KENTUCKY BANKER April 2014
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800.248.3229 | 502.695.3000 | www.bbky.com BBKY-7273 KBA Advertisement 2014-final.indd 1
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CONTACTS BOARD OF DIRECTORS Mr. William Alverson Traditional Bank Mr. James W. Beach People’s Bank & Trust Company Owenton Mr. J. Wade Berry Farmer’s Bank & Trust Company Marion Mr.William F. Brashear, II Hyden Citizens Bank Mr. Neil S. Bryan The Farmer’s Bank of Milton Mr. G. Anthony Busseni Century Bank of Kentucky, Inc. Ms. Katherine Reese Capps First State Financial, Inc.
Mr. David P. Heintzman Stock Yards Bank & Trust Company
Mr. Stephen Miller People’s Bank of Kentucky, Inc.
Ms. Lanie W. Gardner First National Bank of Muhlenberg county
Mr. Louis Prichard Kentucky Bank
Mr. Don Jennings First federal Savings Bank of Frankfort Ms. Elizabeth Griffin McCoy Planter’s Bank, Inc. Mr. Michael H. Mercer First security Bank of Kentucky Mr. Glenn Meyers Kentucky Federal Savings & Loan Association
Cover Photo taken by Melissa Sparks “Horses”
for the Scenes of Kentucky Photo Contest
Mr. Thomas J. Smith, III American Bank & Trust Company, Inc. Mr. H. Lytle Thomas Heritage Bank Mr. Frank B. Wilson Wilson & Muir Bank & Trust company Mr. Greg A. Wilson The First Commonwealth Bank
KBA STAFF Ballard W. Cassady Jr. bcassady@kybanks.com President & CEO Debra K. Stamper dstamper@kybanks.com EVP / General Counsel / Director of Compliance Paula B. Cravens Sturgeon pcravens@kybanks.com Director of Education Solutions Selina O. Parrish sparrish@kybanks.com Director of Vendor Solutions Matthew E. Vance mvance@kybanks.com Chief Financial Officer Miriam Cole mcole@kybanks.com Executive Assistant Paula Cross pcross@kybanks.com Education Services Coordinator Jamie Hampton jhampton@kybanks.com Education Services Coordinator Natalie Kaelin nkaelin@kybanks.com Assistant General Counsel
Chris Kelso ckelso@kybanks.com Manager of AIB Education Solutions Michelle Madison mmadison@kybanks.com IT Manager Lanie Minton lminton@kybanks.com Administrative Assistant Tammy Nichols tnichols@kybanks.com Convention & Membership Services Coordinator Katie Rajchel krajchel@kybanks.com Staff Accountant Yvonne Savage ysavage@kybanks.com PAC Services Coordinator Angie White awhite@kybanks.com Communications Coordinator Steve Whitlow swhitlow@kybanks.com Systems Engineer
Consultants
John P. Cooper jcooper@kybank.com Governmental Affairs Consultant
KBA Insurance Solutions
Chuck Maggard cmaggard@kybanks.com President & CEO Brandon Maggard bmaggard@kybanks.com Account Representative Audrey Whitaker awhitaker@kybanks.com Insurance Services Coordinator
Lane Hettich lhettich@kybanks.com Service Manager Donna McCartin dmccartin@kybanks.com Account Representative
HOPE of Kentucky Billie Wade bwade@kybanks.com Executive Director
KBA Benefit Solutions
Lisa Mattingly lmattingly@kybanks.com Director of Sales & Service
CONTRIBUTING EDITORS Lane Hettich lhettich@kybanks.com
Angie White Awhite@Kybanks.com
CONTACT 600 West Main Street Suite 400 Louisville, KY 40202
Phone: 502-582-2453 Fax: 502-584-6390 www.kybanks.com
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CHAIRMAN’S CORNER Some days are just difficult. Nothing seems to work out the way you had it planned. The car has a flat tire, your scale shows you have gained five pounds, your blood pressure medicine just cannot keep up with the stress of your job, and the questions you are asked have no short answers.
Neil Bryan KBA Chairman
When I am asked why community banks are so important to our state, it is one of those questions that has no easy answer. What is the relevance of our form of financial service in today's digital world? Why does it matter whether we survive or prosper when viewed in the context of the bigger economic picture? Sometimes I think the better question might be "Does anybody really care?". If an impartial observer looked at banking regulation, they would conclude there is nothing very different between money center banks and community banks. For the most part all regulations are applicable to all banks. Nothing about that says we are a unique entity within the financial landscape. Does anybody out there recognize that makes no sense?
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My father decided to get married in 1930. He wanted to get my mother an engagement ring. Times were tough. He did not have the money to make the purchase. What did he do? He went to the local bank and talked to Cashier D.L. Bell. Mr. Bell knew my father, lived within a mile of our family farm, and understood extremely well that the country was in a Depression. He promptly made my father a loan to get the ring. No tax return would have justified the loan. Lack of time on the job would have disqualified my Dad as a borrower. Collateral you ask? He did not have any
thing to pledge except for one precious asset.....his good name. My father fondly told that story about Mr. Bell's trust. I started my career at that bank, in no small measure because of good will that still exists today between my family and this community bank. It made going to work in banking more than just a job. Some things can't be measured on a spread sheet. A person's honesty, the ability to manage finances, the willingness to do whatever is required to repay the loan, are all qualities that speak to relationship. In Washington I heard a lot a people talk about community banks and relationship banking as a synonym. Unfortunately not many of them were writing the rules under which we operate. A great spreadsheet in a wonderfully organized file is a great thing, but let us not forget people pay back loansnot file folders. As we write more regulations that attempt to take the risk out of community banking, the less likely we are to feel capable of making even small leaps of faith to help people in whom we believe. I do not think that is good public policy. It inhibits growth and unfairly penalizes young people such as my father in 1930. Not a chance Mr. Bell would have made that loan in today's regulatory environment! Why is community banking important? I would submit it is because we truly care about more than just our bottom line. Now before anyone thinks otherwise, I will stress I have no desire to run a "non profit" bank. Community banks understand our well
being is inexorably tied to the welfare of our communities. We all have to find a way to be profitable. I have always said a good business deal benefits all parties. When a loan request is judged less on its merits as a good long term business deal, and more on the regulatory risk it places on a bank, we all suffer. Why are community banks important? Because we have the ability to measure risk, in part based on personal knowledge. The numbers matter a lot to us, too. They are not the only determinate though. We keep Main Street in business in each of our towns and cities. The vision to judge likely future financial performance, despite uninspiring recent results, has always been a hallmark of successful community banks. Anything that takes away our ability to come up with innovative solutions as we make well reasoned judgments, taking into account the borrowers character as well as their creditworthiness, is undesirable. Maybe one-size-fits-all works in a bureaucratic world where making a profit relies on a tax increase not an efficient use of scarce capital. In the real world, outside of the beltway of Washington, diverse business models that service a diverse economy are crucial to our commonwealth and our country. No two borrowers are the same. No single model can effectively service all customers. That is my answer as to why community banks matter. We provide the diversity. We risk our own capital. We put ourselves and our institutions into positions of managed risk. We bring the innovations to the heartland of America.
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STRAIGHT TALK
I’m always asked why I get so angry with the regulators…. “…But they are only doing their job,” my critics squawk (primarily the regulators), and they are correct (as much as I hate to admit it). But the executioner was just doing his job, too. Getting angry with people who impair Kentucky banks is not my job, but doing my best to protect our bankers is. I wish I had better control than to blow up every time I talk with a banker who just got through “training” examiners in the exam process; but after a while even Job would be tested and, like Job, I’m not going to give in either!
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we do, but our community’s themselves. When the lender is filling out 63 sheets of paper instead of getting involved in the community to learn more about the new rec center planned for downtown or working on a bond issue for the local hospital, you can see the disconnect of community and compliance.
My anger has to do with disappointing eyes. A phenomenon that is perhaps more powerful than carefully crafted words or well laid strategies in how impactful the end result is for the recipient. You know disappointing eyes as well as I do. The look your child has when they were hoping for something good and it didn’t happen. Or when your wife opens your Christmas present only to find something she already owns and you didn’t notice. THAT look!
Chaining our bankers to their desks to dot 100 i’s and cross all 200 t’s does more harm than good. It wasn’t our community bankers who stretched rules to begin with, it was Congress (see March Ky Banker). I know it’s hard to keep providing money for little league uniforms, donations to hospitals, arts, food pantry’s, and much more when regulations become so obtuse that we now have to spend those “once upon a time” donations on a new compliance officer for our bank... but somehow we manage to keep up. I know we will prevail and Washington will eventually admit what an ill-fated attempt at law Dodd-Frank really was. It was a fool’s errand but even fools learn after a while. Until that point, we will have many obstacles and disappointments to face along the way.
That look is the one that kills me in this job. The look our bankers get in their eyes when we return from Washington or Frankfort with a new report. That anticipation of a break just around the corner, just to be disappointed when I tell them nothing has changed. It’s hard to see the disappointment, and it’s even worse to know that our community banks will continue to deal with undue regulations that stifle not only the business side of what
When will I be able to deliver the good news that Congressman Barr’s work in the House on varying forms of regulatory relief is close to law? When will I be able to tell you that H.R. 2672 passed? Or that Senator McConnell’s bill in the Senate which would enable banks to request the CFPB designate a particular area as “rural” will get a hearing under the current Senate regime? Such a designation could have a significant effect on
STRAIGHT TALK banks since it would exempt certain loans from the bureau’s Qualified Mortgage rule. The answer is, I don’t know. That’s a poor excuse for progress, but it’s what I have to deliver. I hope you understand that the KBA does everything in its power to advocate for your bank, in the media, in Washington, and in the community, but so far it hasn’t been enough. We have small victories here and there, but we are dangerously deceiving ourselves if we don’t realize that those are mere skirmishes. The battle rages on!
just the President or CEOs job to advocate for the bank- it’s everyone who keeps the bank alive, down to the last employee. Our industry needs a “face” in every community and that means involving the front line employees, the lenders, the Vice Presidents, and the Directors. When I get discouraged or hung up on all the back and forth in this industry with politics, regulation, and disappointments I think of one of my favorite quotes by Robert Herjavec, “Tough times never last, Tough people always do.”
We can’t protest enough for all Kentucky banks which is why your input is not only appreciated, it’s necessary. Call your legislators and voice your opinion on the bills. Teach your employees that it’s not
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MY TWO CENTS PLUS SOME ing and complementary concerns. First, of course, you have to protect your institution. You have to make sure that the choices you make are the best for your bank, your shareholders/investors, your employees, and your community. But, you also have to consider the good of the team—the banking industry. There are plenty of ways to help the team. Let me suggest a few:
For the Good of the Team I fully realize how weary you are. The banking industry has been beaten and bruised for more than six years. While the rhetoric may be changing - “we understand how hard it is to be a community bank” - the pressures have not. New and modified regulations continue to push through the system. Some make sense, some do not. Some seem at odds with other regulations, which makes me wonder if the agencies have a full set of the CFR available for their use? But, as weary as you might be, rally yourself. Rather than focus on how hard the journey has been, celebrate how far you have come. We have made it during, and through, circumstances which would have predicted otherwise. Kentucky is a premiere example of how a successful banking industry responds to challenge. Now, take a deep breath and prepare yourself for the future. From your perspective, the future has to be approached with competApril 2014 | 8
One, YOU can promote the good things that you do in and for your community. YOU can continue the spirit of the KBA One-on-One campaign by looking for opportunities to publicize what your bank AND the community banking industry does for our communities. Two, YOU can respond to the Regulatory Feedback Initiative survey after every exam. (Ballard has an article with more information in this month’s magazine.) Three, YOU can advise the KBA, early in the process, of lawsuits that you are aware of or in which you are involved that impact the banking industry as a whole. This is particularly important. Consider the following: • The KBA can help you find attorneys who can share information with your counsel on similar issues they have seen, which may reduce bad decisions. • The KBA can advise others of trends that may be occurring by plaintiffs’ counsel. • The KBA can look at the need
for legislation to correct bad decisions. • The KBA can file an amicus brief, when appropriate, in important issues. Four, YOU can challenge regulator actions when you know that they are wrong. Often, the best approach to regulator concerns is to change what they have identified, keep your head down, and move on as quickly as possible. But, on occasion, the error lies with the regulator and it is so egregious that going along to get along is not the best response. Occasionaly, even though the cost to “go along” may be minimal compared to the cost of a challenge, a challenge is necessary to protect the team (our industry) from precedent. I encourage you to let us know when you believe that you have a situation where the lasting result could be detrimental to the industry as a whole. Call us with the facts. Let us analyze, with you, the probability of success and then allow us to help you proceed. The KBA will stand with you on the cases that can help the industry get back on track and which may put some reason back in to the regulatory thought process. We need the right case, with the right facts, and a bank willing to press through to a final ruling. Debra Stamper dstamper@kybanks.com
Inspiring view of the Capitol taken by Mr. George B. Spragens, President/CEO, The Farmers National Bank of Lebanon. Mr. Spragens’ photographs are featured throughout this edition of the Kentucky Banker Magazine. Thank you for sharing your time and talent with us Mr. Spragens.
Compliance Corner Q: What can and should we do if we suspect a client is a victim of Elder Abuse? A: First it is important to understand the types of elder abuse. There are three main types of elder abuse recognized by Kentucky’s statutes – abuse, neglect, or exploitation. At http://chfs.ky.gov/dcbs/dpp/eaa/signsOfAbuse.htm, you can find warning signs of all three types of elder abuse. Kentucky is a mandatory reporting state. KRS 209.030 states “any person … having reasonable cause to suspect that an adult has suffered abuse, neglect, or exploitation shall report or cause reports to be made in accordance with the provisions of this chapter.” The report shall be made to the Cabinet for Health and Family Services (“CHFS”) and should provide the following information (if known): Name and address of the adult or any other person responsible for his or her care; age of the adult; nature and extent of the abuse, neglect or exploitation; identify of the perpetrator, identify of the complainant, and any other information that would be helpful in establishing the case of abuse, neglect, or exploitation.
CHFS is also authorized to access financial records which are in the possession of the financial institution if necessary to complete the investigation. These reports do not need to be submitted with the report of abuse, neglect or exploitation, but must be provided if properly requested by the CHFS. The state of Kentucky has also developed Financial Institution Training materials for suspected elder abuse: http://chfs.ky.gov/NR/rdonlyres/A39DBDD7FD4C-48F1-BE7A-4108E455D368/0/BankTrainingManual.pdf . And, there are consumer pamphlets available which help elderly customers protect their money: http://chfs.ky.gov/NR/rdonlyres/C14E2921-BF75-4F2CB991-53155AC34BCD/0/trifold_brochure.pdf Information courtesy Natalie Kaelin, KBA Assistant General Counsel. If you have a nagging compliance issue that fellow bankers may face, send Natalie an email. nkaelin@kybanks.com April 2014 | 9
Planning Now Can Limit Future Data Breach Losses By Eric Lillard
Financial institution executives and their cardholders, as well as merchants and other financial services organizations, are understandably on edge these days. Recent high-profile point-of-sale security breaches have revealed a pressing need to reevaluate card security. While the investigations into precisely what happened will likely help to sharpen defenses in the future, PULSE is encouraging issuers to seize this opportunity to plan for the next cyber attack. The Threat Landscape Every organization involved in debit and credit card transactions is facing fraudsters who have proved to be intelligent, coordinated, strategic and stealthy. The nonprofit Privacy Rights Clearinghouse calculates that, over the
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past nine years, businesses including financial institutions and retail outlets have reported 1,571 breaches involving 470 million customer financial records. These attacks are not opportunistic in nature. They are the result of deliberate efforts and long-term planning. Evidence suggests the holiday breaches were likely launched much earlier in the year, with hackers compromising systems, exploring what they could without being detected and then waiting patiently for an opportune moment to exploit their plan. Over the next 18 to 24 months, the risk of events like the recent data breaches is going to continue to be a challenge to the industry. Financial institutions can expect increased scrutiny of everything from the standards and practices of technology service providers and their core processors to the type of payment cards issued. Thirdparty risks were already in the crosshairs of regulators prior to the breaches, with the Office of the Comptroller of the Currency issuing updated guidance for banks to shore up defenses by improving their vendor management programs. Likewise, the push toward the EMV standard has been boosted immeasurably by the breaches.
Time for Planning A Fraud Incident Response Plan is an essential tool that can be used to provide structure and rational thinking during the stress and anxiety that accompanies these types of events. Any financial institution that doesn’t already have a formalized Fraud Incident Response Plan should consider developing one as part of its risk management process. During the chaotic and emotional response to the holiday breaches, it was easy to distinguish between the financial institutions that had a plan in place and had rehearsed these situations from those that did not. A plan takes into account the very stressful conditions that accompany a fraud incident, and provides the financial institution with a framework for making critical business decisions based on data and previously identified risk tolerance levels. Financial institutions that planned ahead were in a far better position to address the challenges they faced when a large number of their customer’s cards are at risk. Essential elements of a Fraud Incident Response Plan include: • Profiles of your transaction-level activity to aid in the rule strategy development process; • Contact information for all process participants including internal and external departments, vendors, decision makers, approvers, etc. • Clear understanding of your organization’s rule strategy approval process. Time is money and you don’t want to waste valuable time; • An accurate inventory of all fraud strategies currently in place within your financial institution; • An assessment of known gaps or risks that you may have in your fraud mitigation program to help reduce surprises during the heat of the battle. Where possible, identify potential solutions to those gaps. This may include the use of third-party organizations that can provide technical and human resource consultants for your financial institution. • Lastly, recognizing that fraud never sleeps, documentation of the hours of operation that your fraud service provider (internal or external) is available. Weekends and holidays are a favorite window of opportunity for fraudsters. Don’t Forget the Human Element
Cardholder behavior also can help to limit exposure to data breaches. PULSE recommends establishing an effective communications program to keep cardholders informed about emerging threats. Use this opportunity to reinforce many of the basics, such as your policy regarding disclosure of account information and Personal Identification Number (PIN). Various forms of phishing attacks often accompany breaches, so this can also be a topic to consider in terms of cardholder education. Having the ability to communicate effectively and quickly with your cardholders is invaluable. Financial institutions should be diligent in their efforts in communicating with their customers about fraud. Breaches appear to be a topic that we will continue to fight at an industry level, and educating your cardholders is a valuable component in reducing anxiety. Finally, financial institutions need to assess their fraud mitigation tools, systems and resources. PULSE offers DebitProtect®, a sophisticated fraud mitigation service that analyzes debit card transactions, detects fraudulent behavior and can optionally block suspected fraudulent activity at the point of sale before a transaction is approved. During the authorization process, DebitProtect evaluates transactions in milliseconds for registered participants. Fraud attacks are escalating and becoming increasingly more sophisticated. Financial institutions are encouraged to seize this opportunity to plan and prepare your organization for practice.
Eric Lillard is Vice President, Fraud and Risk Management for PULSE, a Discover Financial Services company headquartered in Houston, Texas. PULSE is one of the nation’s leading debit/ATM networks, currently serving thousands of banks, credit unions and savings institutions across the country. The network links cardholders with more than 415,000 U.S. ATMs, as well as point-of-sale terminals at retail locations nationwide. Through its global ATM net-
work, PULSE provides worldwide cash access for Diners Club and Discover cardholders through more than 1.3 million ATMs around the world. April 2014 | 11
Health Savings Accounts Poised to Expand Under the Affordable Care Act Health savings accounts (HSAs) have been around for nearly a decade. HSAs have significantly changed over the years adapting to the marketplace, as well as fulfilling Americans’ health care needs. As a result, both the number of HSAs, and the dollars in them, has risen sharply over the last nine years. With most of the key provisions of the Affordable Care Act (ACA) effective on January 1, 2014, HSAs stand poised to be reinvented, reinvigorated, and rediscovered by a whole new segment of the population. With the potential for wider availability under the new law, HSAs likely will expand at an even greater rate than in the past. With expansion comes opportunity for financial organizations to bring in new accounts, new customers, and new noninterest revenue. Is your organization in the game or on the sidelines for this opportunity? How HSAs Work HSAs are a tax-deferred savings account designed to pay the qualified medical expenses of the HSA owner, the HSA owner’s spouse, and dependents. HSAs have eligibility requirements. An HSA-eligible individual is someone who • is covered by a high deductible health plan, • is not covered by another health plan that is not an HDHP, • is not enrolled in Medicare, and • is not eligible to be claimed as a dependent on another person’s tax return. For an HDHP to be HSA-eligible, it must meet the following requirements. • For 2014, the HDHP must have minimum deductible of $1,250 for self-only coverage and $2,500 for family coverage. • For 2014, the out-of-pocket expense maximum (which includes most everything but insurance premiums) cannot exceed $6,350 for self-only coverage and $12,700 for family coverage. An HSA also has restrictions and requirements. For 2014, the contribution limits for HSAs are $3,300 for self-only coverage and $6,550 for family coverage, which includes contributions from individuals and employers. Only distributions for qualified medical expenses are tax-and penalty-free; nonqualified distributions are subject to tax April 2014 | 12
and an additional 20 percent penalty tax. A benefit of an HSA is that balances carry over from year to year, unlike flexible spending accounts or cafeteria plans. All unused dollars still in the HSA at the end of the year remain in the account and may be used for future qualified medical expenses. Account owners have been able to accumulate substantial balances over the years. HSAs in 2014 & Beyond The direction of where HSAs are headed is unknown. Before the ACA, the HSA marketplace was limited for most financial organizations because the vast majority of people enrolled in HDHPs were receiving coverage through their employer who had a directed custodian in place. This allowed the employer to send payroll contributions on behalf of the employee and employer to one custodian—employees generally had no control over where their HSA was set up. If your organization was not selected as an HSA custodian, odds are only a handful of your customers opened HSAs with you in the past. HSAs originally were designed to give small employers the opportunity to offer health care at a lower cost to their employees when they previously couldn’t afford it. What happened, ironically, is a handful of small employers began offering health care, but many large employers began converting their traditional HMOs and PPOs to the HDHPs to cut costs. This drove the explosion of HDHPs and HSAs from 2004 to today. To put HSA growth into perspective, industry sources reports that in 2006, HSAs held over $1.7 billion. At the end of 2012, that number had risen to $15.4 billion, nearly a ten-fold increase. Even more amazing is that the dollar growth more than doubled every two years—even at the height of the Great Recession. Since 2008, the number of individuals with HDHP/HSA coverage expanded from 6.1 million to 15.5 million. All of this is ancient history—or is it? The employerprovided health care marketplace still is driving towards HDHPs with HSAs. Even without the new health care law, this trend would have continued into the future. Under ACA, all Americans are required to be enrolled in a health insurance plan or face tax penalties. While these penalties are not severe in 2014, the penalties will increase in the years ahead. Many young Americans will need to enroll in health plans, particularly individuals turning 27 years old who are no longer covered on their parents’
plans. Quite likely, the number of HDHPs and HSAs will continue to accelerate, which makes it quite probable that the proliferation of HDHPs and HSAs will continue to accelerate. Younger, healthier Americans may look to the new health care exchanges to purchase the most affordable health care insurance they can. The various state health care exchanges and the federal exchange are now “open for business” and allowing people to shop and enroll for health care in 2014. This presents a whole new touch point for financial organizations that are looking to attract new customers, accounts, and revenue streams. With individuals buying their health plans directly from the exchanges, they have more freedom to choose where to place their HSAs—is your organization equipped and ready?
HSAs can, at best, give you a competitive edge in acquiring and retaining customers. At worst, the lack of offering HSAs could send a loyal customer down the street potentially taking other lending business and accounts with them. HSAs are not going to drive massive revenue for your institution. What they can do is be a profitable niche product that enables you to round out your portfolio of financial products that you make available to prospective and existing customers. It’s a small game, but there are few, if any, downsides to not getting into it. The upsides always will be difficult to quantify, but the downsides of not offering HSAs are not. So, I ask again, with HSAs poised for even greater expansion and availability in 2014, is your financial organization in the game or on the sidelines?
The Opportunity HSA stands for health savings account, but when examining the direct and indirect revenue opportunities of these accounts, we should rename them to align with the HSA strategy for the post-ACA world. HSA = having something available. It does not cost much to offer HSAs to your customers. Financial organizations need to offer forms, documents, and have the ability to do the required tax reporting. Offering HSAs opens the door to more than new HSA accounts; it shows new customers that your institution has all of the financial products and services that are important to them. So where is the revenue? In a direct sense, HSAs can drive some noninterest revenue for your organization through a variety of fees. Most deposit HSAs are housed in DDA accounts and tied to a debit or check card. According to a recent study by Devenir, HSA accounts with check cards are swiped eight times a year, with an average transaction amount of approximately $120. This is quantifiable revenue, with any low-balance, account closing or transfers fees that your organization could impose. The real revenue opportunity, is in that 27-yearold, “just fell off of my parents’ insurance” crowd. These individuals likely are a targeted demographic group by your financial organization today— albeit not for HSAs. As you expand your customer base and drive revenue, particularly through lending, this generation of Americans is the future of your lending and deposit programs.
Kevin Boyles is the Vice President of Business Development for the Retirement Products and Services division of Ascensus. During his career with Ascensus, Kevin has managed various segments of the Sales, Marketing, and Strategic Relationships teams at Ascensus, as well as working in several key selling roles. This combination of diverse roles and extensive client contact has given him a very unique perspective on the tax-qualified savings plan marketplace. Mr. Boyles earned the designation of Certified IRA Services Professional (CISP) designation from the Institute of Certified Bankers and the Certified IRA Professional (CIP) designation from the National Association of Federal Credit Unions. Ascensus delivers a full range of retirement plan services – including plan administration, plan design and maintenance, consulting, web-based tools and content, software solutions, education and training, forms and documents, and technical resources – to approximately 7,500 financial organizations nationwide.
April 2014 | 13
2014 KBA Annual Washington Trip Each year, the KBA encourages Kentucky bankers to accompany them to Washington D.C. to meet with our regulators and legislators. This experience gives policy makers “real life” information and discuss the effect their policies have on the banking industry. This sends a powerful message to all policymakers in the nation’s Capitol of the strength and unity we have as Kentucky bankers. This year was no exception. Our bankers braced the ever changing weather landscape for three days of jammed packed visits to seven agencies and meetings with eight legislators on Capitol Hill. Thank you to all our attendees. Photo to left: A great view of the Capitol during the KBA’s annual visit to Washington, D.C. Snow on the ground or not, we can definitely say this was another successful turn out! Photo courtesy George Spragens.
Bankers pause for a photograph in the Federal Reserve. Pictured left to right: Ja Hillebrand, Mark Seaton, Yvonne Savage, Judy Rose, Justin Dixon, H. Lytle Thomas, Neil Bryan, Wade Berry, Natalie Kaelin, Thomas Richards, Luther Deaton, Ballard Cassady, George Spragens, & Michael Berman. Not pictured: Mack Butler and Mike Mineer.
2014 KBA GROUP MEETINGS Group 1 - Paducah – May 6th
Group 7 - London – May 13th
Drake Creek Golf Course
London Community Center
_____________________________
__________________________________
Group 2 – Central City – May 7th Central City Country Club ____________________________ Group 4 - Bowling Green – May 8th Bowling Green Country Club _____________________________
Group 8 - Northern Kentucky – May 20th Summit Hills Country Club _________________________________ Group 6 – Lexington – May 21st University Club of Kentucky _________________________________
Group 9 - Prestonsburg – May 12th
Groups 3 & 5 - Louisville – May 28th
Stonecrest Golf Club
Cardinal Club
April 2014 | 14
April is Financial Literacy Month KBA’S PROGRAM WITH EVERFI IS AVAILABLE FOR STUDENTS AND ADULTS KBA’s Financial Literacy Program with EverFi is the perfect solution for banks looking to expand your outreach in the community to students and adults! At EverFi, they wish Financial Literacy Month were year-round. With EverFi team members working day-in and day-out with students and families across the country, they see the lasting consequence that can result from limited financial knowledge. In a survey conducted with over 20,000 high school students, 60% reported that they were worried about money . . . this is in high school. The stress only grows from there, with 79% of college students stating that they frequently worry about their debt. Having the month of April when everyone – bankers, local companies, educators, and local leaders – can come together to help educate people in their communities is what keeps the EverFi team motivated year-round. Since the start of April, EverFi has seen thousands of teachers, bankers, politicians, business people, deans, parents and students stand up doing their part to make Financial Literacy Month important and impactful, improving the lives of countless students and adults. Fueled by this groundswell of effort from across the country, EverFi wants to do their part to spread the message about the value of quality financial education. Everyone has a role to play in preparing students and adults for their financial futures and now is the time to make a difference! For more information on how your bank can support Financial Literacy needs in your community, contact Selina Parrish at (502) 736-1282 or sparrish@kybanks.com. EverFi is ready to provide the financial literacy support that your students and adults need in the markets that you serve!
Speed
Training Tidbits
Networking
Train your commercial lenders or credit analysts without leaving the bank with ABA created Evaluating and Structuring Commercial Loans: A decision tree approach. Over 35 hours in training included in the courses: •Understanding Business Borrowers •Analyzing Business Financial Statements and Tax Returns •Analyzing Personal Financial Statements and Tax Returns •Qualitative Analysis and Determining a Credit Risk Rating •Loan Structuring, Documentation, Pricing, and Problem Loans Questions: Call or email Chris Kelso 502-7361300 or ckelso@kybanks.com
Event NETWORKING,
WINE TASTING DRINKS AND APPETIZERS
The Old 502 Winery May 14 at 6 p.m. 120 S. 10th St., Louisville, KY 40202
A speed networking event for emerging professionals that are members of the Kentucky Society of CPAs, Louisville Bar Association or Kentucky Bankers Association. Emerging professionals are those who are age 40 or younger and/or have 10 years or fewer of banking experience.
RSVP to Becky Ackerman at backerman@kycpa.org.
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April 2014 | 16
Proudly Serving KentucKy BanKS for 25 yearS t ax -f ree /t axaBle M uniciPal B ondS • uS t reaSurieS /a gencieS
Bill Barker Toll Free: 800.292.4563 bbarker@rsanet.com
One Riverfront Plaza • 401 W Main St, Suite 2110 • Louisville, KY 40202
Louisville ~ Lexington ~ Cincinnati -KBa a SSociate M eMBer Member FINRA and SIPC • Investment Products Not FDIC Insured • No Bank Guarantee • May lose value.
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Specializing in Correspondent Banking yesterday, today and tomorrow. Leadership, experience, technology, innovation, strength and satisfaction…these are the expectations of our correspondent banking clients. As one of the leading correspondent banks in the country, we are uniquely qualified to deliver on these expectations. We understand this business inside and out. We know where it’s been, and where it’s going. Let us put our expertise to work for your bank today. 1-800-644-3330 • bbvacompass.com/correspondent Rusty Davis • VP - Senior Correspondent Officer - 615.585.4779 T. Ray Sandefur • SVP - Credit Services Michael Burnap • SVP - Customer Service Bob Freeman • EVP - Correspondent Banking
All loans and accounts subject to approval, including credit approval. BBVA Compass is a trade name of Compass Bank, a member of the BBVA Group. Compass Bank, Member FDIC.
April 2014 | 18
Resolution
First Federal Savings Bank Of Frankfort in Honor of
Frank R. McGrath WHEREAS, Frank R. McGrath faithfully served on the Board of Directors of First Federal Savings Bank of Frankfort for 39 years; WHEREAS, Mr. McGrath served an additional two years as Director Emeritus; WHEREAS, Mr. McGrath was for many decades a vital part of the Frankfort business community as President of Frankfort Lumber Company; WHEREAS, the Board of Directors, officers, and employees of First Federal appreciate Mr. McGrath’s service to First Federal and our community; WHEREAS, Mr. McGrath passed away on February 25, 2014; NOW, THEREFORE, BE IT RESOLVED that First Federal Savings Bank, through its Board of Directors, does hereby acknowledge our gratitude, honor, and respect for Mr. McGrath and his long service to our bank, our community, and our industry. BE IT FURTHER RESOLVED that as a tribute to Mr. McGrath, this joint resolution be made a part of the permanent and official minutes of the Bank; that a copy be furnished to Mrs. Mary Ann McGrath, Frank’s beloved wife, and that a copy be furnished to the Kentucky Bankers Association magazine for publication. Adopted this 18th day of March, 2014 at the regular Board Meeting of First Federal Savings Bank.
April 2014 | 20
Picture at left, Bank of Lexington’s Cindy Burton awarded with a scholarship to the Graduate School of Banking. KBA’s Manager of AIB Education Solutions, Chris Kelso, presented the award during the March officer’s meeting. Picture below, Amanda Brown-Wyatt, branch manager/ lending officer at South Central Bank with the AIB Residential Mortgage Lending Diploma with Dorsey Hall, President/CEO of the Holding Company and Chris Kelso.
UPCOMING EDUCATION EVENTS & SEMINARS Loan Documentation Workshop
Branch Management Workshop
Bank Security Seminar
Two-day Program
Series
June 26 Louisville
April 1 & 2 Bowling Green
May 13 Louisville
April 3 & 4 Lexington
June 17 Louisville
Certified Teller Seminar
August 12 Louisville
July – August 11 Various Locations
Cash Management Seminar
September 9 Louisville Internal Audit Seminar
April 9 Louisville
Appraisals and Evaluations: Keeping Your August 12 & 13 Bowling Green LENDING COMPLIANCE SCHOOL
Valuation Program Compliant Seminar
April 21-25 Louisville
May 14 Lexington May 15 Bowling Green
Business Development and Officer
August 14 & 15 Lexington COMMERCIAL LENDING SCHOOL September 15-19 Louisville
Calling Seminar
GENERAL BANKING SCHOOL
May 7 Bowling Green
June 1-6 Louisville
May 8 Lexington
Asset Liability Management Seminar October 8 Louisville
HR Seminar Train the Trainer Pegasus Program
June 5 Louisville
May 12 Gilbertsville
FDIC Community Bankers College October 21 Bowling Green
May 13 Bowling Green
Regulators Forum
May 14 Elizabethtown
June 19 Bowling Green
May 15 Lexington
June 20 Lexington
October 22 Lexington
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Regulatory Feedback Initiative- Your Voice Can Be Heard by Ballard W. Cassady Jr. Inconsistency between agencies, examiners and even exams, is among the top concerns bankers raise regarding examinations and visitations by their regulators. This concern often leaves a banker in a frustrating position, trying to deal with inconsistencies between exams and wondering whether the bank down the street has a similar exam experience. Regulatory Feedback Initiative is designed to help with that frustration, among other things. Regulatory Feedback Initiative (RFI) is a powerful tool in the form of a confidential electronic survey which allows bankers to anonymously provide details on their most recent examination, creating a new level of transparency in the examination process. Survey results from participating bankers are aggregated and analyzed to identify and resolve discrepancies in enforcement of banking regulations. The best way to accomplish this is through widespread participation by bankers. And, in order to achieve that, anonymity is crucial. RFI is designed to ensure that no one—not me, not your competition, and not your regulators--can trace data to reporting banks. To achieve that, data is reported only in aggregate form. If an insufficient number of answers are received to a particular question (necessary to ensure anonymity), that question is not published on the survey results. In addition, RFI participation does not violate the confidentiality requirements associated with exams. The federal banking regulatory agencies have reviewed the survey questions and have no concerns regarding confidentiality. As a matter of fact, the agencies have expressed strong interest in viewing the aggregated survey results and considered the information to be valuable in reviewing internal exam processes. RFI has already reflected some improvement in the quality of banks’ examinations. Based on two years of survey data, RFI results show that the proportion of survey respondents who were “very satisfied” with their safety and soundness and compliance exams by the OCC rose from 17% in 2012 to 22% in 2013.
Even more noteworthy is the result of a 2012 RFI report, which established significant discrepancies in fair lending enforcement by the regulators nationwide. Based on data received from over 1,000 surveys completed in 2011, national fair lending criticism rates varied among the four federal regulatory agencies by up to 40%. It was discovered that a regional office of one regulator had a fair lending criticism rate above 70%, while another regulator’s nationwide criticism rate was 20%. After this information was shared with the criticized regulator’s director, the criticism rate in the specified regional office decreased dramatically, to below 30%. Identifying inconsistencies in enforcement of banking regulations has never been more important, given the avalanche of new requirements resulting from the Dodd-Frank Act. As many of the rules recently became effective, both regulators and the industry are working to understand and implement the new requirements. Bankers have the power to help ensure that the new regulations are consistently enforced across the country. The continued success of the Regulatory Feedback Initiative depends on banks integrating the survey into their ongoing regulatory compliance processes, by completing a survey immediately following each regulatory exam or visitation. One of the primary benefits of the RFI is the ability to identify discrepancies in “real time”. Bankers have a unique opportunity to improve the industry’s regulatory climate and truly hold examiners accountable, by making their voices heard after each exam. When sufficient data has been gathered from the survey, participating banks may also request a report from their state bankers association that summarizes the feedback of similarly situated banks (based on asset size, primary federal regulator, region, etc.),which can serve as a powerful resource in exam preparation efforts. More information about the Regulatory Feedback Initiative can be found at: http://www.allbankers.org/initiative.html.
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Jim McKenzie
Correspondent Banking
Count on us. In today’s environment, Correspondent relationships are more important than ever and Stock Yards Bank & Trust is committed to working with the community banks in Kentucky. As one of the largest and strongest Kentucky based community banks, we understand the complex issues your bank is facing today. When your bank has needs around capital, liquidity, acquisition financing, stock buy backs, retirement plans or trust services we want to be your bank’s trusted Correspondent partner. Chances are we know you, your bank and your community. Give James or Jim a call and put our experienced team to work for your bank.
James Brown
Correspondent Banking
The Correspondent Banking Team Jim McKenzie has over 40 years of banking experience, 36 years of those years as a correspondent banker.
James Brown has over 20 years of banking experience in Retail, Small Business, Corporate and Correspondent Banking.
(502) 625-0878 jim.mckenzie@syb.com
(502) 625-9330 james.brown@syb.com
Lending Services Holding Company Shareholder Groups Bank Credit Needs And More! Deposit Services Fed Fund Sweeps Wire Transfer Automated Clearing House And More! International Services Foreign Exchange (CHECKS & WIRES) Letters of Credit And more!
www.syb.com April 2014 | 24
Stock Yards Trust Company Services Retirement Plans Investment Management Insurance Trust Partnering And More! NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
U.S. Bank & Nawbo Louisville Launch Quarterly Small Business U.S. Bank and the Louisville chapter of the National Association of Women Business Owners (NAWBO Louisville) announced the launch of a quarterly “Lunch & Learn” workshop series to help women business owners in the region learn about strategies for growth and network with likeminded entrepreneurs. The workshops, held over an extended lunch hour, will cover topics such as business valuations, buy-sell agreements and ownership transitions, small business lending and credit tips, and employee benefits. The first session will be held at 12 p.m. on April 9 at the Hyatt Place Louisville East. “This workshop series comes at a perfect time as the region’s business community senses that we’re back on the right track,” said Sam Castle, vice president and small business regional manager for U.S. Bank in Louisville. “We’re starting to see small business owners purchase a piece of equipment, or hire an extra person, that will position them for growth in the near future.” U.S. Bank is committed to providing essential funding for local business owners to fuel their business and, in turn, our local economy. In fact, U.S. Bank’s $17 million in SBA
loans approved during the SBA’s most recent fiscal year was more than any other bank in Kentucky, and a 12 percent increase over the previous year. “We’re excited to partner with U.S. Bank to give our members another valued perspective on running a business,” said Ellen Reitmeyer, executive director of NAWBO Louisville. “We’re proud of our role as a resource for women business owners and look forward to the workshops giving them an opportunity to learn and connect with other bright, entrepreneurial minds.” To register, small business owners can contact Jesika Young at U.S. Bank by March 20 at jesika.young1@usbank.com. Media are welcome to attend. U.S. Bancorp (NYSE: USB), with $364 billion in assets as of Dec. 31, 2013, is the parent company of U.S. Bank National Association, the 5th largest commercial bank in the United States. The company operates 3,081 banking offices in 25 states and 4,906 ATMs and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.usbank.com.
Customized Solutions Solving your unique business problems requires more than a one-size-fits-all approach. MCM’s Financial Institutions Services Team understands how to build and deliver customized solutions, tailored to fit banks’ specific needs. Whether it’s managing risk or defining and prioritizing strategic objectives, we strive to stay adaptive and innovative to meet clients’ individual goals, going beyond the expected. For the perfect fit, call us today. Henry Hawkins, CPA, Financial Institutions Services Director 502.882.4490, Henry.Hawkins@mcmcpa.com
mcmcpa.com | Kentucky | Indiana | Ohio April 2014 | 25
ON THE MOVE
Kim Davis has been promoted to Senior Vice President / Marketing of Citizens Union Bank.
Donna Haney has been with Central Bank for seven years in Richmond, but she has over twenty two years of mortgage lending experience. She attended Eastern Kentucky University and has also attended the Kentucky School of Banking. Donna lives in her hometown of Richmond and is active in community organizations like Hospice Care Plus and the EKU Colonel Club.
The Board of Directors of Bank of Edmonson County is proud to announce that Rhonda Meredith was promoted to Human Resources Officer.
Mark Hanks joined Central Bank in 2002 as a Mortgage Lending Officer in Nicholasville. He holds a B.A. in Business Administration from Georgetown College and is active in several civic organizations in the area, including Leadership Jessamine Co., Junior Achievement, and Boy Scouts of America.
Kentucky Bank is a leader in providing mortgages in Woodford County. To reinforce that position, Kentucky Bank welcomes Justin Carroll, AVP Small Business, Mortgage Lender. Justin commented on joining Kentucky Bank, “I am proud to call Versailles my home. I have deep family and business roots that go back generations in Versailles. I am very excited to be able to serve my community in this capacity and excited about the future of Kentucky Bank and Versailles.”
LeeAnn Layne came to Central Bank in 2006. She holds a degree in Business Administration and Finance from the University of Kentucky, and is also a graduate of the Graduate School of Banking of the South at LSU and the Kentucky School of Banking. LeeAnn is involved in the Tates Creek Christian Church.
The Board of Directors of Bank of Edmonson County is pleased to announce the promotion Kevin Alexander to Credit Administration Officer.
Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced the promotion of Ranee Leland to Vice President, Corporate Secretary. Ranee has been with Central bank for over 35 years and has worked in a variety of departments during that time. Originally from Oklahoma, Ranee now resides in Versailles with her husband.
Our industry works hard to serve the communities, we want to recognize bankers who excel in their positions. There are plenty of ways to be “On The Move” in your Kentucky bank. A recent promotion, a new employee, even a new grandbaby! Let us share your good news with our readers. Send On The Move announcements to: Lane Hettich, lhettich@kybanks.com. April 2014 | 26
ON THE MOVE
Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced the promotion of Don Yaden to Vice President, Central Insurance Services. Don Yaden joined Central Bank in 2006 as a Personal Lines Officer. Originally from Stanford, Kentucky, Don graduated from Eastern Kentucky University with a Bachelor’s Degree in Business Administration.
Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced that Sam Collins has joined Central Bank as a Senior Credit Analyst in the Credit Administration Department. A native of Lexington, Sam attended Eastern Kentucky University and received a Bachelor of Business Administration in Accounting. He is also a Certified Public Accountant.
Central Bank Chairman, President and CEO, Luther Deaton, Jr., has announced that Larry Luebbers has joined Central Bank as a Private Banking Officer in Northern Kentucky. A native of Union, Kentucky, Larry attended Saint Henry High School and later University of Kentucky and Midway College. He spent several seasons as a professional baseball player on several teams, including the Cincinnati Reds. “I couldn’t be more excited for this opportunity to return to my hometown and get involved in the community again,” Luebbers said.
Eddie Woodruff, Chief Marketing & Communications Officer for the Forcht Group of Kentucky, has been appointed to the Forcht Bank Board of Directors. Woodruff has been with the Forcht Group since 2007 and is responsible for the strategic direction and implementation of the marketing and communications initiatives of the Forcht Group’s business lines. He is a native of Henderson, KY and holds a B.A. degree in Marketing from Western Kentucky University and a Masters of Science in Management from Brescia University in Owensboro.
For Republic Bank, the Commercial Rebate Program was a very smart financial decision. Steve Trager, Chairman & CEO Republic Bank
Republic Bank knows a thing or two about making smart investments for the future. After making energy-efficient upgrades, they earned more than $14,000 in rebates through LG&E and KU’s Commercial Rebate Program. Cash rebates and long-term savings—now that’s something of substantial interest. To see how your business can apply for up to $50,000 in rebates per facility, visit lge-ku.com/rebate. 74079_LGEku_Banks_7_5x5c.indd 1
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2/28/14 6:39 PM
2014 Fundraising On the Move!
Get Involved! • • • • • •
April 2014 | 28
Professional Membership Payroll Deduction KBA Annual Events 13th Board Meeting Charitable Match Bank Sponsorship