Texas Banking February 2016 by The Warren Group

THE CFPB: FIVE YEARS AND $2.7 BILLION LATER

Contents 8 12 26

V O LU M E 1 0 5 • N O. 2 • F E B R UA R Y 2 0 1 6

Features

Columns

Focus on the future

Message from the President A disappointing end to 2015

Attracting and developing the next generation of bankers

12 Four critical elements to profitability Set your bank apart from competitors and provide the

6 28

foundation for innovation

Chairman’s Forum A scoreboard is only a reflection of the past

Banker to Banker Nathan Robinett honored as Tarrant County Banker of the Year

16 132nd Annual Convention overview Cybersecurity, technology, the economy, political landscape

Your Advocate The CFPB: Five years and $2.7 billion later

and more

26 Community Banker Spotlight Eagle Pass banker appointed to Finance Commission of Texas

Compliance Hotline A matter of perspectives

John L. Snider Immediate Past Chair

Departments

W. David Lacy Community Bankers Council Chair

18 News & Trends

William C. Helms Regional Bankers Council Chair

24 Partner Focus

Robert L. Upchurch, III Government Relations Council Chair Kenneth L. Burgess Jr. Chairman

EDITORIAL OFFICES: 203 West 10th Street, Austin, Texas 78701-2388 512-472-8388 fax 512-473-2560 www.texasbankers.com

Jim R. Purcell Vice Chair

James D. Dreibelbis Treasurer

Olivia Carmichael Solis Editor Katherine Kolstedt Art Director Jocelyn Carby Associate Editor Jamie Tanner Assistant Editor

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31 Bank People

J. Eric T. Sandberg Jr. TBA President/CEO

ADVERTISING OFFICES: The Warren Group 280 Summer St., 8th Floor Boston, MA 02210-1131 800-356-8805 www.thewarrengroup.com Dave Janoff Sales Manager djanoff@thewarrengroup.com

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TEXAS BANKING • FEBRUARY 2016

TEXAS BANKERS ASSOCIATION

BOARD OF DIRECTORS R. MARK BAIN, First United Bank, Lubbock

ERICSANDBERG

DEAN O. BASS, Spirit of Texas Bank, SSB, College Station

TBA PRESIDENT & CEO

GEORGE G. BRUNS, USAA Federal Savings Bank, San Antonio

MESSAGE FROM THE PRESIDENT

KENNETH L. BURGESS, JR., FirstCapital Bank of Texas, N.A., Midland DANNY B. BUTLER, Jefferson Bank, San Antonio

A disappointing end to 2015

When I wrote my January column, there was optimism the industry would be successful in including some of our much-needed regulatory changes in the Omnibus budget legislation that needed to pass in 2015. To get to the meat of the matter, the banking industry’s issues were traded out of the bill on the final days of the negotiations to help secure the Democrat votes necessary to pass this legislation. This was largely a consequence of certain senators mischaracterizing the efforts of Chairman Shelby and others as Wall Street banks seeking relief under the guise of community banks. House Chairman Hensarling and the rest of the Texas delegation in both the Senate and House are squarely in our political corner, but the same cannot be said for many other states. What does this tell us? The most important thing it should tell everyone is that while there is appreciation on Capitol Hill for the role of all banks of all sizes in all communities, there is not enough grassroots effort being generated by everyone. In order to effect change, there needs to be a “movement.” For instance, in Texas, TBA estimates there are approximately 200,000 bankers, employees and directors. Did the Texas-based industry generate 200,000 letters, emails, conversations or invitations to members of Congress to come to our offices and witness what is required to make a loan or open an account? Experience tells me we did not generate 10 percent of this and I would hazard a guess we were one of the most active states in the political arena. Did we get our message across to the Texas delegation? Again, my guess is that our message was communicated loud and clear. However, I will also opine that something is amiss when we receive feedback, like we did on the Federal Reserve dividends and retained earnings takings, that “Congress thought the banking industry would not fight back.” What is required of us as an industry? The short answer is: a redoubling of our efforts. I know bankers are upset and disappointed. We all are. However, this is not time to become discouraged. We must be more effective as an industry in getting our message across. Use some imagination, deploy some “hardball attitude,” make it a point to educate your employees on the necessity to let their elected officials know their internal frustrations, etc. These are lessons learned. While the lobby can be effective at times, nothing beats constituent involvement. Bankers, staff, directors and customers are important constituents to every congressional office. Please find a way to use this underutilized resource in 2016!

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RONALD D. BUTLER, II, First Financial Bank, N.A., Abilene CINDY CAMPBELL, First National Bank, Southlake TIMOTHY J. COOPER, First State Bank, Spearman R. TERRY CULLEN, CTFA, First National Bank in Port Lavaca MORRIS E. DEFRIEND, The Farmers State Bank, Groesbeck GREG DODDS, Texas Bank, Brownwood WADE C. DONNELL, The National Bank of Texas at Fort Worth JAMES D. DREIBELBIS, Woodforest National Bank, The Woodlands ROBERT R. FRANKLIN, JR., CommunityBank of Texas, N.A., Houston JESSE LEE HAGGARD, III, The First National Bank of Trinity WILLIAM C. HELMS, BBVA Compass Bank, Houston JOHN L. HOLT, JR., NexBank Capital, Inc., Dallas ROBERT W. HOXWORTH, First National Bank Texas, Killeen WILLIAM DAVID LACY, Community Bank & Trust, Waco RANDY MCCURLEY, The First State Bank of Mobeetie PAUL S. MOXLEY, Texas Regional Bank, McAllen JIM R. PURCELL, The State National Bank, Big Spring JOE QUIROGA, Texas National Bank, Edinburg CHARLOTTE M. RASCHE, Prosperity Bank, Sugar Land MARK S. REILEY, Icon Bank of Texas, N.A., Houston J. MARK RIEBE, Texas Bank Financial, Weatherford KATHERINE RODRIGUEZ, CPA, Moody National Bank, Galveston RAYMOND H. RUST, III, Commercial Bank of Texas, N.A., Nacogdoches REAVE J. SCOTT, Coleman County State Bank JOHN L. SNIDER, Shelby Savings Bank, SSB, Center STEVE STAPP, R Bank, Round Rock GARY B. TAYLOR, Texas Bank and Trust Company, Longview ROBERT L. UPCHURCH, III, First State Bank of Bedias GARY P. VAN DEVENTER, Security State Bank, Anahuac DON R. WATERS, Liberty Bank, Hurst CEE YAGER, Worthington National Bank, Fort Worth

Expressed opinions in any signed article of Texas Banking are those of the author and do not necessarily reflect the viewpoint of editors or the Texas Bankers Association on the subject. While this magazine makes reasonable efforts to establish the integrity of advertisers, it does not endorse advertised products or services unless specifically so stated. Texas Banking © 2016, Texas Bankers Association. Articles may not be reproduced or reprinted without the expressed written permission of the Texas Bankers Association. Texas Banking (ISSN 0885-6907) is published monthly by the Texas Bankers Association, 203 W. 10th St., Austin TX 78701-2388. Periodicals Postage Paid at Austin, TX and at additional mailing offices. POSTMASTER: Send address changes to Texas Banking, Texas Bankers Association, 203 W. 10th St., Austin TX 78701-2388. Annual dues of TBA members include $20 for each one-year subscription to Texas Banking. Annual rates for additional subscriptions are $48 for member banks and $96 for non-members.

ABA GR SUMMIT March 14-16, 2016 Washington D.C.

WE NEED YOU IN WASHINGTON The 2016 ABA GR Summit is the opportunity for you and your peers to advocate for the changes hometown banks need to better serve their customers. Our collective voice is critical as we educate policymakers on the important role banks play in economic growth and job creation. • Represent the Texas banking industry at the ABA GR Summit in Washington D.C. • Meet with your legislators and connect with bankers GSPN BDSPTT the nation. • Join TBA for a Texas-specific dinner, reception and briefing. Register Now! www.aba.com/summit Texas specific info: www.texasbankers.com/summit.

KENBURGESS TBA CHAIRMAN CHAIRMAN’S FORUM

A scoreboard is only a reflection of the past

At halftime during the recent national championship game, a television analyst asked one of the coaches about the significance of the score. The answer given was one you would expect from a leader. His comment was, “The score is a reflection of the past. I am only concerned about where we go from here.” These were not his exact words, but they express his message. As we look back over the last few years, we are not pleased with the banking industry’s scoreboard. Key legislation the industry fought for over the last few months of 2015 fell on deaf ears in Washington. Although the industry secured a few minor improvements to policy, the most significant items fought for did not make it into the final legislation. Not only that, but the “Highway Bill” was another shot over the bow toward the industry. Like a coach, we can’t relegate ourselves to scoreboard watching. We must go back to the drawing board and increase our focus, our commitment and our planning to assure the future of our industry is headed in a positive direction. Football coaches often talk about going back to the basics of blocking and tackling. In the case of improving public policy relative to our industry, blocking and tackling means going back to the basics of industry engagement in the public policy process. We have about 2 million people working for the industry nationally. That is a number that can wield enor-

mous political clout. The question is, “How do we mobilize and energize this group?” Most of the time, success in political endeavors comes from effective grassroots action. When we begin to mobilize our industry members at the grassroots level, we will begin to see the progress we hope for.

We must go back to the drawing board and increase our focus, our commitment and our planning to assure the future of our industry is headed in a positive direction. What might this look like? 1. Bank leaders begin to communicate with their teams about regulatory and legislative developments occurring on the state and national levels that affect their jobs and careers. 2. All staff members are encouraged to engage in letter writing and calling efforts on Congress and our regulators when those opportunities arise. 3. All staff members are given the opportunity to participate in PAC campaigns for either their state

TEXAS BANKING • FEBRUARY 2016

PAC or the national PAC or both. 4. Banks develop effective communications programs with their customers, informing them about the effects new policy may have on their banking services. 5. Bankers follow up with lawmakers after important legislation is passed, expressing thanks or concerns about actions taken. Lawmakers must know we are paying attention. During most of our careers, we have been focused on the challenges that lie directly in front of us in our banks and in the communities our banks serve. However, in recent years, the impact of legislative and regulatory challenges to our industry dictate that we must become active in public policy development toward our industry. Our state and national banking associations can only do so much. A strong grassroots effort from the members of our industry is critical. We can stand up as an industry and secure a strong voice in the development of policy that affects our communities and our customers or we can stand back and let others develop that policy. If we choose the latter, we will keep seeing the results of the last few years. Now is the time to change the score! In March, the Texas Bankers Association will be traveling with a group of Texas bankers to Washington, D.C., to let our voices be heard. We will be joined by bankers from all over the country. I invite you to be one of us!

Focus on the future

Attracting and developing the next generation of bankers By John Brigance

“The best time to plant a tree was 20 years ago. The second best time is now.” David Lacy, president and CEO of Community Bank & Trust in Waco, cites the Chinese proverb when discussing the need for developing future bankers. 8

TEXAS BANKING • FEBRUARY 2016

An increasing number of bankers are joining Lacy in recognizing the need to develop more “bench strength” within Texas banks. It has been reported that 50 percent of current bank officers will retire within the next 10 years. Some estimates are higher. Lacy poses a few related questions: “Are we attracting enough young bankers today with the right skill sets for the next generation of banks? Are we teaching them traditional banking? Will there be enough talent with the right skill sets to fill positions banks need to succeed 10 years from now? And what will our officer lineups look like then?” Unfortunately, finding, developing and retaining future bankers has become more challenging for banks of all sizes. On one hand, massive regulatory burden has inhibited strategic thinking about longerterm succession within banks and created a more complex work environment for younger bankers. At the same time, misleading perceptions about traditional banks manifested during the financial crisis have steered some young adults away from careers in banking. This one-two punch has bankers considering the future workforce and the need to attract and develop young talent. Due to Lacy’s passion on this subject, Texas Bankers Association Chairman Ken Burgess, chairman of the board of FirstCapital Bank in Midland, tapped the Waco banker to lead a banker task force to begin focusing on attracting and developing future bankers.

Banks engaged in outreach

To establish a manageable scope for their initiative, the task force identified three core areas in which banks and the association can focus: 1. raising awareness of the industry and related careers among students and young adults; 2. offering opportunities for students and young adults to experience banking as an intern or part-time employee; and, 3. once employees have entered the bank workforce, providing ongoing training and mentoring to develop and retain them.

RAISING AWARENESS According to a survey conducted by the task force, 35 percent of Texas banks engage in some form of periodic outreach to local high schools, community colleges, colleges or universities regarding the banking industry and or careers in banking. The majority do not. That represents significant opportunity to “tell the story” of banking and the wide array of career options available within the industry today. In addition to traditional roles from tellers and lenders to relationship officers and accountants, there are growing needs for more non-traditional skill sets related to marketing, communication, social media and computer networking. Most young adults do not consider the types of technological advancements that are rapidly changing customer experiences today are also taking place within most banks. Nor do they connect those advancements to the broad range of career opportunities in

35%

Banks not engaged in outreach

65%

35 percent of Texas banks engage in outreach regarding the banking industry and/or careers in banking.

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TEXAS BANKING • FEBRUARY 2016

banks until it is shown or explained to them. So, what can Texas bankers do to generate more interest in and understanding of banking careers? Lacy and the task force encourage any banks not already doing so to consider prioritizing outreach and presentations at local high schools, community colleges, colleges or universities. Most of these institutions welcome periodic presentations from industry professionals. In addition, most offer some form of career fair, providing local banks a great opportunity to garner exposure and tell the industry story. While competitive compensation and benefits are attractive, young adults also are seeking work environments that embrace technology, collaboration and, in many cases, a sense of contribution to broader economic and societal issues. As dream-builders and civic leaders within communities across the state, most Texas banks are well positioned to paint a compelling picture of societal contribution supported by talented teams and the latest technologies. More young adults just need to see the picture.

ties and, for a small fee, can be branded with the bank’s logo for more tailored communication. Bankers can contact TBA for more information on the brochures.

OFFERING EXPERIENCE

In addition to bank efforts, TBA has enhanced communications promoting careers in banking. This includes exposure to students at universities and graduate banking schools where TBA has been a longtime supporter. Moreover, TBA has created a “Careers” page on its website and has begun adding relevant tools and resources. One such tool is a new “Careers in Banking” brochure that outlines many of the attractive opportunities and benefits of careers in banking. The brochure is available for use by member banks within their communi-

“Most [educational] institutions welcome periodic presentations from industry professionals.”

TEXAS BANKING • FEBRUARY 2016

Another great tool to expose young adults to the banking profession is hiring interns or part-time students. Forty-three percent of banks surveyed report hiring interns or part-time students, suggesting the majority may not. This presents another opportunity for Texas banks to identify and groom future bankers. Interns or part-time hires able to gain exposure to the culture and range of career options within banks are much more likely to seek permanent employment within the industry. To increase the number of young adults experiencing industry opportunities, the task force encourages any banks not already doing so to hire an intern or part-time student this year. Banks already employing young adults in this capacity may also want to consider identifying and suggesting relevant courses at TBA or a local community college to assist the young adults with bank work. Lacy’s bank takes this concept a step further, providing an incentive to interns by reimbursing them for approved courses at the local community college once the intern provides evidence of course completion with a certain grade. “Not only does the arrangement provide valuable knowledge to the individual,” notes Lacy, “but it also establishes a tremendous amount of good will and loyalty toward the bank.” For its part, TBA will be soliciting and recognizing examples of other bank internship and part-time hiring efforts like Lacy’s. By sharing examples from banks of all sizes, more banks can tailor and employ successful practices and build upon a more coordinated industry effort.

30 Percent Under 30! Benefit from an additional incentive to take advantage of valuable education and training for younger

TRAINING TALENT Once young adults have accepted entry level positions within a bank, it is important to develop their skills and abilities. This adds value to the individual as well as the bank. Sixtyseven percent of banks in the survey indicate they provide or obtain training for their bank employees under 30 years of age. A solid majority is good, but task force members agree that percentage could and should be higher. There are a number of resources available to fulfill or supplement a bank’s training for young bankers, foremost among them being TBA. TBA offers an extensive menu of education and training options for younger bankers. Whether training is obtained through the bank, TBA or other resources like local chambers of commerce, community colleges or graduate banking schools such as those supported by TBA at several universities, the task force believes it is a reasonable goal to train all young bankers and equip them for longer term success within the industry. TBA will continue delivering topnotch training for bankers at all levels and, specifically as it pertains to younger bankers, has begun creating more opportunities not only in terms of content but in terms of cost. For 2016, TBA is offering member bankers under 30 years of age additional discounts above and beyond already discounted member rates for registration to many live events. Watch for more information as events are advertised. The task force hopes this will encourage bank leaders to support additional training and will facilitate an influx of younger bankers in professional development. In addition to training, ongoing mentoring of young bankers is critical. It does not require expense but does require time. The task force has recommended each bank consider designating mentors for younger

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bankers. TBA is offering member bankers under 30 years old an additional 30 percent registration discount above and beyond already steep member discounts on most live events throughout 2016. The discounts are not applicable to online offerings or to specific live events, so please review event information and registration to determine which events offer this special incentive.

bankers and regularly evaluate each individual’s development. The mentoring format could be as simple as meeting over coffee once a month to discuss career paths, share ideas and offer guidance. A more robust mentor effort could entail overseeing young bankers’ participation in collaborative bank projects or inviting them to participate in periodic internal or external bank meetings or industry events.

INCREASING FOCUS Whether progress is made through raising awareness among students

and young adults, offering experience through internships or part-time hires, or training and mentoring young employees once they join the bank, there is significant opportunity for the industry to attract and retain young talent. It will require increased focus for interested banks and for TBA. TBA’s leadership recognizes developing and sustaining the industry’s future workforce is a long-term commitment; it will not happen overnight. Accordingly, this subject will be present among the association’s strategic priorities in the coming years. And it will take a team effort. TBA will continue to develop tools and resources for banks and to offer timely, relevant training for younger bankers. In addition, the association will seek opportunities to recognize banks that are active in this regard. As TBA heightens its efforts, the task force encourages banks to do the same by focusing on long-term succession and considering additional steps they can be taking as well. “Some bankers may say they just need to find the right time to get started,” says Lacy. “I suggest that time is now. TBA is here to help. Let’s plant some trees.”

“TBA will continue to develop tools and resources for banks and to offer timely, relevant training for younger bankers.”

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Four critical elements

Set your bank apart from competitors and By Scott McClymonds

omeone recently asked me what “magic bullet” I had that would make his financial institution more successful. I told him my magic bullet was “hard work.” Despite not having a magic bullet for you, I do intend to share four powerful weapons that will increase your bank’s success dramatically if you use them strategically. It is rare that I see these weapons used to their fullest strategic potential, yet the banks whose leaders make them a priority prosper far beyond the norm. These weapons are not earth shattering. You will not be surprised or amazed when I mention them. In fact, you might feel like one of former NFL coach Vince Lombardi’s players when he would tell them, “Gentlemen, this is a football.” Nevertheless, knowing a football exists is different from skillfully using it to throw touchdown passes. Similarly, knowing about the weapons I will discuss is not the same as using them to gain a sustainable competitive advan-

TEXAS BANKING • FEBRUARY 2016

tage, which is what I want to help you achieve. As a final disclaimer I want to emphasize that using these weapons proficiently to gain a competitive advantage is as dependent on leadership as everything else in your bank. That means using the four weapons successfully will require your strong leadership to score touchdowns consistently.

THE FOUR CRITICAL ELEMENTS Given the opportunities most banks have to improve their marketing, focusing on the four pillars of marketing can set your bank apart from competitors and provide the foundation for innovation in areas such as product development, distribution and customer service. These four strategic pillars cut across the physical and digital presence of your bank and apply to all of your different business units, from retail to private banking, small business, commercial and all the rest.

to profitability

provide the foundation for innovation

These four critical and interconnected pillars of strategic marketing are: 1. Brand promise 2. Marketing analytics and automation 3. Referrals 4. Leadership

BRAND PROMISE The importance of your brand promise cannot be overstated. It is a statement that lets everyone in your bank know what you stand for, why youâ&#x20AC;&#x2122;re in business and what your customers can expect from you. It becomes a strategic force when everyone on your team embraces it. The key is stating your values and principles in a memorable, understandable way. Below are some tips to get you started thinking about your brand promise. They are not exhaustive but will certainly get you on the right path.

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1. What makes you unique and special? a. Your values b. Why you are in business c. How and why you want to serve your customers 2. How you will improve the lives of your customers? a. Faster and/or superior service b. Easier access c. Better quality d. Superior reliability e. More secure future 3. How do you want your customers to feel when they do business with you? a. Like you understand them and have products that meet their needs b. Like you care about them and they are important to you c. Like you have anticipated their needs and are delighted to serve them

TEXAS BANKING â&#x20AC;˘ FEBRUARY 2016

Use questions like these to focus your thoughts until you come up with what you want to deliver, how you want to deliver it and who you want to deliver it to. Then build your bank around it. It will take time, but the effort is worth it to build a stronger, more differentiated brand.

MARKETING ANALYTICS AND AUTOMATION Combined with a strong brand promise, analytics and automation can have an enormous impact on your bottom line. Turning analytics into a strategic function has allowed me to generate tens of millions of dollars for banks and create a competitive advantage for them in the process. The analytics gold mine is both tactical and strategic. Here’s a relatively simple example of its strategic use: About 10 percent of bank customers account for 90 percent of profitability. While these may not be the precise numbers for your bank, a minority of your customers create the majority of your profitability. Who are these customers and what should you know about them? Here are some basics you should know about our most profitable customers: • What makes them profitable? • How solid are their relationships? • What are their ages, income ranges, locations, educational backgrounds? • What products do they have and how do they use them? • Why did they choose our bank? • What markets do their businesses serve and what products do they sell? • How many are baby boomers who will soon be retiring? • How many are millennials starting families and buying their first homes? • How many are business owners looking to grow from $1 million to $10 million in revenue? • How many are looking to switch banks? Knowing how to make this information actionable is

critical and that’s why it takes a strategic thinker rather than a technical expert to deliver the goods for your bank. To start, look at the information from a big picture level and summarize your findings about your most profitable customers. Then you want to do at least three things: 1. Retain your best customers, gain referrals from them and help them benefit from more of your services; 2. Determine which remaining customers have the potential to become like your top ones and focus your marketing resources on them; 3. Evaluate whether or not to realign your bank and products around the profile of your best customers. You can see both the strategic and tactical implications of your questions and analysis. The key is knowing the right questions to ask about the primary drivers of your business, brand promise and overall strategy.

Systems and automation Good partners and systems can take the mystery out of your data and use it to transform your profitability. At $16 billion Arvest Bank we wanted to develop a low cost marketing strategy that would use our branch personnel more efficiently. With a strategic technology partner we implemented an advanced set of marketing analytics and automation tools that let us automatically send qualified leads daily to every branch in our four states. As a result, each year we were able to speak with more than 300,000 customers, open more than 30,000 new accounts and generate an incremental $5 million in profits. Similar results are available to small- and mediumsized banks at affordable pricing. Executives who might be concerned by either the cost or complexity of strategic marketing analytics and automation can now have the same tools as the big banks at cost-effective pricing.

REFERRAL STRATEGY Everyone wants customer referrals but most believe they come randomly instead of through a systematic approach. Our existing loyal customers will readily, effectively and inexpensively do our marketing if we let them, and a referral system lets that occur.

A small business case study:

Good partners and systems can take the mystery out of your data and use it to transform your profitability. 14

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When my wife and I owned a small business we tried various marketing tactics, including radio, magazines, direct mail and newsletters. Most were expensive and none generated the results we needed. Eventually, we developed a referral strategy where our customers would regularly provide warm qualified leads. Here’s what we did: 1. Surveyed our customer population to determine satisfaction levels and willingness to make referrals; 2. Met monthly with each customer to determine additional needs and ask for three referrals; 3. Built a daily routine for our director to meet with one predetermined customer.

This system yielded many new customers and, along with our website and digital newsletter, became our primary source of marketing. It is cheap, effective and very easy to duplicate at your bank.

Referral automation system While the system was fairly simple, it still required tracking tools. Implementing a similar system at your bank requires an automated system that reminds employees who to contact and when. This was a key factor in the success at Arvest Bank. To create a simple system like this, begin with your most profitable customers. Make it worthwhile for them to bring their friends, family members and centers of influence to your bank. Use social media, local sports events, theaters, dinner gatherings and mastermind groups to create high value communities where they can grow their networks and expand their horizons. Analyzing your results will determine which customers provided the most referrals and which produced the least. Next, you can test tactics like limiting your referral strategy to customer types that refer the most to you and reducing or eliminating the referral attempts you make with customer types who generate the least referrals. While this takes discipline and focus, implementing a systematic referral strategy along with analytics and automation and a strong brand promise will transform your bank.

LEADERSHIP Of the four strategic marketing pillars, leadership is the most underestimated component of financial services marketing. You won’t hear about it in business schools, and even the best banks hire for technical skill and functional knowledge rather than leadership capabilities. Most of the time, leadership is the missing link that hampers breakout marketing success. Even the best systems, strategies and talent will never overcome a leader’s inability to lead the marketing function or recognize the critical nature it plays in their bank’s success. No one expects you to understand all the technical details of the systems or the quantitative techniques used to analyze and interpret the data. You don’t need to be a marketing expert. However, you must embrace what Peter Drucker said about marketing being one of the two main functions of a business. If you don’t emphasize these concepts, your bank will be average at best and out of business at worst. Your bank needs you to be a champion for its strategic marketing cause. To be a success you must play a strong leadership role in each of the following: 1. Acquiring a top-level understanding of what the four pillars can do for you; 2. Development, implementation and continuous communication of your brand promise; 3. Formation of strategy as a result of the stories told by analytics;

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Leadership is the most underestimated component of financial services marketing.

4. Creation of a referral strategy; 5. Hiring internal or external strategic marketing experts; 6. Rallying your team around new insights, processes and procedures. As leaders, we are all extraordinarily busy. You know how quickly your calendar fills up. However, leaders like you and me ignore the strategic side of marketing to our great detriment. The people actually doing the marketing need our strong direction and support, and our careful attention enables them and our banks to thrive. The importance of these four pillars is simple to understand, but they can be hard to implement. They are interdependent in that: • Successful execution of marketing analytics and automation depends on a strong brand promise; • A strong referral system is dependent on analytics and automation; • Implementing the brand promise is dependent on sound analytics, automation and referrals; • The entire system is dependent on strong, openminded leadership. As a leader, you don’t have to have all the skills, expertise or technical know-how of a professional marketer. However, you do need to commit to active participation in the process, get the help of big picture strategic experts who can make this entire process part of your bank’s DNA and engage your team in the changes you are making. So, what’s your next step? Are you ready to step up to the challenge and provide the vital strategic marketing leadership that will dramatically boost your profitability, improve employee performance and powerfully differentiate your brand? I guarantee that if you bring the four strategic marketing pillars to life in your bank, you will see your profitability and market share soar. Scott McClymonds is CEO of Velocity consulting.

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132nd Annual Convention offers wide range of speakers, topics Bankers from all over Texas will come together May 4-6 at

Leading the slate of speakers is keynoter Mike Rogers,

the Gaylord Texan Resort and Convention Center in

CNN commentator, who has served as a Congressman,

Grapevine for three days of education, networking and

member of the U.S. Army and FBI special agent. Rogers is

entertainment. This year’s theme, “Inspire, Innovate,

a CNN national security contributor and also appears in

Engage,” is reflected in the nationally renowned speakers,

major news outlets. This year, he will host “Declassified,” an

who will address such important topics as national security,

eight-part series on CNN that will delve into true stories of

innovations in technology, leadership, the current political

America’s covert operations around the world. Rogers will

environment, the economy, cybersecurity and much more.

offer expert commentary on our national security.

JOINING ROGERS AS GENERAL SESSION SPEAKERS ARE: AmyK: AmyK is a catalyst for producing sustainable solutions to a leader’s most pressing challenges. As a former executive of a billiondollar global consumer products company, AmyK will help participants “Ignite Brilliance” in their leadership. Participants will learn what questions to ask to drive higher performance and productivity and a culture of excellence. ROB NICHOLS: The new president and CEO of the American Bankers Association, Nichols will provide an overview of ABA activities and advocacy. Nichols joined ABA in August 2015, following 10 years of service as president and CEO of the Financial Services Forum, a non-partisan financial and economic policy organization.

LEE WETHERINGTON: Known throughout the industry for his insight on the trends and implications of new technologies, Wetherington serves as director of strategic insight for Jack Henry & Associates, where he directs the development of actionable insight and strategy for the financial services industry. DAVID WASSERMAN: As the U.S. House editor and quantitative election analyst for the nonpartisan Cook Political Report, Wasserman will provide a 2016 election update. Wasserman analyses the current political environment in a lively and entertaining presentation, using his data-driven forecasting to look at what the future holds for American elections.

TWO DAYS OF BREAKOUT SESSIONS ON THE FOLLOWING TOPICS: “Economic and Interest Rate Outlook” and “Strategic Alternatives in a Challenging Environment.” Presented by James J. DeMasi of Stifel and Craig McMahen of Keefe, Bruyette & Woods, this breakout session will focus on the global and national forces that will influence economic conditions in the bank markets. Also discussed will be challenges in executing strategic alternatives with the economic backdrop of “lower for longer” interest rates, oil prices and regional bank stock valuations.

Michael Brown with Wells Fargo Economics Group will provide a general overview of the U.S. macroeconomy and shed light on current economic events.

“Technology Trends Driving the Industry … According to Your Peers.”

Greg Schaffer with First72Cyber will discuss trends, threats, regulatory changes and how to manage them. He will highlight key regulatory developments and the criticality that risk assessments play in today’s cybersecurity environment.

Shane Ferrell of Computer Services Inc. will pinpoint the technologies that are defining banking in 2016 and beyond. He will reference the responses of 100 bank executives to an industry survey on technology adoption plans.

“Asset-Liability Management Hot Topics.” Joel Updegratt with Sun Trust Robinson Humphrey will evaluate key industry trends, tips and best practices for

risk/return optimization. Regulatory hot topics and beneficial preparation techniques will also be reviewed.

TEXAS BANKING • FEBRUARY 2016

“Texas Economic Outlook.”

“Cybersecurity Update.”

“Marketing to Millennials.” Barret Howell with Q2 Software Inc. will focus on the challenges Texas banks are grappling with in capturing the millennial generation. He will help banks develop an effective strategy to build lasting, secure relationships with millennials.

SPONSORS We wish to thank the following sponsors for their generous contributions.

DIAMOND

SILVER BKD, L.L.P. Bracewell, LLP Davis Kinard & Co, PC Equias Alliance Frost Bank

PLATINUM

GOLD

FTN Financial/FTB Correspondent Services Harland Clarke Hunton & Williams LLP Stephens, Inc. SunTrust Robinson Humphrey

BRONZE Amegy Bank N.A. Bank Compensation Consulting, Inc. Bankers Healthcare Group BBVA Compass Bieging Shapiro & Barber LLP Crowe Horwath LLP CSI Managed Services Fenimore, Kay, Harrison & Ford, LLP Fiserv, Inc. Independent Bank Investment Professionals, Inc.

Kilpatrick Townsend & Stockton LLP Moody National Bank One Beacon Insurance Pentegra Retirement Services Sandler O'Neill + Partners, L.P. Sentry Management Inc. SWACHA Texas Capital Bank, N.A. Travelers Insurance Weaver Wolters Kluwer Financial Services

SUPPORTER Austin Bank, Texas N.A. Broadway Bank First Financial Bank, N.A. FPS GOLD J.B. Lloyd & Assoc., LLC

MARQUIS Software Solutions, Inc. NFP Executive Benefits Performance Trust Capital Partners RSM US LLC Texas Bankers Insurance Agency Works24/Bank on Hold

WWW.TEXASBANKERS.COM/CONVENTION

INDUSTRYNEWS Wells Fargo supports veterans with $2 million scholarship Wells Fargo & Company has committed $2 million over the next four years to Scholarship America to develop and implement the Wells Fargo Veterans Scholarship Program and the Wells Fargo Veterans Emergency Grant Program. The needs-based scholarships and grants will help veterans and spouses of disabled veterans obtain education or training necessary to successfully integrate back into civilian life. “American veterans are important to the strength of our country and our company, which is why we want to make sure they are able to contribute their talents to our workforce,” said Jerry Quinn, Wells Fargo military & veteran program manager. “Our work

with Scholarship America will help fill some of the financial gaps our veterans and their families face with scholarships and emergency aid that will help set them on a course to success.” “Wells Fargo’s generous commitment of scholarships and emergency aid for veterans is a powerful combination that will help many veterans and families by making the path to civilian life more attainable and affordable,” said Bob Ballard, presi-

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The Texas Bankers Association has taken out all the guesswork on the state’s new handgun laws. As a member, you can: • Download legally enforceable signs in English and Spanish for both concealed carry and open carry. • Download legally unenforceable signs in English and Spanish for both concealed carry and open carry. • Download legally unenforceable generic signs. • View videos that not only explain the new laws, but answer your frequently asked questions. This is just one of the many benefits of TBA membership. Check out www.texasbankers.com/OpenCarry.

TEXAS BANKING • FEBRUARY 2016

dent & CEO, Scholarship America. “Wells Fargo is modeling the way.” Scholarship America, the nation’s largest provider of postsecondary educational assistance programs, and Wells Fargo worked together on the application and selection process for the scholarship and emergency grants, using best practices of the highest quality postsecondary educational aid programs.

Applications for Foundation awards due Feb. 26 Applications for the Cornerstone and Leaders in Financial Education (LiFE) Awards are due Feb. 26. The Texas Bankers Foundation, the philanthropic arm of the Texas Bankers Association, annually honors Texas banks and bankers for their service to their communities and industry through these awards: • The Cornerstone Awards honor banks that initiate or participate in an ongoing community service project that enhances the way of life in their communities. • LiFE Awards recognize banks that provide financial education programs that include lessons on saving, credit, homeownership, identity theft or fraud protection. • LiFE Individual Recognition Awards are given to individuals who go above and beyond in dedicating time and energy to financial education. Recipients of these awards will be honored during a luncheon at this year’s Annual Convention, which will be held May 4-6 in Grapevine. Application forms and additional information on these and other Foundation awards and initiatives can be found at www.texasbankers.com/foundation.

Origination report shows TRID slowed mortgage closings 2015 ended with the average time to close a loan holding steady at 49 total days, according to the latest Origination Insight Report released by Ellie Mae. While the average time to close a refinance fell from 49 days to 47 days, purchases climbed one day to 50. The average time to close FHA and conventional loans remained largely unchanged at 49 days, while VA loans increased from 50 to 52 days. In terms of loan purpose, purchases represented 56 percent of all closed loans while refinances as a percentage of lenders’ overall loan volume decreased for the first time in seven months from 46 percent in

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November to 43 percent in December. Ellie Mae’s data also shows that the average FICO score on closed loans increased for the first time since May from 720 in November to 722 in December, while the average FHA refinance FICO score increased to 651, up from 648 in November. Closing rates for all loans remained high at 67 percent in December, dropping slightly from 68 percent in November, with November’s results representing the highest percent in all of 2015. Closing rates on refinances reached their highest point of the year at 63 percent in December, while closing rates in purchases dropped

slightly from 72 percent in November to 71 percent in December. Ellie Mae pointed out that customers are certainly impacted by the “Know Before You Owe” changes. “And while the time to close loans remained consistent from November, the 49-day cycle is still a week longer than the time to close at this same time last year,” said Jonathan Corr, president and CEO. Other findings from the December report: • The average 30-year rate for all loans increased slightly to 4.26. • The conventional purchase closing rates climbed above 72 percent for the first time since August 2011.

TEXAS BANKING • FEBRUARY 2016

INDUSTRYNEWS Consumer delinquencies edge up in third quarter Delinquencies in closed-end loans rose slightly in last year’s third quarter amid slower economic growth, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Delinquencies ticked up in six of the 11 individual loan categories. After falling 17 basis points in the previous quarter, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 5 basis points to 1.41 percent of all accounts in the third quarter. This figure is 10 basis points below the third quarter 2014 composite ratio — which was a record low at the time — and remains well below the 15-year average of 2.25 percent.

The ABA report defines a delinquency as a late payment that is 30 days or more overdue. “The economy remains positive even though its momentum slipped a little in the third quarter,” said James Chessen, ABA’s chief economist. “Slower job and household income growth made for fewer improvements in delinquency rates. Fortunately, consumers remained disciplined in managing their debts, which has kept delinquencies close to historical lows.” Home-related delinquencies fell in two of three categories in the third quarter, continuing their overall downward trend. Home equity line delinquencies fell 3 basis points to 1.31 percent of all accounts and

experience clarity

property improvement delinquencies fell 4 basis points to 0.87 percent of all accounts. Following a drop of 22 basis points in the second quarter, home equity loan delinquencies rose one basis point to 2.91 percent of all accounts in the third quarter. “The steady decline in homerelated delinquencies has been a bright spot as they grind their way back to pre-recession levels,” said Chessen. “We expect this trend to continue as the housing market keeps gaining strength.” Bank card delinquencies rose slightly in the third quarter, increasing two basis points to 2.54 percent of all accounts. They remain well below their 15-year average of 3.72 percent. Chessen expects delinquencies to remain near historically low levels for the foreseeable future as they follow the lead of the economy.

TBA calendar of events Feb ru ar y 5 9 11 26

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Audit & Finance Committee meeting, Austin Board of Directors update call TBASCO Board of Directors meeting, Austin Deadline for 50-Year Banker, Cornerstone and LiFE Award applications.

Mar ch 2

Community Bankers Council meeting, Irving 2 Executive Committee meeting, Irving 3 Past Chairmen’s Council meeting, Farmers Branch 3 Board of Directors meeting, Farmers Branch 14-16 ABA Government Relations Summit, Washington, D.C.

Ap ri l 5 7-8

TEXAS BANKING • FEBRUARY 2016

Board of Directors update call Bankers Legal Conference, San Antonio

New study quantifies ROI of mobile banking Fiserv Inc. has published a new white paper on the results of a year-long study measuring the return on investment of mobile banking services for financial institutions. The analysis shows mobile banking adoption is associated with lower attrition, use of more products and an increase in transactions, resulting in increased revenue for financial institutions that offer the service. The study included eight credit unions and nine banks and evaluated data from more than 67,000 mobile banking users. Researchers looked specifically at the actions of mobile banking users three months before and three months after they started using the service. In addition, the study revealed three key insights: • Increased product holdings — Average product holdings, including loans, certificates of deposit, credit cards and mortgages, increased noticeably following adoption of mobile banking. Mobile users had an average of 2.3 products from their primary financial institution, versus 1.3 for their branch-only peers, an increase of more than 75 percent. • Increased transaction frequency — In the three months after adopting mobile banking, users increased the number of debit and credit card transactions, ATM transactions and ACH transactions they made. • Higher average revenue — Mobile banking users generate more revenue than nonusers due in part to the fact that they own more products and conduct more transactions. Banks saw 72 percent higher revenue from mobile users compared to branch-only customers.

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TBF THANKS BANKS FOR DONATIONS The Texas Bankers Foundation wishes to thank and acknowledge the banks and bankers that have responded to our recent appeal. • Austin Bank, Texas N.A. (Jacksonville) • Broadway National Bank (San Antonio) • Castroville State Bank • Comerica Bank • Commercial State Bank (El Campo) • Community Bank & Trust (Waco) • Community National Bank (Midland) • Dalhart Federal Savings & Loan Association, SSB • Farmers National Bank of Newcastle • First Community Bank (Corpus Christi) • First Federal Community Bank, SSB (Paris) • First National Bank (Rotan) • Icon Bank of Texas, N.A. (Houston)

• • • • • • • • • • • • • •

Muenster State Bank NexBank SSB (Dallas) PointBank (Pilot Point) Rio Bank (McAllen) Round Top State Bank Shelby Savings Bank, SSB (Center) SouthStar Bank, S.S.B. (Moulton) Southwest Bank (Fort Worth) Texas Country Bancshares, Inc. (Brady) The First National Bank of Eagle Lake The Lamesa National Bank Worthington National Bank (Arlington) Vernon W. Bryant, Jr. (Southwest Bank, Fort Worth) Jeff Stewart (The Comanche National Bank)

For more information on the Foundation programs or donating contact Jocelyn Carby, Foundation Coordinator, Texas Bankers Foundation at 512-472-8388 or jocelyn@texasbankers.com.

TEXAS BANKING • FEBRUARY 2016

INDUSTRYNEWS Prosperity Bancshares completes merger Prosperity Bancshares Inc., the parent company of Prosperity Bank, announced the completion of the merger of Tradition Bancshares Inc. with and into Prosperity and the merger of Tradition’s wholly owned subsidiary, Tradition Bank, headquartered in Houston, with and into Prosperity Bank. All were effective Jan. 1. Tradition Bank operated seven banking offices in the Houston area, including its main office in Bellaire, three banking centers in Katy and one banking center in The Woodlands. As of Sept. 30, Tradition, on a consolidated basis, reported total assets of $540.6 million, total loans of $239.2 million, total deposits

of $483.8 million and shareholders’ equity of $46.3 million. Under the terms of the definitive agreement, Prosperity issued 679,679 shares of Prosperity common stock plus approximately $39 million in cash for all outstanding shares of Tradition capital stock. Long-time Houston bankers Downy Vickery, senior chairman of Tradition Bank, and Craig Wooten, chairman of Tradition Bank, will join the Prosperity Bank team as executive vice presidents and will focus on lending efforts. Charlie Norris, CEO of Tradition Bank, will become a regional president and will be responsible for the supervision and management of the former Tradition banking offices.

We Wish to Welcome and Thank Our Newest Associate Members Integrity 1370 NW 18th St., Suite 104 Ankeny, IA 50023-9243 Phone: 515-965-3756 sales@integritysrc.com www.integritysrc.com Integrity is an experienced IT risk management, information security and compliance consulting firm with offices in Des Moines, Austin, Kansas City and Birmingham. Integrity has a suite of information security services tailored to the banking industry, which include virtual CISO, IT audits, penetration testing, vulnerability scanning, social engineering, managed SIEM, IT risk assessments, business continuity and disaster recovery planning, breach investigations and incident response. Kelly Hart & Hallman LLP 303 Colorado St., Suite 2000 Austin, TX 78701-3924 Phone: 512-495-6429 steve.ravel@kellyhart.com www.kellyhart.com Kelly Hart & Hallman, with offices in Fort Worth, Austin, New Orleans and Midland, provides comprehensive representation to financial institution clients of all sizes. Our work for banks includes lender liability and trust department litigation defense, Intellectual Property prosecution, monitoring and litigation, loan documentation and loan workout, bankruptcy representation, board governance and wills, estates, trusts and probate. We are experienced in virtually all varieties of loan/lease products in many industries, including real estate, aviation, commercial and energy. Our experienced bank lawyers provide real world focused and cost sensitive representation across Texas and beyond.

TEXAS BANKING • FEBRUARY 2016

TBA PROFESSIONAL DEVELOPMENT Banking School 5-day - $2,300 ($4,600 nonmember) 4-day - $2,100 ($4,200 nonmember) 3-day - $1,425 ($2,800 nonmember) Compliance Update School - $725 ($1,450 nonmember) Management Development Program $3,900 (1-year program)

Full-day Seminar - $325 ($650 nonmember) Evening Seminar - $145 ($290 nonmember) Webinar - $265 ($530 nonmember) Conference 2-day - $595 ($1,190 nonmember) 2-1/2 day - $625 ($1,250 nonmember) Program pricing, dates & locations are subject to change. Banking school fees are based on single occupancy and include housing and meals.

TBA Schools & Conferences

February 2016

SCHOOLS Fundamentals of Bank Portfolio Investing

Compliance Update School

Annual Convention

April 19-20, San Antonio

May 4-6, Grapevine

Feb. 23-24, Dallas

June 13-15, San Antonio

June 8-10, Lost Pines

CONFERENCES Agriculture & Rural Affairs

Senior Management Summit

Compliance School April 17-22, San Antonio

Commercial Lending 8 12 Weeks

BSA/AML Compliance School CFO Conference

CTFA Online Review Course

February 2016 Call Report Revisions & Holding Company Reports 4-5 San Antonio

Fraud Investigation, Detection & Prevention Webinar 4 1:30-3:30 p.m. (Internal Fraud) 9 1:30-3:30 p.m. (Elder Fraud)

Banking the Medical, Legal & Accounting Professional Webinar 8 1:30-3:30 p.m. (Part 1) 22 1:30-3:30 p.m. (Part 2)

Loan Documentation 101 Webinar 10 1:30-3:30 p.m. (Basics) 17 1:30-3:30 p.m. (Lien Perfection) 18 1:30-3:30 p.m. (Collateral Files)

All webinars are Central Time Zone

11 1:30-3:30 p.m.

Call Report Preparation Webinar 12 1:30-3:30 p.m. (Lending Schedules) Mar. 4 1:30-3:30 p.m. (Revisions)

Revised ATR/QM Options Webinar 16 10:30 a.m.-12:30 p.m.

Financial Analysis Toolkit 1 Webinar 19 1:30-3:30 p.m. (Personal FSA) 29 1:30-3:30 p.m. (Tax Returns)

BSA/AML Compliance Management

8 12 Weeks

Marketing Financial Services

July 13-15, San Antonio

8 16 Weeks

April 6-8, Fort Worth

Incident Response Webinar

All featured ABA courses are facilitated online courses. Course lengths vary from five to 16 weeks and are noted for each course. For full descriptions and a list of self-paced online courses, please visit our website at www.texasbankers.com. Email aba@texasbankers.com with questions.

Money and Banking 8 16 Weeks

7 Habits for Success at Supervising Webinar

Principles of Banking Accelerated 8 10 Weeks

24 1:30-3:30 p.m.

Supervisor Certificate

4 Steps to BCP in an IT World Webinar 25 1:30-3:30 p.m.

Banking High Risk Customers Webinar 26 1:30-3:30 p.m.

Analyzing Financial Statements 16 16 Weeks

General Accounting 16 16 Weeks

Consumer Lending

March 2016

22 16 Weeks

TRID: 6 Month Checkup Webinar

IRA Online Institute 22 12 Weeks

1 1:30-3:30 p.m.

Introduction to Agricultural Lending

Real Estate Loan Doc Webinar

29 8 Weeks

2 1:30-3:30 p.m. (Part 1) 3 1:30-3:30 p.m. (Part 2)

Business Financial Analysis

8 16 Weeks

22 McAllen 24 San Antonio Webinar 23 Houston 25 Dallas 7 1:30-3:30 p.m. (FSA 1) Completing the CTR 11 1:30-3:30 p.m. (FSA 2) Webinar 21 1:30-3:30 p.m. 23 1:30-3:30 p.m. (Cash Flow 1) 25 1:30-3:30 p.m. (Cash Flow 2)

Introduction to Mortgage Lending 29 16 Weeks

Introduction to Trust Products and Services 29 5 Weeks

Principles of Banking 29 16 Weeks

March 2016 CRCM Online Review Course 14 10 Weeks

Economics for Bankers 14 16 Weeks

Principles of Banking 14 16 Weeks

Managing the Bank's Investment Portfolio 28 5 Weeks

Principles of Banking 28 16 Weeks

@TEXASBANKERS

TEXAS BANKING â&#x20AC;˘ FEBRUARY 2016

PARTNERFOCUS R Bank joins the ranks of Texas banks to protect the elderly home in its community and has the flexibility to choose whether to structure its commitment as a community development loan, investment or grant depending on the bank’s need or preference for CRA credit. Once the bank’s financial commitment is in place, the foundation collaborates with the bank to identify nursing or veterans homes for the bank to sponsor. From there, the foundation does all of the work, including implementing the Senior Crimestoppers program in the facilities, training the staff and coordinating a public event to announce to the community what the bank has done for its sponsored facility. The foundation wants to thank R Bank for its recent participation in the nationwide program. R Bank has joined 30 other Pictured from left are Steven Stinson, president of Georgetown location, Travis Texas financial Perthuis, lending officer, and Steve Stapp, president & CEO, all of R Bank; Travis institutions, which Wheat, administrator, Wesleyan at Scenic Homes; Jennifer Boyd, loan administration have loaned or officer, R Bank; and George Clinard, vice president, SHCPF. invested more than $4 million to help provide safe, homes. They all work very hard to crime-free living environments to provide safe, secure and comfortable more than 7,000 Texas seniors who living environments and their desire reside in many of Texas’ long-term to implement the program is just one senior care facilities. Because these more example of this,” said Terry banks are protecting the seniors in Rooker, president of Senior their community, these facilities have Crimestoppers. “Implementing this experienced a 94 percent reduction in program does not mean that the facilcrime incidents. ity currently has a crime problem, but “R Bank is very excited to join with that the administrator is proactively the foundation in sponsoring the finding a way to keep problems from Senior Crimestoppers program. We occurring in the future.” are privileged to be a part of the comInvolvement in the foundation is munities we serve and very proud to easy. A bank sponsors a nursing The Senior Housing Crime Prevention Foundation’s mission is to provide safe, secure living environments to low- to moderate-income individuals by providing crime prevention programs through sponsorship of the nationally acclaimed Senior Crimestoppers program. “Senior Crimestoppers is a way to protect and further enhance the lives of the residents living in nursing homes, HUD senior housing communities and Texas state veterans

TEXAS BANKING • FEBRUARY 2016

sponsor a program serving to protect seniors,” said Steven Stinson, senior vice president, commercial lender and Georgetown Banking Center president. “We hope that this program will add to the peace of mind for the residents and their families. The Wesleyan at Scenic and the many other facilities that care for our seniors strive to provide the best care for this generation of our community. R Bank is honored to sponsor another tool to help in that endeavor.”

Helping the community stop elder financial abuse People rely on the Senior Housing Crime Prevention Foundation, a trusted provider of elder abuse prevention programs in our nation’s long-term senior care facilities, as a resource for information on a wide range of issues both inside and outside of a traditional long-term care setting. Our knowledge of the older American population and their challenges led us to produce the “Preventing Elder Financial Abuse Video Toolkit,” which now gives your bank the ability to educate your family, friends, those in your social organizations and your community at large on how to look for signs of elder financial abuse and how to prevent it. The video information was adapted from the FDIC/CFPB Money Smart for Older Adults, so you can rely on the information to be accurate and timely. Senior Housing Crime Prevention Foundation is a TBA endorsed partner providing CRA qualified loans, investments and grants through their Senior Crimestoppers Program.

Terry Rooker 877-232-0859 terry.Rooker@SHCPFoundation.org

100+ ENDORSED PRODUCTS AND SERVICES The TBASCO Board of Directors grants endorsement to select providers after a thorough vetting process has been completed by TBASCO staff. With TBASCOâ&#x20AC;&#x2122;s reputation for integrity and thorough due diligence, banks can trust TBA endorsed solutions.

Contact Wanda Stevens or Alyssa Albertson at 800-462-7295 tbasco@texasbankers.com | www.texasbankers.com/tbasco

COMMUNITY BANKER SPOTLIGHT

Eagle Pass banker appointed to Finance Commission of Texas HECTORCERNA PRESIDENT AND CEO IBC BANK-EAGLE PASS

Gov. Greg Abbott recently appointed Hector Cerna, president and CEO of IBC Bank-Eagle Pass, to the Finance Commission of Texas. The commission ensures that the banks, savings institutions, consumer credit grantors and other regulated entities chartered or licensed under state law operate as sound and responsible institutions that enhance the financial well-being of the citizens of Texas. “It’s a policymaking board that oversees the department of banking and the mortgage and finance industries,” Cerna explains. “It ensures there’s an availability of financial services to consumers and small

businesses so there’s a level playing field for all.” The commission is comprised of 11 members, including two bankers. Cerna’s banking experience in South Texas and his familiarity with doing businesses in Texas, the TexasMexico border and Mexico makes him a knowledgeable addition to the finance commission.

Growing up in Eagle Pass Eagle Pass is known as one of the gateways to Mexico, bordering Piedras Negras on the Mexican side. “The cities are located in two different countries but it’s really one community,” Cerna says.

TEXAS BANKING • FEBRUARY 2016

Cerna says the once sleepy community has changed dramatically over the years. “Growing up it was more agriculture-based, now it’s more commerce- and retail-based,” Cerna says. Cerna is the youngest of six; his father, Felix, came to Eagle Pass with Cerna’s grandmother following the Mexican Revolution. Felix was the eldest of eight and became the primary breadwinner for the family, due to his father’s passing. Though equipped with only a sixthgrade education, Felix’s lack of higher education didn’t prevent him from being a successful business owner. He started a retail currency

exchange service on the Texas side of the border, which provided plenty for the family. Cerna’s father always insisted that his children “stay in school and strive for the next level.” Cerna is proud to say that there are eight degrees among the six siblings.

Introduction to banking Following his graduation from Eagle Pass High School in 1980, Cerna attended the University of Texas at Austin. He received his bachelor of business administration degree but his involvement with banking started because he was looking for a job while in college. “I got tired of asking my dad for money so I got a job as a walk-up teller — my position was soon eliminated by an ATM,” Cerna says with a laugh. Thankfully, there were other opportunities at the bank — Cerna worked in three or four different departments with United Bank in Austin before he graduated from college in 1983. In 1984, Cerna accepted a credit analyst position with NBC Bank in San Antonio. Cerna worked in a variety of banking departments, particularly commercial real estate lending, during his 10 years at the bank. Through a series of name changes and acquisitions, Cerna says his business card changed at least four times.

Banking in Eagle Pass Cerna finally got the opportunity to move back home to Eagle Pass in 1993. He worked for Camino Real OPPOSITE PAGE LEFT TO RIGHT: 1 IBC Bank Chairman of the Board Dennis E. Nixon, Cerna and IBC Bank-Eagle Pass Director of the Board Rodolfo Barrera at the 2004 groundbreaking of their 37,000square-foot IBC Bank-Eagle Pass Regional

Headquarters building. 2 Hector Cerna with his

father Felix in 2000. 3 Cerna and Aida visited Machu Picchu last year.

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Bank in the branching and consolidation process, combining three bank charters into one. The investor group that owned that bank later sold it to a larger institution. In 2001, Cerna became the IBC Bank-Eagle Pass president & CEO. IBC Bank-Eagle Pass is part of International Bancshares Corporation and features a retail branch network of 11 locations. IBC Bank’s motto is “We do more.” “We try to match our products and banking services to our customers’ needs,” Cerna says. “Our philosophy is to be active in civic and professional organizations.” Some of the challenges IBC BankEagle Pass faces are due to the different business cultures in Mexico and the United States and the heavy regulatory environment. “We’re under a microscope when it comes to compliance matters; nevertheless we’re a highly compliant bank,” Cerna says.

Life outside of banking One of IBC Bank and Cerna’s many philanthropic endeavors is IBC Minitropolis. IBC Bank worked diligently with school officials at Ray H. Darr Elementary School in Eagle Pass to develop the concept for the Maverickville Minitropolis, which functions as a city within a school. The goal of IBC Bank’s Minitropolis program is to help students gain an understanding of financial concepts while learning the value of leadership and responsibility that will set them up for success as adults. Cerna says the students earn “Maverick Bucks” they can spend in the city. “It’s created some positive changes for the school and in the kids’ lives. We’ve been told their attendance gets better, their punctuality gets better — there are really tangible results from the efforts,” Cerna says. “Who knows, maybe some of the students are future bankers.” He and his wife, Aida, have one daughter, Jimena, and a son-in-law,

Antonio. When he gets a chance, Cerna likes to play golf. “My handicap will tell you I don’t play that often,” Cerna jokes. Cerna and Aida have a close-knit group of friends who host dinner parties at least once a month and take a trip together once a year. They almost always manage to squeeze a little time on the golf course on their annual trip.

Who is your hero? My father; he taught me conservative values that apply to personal, family and business alike. He set an incredible example by demonstrating consistency in hard work and being a loving father. What is your favorite book? “Outliers” by Malcolm Gladwell is a fantastic book. While I don’t read a lot of fiction, I’ve read most of John Grisham’s books; “The Firm” got me hooked. What is your favorite movie? “It’s a Wonderful Life” with Jimmy Stewart; I watch it at least once a year, usually in the month of December. Who is your favorite president? Having lived through their presidencies, every day I learn to appreciate more the wonderful period during Ronald Reagan and George Bush Sr.’s terms. While their résumés were very different, I admire each. What is your favorite sports team? San Antonio Spurs. My wife and I escape to San Antonio several times during the basketball season to attend games. What is your favorite quote? “Attitude is a little thing that makes a big difference.” — Winston Churchill. “The greater part of our happiness or misery depends upon our dispositions, and not upon our circumstances.” — Martha Washington.

TEXAS BANKING • FEBRUARY 2016

DONNYPALMER TBA MEMBER RELATIONS OFFICER BANKER TO BANKER

Nathan Robinett honored as Tarrant County Banker of the Year

Longtime Fort Worth banker Nathan Robinett was named Banker of the Year by the Tarrant County Bankers Association at the group’s final luncheon in December. This annual event always draws a big crowd and this one was no exception. Robinett of Frost Bank joins a list of prior winners who started their careers at Overton Bank and Trust or Summit Bancshares, which both ended up being acquired by Frost Bank over the years. Robinett was the president of Overton when it was acquired by Frost in 1998. He became the Fort Worth region chief at that time. In 2007, Frost acquired Summit Bancshares and Robinett was then tasked with managing the Dallas Region for Frost. At that time, their presence in the Dallas market lacked sufficient market awareness and visibility, so his challenge included many duties like adding new locations and expanding the team of bankers on hand. Robinett was introduced by another longtime Fort Worth banker and former chairman of the board at Overton, Denny Alexander. He spoke highly of the many attributes that make up a great banker like Robinett. The luncheon also concluded a very successful year for the outgoing TCBA board of directors and Chairperson Veronica Watkins, executive vice president-CFO at Liberty Bank in Hurst. Carl Cravens, regional president for Southwest Bank, Fort

From left to right: incoming TCBA Chairperson Carl Cravens, Banker of the Year Nathan Robinett and outgoing TCBA Chairperson Veronica Watkins.

Worth, takes the helm this year. The Tarrant County Bankers Association is a non-profit organization with longstanding roots in the local banking community. The bylaws state that their purpose is to: • Develop the leadership skills of bankers; • Provide timely and effective learning opportunities for bankers; • Foster greater involvement of bankers within the banking industry; • Facilitate the development of a network of professional contacts

TEXAS BANKING • FEBRUARY 2016

for bankers throughout the area; • Develop programs that enhance the Texas banking industry’s image. Members are comprised of bankers of all industry experience levels and lines of business responsibilities within their respective organizations. We congratulate Nathan Robinett for his accomplishment and salute all of the dedicated members of the TCBA for the fine community achievements they reach every year. donny@texasbankers.com

JOHNHEASLEY TBA GENERAL COUNSEL YO U R A DV O C AT E

The CFPB: Five years and $2.7 billion later

The Consumer Financial Protection Bureau is arguably the most powerful and least accountable federal agency created by Congress. Established in Title X of the DoddFrank Act, the CFPB does not have to go to Congress to obtain funds. It automatically receives a percentage of the Federal Reserve System’s revenue each year. The CFPB director is protected from removal absent gross misconduct. The CFPB has vast powers to regulate and punish real and perceived violations of all consumer protection and fair lending laws. One of the few things that DoddFrank requires of the CFPB as a form of accountability to another branch of government is an annual report to Congress. The 2015 report is a small window into the activities of the agency. DFA initially gave the CFPB 10 percent of the Fed’s annual revenues and 12 percent every year after 2013. At the end of last year, the Bureau has spent more than $2.7 billion. For fiscal year 2016, the agency will receive $631 million. Approximately half of their budget is spent on employee costs. The next biggest cost center involves the creation of large databases. The CFPB currently employs 1,486 people. That number will continue to grow. In order for the Bureau to fulfill its statutory mandate, it will have to be at least as large as the Internal Revenue Service. Despite the CFPB’s claims of transparency, it often acts in ways that the

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banking industry only finds out after the fact. The best example of this was when subpoenas were issued to core processors about community bank overdraft products. It was only when one of the processors notified their bank clients about potential increased costs did the banks become aware of the subpoenas. TBA has filed a Freedom of Information Act request with the CFPB to try to find out what is going on in the overdraft arena and what other information the agency might be collecting. The CFPB has also filed and settled a number of enforcement actions against banks, thrifts, mortgage lenders, student loan companies, debt relief companies and automobile lenders.

in the form of ‘donations’ to nonprofits that supposedly aid consumers and bolster neighborhoods.” The beneficiaries have been The National Community Reinvestment Coalition, Neighborhood Works and The National Urban League. This was a backdoor way of getting money to political groups that were defunded by the Republican Congress. The 2015 CFPB annual report suggests that the Bureau is acting in a similar manner. Last fall, the agency brought a mortgage redlining case against a New York thrift, Hudson City Savings Bank. The settlement requires Hudson City to pay a $5.5 million penalty as well as $2.25 million in “community programs and outreach.”

Small business loans Fair lending In fair lending actions, the CFPB appears to be following the example set by the Obama Justice Department. A Dec. 4 article in the Wall Street Journal, “Justice’s Liberal Slush Fund,” describes how the DOJ extracted settlements from large financial institutions in the aftermath of the financial crisis. Part of those settlements sent funds to groups politically allied with the administration. “It works like this: The Justice Department prosecutes cases against supposed bad corporate actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid

The DFA also gives power to the CFPB to investigate and regulate fair lending issues associated with small business loans. The agency has only recently begun to staff up for this mandate. A Nov. 12 article in Investor’s Business Daily reports that the CFPB has created a new executive level position: assistant director of small business lending markets. The Bureau already has a director of fair lending, Patrice Ficklin. She is quoted as saying that the agency is starting to look at fair lending-focused exams of business lenders. A “disparate impact” analysis will be used. The November elections will determine if anything can be done to rein in the CFPB.

TEXAS BANKING • FEBRUARY 2016

SCOTTDAUGHERTY PRESIDENT & GENERAL COUNSEL, COMPLIANCE ALLIANCE COMPLIANCE HOTLINE

A matter of perspectives

A survey released by the Federal Reserve and the Conference of State Bank Supervisors (CSBS) sampled 974 community banks and found that compliance costs represented 22 percent of a community bank’s net income. Regulatory compliance accounted for: • 11 percent of their personnel expenses • 16 percent of data processing expenses • 20 percent of legal expenses • 38 percent of accounting and auditing expenses • 48 percent of consulting expenses These increased costs have led some banks to abandon certain products. Many banks have stopped providing mortgage loans as they have seen compliance costs increase by 20 to 30 percent over the past five years. For years, we have talked about the regulatory burden placed on banks by Dodd-Frank. I don’t want to talk about regulatory burden but, rather, how a bank’s perceptions of this very real burden may impact the bank.

A tale of two CEOs The first is a common theme I hear from bankers across the country: “My bank simply can’t afford to keep up with compliance. We have a great compliance officer and we trust her to keep us out of trouble. But we can’t afford more resources or people to help with compliance. We have looked at Compliance Alliance

but we just can’t afford it. Until we have a bad exam we aren’t going to do anything.” The second bank has adopted a cohesive systematic approach to compliance: “The bank has a great compliance officer and we have given her resources and tools to free her up from the routine tasks that could take up all of her time. By utilizing Compliance Alliance, she

Banks have to find innovative and efficient ways to keep up with the continually increasing demands of regulatory compliance. doesn’t have to recreate the wheel on everything. The basic work is done and she can just customize things for our bank. This allows her to focus on managing and monitoring the bank’s compliance. We have found that it has made our compliance program much stronger and more efficient and this has been noted by our examiners. We have found that it is saving us two FTEs.” Aside from the shameless promotion, which of these two approaches seems to be the better way to address compliance? I have advocated that

TEXAS BANKING • FEBRUARY 2016

compliance needs to be reevaluated and that banks should think outside the box instead of the way they have always done compliance. After all, if banks didn’t adapt and invest resources to improve the bank, we would have no ATMs, no mobile banking, no software platforms and we would still be looking up account balances in ledger books. Banks have to find innovative and efficient ways to keep up with the continually increasing demands of regulatory compliance. The days of having one person “do” compliance — and often that was a part-time role — are over and banks must have a plan to manage compliance. Compliance officers are hard to find and are increasingly getting out of the compliance areas. Salaries are going up and banks are desperate to keep their compliance officers. A bank can throw more money at their compliance officer (I promise they won’t mind) or they can hire additional people to help in compliance. Another option is to give them the resources to more efficiently manage compliance, thereby freeing them up to manage the compliance risks rather than spending time doing tasks that could be better done by using outside sources. This allows a small community bank to take advantage of economies of scale that were previously only available to larger banks. One thing you can’t do is stick your head in the sand and pretend there is not more work that the bank must do for compliance.

BANKPEOPLE CORPUS CHRISTI

PLAINSCAPITAL BANK Marc Hinojosa to senior vice president and commercial loan officer. DALLAS

AMEGY BANK Suzy Frazier to senior vice president and manager of Treasury Management Sales. TIB-THE INDEPENDENT BANKERSBANK Charles Phelan to executive vice president and chief treasury officer. Todd Wentz to executive vice president and director of Investment Strategies. Keith M. Sims, Thomas B. Sipp and Aaron

J. Starks to senior vice presidents of TIB Card Services. FORT WORTH

SOUTHWEST BANK Jim Patterson to senior vice president-commercial lending.

Marc Hinojosa

Suzy Frazier

Charles Phelan

Todd Wentz

Jim Patterson

Jared Treesh

Darla S. Henry

Jerry Tarnopol

WORTHINGTON NATIONAL BANK Jared Treesh to senior vice president, commercial lending. HOUSTON

INTEGRITY BANK Darla S. Henry to vice president. Jerry Tarnopol to executive vice president and director of SBA lending.

Send your promotions and new hire notices to olivia@texasbankers.com

INDEX TO ADVERTISERS For information on advertising in Texas Banking magazine, please email advertising@thewarrengroup.com Company Name

Phone

Website

Page

1-800-BANKERS

www.aba.com/RMC

BKD

713-499-4600

www.bkd.com

J.B. Lloyd & Associates

800-964-0360

www.lloyd-ins.com

Kansas Bankers Surety

785-228-0000

www.kbsforbanks.com

Ncontracts

888-370-5552

www.ncontracts.com

800-872-3473 x9559

www.pentegra.com

Phase Engineering

800-419-8881

www.PhaseEngineering.com

Texas Bankers Insurance Agency

800-318-4142

www.texasbankers.com/insurance

American Bankers Association

Pentegra Retirement Services

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TEXAS BANKING â&#x20AC;˘ FEBRUARY 2016

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