fall prevention team define and document the policies, procedures, roles and responsibilities needed to effectively reduce these incidents. They also can help your team develop the tools and communication materials needed to implement this process. Travelers is committed to managing and mitigating risks and exposures and does so backed by financial stability and a dedicated team — from underwriters to claim professionals — whose mission is to insure and protect a company’s assets. For more information, visit www.travelers.com. Slip, Trip and Fall Prevention Travelers 22 Nebraska Banker
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2023 EDUCATION CALENDAR JULY 2023 Agricultural Lending School July 10-14 Manhattan, KS New Account Documentation & Compliance Workshop July 18 Kearney, NE New Account Documentation & Compliance Workshop July 19 Lincoln, NE AUGUST 2023 Young Bankers of Nebraska Conference August 3-4 Lincoln, NE Real Estate Lending Compliance Conference August 15-16 Lincoln, NE Call Report Workshop August 23-24 Virtual Regulation B Workshop August 28 Lincoln, NE Fair Lending Essentials Workshop August 29 Lincoln, NE SEPTEMBER 2023 Fall Agribusiness Conference September 7-8 Lincoln, NE Tri-State Human Resources Conference September 12-13 Overland Park, KS Fall IRA Workshop Series September 18-19 Lincoln, NE Advanced Agricultural Lending School September 19-21 Kearney, NE Fall IRA Workshop Series September 20-21 North Platte, NE Advanced School of Banking, Year 1 September 25-29 Kearney, NE For more information about these live and online education events and training tools, contact the NBA Education Center at (402) 474-1555 or nbaeducation@nebankers.org. You may also visit the NBA website at https://www.nebankers.org/education. 25 Nebraska Banker
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