The Official Publication of the Illinois Bankers Association ilbanker.com
July-August 2021
THE NEXT NORMAL PART TWO
IN THIS ISSUE: Banking on Crypto? 8 Tips and Tricks for Saving on Telecommunicationrelated Costs Realigning Priorities for the New (ab)Normal
ADDRESS SERVICE REQUESTED ILLINOIS BANKERS ASSOCIATION 3201 WEST WHITE OAKS DRIVE, SUITE 400 SPRINGFIELD, IL 62704
July-August 2021 • Vol. 106 / No. 4 • ilbanker.com
TABLE OF CONTENTS
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42 DEPARTMENTS 5 Message from the President and CEO 6 Compliance Corner 26 Golf Outing Highlights 29 Preferred Vendors 34 Future Leaders Alliance
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36 On the Move 37 Events Calendar 38 Education Calendar
FEATURES
40 Industry News
9 Managing Credit Risk in Today’s Environment
41 New Members
10 Banks See Challenges from Fintech Disruption
42 Ad Index
42 The Last Page
12 Banking on Crypto? 17 Welcome to the United Bank of Dystopia 18 8 Tips and Tricks for Saving on Telecommunication-related Costs 20 What is an Engaged Digital User Worth to my Bank? 22 Realigning Priorities for the New (ab)Normal 24 Does Your Change Management Process Need a Conversion?
Our Mission: Advocacy. Education. Industry Resource...for all Illinois bankers. Our Vision: Connecting Bankers. Advancing Banking.® Our Core Values: The Illinois Bankers Association will place our members’ interests first, be responsive to their needs, and provide them with the highest level of professionalism and service. The IBA staff is the Association’s greatest asset. We will conduct ourselves with integrity and respect. We will work together as a team, share information, build upon our strengths, embrace new ideas, and recognize and celebrate accomplishments.
OFFICERS AND EXECUTIVE COMMITTEE MEMBERS C. Brant Ahrens Chairman CIBC, Chicago
Michelle L. Gross Chairman-Elect State Bank of Bement
William P. Gleason Vice Chairman The Leaders Bank, Oak Brook
Betsy Johnson Treasurer Solutions Bank, Forreston
BOARD OF DIRECTORS REGION 1
REGION 4
Joan Heggen U.S. Bank, Chicago
Tom Gihl INB, Springfield
Frank Pettaway The Northern Trust Company, Chicago
Anthony G. Nestler Hickory Point Bank and Trust, Decatur
REGION 2
REGION 5
Gary S. Collins Old Second National Bank, Aurora
T.J. Burge Community Partners Savings Bank, Salem
Rick M. Francois American Community Bank & Trust, Woodstock
Richard J. Knebel The Bradford National Bank of Greenville
REGION 3
AT LARGE
Thomas J. Chamberlain Iroquois Federal Savings & Loan, Danville
Dane Cleven Community Savings Bank, Chicago
Executive Administration Randy Hultgren, President and CEO Erich J. Bloxdorf, Executive Vice President & COO
Pam Macha, Springfield Office Coordinator Legal and Compliance Carolyn Settanni, Executive Vice President and General Counsel Carly Berard, Senior Counsel
Bank and Partner Relations Julie Winterbauer, Vice President Linda Koch, CAE, Member/Business Relations Manager Sarah Cowan, Membership Assistant
Randy Hultgren Secretary President and CEO Illinois Bankers Association, Springfield
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Steven F. Rosenbaum Hoyne Savings Bank, Chicago
James R. Hannon First Security Trust and Savings Bank, Elmwood Park Quint Harmon Pioneer State Bank, Earlville James H. Huiskamp Blackhawk Bank and Trust, Milan Richard J. Mahoney First Midwest Bank, Chicago
Pamela A. ShararStoppel Wintrust Financial Corporation, Wheaton Matthew Smith First Mid Bank & Trust, Mattoon Simon P. Yohanan First Bank of Highland Park Andrew Butts Bank of Belleville (non-voting member)
Two Offices to Serve You! Springfield Office: 800-783-2265 • Chicago Office: 800-878-2265 To connect with our staff, use this email format: firstinitiallastname@ilbanker.com
Amy Giacomucci, Law Assistant
Kevin L. Olson Immediate Past Chairman Grundy Bank, Morris
Jeff Fauver Catlin Bank
ILLINOIS BANKERS ASSOCIATION STAFF DIRECTORY
Michael Schasane, Staff Attorney
Anthony G. Nestler Member-at-Large Hickory Point Bank and Trust Co., Decatur
Rick R. Parks First National Bank of Waterloo
Tyler Rouse First Federal Savings Bank of ChampaignUrbana
Mary Curl, Executive Assistant & HR Manager
Thomas J. Chamberlain Member-at-Large Iroquois Federal Savings & Loan, Danville
Megan Collins Bank of America, Chicago
Communications/Marketing/ Associate Membership Debbie Jemison, CAE, Vice President Tammy Squires, Assistant Vice President Robin Lane, Director, Associate Membership Finance and Administration Mark Bennett, CPA, CFO and Executive Vice President Marcia Stratton, CPA, Director
Illinois Bankers Business Services, Inc. Brian Hoffman, President Phil Talley, Vice President, Insurance Services Illinois Bankers Education Services, Inc. Callan Stapleton, CAE, President Bob Anderson, Manager, Education Relations & IT Support Cassie Mattson, Manager, Event Management and FLA
Marie South, Financial Assistant
Denise Perez, Manager, Education & Training
Government Relations
Amy Sale, Education Assistant
Ben Jackson, Executive Vice President Aimee Smith, Assistant Vice President;
Illinois Bankers Group Insurance Trust Erich J. Bloxdorf, Plan Administrator Mike Mahorney, Senior Trust Advisor Hillary Meyers, Trust Manager
Editorial Office 3201 West White Oaks Drive, Ste. 400, Springfield, IL 62704 217-789-9340 FAX 217-789-5410 www.ilbanker.com Debbie Jemison, Editor With the exception of official announcements, the Illinois Bankers Association disclaims all responsibility for opinions expressed and statements made in articles published in Illinois Banker. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Illinois Banker (ISSN 0019-185X) is published bi-monthly and is available at a cost of $45 per year for members and $90 per year for nonmembers. Regular issue single copy price is $8.50. Postmaster, send address change to Illinois Bankers Association, 3201 W. White Oaks Drive, Ste. 400, Springfield, IL 62704. News items from members of the Illinois Bankers Association are invited and are due on the first of the month preceding publication. © Copyright 2021 by Illinois Bankers Association (unless individual articles list copyright). Reproduction of any material in the Illinois Banker is strictly prohibited without written permission of the publisher.
MESSAGE
It has been too long!
Randy Hultgren
IBA President and CEO
I am loving seeing so many of you in person! It was fantastic to see everyone who made it to our IBA Golf Outing at St. Clair Country Club in May. I have had the privilege of meeting with dozens of our great members at your banks over the last few weeks. It feels like we have turned a corner, and now I am ready to put my foot on the gas (not quite as much as my amazing predecessor, lead-foot Linda) and get to every corner of Illinois to see you and your team! There is so much to talk about, and there is nothing better than having those conversations face to face. I am glad to have met hundreds of bankers across Illinois over my years in elected office, but there are so many old and new friends that I have not yet been able to get together with since I was given the honor last July of helping to lead the IBA. Would you be willing to having me come to your bank for a visit? If so, please send me an email (rhultgren@ilbanker.com) or give me a call (217-789-9340) and we will set up a time to get together at your bank. Whether it is a meeting with you, your team, your Board, or your customers, I would be so grateful for the opportunity to let you know all that your Illinois Bankers Association is doing to serve you. Our legal team continues to provide the best information on compliance and regulation. As a recovering lawyer, I can assure you of the incredible legal minds that are constantly available to help you with any question, and I can remind you of how valuable it is to have your own banking lawyers ready to serve and help you as a Member of the IBA. I want to tell you more about the amazing work your government relations and advocacy
team have accomplished on your behalf through a very challenging legislative session in Springfield. I would also love to give you my perspective on Springfield and DC, having had the privilege of serving the great people in Illinois at both places. I am excited to remind you of the phenomenal educational offerings that are made available to you by the IBA, and to tell you more about the amazing financial literacy efforts we are engaged in to develop strong future leaders in banking. You will be glad to hear about some powerful new relationships that we have developed with companies who can solve your biggest challenges and save you a significant amount of money. I am thrilled to tell you more about the great services our membership team, our peer groups, our forums, and our committees are offering to you. It has been too long since we have seen each other. Please let me know if I can come see you and your team in the next weeks and months. Being a lifelong Illinois resident there are still some towns I have never been to, until now. See you soon!
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COMPLIANCE CORNER The IBA Law Department
QUESTION
Is there a requirement under the Illinois Community Reinvestment Act (CRA) that Illinoischartered banks post CRA notices in their lobbies and on their websites, effective as of March 23, 2021?
ANSWER
Yes, we recommend that Illinois-chartered banks post the required CRA notices in their offices and on their websites as soon as possible. The Illinois CRA became effective immediately on becoming law on March 23, 2021, including its requirement that covered financial institutions post the following public CRA notice in their public lobbies and on their websites: STATE OF ILLINOIS COMMUNITY REINVESTMENT NOTICE The Department of Financial and Professional Regulation (Department) evaluates our performance in meeting the financial services needs of this community, including the needs of low-income to moderate-income households. The Department takes this evaluation into account when deciding on certain applications submitted by us for approval by the Department. Your involvement is encouraged. You may obtain a copy of our evaluation. You may also submit signed, written comments about our performance in meeting community financial services needs to the Department. The Illinois Department of Financial and Professional Regulation (IDFPR) has stated that during the initial stages of administering the Illinois CRA, it will “seek to facilitate compliance with the notice requirement and may consider financial institutions’ good faith efforts in that regard.” Consequently, we recommend that covered financial institutions post the required notices as soon as possible to avoid violating the Illinois CRA.
Additionally, the IDFPR has published a supervisory statement with the following revised notice, which informs customers that your institution has not yet completed its first Illinois CRA evaluation: STATE OF ILLINOIS COMMUNITY REINVESTMENT NOTICE Department of Financial and Professional Regulation (Department) evaluates our performance in meeting the financial services needs of this community, including the needs of low-income to moderateincome households. The Department takes this evaluation into account when deciding on certain applications submitted by us for approval by the Department. Your involvement is encouraged. You may obtain a copy of our evaluation once the Department completes our first evaluation. You may also submit signed, written comments about our performance in meeting community financial services needs to the Department. We will update this notice when our first evaluation has been issued. Also, we note that federally-chartered banks and savings banks are not subject to the Illinois CRA and are not required to post an Illinois CRA public notice. For more information and a link to the IDFPR supervisory statement referenced above, read the IBA’s summary at https://www.gotoiba.com/ articles/effective-now-illinois-communityreinvestment-act.
QUESTION
A business customer wrote a check to one of their vendors that was negotiated and cleared their account. One month later, the customer learned that their vendor did not receive the check. Apparently, a fraudster intercepted the check, created a business with the same name as the payee in another state, and used the check to open an account at another bank. The check was not altered. Who holds the liability for this check, can it still be returned, and do we need to credit our customer for the amount? Our customer notified us of this issue within sixty days of discovering it, as required by our account agreement.
ANSWER
We believe you will need to credit your customer for the check. However, we believe your bank is entitled to demand repayment for the check from the depository bank, since it appears to have breached its warranty to you that the check did not have a missing or unauthorized endorsement.
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Under the Illinois Uniform Commercial Code (UCC), your customer must promptly notify your bank of any unauthorized payments that appear on an account statement. Your customer’s notification within the sixty-day reporting window in your account agreement was timely. As a result, we believe you
will need to reimburse your customer for the check, since they alerted you to the fraud with “reasonable promptness.” Regarding your ability to recover the lost funds, we believe it is too late to return the check since the midnight deadline has passed. However, we believe your bank has a claim against the depository bank since it breached one of the UCC presentment warranties — that the check had no missing or unauthorized endorsements. Here, either the depository bank accepted the check with a missing endorsement or with the fraudster’s endorsement, which was unauthorized. Under the UCC, notice of a claim for breach of warranty must be asserted within thirty days after
the drawee learns of the breach and identity of the warrantor. After this thirty-day period, the depository bank cannot be held liable for any loss caused by the delay in giving notice of the claim. Consequently, we recommend sending notice of the breach of warranty to the depository bank as soon as possible. Additionally, we note that a cause of action for breach of warranty must be commenced within three years after it accrues. Further, your bank should assess whether a suspicious activity report (SAR) should be filed in relation to the check. The FDIC regulations require you to file a SAR if your loss aggregates more than $5,000 and there is an identified suspect involved in the suspicious activity, or if the total loss aggregates to $25,000 or more, regardless of potential suspects.
QUESTION
Must a flood certificate always be pulled ten days before a loan closing? The OCC’s Comptroller’s Handbook states that “the agencies generally regard 10 days as a reasonable time interval.” Are there any exceptions to this rule for refinances or HELOCS when a flood certificate has already been pulled for a different loan? What about commercial loans that must generally close more quickly than other loans?
ANSWER
No, we do not believe a flood certificate must always be pulled ten days before a loan closing. However, we are unaware of any specific exceptions to Regulation H’s requirement to deliver special flood hazard notices within a reasonable time. Regulation H requires that delivery of notice of special flood hazards be provided to borrowers within a “reasonable time” before the completion of the transaction. As you noted, the OCC’s Comptroller’s Handbook states that ten days is considered a reasonable time interval. But the handbook also states that “what constitutes ‘reasonable’ notice will necessarily vary according to the circumstances of particular transactions.” It goes on to explain that “a borrower should receive notice timely enough to ensure that . . . the borrower has the opportunity to
become aware of the borrower’s responsibilities under the NFIP; and . . . the borrower can purchase flood insurance before completion of the loan transaction.” Thus, if you are giving your borrowers enough notice to become aware of their National Flood Insurance Program responsibilities and to purchase flood insurance before closing, we believe you are complying with the notice requirement, and we do not believe that you must always provide special flood hazard notices at least ten days prior to origination. While providing notice on a loan’s closing day is unlikely to be viewed as complying with the notice timing requirement, you may be able to explain to examiners the necessity of a reasonable notice period of under ten days for a HELOC, refinancing, or commercial loan that needs to close in an interval shorter than ten days.
About the IBA Law Department
Our IBA Law Department provides many resources to help our bank members meet their compliance challenges, including a toll-free Compliance Hotline (1-800-GO-TO-IBA) and a dedicated compliance website (www.GoToIBA.com). We also publish a free weekly e-newsletter highlighting the latest regulatory developments, select recent Q&As, and other useful information – let us know if you want to subscribe! Note: This information does not constitute legal advice. You should consult bank counsel for legal advice, even if the facts are similar to those discussed above.
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Managing Credit Risk In Today’s Environment
The leveraged lending market is seeing increased risks for financial institutions. Here are a few tips to help you manage risks effectively in the current business environment. By Brian Franey and Kevin Garcia, Plante Moran
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inancial institutions are under a significant amount of pressure. They’re constantly working to balance risks and opportunities in order to manage their portfolios and drive future growth.
What can financial institutions do to mitigate leveraged lending risks?
Below, we highlight the increased risks in the leveraged lending market and suggest activities that can help financial institutions ensure they’re managing their risks effectively.
For financial institutions with leveraged lending portfolios, mitigating risk will become a major factor in success, particularly if market stress continues well into 2021. In order to manage risks more proactively, financial institutions should monitor their borrowers’ financial performance more closely. This could include activities, such as:
Leveraged lending market
u Reviewing financials more frequently than in the past,
The leveraged lending market has seen increased stress over the past year, with significant impact from the effects of COVID-19 and new concerns still emerging. Leveraged lending refers to a transaction where the borrower’s post-financing leverage, when measured by debt-to-assets, debt-to-equity, cash flowto-total debt, or other such standards unique to a specific industry, significantly exceed industry norms for leverage.
Increasing market stress
The U.S. leveraged loan default rate is expected to increase to 4.76% by the end of 2021 from its current level of 3.89%. The default rate peak is expected at less than 6%, but the default cycle could extend for another one to two years. Balance sheet maneuvers, specifically covenant waivers and extensions, are expected to remain elevated. For industry sectors, market participants expect relative performance to be better for the technology, healthcare, communication services, and consumer discretionary sectors. Conversely, higher risks are seen in the retail, oil and gas, and leisure/lodging sectors.
Growing risk for leveraged lending
As a result of various economic and market issues, banks and other financial institutions have seen an increase in defaults within their leveraged loan portfolios. This has led to a tightening of credit within the leveraged lending market. This is somewhat of a reversal from a year or two ago when community banks were looking to get into leveraged lending. Now, financial institutions are pumping the brakes – tightening up credit underwriting and suggesting that the market may experience a downturn in the short term.
such as reviewing a borrower’s financial results quarterly rather than annually. u Increasing scrutiny with accounts receivables, inventory and fixed asset capitalizations are monitored effectively to ensure credit quality is maintained, and that losses and delinquencies do not mount. u Monitoring accounts payables listings to ensure the borrower is not extending terms with vendor relationships. u Conducting more frequent meetings or site visits (i.e. biannually rather than annually or every 18 months) with borrowers to ensure the institution fully understands the customer’s business, any new business ventures that the customer is expending cash on not included in the lending relationship that could place stress on the balance sheet, as well as further understanding the key and their actions to mitigate risks related to their line of business. u Financial institutions that take the time to strengthen their monitoring of higher risk borrowers will be better able to manage more volatile market conditions and decrease the likelihood of future losses occurring.
Managing your risks to create new opportunities We’ve worked with numerous banks and credit unions to manage and evaluate credit risks. If you’d like more information on leveraged lending concerns or additional credit risks, please contact your local Plante Moran business advisor. About the authors: Brian Franey is a Partner and Kevin Garcia is a Senior manager with Plante Moran. IBA Associate Member
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Banks See Challenges from Fintech Disruption By Carl White, Federal Reserve Bank of St. Louis
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intech firms have been labeled “disrupters.” Whether teaming up with financial institutions or going it alone, fintech firms — or neobanks1 — are rapidly gaining market share in several areas formerly dominated by financial institutions, such as payments and consumer loans. In 2013, according to TransUnion data, fintech companies accounted for 5% of the U.S. personal loan market. By 2018, these firms eclipsed banks with a 38% share of this growing market. Banks’ share of personal loans fell from 40% to 28% over the same period, while credit unions’ share declined 10 percentage points to 21%. At the same time, the technological developments that spawned fintech, such as big data and artificial intelligence, have also greatly benefited traditional financial institutions — whether they have contractual relationships with fintech firms or not. Innovation has spurred new products, increased efficiencies and lowered costs for a range of players. From a deposit standpoint, a review of the Federal Deposit Insurance Corp.’s Summary of Deposits shows that in 2019, U.S. banks classified more than 3% of their deposits as “cyber deposits” — those gathered through online-only branches. In 2020, these deposits represented more than 4% of all bank deposits nationwide. This innovation places an additional burden on banks, however, as they are required to uphold the same regulatory standards for their digital bank operations as they do for their traditional operations.
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When Is a Bank Not a Bank
Most fintech firms are not — and do not aim to be — fullservice financial institutions. They do not meet the definition of a bank — an institution that takes demand deposits and makes loans. They typically market their narrow range of products to specific market segments, such as students, small-business owners and freelancers. Some seek to serve the under- and unbanked who may not want or need a bank to meet some objectives, such as savings, person-to-person payments and small-dollar loans. These firms frequently partner with traditional financial institutions using a variety of models that benefit both providers. Other fintech firms have modeled themselves more like banks, with some seeking bank or bank-like charters. This trend has prompted some concern about unequal regulation and any resulting competitive advantages nonbank firms might gain. This is especially true of very large companies like Walmart, which filed a trademark application in late March for a venture the company says could offer services such as credit card issuance, financial portfolio analysis and consulting, credit and debit card transaction processing, mobile payments and virtual currency transaction processing.
Issues for Policymakers and Regulators
As competition intensifies and banks continue to lose market share in certain product groups, risks are also moving outside the banking system. While that may seem like good news,
there’s a flip side. As Jamie Dimon, Chairman and CEO of JPMorgan Chase, recently noted, “Banks are reliable, less-costly and consistent credit providers throughout good times and in bad times, whereas many ... (competing) credit providers … are not. More important, transactions made by well-controlled, well-supervised and well-capitalized banks may be less risky to the system than those transactions that are pushed into the shadows.” This development could complicate federal policy responses to financial crises and other events. To remain viable in an ever-more digitized environment, banks are extending the use of these technologies to their whole operations, including regulatory compliance and risk management. Regulatory technology, dubbed RegTech, is increasingly being used by banks to detect fraud and comply with anti-money laundering rules, among other uses. Bank supervisors must be able to evaluate banks’ use of RegTech, and they are also beginning to deploy new technologies (SupTech) to improve efficiency in data collection and analysis. This transition will require resources, including human capital.
The Road Ahead
It is clear that financial activity will continue to move outside the traditional, regulated financial sector of commercial banks and other financial institutions. Technology is a double-edged sword for banks: It expands the menu of available services and makes the provision of services cheaper, but it also paves the way for new competitors. The challenges banks face from an ever-increasing number of competitors are many, but so too are the opportunities. Banks remain a vital conduit for the conduct of monetary and fiscal policy, for example. They proved indispensable in assisting the federal government’s response to the pandemic, playing a major role in the rollout of the Paycheck Protection Program and other Small Business Administration programs. Banking will evolve, but banks aren’t going anywhere. About the author: Carl White is Senior Vice President, Supervision, for the Federal Reserve Bank of St. Louis. IBA Associate Member. 1. The term neobank typically refers to companies that use applications — desktop or mobile — to offer financial services to customers.
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Banking on Crypto?
Minimizing the Risks of Crypto Product Offerings By Justin C. Steffen, Barack Ferrazzano Kirschbaum & Nagelberg LLP
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ith escalating prices and newfound public adoption, banks and other financial institutions are beginning to take note of cryptocurrencies. An estimated 14% of the U.S. population owns cryptocurrency, and PayPal, U.S. Bank, and Morgan Stanley have all recently launched crypto products. Although the same rules and regulations that apply to other investments may apply to cryptocurrencies, this new(ish) asset class presents unique obstacles of which new industry participants must be aware. Indeed, in a rush to appease customers, today’s shortcuts may prove to be tomorrow’s legal nightmares. Banks, therefore, must learn to engage crypto with caution.
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A Brief Introduction to Cryptocurrencies
Bitcoin is the seminal cryptocurrency – a digital or virtual currency. Often compared to a form of digital gold, Bitcoin prices have skyrocketed in the last year, trading at over $60,000 at multiple points in recent weeks. Bitcoin was first described in a 2008 whitepaper by a person (or persons) using the pseudonym Satoshi Nakamoto. Nakamoto’s Bitcoin uses public and private key cryptography and hashing to create a secure form of digital currency. Nakamoto’s whitepaper described both Bitcoin and the
blockchain technology underlying the Bitcoin network. Bitcoins are tracked on the Bitcoin blockchain, a large, decentralized ledger – like a spreadsheet that is copied and distributed across participating machines and stored on every user’s system. The blockchain records the movement of all Bitcoin that have been created. By doing so, the blockchain ensures that holders of Bitcoin can neither double-spend nor over-spend. Anyone can edit the blockchain so long as a predetermined majority of other users (known as “nodes”) agree with the change. This system works without a central repository (i.e., a bank) as all transactions are conducted peer-topeer. Bitcoin transactions are recorded by references to “public keys” – a coded “address” that everyone on the network can see. To redeem or control the Bitcoin assigned to a “public key,” one must also possess the private key – another code known only to the owner that operates like a ticket that entitles the holder to access his or her Bitcoin. Ether, XRP, and other cryptocurrencies soon followed. These different cryptocurrency tokens were created using different rules and for slightly different purposes. Ethereum, for instance, was designed to facilitate the use of “smart contracts,” which are automated rules (often distilled as if-then statements), committed to code. In total, there are over 4,000 unique cryptocurrencies. The total market capitalization of all cryptocurrencies is estimated at over $2 trillion. Despite their numerous differences, tokens are often bought, sold, stored, and transferred using very similar methods. Developers, miners or validators, and users are common participants in almost every cryptocurrency ecosystem. First, there are users – people who hold and/or transact with the respective cryptocurrencies. Second, developers make updates to the underlying code and ensure that the cryptocurrency network operates smoothly – or as smoothly as possible. Third and finally, there are miners or validators. These validators are crucial, as they record the transactions on the underlying blockchain or ledger. Other third parties, however, have become commonplace service providers to the participants
in cryptocurrency networks. A number of third-party businesses assist clients by: (1) exchanging between cryptocurrencies and fiat (government) currencies or other cryptocurrencies; (2) transferring cryptocurrencies; (3) safeguarding and/or administering cryptocurrencies, enabling users to control the virtual assets; and (4) providing financial services related to the sale or purchase of certain cryptocurrencies. These third parties encompass a range of businesses, including exchanges, ATM operators, wallet custodians, and hedge funds. The SEC, CFTC, FinCEN, IRS, and a host of other federal and state agencies all have an avowed interest in regulating cryptocurrencies. These regulators each have their own interpretation of cryptocurrencies. To the SEC, they may be securities; to the CFTC, they are commodities; to FinCEN, they are money; and to the IRS, they are property. Navigating these disparate regulatory regimes can be critical. The SEC, for example, has pursued enforcement actions against the issuers of tokens that the SEC believes constitute securities. In its July 25, 2017 Rule 21(a) report, commonly referred to as the DAO report, the SEC concluded that DAO tokens at issue were securities, evaluating the tokens pursuant to the test first articulated by the Supreme Court in 1946. FinCEN, likewise, has issued a wealth of guidance indicating that cryptocurrencies constitute money for purposes of the Bank Secrecy Act and other laws and that, as a result, certain virtual asset service providers would need to register as money services businesses, and comply with anti-money laundering and counter-terrorism financing requirements and other applicable laws. The import of this guidance is clear: token holders and their service providers must be cognizant of the governing rules and regulations, or hazard incurring civil and, in some cases, criminal liability.
Unique Issues Common to Cryptocurrencies
Custody and Ownership (Not your keys, not your crypto?) Although nothing requires users to utilize myriad third parties that help them acquire, hold, and trade digital assets, the simple truth is many, if not most, users rely on one or more third parties. When you entrust a third party with your private keys, you are ceding control over the assets that you
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believe you have acquired. If the party with which you are dealing is dishonest, those tokens may go missing. In 2019, customers of the Quadriga exchange were surprised to learn that its founder had mysteriously passed away and $250 million of customers’ digital assets went missing. In addition, for the sake of speed and cost, not all transactions are recorded “on-chain.” When you “buy” tokens from certain third parties, those purchases may not be recorded on the “immutable” blockchain right away, or ever. If the third party goes bankrupt or ceases operations, your recourse may prove illusory. Data Security (you don’t hack the blockchain…well, typically) Proponents of blockchain technology often cite the security of blockchains, the distributed ledgers frequently used to record crypto holdings. But this supposed security may
prove false. First, when an individual or group, for example, controls the majority of the hashing or computing power for a given token, they can unilaterally determine whether, and how, to record certain transactions. Often referred to as a 51-percent attack, these attacks – though rare – do occur. Shift and Bitcoin Gold were both subject to such attacks. Second, and more frequently, “hacks” (attacks) focus on the third parties that help users transact, store, and trade digital assets. Many wallet services, exchanges, and other third parties have been attacked. Though these entities help execute cryptocurrency transactions that are recorded “on the blockchain,” no activity takes place on the ledger. Wallet services, for example, store customers’ private keys. When connected to the Internet (so-called “hot wallets”), those entities are just as vulnerable to cyberattacks as are other businesses. So, while blockchains may be somewhat resistant to cyber subversion, not every act or actor is completely on-chain, thereby rendering accounts, accountholders, and their affiliates subject to attack. Forks The rules that govern digital currencies (the protocol) are not static. Protocols change to fix imperfections or to change the underlying rules. These changes are referred to as “forks.” Sometimes, a fork results in two unique digital assets, such as when the Bitcoin protocol forked in November 2017, adding Bitcoin Cash tokens to Bitcoin tokens. Users of Bitcoin could obtain Bitcoin Cash. If they used an exchange or wallet service, however, the third party needed to support both sides of the fork. In other words, users completely reliant on others to hold their Bitcoin could lose the opportunity to obtain Bitcoin Cash if those third parties decided against supporting Bitcoin Cash. Although many third parties have very clear policies regarding forks, even clear policies cannot always quell legal risk. By way of example, Coinbase initially disclosed that it was not intending to support the Bitcoin Cash hard fork. Despite Coinbase’s repeated, advanced disclosures, which detailed how users could secure their own assets, several users failed to heed the warnings and threatened legal action over their supposed lost opportunity. Coinbase retroactively supported the fork, allowing its users to obtain Bitcoin Cash tokens. Transparency Blockchains reveal a wealth of transaction information: how much was transferred, at what time, and between what public addresses. Not all details, however, are readily apparent. The individual owners of cryptocurrency addresses are not recorded on the blockchain. For this
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reason, digital currencies are said to be pseudonymous. But this transparency – or the lack thereof – has consequences. First, if regulators or interested parties want to identify the parties engaged in a transaction, they will often look to the third parties that serve as on-ramps to the blockchain ecosystem. Servicing crypto customers in the United States is not without costs. Indeed, large U.S.-based exchange Kraken noted that escalating subpoena compliance costs were to blame for several exchanges excluding U.S. customers. Like exchanges, banks that seek to serve crypto-hungry customers should expect to receive more subpoenas and information requests. Second, because address owners can remain anonymous, users cannot always be certain with whom they are transacting. This poses myriad regulatory and counterparty risks. Are users, for example, transacting with an individual or entity from a restricted jurisdiction, or are transactions facilitating terrorist financing or money laundering? These issues have led to the rise of on-chain forensics firms, like Chainalysis, CipherTrace, and Elliptic. Although these service providers have helped to unmask and deter criminals, not everything is transparent. Regulatory Uncertainty Domestically, the SEC, CFTC, FinCEN, and other state and federal regulators have begun issuing guidance and pursuing enforcement actions with increased frequency. Nevertheless, the rules and regulations that govern the digital currency space remain murky, at best. Even wellintentioned businesses dealing in digital currencies are simply unsure of whether they are always adhering to the letter of law. This lack of clarity can have dramatic economic effects. For years, the SEC has indicated that many digital currencies are likely unregistered securities. Late last year, the SEC charged Ripple’s co-founders with conducting an unregistered securities offering of XRP. XRP is one of the world’s largest cryptocurrencies, with an estimated market cap of $75 billion. The value of XRP, and the fate of Ripple, will likely turn on the outcome of this litigation. Should the courts side with the SEC, XRP holders may be left holding the bag. Fines, legal fees, penalties, and wild swings in value are part of the cost of crypto business.
Tools to Mitigate Risk
The risks attendant with banking crypto may be unavoidable to a degree. That does not mean that banks and financial institutions committed to crypto are helpless. Financial institutions need to consider both traditional and non-traditional risk mitigation tools. First, traditional risk mitigation measures, such as insurance, indemnities, disclosures, representations and warranties, and other tools are available. Insurers, for instance, have created products designed to guard against the risk of lost security keys. These tools alone, however, are likely insufficient. Second, to minimize risk, banks should consider new tools, such as storage and custody products, and bolster their existing compliance regimes. Regardless of the tool, crypto- and vendor-focused due diligence are imperative. Frequently, regulators look to regulated entities and their representatives to educate them regarding cryptocurrency issues. Therefore, retaining knowledgeable attorneys, consultants, and other professionals is imperative, but these professionals must be enlisted early in the product development process. Without proper, timely guidance, the risks described above can transform a promising investment into a costly lesson. About the author: Justin C. Steffen is a Partner in the Barack Ferrazzano Kirschbaum & Nagelberg LLP’s Financial Institutions Group. His practice focuses on providing his clients with strategies and solutions for minimizing risk in the digital economy. In addition to his practice, Justin teaches financial and emerging technologies and the law at Northwestern Pritzker School of Law. IBA Associate Member.
July-August 2021 •
• 15 •
SPECIAL EDITION • THE NEXT NORMAL
Welcome to the United Bank of
By Neal Reynolds, BankMarketingCenter.com
N
ew normal. Next normal. Full-on normal. No one can even agree on what to call what we’re facing, let alone agree on what that might look like. Which is why, if there is just one thing on which we can agree, that we can all be sure of, it is that this “new” or “next” normal will be no such thing, that it will not bear even the slightest resemblance to what we all like to think of as “normal.” These handles are nothing more than wishful thinking; the thinking that by incorporating the word “normal” into any prediction of the future will somehow make it so… normal, that is.
remote part of Montana and spend the remainder of your days off the grid. But I am suggesting that this idea that two years from now we’ll recognize even a modicum of banking as we see it today, well, it’s not realistic.
Truth is, normal as we’ve known it is gone for good. Therefore, in my opinion, there is no “new normal” in banking. Take shopping for instance. What would make anyone believe that the retail experience will ever return, that people so crave the tactile nature of shopping’s days-gone-by that we’ll see a post COVID-19 resurgence in going to the mall? Ain’t going to happen. People don’t want it, nor do they need it.
To sum up, it’s a race to the bottom. When selling your banking services, focus on good, cheap, and fast. There’s an old adage in marketing that these are the three features/benefits upon which you can build the marketing of any product. Only problem is the second part of the adage: You can only pick two. So, pick your two and build your product/service marketing around them. That’s the “new normal” for banks.
Look at health care. Here’s the future there: telehealth. Folks talk about how important that personal relationship with their physician is and how empathy plays such a critical role in the doctor/patient relationship. Well, I’ve got news for you. Telehealth is here and it’s here to stay. People aren’t dying (pun intended) to do a doctor’s visit any more. They’re just as happy, if not more so, to see their doctor from the comfort of their couch via a laptop screen. Post pandemic, will things look any different? Healthcare professionals give a resounding “hell no.” Heck, look at grocery shopping. Is it critical to feeding yourself that you push a cart up and down some aisles, squeezing a cantaloupe or two along the way? No way. Even shopping for groceries is going the way of the T-Rex. Experts predict that online grocery will account for 21.5% of total grocery sales by 2025; an estimated $250 billion, which is a more than 60% increase over pre-pandemic estimates.
Make sure that your marketing team, and your marketing messaging, are as nimble as a Cirque du Soleil contortionist. Be social. Not the kind where you actually meet or talk with people, but the kind where you do absolutely none of that. Instead, take a very promotional approach to your marketing through quick and easy-to-execute messaging via those social platforms where today’s consumers tend to get their disinformation. Forget about building your brand through messaging built on emotional appeal. As Jack Webb used to say, give them, “just the facts, ma’am.” It’s available at this price. Act now. Bank branches will disappear and with them, of course, banks. If your bank takes a very retail/promotional approach to your marketing, forsaking brand and using digital platforms effectively while making sure that your online banking services don’t suck, you may get to stick around for a while.
Now, onto banking. “Offer more than just products” is one piece of advice I’ve recently seen. “Figure out new ways to communicate the human element” is another. I’m not suggesting that you sell everything, move to some
We’re becoming increasingly isolated and impatient. Instant gratification is what drives transactions today, not always relationships, like we grew up with. We see this in the struggle that brands face. Despite their best – and most costly efforts – products and services are fast becoming commoditized.
About the author: Neal Reynolds is President of BankMarketingCenter. com, a web-based marketing portal that is being used by over 300 banks around the country. Banks can create professional marketing materials in seconds, no software or ad agency required. If you’re looking for the “new” or “next” normal, Neal can be contacted at nreynolds@ bankmarketingcenter.com or 678-528-6688. IBA Preferred Vendor
July-August 2021 •
• 17 •
SPECIAL EDITION • THE NEXT NORMAL
8 Tips and Tricks for Saving on Telecommunication-related Costs By Christian Ericson, BITS
A
s the banking industry begins to recover from the Covid-19 pandemic and interest rates remain low, many community financial institutions will look for ways to reduce their operational expenses. Your telecommunications-related expenses for voice, Internet, and data circuits are likely to be a large part of your overall budget, and banks may be paying 20-30% more than they should be in telecom costs. As a service provider working almost exclusively with community banks for telecommunications services for the past 16 years, BITS has acquired some tricks and tips to help your financial institution reduce unnecessary expenses regarding telecom contracts.
1
Your bank won’t realize the maximum savings available unless you are putting your services out to bid. When you only work with one telecom carrier, you don’t get competing offers or realize
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• July-August 2021
the extent of options available to your locations. While you may find a decent price on Internet service from your current carrier, a number of other transport options, such as private fiber may be a better fit for your branch locations. Getting quotes from multiple carriers on a variety of options will ensure that your bank is getting the right service at the best price.
2
Align contracts for your telecom-related services: You won’t have leverage when negotiating for better pricing unless you line up contract dates for as many current telecom contracts as you can. Try and make sure that all of your contracts for POTS lines, PRI, WAN (Wide Area Network), and Internet circuits have aligned expiration dates.
3
Use the same carrier or aggregator for all telecom services. Managing multiple carriers and service providers can be confusing and difficult. Some carriers may fall
short on being able to provide telecom services to certain areas where you may have branch locations, but aggregators can typically provide service just about anywhere. By sticking with one carrier or aggregator for all telecom services, you will find the best pricing and an ideal alignment of contract expiration dates.
4
Stay away from auto-renewal. Auto-renewal clauses allow service providers to automatically continue your contract unless you specifically request cancellation in writing. This locks your financial intuition in for additional years at the end of a contract’s initial term. And often service providers require a 90-to-120day notice period for termination before the actual term end date. If you find yourself close to the end of a contract’s term, request to continue on a month-to-month basis without increasing your cost to “tariff” pricing, until you can renegotiate new contract
terms that better fit any changes that occurred since the start of the contract.
due to service issues, you’ll have proper documentation filed with the carrier.
5
6
Make sure Service Level Agreements best benefit your bank. SLAs ensure that carriers do what they say they are going to do – securely and reliably get your traffic from one place to another in a timely fashion without disrupting normal business operations. When negotiating a new contract, make sure SLAs are fully detailed and both sides understand what the Chronic Outage Clause entails. When experiencing an outage or issue, it’s important to document everything, including what the problem is, when it occurred, and how long it lasted. Open a ticket or complaint via the carrier’s service department every time you experience an issue that is violating your SLA. In the event that you need to terminate your contract
Sign full copies of the contract – not references to weblink agreements. You’ll find that some telecom contacts will ask you to sign a contract that includes a URL with terms and conditions, additional clauses, etc. If everything you sign is not on one actual document, you risk the carrier changing the content on the web address section of the contract without your consent or knowledge. Ensure that your contract terms are listed in an actual document (physical or a digital PDF) – and not living somewhere on a website that can be easily changed.
7
Know your main contact at the carrier – and their boss. It’s important that your service provider or carrier supply specific names and contact information for those to
contact in case of service issues. You’ll also want to know how to escalate your problem, especially if you experience communication issues. Insist on receiving all contact information during the negotiation process to ensure any problems are resolved as quickly as possible.
8
Make sure your contact doesn’t allow the carrier to increase pricing. Some carrier contracts offer heavily reduced “special pricing” for a short period of time (like the initial 12-24 months), then they will increase it to “standard pricing” after 24 months. The delta can be as much as 50% increase without notifying the customer. About the author: Christian Ericson is Head of Sales/CMO for BITS. Contact: christian. ericson@bits.us or 973-474-1828. Learn more at bits.us/telecomadvisory or contact us at telecomadvisory@bits.us or 888-687-5406. IBA Associate Member
July-August 2021 •
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SPECIAL EDITION • THE NEXT NORMAL
What is an Engaged Digital User Worth to my Bank? By Charlie Kelly and Brian Hink, Remedy Consulting
B
ankers provide digital tools to their customers, but many community bank CEOs and even most “Digital Experts” from large financial technology organizations struggle to answer two questions related to their digital users:
“What incremental revenue does an engaged digital user bring me?” and
“What does an engaged digital user cost me?” If you want to determine an ROI for each active digital user you recruit, it may help to have a better understanding of the two sides of the equation – how to quantify the revenue and the cost of each digital user. Throughout this piece, we will try to get bankers thinking about the questions to ask when deciding what a digital user is worth to your bottom line.
A recent McKinsey study suggests that the number of “channels” a customer uses from your financial institution to access their money has a direct correlation to both the number of products they purchase, and the revenue per customer. The number of products purchased increased from five on average for the less engaged customer up to nine products for the most engaged customer. The revenue per customer the study used was $100 per customer for a single channel (less engaged) customer, and $210 per customer for a client that used three or more channels. So, $110 in incremental value for an engaged customer vs. non-engaged customer. We have seen other studies that suggest the incremental value of the digital customer is somewhere between $75$200 per customer. Oddly, we have yet to find an expert to show us how they calculate the value of the engaged digital customer. The reason that they may not want to commit to the secret sauce behind their estimates is because there are so many variables in this equation. The two most obvious might be: Using the concept that more channels equal more products purchased, which additional products can you anticipate that the engaged digital client will purchase? Can the average community bank CEO estimate the value of the additional products? Let’s look at some revenue drivers a bank could use to calculate the value of a digital user. For the purposes of this argument, let’s ignore loans and use just the value of a deposit account for an active digital user. When we build a model for a client, we start with three revenue and one expense reduction driver: Interest Revenue on primary account: When building ROI models for our clients, we start with $9,000 as an average balance, with 25 bps as a conservative estimate of the spread between investments/loans and what a client might pay on account balances. This comes out to $1.88/month.
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• July-August 2021
Fee revenue on a primary account: Use $6 per month per account as an average, which varies significantly depending upon a bank’s fee policy.
can consider them incremental as they drive more cost with each power user and are likely not used by someone who just parks a laggard account with your bank.
Debit card interchange revenue: Average transactions used per user = 15 per month, $.30 per transaction after blending PIN and Signature interchange revenue. $4.50/month.
Divide these by the price you pay each month for these incremental tools by the number of active primary checking account holders, and you will come up with a cost-per-primaryaccount holder per month. For simplicity sake, you could use checking accounts with an active direct deposit as your divisor.
Savings for eStatement users: An active Digital user will offset some account expense that a paper user would not, so we plug our model with $1.90/month savings in postage, labor, statement composition, etc. A bank might be better to use their own customer transaction and revenue estimates rather than mine, since the “expert” opinions on the monthly value of each vary significantly. And these are meant to be gross numbers, they do not net out expenses such as the incentives you are paying your team to bring in new business. But, if we use these numbers we come to an estimated $13 per user per month for the deposit relationship. If you multiply that number times four incremental products for an engaged user, and you are at $52 per month in gross revenue. Most loan products generate more income than a deposit account, so you can see where an incremental value of $75-$200 might be coming from. Not a perfect science by any means but perhaps a framework you can use to plug in your own assumptions while validating how much a digital strategy means when growing your bank. Now let us look at the direct cost side of the equation. Your vendor invoices will give you the direct vendor costs-per-user you currently pay but consider using incremental costs only. By which I mean that every user these days will require a core account, ecommerce, and a mobile application. Those are must-haves that you pay for regardless, so you might ignore when thinking about digital power users. Now look at tools like direct deposit, estatements, bill payment and mobile capture. The use of these tools is what separates a truly active digital primary account user from a laggard. You
If your direct, incremental cost-per-user is $4 per active user, and your potential monthly income from selling those products exceeds that number, then you have a decent way to figure out your return on investment, at least in helping you decide whether to purchase and install additional technology that may draw users to your bank. After running this analysis quite a few times, perhaps the best advice I can provide is to build yourself a model with both the revenue and expense assumptions that your team is comfortable with and use that as a baseline to make decisions. This type of a model can help you decide in what tools to invest in, and once you dig out all the numbers you need for the analysis, it can also help you develop a baseline for your internal digital guru to use to decide how you want to grow the user base going forward. It can become a great strategy planning tool. Do everything you can to negotiate your technology expense, and it will improve your ratios. The evidence strongly suggests that large banks are well ahead of their community bank counterparts when it comes to active digital users. Since larger banks have more customer data to analyze that suggests that they see a strong ROI in investing in digital tools. We have seen the same assumptions at Remedy Consulting when analyzing data across multiple community banks. If you are looking for help to analyze your data, please reach out. About the authors: Charlie Kelly is a Partner at Remedy Consulting and host of BankTalk Podcast. Brian Hink is a Senior Director at Remedy Consulting and manages the vendor negotiation and bank strategy practices. To learn more about Remedy Consulting, visit www.remedyconsult.net. IBA Associate Member
July-August 2021 •
• 21 •
SPECIAL EDITION • THE NEXT NORMAL
Realigning Priorities for the New (ab)Normal
Tactics to Win in a K-Shaped Recovery By JP Nicols, Alloy Labs Alliance
F
inancial institutions are in another strategic planning and budgeting season, and this one has more uncertainty than ever before. Even the dire financial crisis era had some generally predictable, if sobering, trendlines that financial executives could get their heads around as they planned ahead for the next year or so. College of William & Mary adjunct professor Peter Atwater coined the term “K-shaped recovery”; positing that profound and persistent economic inequality is likely to produce not a single broad course of recovery for the economy as a whole, but multiple vectors. Positive outcomes for some, negative for others; and even within that, steeper for some and shallower for others.
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• July-August 2021
Add to those variables the lack of consensus as to when a recovery of any shape might actually even begin, and it hardly portends a certain future to which boards and management teams will be eager to commit precious limited resources. Ready or not, the calendar pages will continue to fly by regardless, and financial institutions can’t afford to just sit back and just see what happens. While the natural inclination might be to slow down and delay action given so much uncertainty, that will only create a bigger gap to close. A better approach is to embrace the uncertainty and actually move faster, but with these three tenets in mind. First, don’t ignore the underlying long-term trends. Like everything else in our lives, all aspects of banking have
been becoming more digital and more mobile for well over a decade now. Customers of all types and all ages are increasingly comfortable using digital technology, and the pandemic forced most of the stragglers to finally cross that Rubicon. Straggling bankers crossed along with them as they were forced to serve customers in new ways, with many pleasantly surprised by the results of even their improvised efforts. Those trends are not going away, and now is the time to double down. We are hearing from many institutions that current branch traffic is a tiny fraction of prior volumes, and it appears unlikely to come all the way back for a long time, if ever again. Leadership teams need to take a hard look at branch locations and activities to free up valuable resources. They should look at reinvesting some of the savings into ATMs, ITMs, mobile banking, chatbots, and other digital tools that can meet customer needs more efficiently. The greater risk is inaction. Secondly, leaders must look at their strategic plans and budgets through both offensive and defensive lenses. A recessionary environment, falling revenues, and rising credit costs are all good reasons to take defensive measures like rationalizing non-interest expenses, but institutions should not ignore the unique opportunities to play offense now. It takes both offense and defense to win over the long run, and it’s important to understand the differing implications for each. The overarching objective in playing defense is not losing. That includes taking defensive actions to blunt the impact of competitors, such as digitizing basic transactions and servicing. Only a handful of institutions with big teams and budgets can truly vie to win the digital arms race. Sometimes ‘good enough’ really is good enough, so any efforts that go beyond achieving parity in some areas amount to a waste of limited resources that could better be reallocated towards other objectives. Playing offense is all about winning, and that means finding opportunities to build and maintain real differentiation from the competition. The biggest risk when playing offense is backing off the gas before you cross the finish line. That’s not to say that whoever
spends the most always wins, but any resources conserved through avoiding waste in playing defense should be considered for reallocation to make sure that offensive moves achieve victory. Smaller institutions in particular like to tout their intimate customer relationships and perceived superior customer service, and often cite that advantage to explain their reluctance to lean too far into digital banking. This is exactly where the best opportunities are to play offense and win. Institutions need to allocate resources now for urgently meeting customers’ needs and preferences that are changing in the post-pandemic world, especially in light of K-shaped divergent paths. Differentiate to win. Finally, boards and leadership teams have to build flexibility and agility into their planning and budgeting process. The answers they need to win are not in their conference rooms or forecast models; they are in the market, with their customers and prospects. They need a better way to find them and incorporate them quickly into the planning and budgeting process. This doesn’t mean throwing money at unproven ideas with vague hopes of striking gold, it means a disciplined and urgent focus on uncovering and meeting changing customer needs. It means breaking down high-stakes projects into smaller actionable pieces to be able to turn those questions into answers quickly and cheaply. And it means empowering internal teams with the ability to act urgently on what they learn without unnecessary bureaucracy. Risk management practices have to be scaled appropriately to support flexibility and agility. Times of great change are also times of great opportunity, and the time to act is now. About the author: JP Nicols is cohost of Breaking Banks, the #1 global fintech radio show and podcast, and cofounder of the Alloy Labs Alliance, the industry-leading innovation consortium of community and mid-sized banks. He is a frequent speaker and serves on the faculty at the Graduate School of Banking at the University of Wisconsin-Madison, an IBA Associate Member, and the GSB Digital Banking School – both of which are currently accepting 2021 enrollments at www.gsb.org. Follow him on Twitter: @JPNicols
July-August 2021 •
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SPECIAL EDITION • THE NEXT NORMAL
Does Your Change Management Process Need a Conversion? By Stephanie Goetz, Bedel Security
W
e have been seeing findings related to change management cropping up in several audit reports this year. Appropriately scoping change management can be tricky in smaller financial institutions which do not code their own applications. In such cases, pointing to a third party or managed IT provider may cover many of the controls needed, such as coding, testing, back out plans, etc. However, the trick here, as always, is understanding the roles in the bank vs. third party. We all know very well that while we outsource the responsibility of performing the task the bank is still ultimately responsible for risk.
standard changes can fast track through the process with appropriate documentation and approval. Significant rated changes, though, require the full gamut of the process because they are high risk prior to implementation. Also considered as high-risk changes are emergency changes, but due to the emergency at hand we ask forgiveness so to speak, by creating the documentation and testing on the backend. Here’s a breakdown of the change types: u Standard – (moderate risk) A simple and common change with a process and procedures in place to mitigate impact, such as implementation and testing procedures. w Example: Firewall changes or patching.
u Low – (low risk) Defined as having limited potential For each step below ensure it is covered in a policy and understand who is responsible for which step as well as the communication points between your bank and the third party to ensure your bank has the oversight needed to understand and manage the risk.
Risk rate your changes
This is where efficiency can really kick in. Low risk and
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• July-August 2021
impact to Bank and Customers. w Example: A minor software configuration change.
u Significant – (high risk) We define those as having significant impacts customers or bank operations to a considerable degree or considerable resource requirements and difficulty of the change make it a significant risk to the bank.
w Example: This would typically be a new system implementation, addition of a module, or major upgrade.
u Emergency – (high risk) This change requires quick action due to an outage or high impact to customers and operations. w Example: A network outage bringing all systems down.
Create your process path for changes
Based on your risk assessment above, your changes should go through the steps below. Some of these steps will take more time for higher risk changes, but the low can breeze through with documentation of the authorization and the significant changes will require more time to understand the impacts, create a test plan and get authorization and coordination needed to successfully implement the change. u Authorization – Approval to make the change by the system owner and if necessary, the Change Advisory Board (CAB), discussed below.
u Test – Document the test plan for the change. How will we know it’s working as intended? Low changes may only require the technician to test, however new implementations may need testing from one or more departments in the bank. Also, don’t forget to test the security controls both new and existing. You may even consider a penetration test for critical internet facing systems prior to moving the change into production processing.
u Backout plan – If the change doesn’t go as planned how to we revert back to the previous version? Do we have adequate backups available to do so? Who needs notified of this so that operations are not disrupted?
is the governing body for the changes as well as the process (explained in #2 above) and should include representation from the following roles: u Business u Technology u Information Security u Internal Audit This doesn’t have to be a newly formed group, rather you may be able to leverage a current management level committee for this, such as an IT Steering Committee, just add an agenda item and voila, we have a CAB!
Train users on the changes, if significant.
Don’t forget as we identify the changes to the system, and perhaps business processes that the users of the system may need training to execute their jobs. This should be discussed, planned where needed and approved by the CAB.
Document the changes
Since we’ve been doing all this great work, let’s take credit by documenting and showing the auditors and examiners how well we are doing! Documentation can be in a ticketing type system or documented and saved in files for a simpler environment. Documentation should include at least the following for each change: u Requirements – What changes are required? Why are these needed? How did we risk rate this change?
u Authorization – CAB or other approver if a low or standard change.
u Changes made – What changes were actually made when all was completed?
u Timing – When is the best time to make the change? Monday morning may be a great time or a bad time depending on who is involved.
u Post-Implementation Review – This is a lessonslearned session to understand what went well, what didn’t and how we can improve the process in the future.
Have a CAB
For those high-risk changes, the Change Advisory Board (CAB) should review them in the authorization stage. This
u Results – What did we learn from the postimplementation review? Hopefully this helps to de-mystify and simply change management process! About the author: Stephanie Goetz, CPA, CISA, CISSP, is the VP COO as well as a Virtual CISO Senior Advisor for Bedel Security. She began her career as a financial and information technology auditor, before getting her CISSP and pivoting into the world of information security for financial institutions. IBA Associate Member
July-August 2021 •
• 25 •
EVENTS HIGHLIGHTS
Spring Golf Outing Highlights May 20 • St. Clair Country Club, Belleville
Jonathan Noble, BackBase • Jace Keaster, The Bradford National Bank • Phil Hayes, NFP Executive Benefits • Rich Knebel, The Bradford National Bank
Chase Matticks, Central Bank of St. Louis • Herb Henson, The Clay City Banking Company • Christy Buchanan, WolfPAC Integrated Risk Management • Gary Genenbacher, BKD, LLP
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• July-August 2021
Joshua Rakers , Marty Davis, Kyle Davis, and Bailey Thompson, all from MurphyWall State Bank and Trust Company, always know how to have a great time! Thank you to Marty Davis for donating his Mulligan prize drawing to Illinois Bankers PAC!
Reece Copeland, The Fairfield National Bank • Mike Bush, Ascensus (IBA Preferred Vendor) • Taylor Brengard, First Bankers’ Banc Securities, Inc • Jeff Rabenort, Bankers’ Bank
A BIG Thank You to Our Sponsors
Mayor Mike Leopold and Dan Nester, both guests of First National Bank of Waterloo, enjoyed the day! Mayor Leopold was our Longest Drive winner!
The IBA’s own Cassie Mattson joined Bethany Shaw, Peoples National Bank and the ’21-‘22 FLA Chair, for the round.
• Backbase USA inc. • BankTalentHQ • BKD, LLP • CLA • Federal Home Loan Bank of Chicago • Ironcore, Inc. • LKCS • Midwest Independent BankersBank • Northland Securities • The Consultants - Powered by Illinois Bankers Insurance Services • Thomson Reuters • United Bankers’ Bank • VGM Forbin
July-August 2021 •
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PREFERRED VENDOR
July-August 2021 •
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PREFERRED VENDOR
Allied Solutions Teams Up with IBBS to Promote Artificial Intelligence Platform By Brian Hoffman, President, Illinois Bankers Business Services, Inc. Allied Solutions, one of the largest providers of insurance, lending, and marketing products to financial institutions, has teamed up with Illinois Bankers Business Services, Inc. (IBBS), the for-profit division of the Illinois Bankers Association, to help the Illinois banking community successfully deploy artificial intelligence and machine learning from industry leading provider, www.interface.ai. Interface.ai has several decades of experience building enterprise-grade technology for financial institutions. Their Intelligent Virtual Assistant has already enabled financial institutions across the world to achieve greater efficiencies in their top-line and bottomline while ensuring the best customer experience. With their solution, financial institutions are automating 60% of call center volume within 60 days, ensuring consumers have access to their financial services provider 24/7 with zero wait times, seeing a 500% increase in online application conversion, a 30% increase in average revenue per customer, and experiencing 0% call abandonment rates. “We are living in a digital world where 24x7 access and self-service options are a must for all organizations providing financial services. Allied Solutions and IBBS are excited to partner with interface.ai to help aid our mutual clients in meeting their consumers where they’re at, retaining revenue and enhancing efficiencies,” said Pete Hilger, Allied Solutions’ CEO. “We are excited to partner with Allied Solutions and interface.ai to help expand their relationships across Illinois and help propel our banks to be digital leaders,” said Brian Hoffman, President, IBBS. As an added benefit, we are happy to announce that IBA members will receive 10% off the licensing fees,” Hoffman said.
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• July-August 2021
For more information, contact: John Garey Allied Solutions 262-278-3887 john.garey@alliedsolutions.net www.interface.ai
Brian Hoffman President, Illinois Bankers Business Services, Inc. 217-789-9340 bhoffman@ilbanker.com www.ilbanker.com
PREFERRED VENDOR
Illinois Banks Receive $122,243 in Distributions from American Bankers Mutual Insurance, Ltd. $91.3 million has been declared in total distributions since 1991. merican Bankers Mutual Insurance, A Ltd., the reinsurer for the directors and officers (D&O), bond and cyber insurance program co-endorsed by American Bankers Association and Illinois Bankers Association, declared a $2.5 million distribution to be shared by qualified ABA member banks insured through ABA Insurance Services, a member of Great American Insurance Group. This is the 31st consecutive year that the industry’s leading professional liability and bond insurance provider
has declared distributions to eligible ABA member banks, bringing the total to $91.3 million since the program’s inception. Banks that purchase their directors and officers, bond, cyber and related insurance from this program and are current ABA members are eligible to receive a distribution. “Even during periods of economic uncertainty, this program provides a stable source of insurance and continues to offer meaningful distributions for our members,” said
Rob Nichols, ABA president and CEO. “This is one of the many ways an ABA membership can add value for your institution.” “This is a testament to the hardworking team at ABA Insurance Services that continues to focus on providing high-quality service to our bank clients during the pandemic,” said Gary Hemmer, chairman of American Bankers Mutual Insurance Ltd. and chairman of the board of First National Bank of Waterloo in Waterloo, IL.
July-August 2021 •
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PREFERRED VENDOR Windsor Advantage’s Q&A Corner
1
When we engage legal counsel to liquidate collateral, what type of provisions should we include in the engagement letter and why are they important? After you have determined that the attorney meets the qualification standards set forth in SOP 50 57 2, the engagement letter should cover a few categories that will be pertinent to the SBA: (1) Locality of the attorney and potential travel expenses; (2) Limitations on billable activities and costs. Under Chapter 21 of SOP 50 57 2, the lender is expected to hire “local legal counsel” except for unusual circumstances. In addition to being licensed in the state in which the litigation will take place, the attorney hired should be relatively local to the county in which the legal action will be filed. The locality requirement is important as the attorney is not allowed to bill for travel costs unless the SBA has pre-approved the travel costs in an itemized litigation plan. Additionally, there are other legal costs that are prohibited or deemed unreasonable by the SBA including: (1) Overhead expenses such as file set up, calendaring court/filing dates; secretarial work etc. (2) Intra-law firm communications; (3) fees from multiple law firms; (4) routine loan servicing duties such as demand letters and liquidation plans; and (5) receiver fees and costs. All of the aforementioned activities and expenses should be addressed in the engagement letter as to avoid any confusion between the lender and attorney.
2
Does the SBA have a legal fee schedule and/or cap on legal fees for each state similar to the Fannie/Freddie model? The SBA does not have a formal fee schedule but it does require lenders to follow “industry standards”. Under Chapter 21 of SOP 50 57 2, fees must be “necessary, reasonable and customary for the locality.” It is recommended that lenders work towards one set hourly attorney fee when working with law firms. Law firms, especially larger ones, have various hourly fee structures based on years of experience. Accordingly, there may be an attorney that bills out at $275 per hour and an attorney that bills out at $500 per hour in the same firm. Those issues should be vetted ahead of time and if possible, one hourly fee should be set for all attorneys as to avoid issues with the SBA.
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• July-August 2021
3
We have an income generating property as collateral and an Assignment of Rents. (a) Can we ask a court to appoint a receiver without the SBA’s consent as we would with a conventional loan? (b) Can we collect rents without initiating a foreclosure action? It Is best to consult with a local attorney prior to taking any action on the Assignment of Rents (AOR). A receiver may not be appointed without pre-approval by the SBA (although there may be some exceptions for emergency circumstances). The justification for the appointment as well as the related fees and costs should be detailed in the litigation plan. It is also important to note whether the lender is asking for a receiver to simply maintain the property (secure it, maintain the lawn, snow removal etc.) or if the lender is asking for a receiver to take over the business of the borrower. When foreclosure rates rise, local municipalities tend to be stricter in terms of enforcing local ordinances regarding property maintenance. Housing court cases also tend to rise in which the county or city will bring an action against the owner for violating maintenance related ordinances; which could then in turn result in a lien against the property. For the aforementioned reasons, it may be wise to seek pre-approval for a receiver especially if the property is abandoned. Regarding pre-litigation collection of rent, an AOR will typically allow the lender to send demand letters to the tenants demanding the rent be turned over to the lender. That being said, a local attorney should be consulted prior to sending demand letters as some counties/judiciary disfavor that type of action especially if the property is occupied by the owner as a principal residence.
4
When should an SBA Liquidation Plan and Budget be submitted to the SBA and how much detail should be included? Litigation Plans are required on all non-routine litigation and for litigation fees/costs that exceed $10,000. It is recommended that Litigation Plans are submitted on all non- routine litigation prior to commencement of the litigation. The Plan should contain as much detail as possible in regard to the chronological actions/filings that will take place from the initial complaint through final judgment. The Plan should also include an addendum in which the attorneys’ fees and costs are itemized. It is recommended to put in as much detail as possible and submit a revised plan well before the fees/costs exceed the estimate in the original Plan.
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SBA Notes of Interest The CARES Act has supported thousands of SBA businesses since 2020 and the payment relief did not come soon enough. Nonetheless, many SBA borrowers may not survive once the SBA discontinues payment subsidy relief. We have been asked some very good questions relative to handling borrowers in 2021 and working out stressed portfolios.
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July-August 2021 •
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FLA UPDATE Introducing the Officers of the 2021/2022 FLA Board of Directors Congratulations to Bethany Shaw, Peoples National Bank, N.A., for moving into the role of Chair (Class of 2009) Congratulations to Kara Austin, Murphy-Wall State Bank & Trust, for accepting the role of Vice-Chair (Class of 2019) Thank you to Andrew Butts, Bank of Belleville, for serving as Chair for 2020/2021 and moving into the role of Immediate Past Chair (Class of 2017)
Introducing new members of the 2021/2022 FLA Board of Directors Congratulations to Jim Smith, Busey Bank, for joining the Board (Class of 2018) Congratulations to Georgia Pelletiere, Lisle Savings Bank, for joining the Board (Class of 2021)
Continuing their term on the FLA Board of Directors • • • •
•
Ryan Martz, Solutions Bank (Class of 2015) Trent Cox, Farmers & Mechanics Bank (Class of 2017) Lora Kalka, FNBC of LaGrange (Class of 2020) Josh Ishmael, INB, N.A. (Class of 2019)
Leaving the FLA Board of Directors Christopher Hushka, CIBC (Class of 2017) – Thank you for serving on the FLA Board! Matt Wyatt, Busey Bank (Class of 2011) – Thank you for serving as FLA Immediate Past Chair for 2020/2021!
Additional FLA Class of 2022 – The newest class is already 2 sessions down with 4 more to go! Their 3rd session will be hybrid and will be the first time we’ve had an FLA class together in-person since last February. The students are excited for July! A Day in the Life of a CEO – The FLA Class of 2022 was fortunate to hear from some incredible leaders in the banking field during this panel discussion in April. A special thanks to Betsy Johnson (Solutions Bank), Micah Bartlett (Town & Country Financial Corporation), Erich Bloxdorf (Illinois Bankers Association) and Randy Hultgren (Illinois Bankers Association) for inspiring the class! FLA Book Club – The newest addition to the FLA is our monthly leadership book club! We currently have 31 members from both the current FLA class and alumni. The first book pick was The Peter Principle: Why Things Always Go Wrong and next on the docket is Extreme Ownership. A big shout out to all Illinois bank CEOs who submit their leadership book recommendations for this book club.
Shaw
Austin
Butts
Smith
Pelletiere
Wyatt
Martz
Cox
Kalka
Ishmael
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• July-August 2021
Hushka
ON THE MOVE
Argenta
THE GERBER STATE BANK Don Schlorff retired from the bank, effective May 14.
Bloomington Lindsey
Cortelyou
HEARTLAND BANK AND TRUST COMPANY Heartland Bank and Trust Company announces the promotion of Todd Lindsey, CTP, to Assistant Vice President, Treasury Services Sales Manager.
Bushnell Allaman
Caligiuri
Kessler
Morrow
Nagle
Cousley
FARMERS & MERCHANTS STATE BANK OF BUSHNELL Bank President Dan Cortelyou retired from the bank on April 30th after nearly 42 years of service. Dan also served as Bushnell City Treasurer for 36 years. Doug Allaman, Chief Operations Officer, has been named President of the bank. He also serves as Director of Compliance and on the bank’s senior management committee. He began his employment at Farmers and Merchants State Bank in 1995. Connie Morrow, Chief Financial Officer for the bank, has been named Executive Vice President and Trust Officer. She serves as Project Manager, Information Security Officer, and serves on the senior management committee of the bank. Connie began her career with Farmers and Merchants in 1994.
Chicago
McKee
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Lutz
• July-August 2021
BMO HARRIS BANK Peter Caligiuri has joined BMO Harris Bank as Head of Correspondent Banking, where he will lead BMO’s team that covers community and regional banks on a nationwide basis. Caligiuri has over 30 years of experience in corporate and commercial banking.
Davenport, IA
QUAD CITY BANK & TRUST Quad City Bank & Trust announced that John Nagle will be promoted to the position of Senior Vice President, Chief Lending Officer. The transition is effective July 4 following the well-deserved retirement of Jeff Lockwood, who has managed the commercial banking division for 15 years. Aaron Rios has joined QCR Holdings, Inc. as Executive Vice President of Operations and oversees QCR Operations teams with a focus on business process optimization. In addition, Nathan Kessler has been hired to the role of Vice President, Commercial Banking Officer.
Edwardsville
BANK OF MADISON COUNTY Bank of Madison County announced the hiring of Mark Cousley as the bank’s new Vice President of Commercial Banking. Cousley has more than 20 years of experience in banking.
Effingham
WASHINGTON SAVINGS BANK Washington Savings MHC named Paul Koerner as the chairman of the board. Koerner is currently the CEO and president at Koerner Distributor, Inc.. He will succeed outgoing Chairman Rocky Weber, who will remain on the board.
Freeport
STATE BANK State Bank, a subsidiary of Foresight Financial Group Inc., appointed Peter Morrison president and CEO. Mary Hartman will retire from the role of president/CEO and will continue to serve through June for the transition period.
EVENTS CALENDAR
Galesburg
F&M BANK Todd McKee has joined the financial services team of F&M Investment Services at F&M Bank.
Waterloo
FIRST BANKERS TRUST First Bankers Trustshares Inc. and unit First Bankers Trust Co. NA appointed Seth Runkle as CFO, effective June 1. Current CFO Tom Frese will step down from the position but will remain with the bank until his retirement at the end of 2021.
FIRST NATIONAL BANK OF WATERLOO First National Bank of Waterloo announced the retirement of Glen Lutz. Lutz has been with the bank for 45 years. He is the 2nd longest tenure employee at First National Bank of Waterloo, and the longest tenure retired employee in the history of the bank. Glen’s great grandfather, A.C. Rexroth, was one of the original founders of the bank, and his father, Otis Lutz, worked at the bank for many years as well. Lutz started working for the bank in 1976 as a teller.
Springfield
Urbana
Quincy
TOWN AND COUNTRY FINANCIAL CORPORATION Dave Kirschner, Executive Chairman of Town and Country Financial Corporation, the parent company of Town and Country Bank, announced two new Directors of the Board, Jennifer Wagner and Scott Garwood. Additionally, John Cobb will retire as a member of the Board but will continue to serve as an Advisory Director. Wagner is the President and CEO of Maintenance Supply Corporation and Masco Packaging & Industrial Supply, where she started her career in 1991. Garwood is an attorney and partner at Samuels Miller Law firm in Decatur, where he’s worked for the last 19 years.
UPCOMING EVENTS August 11-14 Annual Conference Branson Convention Center Branson, MO August 25-26 Ag Banking Conference Crowne Plaza Springfield Springfield October 4 Fall Golf Outing Pekin Country Club Pekin October 19 Fall Compliance Conference The Regency Conference Center O’Fallon
FIRST FINANCIAL BANK Zach Paragi has been named Manager for First Financial Bank’s Philo Road Banking Center in Urbana.
October 7 BankTech Conference Chicago Marriott Southwest at Burr Ridge Burr Ridge
Watseka
October 28-29 Women in Banking Conference Crowne Plaza Springfield Springfield
IROQUOIS FEDERAL SAVINGS & LOAN ASSOCIATION After 45 years in banking, Terry Acree, EVP Watseka Community President, retired from Iroquois Federal on July 9.
November 4 Midwest Bank Leaders Conference Gleacher Center Chicago December 2 Chicago Area Chapter Holiday Breakfast Chicago Suburbs December 3 Bank Counsel Conference Renaissance Chicago Downtown Hotel Chicago Some events are also being held virtually. Please check ilbanker.com for the most up-to-date schedule.
July-August 2021 •
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EVENTS CALENDAR SEMINARS, CONFERENCES & FORUMS
AUGUST 5
Commercial and Industrial Lending in Today’s Competitive Market – Springfield
6
Commercial and Industrial Lending in Today’s Competitive Market – Oak Brook
6
CFO Forum Springfield
11-12
IBA Annual Conference
18
Small Bank CEO Forum – Bloomington
19
Technology & Operations Forum
17
Loan Doc for Secured Commercial Lending Transactions
20
CFO Forum Schaumburg
2 5-26
Ag Banking Conference – Springfield*
SEPTEMBER 15
Performing Your ACH Audit – Springfield
16
Performing Your ACH Audit – Oak Brook
2 0-24
Regulatory Compliance Series – Springfield* Credit Compliance, Part 1 Credit Compliance, Part 2 Credit Compliance, Part 3 Deposit Compliance BSA/AML Compliance and Regulators’ Forum
27 Senior Retail Forum, Session 3 2 8-30
Operations School – Springfield*
2 9-10/1 Consumer Lending Bootcamp: Beyond the Basics
*Hybrid (In-Person or Virtual)
All programs delivered virtually unless otherwise noted Visit www.ilbanker.com/Education-Events/Calendar-of-Events
IBA Webinars
AUGUST
18 Workplace Violence Planning
& Active Shooter Preparedness
SEPTEMBER 8 Execute the Ultimate Data Strategy 14 Notary Update ONCOURSE LEARNING WEBINARS
AUGUST
2 CRE Appraisals: Components,
Approaches to Value & Cap Rates
3 Do’s and Don’ts on
Power of Attorney Documents
3 Writing an Effective
4 Consumer Real Estate Loans 5 Advertising Compliance 5 Banking Cannabis Businesses:
FinCEN Guidance, Due Diligence Policies and Procedures and Risk Management
11
Excel: Filtering and Slicing Data
14 Excel Explained:
Auditing Spreadsheets
14 Writing Marijuana and Hemp Policy 21 Being Strategic with
Base Compensation for Non-Executive Positions
30 Consumer Collections 101 ABA WEBINARS
AUGUST
24 Compliance Management for First-Line Operations
SEPTEMBER 1 Nonprobate Transfers:
Advantages and Disadvantages
ABA ONLINE TRAINING COURSES
AUGUST 2
Building Customer Relationships
SEPTEMBER 6 IRA Online Institute
16 Strategic Loan Pricing
7 The Banking Industry
17
13 Analyzing Bank Performance
The Right of Setoff
17 Auditing BSA - New Chapter Revisions 24 Opening Trust Accounts 31 De-Risking Customers Where Are We?
SEPTEMBER 1 Serve Well, Sell Right at the Branch 2 7 Habits of High Performing Banking Teams
7 Mapping Multi-Tiered
• July-August 2021
Fall 2021
Credit Memorandum
Business Accounts
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9 Quarterly Compliance Briefing:
13 20
Legal Foundations in Banking Introduction to Mortgage Lending
27 Basic Administrative Duties of a Trustee
27 Introduction to Agricultural Lending
NEWS & NOTES
In Memory Of
Pictured: IBA’s Mike Mahorney, Frank Joy, IBA’s Phil Talley, bank President Michael Ennen, and bank Senior VP and IBA Board Member Richard Knebel.
Joy Joins IBA’s 50 Year Club
Members of our IBA team had the pleasure of visiting Bradford National Bank in Greenville and presenting Chairman of the Board Frank Joy with his 50 Year Pin. Frank is a past member of the IBA Board and a third generation banker. In fact, he still has the 50 Year pin that was presented by the IBA to his father, Frank Joy, Sr.
Congratulations, Frank! Thank you for your many years of service!
Mcintire Earns National Certification
Tom McIntire, F&M Bank, was recently awarded the Certified Trust & Fiduciary Advisor (CTFA) professional certification from the American Bankers Association. The CTFA certification is awarded to individuals who demonstrate excellence in the field of wealth management and trust. McIntire joined F&M Bank in February 2020 as Vice President, Trust Officer. He holds a bachelor’s degree in business administration and political science from Augustana College and received his JD from the University of Wisconsin.
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• July-August 2021
Ronald L Wohlwend Ronald L. Wohlwend, 79, passed away on April 17. Ron came to Morris in 1966 to serve as Manager of Operation Services at Grundy Bank. He became the Bank’s Vice President and Cashier in 1970, its Executive Vice President in 1975 and Grundy Bank’s President and Chief Executive Officer in 1981. He retired in 1999 and continued serving as its Chairman of the Board until 2019. During his career at Grundy Bank, Ron traveled around the country as a member of the National Speakers Association. His main speaking topic was “How to Talk to Your Banker.” Throughout his career, he was a leader in the banking industry. He taught Principles of Bank Operations at the American Institute of Banking and served on the Advisory Council of the Graduate School of Banking in Madison, Wis. He was influential in state and national banking organizations through his leadership roles on the Illinois Bankers Association Executive Committee of its Board of Directors and the Community Bankers Council of the American Bankers Association. He was recognized in September of 2016 by the IBA for 50 years of service to the banking industry and Grundy Bank. Russell E. Spaulding Russell E. Spaulding, 80, was born November 18, 1940, in Harvey, Ill., and passed away on May 7. He proudly served his country in the United States Air Force Reserve from 1963 through 1968. He began his banking career at the National Stock Yards Bank in 1969. After it was purchased by Boatman’s Bank of St Louis in 1979, he continued with Boatman’s until it was purchased by Bank of America in the mid 90’s. Russ retired from Bank of America in 2002. He was offered a position the same day he retired at the First National Bank of St Louis which changed their name to Central Bank of St Louis. Russ was promoted to Senior Vice President in 2019 and was working at Central Bank at the time of his death. The IBA extends it deepest condolences to the family and friends of Ron Wohlwend and Russ Spaulding.
WELCOME NEW MEMBER BANKS First Business Bank
• Financial Services Industry Member
When your bank’s a member, you’re a member!
NEW ASSOCIATE MEMBERS (as of 6-1-21) Apiture Wilmington, NC apiture.com Apiture is a leading cloud-native provider of digital banking solutions created to empower financial institutions to accelerate their digital transformation while enhancing the overall user expaerience. Apiture has served the market for over twenty years offering a feature rich platform to provide a single solution for increased access and control of data. Apiture’s solutions include competitive retail and commercial digital experiences across channels including online, mobile, and device. Banzai Inc Provo, UT teachbanzai.com Banzai is an education platform with a focus on financial literacy. We serve communities by providing unparalleled financial literacy education to schools, and we serve our partners by providing access to invaluable marketing insights and meaningful CRA opportunities. KlariVis Roanoke, VA klarivis.com KlariVis is a cloud-based data analytics platform built by bankers, for bankers. We integrate into various core and ancillary systems and deliver your high-value customer data through interactive dashboards. KlariVis delivers all the necessary data to give financial institutions immediate insight into key performance metrics such as deposit account growth, fee income, loan growth, customer engagement levels, credit quality trends, financial results, and more!
OakNorth Americas (US) Inc. New York, NY oaknorth.com OakNorth is the creator of the ON Credit Intelligence Suite - proven cloud software that transforms commercial lending by helping banks build deeper relationships with their clients, unlocking new opportunities, and delivering credit decisions ten times faster than traditional models – with lower risk and greater efficiency. OpenLending Austin, TX openlending.com Say YES to more automotive loans! The Lenders Protection™ program can provide your financial institution with a safe way to increase near and non-prime auto loan volumes without the added risk. Lenders Protection™ is a unique auto lending enablement platform utilizing proprietary data and advanced decisioning analytics that provides lenders with a powerful and safe way to increase near and non-prime auto loan volumes that achieve higher yields without adding significant risk.
ASSOCIATE MEMBER NEWS Finastra ENACOMM, a FinTech enablement company empowering financial services companies with affordable solutions for improving the customer experience (CX), fighting financial fraud, and increasing operational efficiency, announced that the ENACOMM Financial Suite (EFS) with intelligent IVR application is available for purchase through Finastra’s FusionStore. ENACOMM’s nextgeneration IVR will enable banks, credit unions and credit card institutions to benefit from its multichannel, intelligent customer self-service applications, which are delivered as Software as a Service (SaaS) or hosted solutions and provide valuable analytics for improving the customer experience and fighting fraud. WolfPAC Integrated Risk Management WolfPAC Solutions is excited to announce the launch of their newest offering to the WolfPAC Integrated Risk Management® platform—the Incident Management Solution. This solution joins WolfPAC’s suite of integrated risk management software, helping users optimize their risk management programs and keep their organization safe. Designed for financial institutions, businesses, and healthcare organizations, the new Incident Management Solution enables professionals to track and collaborate in real time on active incidents, including tests and exercises of any kind. Through an interactive, step-by-step process for improved decision making, the real-time task management ensures critical action items and tasks aren’t overlooked. www.wolfpacsolutions.com.
July-August 2021 •
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THE LAST PAGE
Making History with Bradford National Bank
In the early 1900s, right after receiving its national charter, Bradford National Bank in Greenville started issuing bank notes – currency issued to a bank that had to be hand-cut out of sheets of paper (three tens and a twenty per sheet) and hand signed to make them legal tender. During this time, Myrtle T. Bradford was president of the bank, and she has the distinction of being the first woman in the country to affix her signature to a national bank note. In fact, not only did Bradford National Bank have one female signor, but they actually had two: Myrtle T. Bradford and Nancy Rogers Bradford.
The Greenville Advocate reported this about Myrtle, who was bank president for just six months,
“Mrs. Bradford is probably the only lady in the state who has been elevated to the presidency of a bank. In any event, the case is a rare one and this distinction comes to but few women the country over. Mrs. Bradford is a gifted woman in many lines. She is versatile and has good business judgment.” Thank you to Bradford National Bank Vice President Randy Alderman for sharing this amazing bit of history!
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Bankers’ Bank (Wisconsin)
800-388-5550
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BOK Financial Institutions Group
866-440-6515
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LKCS
815-223-0391
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MIB – Midwest Independent BankersBank
800-347-4642
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Back Cover
PG Design + Build
815-654-9700
www.pgarch.com
11
SPARK
612-345-0683 www.lendwithspark.com
16
United Bankers’ Bank
612-881-5800
www.ubb.com/home
14
Wipfli, LLP
800-486-3454
www.wipfli.com
19
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• July-August 2021
8 28 2 35 Inside Back Cover
