Kentuckybankermagazine marapr2018

GOVERNMENT RELATIONS

KENTUCKY BANKER MARCH APRIL 2018

COMPLIANCE & LEGAL

EDUCATION ALLIANCE

INSURANCE SOLUTIONS

PRODUCTS & SERVICES

HOPE OF KENTUCKY

KBPAC POLITICAL ACTION COMMITTEE

BORN TO BE

BANKERS

SINCE 1891

STRAIGHT TALK Ballard W. Cassady, Jr. President & CEO bcassady@kybanks.com

THANK YOU!

Senator Mitch McConnell and Senator Rand Paul The Kentucky Bankers Association, and their member banks across Kentucky, want to thank Senate Majority Leader Mitch McConnell, and Senator Rand Paul, for their continued support of community banking and small business expansion in Kentucky, and across the country.

With the bi-partisan passage of Senate bill 2155 the United States Senate has taken the economy of Kentucky, and our nation, a step in the right direction. This bill will help stimulate lending and growth by removing needless regulations that have stood in the way of economic expansion for several years. Thank you Senators McConnell and Paul for putting our Commonwealth’s economy first!

MAR/APR 2018

PAGE 3 | KENTUCKY BANKER

KENTUCKY BANKER MAGAZINE Published bi-monthly by the Kentucky Bankers Association

YOUR ASSOCIATION OUR COMMONWEALTH

MARCH/APRIL 2018 IN THIS ISSUE

PHOTO CREDIT: MELISSA SPARKS

2017-2018 OFFICERS Chairman Mr. Timothy E. Barnes President & CEO Hometown Bank

Vice Chairman Mr. David M. Bowling, CEO Citizens Union Bank of Shelbyville Treasurer Mr. Lloyd Hillard, Jr. President & CEO United Bank & Capital Trust Co. Past Chairman Mr. Michael H. Mercer President & CEO First State Bank

President & CEO Mr. Ballard W. Cassady, Jr. Kentucky Bankers Association

BOARD OF DIRECTORS Group Representatives

Representing Group 1 Mr. J. Brent Bugg President & CEO, Fredonia Valley Bank Representing Group 2 Ms. Lanie W. Gardner Community President First Southern National Bank Representing Group 3 Mr. John T. Taylor President & CEO, PBI Bank

Kentucky Bankers Association 600 West Main Street, Suite 400 Louisville, Kentucky 40202

Representing Group 4 Mr. Dan M. Harbison President & CEO The Farmers National Bank of Scottsville Representing Group 5 Mr. Gregory D. Goff, President & CEO First National Bank of Kentucky

Representing Group 6 Mr. Darin L. Young President & CEO, Century Bank of Kentucky

Thank You!......................3 Chairman’s Corner.............. 7 Patti Powell...................9 The Murray Bank............12 SBA Honors.............14 Wellness Winners............19 Financial Wellness..............20 Bad Behaviors......................22 ATM Safety....................24 Farm Credit Watch...............26 Lending Discrimination?....28 Underbanked...........32 TRID...................................34 Annual Convention.......36

Representing Group 7 Mr. Steve Tolliver, Market President The Monticello Banking Company

ON THE COVER

It is finally spring, and with the new season flowers are budding.

Will April showers bring May flowers? Only mother nature knows for sure.

Representing Group 8 Mr. Anthony Kinder President & CEO Peoples Bank of Kentucky

Representing Group 9 Mr. Jed Weinberg Chairman, Bank of Hindman

Representing Thrifts Ms. Shanda L. Smith, President & CEO Blue Grass Federal Savings & Loan

Representing Thrifts Kari R. Gough President & CEO, Winchester Federal Bank

Representing Bank Size

Assets of $1B or more Mr. James A. Hillebrand, President Stock Yards Bank & Trust Company

Assets at least $200M; less than $1B Mr. Dale Sights President, Field & Main Bank

KBA Benefits Trust Mr. W. Fred Brashear, II President & CEO, Hyden Citizens Bank

Kentucky Banker Magazine (KBM) is the official bi-monthly periodical of the Kentucky Bankers Association (KBA). No part of KBM may be reproduced without written permission from the KBA. The KBA is not responsible for opinions expressed by outside contributors published in KBM. The KBA reserves the right to publish submissions at the discretion of the KBM editorial team. Subscriptions: $30/year for KBA members; $60/year for KBA non-members; single copies $5 each.

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KENTUCKY BANKERS ASSOCIATION STAFF 23 EMPLOYEES WITH 300+ YEARS OF COMBINED EXPERIENCE SERVING THE COMMONWEALTH

Ballard W. Cassady Jr. President & CEO bcassady@kybanks.com

Jamie Hampton Education Services Coordinator jhampton@kybanks.com

Debra K. Stamper EVP & General Counsel dstamper@kybanks.com

Michelle Madison IT Manager mmadison@kybanks.com

Matthew E. Vance Chief Financial Officer mvance@kybanks.com

Tammy Nichols Convention Coordinator Finance Officer, HOPE of KY tnichols@kybanks.com

Selina O. Parrish Director of Membership sparrish@kybanks.com Natalie Kaelin, Esq. Director of Education nkaelin@kybanks.com Josh Fischer Director of Communications jfischer@kybanks.com Billie Wade Executive Director, HOPE of KY bwade@kybanks.com Miriam Cole Executive Assistant mcole@kybanks.com John P. Cooper Legislative Solutions jcooper@kybanks.com Paula Cross Education Services Coordinator pcross@kybanks.com Casey Guernsey Enrollment and Billing Specialist cguernsey@kybanks.com

Katie Rajchel Staff Accountant krajchel@kybanks.com Steve Whitlow Systems Engineer swhitlow@kybanks.com Chuck Maggard President & CEO, KenBanc cmaggard@kybanks.com Lisa Mattingly Director of Sales & Service KBA Benefits Solutions lmattingly@kybanks.com Brandon Maggard Account Representative KenBanc Insurance Services bmaggard@kybanks.com Donna McCartin Benefit Support Specialist dmccartin@kybanks.com Audrey Whitaker Insurance Services Coordinator awhitaker@kybanks.com Allie Graves Benefit Support Specialist agraves@kybanks.com

SINCE 1891

What do You Remember About Education?

CHAIRMAN’S CORNER Tim Barnes 2017-2018 KBA Chairman

What better way to start off a banking article about educa- So I ask myself, WHAT DO YOU REMEMBER tion than with a quote from Benjamin Franklin, “An investABOUT YOUR EDUCATION? ment in knowledge pays the best interest.” Bankers love interest and my Dad loved education.

I remember the friends I have made along the way. I remember Kelly, Tim, Abe, Tony, John from high school and My father was a firm, actually very firm believer in educa- Eric, Darrin, Kelli, Trey, Danny and Tom from my Centre tion. Growing up I was expected to attend school every days. I remember the Liberty Bank mafia. day, sit in front of the class, do my homework, ask questions, and be prepared to discuss current events. On the I also learned that sometime during a rambling article that way to school in the mornings or over breakfast, we would you need to make a point. Well here it is! Be educated discuss news stories or what was going on in the world. I and learn from your friends and peers! KBA has great edwas taught and loved to read newspapers every morning ucation resources! before school.

As I think back over my formal education, which consisted of Paintsville High and Centre College (Go Tigers! Go Colonels!), I realize that I remember very little about the certain subjects and more about the folks I have met along the way. I remember Mr. Baldwin’s Algebra class but not how to solve a linear word problem. I remember getting in trouble in Mr. Pack’s English class for chewing gum but have no clue why Huck Finn traveled the Mississippi River. I remember not to throw snowballs at the cross walk guards and I still miss playing with parachutes in Miss Couples’ PE class.

Sign up or register your new superstar for the KBA Consumer Lending School. You may learn about new bankruptcy trends or meet Cathy from Town Square Bank and exchange loan operations issues with her.

Enroll someone in the KBA General Banking School, learn through the computer banking simulation, but more importantly, pick the brain of Bruce from Community Bank of the Heartland. Attend a Business Continuity Planning Seminar and pray that you never need the knowledge. Go figure out what CECL means and take time to introduce yourself to Greg at Farmers National. You never know when you will need to buy or sell a participation loan. Go I remember my first Humanities class at Centre and how to the Regulators’ Forum in Bowling Green and invite Dan few pictures were in the Beowulf novel. After I took Chem- or Mike out for drinks afterwards to discuss loan demand istry for the second time in college, I understood the im- or how to branch into new markets. Have a lunch and portance of learning the periodic table. Is it wrong that learn in your office while watching a Ransomware & CyI remember my college post office box code but not the ber Extortion webinar with your branch managers and ask difference between psychology and philosophy? what keeps them up at night.

I remember taking KBA’s Principles of Banking class at Jenny Wiley State Park but still have a hard time explaining why credit unions are tax free. I remember taking part in Office Cube Olympics during my Liberty National Bank training program but not how to figure a cash flow statement by hand. I even remember teaching (how scary is that) Law & Banking and Bank Management classes for KBA when I moved to Corbin but still have to look up all of the ABC and DFE regs.

MAR/APR 2018

The KBA has many different education opportunities waiting for you. If you need training on something we do not offer, speak up and we will try our best to deliver.

I do not want to sound like old Ben Franklin BUT, “ An investment in KBA EDUCATION pays the best interest!”

PAGE 7 | KENTUCKY BANKER

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Patti Powell Named to Farmers National Bank Board of Directors Patti Powell, President of Stuart Powell Ford-Lincoln-Mazda, has been named to the Farmers National Bank Board of Directors. A Danville native and resident, Powell has worked in the automotive industry for nearly 30 years and is a graduate of the National Automobile Dealers Association Dealer Academy. She had previously served on the bank’s Boyle County Community Board.

“We are very pleased to add Patti to an already strong board,” said Greg Caudill, CEO of Farmers National Bank. “She brings a solid business background, and a deep knowledge and commitment to our community. We look forward to her continued contributions to our organization.”

Powell attended Danville High School and graduated from Texas Christian University with a Bachelor of Fine Arts in Advertising/Design. She has been active with several local organizations including the Danville-Boyle County Chamber of Commerce and the Boyle County Industrial Foundation. She is also a member of the Advocate Brass Band.

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UNITED IN SERVICE

Farmers National Bank Receives Historical Preservation Honor Several members of the Boyle Landmark Trust recently presented Farmers National Bank, 304 West Main Street, Danville, Kentucky, a historical plaque for the bank’s efforts in historical preservation. The property that the bank currently sits on today was formerly the Old Whitley; Old Moore Building; Spoonamore Drugstore; and, Masonic Lodge Building.

Jacob Pankey, Chair of the Boyle Landmark Trust, along with board members George Coomer; Barbara Hulette and Kathy Milby presented the plaque to Farmers National Bank representatives, Greg Caudill, CEO; Marty Gibson, President and Sharon Howell, Vice President, Director of Marketing.

The program recognized the property as being at least 100 years old; there is recorded & documented history of the property; and, Farmers National Bank’s support of architectural historic preservation within Boyle County, Kentucky.

The Boyle Landmark Trust, which was founded in 1971, works to assure that architectural history is respected, protected, and preserved for future generations.

Farmers National Bank, a community owned bank since 1879, has banking facilities in Danville, Burgin, Harrodsburg, Junction City, Lancaster, Perryville and Stanford.

PAGE 10 | KENTUCKY BANKER

MAR/APR 2018

SINCE 1891

Discover to Purchase 2018 Yearbooks for MCHS Discover Financial Services, the debit card brand of CFSB is “paying it forward” to the students of Marshall County High School. Discover, a proud new member of the community has partnered with Balfour and Marshall County High School to purchase yearbooks for every student, faculty, and staff member of the school. Each book will be personalized with the scholar’s name and an icon, a symbol that represents his/her individual personality.

“We want to get to know this tight-knit community and be part of it,” said Dave Schneider, President of PULSE and Senior Vice President of Debit Strategy for Discover. Jason Jones, CFSB Market President of Marshall County said, “When Discover approached us with the idea of paying for these books for everyone at MCHS, we were overwhelmed. While these students are learning a new normal following the tragedy on January 23rd, the outpouring of love and support from locals as well as from people around the country has been such a blessing to witness.”

“We stand with the wonderful people of Marshall County and our prayers are with each of them during this difficult time,” said Steve Seivert, Executive Vice President of Marketing for Discover. Marshall County High School Principal Patricia Greer said, “We are so thankful to live in a community that cares so much for our students as well as our teachers and staff. On behalf of all of those who call MCHS home, we are very appreciative of these gifts of kindness and goodwill.”

MAR/APR 2018

PAGE 11 | KENTUCKY BANKER

UNITED IN SERVICE

The Murray Bank Donate to the Lady Tigers Travel Fund

#kbabankshots

BANK SHOTS!

ANNIE SUITER

Pictured are members of the All A State Champion Lady Tigers and Head Coach Wyatt Foust, receiving a donation from Bob Hargrove, President & CEO at The Murray Bank and Darren Jones, Vice President at The Murray Bank. The Murray Bank provided a significant monetary donation to support the Lady Tigers travels on their way to another All A State Title! Congrats Lady Tigers, from all your fans at The Murray Bank.

The Murray Bank Crosstown Assist

Community Financial Services Bank (CFSB) welcomes Annie Suiter to our Graves County Banking Center team. Suiter’s 20 years of banking experience will continue to ensure superior customer service and secure the future of CFSB. Annie’s financial career has included roles in bookkeeping, administrative assistant in credit as well as home mortgage origination. Suiter’s new responsibilities at CFSB include Residential Lending in the Mayfield/Graves County market.

CFSB’s Graves County Market President Andrew Ellison said, “We are proud to have Annie working for CFSB. She is so involved in our community and her lending knowledge will truly provide a great experience for our clients.”

Suiter graduated from Graves County High School, a member of the Class of 1996. Annie maintains an active role in the Mayfield/ Graves County Community. She is a Graves County High School LEAD mentor and Graves County Middle School volunteer, a member of the Graves County Board of Realtors.

During a special presentation between games at The Murray Bank Crosstown Classic, The Murray Bank proudly presented each school superintendent with a donation in the amount of $10,000. These donations were made on behalf of all The Murray Bank Spirit Debit Card holders.

Photo (from left): Darren Jones, VP The Murray Bank, Eleshia Brandon, VP The Murray Bank, Molly Ryan, Jack Ryan, Tony Ryan, VP The Murray Bank, Eve Stark, Katja Hamm, Coy Sammons, Murray Independent Superintendent, Emily Dunn, Isabella Hamm, Tres Settle, Calloway County Superintendent, Bob Hargrove, President & CEO The Murray Bank, Zak Stark, Chad Stubblefield, VP The Murray Bank, Tim Stark, Marketing Director, The Murray Bank, Jadyn Stark, Leah Stark.

PAGE 12 | KENTUCKY BANKER

KBA BANK SHOTS! highlight your achievements; this is where we publish your successes & acknowledge your milestones. email jfischer@kybanks.com @kybankers #kbabankshots

MAR/APR 2018

SINCE 1891

#kbabankshots

BANK SHOTS!

WILLIAM D. MICHAEL The Board of Citizens Bank of Kentucky is pleased to announce the appointment of CFO William David Michael to Executive Vice President. David came to Citizens Bank of Kentucky as the Senior Vice President/Chief Financial Officer in November of 2016 from an area bank. He has over 28 years of banking experience and graduated from Morehead State University with a BA in Accounting.

AMY SHERROW Peoples Exchange Bank recently announced that Amy Sherrow has been named Vice President of Commercial Lending for the Lexington market. “Amy’s dedication and hard work have made her a key contributor to our team,” said Matthew White, Market President – Lexington. “Her experience and knowledge of the Fayette County market have been instrumental to our success. In this position she will continue to create trusted relationships and provide exceptional service.” Sherrow brings over 20 years of financial experience to the Vice President position. She is a graduate of UK and IU.

MAR/APR 2018

Citizen Union Bank Donates $20,000 to Shelby County Education Foundation Senior officials at Citizens Union Bank announced that they have made a donation of $20,000 to kick off the Shelby County Education Foundation.

CUB Bank’s Chief Executive Office, David Bowling, stated; “CUB has been a strong supporter of the Shelby County schools for generations. Many of our employees are products of the great school system we have here. The Shelby County Education Foundation will be a continuation of that legacy and we are proud to be able to continue our support.”

Shelby County Superintendent, Dr. James Neihof added, “The task of preparing our students for their next steps is one our community takes seriously. The partnerships we enjoy throughout our district are laying a path for success. One exemplar model of that partnership is Citizens Union bank.”

PAGE 13 | KENTUCKY BANKER

SINCE 1891

SBA Honors Community Trust Bank as Kentucky’s Top SBA Community Bank Lender ‘16 ‘17 Community Trust Bank, Inc. was recently honored for the ninth consecutive year with the “Gold Lender Award” from the United States Small Business Administration (SBA) as Kentucky’s top volume SBA 7a Community Bank lender for the federal fiscal year that runs from October 1, 2016 to September 30, 2017. The award was presented November 17, 2017 at the SBA Lender’s Conference in Shelbyville, Kentucky.

CASSIE SCOTT Cassie Scott has been named Assistant Vice President, Operations Manager of WealthSouth. She has 17 years of experience in the financial services industry.

She graduated Magna Cum Laude from EKU majoring in accounting.

“Community Trust Bank has led the way with SBA lending for many years in Kentucky and is one of the premier community banks in the entire country,” said Ralph Ross, Kentucky District Director for SBA. “We thank Community Trust Bank for the commitment shown to small businesses in the region and for making a tremendous difference to communities and local economies.”

During the 2016-2017 federal fiscal year, Community Trust Bank closed or increased 91 SBA 7a and 504 loans, providing $18,356,739 in new funding for small businesses in four states (Kentucky, West Virginia, Tennessee and Ohio). Over the last nine federal fiscal years, Community Trust has closed or increased more than 770 SBA 7a and 504 loans, providing in excess of $133 million for small businesses in the communities we serve.

CHELSEY MADDING Community Financial Services Bank announced Credit Risk Analyst Chelsey Madding will become a Commercial Lending Administrative Assistant.

“Once again we are pleased to 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 2018.”

Terry Spears, SBA Officer for Community Trust, said 2018 should also be a good year for small businesses seeking SBA-guaranteed loans. “The SBA has continued its waiver of the guaranty fee for all loans up to $125,000” said Spears. “Also, they still have special programs to eliminate and/or reduce the SBA guarantee fee for veterans. We will continue to take advantage of these opportunities to help our customers.”

Photo (at right): Ralph E. Ross, left, Kentucky District Director of the Small Business Administration (SBA), recently presented Community Trust Bank with the “Gold Lender Award” for being Kentucky’s top SBA 7a lender during 2016 - 2017. Terry Spears, SBA Small Business Banking Officer for Community Trust, accepted the honor on behalf of the bank.

PAGE 14 | KENTUCKY BANKER

GALE HATTON Gale Hatton has been named Vice President, Treasury Management Relationship Manager at Paducah Bank. She has been with the bank for over 18 years.

JENNIFER FRYE Bank of the Bluegrass & Trust Co., welcomes back Jennifer Frye, AVP, Sr. Mortgage Loan Officer. Jennifer adds over 25 years of Mortgage Lending experience to our team.

MAR/APR 2018

SINCE 1891

Resolve to Get Your Findings Organized With 3 Easy Tips

by Michael Berman, Ncontracts

Tip #2 Allocate Tasks

People love to make New Year’s resolutions, but they aren’t so good at keeping them. Statistics suggest that as many as 80 percent of New Year’s resolutions are broken by the second week of February. That means most resolutions have already fallen by the wayside. But it’s not too late to set new goals and try again with a more effective strategy.

Unless someone really cares about a problem, it won’t get fixed.

The best way to make someone care is to assign them responsibility. Don’t just mention it in a meeting where it might be easily brushed off or forgotten. Communicate it in writing and keep it with your centralized data. Clear lines of responsibility promote action. As an added benefit, delegating tasks will help remove some of the heavy lifting from your own plate, freeing you up to work on big picture items that can be hard to find time for.

There’s a lot of reasons resolutions go wrong, but one of the biggest obstacles is that our resolutions require us to actively make changes when we’re used to running on autopilot. We’re used to eating that afternoon snack, splurging on that cup of coffee, or sitting on the couch when we get home. We’re used to running our meetings or handling tasks a certain way. Our habits are ingrained and our minds are programmed to do what they’ve always done, good or bad. Life is busy, and our default mode is autopilot. The secret, then, to keeping a resolution is to make it easy. The less you have to actively do, the more likely you are to succeed. This may not be particularly helpful when it comes to typical resolutions like eating more healthfully, exercising more often, or saving more cash, but it can work in your favor when it comes to getting organized, specifically with your audit and exam findings.

With a little upfront work, 2018 can be the year you get your institution’s audit and exam findings organized. Just follow these three tips: Tip #1 Centralize Your Findings Data Is your findings management a pastiche of spreadsheets, documents and emails? Are people across your institution using their own individual approach to findings management? Tracking all these pieces is time consuming, not to mention unreliable. If just one person fails to update the document or if they make different versions of the spreadsheet to keep on their computer, then it can create a mess. Enter the data once and use it everywhere. It’s not just more accurate, it’s easier and more efficient.

One and done.

While implementing a centralized system will take time and effort upfront, requiring you to fight the inertia for a short period, it will ease your workload going forward.

MAR/APR 2018

Tip #3 Automate Task Management You know when I’m most likely to remember that something needs to be done? It’s when I have a few quiet minutes to think.

These come to me at the most inconvenient times, like driving to work or in the shower, when there is no easy way to take action, then I forget about it.

Yet I never forget a meeting. That’s because I set reminders. Apply that concept to findings management with automation. Find a method that makes it easy to assign, track, and remind task owners what needs to be done and when. It should also make it easy for task owners to log their work. It’s hard to find the time to check in with each team member and remember what they are supposed to be doing. It’s much easier to find a few minutes to check a centralized, automated task management system to see if you and your team are on track. And it should give you the reminders to make sure you do it instead of forcing you to override your personal autopilot and remember.

Once implemented, these tips will make life simpler and easier, which gives you a real shot at achieving your get-organized resolution. There’ll be no more hunting down answers, no more wondering what got done, and no pressure to remember what needs to be done next. It’ll all be in one place with proactive reminders of what step is next.

If only all resolutions could be that simple. Which reminds me, if you have advice for how to actually stop working during vacation and focus on family and relaxation, please send me your tips. My wife thanks you.

PAGE 17 | KENTUCKY BANKER

SINCE 1891

KBA Benefit Solutions Wellness Program Winners JOE BERRY Joe Berry, Executive VP of the Greater Owensboro Economic Development Corporation, has been named the new Vice President of Community Development for First Security Bank.

“Joe has a passion for Owensboro, and its business community, that aligns perfectly with the culture and why at First Security Bank,” said Michael F. Beckwith, President and CEO of First Security Bank. “We can’t wait to integrate his talents, connections and passion with our strategic plan.”

Berry has been with the Greater Owensboro Economic Development Corporation (GOEDC) since 2011. During his tenure at the GOEDC, Berry served as chief innovation officer, responsible for the recruitment, retention, and development of start-up, high tech, and scalable companies within the Greater Owensboro region, including the management of the Owensboro Centre for Business & Research.

BARRY OMOHUNDRO Peoples Exchange Bank recently announced that Barry Omohundro has been named Vice President of Commercial Lending for the Winchester market.

“Barry’s dedication to the community and developing account relationships with customers of the bank is unparalleled,” said Tony Parrish, CEO of Peoples Exchange Bank. “His experience and knowledge of the Clark County market has earned him a reputation as a respected lender and financial partner.”

Omohundro brings over 23 years of financial experience to the Vice President position, including various roles that add to his expertise in the field. He joined Peoples Exchange Bank in 2013 as a lender. Omohundro is a graduate of Eastern Kentucky University and the KBA General Banking School. He is a 2008 graduate of the Leadership Winchester program.

MAR/APR 2018

Brandon Maggard, representing KBA Benefit Solutions, presents Dorothy Bickett of Springfield State Bank with the Grand Prize $5,000 check. $29,000 in cash prizes were given away including five $1,000 checks; see the winners below!

Dorothy Bickett Springfield State Bank Erin Bukowski Citizens Union Bank Jennifer Whalen First Federal Savings Bank of KY Tracie Holder First National Bank of Grayson Sabrina McKenzie Owingsville Bank Peoples Bank of Marion Terry Bunnell Lisa Booth Bank of Edmonson Mandee McDougle Bank of Edmonson Melissa Whobrey Bank of Edmonson Judy Wilson Bank of Edmonson Scott Smith Century Bank Shelia Sonntag Citizens Bank of Cumberland Co Citizens Bank of KY Jerry Booth Crystal Branham Commercial Bank of Grayson Amy Mabry Commercial Bank of Grayson Deborah Prichard Commercial Bank of Grayson Susan Middleton Farmers Bank of Nicholasville Brittany Hulette First Federal Savings Bank of KY Carolyn Mulcahy First Federal Savings Bank of KY Tim Barnes Hometown Bank of Corbin Rodney Chamberlin Kentucky Farmers Bank Erienne McGown Magnolia Bank Stephanie Beane Morgantown Bank Tina McNay Peoples Bank & Trust Owenton Kendra Glasscock Taylor County Bank Jennifer Johnson Taylor County Bank ...and 40 $100 Prize Winners!

$5,000 $1,000 $1,000 $1,000 $1,000 $1,000 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

PAGE 19 | KENTUCKY BANKER

SINCE 1891

5 Ways Your Bank Can Improve Family Financial Wellness

by Tom O’Keefe, EVERFI

3) Educate and empower employees

Financial Literacy Month is the perfect time for your bank to reflect on how you are helping improve the financial capability of your customers and what else your bank could be doing to improve the lives of people in your community.

Your employees are on the front lines meeting with customers, so making their personal financial education an ongoing process ensures your customers are getting the best engagement and information possible. Having them understand their own financial situation will also help them be more productive at work. Since more than three-fourths of employers report that worker’s financial issues impact their job performance, noting increases in stress (reported by 76 percent), lack of focus at work (60 percent), and absences/tardiness (34 percent). Arming your employees with financial know-how can alleviate these pressures, allowing them to be less stressed and more focused at work (and giving them the skills to help your customers in branches or over the phone!).

Nearly two-thirds of Americans do not have $500 in savings, and 138 million do not engage with financial institutions, relying instead on fringe banking, check cashing, and other unhealthy financial options. In fact, the majority of adults admit that they do not feel confident in their ability to make strong financial decisions.

With consumers displaying a strong need for financial education—banks are in the perfect position to provide it. Empowered with quality financial education, consumers can take control of their finances, make more informed decisions, and, eventually, realize their financial potential.

Here are five ways your bank can make a difference during Financial Literacy Month: 1) Make financial education part of your loyalty program Ideally, the financial education you provide should cover three audiences: children, adults, and parents. Make sure the learning materials are available as an unbiased set of resources and resist the urge to sell to your customers. Your content should be measured against its ability to educate your audience and grow the value of your bank, along with its ability to create customer loyalty.

2) Make financial education resources readily available In addition to offering financial education to your loyal customers, your bank should also make your resources readily available and searchable on your website for potential customers. If you provide something of real value on your website—through education—your audience will not only be more likely to engage in that moment, but they will also be more likely to return to your institution for more information or to use your services in the future. In fact, recent research has shown that consumers who consume educational content are 131% more likely to make a purchase. Bottom line? Educational content is a powerful way to connect with your community.

PAGE 20 | KENTUCKY BANKER

4) Embrace banking for the next generation Along with offering financial education for kids, your bank can also promote entry-level accounts for young people interested in learning financial capability on a small scale. This allows kids to practice working with financial institutions and learning about money—early on. In an EVERFI study, we found that a majority of childrens’ financial knowledge comes from parents and fewer than half of parents describe themselves as “well prepared” for money conversations. A bank that can help fill the gap would help improve the financial capability of young people before financial mistakes are made.

5) Support financial education in schools School-based financial education can make a big difference in improving financial capability. If your bank supports financial education in schools that are in underbanked communities it can help improve the financial capability of not only the children, but the parents as well. By supporting and promoting these programs, your bank can increase accessibility to education—and also help to fulfill your CRA requirement.

For more information on EVERFI’s research into family financial capability, and how your financial institution can get involved, contact Tom O’Keefe at (540)580-6186 or tokeefe@everfi.com

MAR/APR 2018

Hancock Bank & Trust Names Lori Beliles EVP & COO

Lori Beliles has been promoted to Executive Vice President and Chief Operating Officer for Hancock Bank & Trust. She is a veteran banker with 34 years in various banking positions in South Central Kentucky.

She is a native of Simpson County, grew up in Morgantown and currently resides in Bowling Green.

Beliles graduated from the Barret Graduate School of Banking in 2017 with Honors, and she is also a 2017 graduate of Leadership Bowling Green. She is active in the Women’s Fund of South Central Kentucky.

Hancock Bank & Trust operates six locations in Warren, Hopkins and Hancock Counties. “Hancock Bank & Trust is extremely fortunate to have someone with Lori’s experience and leadership skills for both of these important leadership positions,” said Danny Coffey, Chief Executive Officer. “We look forward to Lori’s continued contributions in her new leadership roles for our bank’s future.”

MCM is a proud partner of the KBA in statewide advocacy efforts MCM CPAs & Advisors appreciates the KBA’s confidence in our firm as Partner Henry Hawkins leads the organization in its Frankfort outreach to address the tax inequalities faced by community bankers. The KBA Tax Committee is to be commended for its advocacy on behalf of its constituents, and recently included Partner Rick Woods on the tax reform analysis performed to support the KBA’s efforts. In the wake of the Tax Cuts and Jobs Act, MCM is also taking proactive steps to assist banks and their shareholders as they navigate the changing tax environment. Contact us for more information on how we can help you and your bank.

Henry Hawkins, CPA Assurance Partner Henry.Hawkins@mcmcpa.com

Rick Woods,CPA Tax Partner Rick.Woods@mcmcpa.com

Expert guidance, beyond the bottom line.

888.587.1719 | www.mcmcpa.com

UNITED IN SERVICE

Saving Money is Hard

Prize-Linked Savings Helps

by Brian Gilmore, Commonwealth

JESSE CLARK Community Financial Services Bank announced that Risk Analyst Jesse Clark will become a Commercial Lender with the Graves County Banking Center team.

Savings is the bedrock of financial stability. Short-term savings allow families to weather financial emergencies – an unexpected car repair or medical bill – and long-term savings open the door to the pursuit of higher education, home ownership, and retirement security. But Americans continue to struggle to save. The Federal Reserve reports that in 2016 nearly half of American adults – 44% – said they could not cover an emergency expense of $400.

Saving money is hard. For many families, managing finances is stressful and savings can seem unattainable. Traditionally, savings has been seen as setting money aside for later and delaying gratification. But what if savings could be fun and rewarding? Prize-linked savings products, which reward the act of saving through raffle-style prizes, have proven to engage individuals in increased savings behavior across the country. By offering a prize-linked savings product, your organization can build financial security for your customers while growing core deposits and attracting and retaining new clients.

KATIE MINOR BAIRD Katie Minor Baird has been named VP, Controller of Farmers National Bank.

Baird has 14 years of experience in financial services.

Prize-linked Savings 101 Prize-linked savings (PLS) is a tested, successful concept in which savers earn chances to win by saving in insured financial institutions or through government-offered products. Deposits act as entries into prize drawings which reward people for saving. PLS engages consumers to save by changing the savings experience. By injecting fun and the excitement of winning into the act of saving, PLS products have incentivized first-time savers, generated long-term savings, and attracted new customers to the financial institutions that offer these products. Prize-linked savings products work. The nation’s three largest credit union PLS products, Save To Win™, Lucky Savers, and WINcentive Savings, have engaged over 75,000 credit union members in fourteen states who have saved over $175 million since 2009.

• Save To Win operates in 13 states and has awarded $2.3 million in prizes to 25,000 credit union members.

• New York’s Lucky Savers product generated over $2 million in savings in its first two months.

• WINcentive Savings in Minnesota, helped nearly 4,000 savers set aside over $2.8 million in funds in its first year.

PAGE 22 | KENTUCKY BANKER

NATHAN POOLE Citizens Union Bank promoted Nathan Poole to Vice President Mortgage Production Manager.

NICOLE WARE Traditional Bank welcomed Nicole Ware as Business Development Associate. Ware is a graduate of UK. Her office will be located at Traditional Bank’s Downtown Lexington location.

MAR/APR 2018

SINCE 1891

Saving Money is Hard (continued)

JUSTIN CARROLL United Bank & Capital Trust Company announced the hiring of Justin Carroll as Vice President. He will join the Bank’s 100 United Drive office as a Commercial Lender.

NATHAN ROWTON Community Financial Services Bank recently promoted Commercial Lender Nathan Rowton to Assistant VP. Nathan has 28 years of business practice.

RICHIE ANGLIN Richie Anglin has recently been promoted to Mid City Banking Center Relationship Manager at Paducah Bank.

Anglin has been with Paducah Bank for 17 years.

Blue Ridge Bank in Virginia, the nation’s first bank to offer a PLS product called the Jackpot Account, helped small-dollar savers (less than $1,000 in savings) accumulate $1 million in deposits in their PLS accounts. Community Bank in Oregon and First County Bank in Connecticut are also seeing promising early responses. In 2016, 153 credit unions and three banks helped over 28,000 customers save nearly $70 million in accounts that used prize-linked savings.

Prize-linked savings accounts are successfully reaching people who struggle to save. Over 80% of prize-linked savings accountholders in credit unions are financially vulnerable and over half had never had a certificate of deposit before. In North Carolina, Save to Win helped savers both build up funds and increase their sense of confidence and capability when it came to their finances.

Banks and credit unions aren’t the only institutions that have successfully integrated PLS into their range of products. Financial technology startups like Long Game are using PLS to offer inventive ways to save through technologies, like apps and smartphones, which consumers already use to manage their finances. After only a few months in market, Long Game has grown quickly with nearly 70,000 users.

In August 2016, Commonwealth partnered with Walmart and Green Dot to offer Prize Savings, a PLS feature for the Walmart MoneyCard Vault, as a way for card users to earn a chance to win prizes by saving. Prize Savings was an instant hit among consumers, and in its first year more than 200,000 card holders were saving in the Vault - a growth of 274 percent. Not only were more people saving money, they were saving in greater quantities, with the average savings growing by 34 percent.

The ABA Foundation awarded Green Dot Bank an Economic Inclusion award in 2017 for its role in offering Prize Savings.

Prize-linked savings accounts can be successfully implemented by a wide variety of institutions, but there is no “one-size-fits-all” model. When designing a PLS product, there are several factors to consider, including the following: • • • • •

PATRICK TOWLES Traditional Bank welcomed Patrick Towles as Business Development Associate. He is a graduate of UK. His office will be located at Traditional Bank’s Downtown Lexington location.

MAR/APR 2018

Savings product design (underlying savings vehicle) Prize design (entry requirements, prize pool, frequency) Legal (compliance with applicable law, reporting requirements) Marketing (product name, consumer and internal marketing) Operations (collecting/managing data, managing drawings)

To learn more about prize-linked savings and how to launch your own PLS product, contact Brian Gilmore at bgilmore@buildcommonwealth.org

PAGE 23 | KENTUCKY BANKER

SINCE 1891

Time to Assess ATM Safety

by Craig M. Collins, President OneBeacon Financial Services

safety measures can be taken for machines in specific locations.

ATM security has been in the news recently, so now is a Drive-up ATMS good time to take stock of the security measures you have in place to protect the machine against fraud and theft, as Guideposts should be brightly colored, freshly painted and well-maintained. Beware the “ram raid.” Anchor the well as protect customers who are using it. machine to the structure and the ground. The machine should be alarmed and equipped with a GPS tracker. In All ATM Locations winter weather locations, make sure the area leading into Whether your ATM is located inside or outside your bank, and out of the ATM is cleared of snow and ice, and is well consider these safety measures for added protection. salted or sanded to prevent vehicles from sliding when enMaintenance: If maintenance on the machine is required, tering or exiting the area. be sure branch employees are made aware of it ahead of time. A branch employee should call a specific individual Walk-up/Controlled Access ATMs at the bank or the manufacturer to confirm the legitimacy of any service visit, since fraudsters have been posing Make sure the ATM is in an open area that is well-lit with as “authorized ATM representatives.” Additionally, ensure no landscaping, signage or dividers obstructing the view the key to access the machine is specific to that ATM, and to the machine. Walkways should be well-maintained and the surface area should be in good condition. In areas that is not a “universal key” for a generic lock. experience winter weather, ensure snow and ice are removed completely and the area is well salted and sandAlarmed Top Hats ed to help prevent slips and falls. Test and maintain the Consider installing metal top hats with contact alarms. controlled access system, including inspections to look for Alarms should be designed to activate at the earliest pos- skimmers on the access point hardware. sible sign of tampering, and should be incorporated into Wherever your ATM is located, examining the machine the bank’s main alarm system. and surrounding area should be part of your daily routine.

Address any concerns or maintenance issues quickly to Cameras protect your business and your customers.

Clean and inspect cameras inside the machine to confirm that they are properly able to scan and record the area right outside of the ATM. Also, confirm that other external cameras are positioned so that they are in sight of the ATM. Card Reader Detection Consider installing a detection system that sends an alert or shuts down the ATM when anything is attached to the card reader or key pad. Also, the card reader should be physically inspected for skimmers each time the ATM is reloaded.

Networks If software patches are available for your ATM’s system, make sure they are downloaded regularly and kept up-todate. In addition to the precautions above, the following PAGE 24 | KENTUCKY BANKER

For a FREE evaluation of your current insurance coverage contact Chuck Maggard, President & CEO of KenBanc Insurance Services.

Phone: 502-736-2671 Free: 800-392-4045 Email: cmaggard@kybanks.com WE KNOW BANKS

KenBanc Insurance Services provides a full line of insurance products targeted specifically to meet the wide-ranging needs of financial institutions. Our team is fully trained in analyzing your bank and its specific needs; we look closely for both gaps and overlaps in your various policies, and utilize peer analysis and benchmarking to make coverage recommendations.

MAR/APR 2018

UNITED IN SERVICE

Congress Modifies Tax-Bill Provision Benefitting Ag Coops March 2018 (No. 240)

2015. This sharp decline was due largely to the tax bill’s effect on CoBank. Like other corporations, CoBank had to

by Bert Ely recalculate its deferred tax assets and tax liabilities, as of the end of 2017, at the new lower tax rate; doing so genAs last month’s FCW reported, the major tax bill Congress erated a $142.3 million tax benefit for CoBank, reducing its enacted at the end of last year added a new section 199A tax bill from $171 million in 2015 and $158 million in 2016 to the Internal Revenue Code, one portion of which would to just $15 million for 2017. greatly benefit agricultural cooperatives at the expense of investor-owned grain companies of all sizes — not only The tax bill for the rest of the FCS actually increased, from Cargill and Archer Daniels Midland but also much smaller a miniscule $17 million in 2016, for an effective tax rate of companies purchasing grain from farmers. That would be just 0.43 percent, to a still miniscule $23 million, on $4.087 the case because 199A would allow farmers “to deduct up billion of pre-tax income in 2017, for an effective tax rate to 20 percent of their totals sales to cooperatives,” which of 0.56 percent. These absurdly low effective tax rates would have let some farmers reduce their taxable income highlight why Congress needs to undertake a fundamental to zero. Quite understandably, investor-owned grain com- examination of how the FCS is taxed relative to commerpanies of all sizes protested the obvious unfairness, to cial banks and other taxpaying firms financing farmers and them, of 199A, calling it the “grain glitch.” rural America.

Congress responded to their complaints, in the just-passed omnibus spending bill, with a provision that caps a farmer’s deduction on grain sales to coops at 20 percent of net income, excluding capital gains. Farmers still retain other benefits from doing business at coops where they are members. The FCS, and CoBank in particular, may still benefit from the revised provision, to the extent that it results in increased loan demand from coops that borrow from CoBank.

FCSIC rebates $162.7 million to FCS institutions

The Farm Credit System Insurance Corporation (FCSIC), the arm of the FCS which insures the timely payment of principal and interest on debt issued by the Federal Farm Credit Banks Funding Corporation (the FCS’s link to the capital markets), will “return” to the four FCS banks $162.7 million of “excess funds.” This return of these funds essentially is a rebate of premiums previously paid by the banks to the FCSIC. Each bank, in turn, almost certainly will rebate Tax bill drives the FCS’s effective tax rate even lower a substantial portion of the excess funds it receives to the FCS associations it funds, reflecting the fact that each bank One effect of last year’s tax bill was to drive the FCS’s effec- allocates to those associations a portion of the premiums tive tax rate in 2017 to a new low — to just 0.73 percent, the bank pays to the FCSIC. This rebate has occurred becompared to 3.48 percent for 2016 and 4.03 percent for cause the fund balance in the FCSIC currently exceeds the

PAGE 26 | KENTUCKY BANKER

MAR/APR 2018

SINCE 1891

BERT ELY FARM CREDIT WATCH CONTINUED FROM PREVIOUS PAGE

amount of assets the FCSIC must hold to meet a minimum its funding bank.” That bank has dealt with Lone Star’s acbalance requirement, called the “secure base amount,” counting problems by issuing a “waiver of default” so that equal to 2 percent of the outstanding debt issued by the Lone Star can continue borrowing from the bank.

Funding Corporation.

What is especially troubling about the Lone Star accountThe timing of this rebate is questionable given the likeli- ing mess is that the FCA apparently has not issued any enhood of growing credit-quality problems within the FCS forcement order, or written agreement, as the FCA calls due to declining net farm income and the unwise practice such orders, against Lone Star. The absence of any FCA of some associations to encourage their borrowers to de- written agreement against Lone Star can be deduced from fer loan principal repayments, a practice I questioned in the fact that in the discussion of FCS regulatory matters in last month’s FCW. As the FCSIC news release announcing the 2017 Annual Information Statement of the Farm Credit this rebate noted, “the FCSIC board has the authority to System, published by the Funding Corporation, there is no hold the excess funds if conditions warrant doing so.” discussion of written agreements the FCA has entered into with FCS institutions. Prior years’ Information Statements Current conditions certainly do warrant holding back those have indicated how many written agreements were outexcess funds. It would have been far more appropriate, standing and the total assets of the institutions subject to though, for the FCSIC to send those funds to the U.S. Trea- written agreements. sury as compensation for the $10 billion taxpayer-backed line-of-credit the Treasury began providing to the FCSIC in The apparent absence of an enforcement order against Sept. 2013.

Lone Star evidences a serious problem at the FCA — its continued unwillingness to publish its enforcement orders, In the Dec. 2017 FCW, I discussed the most recent exten- something the banking regulators routinely do. Any bank sion of this line-of-credit, to Sept. 2018. To date, the FC- with accounting problems of the magnitude of Lone Star’s SIC has paid absolutely zero to the Treasury for this line would have long ago been subject to a tough enforcement of credit. Sending this FCSIC payment to the Treasury also order issued by its primary federal regulator, and that orwould compensate taxpayers for the insufficient amount der would have been published for all to read. of income tax paid by the FCS, as discussed above.

What FCS associations are you competing against?

Lone Star Ag Credit not subject to an FCA enforcement I often find that bankers do not know which FCS associaAs prior issues of the FCW have reported, Loan Star Ag tion or associations they are competing against or where Credit, which is headquartered in Fort Worth, Texas, has local FCS offices are located. The Farm Credit Council, the not issued any financial reports since the first quarter of FCS trade association, has helpfully made that information 2017. On Aug. 9, 2017, Lone Star issued a letter stating available, on farmcredit.com/locations. Simply select a that its financial statements for 2016 and the first quarter state and office type (branch or headquarters) and then of 2017 “should no longer be relied upon” due to it having click on Apply to find those office locations. You also can discovered “appraisal and accounting irregularities affect- search by ZIP code, county, or city. Learn more about your ing a segment of [Lone Star’s] lending portfolio.” local FCS competition — who they are and where they are located — by using this easy-to-use search tool.

Additionally, the Farm Credit Administration (FCA) withdrew from its database all Lone Star call reports filed with the FCA after 2015. In effect, Lone Star’s finances have been a black hole for over two years. Worse, Lone Star “is not in compliance with some requirements of its general financing agreement with the Farm Credit Bank of Texas, MAR/APR 2018

PAGE 27 | KENTUCKY BANKER

SINCE 1891

Do Home Mortgage Disclosure Act Data Prove Lending Discrimination?

by Julie Stackhouse, Executive Vice President Federal Reserve Bank of St. Louis

quirements for most mortgage lenders. Loans covered include home purchase loans, home improvement loans and mortgage refinancings. HMDA reports contain informaThis article is part of a series titled “Supervising Our Na- tion about the location and demographics of applicants, tion’s Financial Institutions.” The series, written by Julie as well as some terms of the loans.2Beginning in 2018, Stackhouse, executive vice president and officer-in-charge lenders are required to provide much more detailed data of supervision at the St. Louis Federal Reserve, appears at about loan applicants and loan terms. For an overview of least once each month. the HMDA and these new requirements, see the Sept. 25, 2017, Lexology article, “Major Changes Looming for HMDA In my January 2018 blog post, I addressed the challeng- Reporting.” es and opportunities of the Community Reinvestment Act (CRA). As part of that post, I referenced several laws that HMDA data are used by examiners, community groups and complement the CRA in promoting “fair lending,” includ- consumer advocates to identify potential fair lending risks. ing the 1974 Equal Credit Opportunity Act (ECOA) and the Sometimes, HMDA data are cited in the press as evidence 1968 Fair Housing Act (FHA). of discrimination when, for example, very high interest rates are more common on mortgages to persons of color CRA Complements than those on mortgages to others.

The ECOA and FHA were passed in response to troublesome lending and housing practices in the early 20th century. For additional information, see U.S. Department of Justice, Equal Credit Opportunity Act; U.S. Department of Justice, Fair Housing Act; and Federal Financial Institutions Examination Council, Interagency Fair Lending Examination Procedures. For example, prior to the ECOA, it was acceptable for lenders to deny loans to women and instead ask them to have their husbands apply.

HMDA Data Just a Starting Point

And prior to the FHA, lenders could explicitly consider race, religion and national origin when making decisions in the underwriting of home loans. The ECOA and FHA made it illegal to discriminate in lending on a “prohibited basis.”

Importantly, though, these laws did not bar lenders from denying loans based on credit risk or capacity to repay.

If statistically meaningful disparities exist after these data are considered, the examiner will then complete a detailed and exhaustive investigation. The investigation includes lender interviews, physical loan file reviews and data verification and validation. It is rare for examiners to find discrimination after this exhaustive analysis. More typically, examiners identify opportunities for the bank to strengthen its policies and procedures, risk monitoring, training or internal controls to ensure that discrimination does not occur.

A New Tool

While HMDA data provide a useful start in assessing lending practices, the data alone do not prove discrimination.

If HMDA data trigger concern, bank examiners conduct a comprehensive review, including an in-depth statistical analysis. The statistical analysis looks for legitimate credit underwriting factors, such as minimum credit scores and maximum debt-to-income ratios.

To aid in the implementation of the ECOA and FHA and to promote public transparency, Congress passed the Home Mortgage Disclosure Act (HMDA) in 1975. The HMDA and After all, the goal of fair lending supervision should be to its subsequent amendments detail public reporting re- prevent discrimination before it happens.

PAGE 28 | KENTUCKY BANKER

MAR/APR 2018

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SINCE 1891

Supporting Underbanked Populations Fintech Partnerships Helping to Increase Access

by Trevor Dryer, Mirador There are millions of Americans that do not have a bank account and/or have little to no participation in the formal financial system. According to a survey conducted by the FDIC, “approximately 15.6 million adults were ‘unbanked’ in 2015.” An additional 51.1 million adults were considered to be “underbanked,” meaning they had some type of bank account, but also relied on “alternative financial services” (AFS), like money orders, payday loans, pawn shop loans, etc.

with gaining access to the formal financial system. That also means it’s more difficult for them to purchase a home or start a business.

There are also non-financial barriers to formal banking, like those who live in remote areas or groups like the Amish.

While digital banking is closing the gap on geographic and cultural challenges, in most cases you still need to be physically present to open a checking or savings account, or apply for a loan. Traditional “banking hours” (9:00 a.m. to 5:00 p.m.) create an obstacle for those who work during the day, often on an hourly basis, and cannot afford to take There are a variety of reasons an individual might not have time off to visit the bank. a bank account or use the services of a regulated financial institution. While, “not having enough money to maintain Creating a more inclusive banking system an account” prevents the majority of these individuals from participation, there are other barriers to entry. With- Improving access to mainstream financial services for out a bank account or formal record of financial reliabil- these alternative populations benefits society as a whole. ity, these “alternative populations” don’t have access to It can help lift many out of poverty and reduce the societal a variety of other critical financial services such as credit, costs of supporting them. Better access also means more mortgage loans and small business loans. money being invested in the financial system as a whole, helping the economy grow.

Barriers to the financial system Giving these individuals a safe and inexpensive place to Not having enough money to maintain an account is a build up savings and credit will ultimately lead to a higher problem most of the unbanked and underbanked struggle rate of home ownership and more small businesses. This with. Poor Americans often get stuck in a cycle of pover- can be achieved by creating a modern banking system that ty since their only resort for financial services are usually is more efficient, convenient and incorporates non-tradihigh interested AFS, never giving them a chance to build tional data into the underwriting process. savings and get ahead.

The cost to maintain the outdated and slow legacy systems According to the U.S. Census Bureau, Black and Hispanic much of the current banking infrastructure is built upon is families have the highest rates of poverty in the US, and extremely expensive. While more efficient options do exfamilies headed by a single mother are by far the poorest ist in the AFS space, they also charge egregious interest type. rates. If regulated financial institutions were to re-build their expensive and cumbersome processes using modern People with disabilities, including many veterans, are also technology, they could offer services to alternative poputwice as likely to live in poverty compared to an adult with- lations – and all populations for that matter – at a much out a disability. These groups struggle disproportionately lower cost.

ARTICLE CONTINUED ON THE NEXT PAGE

PAGE 32 | KENTUCKY BANKER

MAR/APR 2018

ARTICLE CONTINUED FROM PREVIOUS

Fintech Partnerships Helping to Increase Access

Not only is digital banking less expensive – it’s more convenient. While branch locations still serve an important purpose in the community, they are expensive to maintain.

By reducing the number of physical locations and increasing the services available online, banks can broaden their reach to those in remote locations and those who can’t easily visit a branch.

Another way to support these alternative populations who often don’t have a formal credit history is to incorporate non-traditional data, like rental payments or utility bills, into the underwriting process. For small business loans this could also mean customer reviews and other indicators of business performance.

company an enhancement of this nature. While it’s true that upgrading these legacy systems internally would be a costly and risky venture, many regulated financial institutions have found a faster and less costly way to get ahead – partnerships.

Fintech companies, like Mirador, partner with banks to quickly create a modern banking relationship that is more inclusive. Mirador’s technology allows banks to originate loans at a lower cost, reducing the time and effort required by borrower and lender, and they incorporate non-traditional industry insights into the underwriting process.

By removing the barriers to the formal financial system and encouraging alternative populations to build up their Fintech partnerships helping to increase access wealth, all of society benefits. A modern banking relationship is one that celebrates diversity and creates an incluWhile few would argue that banks could offer services at sive environment where all people have a chance to para lower cost and improve their digital presence with mod- ticipate. ern technology, many cite the large cost that would ac-

UNITED IN SERVICE

Is the TRID Improvement Act Truly an Improvement?

by Victoria E. Stephen, Compliance Alliance While we were eagerly awaiting a final rule from the CFPB on the so-called “black hole” tolerance issue, a new bill was swiftly passed by the House of Representatives last month: the TRID (TILA-RESPA Integrated Disclosure) Improvement Act of 2017.

The CFPB didn’t much care for this approach, though, and designed a specific formula for banks to use for disclosing title policies under the TRID rule. The rule as it stands today reads as follows:

The premium for an owner’s title insurance policy for which a special rate may be available based on the simultaneous On October 5, 2017, Congressman French Hill introduced issuance of a lender’s and an owner’s policy is calculated H.R. 3978, which eventually had four other bills tacked and disclosed pursuant to § 1026.37(g)(4) as follows: onto it, making it a five-in-one set of changes for the financial services industry.

The title insurance premium for a lender’s title policy is based on the full premium rate, consistent with § One of these bills, the TRID Improvement Act, specifical- 1026.37(f)(2) or (f)(3). ly amends and clarifies how title insurance premiums and discounts are disclosed on the Loan Estimate and Closing The owner’s title insurance premium is calculated by takDisclosure. On February 14th, the House of Representative ing the full owner’s title insurance premium, adding the passed the bipartisan bill by a healthy 271 to 145 vote. simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverNow you may be asking yourself, “What exactly is the prob- age. lem with how title insurance is disclosed?” Well, to put it simply, it isn’t disclosed the way it is actually charged, and 12 CFR 1026.37(g)(4)-2 some argue that this is counter to the general spirit and intent of the TRID rule.

In simpler terms, the lender’s title policy must be disclosed as the full undiscounted amount, while the owner’s title As Congressman Hill pointedly put it, “This legislation seeks policy is disclosed as the cost of both the owner’s and to correct this error by ensuring that consumers know the lender’s title policies together, minus the cost of the full exact cost of their title insurance – not the number report- lender’s title policy. For those math types out there, this is ed as one price on a lending estimate and another price on what it looks like as a formula: a closing document.”

Lender’s Title = Cost of Lender’s Title without purchasing In many states, when a borrower purchases a lender’s ti- Owner’s Title tle insurance policy (as is often required by the bank), the borrower will receive a discount on the lender’s title policy Owner’s Title = (Owner’s Title + discounted Lender’s Title) if an owner’s title policy is also purchased.

– Cost of Lender’s Title without purchasing Owner’s Title This markdown is often called a “simultaneous issue discount,” and although it effectively reduces the rate of the owner’s title policy, the discount is technically applied to the lender’s title policy.

PAGE 34 | KENTUCKY BANKER

For example, if the lender’s title policy on its own is $900, and a $1,000 owner’s title policy is also purchased, the lender’s title policy is discounted to $100 and the owner’s title policy remains at its full $1,000. Under the current MAR/APR 2018

SINCE 1891

TRID rule, disclosing lender’s title as $100 and owner’s title as $1,000 as it is actually charged would be incorrect.

The correct way to disclose these facts is: Lender’s title policy = $900 Owner’s title policy= $200 [$1000 (Owner’s) + $100 (Discounted Lender’s) - $900 (Lender’s) = $200] SPRING SMITH-YOCUM Citizens Union Bank promoted Spring Smith-Yocum to Assistant Vice President Customer Care Center Manager.

For a rule that was created to support transparency and accuracy in the home closing process, many understandably question whether this convoluted formula may be doing just the opposite.

The TRID Improvement Act seeks to change this rule, and require disclosure based on the actual amounts imposed.

TANISHA HOUSE Citizens Union Bank promoted Tanisha House to Assistant Vice President and Branch Manager.

Specifically, the requirement to “itemize all charges” will be replaced with one to “itemize all actual charges,” and the following sentence will be added: “Charges for any title insurance premium disclosed on such forms shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by State regulation or the title company rate filings.”

To apply these proposed changes to our example above, the bank would disclose the lender’s title policy as $100 and the owner’s title policy as $1,000, exactly as they are charged by the title insurance company.

So where do we go from here? As of publishing, the bill is still awaiting passage by the Senate before it moves on to the President, so there are several steps left before these changes potentially become final.

The effective date currently set out in the bill is 18 months after enactment of the Act, so banks will have plenty of time for implementation if and when it is enacted.

TANYA SEABROOKS Citizens Union Bank recently hired Tanya Seabrooks as their Mortgage Loan Originator at the bank’s Elizabethtown Branch.

As for other TRID changes, the proposed rule that seeks to clarify the infamous “black hole” problem is still pending, with no word yet on when it might be made final. Mandatory compliance for the other 2017 TRID amendments is fast approaching though.

Generally, compliance with the 2017 amendments is mandatory for transactions for which the bank receives an application on or after October 1, 2018. As a reminder, banks are allowed but not required to implement the amendments early, and don’t necessarily have to implement them all at once.

TONY BUSHONG Tony Bushong has joined the team of The Paducah Bank and Trust Company as Information Security Manager. He is a graduate of Murray State.

MAR/APR 2018

For a rule that was originally designed to help consumers better understand the home closing process, many would say that we have a long way to go, but the TRID Improvement Act seems to be a step in the right direction.

For any questions or concerns give us a call at (888) 353-3933 or email at: hotline@compliancealliance.com PAGE 35 | KENTUCKY BANKER