KENTUCKY BANKER January 2015
Key To Success Providing products designed specifically for community banks is key to becoming the best correspondent bank in the marketplace. Let The Bankers’ Bank of Kentucky offer your institution innovative solutions to meet the challenges of today’s complex banking environment.
• Daily Settlement & Cash Management • Federal Funds Lines of Credit • QNET correspondent connection • Loan Participations Buy/Sell • Holding Company Loans • Secondary Market Mortgage service • Safekeeping / Bond accounting • Asset liability management • ACH Origination • International Wire Transfer • Foreign Item Collection • Merchant Services • Visa Gift Card Program • IT Outsourcing* • And more!
Please contact a member of our Correspondent Banking Team at
800-248-3229
January 2015 | 2
for a personal appointment.
CONTAC TS BOARD OF DIRECTORS Mr. Gordon Kidd United Cumberland Bank
Mr. H. Lytle Thomas Heritage Bank, Inc.
Mr. William Alverson Traditional Bank, Inc.
Mr. Michael H. Mercer First Security Bank of Kentucky
Mr. Frank B. Wilson Wilson & Muir Bank & Trust Company
Mr. James W. Beach Peoples Bank & Trust Company Owenton
Mr. Glenn Meyers Kentucky Federal Savings & Loan Association
Mr. Greg A. Wilson The First Commonwealth Bank
Mr. William F. Brashear, II Hyden Citizens Bank
Mr. Michael Mineer Citizens Deposit Bank & Trust
Mr. J. Wade Berry Farmers Bank & Trust
Mr. Bill Allen Bank of the Bluegrass and Trust Company
Mr. Neil S. Bryan The Farmers Bank of Milton
Cover photo taken by Amber Ard “Water Fall�
for the Scenes of Kentucky Photo Contest
Mr. Louis Prichard Kentucky Bank
Ms. Lanie W. Gardner First National Bank of Muhlenberg County
Mr. Thomas J. Smith, III American Bank & Trust Company, Inc.
Ms. Elizabeth Griffin McCoy Planters Bank, Inc.
Mr. Ryan Steger Commonwealth Bank FSB
KBA STAFF Ballard W. Cassady Jr. bcassady@kybanks.com President & CEO Debra K. Stamper dstamper@kybanks.com EVP / General Counsel / Director of Compliance
Michelle Madison mmadison@kybanks.com Information Technology Manager Lanie Minton lminton@kybanks.com Administrative Assistant
Paula B. Cravens Sturgeon pcravens@kybanks.com Director of Education Solutions
Tammy Nichols tnichols@kybanks.com Convention & Membership Services Coordinator
Selina O. Parrish sparrish@kybanks.com Director of Vendor Solutions
Katie Rajchel krajchel@kybanks.com Staff Accountant
Matthew E. Vance mvance@kybanks.com Chief Financial Officer Miriam Cole mcole@kybanks.com Executive Assistant
Yvonne Savage ysavage@kybanks.com PAC Services Coordinator Angie White awhite@kybanks.com Manager, Communications Solutions
Paula Cross pcross@kybanks.com Education Services Coordinator
Steve Whitlow swhitlow@kybanks.com Systems Engineer
Jamie Hampton jhampton@kybanks.com Education Services Coordinator Natalie Kaelin nkaelin@kybanks.com Assistant General Counsel
Consultant
John P. Cooper jcooper@kybanks.com Legislative Solutions Consultant
KBA Insurance Solutions
KBA Benefit Solutions
Brandon Maggard bmaggard@kybanks.com Account Representative
Lane Hettich lhettich@kybanks.com Benefit Manager
Audrey Whitaker awhitaker@kybanks.com Insurance Services Coodinator
Donna McCartin dmccartin@kybanks.com Benefit Support Specialist
Chuck Maggard cmaggard@kybanks.com President & CEO
Tim Abbott tabbott@kybanks.com Account Representative
Lisa Mattingly lmattingly@kybanks.com Director of Sales & Service
HOPE of Kentucky Billie Wade bwade@kybanks.com Executive Director
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
January 2015 | 3
CHAIRMAN’S CORNER Washington, DC, it is important to remember that we are also here to provide resources to you and your organization that can address nearly any challenge that you face. By banding together as an association search out and find solutions to issues facing banks in our state . We utilize economies of scale to achieve cost savings through health-insurance programs and vendor programs with proven providers of service to our industry. Happy New Year! It is that time of year, again. As a leader of a banking organization, I feel like a football coach preparing for a game at the beginning of a long season. I’m analyzing our strengths, weaknesses, opportunities, threats, competition, market position, regulatory environment, and employee-development needs – all with the hope that I can develop an organization plan that will make our customers, employees, and shareholders happy and prosperous in 2015. And I’m guessing this sounds pretty familiar to many of you. Every bank is proud of their team of employees! Employees are always considered a strength of our banks here in Kentucky. However, remember that your team of resources extends beyond your immediate employees. As you look for solutions to challenges during the coming year, don’t forget about the services and assistance provided by Kentucky Bankers Association (KBA). While we traditionally look to the KBA to navigate the regulatory environment in both Frankfort and
We have an extensive list of KBA-approved vendors that have been thoroughly researched and proven as trustworthy partners providing any number of services to our members, each driven by the desire to fill a need for our banks. In addition to these programs, the KBA can also assist your human resources departments by providing important employee development webinars and training platforms on such topics as compliance, leadership, credit training, information technology, and other important topics in the banking field. As you contemplate your organization’s strategy in 2015, remember that your Kentucky Bankers’ Association is here to help you grow your business, develop your employees, maintain your competitive edge, and achieve success! Have a great year and may God bless you, your organizational teams, and your families. H. Lytle Thomas President, Heritage Bank
Security Bank And Trust Honors Evelyn Beckett Maysville, KY - Congratulations to Evelyn Beckett of Security Bank and Trust. Evelyn retired from the bank after 56 years of dedicated service. Evelyn began her banking career April 27th, 1958. Best wishes in your retirement Evelyn. January 2015 | 4
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January 2015 | 5
STRAIGHT TALK Every Picture Tells a Story I’m guilty. Sometimes I skip to the pictures when browsing through my favorite publications. We all do it. Though the congressional budget report isn’t quite “bedside reading,” I found this chart compelling. If the U.S. doesn’t get a grip on spending, we won’t have enough ink to keep printing this magazine. It’s high time our government sets a managable budget, one that actually keeps money in the house.
Let me know what you think: bcassady@kybanks.com
January 2015 | 6
SAVE THE DATE 2015 WASHINGTON DC TRIP MARCH 15 - 18
Registration details to follow in January
January 2015 | 7
Question: We have a student account owned solely by a 16 year old boy that is overdrawn. We are afraid the boy either isn’t writing the checks, but would say he is, OR is being told to write the checks by a parent with a bad banking history. Unfortunately, the boy is now on the court docket for cold checks. He did answer his phone this morning, and when he was told he was overdrawn, he stated he didn’t know and that he would talk to his parents. 1) Are we within our legal rights to talk to the boy without his parents present to show him his checks to see if he signed them? 2) Based on KRS 286.3-380, can we even collect the overdraft fee? 3) Are we better off waiving the fees, closing the account, and sending checks back “account closed”? 4) Should we contact law enforcement? Response: Since it is his account alone, the bank can ask him to come in and look at the checks, but the bank cannot demand that he come without his parents. Unless the checks written are for essentials (food, clothing, shelter, medical) the bank cannot force it against him. I am not aware of anything that would prohibit overdraft fees, but the fees would not be enforceable in court. Finally, this is why banks should truly consider only opening joint accounts for minors with their parents for checking accounts or debit cards. If the minor wants an account of their own, it should be a savings account. I would suggest that the bank talk to the son and the parents together and tell them that there is an issue with the account. They can advise the parents that the son could be in substantial legal trouble and if it is found that the checks were written by someone else, or directed by someone else, that could be another legal issue. That might give the parents a chance to clear up the problem. I would suggest also calling the Attorney General’s office or Cabinet for Health and Family Services and ask if this is covered as abuse. As always, feel free to contact Assistant General Counsel with your compliance questions: Natalie Kaelin nkaelin@kybanks.com
First. Best. Next.
80 years of ExcEllEncE in Banking Education
January 2015 | 8
Thanks Jim. Jim McKenzie retired from Stock Yards Bank & Trust on December 31, 2014. He has served the banking community for over 40 years and will be remembered by clients, employees, and James Brown Correspondent colleagues forBanking the many contributions he has made during his banking career. We have been honored to work with a dedicated and forthright partner like Jim and wish him a happy and healthy retirement!
THE CORRESPONDENT BANKING TEAM
JIM MCKENZIE
January 2015 | 9
Kasasa Changes the Face of Local Banking in Kentucky Eclipse Bank Introduces Kasasa, a Striking Alternative to the Megabank Rollercoaster Louisville, KY - Eclipse Bank asks consumers, “Do you Kasasa?” as it becomes the next financial institution in Kentucky to launch the country’s most innovative financial products. Kasasa® is a new brand of free checking and savings accounts that rewards consumers for using their account with what interests them most—high interest, cash back or automatic savings. These accounts, combined with the personal service that only community financial institutions can deliver, are offering residents a better banking option than the megabank experience. “Consumers deserve to have a meaningful banking experience, without the nightmare of megabank fees and mistreatment. We are pleased to offer these unique, free accounts to our community,” said Steve Stratton, President and CEO at Eclipse Bank. “Kasasa delivers what research shows people really want but believe they can’t have—great financial products with the personal service of a community based financial institution.” Eclipse Bank is offering three Kasasa financial products, including Kasasa Cash®, Kasasa Cash Back™, and Kasasa Saver®. All Kasasa products are free, reward-based accounts, with no minimum balance to earn the rewards or maintain the account, no monthly service fee, free online banking and free ATMs nationwide. • Kasasa Cash - A free checking account that rewards consumers with high interest for every month they qualify. • Kasasa Cash Back - A free checking account that rewards account holders with major cash back on everyday debit card purchases, without points or category restrictions like the big guys. The cash back amount is based on how much a consumer spends on his or her debit card. • Kasasa Saver - A free, high interest saver account linked to a Kasasa Cash or Kasasa Cash Back checking account. The interest and ATM fee refunds earned in the Kasasa Cash account (or the cash back and ATM fee refunds earned in the Kasasa Cash Back account) are automatically deposited into the Kasasa Saver account when the account holders qualify. The balance in the Kasasa Saver account also earns a high rate of interest.
To receive the Kasasa account benefits, each monthly qualification cycle consumers are asked to do a few simple things like receive an eStatement, use a debit card a minimum number of times and have an electronic transaction (such as ACH withdrawal) post and settle. If an account holder does not meet the qualifications in a given month, Eclipse Bank will alert the individual, who will be eligible the following month for the benefits. “Extensive research has shown us that consumers would prefer to do business with community financial institutions, but feel they would lose access to products,” continued Stratton. “Kasasa is opening people’s eyes to a new banking model where no sacrifices are necessary. It’s a win-win because account holders get innovative products and personalized service.” Kasasa is distributed to Eclipse Bank from BancVue, the leading provider of innovative products, dynamic marketing, and datadriven consulting solutions to community financial institutions nationwide to help them win the war against the megabanks. For more information on Kasasa accounts, consumers can visit http://www.eclipsebank.com/. Do you Kasasa? Kasasa® is the first national brand of the most innovative checking accounts available today. The accounts, offered exclusively by the finest community financial institutions, are designed to be the first and only accounts that actually take an interest in account holders by rewarding them for using their account with what interests them most—high interest, cash back, automatic savings, money to donate to charity or iTunes® or Amazon.com® downloads. Kasasa, developed and distributed by BancVue, marries innovative banking products with the personal touch of community financial institutions. For more information, visit www. kasasa.com.
Farmers National Bank Offers PaySound® – No Overdraft Fees Ever Checking Plan Danville, KY - Locally owned Farmers National Bank is now offering a checking account with no overdraft fees ever under the brand name PaySound® Checking Plan. Thomas Hager, Executive Vice President of Farmers National Bank, said “Avoiding overdraft fees with certainty has become an objective of a growing number of consumers. We wanted to provide an option for them that would assure no overdraft fees ever including no bank return check charges, either in a full service checking account or with a debit card only account. We think it will be a great benefit to many households. To our knowledge, no other bank in the area offers such a comprehensive, no overdraft fee ever account.” Market research by the Pugh Trust shows that 70% of consumers today are very concerned about overdraft fees. Hager continued, January 2015 | 10
“In today’s debit card environment where electronic transactions can clear at odd times, it can sometimes be hard to avoid a surprise overdraft fee. This account will assure the consumer has spending control and the ability to avoid overdraft surprises. We even offer a line of credit to customers to cover occasional liquidity needs at 15% APR (annual percentage rate) and it doesn’t require a credit score.” The PaySound® No Overdraft Fees Ever Checking Plan is available at any branch of Farmers National Bank, or you can learn more at the website (www.fnbky.com) or the PaySound® website. Farmers National Bank, a community owned bank since 1879, has banking facilities in Danville, Burgin, Harrodsburg, Junction City, Lancaster, Perryville and Stanford.
Community Bank Shares of Indiana, Inc. Announces Completion of Merger with First Financial Service Corporation of Elizabethtown, KY
New Albany, Ind., (January 2, 2015) – Community Bank Shares of Indiana, Inc. (NASDAQ: CBIN), the holding company for Your Community Bank and The Scott County State Bank, announced today that it has successfully completed its acquisition of First Financial Service Corporation (NASDAQ: FFKY). As part of the agreement, First Federal Savings Bank of Elizabethtown, a wholly-owned subsidiary of First Financial Service Corporation, merged with and into Your Community Bank. The former locations of First Federal Savings Bank of Elizabethtown will be operated as financial centers of Your Community Bank under the name of First Federal Savings Bank until system conversions are completed in March of 2015. The acquisition was first announced on April 22, 2014. CBIN and FFKY shareholders approved the acquisition on December 16, 2014, and all regulatory approvals were completed that same month. With the acquisition, CBIN now has 41 financial centers throughout southeastern Indiana and Kentucky and estimated total assets of approximately $1.6 billion. James D. Rickard, President and CEO of Community Bank Shares of Indiana commented, “Community Bank Shares is stronger than ever, and we’re eager to provide our outstanding menu of products and services to new customers in the region. With this merger, we are increasing our market presence in the Louisville and Bardstown areas, and creating new opportunities in Bullitt, Hardin, Hart and Meade counties. Culturally and geographically, this is a fit, and it aligns with our vision for growth.”
About Community Bank Shares of Indiana, Inc. - Community Bank Shares of Indiana, Inc. is a bank holding company headquartered in New Albany, Indiana. It includes two wholly owned, state-chartered subsidiary banks, Your Community Bank and The Scott County State Bank. The Company operates 41 financial centers in Indiana and Kentucky. The Banks are engaged primarily in the business of attracting deposits from the general public and using such funds for the origination of commercial business and real estate loans and secured consumer loans such as home equity lines of credit, automobile loans, and recreational vehicle loans. Additionally, the Banks originate and sell into the secondary market mortgage loans for the purchase of single-family homes. For more information visit www.yourcommunitybank.com and www.scottcountystatebank.com. FORWARD LOOKING STATEMENTS This press release contains forwardlooking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the Community Bank Shares’ and First Financial Service Corporation’s current expectations regarding our business strategies and their intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends”, “will” and similar expressions, as well as any statements related to future expectations of performance.
could cause or contribute to actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, the breach by third parties of their contractual obligations to Community Bank Shares; unanticipated breaches by a party to the agreement and plan of share exchange; Community Bank Shares’ failure to integrate acquired institutions in accordance with expectations; deviations from performance expectations related to acquired institutions; general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; competitive conditions in the banking markets served by the bank subsidiaries; the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans; and other factors disclosed periodically in filings with the Securities and Exchange Commission. Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by Community Bank Shares of First Financial Services Corporation or on their behalf. Neither company assumes any obligation to update any forward-looking statements.
Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties January 2015 | 11
January 2015 | 12
KBA Emerging Leaders Deadline Approaching The leadership of the Kentucky Bankers Association saw the need for succession planning among our member banks, and the KBA Emerging Leaders Program is a program designed to assist you with that task. The KBA Emerging Leaders Program is an intensive one-year program which introduces up-and-coming leaders in your bank to the KBA and helps them acquire skills necessary to make that next step in their career. Due to the curriculum involved, we ask that the nominees for the program be less than 40 years of age OR with less than 15 years of banking experience. Exceptions can be made on a case by case basis, if appropriate.
The program will follow the following schedule: January 2015 --Nominations Taken, Deadline January 30, 2015 February 2015 --Emerging Leaders Class of 2015 Selected March 2015 --Orientation for the Emerging Leaders Program in KBA Office April 2015 --Spring Conference, Lexington KY (Sunday-Tuesday) May 2015 --Group Meetings (Attend only their Group’s meeting) June 2015 --Regulators Forum July 2015 --Community Involvement Training in KBA Office August 2015 --PAC Golf Outing September 2015 --Convention at Hilton Head, South Carolina (Saturday-Wednesday) October 2015 --FDIC School November 2015 --Operational Training in KBA Office December 2015 --KBA Board Meeting February 2016 --PAC Orientation and Washington, D.C. Trip (Sunday-Wednesday) March 2016 --Bankers Day in Frankfort/Government Relations Development
Please send your nomination form to Debra Stamper or Natalie Kaelin by January 30th, 2015
It’s a New Year....Speak Up and Brag about your Bankers! Do you have a standout banker in your community? Tell us! Send submissions to Lane Hettich, lhettich@kybanks.com January 2015 | 13
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Are you registered? 2015 Spring Conference April 12 - 14 Hyatt Regency Lexington Visit www.kybanks.com to register today Questions? contact Paula Cravens Sturgeon pcravens@kybanks.com
January 2015 | 14
NEW ALBANY
2015 KBA Group Meetings Group 1 - Paducah – May 5th Drake Creek Golf Course Group 2 – Central City – May 6 th Central City Country Club Group 4 - Bowling Green – May 7th Bowling Green Country Club Group 9 - Prestonsburg – May 12th Stonecrest Golf Club Group 7 - London – May 13th London Country Club Group 6 – Lexington – May 14th Kearney Hill Golf Course Group 8 - Northern Kentucky – May 19th Summit Hills Country Club Group 3/5 - Louisville – May 20th Wildwood Country Club
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Income-Producing Credit Card Products Corserv Account Issuer Program manages risk and produces rewards. For years, credit card lending has typically demonstrated stronger profitability compared with other banking product lines. Corserv provides an innovative program to help community banks compete profitably with larger lenders. Lenders can realize the full rewards of growing credit card loans on balance sheets, while retaining ownership of customer lending and servicing relationships. The Corserv program helps financial institutions overcome the risks traditionally associated with unsecured lending, operational complexity, lengthy time to market, limited economies of scale and a challenging regulatory environment. Corserv assumes total responsibility for credit card fraud, an advantage no other competitor currently provides. A comprehensive suite of products, including lower rate credit cards and local rewards programs are supported with easyto-implement policies for compliance, marketing and risk management. Branch office employees, call centers and the client’s web presence are all supported by a proprietary Corserv IT platform that enables local sales, underwriting, and customer service. Corserv management includes veteran credit card portfolio managers to guide clients. They will design, develop, implement and manage a comprehensive suite of consumer, business and corporate credit card products, overcoming the obstacles that have prevented your bank from building a profitable relationship based loan portfolio. Corserv Account Issuer helps you systematically build a predictable, profitable, easily managed credit card portfolio. Learn how your bank can generate higher returns from income-producing credit card products using the Corserv Account Issuer Program by contacting Selina Parrish (502) 736-1282 or sparrish@kybanks.com.
Central Bank announces new Advisory Board Members for 2015 Chairman, President & CEO Luther Deaton, Jr. announced the selection of eight new members to its Lexington Advisory Board, including Rick Avare, MAP Entities; Jed Bullard, Owner, E.D. Bullard Company; Kiki Courtelis, President, J & C Kentucky, Inc.; Mark Nabity, President, Grayhawk Construction Company; Jim Parsons, CFO, Ball Homes, LLC; Denis Steiner, CEO, Denham Blythe Company, Inc.; Dr. Russell Travis, Travis Neurosurgical Consulting; Randy Walker, President, Randy Walker Electrical Contractors, Inc. They join Dr. Michael Karpf, Dennis Anderson, Shaw Hopkins, William Lear, Pat Madden, William Owen, P.G. Peeples, Steve Sherman, Michael Tearney, Bill Brewer, Tom Jones, Mike Kerwin, Craig King, Ralph Pawsat, Bill Thomason, and Dr. Bill Rood who are continuing to serve.
Central Bancshares, Inc. is a financial services holding company in Lexington, Kentucky. The Company’s wholly-owned subsidiaries serve individual consumers and businesses with full-service banking, investment, mortgage, insurance and wealth management services in 26 banking offices and 31 ATMs in Boone, Clark, Fayette, Jefferson, Jessamine, Kenton, Madison and Scott counties. The subsidiaries include Central Bank & Trust Co., Central Bank of Jefferson County, Central Insurance Services and Central Investment Center. Central Bank was recently recognized as one of the Best Banks to Work For in America.
January 2015 | 17
BOND SCHOOL
KBA BOND UNIVERSITY: Managing Your Investment Portfolio
TUESDAY, FEBRUARY 24 | 9 AM - 4 PM Kentucky Bankers Association | 600 West Main Street, Louisville, KY Registration Fee $99/Person | Register Early, Space is Limited
KBA Bond University, sponsored by Duncan-Williams, Inc., provides an in-depth look at the bond portfolio and how it should be managed to compliment loan, deposit and A/L decisions that community banks make. Portfolios provide liquidity and are the primary tool to manage interest rate risk. And, as portfolios have grown, they have also become critical revenue generators. This session will cover how to build and manage a portfolio based on the reward and the risk needs of community banks. The session will progress from basic concepts to more advanced topics.
WHO SHOULD ATTEND?
CFOs, Portfolio managers, Treasurers, A/L managers and anyone wanting to learn about the bond portfolio’s importance in managing interest rate risk.
TOPICS COVERED: • Economic overview – What are banks facing
• MBS & CMO market overview
• Bond Basics – pricing, duration, convexity and price volatility
• Bond swaps – too many banks “swap” bonds before knowing the long-term impact to the portfolio and balance sheet.
• Understanding rate markets (yield curve, spreads, demand) • The 3 most important steps to building a high performing portfolio • Agency market and GSE overview • Corporate market overview
• Portfolio strategies - laddering, barbells, rolling down the curve • Understanding leverage strategies and how they can improve portfolio performance • Q&A
• Municipal market overview For more information or to register, please visit www.kybanks.com.
6750 Poplar Avenue, Suite 300 Memphis, Tennessee 38138 (901) 260-6800 · (800) 827-0827
January 2015 | 18
MEMBER FINRA, SIPC, BDA, WBENC
DuncanWilliams.com
Bankers on the Move Wallace H. Dunbar, Jr. joined First Kentucky Trust as Chairman of its Board. Mr. Dunbar has over 30 years of experience in the Investment and Trust business.
Lisa Kaiser joined Citizens Union Bank as a Mortgage Loan Officer at the Blankenbaker branch.
J. Bradford Southworth was promoted to Senior Vice President, Chief Internal Auditor. Mr. Southworth has been with Farmers Capital Bank Corporation for four years.
Mark A. Hampton was named Executive Vice President and Chief Financial Officer for Farmers Capital Bank Corporation. Mr. Hampton has been with the company for 18 years.
Brian Arterburn joins First State Financial as Senior Vice President. Brian comes to First State Financial with ten years banking experience and 7 years of insurance experience.
Town & Country Bank and Trust Co. recently announced that W. Raffo Wimsett, Jr. has been named President and CEO at Town & Country Bank and Trust Co. (TCBT).
Grant Simpson joined Citizens Union Bank as First Vice President, Commercial Lending at the LaGrange Branch.
Farmers Capital Bank Corporation is pleased to announce that Teresa Tipton was named Vice President, Human Resources. Teresa has worked in that department of the company for 19 years.
James Barsotti was named Executive Vice President, Chief Credit Officer. Mr. Barsotti has been with Farmers Capital Bank Corporation for ten years.
Thomas A. Wimsett announced that he will step down as Chair of the Board of Directors at Town & Country Bank and Trust Co., effective immediately, to allow him time to focus on other business interests and philanthropic efforts. Tom has served as Chair of the board since his appointment in March 2011. Tom will continue to serve as a board member for the holding company and the bank. Stephen T. Hamilton was appointed as Chair of the Board of Directors for Town & Country Bank and Trust Co., effective immediately. Stephen joined the bank board and the holding company board in 2009.
January 2015 | 19
ABA launches campaign to increase political pressure on FCS The ABA has just launched a new campaign to increase public and congressional awareness of the multitude of risks that the FCS poses. The campaign includes a new website, www.ReformFarmCredit.org, that will express in stark, easy-to-understand terms the risks posed by the FCS’s implicit Treasury backing (see next article), the waste generated by its unfair tax advantages, and the missed opportunities resulting from the FCS’s neglect of its core mission. The campaign includes reaching out to policy organizations in Washington to encourage them to focus on FCS issues as well as initiatives at the local level to encourage discussions of the FCS in local media outlets.
Still no info about FCS’s $10 billion Treasury line of credit On May 8, I filed a Freedom of Information Act (FOIA) request with the Treasury Department to obtain all documents related to the creation of the $10 billion lineof-credit the Farm Credit System Insurance Corporation (FCSIC) obtained from the Treasury Department’s Federal Financing Bank. This line-of-credit, created on September 24, 2013, was set to expire on September 30, 2014; it has since been renewed for another year. Although I have had numerous exchanges with Treasury since filing my FOIA request, I have yet to receive a single piece of paper. I was recently advised that a Treasury official “is reviewing the documents” I have requested before they are sent to a group of officials within Treasury for further review. I will persevere in my pursuit of these documents and report to FCW readers on the background behind this line-of-credit, which came into being without any congressional authorization, as soon as I receive a response from Treasury. January 2015 | 20
Conflict within the FCA over mergers and “alliances”? Conflict, or confusion, may be emerging within the Farm Credit Administration (FCA) over the manner in which the consolidation process proceeds within the FCS. Traditionally, consolidation has occurred when two or more FCS associations merge and, less frequently, when two Farm Credit banks merge. Due to mergers, over the last decade the number of FCS associations has shrunk from 97 to 77 while the number of banks has declined from five to four. In sharp contrast, there were 845 FCS entities thirty years ago. As the October FCW reported, a new form of consolidation has surfaced within the FCS – a “strategic alliance” between FCS of America (FCSA) and Frontier Farm Credit. Essentially, FCSA, the largest FCS association, assumed management control of the much smaller Frontier without taking ownership of it through an outright merger. As a result, Frontier is merely a shell organization today, with a board of directors but with no employees or any meaningful substance – all of that lies within the control of FCSA, which serves all of Nebraska, Wyoming, South Dakota, and Iowa. Frontier’s territory encompasses eastern Kansas. Why FCSA did not simply acquire Frontier, through an outright merger, continues to be a mystery. Interestingly, the Farm Credit Act did not mandate FCA approval of this alliance while a merger of the two associations would have. On December 1, Leland Strom, one of the FCA’s three board members, issued a “Statement Regarding Strategic Alliances.” Strom’s statement was issued independent of any FCA board meeting or speech; speeches are how board members usually express their position on FCS issues. As Strom noted, in a strategic alliance, “the corporate charters of both associations will remain intact under the governance of each individual board, but the institutions will have joint management and a common business model and platform.” He then observed that “the anticipated advantages the associations have identified may provide the planned efficiencies, but this alliance is the first of its kind and we do not know for certain that it will produce these benefits. Therefore, it is important for the boards of these associations to remain vigilant and responsive to the needs of the memberborrowers who elected them and whom they serve.” Of course, how Frontier’s directors will be able to be vigilant when they have no employees reporting to them is an open question – time will tell. Strom went on to state that “I believe it is important to ensure that any alliance structure does not interfere with a board’s ability to serve its members in any way . . . each association’s board of directors remains responsible for ensuring that its association operates in a safe and sound manner, complies with all laws and regula-
tions, and serves as an independent board to meet the needs of its member-borrowers . . . In my opinion, FCA should continue to expect each board of directors to remain autonomous and to provide independent leadership for its association.” It is extremely difficult, though, to believe that Frontier’s board will pass Strom’s test given that it has essentially delegated, in all regards, the management of its association to FCSA. Just eleven days after Strom issued his statement, the FCA board adopted a proposed rule on mergers and consolidations; it will be open for a 90-day comment period once it is published in the Federal Register. Based on an FCA news release, “the purpose of the proposed rule is to clarify the merger consideration process and to incorporate existing practices in the regulations.” Based on the news release the specific features of the proposed rule do not seem very substantive, but important changes in the manner in which mergers are executed may be revealed once the proposed rule is published. Perhaps the real intent of this proposed rule is to head off future strategic alliances. FCA board proposes a rule limiting compensation disclosures In what appears to be yet another effort to reduce transparency within the FCS, the FCA issued a proposed rule on October 9 that would exclude certain FCS employees from current reporting requirements for compensation disclosures to FCS shareholders and investors. Currently, each FCS institution must “include a compensation table in its disclosures to shareholders [that] discloses the names and compensation amounts of all senior officers and any other employees who are among the five most highly compensated employees at the institution during the reporting period,” usually a calendar year. The intent of the proposed rule is to exclude from this reporting requirement employees who “might receive a one-time or lump-sum pension payment at the end of his or her career, briefly making him or her among the top five most highly compensated.” Of course, this is precisely the type of compensation disclosure that should be made, to deter excessive end-of-career payouts.
Experience is the teacher of all things.” – Julius Caesar
Regulatory compliance examinations are getting tougher for community banks. Having seasoned compliance resources on your team with winning moves in the form of best practices is critical. Choose CRI, where our regulatory compliance experience is your check mate. banks@CRIcpa.com CRIcpa.com | blog.CRIcpa.com INTERNAL AUDIT | EXTERNAL AUDIT | TAX | REGULATORY COMPLIANCE | LOAN REVIEW | IT SERVICES
Report FCS lending abuses to: green-acres@ely-co.com Bankers are continuing to send FCW reports of FCS lending abuses, such as FCS loans for rural estates, weekend getaways, and hunting preserves. Email reports of similar lending abuses in your market to: green-acres@ely-co.com. Please provide as much detail as possible about any loan which violates the spirit, if not the law, governing FCS lending.
It’s a new year..time to start your KBPAC initiative and get ahead of the curve! January 2015 | 21
SBA Honors Community Trust Bank as Kentucky’s Top SBA Community Bank Lender, 2013 – 2014 PIKEVILLE, KY. – Community Trust Bank, Inc. was recently honored with the "Gold Lender Award" by the United States Small Business Administration (SBA) as Kentucky's top community bank SBA 7a lender in 2013 – 2014. This is the sixth consecutive year that Community Trust has received this award from the SBA. In the federal fiscal year 2013 – 2014, Community Trust Bank funded 98 SBA loans for more than $17.5 million. In Kentucky alone, the bank funded 84 loans totaling $14,245,100. In the last six years, Community Trust has funded more than 500 SBA loans, providing approximately $85 million for small businesses through its partnership with SBA. Community Trust Bank, Inc. has been originating loans for over 111 years. They have been an active participant in the government’s SBA programs for many years. In all, 25 loan officers at Community Trust Bank's 81 locations in Kentucky, West Virginia, and Tennessee were successful in obtaining SBA loans for their customers during the year. • Bob Watson in Versailles, Kentucky was the top SBA lender in number of loans for the sixth consecutive year. Mr. Watson closed or increased 22 SBA loans for $1,213,200. He received a special Louisville Slugger bat engraved with his name as a six-time member of SBA's Kentucky "All-Star" Team at the recent SBA Lender's Conference held at Churchill Downs in Louisville, Kentucky. • Larry Forester in Lexington, Kentucky had the second-highest number of SBA loans in the Company with 15 loans closed or increased for $1,354,800. • Steve Belcher in Pikeville, Kentucky had the highest dollar amount of SBA loans, with three new loans for $6,526,609. • Clovis Lawless in Summersville, West Virginia closed or increased six loans for $661,000. Mr. Lawless also recently accepted an award for Community Trust Bank from the West Virginia SBA Office recognizing CTBI as the West Virginia "Community Bank Lender of the Year." January 2015 | 22
• Jody Thompson in Pikeville, Kentucky closed five new loans for $1,705,000. • Chris Castle in Versailles, Kentucky closed five new loans for $864,300. • Evan Chick in Hazard, Kentucky closed five new loans for $220,000. • Robert Brewer in Frankfort, Kentucky closed four new loans for $1,028,000. • Tim Houck in Richmond, Kentucky closed or increased four loans for $386,000. • Kristy Gross in Ashland, Kentucky closed or increased four SBA loans for $354,200. • Nicole Newsome in Pikeville, Kentucky closed or increased four loans for $155,000. • Bruce Nichols in Danville, Kentucky closed or increased three loans for $230,000. • Reed Caudill in Whitesburg, Kentucky, Scott Osborn in Richmond, Kentucky, Skip Stocker in Harrodsburg, Kentucky and Jeannine Petell in Lexington, Kentucky each closed or increased two loans. • Willie Swatzell closed a 504 loan with the bank's portion being $1,236,031. • Barry Pennington, Berry Popp, Brett Keene, Brian Bentley, Calvin Capps, Ed Pope and Rhonda Longmire also closed SBA loans during the fiscal year. “We are pleased to once again receive this honor from the Small Business Administration,” said Mark Gooch, President and CEO of Community Trust Bank, Inc. “Over the years, the relationship with the SBA has been an excellent one for both Community Trust Bank and our customer base, allowing us to offer competitive business loan products across our service area. I’m proud of our employees as we look forward to continued profitable growth in this business in 2015.” “SBA has enjoyed a long and productive relationship with Community Trust Bank, and last year they contin-
ued to lead the group of community lenders in overall SBA loans in Kentucky,” stated Ralph E. Ross, SBA Kentucky District Director. “Terry Spears is the SBA expert within the Community Trust system. His hard work and know-how are an important reason why so many small businesses benefit from the Community Trust/ SBA partnership. Community Trust is a big organization with a big footprint in the Appalachian Region. Jean Hale, Chairman, President and CEO of Community Trust Bancorp, Inc., ties the widely-scattered branches together with the back office in Pikeville, Kentucky. We are grateful for her ongoing commitment to the entrepreneurs of the region. Ms. Hale is a key leader in the Shaping Our Appalachian Region (SOAR) initiative, and SBA cannot thank Jean Hale and Terry Spears enough for their hard work and their continuing commitment to small business lending.”
the same. The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, the SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam. Community Trust Bank is a wholly owned subsidiary of Community Trust Bancorp, Inc. Community Trust Bancorp, Inc., with assets of $3.7 billion, is headquartered in Pikeville, Kentucky and has 71 banking locations across eastern, northeastern, central, and south central Kentucky, six banking locations in southern West Virginia, four banking locations in Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.
Terry Spears, SBA Officer for Community Trust, said 2015 should be a good year for small businesses seeking SBA-guaranteed loans. "SBA has implemented some new policies which should greatly benefit small businesses in 2015," said Spears. "The SBA has continued its waiver of the guaranty fee for loans up to $150,000, so we will continue to take advantage of this opportunity to help our customers without having to pass along this cost. Additionally, SBA has continued and expanded its programs to assist veterans. The guaranty fee is waived on SBAExpress loans up to $350,000 for veterans and their spouses. For loans over $350,000, the guaranty fee is discounted 50 percent for veterans and their spouses. "We plan to continue to use all lending tools available to continue helping small businesses grow stronger and to create jobs in the communities we serve," added Spears. The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. The SBA recognizes that small business is critical to the United States’ economic recovery and strength, to building America's future, and to helping the United States compete in today's global marketplace. Although the SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains
Photo: Ralph E. Ross, left, Kentucky District Director for the Small Business Administration (SBA), recently presented Community Trust Bank with the “Gold Lender Award” for being Kentucky’s top community bank SBA 7a lender during 2013- 2014. Terry Spears, SBA Small Business Banking Officer for Community Trust, accepted the honor on behalf of the bank.
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UPCOMING EDUCATION EVENTS & SEMINARS
BSA/AML Pegasus Seminar January 20 Elizabethtown January 22 Bowling Green January 26 Paintsville January 27 Somerset January 28 Lexington January 29 Gilbertsville Appraisals and Evaluations Compliance Review Seminar: An In-Depth Study January 21 Lexington January 22 Bowling Green How to Improve Your Collection Department Seminar January 28 Louisville Bank Accounting & Audit Issues Update Seminar February 11 Paducah Bond University Seminar February 24 Louisville
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Real Estate Lending Compliance Seminar February 24 & 25 Bowling Green February 26 & 27 Madisonville March 3 & 4 Lexington Deposit Compliance Fundamentals Pegasus Seminar March 17 Elizabethtown March 19 Lexington March 24 Somerset March 25 Bowling Green March 26 Gilbertsville Banking Business and Fiduciaries in Kentucky Pegasus Seminar March 23 Gilbertsville March 24 Bowling Green March 25 Elizabethtown March 26 Lexington Consumer Lending School Two-day Program March 24 & 25 Bowling Green March 26 & 27 Lexington