ISSUE 3 2022 CRUCIAL STEPS IN A DATA BREACH RESPONSE PLAN FOR FINANCIAL ORGANIZATIONS BREAKING DOWN THE DEBATE OVER DIGITAL ASSETS O F F I C I A L P U B L I C A T I O N O F T H E U T A H B A N K E R S A S S O C I A T I O N SIXTH ANNUAL UBA GOLF CLASSIC A SWINGING SUCCESS
Learn more and register: www.utah.bank/ebl Emerging Bank Leaders is an exciting program developed by bankers to provide networking, education, and career development opportunities for the next generation of bank leaders! JOIN OUR TEAM! Annual Membership Only $50! Includes access to: Networking Events Mentor Match Program Leadership Opportunities on EBL Committees Access to Leadership Insights from Bank Executives Community Service Banker Meet-Ups ..And More!
Howard M. Headlee President howard@utah.bank Becky Wilkes Senior Vice President bwilkes@utah.bank Beth Parker Director of Education beth@utah.bank Sara Matute Director of Member Services sara@utah.bank Brian Comstock Director of Communications & Marketing brian@utah.bank UBA Staff CONTENTS 1 ©2022 Utah Bankers Association | The newsLINK Group, LLC. All rights reserved. Utah Banker is published four times each year by The newsLINK Group, LLC for Utah Bankers Association and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and banker 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 Utah Bankers Association, 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. Utah Banker is a collective work, and as such, some articles are submitted by authors who are independent of Utah Bankers Association. While Utah Bankers Association 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. 2 The Bottom Line By Howard Headlee, President and CEO, Utah Bankers Association 3 Upcoming UBA Events Fall 2022 4 Washington Update Breaking Down The Debate Over Digital Assets By Rob Nichols, President and CEO, American Bankers Association 6 Federal Home Loan Bank Celebrates 90 Years By Douglas L. DeFries, President and CEO of Bank of Utah, FHLB Des Moines, Board of Directors Utah Directorship 8 Sixth Annual UBA Golf Classic A Swinging Success 10 Cryptocurrency: Safe or “Sus”? By Carol Ann Warren, JD, Associate General Counsel, Compliance Alliance 12 For Community Banks, The Sun Also Rises Solar Tax Credit Investments Now More Accessible By Josh Miller, CEO, KeyState Renewables 14 As Client Needs Evolve, Banks Are Expanding Offerings Through Correspondent Banking By Phil Diederich, Manager, Zions Correspondent Banking 16 The Edulogue By Beth Parker, Director of Education, Utah Bankers Association 18 Crucial Steps In A Data Breach Response Plan For Financial Organizations By James Fair, Sr. VP of Technical Operations, Executech 20 UBA Fall Washington, D.C. Visit 21 Emerging Bank Leaders Spotlight 22 Bank Kudos 24 Bankers on the Move 26 UBA Community Reinvestment Conference By Brian Comstock, Director of Communications & Marketing, Utah Bankers Association 27 Questions, Issues And Strategies Involved In Opening Accounts Online By Sharvelle Washington, CAMS BSA/Compliance Officer, Bankers’ Bank of the West 28 Loan Strategies To Help Your Customers Fight Inf lation And Earn Their Trust By Stephenie Williams, Vice President, Financial Institution, Product and Strategy, Vericast 31 UBA New Associate Member FHN Financial 32 UBA Associate Members 35 A Case Study: Lenders Beware of an Expiring Statute of Limitations 12 4 14 16
utah.bank 2 The Bottom Line Howard Headlee President and CEO Utah Bankers Association I recently attended the American Bankers Association Annual Convention in Austin, Texas. It was an excellent event, loaded with critical information and insights on the latest issues. Scott Anderson delivered a stirring farewell as Chairman of the ABA, recognizing the exceptional leadership of ABA President Rob Nichols, the ABA’s leadership in assisting its member banks in becoming more diverse and inclusive, the commitment of bankers across the country in advocating for our industry, and the dedication of those same bankers to serving their communities. Scott’s enthusiasm energized the room. He repeated his pride in being a banker, and I was proud of how he represented the industry and, more specifically, bankers in Utah! Scott’s presentation was followed immediately by FDIC Chairman Marty Gruenberg. Talk about a roller coaster ride. We all braced for his comments — after all, we have entered some challenging times. But no one in the room could have predicted what he said. But before I get to that, let me restate my recent message: inf lation is the sworn enemy of banking. Our mission is to help people save, protect, and build wealth. Inf lation does the exact opposite; it destroys wealth and works against everything we are trying to accomplish for our customers. The Fed understands the threat inf lation poses to individuals and the economy, so it has taken an aggressive approach to increasing interest rates, inf licting short-term pain in hopes of minimizing the more damaging long-term impact of inf lation. After an unprecedented period of historically low rates, such a rapid change in interest rates creates enormous challenges for customers and bankers alike. As I wrote previously, if those in charge of fiscal policy fail to exercise the same discipline, this could go on for a while. Clearly, this is a significant economic moment for bankers, and their skills and wisdom will be seriously tested. Their ability to navigate these competing economic forces will impact every American and every community. So, bankers gathered in Austin, fully expecting to hear some cautionary words and critical insights from Chairman Gruenberg of the FDIC — a man who has witnessed and weathered many economic storms. What we heard was f labbergasting. He spent his entire presentation discussing, explaining, and rationalizing the FDIC’s obsession with climate change. Like every other federal agency, the FDIC appears consumed with the Biden administration’s directive on climate change. And without even a nod to the current economic challenges, the Chairman of the FDIC spent every minute in front of over 1,000 bankers lecturing them on a risk they have successfully managed for decades. Don’t get me wrong; it would be fantastic if current economic challenges ended up being a small blip and bankers had the luxury of focusing all their time and attention on facilitating our customers’ smooth and seamless transition to more renewable sources of energy. But for now — right now — that feels like a dangerous miscalculation of the current risks. We know how this plays out inside the beltway. Policymakers continue to ignore the obvious danger, pushing their preferred agenda until reality, and the American people, demand they reverse course. Then, they abruptly shift gears, blame everyone else — including the banks — and pretend their policy had no role in the outcome. It happened before with housing policy, and it’s happening now with climate. However, I predict the outcome will be different this time, and here’s why: the public overwhelmingly trusts banks, especially their individual bankers. Satisfaction with banks has never been higher. The same cannot be said for Congress and executive branch agencies. And banks will continue to build this public trust by helping customers navigate the economic risks at hand. Eventually, people will realize this crisis was created by foolish policymakers so enamored with their political narratives that they lost sight of our economic reality. n
Issue 3. 2022 3 Upcoming UBA Events 16 NOV 2 DEC Emerging Bank Leaders Conference Zions Technology Center Midvale, UT Bank Executive Winter Conference Little America Hotel Salt Lake City, UT LEARN MORE AND REGISTER AT UTAH.BANK New This Year! Networking Social 11/15 26 JAN FDIC Community Bankers Workshop Wasatch Retreat Center Salt Lake City, UT
utah.bank 4 Washington Update Rob Nichols President and CEO American Bankers Association BREAKING DOWN THE DEBATE OVER DIGITAL ASSETS As I traveled the country this summer speaking at various state bankers association conventions, I’d always ask this question of my audience: How many of you have clients and customers asking you about cryptocurrencies and digital assets? And nearly everywhere I went, nearly every hand would go up. The interest in cryptocurrencies and digital assets is undeniable – even in the face of recent volatility in digital asset markets. Americans want them: from the casual dabbler to the serious investor, from Gen Z’ers to boomers, it seems everyone wants a bite at the crypto apple. Many banks want to engage, too – as digital assets become more popular, and those banks are exploring ways to meet the needs of customers who want their bank to be the custodian of these assets. I’ve written previously about the merits of banks being able to take on custodial roles for digital assets – there are many – and the need for a regulatory architecture that will support them in taking on these roles if they choose. That’s an area where ABA continues to advocate for banks’ ability to enter the digital asset space safely and soundly. But it’s just one of the debates currently brewing over crypto. There are several others of which bankers should be aware: Who should regulate? One key quandary facing policymakers right now: what’s the right way to regulate crypto, and to which agency should that authority be delegated? Currently, the Securities and Exchange Commission and the Commodity Futures Trading Commission are both vying for the role of crypto cop. Two separate bills have been introduced this summer – one by Sens. Cynthia Lummis (RWy.) and Kirsten Gillibrand (D-N.Y.) and another by Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.) – that would delegate most of this authority to the CFTC. Simultaneously, there are some in the crypto community calling for the creation of a whole new regulatory agency dedicated to digital asset supervision, though this seems far less likely. Regardless of which entity ultimately ends up with regulatory authority, it is imperative that it develops clear definitions of digital asset products that are based on the risk that each category of digital asset carries. Working with the banking agencies, any prospective crypto regulator must also ensure a level playing field between bank and non-bank entities in
Issue 3. 2022 5 FEEL SECURE. BE SECURE. Contact us today! 801.489.9600 securityservicesutah.com Video Surveillance Electronic Alarm Systems Vault and Safe Locks Access Control Under Counter Steel Pneumatic Drive Up Equipment Deal Drawers Audio/Visual Sound Systems Networking/Structured Wiring The interest in cryptocurrencies and digital assets is undeniable – even in the face of recent volatility in digital asset markets. Americans want them: from the casual dabbler to the serious investor, from Gen Z’ers to boomers, it seems everyone wants a bite at the crypto apple. the digital asset markets and establish clear guidelines for risk management and consumer protection. Payments system access? Another key question is the extent to which nonbank crypto firms should have access to the payment system. The Federal Reserve took a significant step toward answering this question in mid-August when it finalized a framework for assessing which entities may be granted payment system access. This framework creates a tiered system for evaluating incoming requests, and under it, institutions that engage in novel activities would undergo a more extensive review. Access to the payments system is a significant privilege with many responsibilities. As the Fed begins evaluating new requests for access, we’ll be watching carefully to ensure that these new guidelines appropriately account for the inherent risks that come with some of these new financial players. Is there a use case for a CBDC? Finally, there’s the question of a central bank digital currency and whether there’s a use case for it in the U.S. As ABA told policymakers in several comment letters and testimonies over the last year, our view is that no such case exists – for every problem that proponents say a CBDC could solve, the fact is that there are already solutions available that don’t involve a governmentcreated currency. Financial inclusion is just one example: Banks are already making great strides to bring more unbanked households into the financial system by offering Bank On-certified accounts. Not only would a CBDC be duplicative of private-sector solutions that already exist, but it also has the potential to have an incredibly damaging effect on bank balance sheets and the flow of credit to households and businesses if the Federal Reserve were to become a competitor for bank deposits. These ongoing debates underscore an urgent need for a fair, well-calibrated regulatory framework for digital assets that promote responsible innovation while minimizing systemic risk and protecting consumers. And that’s a framework we’ll continue to fight for. n
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Issue 3. 2022 7 This year marks the 90th anniversary of the creation of the Federal Home Loan Bank System. Established at the height of the Great Depression through the Federal Home Loan Bank Act of 1932, the system is composed of 11 regional FHLBanks and serves 6,500 members, including many financial institutions in Utah. Today, nine decades later, FHLBanks across the U.S. continue to champion community-focused lenders, such as Bank of Utah, by providing affordable liquidity. This means we can bring homes and financial stability to our communities and give back in meaningful ways. As a director for FHLB Des Moines, I am especially proud that our partnership helps ensure our neighbors have a great place to live and work, a place where they can thrive. I’d like to share two examples of how we do that, both of which underscore why the Bank of Utah is celebrating 90 years of FHLB Des Moines’ service. The Affordable Housing Program Supports Local Housing Needs Since its creation, the Affordable Housing Program (AHP) has grown to be one of the most successful sources of private funding for affordable housing, providing nearly $7 billion in funding to build or improve 994,000 homes nationally. The state of Utah has utilized $32 million in grant funds to build or improve nearly 5,200 homes. The program is designed to help local banks and their nonprofit partners develop housing based on the affordable housing or economic development needs in their communities. FHLB Des Moines understands the gaps in the cost of housing versus household incomes across its district. That intimate knowledge provides a great opportunity for the bank to customize grant programs, including helping Utah communities overcome the high cost of housing. FEDERAL HOME LOAN BANK CELEBRATES 90 YEARS By Douglas L. DeFries, President and CEO of Bank of Utah, FHLB Des Moines Board of Directors Utah Directorship Douglas L. DeFries President and CEO of Bank of Utah FHLB Des Moines Board of Directors Utah Directorship Grant Funds Put People in Homes Bank of Utah has been a supporter and user of FHLB Des Moines’ services for a long time, and while we appreciate the access to low-cost liquidity and the Mortgage Partnership Finance® Program, we believe the program that makes the most difference in whether or not people can get into a home is the Home$tart® Program. Through Home$tart, families and individuals receive up to $7,500 in down payment and closing cost assistance to purchase their first home. FHLB Des Moines has awarded $111 million in these types of grants to help more than 20,300 families. Many of these families would not have had the opportunity to purchase homes without Home$tart. Down payments are hard to save for, especially when the housing market is incredibly competitive. Paying for day-to-day expenses can seem overwhelming. There are too many obstacles and getting a mortgage can feel impossible, but with Home$tart we remove a few of those barriers. FHLB Des Moines is celebrating a huge milestone, and while congratulations are definitely in order, I would also like to extend a big “thank you” to the FHLBank System. Without our partnership with FHLB Des Moines, we would lose a backstop and stable source of liquidity that I have come to rely on in my 38 years in the banking industry. More importantly, our communities would suffer, and families would not have the opportunities to build a future. Congratulations on 90 years! Bank of Utah is proud to be a member of the Federal Home Loan Bank of Des Moines. There are too many obstacles and getting a mortgage can feel impossible, but with Home$tart we remove a few of those barriers.
utah.bank 8 More than 100 bankers and business partners teed off at Old Mill Golf Course in Salt Lake City Sept. 9, 2022, a glorious day of golf to support Utah’s banking industry. Mother Nature cooperated by dialing back the sweltering summer temperatures, making for a gorgeous day on the links with perfect opportunities to connect with colleagues and tournament sponsors. Each hole on the course was sponsored by one of UBA’s amazing business partners, with many handing out free swag and raff ling off fantastic golf prizes. SIXTH ANNUAL UBA GOLF CLASSIC A SWINGING SUCCESS By Brian Comstock, Director of Communications & Marketing, Utah Bankers Association Congratulations to the group from Wells Fargo, who shot the tournament’s low score of 55. The foursome was led by Wells Fargo’s Regional Banking Director and UBA Chair, Matt Bloye, and included Steve Alsup, Song Mom, and Dallen Atwood. Contest Winners Longest Drive (Men): Dallen Atwood, Wells Fargo Longest Drive (Women): Jhae Smith, Capital Community Bank Longest Putt: Zach Espinosa, Celtic Bank Closest to Pin: Judd Anderton, Regions | EnerBank n
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utah.bank 10 In today’s financial regulatory environment, two of the hottest topics are cryptocurrency and cybersecurity. Within the past year, multiple agencies have released various regulations and guidance regarding cryptocurrency, banking, and cybersecurity, both individually and collectively. As my teachers would say, if something is said more than once, it is probably important, and you will likely see the material again. Similarly, cryptocurrency and cybersecurity threats are likely here to stay, and regulators are preparing for those implications. Banks are now put on the spot to adapt to the market shift and the regulations that will surely follow. What is cryptocurrency? The Merriam-Webster’s dictionary defines cryptocurrency as “any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.” How does cryptocurrency relate to banking? For bankers, the question of how cryptocurrency relates to banking is pressing and hard to answer. Crypto-currency usage is typically stereo-typed between two different groups: underground-market transactions (i.e., drug market or selling a kidney online) and GameStop/Reddit kids who almost crashed the stock market in 2021. Volatility and illicit activity are two of the biggest regulatory fears for bankers, so how do banking and cryptocurrency relate? First, who are the individuals actually investing or using cryptocurrency? According to a November 2021 article from Pew Research, 16% of Americans have used or are invested in cryptocurrency. Of CRYPTOCURRENCY: SAFE OR “SUS”? By Carol Ann Warren, JD, Associate General Counsel, Compliance Alliance
Issue 3. 2022 11 According to a November 2021 article from Pew Research, 16% of Americans have used or are invested in cryptocurrency. Of that 16% of Americans, 52% of those individuals are between the ages of 18-49. The individuals in this age group are not typical “in-person” banking customers. that 16% of Americans, 52% of those individuals are between the ages of 18-49. The individuals in this age group are not typical “in-person” banking customers. As the market is shifting and these individuals have more market power, banks scramble to advertise to this group. Cryptocurrency may be a way to do that successfully. The guidance from regulators is that banking, one of the most highly regulated industries in the country, is supposed to mix with cryptocurrency, one of the most unregulated commodities in the world. The two seem like oil and water, but the Office of the Comptroller of the Currency (OCC) argues in Interpretive Letter #1170 that it is more like M&Ms and popcorn, an unlikely yet satisfying combination. The OCC didn’t actually say that, but they did argue that for banks, providing custodial services related to cryptocurrency would be in line with a bank’s intended purpose: “safe keeping” of assets. The banking world has been shifting from physical currency and safekeeping to virtual safekeeping for many years now. Therefore, the argument is that providing services for cryptocurrency is not a far-fetched idea, but a natural progression. How does cryptocurrency relate to cybersecurity? Because cryptocurrency is “so hot” right now and because of its anonymity, it is a prime target for hackers and bad actors around the world. From what the banking industry is seeing with P2P activity in relation to Regulation E and the new Interagency Guidance on cybersecurity, the question many bankers are asking is, “Do we want to add cryptocurrency to this dumpster fire?” The answer: Maybe. The Interagency Guidance defines a “cybersecurity incident” as one that rises to the level of a “notification incident.” A cybersecurity incident is an occurrence that: (i) Results in actual or potential harm to the confidentiality, integrity, or availability of an information system or the information that the system processes, stores, or transmits; or (ii) Constitutes a violation or imminent threat of violation of security policies, security procedures, or acceptable use policies. This new guidance is giving rise to new policies, procedures, and safeguards for banks to have to implement. Ultimately, this is giving time to prepare for the inevitable cybersecurity attack, but this is not without cost to the bank. The next question is: If a bank takes on servicing cryptocurrency customers, does this increase the risk of a cyber-security incident? The answer: Probably. Ultimately, this will be more of a cost-benefit analysis for the bank. According to a recent CNN article, there were over $1.9 billon worth of cryptocurrency stolen in 2022, so far. According to FinCEN, ransomware attacks are at an all-time high and only continue to increase. There is an argument that combining the banking with cryptocurrency will only lead to an increase in cyberattacks on banks, which is likely true. Is it worth it? The answer: Maybe. Banks need to have safeguards in place to protect current assets, private information, and to comply with the myriad of new guidance. There is an argument that the infrastructure is already there. Lastly, several agencies acknowledge the risk associated with servicing cryptocurrency and still push for banks to consider servicing this group. At the end of the day, a bank is one of the safest places to keep assets, virtually or physically. Therefore, banks may want to consider servicing this group, because banks have specialized in safekeeping throughout their existence. If they choose not to service this group, they may miss out on a lucrative market opportunity. n Carol Ann Warren, JD, is an Associate General Counsel at Compliance Alliance, and can be reached at compliancealliance.com.
utah.bank 12 FOR COMMUNITY BANKS, THE SUN ALSO RISES SOLAR TAX CREDIT INVESTMENTS NOW MORE ACCESSIBLE By Josh Miller, CEO, KeyState Renewables For more than a decade, large financial institutions like U.S. Bank and Wells Fargo, joined by Fortune 500 giants like Apple and Google, have been the dominant players in solar investment tax credits (ITCs). Driven by federal incentives, these companies have provided funding for the largest solar projects in the country, collecting healthy returns while raising their corporate profiles as environmental/social/ governance (ESG) leaders. The benefits of solar ITCs are hard to ignore. Tax credit investors funding renewable energy projects can significantly offset their federal tax liability and recognize a meaningful annual GAAP earnings benefit. From 2005 to 2020, renewable energy tax credits have fueled the explosive growth of solar and wind power production nearly 18-fold. The recently passed Inf lation Reduction Act is a transformational bill with provisions to entice large numbers of mid-size businesses and community banks to deploy capital into renewable energy projects across the U.S. It extends solar ITCs for at least 10 more years (until greenhouse gas emissions are reduced by 70%) and retroactively increases the ITC from 26% to 30%, effective January 1, 2022. This extension and expansion of ITCs, along with other meaningful incentives included in the bill, will result in a significant increase in renewable energy projects being developed and constructed over the next decade. Community banks are the logical source of financing for solar ITCs and traditional loans in response to this expected f lood of mid-size renewable projects. Solar ITCs have a notably better return profile than other tax credit investments commonly made by banks. Solar ITCs and the accelerated depreciation associated with a solar power project are fully recognized once built and producing power. This is quite different from other tax credit investments, such as new markets tax credits (NMTCs), lowincome housing tax credits (LIHTCs) and historic rehabilitation tax credits (HTCs), where credits are recognized over the holding period of the investment (five, seven, 10, or 15 years). Like other tax equity investments, solar tax equity investments require complex deal structures, specialized project diligence and underwriting, and active ongoing monitoring. Specialty
Issue 3. 2022 13 investment management firms like KeyState provide support to community banks hoping to make solar tax credit (i.e., “solar tax equity”) investments by syndicating the investments across small groups of community banks. Without support, community banks may struggle to consistently identify suitable solar project investment opportunities built by qualified solar development partners. Not all solar projects are created equally, and it is critical for a community bank to properly evaluate all aspects of a solar tax equity investment. Investment in particular types of solar projects, including utility, C&I, municipal, and community solar projects, can provide stable and predictable returns. However, a community bank investor should perform considerable due diligence or partner with a firm to assist with the diligence. There are typically three stages of diligence: • The bank should review the return profile and GAAP model with their tax and audit firms to validate the benefits illustrated by the solar developer and the anticipated impact of the investment on the bank’s earnings profile and capital. • The bank should work with regulatory counsel to identify the path to approval for the investment. Solar tax equity investments are permissible for national banks under an April 1, 2021, OCC Rule (12 CFR 7.1025). Banks have been making solar tax equity investments based on OCC published guidance for over a decade. In 2021, this new OCC rule codified that guidance. It provides a straightforward roadmap and goes so far as to encourage community banks to consider solar tax equity investments. Alternatively, under Section 4(c)(6) of the Bank Holding Company Act, holding companies under $10 billion in assets may also invest in a properly structured solar tax equity fund managed by a professional asset manager. • The bank must underwrite the solar developer and each solar project. Community banks should partner with a firm experienced in evaluating and underwriting solar projects. The bank’s diligence should ensure structural mitigants are in place to fully address the unique risks associated with solar tax equity financings. Beyond the compelling return profile and stable and predictable cash f lows offered by conservative, investment-grade solar projects, achieving energy independence and reducing carbon emissions are critical goals in and of themselves. Solar tax credit investments can be a key component of a bank’s broader ESG strategy. The bank can monitor and report the amount of clean energy generated by the projects it has financed and include this information in an annual renewable energy finance impact report or a broader annual sustainability report. n Josh Miller is CEO of The KeyState Companies, which manages tax-advantaged investment and insurance structures for over 130 community banks across the country. KeyState Renewables launched its solar tax equity fund platform, SOLCAP, in 2019. To date, SOLCAP has financed over $120 million across 35 mid-size U.S. solar projects in seven states. SOLCAP expects to double this amount in 2023, providing another $130 million in capital for new solar project development. MEET YOUR UTAH RELATIONSHIP MANAGERS Bankers’ Bank of the West bBWEST.COM 800-873-4722 WHERE COMMUNITY BANKS BANK Member FDIC Scan to call now As a bankers’ bank we strive to help with every level of service and expertise, covering 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!” Lance Ni les, lniles@bbwest.com David Phi l ippi , dphilippi@bbwest.com
AS CLIENT NEEDS EVOLVE, BANKS ARE EXPANDING OFFERINGS THROUGH CORRESPONDENT BANKING By Phil Diederich, Manager, Zions Correspondent Banking utah.bank 14
Issue 3. 2022 15 Community banks play an important role in serving residents and businesses across Utah, while the state’s industrial banks also serve their unique niche clients. As of the second quarter of 2022, Banking Strategist reports 4,612 community bank charters in the U.S., and nearly half are headquartered in smaller, rural counties with populations less than 50,000. Many community and industrial banks recognize that their growth plans are tied to their need for technology tools and specialized lending capabilities to deliver a better customer experience. Over the years with Zions Correspondent Banking, I’ve come to recognize the challenges many community banks face in managing growth and profitability. More and more are finding the need for a full range of credit, treasury, and liquidity products to serve their commercial clients. As community and industrial banks work to expand their quiver of tools as their clients’ needs evolve, they may consider the benefits of these services: Fed Funds Fed Funds Sweep Accounts can seamlessly allow banks to manage balances by moving them into an overnight interestbearing account that can earn added revenue. Letters of Credit As more Utah companies expand overseas, community and industrial banks may find a need for commercial and standby letters of credit for both domestic and international deals. Foreign Exchange Community and industrial bank clients need tools to mitigate foreign currency exposure and execute cross-border transactions. Correspondent banking can offer the safe conversion and transfer of funds online for current rates worldwide. By expanding services to clients, banks can better support their customers’ global business objectives. Commercial Card More and more banks are finding value in utilizing commercial cards, not only for their employee expenses but also for paying vendors. In doing so, community and industrial banks can maximize their opportunities for revenue share. Third-Party Solutions Some third-party service providers offer loan programs for those with additional liquidity. Other services can assist in tax incentives for banks wanting to invest in renewable energy. When community and industrial banks look to enhance their software, digitized records/information, cash machine automation and recycling, a correspondent banking relationship can help. Additional third-party offerings can include employee retention credits and financial or strategic advisors. Safekeeping Banks can enhance their liquidity by using safekeeping accounts. Online safekeeping allows banks to find the latest information on their accounts. Investment Portfolio Reporting Banks can enhance their portfolio management by using Investment Portfolio Reporting solutions. These pull all data from all of a bank’s investment sources into one program, enabling customizable data reports. Capital Markets Bank clients seeking to maximize their investment needs and objectives may want to participate in the fixed income market. A correspondent banking relationship can help bridge community and industrial bank gaps for their institutional clients to work with registered representatives. Asset-based Lending and Factoring Community and industrial banks with commercial clients who need customized solutions can explore specialized credit programs. Asset-based lending (ABL) can provide working capital through a modified factoring product to assist with cash f low needs based on the creditworthiness of commercial accounts receivable. As an alternative to conventional financing, this can be a stable and f lexible source of funding that ensures available liquidity and f lexibility for growing or transitioning businesses. From start-ups to financially sound companies with seasonal needs, ABL and factoring can provide working capital solutions tailored to clients’ requirements and industry. Treasury As more and more of their business clients seek automated payment and cash f low solutions, community and industrial banks can utilize correspondent banking relationships to deliver their treasury solutions. These capabilities can include privatelabeled lockbox, check image and traditional clearings and wires, online banking, brokered deposit programs and excess balance accounts. As community and industrial banks strive to grow their services to meet clients’ needs, a correspondent banking relationship can enhance their offerings. n Phil Diederich manages Correspondent Banking at Zions Bancorporation, N.A. A veteran banker, he has 38 years of industry experience, 24 years of which have been serving community banks through correspondent banking. He and his team can be reached at 800-737-6470. Zions Bank currently maintains more than 700 community bank correspondent relationships across the country in 48 states and Guam, including both community banks and industrial banks in Utah. Helping advance more economic opportunity for traditionally underserved communities, Zions also provides banking services to 44 minority-owned (MDI) banks. We currently have a relationship with 85% of community banks and 84% of industrial banks in the Utah market. Banks can enhance their liquidity by using safekeeping accounts. Online safekeeping allows banks to find the latest information on their accounts.
utah.bank 16 THE EDULOGUE By Beth Parker, Director of Education, Utah Bankers Association Learning & Development Trends for 2023: What You Should Know eLearning is the future of training and development. The pandemic paved the way for the creation of technologies that continually refine and redefine how we learn. The digitization of learning not only brings convenience but also offers ways for organizations to harvest crucial insights that inform learning strategy. eLearning can provide equal access and learner customization that addresses the need of every learner. Virtual Training Virtual learning refers to an environment where students study a digital-based curriculum taught by instructors that lecture online via video or audio. This instruction can occur either in a selfpaced, on-demand environment or a real-time instructor-led environment. Within the realm of virtual learning, virtual reality (VR) and augmented reality (AR) are immersive technologies that enable users to experience digitally rendered content in both physical and virtual spaces. Highlights and benefits: • Remote work setup will increase the demand for ways to provide virtual training. • Virtual Reality (VR) is set to revolutionize corporate learning. • Virtual training has the potential to close the skills gap in organizations. Microlearning Microlearning is educational content focused on a single learning objective delivered in a short modular format (often 5-10 minutes long). This content is typically designed as digital media to meet a specific learning outcome. Highlights and benefits: • In the corporate sector, learners prefer microlearning over other training methods. • The on-demand design of microlearning improves employee engagement. • The focused and targeted design of microlearning increases comprehension rates. Planned Learning Journeys A planned learning journey is a strategic employee development approach anchored on business strategy. It incorporates multiple formal and informal development components that take place over time. Most organizations design a learning journey for employees in leadership positions. The main objective is to optimize training investment and maximize learning stickiness (when knowledge stays with us forever) to transform behavior. Highlights and benefits: • 91% of HR professionals find the planned learning journey approach more effective in employee development. • Using AI, planned learning journeys deliver customized learning experiences. • Planned learning journeys optimize training investment and maximize learning stickiness. Smart Content Curation and Adaptive Learning Smart content curation is the act of continually identifying, selecting, and sharing the best and most relevant online information in a timely manner. Aside from smart content curation, another eLearning trend related to content curation is Adaptive learning. This is a technique for providing personalized learning, which aims to provide efficient, effective, and customized learning paths to engage each student. Adaptive learning systems use a data-driven approach to
Issue 3. 2022 17 adjust the path and pace of learning, enabling the delivery of personalized learning at scale. Highlights and benefits: • Smart content curation filters irrelevant information and provides targeted learning content. • AI assists smart content curation in making learning more effective by collecting and filtering relevant information as needed by the learner. • Smart content creation complements social learning through sharing of well-curated content. • Adaptive learning will benefit learners by ensuring efficient and effective learning. • The data-driven approach of adaptive learning addresses unique learner needs. • Adaptive learning designs and monitors both progression of learning and method of delivery, making it an effective eLearning tool. Accessible learning Employees with physical limitations require assistive technologies to effectively work and train remotely. The demand for accessible learning programs is a significant eLearning trend. There is an urgent need for platforms and content formats optimized to meet the needs of employees that rely on assistive technologies. Highlights and benefits: • Tools that promote inclusive learning will be at the forefront of eLearning. • Technology that will address accessibility issues will be in high demand to engage all types of learners. • Tools that will engage learners with disabilities will address the demand for accessible learning programs. Social Learning When learners are placed in an environment with other learners, they can observe the behavior of others and model the behavior if it is aligned with the outcomes that learners value. This occurs within gamification leaderboards, direct message functions, forum discussions, and comment boxes. Consequently, this integrated environment paves the way for forming shared values. The digitization of learning not only brings convenience but also offers ways for organizations to harvest crucial insights that inform learning strategy. Highlights and benefits: • Social learning occurs each time interaction takes place, making it an effective tool for forming shared values. • Collaboration in the workplace facilitates social learning. • Social learning can be a very useful tool in promoting desired organizational outcomes. UBA and our training partners are constantly striving to meet the eLearning needs and expectations of Utah bankers. n
utah.bank 18 Banks and other financial institutions handle some of the most sensitive parts of an individual’s life. We hope that our information is safe with these organizations, but unfortunately, breaches happen far too often. In fact, 62% of breached data came from financial services in 2019. And companies in the financial services sector can suffer dramatically if a breach occurs. So, what should banks and other organizations do in the aftermath of a data breach? There are a few steps these organizations should include in their data breach response plan to mitigate damage and retain customers. Protecting Banks from Cyber Attacks Data breach response plans will help financial institutions find their footing after a data breach, but banks should also have measures in place to prevent cyber-attacks and breaches in the first place. To do this, leaders and decision-makers need to understand and implement strict cybersecurity policies throughout the organization. This includes safeguards like password policies. Put together a formal password guide, informing employees what types of passwords are the strongest, setting password expiration dates, and requiring the use of multi-factor authentication. Even this small step can add a level of protection to your organization. You’ll also want to ensure your organization utilizes a firewall and other cybersecurity solutions. One thing organizations often overlook in securing their data is mobile devices. Many financial services companies use laptops, tablets, and smartphones for their employees. If these devices contain company information and are not protected, you are opening a door for hackers. To give your business the best chance at preventing data breaches, you must do an entire risk assessment to determine the best cybersecurity solutions. If you don’t have internal IT resources to provide this assessment, you can always reach out to a cybersecurity provider and have them help you. Some companies even offer free assessments for this very situation. Putting Together a Data Breach Response Plan No matter what cybersecurity measures you have in place, if you experience a data breach, you’ll want to have a response CRUCIAL STEPS IN A DATA BREACH RESPONSE PLAN FOR FINANCIAL ORGANIZATIONS By James Fair, Sr. VP of Technical Operations, Executech
Issue 3. 2022 19 plan ready. A previously prepared plan of action will help you get back up and running as quickly as possible. When creating your data breach response plan, what are a few things you should ensure are included? 1. Assess the Situation Following a breach, the first step organizations should take is to evaluate their systems and identify the stolen data. Many businesses want to spring into action immediately. However, you first must identify the security vulnerabilities that led to your systems becoming compromised. Then, determine what information the criminal may have taken. Was it financial information? Or was it a more personal type of information, such as names and addresses? The type of data exposed will help you figure out how serious the breach was and what other steps need to be taken. 2. Comply with Legal Obligations There are a variety of different laws regulating data breaches – both on the state and federal levels. These regulations will dictate the timeline in which you must notify customers and what information the notification requires. It also may dictate which authorities you must alert to the breach. Depending on where your business operates, you will need to determine what legal obligations you must meet. If you fail to comply with any laws, you will most likely have to pay a hefty price. 3. Prevent Further Unauthorized Access As recommended in step one, after you have evaluated your network and systems, you’ll want to ensure that any remaining vulnerabilities are quickly patched and secured. For example, if a hacker got to your data from an exposed mobile device, you’ll need to implement solutions so that that access point is no longer open. You’ll likely want to call in the help of security experts to ensure your organization is secure. 4. Notify Your Customers One of the most important pieces of a data breach response plan involves keeping your customers in the loop. This can help you regain your clients’ trust and minimize lost business. A data breach can easily impact your customers’ confidence in your organization, but being upfront and transparent can make a big difference in keeping them around. You might already have a legal obligation to inform your customers of the breach within a specified time window. Whether this is the case or not, we recommend communicating with your customers sooner rather than later. Notify them what data was affected by the breach, whom they can reach out to for more information, and what steps you are taking to secure your systems and their data. 5. Continually Monitor and Update Your Security Lastly, your data breach response plan should also include continual security monitoring. This way, you can help ensure your organization won’t be hit again. New types of cyber-attacks are always emerging, and older forms evolve. To stay on top of your cybersecurity landscape and keep your organization protected, you have to stay updated on the newest forms of threats. To do this, you might consider hiring a managed service provider to manage and improve your cybersecurity. If you choose this option, you can keep focusing on your core business and leave the security up to the experts. Conclusion Cybersecurity cannot be underestimated in the financial services industry. Any bank, credit union, or other institution must prepare and protect its organization. And if a breach does happen, they need to be ready with a response plan. A response plan will give a company an outline of the steps it should take to reduce stress and panic within the organization. Even more, it will help ensure that a business does not miss any crucial steps in recovery. To give your business the best chance at preventing data breaches, you must do an entire risk assessment to determine the best cybersecurity solutions.
utah.bank 20 A group of Utah bankers traveled to Washington, D.C. in September to meet with federal regulators and Utah’s Congressional delegation. UBA FALL WASHINGTON, D.C. VISIT
Issue 3. 2022 21 Lydia Levin, SVP, Channel Strategy at Zions Bank in Salt Lake City, was one of 11 recipients of the American Bankers Association’s inaugural Emerging Leader Awards, honoring the next generation of bank leaders for their high standards of achievement and service to the industry and their communities. “Banking provides the great opportunity to meet, work with, and serve people from all segments of society,” said Levin. “I love the focus that we have on improving the communities where we live and work.” Levin served on the UBA Emerging Bank Leaders Board from 2019-2022, and she is still active in the group’s Mentoring Committee. Asked why she is passionate about banking, Levin said, “I work with intelligent, passionate, and talented people. This makes it rewarding and fun. My peers are professionals, genuinely interested in improving the financial condition of our customers through delivering the bank’s suite of products and services, whether they work in operations, compliance, or manage branches and client relationships.” Her best piece of advice to other bankers or those looking to join the industry? “To plan, but always be f lexible and open to new challenges and opportunities.” The complete list of 2022 ABA Emerging Leader Awards Winners can be found on ABA.com. EMERGING BANK LEADERS SPOTLIGHT LYDIA LEVIN RECOGNIZED WITH ABA EMERGING LEADER AWARD FALL NETWORKING EVENT AT TOPGOLF Emerging Bank Leaders from around Utah gathered at TopGolf in Midvale on September 28 for an afternoon of friendly competition, networking, and fun. This annual fall event is a highlight of the EBL calendar, and it’s totally free for members. Join us today at utah.bank/ebl, and we look forward to teeing it up with you next year!
utah.bank 22 BANK KUDOS BANK OF UTAH ANNOUNCES WINNERS OF 2022 “MY UTAH” PHOTO CONTEST A stunning photo of Utah Lake’s seasonal ice stacks, taken by Jami Bollschweiler of Weber County, won first prize in Bank of Utah’s 2022 “My Utah” photo contest. Now in its third year, the bank’s photo contest has gained popularity, resulting in a pool of nearly 400 entries, compared to 86 in 2021. Bollschweiler received a $500 prize for rising to the top, and Bank of Utah will highlight her spectacular photo in advertising, on social media platforms, and on the bank’s website. D.L. EVANS BANK OPENS NEW LAYTON BRANCH D.L. Evans Bank hosted a Grand Opening for their new Layton branch on September 13, celebrating the occasion with a ribbon cutting ceremony, prize giveaways, and refreshments. The new branch is located at 360 E. Gentile Street in Layton. FIRST COMMUNITY BANK CELEBRATES COMMUNITY GIVING MONTH During August, First Community Bank Utah, Division of Glacier Bank, celebrated their annual community giving month. The employees participated in giving back to their communities through various events, including Customer Shred Days, a Red Cross Blood Drive, a massive Community Giveaway Drawing, and a surprise drink blitz in which bankers purchased drinks for customers at local soda and coffee shops. Employees also f looded their communities with $95,000 in donations to nonprofit organizations selected by each branch. The response from these organizations was overwhelmingly grateful, and bank employees were proud to live out their purpose of building their communities, one dream at a time. TAB BANK’S SUSAN HOSTETTER NAMED A 2022 HR ACHIEVEMENT HONOREE BY UTAH BUSINESS TAB Bank announced that Susan Hostetter – Executive Vice President, Human Resources – was named a 2022 HR Achievement Honoree by Utah Business. The annual list honors HR professionals who foster culture, growth, and happiness in the workplace. Hostetter has prioritized efforts to combat the tough labor market impacted by the great resignation and the COVID-19 pandemic by ensuring that employees connect with TAB’s mission and vision. TAB has also invested in training employees and providing opportunities to grow within and across the business as they progress in their careers. TAB BANK HOSTS FUNDRAISING GOLF TOURNAMENT FOR OGDEN RESCUE MISSION TAB Bank hosted the 2022 Ogden Rescue Mission Charity Golf Tournament on September 9 at Wolf Creek Resort in Eden, Utah, to raise money for the Ogden Rescue Mission, a faithbased 501(c)(3) nonprofit organization that provides housing, food, counseling, and employment services for homeless persons in Northern Utah. Since 2001, with the generous support of past participants, donors, sponsors, and friends, the tournament has raised $475,000 to provide 180,000 meals to the less fortunate in the community.
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