O F F I C I A L P U B L I CA T I ON O F THE V I R G I N I A A S S OC I A T I ON O F COMMUN I T Y B ANK S Pub. 10 2021 Issue 4 CommunityBanker The SMART WAYS TO FIND PAGE 16 LOAN GROWTH
VACB BOARD OF DIRECTORS © 2021 Virginia Association of Community Banks |The newsLINKGroup, LLC. All rights reserved.The Community Banker is published four times each year byThe newsLINKGroup, LLC for the Virginia Association of Community Banks and is the official publication for this association.The information contained in this publication is intended to provide general information for review and consideration.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 specific circumstances.The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Virginia Association of Community Banks, 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.The Community Banker is a collective work, and as such, some articles are submitted by authors who are independent of theVirginiaAssociationof Community Banks.WhileTheCommunity 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. CONTENTS 16 18 CHAIR Dennis A. Dysart First Bank Strasburg CHAIR-ELECT Jay A. Stafford Benchmark Community Bank Kenbridge VICE CHAIR Tara Y. Harrison Virginia National Bank Charlottesville IMMEDIATE PAST CHAIRMAN J. Michael Thomas Select Bank Lynchburg ICBA VIRGINIA DELEGATE Mark C. Hanna F&M Bank Timberville PRESIDENT & CEO Steven C. Yeakel, CAE VACB Richmond VACB DIRECTORS CLASS OF 2022 Dabney T.P. Gilliam, Jr. The Bank of Charlotte County Phenix Bryan P. Thompson Highlands Community Bank Covington Joseph R. Witt The Old Point National Bank Hampton CLASS OF 2023 J. Steven Grist CornerStone Bank Lexington James E. Hendricks Village Bank Midlothian Lisa E. Kilgour MainStreet Bank Fairfax Paul M. Mylum National Bank Roanoke Thomas L. Rasey, Jr. The Farmers Bank of Appomattox Appomattox CLASS OF 2024 Christopher B. Snodgrass The Bank of Marion Marion Blake M. Edwards, Jr. Skyline National Bank Independence VACB STAFF Katharine C. Garner, CMP Vice President Education & Communications Kelli C. Mallinger Member Services Administrator 4 Chairman’s Message 5 President’s Message 6 VACB 44th Annual Convention October 3-5, 2021 Hotel Roanoke & Conference Center 12 VACB 44th Annual Convention & Trade Show Exhibit Hall Prize Winners 14 Thank You, Convention Sponsors 15 Newly Elected Officers and Board Members for 2021-22 16 Smart Ways to Find Loan Growth 18 Banking on the “E” in ESG 20 Uncovering Fee-Income and Yield Opportunities in a Challenging Market 21 ACH Debit Entry Fraud
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The CommunityBanker 4 Chairman’s Message By Dennis Dysart, VACB Chairman First Bank, Strasburg I want to begin by saying thank you. Thank you for your membership in the VACB, thank you for your attendance at the 2021 Annual Convention in Roanoke, and thank you for the opportunity to serve as your Chairman over the next 12 months. It was truly refreshing to be back in person at the Hotel Roanoke. While video conferences and meetings can certainly be productive and efficient, I must admit that I prefer personal interactions. We had some great presentations from industry leaders and time to interact and learn from one another and our associate members. Thanks to Steve, Katharine and Kelli for a great convention. Likewise, a special thanks to Mike Thomas for his leadership, counsel and direction as Chairman in 2021. As we plan for 2022, I suspect most of our banking companies will face similar operating challenges: excess liquidity, aggressive loan pricing and margin pressure, as well as increased competition for human capital resulting in considerable wage pressure. The operating environment may be challenging; however, community bankers in the Commonwealth have always been resilient and resourceful. Now is the perfect time to leverage your membership in the association. I believe we share a common vision to build vibrant, local communities, promote economic growth, offer local employment and serve as community leaders. To be successful, our predecessors formed the VACB to provide a unified voice for undiluted advocacy, a source for targeted education and connections for quality collaboration. All are included in our simple yet powerful mission statement. Undiluted Advocacy. Targeted Education. Quality Collaboration. VACB-One Mission. Community Banks.® I routinely remind myself the VACB is a membershipbased, membership-driven organization. We, both the board and staff, serve at your pleasure. In that regard, your board members have launched a member outreach initiative to ensure we are focused on member value and mission. I have truly enjoyed my personal calls, learning from each one of you and your banks. The calls confirmed we are all facing similar operating challenges at the most basic level, as noted above. More importantly, I heard stories from you regarding the association’s important role when PPP loans were launched and when we needed support and guidance. Similarly, we discussed the role the VACB and ICBA plays at a federal advocacy level. However, I also heard some of you discuss the need and desire to become more engaged with your association. We hope each of you will be more active with the VACB in 2022. There are some easy ways to launch that interaction and engagement. To begin: • Ensure your bank contacts are current at the VACB, so the association sends information and educational opportunities to the right people at your bank. • Plan to attend the ICBA Capitol Summit in Washington, D.C. (May 1-4, 2022) and be part of the Virginia delegation. It’s a great way to be part of a national ICBA event close to home and ensure our competitive position is protected inside the beltway. • Commit to calling another member bank or associate member to share best practices or learn more about new solutions, technologies or services. • Put the Annual Convention in Williamsburg on your calendar (Oct. 2-4, 2022). In closing, your membership and engagement are appreciated and highly valued. Steve, his team and your board stand prepared to support you and your banking company as we navigate the challenges and opportunities in 2022. Wishing you and yours a joyous holiday season. Dennis Membership Engagement
5 Winter | 2021 President’s Message By Steve Yeakel, CAE VACB President and CEO Among the positives to be noted during the delay in our full economic recovery, one bright spot would be the staying power of the impression made in your role as community bankers. You’ve saved jobs and small businesses across Virginia and beyond through the last twentyplus months. Employers and employees alike continue to mention that, as challenging as things are now, they would have been in catastrophic condition had their PPP loan not come through expeditiously, and in many cases, been forgiven. Your energy, sacrifice and commitment to your customers and communities have produced well-earned goodwill for you and your bank. The results have been both intangible and tangible. Just today, I heard a comment that I had heard several times before: “My big bank couldn’t serve me, so I found a smaller bank who worked with me to make it happen. I’m very happy working with them now.” I’ve also heard community leaders across the Commonwealth singing the praises of their community banks. And, of course, as all of your stories stay relevant and impactful, so does your community bank association’s ability to share them with key decision-makers in Washington, D.C. This “wind in our sails” is most needed now, as we battle an unusually large number of threats to our ability to serve our customers and communities in the manner they deserve. Only part of what we’re taking on includes: • The IRS reporting proposal • An alarming nomination for leadership of the OCC • A proposal to allow direct lending to businesses by the SBA • Challenging new requirements to provide the CFPB with additional data on small business loans • A postal banking pilot project in Virginia We can only win on these issues if we have your best efforts. You have generated a palpable measure of goodwill; we must call on it now for the benefit of our banks, our customers, and our communities. Over the next few months, we’ll be calling on you often to participate and recruit others to participate as well, to lift your voices among those who represent you in Congress. You have engaged with profound impact before; I am confident that we can prevail again, working together. The Story That Does Not Get Old: Yours! You have generated a palpable measure of goodwill; we must call on it now for the benefit of our banks, our customers, and our communities. Over the next few months, we’ll be calling on you often to participate and recruit others to participate as well, to lift your voices among those who represent you in Congress.
The CommunityBanker 6 October 3-5, 2021 Hotel Roanoke & Conference Center VACB members gathered at Hotel Roanoke in early October for a live, in-person convention after a 24-month hiatus and a virtual convention in 2020. Although attendance was a little lighter due to concerns over COVID, members were excited to be meeting in person and spent the three days in Roanoke enjoying time together and bringing VACB’s formula for convention success to life. The VACB annual convention works on a three-prong process — focusing on trends in the banking environment, exposure to the latest offerings from our Associate Members and great networking opportunities. The two Business Sessions were on target with valuable information, insight, and inspiration. The morning began with the membership approving the slate of officers for 2021-2022. Next was an economic overview presented by Dr. Robert Genetski, who provided an outlook for the economy and financial markets. In addition to discussing government policy changes and how they will affect various parts of the economy, Dr. Genetski presented his thoughts on Virginia’s economy and how the Commonwealth faired throughout the pandemic compared to other states. Our next presenter, Dan Stimpson from ICBA Securities, presented his view on the changing landscape of liquidity. Dan shared best practices for liquidity risk management, regulatory expectations, and various strategies banks can deploy to maintain the correct mix of liquidity and core earning assets. The final presenter Monday was Brian Plum with Blue Ridge Bank. He led a lively Q&A discussion with VACB President Steve Yeakel on Blue Ridge Bank’s entry into the VACB 2021-2022 Board of Directors
7 Winter | 2021 L to R Mike Thomas, Ned Honts, with Brandon Driver & Jesse Meadows presenting the YHB Grand Prize Gift FinTech arena and why banks present at the convention need to embrace FinTech and start the vetting process of these companies sooner rather than later. The pandemic changed the way a lot of customers bank, and that online, remote presence isn’t going away. Our Monday Business Session concluded with the Passing of the Gavel. Then current Chairman Mike Thomas with Select Bank welcomed Dennis Dysart into the role of Chairman for 2021-2022. Monday night at the Chairman’s celebration, attendees gathered for a Hometown Hoedown. The country & western-themed evening started with a delicious meal that featured all the vittles you would expect at a downhome cookout, and what a feast it was! After dinner, the night was open for a great time, both inside and out. Attendees had their choice of fun events, including bourbon and cigars, relaxing by fire pits with friends, or playing one of the many games available to attendees. The evening was all about fun and fellowship as we celebrated our 2020-2021 Chairman, Mike Thomas. Tuesday began with the traditional buffet breakfast. A number of attendees then gathered for a brief Moment of Remembrance, which had been created as a special event this year to honor some of those lost over the past year. President Steve Yeakel read the names of several friends and family lost, including former VACB Executive Director Pat Satterfield, and Vicki Thomas, our Chairman’s wife, who fought a courageous battle against cancer. Following the reading of the roll, Steve was joined by Stacy Stevens, a fine musician and banker at Bank of Botetourt, and the duo offered “It Is Well” as a musical reflection. It was a moving, beautiful service. Our second Business Session began with a sit-down Q&A between Steve Yeakel and ICBA Chairman Bob Fisher. Bob shared fresh updates on the latest developments in Washington, D.C., provided a review of priority issues that ICBA is tackling on behalf of its community bank members, and how ICBA continues “building the brand” of community banking. Our next session featured Shelli Willis and Zayne Tweed (with Troutman Pepper), and Nasreen Quibria (with ICBA) for a panel discussion. This one focused on the future of FinTech, blockchain technology and how and why banks should be preparing for these technologies and the opportunities these products and services will afford banks and help to level the playing field with larger banks. Our final session featured Jason Young with LeadSmart, who shared his insight into what creates the ultimate high-performance workplace. As a veteran at Southwest Airlines, Jason knows a thing or two about creating engaged employees performing at their best in a successful workplace culture. The convention concluded with the YHB Grand Prize Drawing. This year Jesse Meadows and Brandon Driver with YHB were on hand to draw a lucky banker’s name for one of several prize choices shipped to their home. Our lucky winner at this convention was Ned Honts with Bank of Botetourt. In his last act as VACB Chairman, Mike Thomas declared the 44th Annual Convention convened and wished all a safe trip home. He also urged everyone to make plans now to join VACB at the Williamsburg Lodge for the 45th Annual Convention & Trade Show in 2022. Although attendance was a little lighter due to concerns over COVID, members were excited to be meeting in person and spent the three days in Roanoke enjoying time together and bringing VACB’s formula for convention success to life.
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The CommunityBanker 12 VACB 44th Annual Convention & Trade Show Exhibit Hall Prize Winners Atlas Powered by StreetShares Echo 10 Show Won by: Jay Hendricks Village Bank Banc Card of America Sony Wireless Speaker Won by: Dennis Dysart First Bank Brown Edwards CPAs Gift Basket of Goodies Won by: Jay Stafford Benchmark Community Bank ICBA | ICBA Bancard $150 Gift Card Won by: Susan Ralston The Old Point National Bank ICBA Securities Corky’s Ultimate Taste Package Won by: John Caldwell The Farmers Bank of Appomattox KlarVis Gift Basket Won by: Scott Harvard First Bank Ken Smith Home Safe Won by: Jay Hendricks Village Bank LenderSelect Mortgage Group Ring Doorbell & Ring Stick Up Camera Won by: Ronnie Williams Benchmark Community Bank Paymerang $250 Visa Gift Card Won by: Lyn Hayth Bank of Botetourt ProcessMaker YETI Cooler filled with North Carolina Spirits Won by: Lisa Kilgour Main Street Bank SHAZAM $200 Master Card Gift Card Won by: Neil Burke Benchmark Community Bank Source4 $200 Gift Card Won by: Ronnie Williams Benchmark Community Bank The Counts Realty & Auction Group Leather Duffle Won by: Alice Fraizer Bank of Charles Town Virginia 1st One-Year Membership Won by: Hope Brown The Bank of Charlotte County Works 24 Corporation Golf Club Won by: Lyn Hayth Bank of Botetourt Grainger Del Rio & Meredith Little with ProcessMaker presenting their prize to Lisa Kilgour, MainStreet Bank Sanjay Bhaskar and Brendon DiBella with Atlas Powered by StreetShares presenting their prize to Jay Hendricks, Village Bank Brian Kain with SHAZAM presenting their prize to Neil Burke, Benchmark Community Bank
13 Winter | 2021 We Are All About You. YHB has a team of dedicated professionals who specialize in providing expert services to community banks. They have committed their entire career to helping banks thrive and no one has more experience than your YHB team. We are relentless in our pursuit of providing you the resources and personalized service you deserve. At YHB, we knowwhat it takes to help you succeed because we know community banks. Internal Audit | External Audit | IT Controls & Governance | Tax Services Never settle for less. Choose the experts at YHB. Auctioneers & Appraisers delivering successful results to Virginia Banking institutions since 1963 www.countsauction.com
The CommunityBanker 14 Thank You, ConvenƟon Sponsors! Thank you, Convention Sponsors! Diamond Platinum Gold Silver Bronze
15 Winter | 2021 VACB 2021 ‐ 2022 OFFICERS AND NEW BOARD MEMBERS VACB Executive Committee Chairman Dennis A. Dysart President & COO First Bank, Strasburg Vice Chair Tara Y. Harrison Executive Vice President & Chief Financial Officer Virginia National Bank, Charlottesville VACB Board of Directors ‐ Class of 2024 Chairman‐Elect Jay A. Stafford President & CEO Benchmark Community Bank, Kenbridge Steven C. Yeakel, CAE President & CEO VACB, Richmond Christopher B. Snodgrass President & CEO The Bank of Marion Blake M. Edwards, Jr. President & CEO Skyline National Bank, Independence VACB 2021 ‐ 2022 OFFICERS AND NEW BOARD MEMBERS VACB Executive Committee Chairman Dennis A. Dysart President & COO First Bank, Strasburg Vice Chair Tara Y. Harrison Executive Vice President & Chief Financial Officer Virginia National Bank, Charlottesville VACB Board of Directors ‐ Class of 2024 Chairman‐Elect Jay A. Stafford President & CEO Benchmark Community Bank, Kenbridge Steven C. Yeakel, CAE President & CEO VACB, Richmond Christopher B. Snodgrass President & CEO The Bank of Marion Blake M. Edwards, Jr. President & CEO Skyline National Bank, Independence VACB Executive Committee VACB Board of Directors-Class of 2024 Newly Elected Officers and Board Members for 2021-22
The CommunityBanker 16 In a long career focused on credit risk, I’ve never found myself saying that the industry’s biggest lending challenge is finding loans to make. But no one can ignore the lackluster and even declining demand for new loans pervading most of the industry, a phenomenon recently confirmed by the QwickAnalytics® National Performance Report, a quarterly report of performance metrics and trends based on the QwickAnalytics Community Bank Index. For its second quarter 2021 report, QwickAnalytics computed call report data from commercial banks $10 billion in assets and below. The analysis put the banks’ average 12-month loan growth at negative -0.43 basis points nationally, with many states showing declines of more than 100 basis points. If not reversed soon, this situation will bring more troubling implications to already thin net interest margins and stressed growth strategies. The question is: How will banks put their pandemic-induced liquidity to work in the typical, most optimal way — which, of course, is making loans? Before we look for solutions, let’s take an inventory of some unique and numerous challenges to what we typically regard as opportunities for loan growth. • Due to the massive government largess and 2020’s regulatory relief, the coronavirus pandemic has given the industry a complacent sense of comfort regarding credit quality. Most bankers agree with regulators that there is pervasive uncertainty surrounding the pandemic’s ultimate effects on credit. COVID-19’s impact on the economy is not over yet. • We may be experiencing the greatest economic churn since the advent of the internet itself. The pandemic heavily exacerbated issues including the e-commerce effect, the office space paradigm, struggles of nonprofits (already punished by the tax code’s charitable-giving disincentives), plus the setbacks of every company in the in-person services and the hospitality sectors. As Riverside, Californiabased The Bank of Hemet CEO Kevin Farrenkopf asks his lenders, “Is it Amazonable?” If so, that’s a market hurdle bankers now must consider. • The commercial banking industry is approaching the tipping point where most of the U.S. economy’s credit needs are being met by nonbank lenders or other, much-less regulated entities, offering attractive alternative financing. So how do banks grow their portfolios in this environment without taking on inordinate risk? • Let go of any reluctance to embrace government-guaranteed lending programs from agencies including the Small Business Administration or Farmers Home Administration. While lenders must adhere to their respective protocols, these programs ensure loan growth and fee generation. But perhaps most appealing? When properly documented and serviced, the guaranties Smart Ways to Find Loan Growth By David Ruffin, Principal, IntelliCredit
17 Winter | 2021 Ease into innovative payment products at icba.org/bancard Ease into modern payments with the comfort of ICBA Bancard. High quality, innovative payment products, including mobile card apps. Backup support for your community bank in negotiating with payments providers. Letting your customers sit back and use payment solutions from anywhere. A strong foundation in thought leadership in payments and ongoing personalized support. offer credit mitigants to loan prospects who, because of COVID-19, are at approval levels below banks’ traditional standards. • Given ever-present perils of concentrations, choose a lending niche where your bank has both a firm grasp of the market and the talent and reserves required to manage the risks. Some banks develop these capabilities in disparate industries, ranging from hospitality venues to veterinarian practices. One of the growing challenges for community banks is the impulse to be all things to all prospective borrowers. Know your own bank’s strengths — and weaknesses. • Actively pursue purchased loan participations through resources such as correspondent bank networks for bankers, state trade groups and trusted peers. • Look for prospects that previously have been less traditional, such as creditworthy providers of services or products that cannot be obtained online. • Remember that as society and technology change, new products and services will emerge. Banks must embrace new lending opportunities that accompany these developments, even if they may have been perceived as rooted in alternative lifestyles. • In robust growth markets, shed the reluctance to provide — selectively and sanely — some construction lending to help right the out-ofbalance supply and demand currently affecting 1 to 4 family housing. No one suggests repeating the excesses of a decade ago. However, limited supply and avoidance of any speculative lending in this segment have created a huge value inflation that is excluding bankers from legitimate lending opportunities at a time when these would be welcomed. Bankers must remember the lesson from the last banking crisis: Chasing growth using loans made during a competitive environment of lower credit standards always leads to eventual problems when economic stress increases. This is the “lesson on vintages” truism. A July 2019 study from the Federal Deposit Insurance Corp. on failed banks during the Great Recession revealed that loans made under these circumstances were critical contributors to insolvency. Whatever strategies the industry uses to reverse declining loan demand must be matched by vigilant risk management techniques, utilizing the best technology to highlight early warnings within the new subsets of the loan portfolio, a more effective syncing of portfolio analytics, stress testing and even loan review. David Ruffin is a principal at IntelliCredit, A Division of QwickRate. He has extensive experience in the financial industry including a long and pronounced emphasis on credit risk in a variety of roles that range from bank lender and senior credit officer to co-founder of the successful Credit Risk Management, LLC consultancy and professor at several banking schools.
The CommunityBanker 18 Environmental, Social and Governance (ESG) discussions in the investing world have quickly become ubiquitous. ESG criteria are standards of a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine its relationships with employees, suppliers, customers, and the communities where it operates. Governance evaluates a company’s leadership, executive pay, internal controls, and shareholder rights. In this article, we’re going to focus on the “E” in ESG. In 1946, Oscar-award-winning composer Richard Sherman wrote “It’s A Small World (After All),” a song likely on the Top Ten list of earworms for anyone who has visited Disneyland or Disney World in Orlando. Seventyfive years later, everyday events keep reminding us that Mr. Sherman’s catchy sentiment was right on the money. No matter if you live in Richmond, Rome, or Rio, you likely shared similar concerns about the COVID-19 virus, whether it was fear of falling ill, the stability of your job or bank, or the impact on your family, friends, or local Banking on the “E” in ESG Community bankers have always stepped up to be the backbone in the large cities or small towns they serve. Community bankers were at the forefront of the mission to provide PPP loans to the small businesses in their markets. The industry proved it could be nimble in a time of great distress. Their communities needed community bankers, and they answered the call. By Steven D. Halpern, YHB|CPAs & Consultants
19 Winter | 2021 community. Beyond the pandemic, not a day goes by that we don’t learn of a natural calamity affecting parts of the world near and far that could just as easily hit home. Our screens are filled with Mother Nature’s fury in the form of floods, fires, drought, wind, tidal surges, and the list goes on. The vast majority of the scientific community warns that our global climate is changing in ways that will significantly impact all humans. We can expect these events to be more frequent with increasing force. Events considered once-in-a-century are now happening much more often. All 7.8 billion (and counting) of us that inhabit this planet, despite our vast differences, have a vested interest in the health of Earth. Or, in Mr. Sherman’s words: “There’s so much that we share.” The last thing community bankers seek is something to add to their plate of responsibilities. From managing margins in a zero-interest rate environment, working with customers as they meet the challenges of the pandemic, to maintaining a strong workforce during a labor shortage, there is plenty to keep everyone busy. Why add concerns about the environment to a neverending to-do list? It would be shortsighted not to! Strategizing to become more eco-friendly could provide a foundation for improving the profitability of your bank over the long term. How? By bringing together members of your team to pursue a common goal. Efforts to become more “green” could reduce costs, improve your reputation, and make your institution more appealing to investors and potential employees, especially the future generation of leaders we are all struggling to attract. In a Gallup Poll conducted in 2018, 29% of those polled who were 55 and older believed climate change would pose a serious threat in their lifetime. For 18- to 34-year-olds, the result was 51%. Our future leaders, shareholders, and customers will value an institution that takes this issue seriously. That same group is likely to share a proclivity toward an organization that takes the “S” and “G” in ESG to heart as well. Start with the simple, low-cost opportunities like promoting recycling, reducing paper use, reusing/ repurposing older equipment or other items, refusing to use non-biodegradable products, or finding ways Steven D. Halpern, CPA, is a Principal on the Financial Institutions Team at YHB|CPAs & Consultants. Steve can be reached at steve.halpern@yhbcpa.com or 443-725-5395. to reduce energy usage. Build upon that by offering an electric vehicle (EV) charging station in your parking lot or purchasing energy produced through renewable sources. Provide financing to companies leading the charge to a cleaner environment. Turn non-permeable areas around your branches into more natural environments. Doubtless, a group of talented bankers could come up with even more creative ideas. Then, promote your efforts through social media and other outlets to differentiate your bank. The tax code provides incentives to invest in clean energy appliances and sources. The proposed budget framework making its way through Congress (at the time of this writing) would extend many of these incentives, including retrofitting buildings to make them more energy-efficient. These incentives, combined with accelerated depreciation opportunities, can reduce payback periods for these investments. Community bankers have always stepped up to be the backbone in the large cities or small towns they serve. Community bankers were at the forefront of the mission to provide PPP loans to the small businesses in their markets. The industry proved it could be nimble in a time of great distress. Their communities needed community bankers, and they answered the call. The climate change challenge is a slower-moving crisis, but the time to start acting is now. Regulators are implementing frameworks to standardize the reporting and disclosure of ESG metrics. For now, these standards will primarily affect large companies hoping to attract large socially conscious investors or mutual funds. As we all know, standards and expectations that affect the largest companies in our economy eventually trickle down to smaller operators. Why not get ahead of this trend and differentiate your bank from your competitors in a meaningful way that could actually improve the potential of your institution? Strategizing to become more ecofriendly could provide a foundation for improving the profitability of your bank over the long term. How? By bringing together members of your team to pursue a common goal.
The CommunityBanker 20 Uncovering Fee-Income and Yield Opportunities in a Challenging Market The best way to attract the highest quality borrowers is through selective targeting and investing in marketing. The pandemic has brought a lot of change to financial institutions, including how to engage with your borrowers, serve their needs, and drive additional revenue into your bank. For many, this includes looking at partnering with alternative lenders. With the right lending partner, community banks can strengthen and diversify their loan portfolios through new income opportunities. A strategic partnership can provide you with access to quality loans that align with your business goals and enable you to work toward your growth plans — without additional time or cost. These five questions can help you quickly uncover a potential partner’s credibility and commitment so you can focus on increasing your revenue while mitigating your risk: 1. What is your track record of success? Gauge how the lender has endured market changes. The economy is still recovering, and this won’t be the last downturn – seek to understand how they navigate uncertainty. You want a resilient partner that can originate quality loans for your portfolio at any time, has a track record of success, and can adjust its business model to meet your needs. 2. How do you make lending decisions? Quantitative analytics and historical borrower data are key, as they uncover variables that predict risk. Utilizing data is commonplace today, but a partner that dives deep into the analytics can make better predictions when originating loans, resulting in a stronger return on the portfolio you purchase. 3. How do you attract borrowers? You want access to expertise and experience. The best way to attract the highest quality borrowers is through selective targeting and investing in marketing. Partners that execute innovative, highly targeted campaigns across every marketing channel, and are precise in who they lend to, offer a unique advantage in the marketplace. This ultimately creates a better loan offering for your bank. 4. How does your underwriting process create efficiencies for our bank? Evaluating credit files is timeconsuming. Your partner should offer a simplified underwriting process with consistent loan packages, so you can quickly and easily analyze files to make informed purchasing decisions. 5. What is your commitment to service? Borrowers seek out their local community bank because of the personalized level of service they provide. Your partner should also place a high value on service to ensure a positive borrower experience every step of the way. The pandemic has been challenging for community banks across the country, but it has also posed a new opportunity for banks to partner with alternative lenders to drive fee income and new revenue streams into their business. Adding highperforming assets and maximizing yields can help boost profitability for those willing to seek out new partners this year. Contact your BHG representative Jim Crawford, EVP, Institutional Sales at 315-509-2638; JimCrawford@em.bhgbanks.com, or bhgloanhub.com/jimcrawford.
21 Winter | 2021 Banks and financial institutions rely on technology to operate successfully and provide customers the best products and services. With technology, though, comes the heightened risk of falling victim to wire fraud schemes that can result in significant financial losses. One example is Automated Clearing House (ACH) debit entry fraud, when a bad actor executes ACH transfers from a victim’s bank account into an account controlled by the fraudster. Because of the rising popularity in using ACH transfers and strict National Automated Clearing House Association rules, banks and financial institutions have never been more at risk. According to the most recent Federal Reserve Payments Study, the number of ACH debit transfers (16.6 billion) exceeded the number of check payments (14.8 billion) for the first time in 2018. In 2000, to provide context, there were 42.6 billion check payments and only 2.1 billion ACH transfers. “More people and businesses are using this type of transaction, but financial institutions should be aware of the risks involving ACH and the potential for fraud,” said Jerry Keup, National Underwriting Officer, Banks and Diversified Financial at Travelers. “There are steps these institutions can take to reduce the likelihood of a fraudulent incident taking place, but they should be vigilant and address any vulnerabilities seriously.” Risk mitigation steps include, but are not limited to: Develop methods to identify synthetic identity fraud. The Federal Reserve bank has identified red flags to aid in recognizing synthetic identity fraud. These include paying close attention to accounts that show: • The credit file depth is inconsistent with the customer’s age or other profile information ACH Debit Entry Fraud • Multiple identities with the same Social Security number • Multiple applications from the same phone number, mailing address or IP address • Use of secured credit lines or piggybacking to build credit • Social Security numbers issued after 2011 • Multiple authorized users on the same account Monitoring and analytics. Using software and analytic data can often detect financial crime attempts much faster than the human eye. But even the best controls can fall short. Travelers offers a wide range of coverages for financial institutions, including an endorsement that covers two specific ACH scenarios: • A fraudster opens a deposit account with a bank or credit union, then feeds that account with stolen funds from victims through ACH pulls • A fraudster establishes a loan or line of credit with a bank or credit union and causes ACH transfers from victims’ accounts to repay the loan or line of credit Preventive measures taken or reinforced now against ACH fraud attempts can lead to positive results in the future. It’s worth the time and investment. 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 ensure and protect a company’s assets. For more information, visit travelers.com or talk to your independent insurance agent about ACH coverage.
*weighted average More than 1,300 banks have earned nearly $1B in combined interest income. #1 Source for Time-Tested & Proven Assets BHG LOAN HUB THE BHG PROFESSIONAL CHARACTERISTICS FICO* 737 YRS IN INDUSTRY* 20 INCOME* $293,500 AVG. LOAN SIZE $125,800 WHAT YOUR BANK CAN EXPECT 2.00–4.00% return for your bank $0 Historical Loss on the BHG Core Loan Program ~$10MM in loans available for purchase daily TO LEARN MORE ABOUT BHG, PLEASE CONTACT: Jim Crawford, EVP, Institutional Sales JCrawford@bhgbanks.com • (315) 509-2638 BHGLoanHub.com/VACB This magazine is designed and published by The newsLINK Group, LLC | 1.855.747.4003 Virginia Association of Community Banks 7204 Glen Forest Drive, Suite 101 Richmond, VA 23226 PRSRT STD US POSTAGE PAID SALT LAKE CITY, UT PERMIT NO 508
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