July/August 2023
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“We were content with the coverage we had and were not shopping our plan. After meeting with KBA Insurance Solutions, we had no choice but to make the move to Chuck and his team. They proposed a thoughtful plan design & introduced benefits that we had not previously offered. When we showed the rates KBA Insurance Solutions offered to our prior agent, she said: “…you have to make this change.” Since changing our results have been better coverage, expanded offerings and greater cost savings. I would highly recommend that any bank explore the options available through KBA Insurance Solutions.” Mr. Charlie Dicken, EVP Trust Officer, First Kentucky Trust
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Brandon Maggard KenBanc Insurance Account Representative cell 606-682-2769 bmaggard@kybanks.com
KBA STAFF Ballard W. Cassady Jr.
WHO WE ARE: The KBA is a nonprofit trade association that has been providing legislative, legal, compliance and educational services to its member institutions since 1891. KBA's directors and staff work together with its members to make the financial services industry a more effective and successful place to work. The strength of the KBA is bankers unifying as an industry to speak as one voice. WHAT WE DO: The purpose of the Kentucky Bankers Association is to provide effective advocacy for the financial services industry both in Kentucky and on a national level; to serve as a reliable and responsive source of information and education about areas of interest to the industry; and to provide a catalyst and forum for collective industry action. The KBA does this in 4 ways: 1. Government relations & industry advocacy 2. Information interchange 3. Education 4. Products and services
President & CEO KenBanc Insurance cmaggard@kybanks.com
Timothy A. Schenk
Lisa Mattingly
General Counsel tschenk@kybanks.com
Miriam Cole
KENTUCKY BANKERS ASSOCIATION 600 West Main Street, Suite 400 Louisville, Kentucky 40202 KENTUCKY BANKER is the official bi-monthly magazine of the Kentucky Bankers Association (KBA). No part of this magazine may be reproduced without express written permission from the KBA. The KBA is not responsible for opinions expressed by outside contributors published in KENTUCKY BANKER. The KBA reserves the right to publish submissions at the discretion of the KENTUCKY BANKER editorial team. For more information, or to submit an article, pictures or pass on a story lead, contact Matt Simpson, Managing Editor, at msimpson@kybanks.com
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Director of Sales & Service KBA Benefit Solutions lmattingly@kybanks.com
Donna McCartin
Executive Assistant mcole@kybanks.com
Benefit Support Specialist dmccartin@kybanks.com
John P. Cooper
Tammy Nichols
Legislative Solutions jcooper@kybanks.com
Paula Cross Education Coordinator pcross@kybanks.com
Nina K. Gottes Sponsorship & Events Coordinator ngottes@kybanks.com
Casey Guernsey Enrollment and Billing Specialist cguernsey@kybanks.com
Jamie Hampton
kybanks.com
Chuck Maggard
President & CEO bcassady@kybanks.com
Education Coordinator jhampton@kybanks.com
McKenzie Just Caldwell Staff Accountant mcaldwell@kybanks.com
Finance Officer HOPE of the Midwest tnichols@hopeofthemidwest.com
Katie Rajchel Accounting Manager krajchel@kybanks.com
Selina O. Parrish Director of Membership sparrish@kybanks.com
Jessie Southworth
Director of Education jsouthworth@kybanks.com
Jennifer Schlierf Sales Support KBA Insurance Solutions jschlierf@kybanks.com
Matt Simpson Communications Director msimpson@kybanks.com
Tamuna Loladze
Matthew E. Vance, CPA
Chief Operating Officer HOPE of the Midwest tloladze@hopeofthemidwest.com
Chief Financial Officer mvance@kybanks.com
Michelle Madison
Billie Wade
IT Manager mmadison@kybanks.com
Executive Director HOPE of the Midwest bwade@hopeofthemidwest.com
Brandon Maggard
Audrey Whitaker
Account Representative KenBanc Insurance bmaggard@kybanks.com
Insurance Services Coordinator awhitaker@kybanks.com
Bold frame denotes management team member. Please feel free to email us, we are here to help!
2022-2023 OFFICERS & BOARD CHAIRMAN Mark Strother, President & CEO Farmers Bank & Trust Co.
PAST CHAIRWOMAN Ruth O’Bryan Bale, Chairman South Central Bank, Inc.
VICE CHAIRWOMAN April Perry, Chairman & CEO Kentucky Farmers Bank Co.
KBA PRESIDENT & CEO Ballard W. Cassady, Jr., President & CEO Kentucky Bankers Association
TREASURER W. Lee Scheben, President Heritage Bank, Inc GROUP REPRESENTATIVES Represents Group 1 Jeff McDaniels, President & CEO Farmers Bank & Trust Company Represents Group 2 Michael W. Hunt, President & CEO The Sacramento Deposit Bank Represents Group 3 Greg Pawley, President & CEO The Cecilian Bank Represents Group 4 Jason T. Jones, President Morgantown Bank & Trust Co. Represents Group 5 Don D. Jennings, CEO First Federal Savings Bank of KY Represents Group 6 Robert Miles, President & CEO Peoples Bank of Lebanon Represents Group 7 Lucas Shepherd, CEO First National Bank of Manchester Represents Group 8 Lonnie Foley, CFO Peoples Bank of KY, Inc.
Represents Group 9 James Ayers, Regional Manager First State Bank, Inez THRIFT REPRESENTATIVE Glenn Meyers, Executive Vice President Citizens Federal Savings & Loan Assoc. BANK SIZE REPRESENTATIVES Represents Banks w/ Assets of $1B+
Michael F. Beckwith, Executive Vice President, Chief Banking Officer, German American Bank Represents Banks w/ Assets of -$1B & at least $200M
H. Alexander Downing, President & CEO Franklin Bank & Trust Company
Banker Kentucky
SEPTEMBER/OCTOBER 2023 7
Chairwoman’s Corner
11
Field Notes - Ballard Cassady
14
Annual Convention Recap
18
CFPB Supervisory Highlights
21
Introducing Jessie Southworth
22
Onward & Upward
24
Book Review - James Ayers
28
Lanie Gardner Q&A
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EDUCATION ALLIANCE REPRESENTATIVE
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Lanie W. Gardner, Community President First Southern National, Central City
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KBA BENEFITS TRUST COMMITTEE REPRESENTATIVE W. Fred Brashear, II, President & CEO Hyden Citizens Bank
ADVERTISE IN KENTUCKY BANKER Want to advertise in KENTUCKY BANKER magazine? CONTACT Nina Gottes Sponsorship & Events Coordinator ngottes@kybanks.com 513-293-2467
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So Long, But Not Goodbye... Ruth was unexpectedly unable to deliver her final speech at the 132nd Annual Convention. Below is her adapted speech that she had prepared. We celebrate Ruth’s amazing service and can’t wait to see what’s next for her career in banking!
by Ruth O’Bryan Bale, KBA Chairwoman After 12 months of serving as Chair of the Board for the Kentucky Bankers Association, it is time for me to step away and welcome our next leader. I want to share how privileged I am to have had the opportunity to serve as the Chair of the KBA and work with the outstanding member institutions. I know through our combined efforts we have strengthened the banking industry across Kentucky. I want to take this time to congratulate Mark Strother on being named the next Chair of the Kentucky Bankers Association Board. We all have the greatest confidence in your ability to lead and serve with the KBA. I look forward to continuing to work with you to advance our mission. I also want to thank my predecessor, James Hillebrand, for his support over the past 12 months. As Chair of the KBA, this past year would have been much more difficult had it not been for the support and advice of many colleagues. I would especially like to express my gratitude to Ballard Cassady for his encouragement and guidance. The Kentucky Bankers Association is fortunate to have Ballard at the helm and I would like him to know how much he is appreciated. Ballard is dedicated to strengthening Kentucky‘s banking industry and equally dedicated to the hundreds of thousands of Kentuckians who rely and depend on their community’s banks every day. Ballard has a strong reputation for being a staunch advocate for the financial services industry in Kentucky and across the nation as well. To him, I have a large debt of gratitude for his leadership, constant support, and advice. Ballard, thank you very much.
But we all know behind every great leader is a great team. The staff at KBA is an outstanding group of people who are dedicated to serving our member institutions. You all do excellent work to strengthen the banking industry - and for that every Kentuckian has benefited. Without the KBA, providing the type of financial services to our customers would be very different from how we enjoy it today. It has been an honor and a privilege to work with you all. Thank you very much! To our member institutions, thank you for your investment in the KBA! I think we all can agree that the banking industry is everchanging in terms of compliance, consumer transaction strategies, and advancements in technology. Add to that the need for continuing education in best practices for lending strategies and risk management, and the task of working with and managing banking institutions can be overwhelming. Together, we are strengthening the banking industry for Kentuckians. Thank you to all for your commitment. There are also nearly 300 additional people, who I consider family and mean so much to me, our bank, and the customers they serve every day. I would like to recognize our President & CEO, Tommy Ross. He is the leader of our team and does an outstanding job managing the operations of our 30 offices across Kentucky and Tennessee. Joining him is our Northern Region President, Brandon Fogle; our market presidents Chris Whitfield, Patrick z, Kevin Carrico, Nate Harding, Amanda Brown-Wyatt, and Camden Skidmore. One of our lenders, Braden Pace is from our
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Hardin County office. Braden is a member of this year’s KBA Emerging Leaders program. Also, there is Marilyn Mills from our compliance department and Phillip Carter from marketing. These are some of the most dedicated people in the business and I am extremely grateful they are on my team. Thank you for the great work you do for our company. I love you all! This last year has given me the tremendous opportunity to gain valuable experience in the workings of
the financial services industry both in Kentucky and on a national level. I am so proud of the important work we do and how it benefits our industry.
the economy, and I deeply believe we should invest in our communities whenever we have an opportunity to do so.
When I assumed this role a year ago, I shared how our financial institutions are significant drivers of Kentucky’s economic growth and job creation. I believe that remains true today. I believe in the strength our lending institutions give to those who have a vision of growing and developing a business or the family who is ready to purchase their first home. Kentucky’s Banks are essential to the vitality of
I know through our combined efforts we have strengthened financial services across Kentucky because we are truly unifying the banking industry. Thank you so much for allowing me to serve the Kentucky Bankers Association this past year. It has been an honor and privilege.
C
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HOPE in the NEWS!
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IN HAPPIER NEWS Congratulations to Lanie Gardner, the first recipient of the DK Stamper Women in Banking Award of Excellence. I can’t think of anyone who deserves it more. Her stalwart support of the KBA and her fellow Kentucky bankers is rivaled by her support of her wider community in every area of need, both financial and personal. Her unwavering faith in God has known the refining fire of health concerns that she’s come through as the warrior you’d want at your side in any kind of struggle. Congratulations, Lanie!
Field Notes Musings from the front lines at the start of Winter. by Ballard Cassady KBA President
ALSO WELCOMING If knowledge is power, then developing our education program here at the KBA is the key to empowering our members for success in an ever-evolving industry. It’s not just about staying informed; it’s about equipping our community with the tools and insights they need to thrive and lead in a dynamic, ever changing landscape. The role of KBA Director of Education isn’t one without challenges, and requires someone with real vision on how to move forward.
Growing up in eastern Kentucky, you didn’t have to punch me more than once for me to know I was in a fight. It was dangerous to even hang out with people who didn’t have enough sense to figure that out. So my hackles are way up to see Congress ignoring the body blows of its regulatory agencies – from the Fed down to the suckerfish of the CFPB – to the backbone of the U.S. economy, aka, the banking industry.
We believe Jessica Southworth has that vision, and are thrilled to announce her as our new director of education. She comes to us from the KDFI where she was an EIC and also taught classes for Conference of State Bank Supervisors (CSBS). She is extremely sharp and talented, and we are very fortunate to be able to get someone of her caliber here at the KBA. Please help us welcome Jessica.
[At least that described our industry until Congress started giving away money like Monopoly bucks, and no one needed banks for a good long while – if you ran out of money, chances were good Uncle Sugar would send you more.]
A PAINFUL REMINDER I’m spoiled to work alongside and for the best people in every community in the country… bankers. That can make it jolting to encounter the worst of people.
Starting at the top, the Federal Reserve – who’s never fixed a problem it didn’t first create – put out a proposal this week to cut the debit card interchange fees despite the fact that debit card expenses have been on the increase relative to revenue. Yes, those same fees that help banks single handedly pay for all the consumer fraud that is also increasing!
I love dogs, especially ours. Penny goes with me everywhere she’s allowed and a few places she isn’t. We spend some part of every day in a local dog park that has forged genuine community among people with little else in common.
To quote one of our more astute bankers, “This sends a clear message to the banking community that our customer base needs to either exclude from the banking system at least ½ of the population which is unable to maintain significant depository balances, or to implement/increase monthly service charges paid directly by the customers.” Exactly! But to what purpose? Well, it’s anything BUT consumer protection! Much as my respect for the independence and competence of the Federal Reserve couldn’t get much lower, I’ll credit even the Fed with the ability to follow the money when its path is unmistakable. This move essentially transfers fee revenue from banks (who pay for fraud) to retailers (who don’t). Fed members who actually believe retailer claims that those fees will be passed on to consumers might also believe in the Loch Ness monster. The difference is there might actually be some evidence of Nessie. Is there anybody in the D.C. regulatory cabal that didn’t graduate from the Bernie Sanders School of Financial Illiteracy? There’s ONE, Governor Michelle Bowman, a former banker and state commissioner from Kansas. As someone who has actually worked in banking and understands how it functions, she voted NO! But she was outvoted 6 to 1. I logged this one as: Lions 6 – Christians 1.
Last week, as Penny and I visited with her friend Noble, Noble spotted something on the distant road and dashed after it. He didn’t make it back. Even the most heartbroken of witnesses did not fault the driver of the car – until it became a hit-and-run. If I ever wondered what it would take to trigger more anger and disgust than federal banking regulators inspire on a daily basis, I got my answer that day. What kind of a person ends the life of a pet that, given where it happened, could be assumed to be a beloved family member without stopping to offer simple regret? Fortunately for the owner for whom Noble was an immediate family member, others rallied to do the little that could be done. Both of them were loaded into a bystander’s vehicle that raced to a vet hospital and quietly paid his final expenses when all hope was lost. In all those drivers – perfect strangers -- who did stop to look for a way to help, I saw virtues that I recognized because they’re so common in the industry I serve. That day was a painful reminder that they can’t be taken for granted. OUR FAMILY CONTINUES TO GROW Just this month, the KBA family grew by three. • Renly Cole - 8 lbs., 20 inches, baby boy • Lyla Kay Rajchel - 8 lbs., 10 ozs, 21 inches, baby girl. • Lowen Kay Cassady - 7lb. 9oz. baby girl. Our blessings, as always, continue to grow....
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132nd Annual Convention September 23-26, 2023 The Broadmoor, Colorado Springs, CO
Thank you to everyone who made our 132nd Annual Convention a huge success. Nestled in the mountains of Colorado Springs, CO, folks from across the bluegrass came together to celebrate our common desire to be better bankers. The perfect location, the perfect people, and memories that will last a lifetime -- thank you, thank you, thank you!
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// THANK YOU!
To All Our Convention Sponsors! COLONEL SPONSORS
16 | KENTUCKY BANKER
THOROUGHBRED SPONSORS
BLUEGRASS SPONSORS
COMMONWEALTH SPONSORS Carr, Riggs & Ingram, LLC Check Printing Contract Consulting CRA Partners Elliott Davis, LLC
HUB | Taylor Advisors Jack Henry & Associates, Inc. SBS CyberSecurity, LLC United Bankers’ Bank
The CFPB “Supervisory Highlights:” Where Are We Going With Fees? by Timothy Schenk, General Counsel
Fees, particularly in the form of representment fees and non-sufficient fund (NSF) fees, have been the focal point of CFPB criticism for over a year. The CFPB has been successful in convincing other regulators to follow its lead in disparaging representment fees, NSF fees and other bank fees. As noted in the Supervisory Highlights: “In recent examinations of depository institutions and service providers, Supervision has reviewed certain fees related to deposit accounts to assess whether supervised entities have engaged in any unfair,
Examiners have focused on NSF and overdraft fees in particular and have reviewed statement fees and surprise depositor fees as well.”
While regulators have followed CFPB leadership and taken part in the “work” that “has resulted in institutions refunding over $140 million to consumers,” other regulators have recognized there are limitations related to fees, particularly when it comes to core processors. Core processor system functionality “drives many fee practices” and regulators, exclusive of the CFPB, appeared to understand core processors have limited banks’ capabilities when it comes to fees, particularly representment fees. However, based on the “Supervisory Highlights,” it appears banks will no longer be able to assert core limitations as part of their fee processing analysis. The “Supervisory Highlights” state, “Supervision has examined core processors in their capacity as service providers to covered persons providing deposit services.”
deceptive, or abusive acts or practices (UDAAPs) prohibited by the Consumer Financial Protection Act of 2010 (CFPA).
18 | KENTUCKY BANKER
“Examiners concluded that, in the offering and providing of core service
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It appears banks will no longer be able to assert core limitations as part of their fee processing analysis.
““
O
n October 11th, the Consumer Financial Protection Bureau (CFPB) released a “special edition” of its Supervisory Highlights for its “Junk Fee Update.” While the CFPB does not outright say this, the eighteen (18) pages of “Supervisory Highlights” can be summarized as, “We do not want you to charge fees and here is what we are doing to stop you.”
“Injurious fees were foreseeable in light of the system limitations, as the core processor platforms did not allow financial institutions to refrain from charging more than one NSF fee per item without discontinuing NSF fees altogether or manually waiving individual fees. These fees were not reasonably avoidable by consumers, where consumers did not have a meaningful opportunity to prevent another fee after the first failed representment attempt. The consumer injury at issue was not outweighed by countervailing benefits to consumers or competition.” “To address these findings, the core processors enhanced the systems they provide to financial institutions to facilitate their implementation of policies to eliminate NSF representment fees. Additionally, Supervision intends to review the practices of financial institutions seeking payment from the consumer’s financial institution, often called Originating Depository Financial Institutions, to ensure that represented transactions are coded properly to enable systems to identify the relevant transactions efficiently as well as refrain from charging NSF fees on those transactions.” In short, the CFPB said that your core processor is no longer an excuse to charge representment, NSF and other fees. Since your core is no longer an “excuse,” the CFPB reiterated its contempt for fees.
Throughout the “Supervisory Highlights,” the CFPB attacks bank fees with statements like:
fee is disclosed up front! If the consumer meets the terms of the agreement, it does not get charged the fee!
•
I am not sure where the CFPB lawyers went to law school, but the first lesson I learned there is a “contract-is a contract-is a contract.” Simply put, you are bound by your agreement.
•
•
•
Supervision found that financial institutions engaged in unfair acts or practices by charging consumers representment NSF fees without affording the consumer a meaningful opportunity to prevent another fee after the first failed representment attempt. These injuries were not reasonably avoidable by consumers, regardless of disclosures in account-opening documents, because consumers did not have a reasonable opportunity to prevent another fee after the first failed presentment attempt. And the injuries were not outweighed by countervailing benefits to consumers or competition. In discussing authorize-positivesettle-negative overdraft fees: Supervision has identified tens of millions of dollars in injury to thousands of consumers that occurred whether supervised institutions used the consumer’s available or ledger balance for fee decisioning. Consumers could not reasonably avoid the substantial injury, irrespective of account opening disclosures. The consumer injury was not outweighed by countervailing benefits to consumers or competition. In October 2022, the CFPB issued a compliance bulletin stating that it is likely an unfair act or practice for an institution to have a blanket policy of charging return deposit item fees anytime that a check is returned unpaid, irrespective of the circumstances or patterns of behavior on the account.
Let us stop the analysis there. It is absurd for the CFPB to take the position that regardless of disclosures, i.e. what the customer is told when they first sign up for an account, that all fees are unfair because “the consumer does not have a meaningful opportunity to avoid it.” The
“
Who is the
“
platforms, core processors engaged in an unfair act or practice by contributing to the assessment of unfair NSF fees on re-presented items. An act or practice is unfair when: (1) it causes or is likely to cause substantial injury to consumers; (2) the injury is not reasonably avoidable by consumers; and (3) the injury is not outweighed by countervailing benefits to consumers or to competition. Consumers incurred substantial injury in the form of the relevant representment NSF fees. Consumers were also at increased risk of incurring additional fees on subsequent transactions caused by the representment NSF fees, which lowered consumers’ account balances.”
CFPB Really
Protecting?
Hundreds of years of jurisprudence stated phrases such as: “Written contracts are not lightly set aside”; “Parties who are sui juris are bound by their lawful contracts”; “If there is an express written contract covering the transaction, its terms are controlling and the parties are bound by it and their rights are to be measured by it”; “As the right of private contract is no small part of the liberty of the citizen, the usual and most important function of courts is to enforce and maintain contracts rather than to enable parties to escape their obligations on the pretext of public policy or illegality.” The CFPB is unilaterally setting aside this jurisprudence and determining that all contracts involving fees are unconscionable, a substantial change unjustified in law or equity. Then there is the issue of “meaningful opportunity to avoid it.” The burden has shifted. Consumers have all the ability in the world to avoid it; in fact, they have the benefits that did not exist in the hundreds of years of jurisprudence discussed above. Consumers could balance a checkbook like families did for decades. Modern pay apps, banking apps, websites, programs and otherwise that did not exist for the past hundreds of years give consumers access to real-time balances so they know what they have the ability to pay for and what they do
not. It is consumer responsibility. A notion completely lost on the CFPB and shifted to the banks because there are “countervailing benefits to consumers.” I could write the entire magazine on what is wrong with this concept, but you understand the point. Outside of the absurd positions regarding responsibility, the CFPB’s suggested result is just as unfounded. Throughout the “Supervisory Highlights,” the CFPB states the results of their positions on various fees that almost all mirror each other with little differentiation, applauding those who are doing away with fees: •
“And many have announced that they are eliminating non-sufficient fund (NSF) fees on consumer
deposit accounts.” •
“Additionally, the vast majority of institutions reported plans to stop charging NSF fees altogether.”
•
“In recent examinations, and consistent with Supervision’s earlier work, supervised institutions that had reported to examiners that they engaged in APSN overdraft fee practices now report that they will stop doing so.”
I know this is not breaking news to anyone who follows CFPB publishing, but they do not like you charging fees, and it’s pretty clear to me that they want you to stop. Will the other regulators continue to follow the CFPB’s directives and outright ban fees? I’m not sure at this time, but we monitor it every day.
Count on us…
The CFPB has been unrelenting on its target on fees. I think we all understand that by now. But I think the problem continues to sit with the data. Who is the CFPB protecting? While there are lines and lines about fees, problems, penalties, and remedies, the “Supervisory Highlights” only once states, “Across all institutions monitored, most account holders do not incur overdraft-related fees.” If most account holders are not experiencing any fees, why are we allowing the CFPB to re-write hundreds of years of jurisprudence, re-write core systems, change policies and amend the entire banking industry because of the thoughts of one agency’s radical opinion? My answer is we shouldn’t.
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Jessie Southworth Named New KBA Director of Education. The Kentucky Bankers Association has seen significant growth over the past year in its education department with the addition of eight new programs, the launch of its tremendously successful Fraud Academy and will be announcing another first-of-its kind program later this November to continue to lead the banking industry in education. The KBA is now adding Jessie Southworth to its talented education team as Director of Education. Jessie has spent the past ten (10) years working in various roles at the Kentucky Department of Financial Institutions, including as a senior examiner. She brings a wealth of knowledge and experience that will greatly benefit our bankers and education programs. Since 2019, Jessie has served as an instructor for the Conference of State Bank Supervisors, instructing examiners across the country in conducting Bank Secrecy Act examinations, in addition to evaluating content and effectiveness of education programs offered. “We are extremely blessed to add Jessie with her knowledge, experience and skillset to our team,” said KBA’s General Counsel, Tim Schenk. “Jessie is one of the most respected regulators in the industry, and I am excited to work with her and see her breadth of knowledge continue to make the KBA’s education department amongst the best in the country in meeting the needs of our bankers.”
“We accomplished a lot in improving our education programs and educating bankers over the past year. Jessie will create new programs and keep our bankers at the forefront of education.” Jessie is also excited to join the KBA team. “Throughout my career as a regulator, the accomplishments that I am most proud of lie within the education space. Over the years, I found that I not only had a passion for developing and implementing trainings, but I enjoyed the process of education. I enjoyed seeing growth not only in the individual, but myself as well as I learned from their perspective and thought-evoking questions that made me stop and think. “I am bringing to the table my regulatory knowledge and background, but I am extremely excited about the opportunities to work with our bankers to see what issues our bankers are facing and find a way to address those needs. The KBA has a strong commitment to education, and I am looking forward to continuing that commitment as well as launch additional programs in 2024.” Please join us in welcoming Jessie to the KBA family. She can be reached at JSouthworth@kybanks.com.
Onward & Upward
Have a promotion or branch news you want to see featured? Email us at mattsimpson@kybanks.com
Monticello Banking Company’s Louisville office celebrated their sponsorship of the Senior Crimestoppers Program at Home of the Innocents School, 1100 E. Market Street, Louisville. The MBC plaque was presented to Home of the Innocents by the bank and CRA Partners. Congrats to you all! Market President Alan VanArsdall has announced that Isaac Steverson has joined Central Bank as commercial lending officer. Isaac joins Central Bank with 4 years of banking experience, including commercial credit and two years of commercial lending experience. Mr. VanArsdall has also announced the promotion of Todd Addington to commercial lending officer, Nicholasville. Todd has been with Central Bank for over 8 years, most recently as a credit analyst. The KBA salutes you both! Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced that Mark Yates has joined Central Bank as vice president, commercial lending officer. Mark joins Central Bank with more than 29 years of banking experience, with many of those years in commercial lending. Well done, Mark! Winchester resident Nikki Blakemore has joined Peoples Exchange Bank as a new mortgage lender serving its Clark, Montgomery and Eastern Kentucky markets.
Blakemore has held various positions throughout her experience in the title and banking industry. Her work ethic and tenure has enabled her to pursue her dream of becoming a mortgage lender! Dane Wirfs has also joined Peoples Exchange Bank as a mortgage lender in its Lexington market. With 12 years of experience, Wirfs has served as a home lending professional versed in every type of mortgage product. Mark A. Gooch, Vice Chairman, President and CEO of Community Trust Bancorp, Inc., is pleased to announce that Jackie Tackett has been promoted to the position of Assistant Vice President, Deposit Transaction Services Manager of Community Trust Bank, Inc. Mr. Gooch would also like to announce that Chris Daniels has been promoted to the position of Senior Vice President, Building & Facilities Manager. Mr. Gooch would also like to announce that Jonda B. Patton has been promoted to the position of Senior Vice President, Director of Deposit Operations of Community Trust Bank, Inc. Mr. Gooch would also like to announce that Jesse Johnson has been named the Danville Market President of Community Trust Bank, Inc.
Mr. Gooch would also like to announce that Nicholas T. King has been promoted to the position of Senior Vice President, Senior Staff Attorney of Community Trust Bank, Inc. First National Bank is honored to announce the donation of the former Willard Branch property to the Webbville Volunteer Fire Department. We recognize and appreciate the great service that the fire department provides to Willard and the surrounding area and hope that through this, they can continue to grow and better serve their community. Rusty Smith, Vice President and BSA Officer for FNB Bank, was recently awarded the Certified AML and Fraud Professional (CAFP) certification from the American Bankers Association. Congrats, Rusty! Bank of the Bluegrass & Trust Co. announced the introduction of a patentpending new checking account product developed intentionally to meet the needs of small business owners. This new account, Bluegrass Business Rewards™, offers significant benefits, including 1% cash back on qualifying debit card purchases. Congrats! FNB Bank is proud to announce that groundbreaking for FNB’s new Operations Center took place on Monday, August 28th, 2023. The building will house FNB’s Operations and Customer Support Center staff.
Monticello Banking Co. & more Todd Addington
Isaac Steverson
Mark Yates
Nikki Blakemore
Dane Wirfs
Jackie Tackett
Jonda B. Patton
Jesse Johnson
Nick King
Rusty Smith
Chris Daniels
Ronda Nolan has been promoted to Vice President, Internal Auditor for Farmers National Bank. Nolan joined Farmers National Bank in 2017 and has 35 years of banking experience. The Peoples Bank have recently celebrated the grand opening of their new branch in Cave City. Congrats all! FNB Bank is proud to announce that Lori Noel has been appointed to the Kentucky Agricultural Finance Corporation (KAFC) Board by Kentucky Commissioner of Agriculture Dr. Ryan Quarles. Lori currently serves as Executive Vice President and Chief Lending Officer for FNB. Lori has an extensive banking background with over 30 years of experience. Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced the promotion of Matt Frank to vice president, wealth management development officer. Matt has over 19 years of banking experience, including the last 6 years in Central Bank’s wealth management department. Clinton Bank is pleased to announce the one-year anniversary of our wealth management division, CB Wealth Partners. The division is led by Financial Advisor, Jon Case. Jon has four years of banking experience and a bachelor’s degree in finance from Murray State University. Northern Kentucky Market President Jim Uebel announces the addition of Carri Chandler to Central Bank’s Northern Kentucky Advisory Board. Carri Chandler is Vice President of the St. Elizabeth Foundation, where she leads a team of staff and volunteers dedicated to inspire and
Ronda Nolan
Lori Noel
connect our generous community with programs and projects improving the health of our family, friends and neighbors. Edmonton State Bank, a subsidiary of Edmonton Bancshares, Inc., and Sumner Bank & Trust, a Gallatin, Tennessee based bank which is a subsidiary of Sumner Financial Corporation, have announced an agreement to merge. The merger of Sumner Bank & Trust will add three new offices to Edmonton State Bank’s existing fifteenbranch network. All of Sumner Bank & Trust’s offices are located in Sumner County, Tennessee. The Cecilian Bank is pleased to announce that Laura Owsley has joined the Board of Directors effective October 20, 2023. Laura is the daughter of the recently deceased Chairman of the Board, Bob Owsley.
Ribbon cutting photo from Eclipse Bank’s grand opening/ribbon cutting held on Thursday, September 28, 2023 at their new location off Old Henry Road/Gene Snyder Freeway. Congrats to all!
Matt Frank
John Case
Carri Chandler
Laura Owsley
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REVIEW:
THE LAST LECTURE Author: James Ayers Assistant Vice President Regional Retail Manager Kentucky Market First State Bank
Pausch, a computer science professor, delivered a lecture that transcended mere academia and delved into life’s big questions. In the shadow of terminable pancreatic cancer, The Last Lecture compels us to seize life and overcome our challenges.
The idea for this article began several years ago. During a conversation with Debra Stamper, I made the comment that I would like to write book reviews for the KBA magazine. She enthusiastically supported the idea. Then the pandemic happened, and I was busy pursuing an MBA and found myself in the middle of a merger. All events that sparked article ideas, but alas, my procrastination continued. As recently as July, over dinner in Washington, D.C. during the annual KBA trip, Debra and I discussed my yet-to-commence articles. Her advice was simple, “just start!” Then, in late August, came the unbelievable news of our friend and mentor. I was immediately reminded of our many conversations over the years. I was also reminded of the fragility of life, how quickly it can end, and how it is incumbent upon all of us to live each day to the fullest. This thought lies at the heart of one of my favorite books, “The Last Lecture” by Randy Pausch. Pausch, a professor of computer science at Carnegie Mellon University, was diagnosed with pancreatic cancer. With his disease progressing, he had no choice but to retire early. Tradition dictated that he deliver a ‘last lecture’ (the title of the event was, in fact, “The Last Lecture,” but in a moment of comedic relief, he explains how the title changed, just as he “nailed the venue”). Pausch delivered his last lecture to a packed auditorium. The content was far from computer science, however. For over an hour, he discusses achieving your childhood dreams and how to live your life. The lecture was recorded, uploaded to YouTube, and became one of the early videos to go viral. Soon, Pausch was being interviewed by all the major networks, and his book, “The Last Lecture,” soon followed. Pausch recounts important moments in his childhood and career, relating to the reader with humor and candor. The perspective that he shares on these moments, as well as his impending fate, makes this book a fast, satisfying read. I have recommended it for years as part of our bank’s intern program and given it as a graduation present. The earlier one embraces the lessons in this book, the fuller their life will be. I’m comforted in my belief that Debra did just that.
Title: The Last Lecture Author: Randy Pausch Publisher: HyperionBooks
Educating Professionals, Creating Leaders
CONGRATULATIONS
2023 GRADUATES FROM KENTUCKY We congratulate you on completing the rigorous 25-month program and joining the more than 23,000 alumni who have gone on to leadership positions in their organizations, associations and the financial services industry. Best wishes for continued success! Jeanna Ashley
Jordan Talley
Mallory Winstead
River City Bank, Inc.
Planters Bank, Inc.
Community Financial
Louisville
Hopkinsville
Services Bank Benton
Sponsored by:
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CONGRATS,
GRADUATES!
Davis, Chris - VP/Market Manager, Farmers National Bank Elder, Bryan - Senior Vice President, People's Bank & Trust Kiser, Jared - Assistant CFO, Citizens Bank & Trust Lunsford, Mason - Lender, The Peoples Bank Preston, Melissia - Chief Operating Officer, First Federal Savings & Loan Southerland, Dalton - VP/Commercial Lender, Farmers National Bank Stallons, Landan - VP/Commercial Lender, Planters Bank
25 | KENTUCKY BANKER
In The
SPOTLIGHT shining a light on new KBA Associate members!
EverySpend, Inc. (dba BOND.AI), Little Rock, AR BOND.AI is the creator of the world’s first Empathy Engine®. Its proprietary algorithms holistically understand customer behaviors and needs to align it with the growth of financial institutions. The Empathy Engine® allows financial institutions to build a better bond with consumers by boosting engagement, alongside improving institutional performance and revenue without any incremental cost. Contact: Yogesh Asudani (858) 964-8680 yogesh.asudani@bond.ai NCR, Atlanta, GA NCR DI is a flexible, core-agnostic, SaaS-based platform that allows banks to configure and tailor their digital banking solution how they want. They can help them seamlessly connect any external system, data or third-party provider. Plug and play at their own pace with 180+ pre-integrated services and solutions. And reduce customization and integration costs with access to developer tools and APIs. Contact: Vince Brady (773) 620-7007 vince.brady@ncr.com Plante Moran, Southfield, MI Plante Moran has extensive experience and technical expertise in the banking industry. From the internal audit, loan review, and trust audit services to regulatory compliance, IT audit, model validation, and other risk management services, their professionals are prepared to help you address any challenge and leverage every opportunity. Contact: Bryan Johnson (248) 603-5300 bryan.johnson@plantemoran.com Vela AI, LLC, Tulsa, OK Vela eliminates the number one source of friction in commercial lending: requesting and chasing down the right documents from the right people. The software empowers commercial lending teams to request commonly needed documents, automate routine tasks, set reminders, share information securely, and visualize any loan’s status at a glance quickly and easily. Contact: Justin Zawaly (918) 303-8100 justin@vela.ai
Associate Members serve an important and supportive role in the KBA and to the Kentucky banking industry by providing quality products and services. We look forward to having these new associate members involved in KBA and supporting the member banks! To learn how you can be a KBA Associate Member, contact Selina Parrish at sparrish@kybanks.com
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Congratulations John McGarvey Elected as Fellow of American College of Finance Lawyers FROM ALL OF US AT:
Morgan Pottinger McGarvey is pleased to announce that John McGarvey has been elected as a Fellow of the American College of Finance Lawyers. McGarvey was nominated for his achievements in the field of commercial finance law.
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27 | KENTUCKY BANKER
Women in Banking Award of Excellence Recipient: Lanie Gardner When Lanie first accepted a position at First National Bank, now First Southern National Bank, she had no idea it would lead to a flourishing career. But with over 23 years of service, Lanie now sees her love of the industry as a God given calling. Lanie’s dedication to serving the community and lifting up other women in banking showcases the very heart of our mission. As such, the KBA has named Lanie as the first recipient of our quinquennial Women in Banking Award of Excellence - a testament to honor the legacy of the late Debra K. Stamper.
Photography and Interview by Matt Simpson, Managing Editor
Kentucky Banker: What’s it like living here in Muhlenburg County? Lanie Gardener: Music is a big part of the town’s history, and I’m talking specifically about thumb picking country...Think about guys like the Everly Brothers - this is their home. We have festivals in their name. We have John Prine, and newer artists like Joe Hudson who is world renowned and still lives here. So culturally, it’s very rich.
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And for me, it’s just been a place where I’ve been blessed to be in a career where I really get to meet our community and be invested in it and take pride in it. KB: Were you always a banker here? LG: No, actually. My first love was healthcare! I worked at our hospital for 15 years in administration and HR.
Really, it was just a phone call from the president here, Tommy Eades, that launched my career in banking. I didn’t know anything about banking, but Tommy knew I cared deeply about culture, and about leadership, and bringing enthusiasm to the table. It was unexpected but I know it was a God thing, and I trusted that calling. That was 23 years ago and we were called First National Bank.
LG: I learned early on that banks play a key role in community leadership, and nurturing that role has been something that’s kept me passionate about what we do. I love seeing our bankers involved in things that impact the community - things like the Chamber of Commerce, civic programs like Lions or Rotary Clubs, or 401(C)(3) organizations like Happy Feet or Relay for Life. If we have a banker that wants to serve, I love being able to help facilitate those passions. KB: Is that a big part of your job as Community President? LG: For me, everything is just interwoven. Yes, I’m involved in marketing, but I’m also on the deposit side. You have to understand the loan side, and the people portfolio. You have to know all the pieces so you can deeply understand your people inside the bank in order to find those opportunities. And that’s advice I would give to anyone in the industry - just be prepared to evolve. We’ve had leadership changes over the years, everyone will. And people will depend on you to bridge the gap. If you aren’t prepared to pour into people and bring them up, then you lose, and the bank loses. My goal is that someday, people will say, Lanie taught me that. Lanie pushed me to succeed. I hope they say I gave freely of everything that has been given to me. KB: You’re being awarded the Women in Banking Award of Excellence. What can you tell me about being a women in a predominately male career path? LG: I would have to say first that men in this career have taught me a lot. People like Mr. Bob Lawton, our president at First National, and Jess Corli, our current president here at First Southern, both have been hugely influential on my growth. Both love nothing more than meeting new people and living that life of service. But that doesn’t come easy for everyone. People think that it must be
super easy for me, but I can be a wall flower like everyone else. I remember going to my first KBA meeting, and it was just a sea of men. And yeah, I was uncomfortable! I didn’t know anyone there. And there are still women in this career who have to enter those spaces and look around and feel very alone. But I would just encourage them to keep sitting at the table. Keep being excited. We are in a period of positive change for women like us, and you can look around Kentucky and see strong women presidents now. You can see so many women in leadership roles and women who are making a difference in the industry. It’s amazing to see. I think it really became clear to me at this years Women in Banking conference. It was just electric and that’s going to continue to be a pipeline for women in our state who have fallen in love with banking. KB: You were the MC at the Women in Banking Conference and I think you really came across as a leader for the women there. And when I look around the room, I see you are a lover of books, and all of them seem to be about leadership in one way or another. Talk to me about what you think makes a good leader. LG: A leader has to be so many things. They should be someone you can trust. They should be a sounding board, someone who you can bounce different ideas off of, someone who is passionate and inspires passion. But more simply, I think the biggest thing is a leader should have a genuine heart. They should want to do the right thing, the right way. I believe that if we make the right decision for the right reason, everything else will fall into place. And if you make a mistake, own it - you’ve done your best. KB: You talk about mistakes...What about challenges that are out of your control? How do you deal with set backs that seem to challenge our best laid plans. LG: Every time we do something, or make a decision, we’re giving a part of ourselves. I ask myself, how much am giving away and how much am I leaving for the things that God is
“
If we make the right decision for the right reason, everything else will fall into place.
“
KB: What has kept you inspired to keep growing in our industry?
29 | KENTUCKY BANKER
leading me to? If I keep that in mind, then when things come crashing down, I have a reserve left. It happened four years ago to me. My career was going great. My relationships were wonderful. And then I took the shingles vaccine and everything changed. Almost overnight my brain grew out of its spot as a result of encephalitis and I crashed hard. The doctors were lost. They kept saying migraine. I had considered it could be diabetes. Two days after the vaccine I started passing out and we were just getting no answers. Finally, in Louisville, I coded for the first time. It’s personal, but I experienced several things during this that some people wouldn’t believe. I had really lost my way. I didn’t recognize my husband. I was asking for my deceased father. And I felt like I was falling into something, right up until I felt my husband’s hands pulling mine, saying, “I love you,” as if he was pulling me out of the darkness.
Stamper’s passing makes everyone stop and realize how you can’t take life for granted. And as easy as that is to say, we still do everyday. It’s a struggle. But it makes you better. I’ve always been a passionate person, but now my empathy is stronger than ever. I want to consider the full person, always. That line, “leave your problems at the door,” - no, thank you. You are who you are and all of these things make up the totality of you as a person. I want people to know that we expect life to have its ups and downs and that we support your journey. I’m just one person, of course, but I hope the people I come in contact with can say when they leave that at least one person has your back. That Lanie thinks you have a lot to offer.
I came through, but not unscathed. From then on, I was experiencing massive headaches. I was on more steroids than a football team could take. I was on medicine for seizures. And now, still, I deal with what’s happened. I can be having a good day, like now, and suddenly just get smacked in the head by those familiar headaches and fear. KB: How does a life altering situation like this change your perspective? LG: I think things like this and recently with Debra
30 | KENTUCKY BANKER
The Women in Banking Award of Excellence. This custom, limited edition piece has been crafted by Society Awards of New York. Society Awards also work with the Emmy’s, MTV, CMT, and other society presentations.
Lanie’s 3 Books for Leaders
Start With Why Simon Sinek 2009
Great Leaders Pat Williams 2015
Dare to Lead Brené Brown 2018
31 | KENTUCKY BANKER
“ I hope
they say I gave freely of all that has been given to me.
“
Lanie Gardner
Lanie and her husband, Barry Gardner, 33 | KENTUCKY BANKER
The Journey to Brand Consistency: How Facilities, Marketing & People Create the Financial Success Puzzle Now more than ever, brand consistency is of utmost importance to financial institutions. Creating brand consistency goes a long way in building brand trust, increasing customer/employee/ community loyalty, and impacting your bottom line. Why is there so much brand inconsistency in the community banking landscape? Because being brand consistent requires change and commitment, and it can be tedious and expensive. Taking the first step is often overwhelming. Where do you start? What do you update first? These are excellent questions, but there are other important questions to consider. What is the cost of NOT getting brand consistent or what is the cost or potential loss of creating brand confusion? Inconsistencies are costing your bank time and money. Not practicing brand consistency will cost you significant consequences to customer experience, brand reputation, and overall loss of trust – all of which can impact your bottom line. Conflicting brand usage accounts for a damage to brand credibility, making it harder to compete in the market. Jeff Klump, President of K4 Architecture + Design Nicole DeRogatis, CMO of K4 Marketing + Branding
As K4 gets ready to hit the road in 2024, presenting at various community banking conferences on this topic, we thought it was important to preamble this timely subject of the Financial Success Puzzle. At K4, we define the Financial Success Puzzle as a 3-piece formula to creating and maintaining brand consistency for community banks. This formula is simply the act of connecting people to place and connecting brand identity to place. Many retailers have capitalized on this concept for years. Your branch facilities, marketing & people MUST work together to create stability and not only that...they must be triplets, not just siblings. They can’t just resemble one another; they need to be nearly identical in their delivery.
Branch Facilities
The approach to the design of your branches should be focused around transforming them into physical manifestations of your brand and using design to appeal to different demographics in your branch network to meet the needs of your communities. Second, a mindset shift from “thinking like a bank” to “thinking like a brand” is a game changer in terms of branch design and small changes in your day-to-day thinking including the marriage of your brand and branch technology. It is no coincidence that the 5 keys to success in retail facilities can also be applied to the branch facility and are defined in this order: location; marketing; branch layout & appearance; customer service and bundle selling. If you are considering a branch update, new build or remodel – you ought to be equally considering a simultaneous brand update including your physical and digital marketing assets. What does this mean? It means that the design of your facilities anchors your branding effort. At K4, our family of companies work together and the facility designers provide the design elements used in the exterior and interior to our marketing department to formulate brand standards and create a cohesive look throughout the financial success puzzle. Ultimately branches are your number one touch point, they should be your brand anchors, and the first step to achieving brand consistency and building brand equity.
Marketing
As mentioned above, using a remodeled or newly built branch and unveiling rebranding simultaneously is the ultimate scenario. The typical update path for a financial institution typically goes something like this:
FACILITY > WEBSITE > MOBILE > SOCIAL MEDIA > PRINT. The design and branding elements dictated in the facility design are applied throughout the rest of your digital and physical marketing assets in cohesive manner. Facility, website and mobile are often completed in tandem, as no one wants to remodel a facility and have their customers say, “Is this the same place?” when logging into an outdated website or mobile banking app. Next, we suggest considering planning out social media to include one to two organic, branded posts per week following the natural cycles of community banking and mixed in with staff spotlights, community support, employee and bank milestones, and holiday content. The goal here of organic content is brand awareness – to remind the community you are there when and how you need them, and that you are a proud neighbor.
People
While branch design for employee recruitment and retention should certainly be part of your branding strategy, this article focuses on design for your people as your internal branding efforts should always be turned on. Employee experience should be strongly considered in the design or remodel of your facilities, in equal weight to customer experience. Employee believers are instrumental in creating brand experience and connection to the customers. After all, the entire experience should be about building those strong lasting relationships with your customer base, and your employees have the power to solidify these connections. Think of your website, social media and other digital marketing efforts as chauffeurs, each should be focused on driving traffic to the branch so your skilled staff can sell. If you do seek direct response or to make the phone ring – be mindful of how much time you devote to creating content with your audience count in mind. Using paid social media to leverage larger audiences around mortgage loans, credit applications, etc, can be beneficial. Says Scott Gardener in Forbes – “Your employee’s interactions with customers become your authenticity ‘litmus test’ based on how they facilitate your company’s purpose. Any brand can position itself how it wants, but how does that positioning hold up during customer engagements?” No matter what you say your brand is, it’s your employees who must live and breathe it every day from your front-line staff, to admin, to management. This is called putting your brand into operation and you must ensure that your staff know how to live your brand. Many companies mistakenly put forth stellar branding efforts, only to fail to connect the dots to everyday employees. The single biggest threats to your brand don’t come from competition, they come from bad customer experiences, and that threat is internal. One negative interaction will destroy years of great branding as we’ve seen when brands are attacked on social media by customers, and the virality of such negative messaging as the word spreads. Just ask the airlines if you don’t believe us! The key takeaway here - never assume that your employees know your brand and are delivering on your brand promise. In order to create a long lasting and consistent branding effort, you must embrace the three pieces of the Financial Success Puzzle – Facilities, Marketing & People - and implement them correctly into your organizational DNA. The result? Your brand consistency will reward brand awareness, which will yield brand equity for years to come.
Under Pressure: Cost of Funds Strategies in a Rising Rate Environment When rates were at record lows for long periods of time, the true value of low-cost funding may have faded into the background; however, low-cost core deposits continue to be the driver of longterm franchise value. Now, with rates continuing to rise – the oneyear treasury exceeded 4.5% in January of 2023 – the importance of low-cost funding is once again at the forefront. The chart below is for a financial institution with strong low- and no-cost funding. In record low-rate environments, its cost-of-funds advantage over its peers was relatively small at 20-30bp. When rates started to rise from 2017 – 2019, it tripled to 60bp. For a $1 billion institution, that represents a $6 million increase to the bottom line. The current rising rate environment will lead to similar increases in profit. The jump from an 18bp to a 38bp advantage in 2022 shows the trend that will continue to accelerate. Achim Griesel & Dr. Sean Payant
In addition, deposit growth stagnated in Q2 of 2022 and then started to decline in the second half of 2022. On the macro level, FDIC insured deposits were down for the first time in a long time, and they were down significantly at 2.89% from their peak in Q1 of 2022. A deeper dive into the deposit decline shows that the majority of the decline happened in non-interest-bearing deposits, which declined almost 6%. That decline was partially offset by growth in growth in time and brokered deposits, putting even more pressure on funding cost. On the micro level, our data for consumer and business checking account deposit balances shows balances are down 5% and 4%, respectively, from the beginning of 2022. Even more importantly, the entire balance decline happened since mid-2022, and we anticipate this trend will continue. Large institutions are aware of the value created by low-cost deposits, and they have the budgets to target core relationships that drive these benefits. For example, Chase is back to its $600 offer for opening a checking and a savings account. BMO Harris pays up to $500, and Citi has an offer of up to $2,000 for relationships with extremely high balances. In addition to the cost of the offer, these largest banks spend a significant amount of marketing dollars to gain new core relationships and the benefits that come with them. When a financial institution does not commit to an always-on marketing strategy, it must provide above market offers to “buy” new relationships.
To grow low-cost deposits, it is essential you follow a disciplined approach: Step One – Your Institution must have a Sales and Service Culture. Good products are the foundation of a sales and service culture. You cannot ask your teams to sell, or consumers to buy, inferior products. If you want to know if your institution has good products, ask your customer-facing employees; they can tell you how consumers respond. Equally important is ensuring your team members are well-trained, understand and believe in your products and consistently execute your service expectations. Step Two – Your Institution must be Strategic. Large institutions have the staffing and marketing budgets that allow them to frequently change offers, products marketed and/or desired prospects. For community-based FIs to compete, they must make data-driven, always-on marketing part of their core growth strategy. Your alwayson marketing strategy supported by your sales and service culture will drive tangible results even when large banks are in periods of very high offers. Step Three – Your Institution must be Aligned. Your FI’s training and execution at the branch and through online channels must be aligned with your strategic marketing. Aligning marketing and execution is what reduces the acquisition costs for new core relationships. Without this alignment, your FI is left trying to compete on the offer alone, making it expensive to match those large bank offers previously mentioned. Step Four – Measure, Inspect and Reward! Any strategic initiative needs to be measured. Your core relationship growth strategy should have periodic – quarterly at least – goals. In addition, determine benchmarks to evaluate success. Inspect what you expect in order to ensure your sales and service standards are being consistently executed. Reward success! When your team members are fully aware of where they stand compared to their goals, it is possible to evaluate results and reward successes. Growing core relationships in order to grow low-cost deposits should be of primary importance in any rate environment; however, it is paramount in the current rising rate environment. Ultimately, out-performing your peers by 60bp will be welcomed by your board and celebrated by your management team. When you strategically align your culture, products, and people, competing for core relationships becomes easier and the $500+ offers from large banks become less effective. David will beat Goliath! Achim Griesel is president and Dr. Sean Payant is chief strategy officer at Haberfeld, a data-driven consulting firm specializing in core relationships and profitability growth for community financial institutions. Achim can be reached at 402.323.3793 or achim@ haberfeld.com. Sean can be reached at 402.323.3614 or sean@ haberfeld.com.
Community-based financial institutions (FIs) cannot compete by following a similar strategy. Unlike their large competitors, community-based FIs do not have the budgets for acquisition incentives of $500+ or the expansive budgets associated with marketing to acquire these relationships. Compared to community-based FIs, large banks generally have more products and services as well as marketing teams who dwarf their smaller competitors. Given this reality, what does a communitybased FI need to do to thrive?
35 | KENTUCKY BANKER
Aritificial Intelligence
The Benefits and Challenges for Financial Institutions The technologies of artificial intelligence (AI) are becoming an integral piece of the world we live. These technologies are being deployed across a plethora of fields ranging from simple devices such as a cell phones to more complex technologies such as autonomous vehicles or the diagnosing of diseases. Artificial intelligence is even rearing its advancing technological head into the playing field of banking. It is a constantly evolving technology that many industries are jumping into while other are slowly pushed into in their efforts to thrive. For banks, it’s critical to embrace the advancements of the future, but also to consider the security and regulatory requirements and overall risk to the organization and its customers. What is Artificial Intelligence Artificial Intelligence is a term that commonly references the various technological capabilities that allow for the analyzation of data and the identification of patterns to make decisions and impact an outcome. Some examples of these AI type activities or branches include machine learning, natural language processing, robotics process automation, and speech and object recognition. Machine learning is a branch of AI and computer science that focuses on the use of algorithms and data to imitate human learning patterns, while gradually improving the accuracy. With machine learning, the system learns and improves, as new data or is made available. Another branch of computer science and AI is natural language processing. This branch of AI enables computers to process human language, received through text and spoken words, and to understand the meaning and intent. It basically allows a computer system to understand the semantics of conversational language. The AI branch of robotics process automation, also known as software robotics, is the use of applications and systems to perform human-like tasks. It uses intelligent automation technologies and rule-based software to perform business process activities at a more efficient volume, reducing the need for human resource or involvement in the task. Finally, the AI branch of speech recognition enables a system to identify and process human speech into a written format. Speech recognition may also be referred to as automatic speech recognition, computer speech recognition, or speech-to-text. This AI technology is often confused with voice recognition which focuses on identifying an individual user’s voice. However, speech recognition focuses on translating speech from verbal to text. Each of these artificial intelligence branches are utilized throughout financial institutions and countless other industries around the world. The Benefits of Artificial Intelligence Artificial intelligence is used in various fields and applications ranging from online shopping, advertising, and machine translation enabling cross-language communication, to improving the overall operations and cost efficiency of financial institutions. The use of artificial intelligence technologies in financial institutions can drastically reduce operational costs while significantly increasing productivity. With its broad range of uses, AI can potentially aid financial institutions in reducing costs associated with products and services, and it can enhance the overall customer experience as it bridges the gap between customer convenience and relationship. AI can benefit a financial institution’s lending process as it can expand credit access, assist in financing decisions, decrease the underwriting times and costs, and enhance both the borrower and lender experience. AI can be beneficial throughout other areas within financial institutions such as identity validation and real-time antifraud monitoring. The opportunities and benefits when it comes to AI and financial institutions seem to be endless. But there has to be challenges, right? Artificial Intelligence Challenges Artificial intelligence isn’t perfect. Like any other enhancing technologies, AI comes with its own set of risks and challenges. Some of those risks and challenges include system integration and a gap in skills. With system integration, the data behind AI is equally as critical as the technology itself. In order for the utilization of AI to be beneficial and effective, the data quality and quantity need to be accurate. This involves organizing data and preparing for integration. This means that financial institutions with a core processor will have to coordinate between their core system and their AI technologies. This can often be a complex and costly undertaking and financially burdensome, especially for small financial institutions and community banks. Financial institutions may also run into a more complicated integration processes if their core processors and AI solutions vendor are competitors of the same or similar products and services. This challenge often leads to increased fees and costs for integration. Even if financial institutions are able to work out all the kinks related to system integration, there is always the challenge of
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obtaining expertly trained staff who are knowledgeable in building and deploying of AI solution. With the rapid advancement and use of AI technologies, it has led to a shortage of skilled AI experts in the broader labor force. While this is a challenge that is expected to improve in the future, at present, it leaves financial institutions competing with large tech companies such as Apple or IBM when recruiting for AI talent. An even more challenging area associated with artificial intelligence and financial institutions is meeting compliance expectations on technologies that are surrounded by so much regulatory uncertainty. Financial institutions are expected to identify and manage all risk related to artificial intelligence and how it is used within the organization. It’s not enough for financial institutions to simply employ the technologies of AI, but rather they are expected to understand the data or inputs that drive the outcomes. Financial institutions are expected to ensure that all data used within the various branches of AI, align with regulatory compliance requirements. For example, if the machine learning branch of AI is used in the decision-making for credit, the bank should understand and be prepared to explain what the contributing factors were that the AI system used to make that decision (i.e., what data was inputted to receive the outcome/ decision). It is critical that financial institutions are not only able to understand and explain this process, but also that all the data used within the AI system meet regulatory requirements. This means ensuring that the AI system isn’t using information that may violate consumer or fair lending laws. Financial institutions that are utilizing AI should have processes in place that allow for the identification of risk, both new and emerging, as well as controls for managing that risk. Because of the rapidly evolving technologies of AI, there is always the challenge of changes in risk level or even unidentified risk developing. Financial institutions need to be prepared to rise to the occasion when it comes to meeting those regulatory and risk challenges, whether that be through an increased frequency in monitoring and reviewing established controls or contracting with external vendors to conduct robust third-party risk management. The use of AI technologies within financial institutions has captured the interest of regulators and policymakers alike. A couple of key concerns are always the safety and soundness of financial institutions and consumer protections. While AI is constantly growing and advancing, many of the banking laws and regulations currently on the books are still a little behind the times, leaving some areas of regulatory uncertainty. Nevertheless, regulators acknowledge the benefits of AI and support the responsible innovation by financial institution. In 2021, the agencies (Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve Board) issued RFI’s (request for information) on the use of artificial intelligence by financial institutions. In 2022, the OCC (Office of the Comptroller of the Currency) issued supervisory expectations for how banks should manage risks associated with AI. And most recently, in April 2023, a joint statement was issued by the agencies on the enforcement efforts against discrimination and bias in automated systems. The 2023 statement outlines some of the challenges of AI and serves as a reminder that financial institutions must embraces responsible innovation. Conclusion For financial institutions to thrive in the industry and remain relevant in the market, they must continue to be forward thinking and responsible in their innovation efforts. Artificial intelligence is an ever evolving technology and convenience of the world in which we live. Financial institutions must engage in the balancing act of supporting new and innovated technologies for its consumers, while also acknowledging the managing the risks and challenges of such growth. It is imperative to fully understand the technologies that our institutions relies on for its operation and that we remain abreast of any arising issues in the regulatory world. Artificial intelligence is the future and it’s filled with risks and rewards.
Julia A. Gutierrez
RESOLUTION OF THE BOARD OF DIRECTORS OF THE CECILIAN BANK IN MEMORY OF JOSEPH RICHARD WRIGHT WHEREAS the board of directors and members of our staff were saddened to learn of the passing of Joe Wright and WHEREAS Joe Wright was a loyal and devoted board member, serving from 2017 until the time of his passing; he worked tirelessly to improve the quality of life for our bank customers and fellow citizens in numerous capacities while being a consummate promoter of the bank. WHEREAS his exceptional contribution to the bank was ever present whether he was attending a personnel committee meeting by telephone from the cab of a combine in a corn field or stopping by one of our executive’s offices to offer a word of wisdom and sage advice. WHEREAS Joe was born on the family farm, in Harned, KY, on July 29th, 1940, where he would live his entire life. He was blessed by joining his brother Ben in a partnership that would see two family businesses, Wright Implement and Wright Brothers Farms, grow and expand to become icons in the agriculture industry. WHEREAS he graduated from the University of Kentucky where soon after graduation Joe received a letter from one of his house mothers with the salutation “Dear Mr. Future Senator.” How prophetic was this expectation of his future accomplishments. His mantra of hard work, no pain, no gain was shared with all who knew Joe, in particular his grandchildren, of whom he was most proud. However, he would always end his counsel with “don’t forget to have some fun.” WHEREAS Joe Wright leaves behind an indelible legacy of integrity, compassion, and loyalty in both his public and private life and diligence and dedication in all his chosen endeavors. BE IT RESOLVED, that this board extends to his family, to his wife Barbara Wright and to his many friends profound gratitude for all that Joe gave to our bank. We express our sympathy and offer our condolences to the family of Joseph Richard Wright. BE IT FURTHER RESOLVED, that an appropriate copy of this resolution be prepared for publication in the Kentucky Banker Magazine, an executed copy be delivered to Joe’s family and a copy be retained in the permanent minute book of The Cecilian Bank. Adopted this 31st day of July, 2023, at a special meeting of The Cecilian Bank Board of Directors: Chairman Bob Owsley, Secretary Don Wise, Sarah Mahurin, Garry Watkins, Lindsey Alicna, David Hawkins, David Downs and President & CEO Greg Pawley.
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Remembering Wade Baker. James “Wade” Baker, 71, went to be with his Lord and Savior on Friday, October 6, 2023, after a battle with Liver Disease. He, with help from his wife Laura, fought this terrible illness valiantly. Wade was born in Pittsburgh, PA on August 19, 1952, and was raised in Princeton, KY. He was a long time resident of Owensboro. Wade attended Georgetown College and is a graduate of the Louisiana State University Graduate School of Banking. His first career was in banking, in a variety of positions prior to his retirement. James was a longstanding friend and associate with the KBA and has been a foundation in our General Banking School program. He knew and loved bankers, and is responsible for training so many of our new bankers in the state. Truly, his legacy will continue and his loss will be felt tremendously throughout the KBA program.
Remembering Bob Owsley. Bob Owsley joined The Cecilian Bank in 1958 and the banking industry welcomed him with open arms. Starting as a canceled check filer, Bob progressed through the ranks, from loan officer to executive leadership roles, and to serving as Chairman of the Board at The Cecilian Bank. For the first time in 66 years, Bob was unable to join us at the Annual Convention. His presence was deeply missed. Soon after our convention, we received word on the passing of Mr. Bob Owsley. On behalf of myself, Ballard Cassady, the Kentucky Bankers Association, its Board of Directors, members and staff, we report this news with our deepest condolences. We thank God for giving us a wonderful person who left this world a much better place due to his presence in it. Bob will be terribly missed, but never forgotten. Our special thoughts go out his daughters, Lou Ann Allen and Laura Owsley and their families at this difficult time.
“The reports provide critical information on a quarterly basis regarding how we are trending compared to other financial institutions in our state.” Mr. H. Alexander Downing President & CEO Franklin Bank & Trust Co. Franklin, KY
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