Ohio Bankers League 2011 Magazine by Jeff Vanik

fall 2011 issue

The Official Magazine of the Ohio Bankers League

The Bank Technology Edition

How Tech Developments will Change Banking INSIDE THIS ISSUE

THINKING OUTSIDE THE BRANCH TECHNOLGY TRENDS DRIVING GENERATION Y CUSTOMERS

OBL JOINT CONVENTION IN PICTURES

DON’T LET CUSTOMER COMPLAINTS MANAGE YOU

Consultants to the Financial Industry

Y o u n g & As s o c i a t e s , I n c .

Information nformation Technology Technology Services IT Risk Assessments and Audits Network Vulnerability and Penetration Vulnerability ulne etration Testing Testing Social Engineering Tests Tests Information Security Program Development Business Continuity Plan Development

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fall 2011 issue

Contents A Comprehensive Resource for the Ohio Banking Industry

Other News

4 Chairman’s Corner 6 Random Thoughts 24 The Banker’s Calendar 28 Window on the Capitol

30 Steps of the Statehouse

45 Around the Industry

Features

Charting a Course to Success 2011 CEO OBL Joint Convention in Pictures

Climbing Ladder of Success at OBL Bank Management School In Pictures

Bank to the Future The 2011 OBL Annual Meeting

18 20

Your Success Online – It’s as Easy as “1-2-3” Think Outside the Bank: Creative Strategies for the New Customer Service

Managing Compliance Risk Don’t Let Customer Complaints Manage You

26 33

The Need for Courageous Leadership The Next Big Thing Is Here Structured CDs

Thinking Outside the Branch Technology Trends Driving Generation Y Customers

38 40

Engaging the Next Generation Boosting your Bottom Line with OBL BankServices

Locking the Back Door

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chairman’s corner The Importance of Telling Our Story At the OBL Convention last month, Ohio Congressman Jim Renacci told us we need to do a better job of blowing our own horn. “Tell us your stories,” he said. “Let us know how you are helping your communities every day. Give us examples of how over-burdensome regulation is keeping you from helping your customers.” It wasn’t the first time I have heard this plea from members of our Congressional delegation. At this year’s OBL D.C. Fly-in, we heard the same thing. “We know Ohio banks did not create the problems in the financial markets, but you guys need to give us more examples of the good work you do in your communities.”

Hurt As well as talking up the good we do, we also need to do a better job of telling our elected officials why we don’t like the things that could hurt our industry and our local economies. When credit unions go after more powers, or retailers try to limit the fees bank can receive from card products, the worst thing our advocates at the OBL can hear from legislators is, “Sorry. I didn’t hear from many bankers on that one.” It is not just the OBL’s job to ensure that never happens. It is ours. It feels good to think someone else is fighting the battle for us, be it the OBL or others. But this is a team game and when it comes to political weight, there is strength in numbers. As Jim Renacci said, our legislators need to know where Ohio bankers stand on the key issues. It may sound simple, but when unique local perspectives are used together they can be a powerful weapon. They can make us a trusted source for policy makers who often have to make decisions quickly and without the breadth of input they would get in an ideal world.

Ohio Record fall 2011

Beacons Former OBL Chairman Steve Wilson – another convention speaker - hit upon the same message. When Steve, who is also current American Bankers Association chairman, outlined his priorities for his year with the gavel, rehabilitating our industry’s battered image topped the list. Banks are beacons of light, economic engines – Steve wanted to put a framework in place to make sure those beacons shine even more brightly. Forming a task force co-chaired by another former OBL Chairman, Hocking Valley Bank’s Bick Weissenrieder, Steve rolled out a new Proud to be a Banker toolbox, laying out exactly how we as bankers should better communicate the good things we do. It emphasized the need to get our employees – who are all ambassadors for our banks and our industry – to speak confidently about the good work banks do, be it when they’re on the teller line or talking to friends at a party. After all, it’s not just us as CEOs who play a role. Every bank employee should know the important part their bank plays as an economic engine in their local community. As an industry we are a modest bunch, but when you are up against the credit unions, retailers and others, maybe the time to be modest has passed us by.

Grey Haired Another message I heard at this year’s D.C. Fly-in concerned who we bring to Washington. “When you bankers come to D.C., we see middle-aged, grey haired men telling your story. When the credit unions come to town, they bring tellers, managers… even customers!” So my challenge to you is this: Come to next year’s Washington D.C. Fly-in or Day at the Capitol in Columbus. Bring some of your staff. If you have a junior manager on the OBL’s Next Generation Advisory

Paul Reed, President and CEO of Farmers Bank and Savings Company, Pomeroy

Board, bring them. It could be a great opportunity to give them some insight into the political side of this business and make them part of the team. But more importantly, it will help them do a better job of telling our story.

Annual Meeting It’s come around quickly but we have the OBL Annual Meeting coming up again on Nov. 2 at the Fawcett Center in Columbus. This year we will be going “Bank to the Future” with informative speakers covering subjects like how social media technology will transform banking, and how cloud computing will impact our industry. Read more about it elsewhere in this edition, but it promises to be another action packed day. I hope to see you on Nov. 2!

Are you looking for that Spark? Creative print is more than just ink on paper It’s about gaining Attention for your business

It’s about stimulating Interest in your products

It’s about creating Desire for your services

That’s where Ohio Record comes in To reach over 4,000 key banking decision-makers contact James Thurston at (614) 340-7621 or jthurston@ohiobankersleague.com.

Pandora Young Entrepreneurs In Action 4249 Easton Way, Suite 150 Columbus, Ohio 43219-6170 Fax (614) 340-7596 James Thurston, Editor Susan Poling, Features Association Staff Michael Adelman Vice President of State Government Relations madelman@ohiobankersleague.com | (614) 340-7616 Brenda Arnold, Administrative Assistant OBL BankServices barnold@ohiobankersleague.com | (614) 340-7620 Mike Baker, VP & Executive Director, OBL BankServices mbaker@ohiobankersleague.com | (614) 340-7600 Dan Conklin, Registrar dconklin@ohiobankersleague.com | (614) 340-7607 Michelle Crume, Vice President & Regional Director OBL/Infinex Partnership mcrume@ohiobankersleague.com | (614) 340-7622 Carol Halkias, Accounting Manager chalkias@ohiobankersleague.com | (614) 340-7604 Alan Haskell, Compliance Consultant ahaskell@ohiobankersleague.com | (440) 552-8918 Wendy Hench, Administrator Ohio Bankers Benefits Trust whench@ohiobankersleague.com | (614) 340-7617 Julie Kiplinger, Manager of Professional Seminars & In-Bank Training jkiplinger@ohiobankersleague.com | (614) 340-7612 Sue Leppert, Administrative Assistant sleppert@ohiobankersleague.com | (614) 340-7602 Lynn Moore, Accounting Coordinator, Compliance Coordinator, OBL Compliance Services lmoore@ohiobankersleague.com | (614) 340-7618 Susan Poling, Education Manager spoling@ohiobankersleague.com | (614) 340-7611 Jeff Quayle, SVP & General Counsel jquayle@ohiobankersleague.com | (614) 340-7603

First National Bank of Pandora’s young entrepreneurs learned first-hand about responsibility, earning money, creativity, and teamwork. This BIG lemonade stand was recently held in front of First National Bank during the Annual Riley Creek Festival in Pandora. All proceeds were deposited into the kids’ savings accounts. “In our vision statement, we say that First National Bank of Pandora ‘encourages creative thinking from empowered team members’ in order to provide financial solutions to our communities,” said First National Bank of Pandora President & CEO Todd Mason. “This lemonade stand is an idea that was developed by our sales manager, Brendon Matthews, as part of a program we have been presenting in local schools.” The Young Entrepreneurs program encourages youth of all ages to be creative, entrepreneurial and proactive about money. “The lemonade stand was a natural way for us to take the concepts we’re sharing in classrooms and help demonstrate them in a practical way that young people can appreciate,” added Mason. “We have had over 60 participants between two stands we’ve held this summer at local events and the response has been very positive. Our intent is to continue to develop the program in a way that positively impacts our youth and our communities.”

Joe Rosato, Government Relations Coordinator jrosato@ohiobankersleague.com | (614) 340-7605 Bill Showalter, OBL Compliance Services wshowalter@ohiobankersleague.com | (614) 340-7623 Gary Sutter, Employee Benefits Manager, OBL BankServices gsutter@ohiobankersleague.com | (614) 340-7615 James Thurston, Communications Manager jthurston@ohiobankersleague.com | (614) 340-7620 Mike Van Buskirk, President & CEO mvanbuskirk@ohiobankersleague.com (614) 340-7601 Melea Wachtman, Senior Vice President of Administration mwachtman@ohiobankersleague.com (614) 340-7606 The Ohio Record is published quarterly by OBL BankServices. Member subscriptions may be purchased for $25 per year; Non-member subscriptions may be purchased for $50 per year. POSTMASTER: Send address changes to Ohio Record at the address listed above.

Find Us on the Web Go to www.ohiobankersleague.com to catch up with the latest news as it happens in the Ohio banking community. View our calendar of events; get involved in online political grassroots campaigns; find a product or service; browse our banking news section; or enroll in the latest in banker education programs. It’s all there.

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random thoughts Countering the Brain Drain A recent article in The Economist pointed out that the number of unemployed and underemployed in the United States currently equals the population of Texas. That’s a graphic representation of substantial human pain. In discussing possible solutions the magazine observed, “The combination of new technology and globalization has reduced the demand for the less skilled….. It suggests an important part of any jobs agenda must involve changes in education, more training to equip people in the rich world for tomorrow’s jobs…” Wishful thinking about the benefits of spending stimuli by our elected officials, Washington aside, our standard of living in the United States depends on American business being more productive than the rest of the world. In the 19th and early 20th century our advantage was lower cost raw materials and transportation. By the late 20th century the advantage was more commonly superior technology, but the rest of the world began catching up. Japan, Korea and more recently China narrowed the productivity gap with lower cost labor. Tires made in Akron, steel in Youngstown, or ships in Lorain are now made largely in other countries. Education drove our technological prowess. But the world began to send some of its brightest students to U.S. colleges. Initially many of them stayed in the U.S. but in recent years more went home thus narrowing our technical advantage. Those of you who attended this year’s OBL CEO Symposium heard O.S.U. President Gordon Gee say that a more enlightened U.S. immigration policy would staple an application for citizenship on every Ph.D. in science, engineering, or mathematics that a U.S. university awards a citizen of another country. I agree, but I want to address a perhaps more significant loss of the best and brightest minds. I’ve always believed that the purpose of banking, finance in general, was to be a

Ohio Record fall 2011

means (a critical one) to an end. In commercial finance, that end is a competitive, successful business that is profitable and grows (and pays its loans back). Those businesses create jobs and healthy communities. Those are the businesses that our economy rests on. The Quants, a book by Wall Street Journal reporter Scott Patterson, is subtitled “How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It.” It features Clifford Asness, a University of Chicago economics Ph.D. who founded AQR Capital Management. In 2003 AQR paid Asness $50 million. Over and beyond the question of whether anyone is worth that much money, Asness made AQR into a business that no longer was the means to an end but an end itself. I don’t write about Asness to criticize him, although AQR like most similar firms lost more than half of its assets from its peak by the end of 2008. A testimony to his ability is that AQR had survived, at last report, under his leadership. My point is simply that the lure of a huge paycheck has been a siren song to too many of the brightest young American minds to follow Asness into a career that does little for American competitiveness. Former Ohio Congressman Mike Oxley chaired a financial subcommittee of the Commerce Committee while Congress was hammering out the Gramm, Leach, Bliley Act. Shortly before the final bills details were announced he outlined the agreement to me. He wasn’t pleased to hear me say that I thought the bill only did half the job - that it left an obsolete regulatory structure in place. And that obsolete structure exempted hedge funds, private equity firms, and similar financial companies from government oversight and regulatory costs. In fairness to the congressman, the traditional Washington regulators are potent lobbyists - just as Fannie Mae and Freddie Mac were. Members of

Michael M. Van Buskirk President & CEO

Congress may believe the system doesn’t work well, but for 80 years they have been unable to do much more than tinker with the framework. Last year the Dodd Frank Act, written during a financial crisis like virtually all landmark financial bills since the 1930s, largely left that regulatory structure that had presided over the collapse in place. No one would have intentionally designed our U.S. financial regulatory blue print. Agencies were created for different purposes and at very different times. As the world changed those agencies were pushed and pulled in an effort to fit but they never quite did. Given its clumsy structure the fact that it functions at all is a bit surprising, a testimony to a lot of good people that really try to do their jobs. The problem is that the structure no longer matches up very well with the marketplace. New market entrants have little regulation. The burden on traditional banks, and the economic engine they represent, has multiplied. An Ohio banker early in my career defined the job of traditional banking as making dreams come true. For most financial executives like Cliff Asness, the only dreams they make come true concern their own wealth. Asness, his counterparts, and the Ph.D.s and MBAs they hired, developed complex mathematical models run on super computers to identify and profit from fleeting arbitrage opportunities in an inefficient stock and bond market instead of designing new inexpensive sources of energy, or a cure for cancer, or an automobile that travels 100 miles on a gallon of gas. Not only was the talent not employed in ways to maximize the nation’s wealth, sometimes it actually destroyed it. Private equity firms sometimes powered hostile takeovers of American firms that enriched the private equity firm but left the target company crippled. Most of these financial firms handing out truly huge pay checks

bear few government imposed regulatory costs of doing business. Most were, and remain, largely unregulated. There are many factors that have slowed our recovery from the 2008 meltdown; but I would argue an important and overlooked one is that America’s brightest minds were not in our research laboratories or manufacturers producing the technological breakthroughs America needed to continue to lead the world. America has long needed a modern, effective, fair, and efficient regulatory structure. The Dodd Frank Act failed to give us one. Washington must create a regulatory structure that rewards those financial institutions who believe their mission is to be the means to a better paycheck for the average American. The price we pay for Congress’ failure to give us one, is a level of unemployment equal to the population of Texas.

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2011 OBL/ILFI Joint Conventiones

r u t c i In P

Bankers packed the meeting room during one of two Convention general sessions

his year’s Convention theme, Charting a Course for Success, was almost too apropos as seemingly endless rain fell on Baltimore for the first two days of the event. Despite the pelting rain and wind outside, it was smooth sailing inside as more than 300 banking industry executives and decisions makers gathered along Baltimore’s Inner Harbor. Much of the program content at this year’s Convention, which attendees overwhelmingly rated among the best ever, centered on the future of banking. Congressmen, top regulators, leading consultants and industry experts offered insights on the challenges and opportunities ahead for banking. Technology, shifting demographics, regulation and a prolonged economic downturn have changed, and will continue to change, the shifting landscape in which banks operate. Convention presentations and handouts are available online through the OBL Website at www.ohiobankersleague.com. Watch for an announcement soon about next year’s convention in Tennessee.

Melea Wachtman OBL Senior Vice President of Administration

MANY THANKS TO OUR 2011 CONVENTION SPONSORS Sponsorship dollars help us manage costs and produce top-notch events providing great benefits for all participants. We are grateful to the following companies for their generous support. PREMIER SPONSOR

GOLD SPONSORS

SILVER SPONSORS

Principal Financial Group

Crowe Horwath LLP Fiserv Keefe Bruyette & Woods PNC Financial Institutions Group LLC S.R. Snodgrass, A.C.

Boenning & Scattergood Capital Markets Securities, Inc. Compushare Floodplain Consultants Elan Financial Services Ohio Capital Corporation for Housing Pentegra Retirement Services Young & Associates

PLATINUM SPONSORS

Banc Consulting Partners Federal Home Loan Bank of Chicago Federal Home Loan Bank of Cincinnati Vorys, Sater, Seymour & Pease, LLP

Ohio Record fall 2011

Former OBL Chairman Blair Hillyer (far left) visits with fellow past Chairman Howard Boyle and his wife Linda (center) along with Mechanics Bank Director Justin Marotta (far right) and his wife Lynn

OBL Chairman Paul Reed and wife Laurie (right) enjoy a cool summer night with Rick and Heather Coe (left)

Ohio Congressman Jim Renacci (far left) and Illinois Congressman Bob Dold (far right) flank OBL Chairman Paul Reed (second left) and ILFI Chairman Jim Renn (second right)

Bankers take in a view of the field from the press box (right) and from the visiting team dugout (above) during the tour of Camden Yards â&#x20AC;&#x201C; home of the Baltimore Orioles

2011 OBL/ILFI Joint Conventiones

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SILENT AUCTION RECOGNITION Ohio Valley Bank President & CEO Jeff Smith and wife Marsha smile for the camera

Former OBL Chairman Steve Wilson (right) greets LCNB National Bank colleague Steve Foster (left)

Anchors Aweigh! Martin and Julie Cole

Ohio Record fall 2011

Never a disappointment, the PAC Silent Auction & Desserts Reception is a networking highlight of the Convention. There were many individuals and organizations who contributed to the eveningâ&#x20AC;&#x2122;s success. DONATED ITEMS

PURCHASED AN ITEM

Ann Durr, Valley Savings Bank Barry W. Ritchey, Standing Stone National Bank Blair Hillyer, First National Bank of Dennison Bruce Beck, The Commercial Savings Bank Dave Summers, Monroe Federal Savings Dean Miller, First National Bank of Bellevue Doug Naylor, The First National Bank of Blanchester Ed McKeon, Western Reserve Bank G. Courtney Haning, The Peoples National Bank Greg Roy, Fidelity Federal Savings and Loan Association Howard T. Boyle II, Home Savings Bank Jason Buckley, ATM Solutions Jim DeRoberts, Gardiner Allen DeRoberts Jim Huston, Advantage Bank Joe Bunke, Cincinnati Federal Savings John Gulas, Farmers National Bank Mark Johnson, The First Citizen National Bank of Upper Sandusky Mike Hines, Floodplain Consultants Inc. Mike Melvin, Perpetual Federal Savings Paul Reed , Farmers Bank Paul Reynolds, Fifth Third Bank Paul Thompson, First Federal Savings Newark Rick Coe, Portage Community Bank Rick Hatcher, Citizens Federal S&L of Bellefontaine Ron Zimmerly, Liberty National Bank Steve Foster and Steve Wilson, LNCB Todd Mason, The First National Bank of Pandora Tom Will, Vinton County National Bank Trent Troyer, First Federal Community Bank of Dover William Wendt, The Henry County Bank

Barry W. Ritchey, Standing Stone National Bank Blair Hillyer, The First National Bank of Dennison Bradley Jones, First State Bank C. Allan Runser, First Federal Savings and Loan Assoc. of Van Wert Charles Crowley, Stifel Nicolaus & Company, Incorporated Coleman J. Clougherty, Farmers Citizens Bank Dennis Stillwell, Farmers Citizens Bank Gregory McClure, Crowe Horwath LLP Howard T. Boyle II, Home Savings Bank Jack Casey, Elan Financial Services Jeff Smith, The Ohio Valley Bank Company John Martin, Optimum System Products, Inc. Jonathan Welty, Ohio Capital Corporation for Housing Joe Bunke, Cincinnati Federal Savings and Loan Association Justin Marotta, Mechanics Bank Larry Lindamood, The Peoples National Bank of New Lexington Martin Cole, The Andover Bank Michael Pell, First State Bank Mike Hines, Floodplain Consultants, Inc. Paul Reed, Farmers Bank and Savings Company Paul Siebenmorgen, The Farmers & Merchants State Bank Phil Linton, BancVue Rick Coe, Portage Community Bank Rick Hatcher, Citizens Federal S&L Assoc. of Bellefontaine Rocco Serafini, The Bank of Magnolia Company Terry Bumpus, First Federal Savings & Loan Assoc. of Centerburg Tom Moore, First Federal Bank of Ohio Nicole Spiker, Crowe Horwath LLP Uma Zielinski, Deluxe Financial Service, Inc.

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IN PICTURES

BY SUSAN POLING, OBL EDUCATION MANAGER

Climbing Ladder of Success at OBL Bank Management School of your comfort zone,” said Paul “In order to advance your career in banking, you have to step outside y, as he addressed the graduates Compan Savings and Bank Reed, OBL Board chairman and CEO of Farmers just that as they worked their way of the 2011 OBL Bank Management School. Twenty- eight students did the annual school. The six-day for us Columb in Center through the week of Sept. 11 at the OBL Training and challenged bank simulawhole a as bank the nding program provided a comprehensive look at understa banks. their at making tion teams through six quarters of tough decision ng, tattoos & Toyotas” as Buck$ Whether “standing strong” as Redwood Bank, or specializing in “tailgati liquidity, and to meet asset improve , margins interest net Bank, the management teams worked to improve ran the Bank Executive who member faculty lead ll, quality goals under the direction of Bill Campbe ment & asset/liability were woven Simulation program. Presentations on strategic planning, risk manage ns with former regulators and discussio panel -favorite program into the curriculum along with informative and current CEOs. on their bank simulation teams, Having served as a CEO, controller, loan, investments or deposit officer nding of the industry and understa d enhance an with asset students returned to their institutions as a valuable of financial industry network peer e statewid a formed and – the interrelationships of each banking function ip efforts of leadersh the of tive apprecia while fact, in s, professionals. The Redwood Bank team member with a week) the (and tion presenta lder stockho final their Redwood Bank “CEO” Rob Albers, concluded s they hold. resignation note, as they opted to return to their respective banks and position something while during the did ely collectiv ons instituti ’ At graduation, Reed concluded that the students that ladder. Now take what of rung next the on you put ully week while they were not looking. “They successf week of learning. Let this a of ending the be not this may you learned and put it to work at your bank. And be the beginning.” the OBL Training Center. Contact The 2012 OBL Bank Management School will be held Sept. 16 – 21, 2012 at s. Susan Poling at 614-340-7611 with any question

Tom Ciresi, Fede ral Home Loan Ba nk of Cincinnati, congratulates co lleague Judy Rose who received the Ora (Andy) An derson GSB Scho larship Award

Ohio Record fall 2011

Hoffman and Larry nancials rd a ly a S the fi Stacie y through decision Students their wa e nk k a a b m t eir firs begin to on for th ti ra a p re in p

Bill Campbell (standing) spe nds time with “Redwood Bank” during a bank simulation decision session

Jeff Quayle, OBL senior vice president and general counsel, led a regulatory panel featuring Mark Yates, Dave Thomas, Jeff Smith, Jeff Quyale and Bud Burkle

Jennifer Griffith, Commerce National Bank; Tom Westfall, The Arlington Bank; Paul Thompson, First Federal Savings and Loan Association; and Coleman Clougherty, The Farmers Citizens Bank made up this year’s CEO Panel - a favorite among students

Christi V an McChesn Meter, Deborah Stevens ey work and N with during th e openin “highly technical ick g team b tools” uilding s ession

Champions Bank team members gather post-graduation to celebrate their bank’s success, where there is “No time for losers

2011 OBL Bank Management School Graduates Robert Albers, Minster Bank Philip Baum, Nationwide Bank Nick Blanchard, First-Knox Bank – A Division of PNB Amy Blankenmeyer, The Union Bank Company Randy Colian, Farmers National Bank J. Michelle Crume, Ohio Bankers League Kristy Fosnaugh, Fairfield Federal Savings and Loan Association Clayton Herold, Richland Bank – A Division of PNB Larry Hoffman, The First National Bank of Pandora Matthew Jenkins, WesBanco Bank Chris Kassner, Kingston National Bank Erin Krawsczyn, Farmers Bank and Savings Company Julia Masterson, The First National Bank of McConnelsville Nicholas McChesney, United Bank – A Division of PNB Kimberly McGowan, The Farmers Citizens Bank

Christopher Miller, The Arlington Bank Jordan Miller, The Citizens National Bank of Bluffton Anna Montle, The Hocking Valley Bank Pam Parcher, The Farmers Citizens Bank Judy Rose, Federal Home Loan Bank of Cincinnati Stacie Salyard, Farmers National Bank Jason Shade, The Farmers Citizens Bank Jessica Six, The First National Bank of McConnelsville Shaun Starr, Ohio Division of Financial Institutions Deborah Stephens, The Marblehead Bank Christina Van Meter, American Savings Bank, FSB Heidi White, Kingston National Bank James Younkin, American Savings, Bank, FSB

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Ohio Record fall 2011

Annual Meeting 2011

t “Bank to The Future - the OBL Annual Meeting, 2011,” Ohio bankers will get the inside track on how technology trends and leadership best practices will

transform the banking industry in Ohio in 2012 … and in the years to come.

Cutting edge ideas and strategies will help you determine what your institution must

do to succeed. Registration includes morning and afternoon breakout learning sessions, two nationally known keynote presentations and lunch, as well as the Financial Services Expo, the 2011 OBL Annual Business Meeting, networking and more. Join us!

Keynote Presentations

1 2

Eric Cook, consultant, WSI (We Simplify the Internet), has held a variety of positions in the banking industry, starting his career behind the counter as a teller and eventually moving into marketing, human resources, consumer lending, technology, operations and eventually assuming roles as OCC and regional president for a publicly-traded, Michigan-based community bank. Three Keys to Online Success: Destination, Conversation & Location, his keynote address sponsored by Banc Consulting Partners, will take a look at today’s online world and these three legs of the “strategy chair” to ensure that your institution provides the right Destination for those interested in doing business with you, participating in the Conversation that is going on via social technology and ensuring that you understand the importance of the Location of those that are interacting with your bank.

Eric Cook

During the opening general session, sponsored by Crowe Horwath LLP, Lyle Sussman, PhD, University of Louisville, will take a look at Bank Leadership and the New ROA. While the industry has been and always will be an industry where people work together to serve the financial needs of other people, changes in competition and technology means senior bank managers must leverage the human capital by increasing their institution’s ROA; Return on Attitude; ROE: Return on Everyone; and ROI: Return on Intelligence. Lyle Sussman, PhD

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Annual Meeting 2011

Optional Breakout Sessions Forty-five minute morning and afternoon breakout sessions will be offered to participants.

10:30 11:15 a.m.

Think Outside the Bank: Issues & Strategies for Creative Customer Service Dr. Lyle Sussman, Chairman and Professor of Management, College of Business, University of Louisville Renew Your Branch Network Jim Caliendo, President & COO, PWCampbell Debt Cancellation Contracts in the Lending Environment Greg Janssen, SVP Sales Director, and Tony Snow, Sales Advisor, Individual Assurance Company

33:45 p.m.

Investment & Interest Rate Risk Strategies to Manage Risk & Maximize Performance Ryan Hayhurst, Associate Partner, The Baker Group Community Banking Update on Accounting Nicole Spiker, CPA, Senior Manager, and Jake Swinehart, CPA, Manager, Crowe Horwath LLP Free vs. Fee-Based Checking: Striking the Right Balance for Your Institution Jeff Glueck, Senior Director, Community Banks, Affinion

Financial Services Expo Always a featured portion of the event, The Financial Services Expo, sponsored by OBL BankServices, will highlight the latest in financial industry produce and service providers with many of the industryâ&#x20AC;&#x2122;s leading vendors. Beginning at 8 a.m. and running until Noon, the Expo affords attendees an opportunity to find collaborative answers to your most pressing bank service needs.

Registration Check out the great value! More than three hours of classroom education, including two general sessions with two nationally known speakers, luncheon meeting, participation in the 2011 OBL Annual Business Meeting, and invaluable networking at a cost affordable for your institution. MEMBERS $150 for the first individual from an OBL member institution or company $125 for each additional registrant from the same institution or company BANK LEADERSHIP INSTITUTE ALUMNI $99 per person NONMEMBERS $225 per person

Ohio Record fall 2011

Thank you to our sponsors (at the time of print): Keynote Sponsors: Banc Consulting Partners; Crowe Horwath LLP Classic Sponsors: Federal Home Loan Bank of Cincinnati; Gardiner Allen DeRoberts; Keffe, Bruyette & Woods, Inc. Classic Sponsor: Young & Associates, Inc.

For more information about the program content, contact Susan Poling at 614-340-7611. For Financial Services Expo information, call Brenda Arnold at 614-340-7620; and for registration questions, please contact Dan Conklin at 614-340-7607.

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The Bank Technology Edition Eric Cook is a keynote speaker at Bank to the Future – the 2011 OBL Annual Meeting

Your Success Online It’s as Easy as Eric Cook Consultant WSI

“1-2-3”

Today’s consumer is connected more than ever. The Internet is accessible virtually anywhere and at any time, whether you’re connected on a tablet device, mobile phone or a laptop at the local coffee shop. But, with all the different options for your bank’s online efforts to connect with the ever-connected consumer, how can today’s community banker prioritize and organize an effective online strategy that stands the greatest chance of success? I like to think it’s as easy as 1-2-3, or in this case D-C-L. Let me explain…

D is for Destination Granted, all the buzz these days seems to be about social media and getting a Facebook page launched or putting videos out into a YouTube channel. Sure these types of sites are becoming increasingly important, but the first thing to remember in your online strategy is that your customers (and future customers) will need a place to go to learn more if they want to start doing business with you. They need a place to go, your virtual office, and that is your Destination (otherwise known as your website). It’s here that you have complete control over the content, necessary regulatory disclaimers for products, security and other factors that someone will expect to have in place to do business with you. But getting them to your site, whether it’s through SEO (search engine optimization) or social media efforts, is only the part of the story. What do you do with them once they get there? Do you have a way to make it easy for someone to start banking with you (or do more banking with you if they are already a customer)? Many bankers are starting to take a hard look at online account opening solutions from their core vendors and other thirdparty providers, and for a good reason. If you get someone interested in you “digitally”, you really should be able to offer them products that way.

C is for Conversation Before someone decides to visit your “virtual” (or even physical) branch, they first need to know a bit more about you. What kind of a bank are you? What type of employees do you have working there? What do others say about you? These are all part of the online Conversation that is taking place via the social networks and other online sites where people can easily share information with one another. So, maybe you have a Facebook page or have started that YouTube channel, but that’s not the end of it. By no means is it the end. As the name implies, a Conversation requires two-way dialogue, which means you need to not only be listening to the “chatter” that is going on around you, but play an active role in what’s being said (and yes, that means even if it may be negative). Are you prepared to carry on this Conversation with those that are interested in talking with you? If not, you better get prepared because simply ignoring what’s being said about you online isn’t a strategy, and not participating won’t make it go away. This area is quickly becoming an area that bankers simply have to devote resources to or risk being left behind.

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L is for Location According to a recent Gartner study, the mobile device will be the number one device for accessing the Internet by 2013. Are you prepared to deliver your message efficiently over a micro-sized browser held in your customersâ&#x20AC;&#x2122; hands? No longer does someone have to be at a computer, at the office (or their home) to get high-speed access, or even on a computer for that matter. In some ways, location is one of the most important factors of your online strategy, yet the one you have the least amount of control over since you never know just how and where someone will try to connect with you online. When it comes to mobile devices, many community banks are now offering remote access for their customers via

mobile banking systems, yet their website is still formatted for a regular-sized screen. Sure, you can pinch, zoom and stretch a site if youâ&#x20AC;&#x2122;re on an iPhone, but if a mobile version of your site is not in the works, youâ&#x20AC;&#x2122;re missing the boat. Additionally, with the GPS capability that is native to todayâ&#x20AC;&#x2122;s smart phones, many consumers are â&#x20AC;&#x153;checking inâ&#x20AC;? at locations and telling their friends where they are with services like Foursquare. Do you know if anyone has â&#x20AC;&#x153;checked inâ&#x20AC;? to your bank, and if so, is there any feedback from customers letting others know what type of service you provide? So, how prepared is your bank with its own DCL Strategy? Yeah, thereâ&#x20AC;&#x2122;s a lot to think about. Itâ&#x20AC;&#x2122;s not as â&#x20AC;&#x153;easyâ&#x20AC;? as it was when we only had a website to worry

about. But if youâ&#x20AC;&#x2122;re not sure where to go from here, have no fearâ&#x20AC;Ś At the OBLâ&#x20AC;&#x2122;s 2011 Annual Meeting in November weâ&#x20AC;&#x2122;ll be exploring each of these areas in greater detail together, providing examples of how you can better prepare and ensure that youâ&#x20AC;&#x2122;re ready to put forward a competitive DCL Strategy at your bank. I look forward to the opportunity to join you for the meeting and hopefully when weâ&#x20AC;&#x2122;re done, you too will find developing an online strategy for your bank as easy as 1-2-3 (D-C-L). Eric Cook is a keynote speaker at Bank to the Future â&#x20AC;&#x201C; the 2011 OBL Annual Meeting.

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The Bank Technology Edition Lyle Sussman is a keynote speaker at Bank to the Future – the 2011 OBL Annual Meeting

Think Outside the Bank Creative Strategies for the New Customer Service Lyle Sussman Professor and chairman of the Department of Management and Entrepreneurship, University of Louisville

What Time is It? If you ask that question of a random sample of people over 35, they will answer by checking a watch. If you ask that same question of a random sample of people under 25 they will answer by checking a smart phone. When I ask that question in one of the regional or national banking schools I teach in I pause for a few seconds and then answer: It’s time to start thinking out of the bank! The world of financial services generally and banking specifically is changing at a frenetic and ever increasing pace. Entrepreneurs around the world are leveraging social networks, broadband connectivity, mobile computing, and an ever expanding array of apps to create innovative business models designed to disrupt and challenge the status quo. These disruptive models are making more and more banks look “old fashioned”…even those banks with state of art IT departments, networked ATMs and user friendly web portals. Looking “old fashioned” is even possible on Facbeook and Twitter, depending on what you say and how you say it. Just as Generation Yers tell time by checking a smart phone, so too will they conduct banking by pointing or clicking on an app recommended by fifteen of their closest friends. And that portal or app could be a “bank shell” outsourcing the transaction to a “real” bank for a fee. Tomorrow’s banking customer is already telling you how they intend to bank. You’ve got to decide what to do with that message, regardless how disruptive and disconcerting you think it is. The only option for today’s banker hoping and planning to become a tomorrow banker is to “think outside the bank”…to discard perceptual and cognitive blinders and create a wow experience for their customers. You must start thinking about possibilities, not constraints. The following three principles and associated examples are designed to help you move from constraints to possibilities. Moreover, these principles and examples apply to the customer walking into your branch, clicking on your web portal, or pointing to an app.

Become More of a Search Engine Culture There are two kinds of managers and organizations. The first type is analogous to a spread sheet and database; they know lots of things. The second type is analogous to a search engine. They know how to know lots of things. You and you bank must become more of the latter. Websites that collect, produce, and aggregate information (think Yahoo, and AOL) are losing both advertiser and shareholder dollars while search engines and social networking portals (think Google and Facebook) are attracting advertiser dollars. And yes, advertising dollars follow the clicks. The lesson for you and your bank is simple, clear and compelling: Information is becoming commoditized. Extend this logic to you, your employees, and your bank. The

Ohio Record fall 2011

information you provide customers will become increasingly less valuable as it becomes increasingly commoditized. Your value today and tomorrow is convincing customers, those who walk into a branch and those who click on your web portal that you are a search engine. Your customers must see your bank not only as a source of expertise and information, but also as a source for finding the expertise and knowledge they need. Move from being a database, knowing something to becoming a search engine, knowing how to know and providing that value to your customer. Stated differently, become discovery oriented, not just transaction oriented. For example, don’t be surprised when you hear about a bank with multiple customer advisory boards, one composed of Generation Yers, and another with Baby Boomers. And yes, I mean advisory boards, not focus groups.

plane, condo, farm etc.) What can your bank do to create “bonding” with existing customers or potential customers? State Bank and Trust in Fargo North Dakota answered this question by giving each employee a $1,000 holiday bonus with this stipulation: You can’t spend the money on yourself, your family or the family of any other bank employee; you must pay it forward for someone in need in this community. And document it for others to see. Banks have always found ways to bind with their neighbors by sponsoring local charitable events. Now find creative ways to do that in both the physical and virtual world. Remember: concentric focus creates bonding, and bonding creates sales.

Become discovery oriented, not just transaction oriented.

Shift from Selling to Bonding For the last 25 years banks have transformed themselves (some more so than others) into sales organizations. You must now transform yourself into a bonding organization. According to Mashable.com, an organization that tracks trends in intent traffic and usage, 92% of US infants under age two have a presence on the internet. That presence was created by family and friends sharing pictures, videos, and anecdotes about the beautiful little baby. They have created a community of friends and fans where the baby is the concentric focus. Do the same in your bank. Create a community of friends, fans, and followers where your bank is the concentric focus. For example, apps now exist that allow a community to share the fractional expenses of purchasing any large expenditure (boat,

Shift From Customer Service to Customer Wowing Customer service is meeting and exceeding customer expectations. Customer wowing is surprising a customer with a service they didn’t think they needed until you provided it, and didn’t even know existed until you created it. How many people thought they needed an ipod, an iphone, or an ipad before those products hit the market? The disruptive genius of Steve Jobs is not that he met and exceeded customer expectations. No, his genius was an ability to create a Wow experience and a need that customers didn’t know that had until he created it. For example, an insurance company in Europe sends out txt messages to its customers whenever weather related driving conditions are hazardous. Some emergency rooms in the U.S. are proving estimated waiting times on their website or through txt messages. Think about the txt messages or announcements on your web portal or outdoor signage that would wow your customers…information and services they

never knew existed, and didn’t think they could use until you provided it. Spend a few minutes scanning the stories and examples on fastcompany.com and springwise.com. Then ask yourself a simple, yet potentially gut wrenching question: What are we doing in our bank today to create a wow experience? Giving away refrigerator magnets, calendars, pens, and coffee cups with a handshake and a smile simply demonstrate that you and your bank are “nice”, not that you are innovative, and forward thinking. Yes, being nice is necessary; but it’s not sufficient. What time is it? It’s time to apply these three principles. Lyle Sussman. professor and chairman of the Department of Management and Entrepreneurship, University of Louisville, is a keynote speaker at Bank to the Future – the 2011 OBL Annual Meeting. He is a nationally recognized author, speaker, and consultant on communication, customer service, leadership, and creativity.

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MANAGING COMPLIANCE RISK

Don’t Let Customer Complaints Manage You By William J. Showalter, CRCM, CRP OBL Compliance Services Senior Consultant

You have probably heard any number of times that it is important to have a formal process for managing complaints from our customers. We have all nodded our heads and mumbled agreement and, then, went back to work at our day-to-day responsibilities without taking any further action to change our bank’s complaint process. If we do not handle customer complaints in a consistent manner, they will manage us. This approach can result in serious difficulties as sources of customer dissatisfaction are not dealt with and studied in a uniform way. Some customers find their issues taken care of quickly and satisfactorily, while other customers feel abandoned by the bank, and everything in between. Is this really how you want to run your bank?

Benefits of Managing Complaints One positive aspect of proactively managing the customer complaint process is there is no real downside. The only “downside” is that such a process shines a light on the extent of complaints, and their underlying causes. But, this disadvantage is actually an advantage. What you don’t know really can hurt you. The positive results from complaint management can include: •Uncovering and dealing with shortcomings in product features, bank processes, customer service, and other issues at an early stage, before they grow to a point that they present real threats to the institution •Improving customer satisfaction with the bank, and enhancing the bank’s efforts to serve the banking needs of its community •Resolving fair treatment issues at an early stage •Realigning bank products, processes, and services with regulatory requirements and expectations •Heading off potential UDAAP (unfair, deceptive, or abusive acts and practices) issues

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Managing Complaints The bank already has formal processes, with assigned responsibilities, for handling errors/disputes asserted by customers related to electronic banking (Regulation E, EFTA), open-end credit (Regulation Z, TILA), and mortgage loan servicing (HUD Regulation X, RESPA). However, a formal process to address customer complaints in other areas – both those received directly from customers and those referred by the regulators – is considered an industry best practice. The structure of this program will vary depending on the culture of the bank and other internal factors. But, there are some common elements that form the basis of any sound customer complaint program, including: •Make sure everyone knows how important it is to respond promptly and accurately to any customer complaints. This is a basis for giving good customer service. •Appoint a central point (an individual or an office) to be in charge of your complaint response program, especially those referred by the regulators – and make sure that all bank staff is aware of how to handle complaints, including where to refer them. Branch managers can be charged with handling customer service issues occurring at their branches that do not involve regulatory issues (fair lending, EFTA, etc.). However, they should report on these complaints and resolutions to the central complaint point for tracking of any trends that may arise. •Establish uniform standards and timeframes for investigating customer complaints. The time limits you set should be reasonable and probably not significantly longer than those set by regulations for some error resolutions (EFTA, TILA). •Document your investigation (e.g., copies of relevant documents and reports) of each customer complaint and the bank response. •Ensure that regulators are informed promptly of the results of investigations of any complaints referred by regulatory agencies. •Maintain a database of your customer complaints, either manually or using some spreadsheet or database software. This step allows you to mine the data related to this process for information about problems with your products, customer service, potential fair treatment/lending issues, and so forth.

Results The database discussed in the final bullet above can provide a wealth of information about how customers view your bank, your product mix, your service levels, and many other facets of your business. It also provides you with an opportunity to discern trends in their infancy, allowing you to deal with negative issues early or enhance the benefits from positive developments. A proactive approach to customer complaint management derives many benefits for the bank, not the least of which is reducing conflicts with customers, enhancing the bank’s public image, improving bank relations with regulators, and creating a competitive advantage for the bank.

Contact William J. Showalter of OBL Compliance Services for all your compliance needs at (614) 340-7623 or wshowalter@ohiobankersleague.com.

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OCT. 20

OCT. 24 – 28

OBL TRAINING CENTER

HILTON GARDEN INN, BEAVERCREEK/DAYTON

One-Day Principles of Performance Earn nine CPE credit hours as Performance Trust instructors address the 10 biggest risks currently facing portfolio managers during this one-day seminar. Investment strategies, the current state of the municipal market and ways to assess credit risk, as well as current issues in capital markets regulation will be covered among other topics. Highlights also include an opportunity to participate in a Q&A session with a national regulator to address current topics in capital markets regulation.

Community Bankers for Compliance School Offering both a lending compliance module, as well as an operations module, this 5-day school, presented by the OBL and Young & Associates, Inc., offers a comprehensive look at the major regulator compliance regulations prominent in the industry today. Practical tools and strategies will be shared to help attendees apply the information at their institutions. A 2010 student noted of the 11-year old program, “The presenters were concise and delivered content in a plain, direct language. In addition, the materials are comprehensive and will be useful for training.”

OCTOBER – NOVEMBER

NOV. 16 – 18

OBL MEMBER BANKS

OBL TRAINING CENTER

OBL Bank Tax Roadshow The OBL is hosting six district Bank Tax Roadshows to find out what Ohio bankers want the state’s bank tax structure to look like as Ohio government searches to find a more equitable means for taxing banks and thrifts in Ohio. Each of these six district sessions includes an update on discussions with both the governor and the special Taxation Tax Force; as well as open discussion with questions and recommendations from bankers on the most equitable way to move forward. Participants will also receive an update on the OBL’s new Regulatory Feedback Initiative - a nationwide effort to provide exam feedback to regulators. Contact Sue Leppert at (614) 340-7602 with questions or register online.

Ohio Record fall 2011

School of Commercial Lending Essentials Jeff Judy returns to Columbus to share his analysis of the entire commercial lending process during this popular annual program. Commercial lenders, credit department personnel, management trainees, branch managers (who handle small business lending), loan support staff and small business personnel will learn about risk assessment, loan structure, management and monitoring, as well as relationship management, financing alternatives and more. According to Charles Moore, deputy superintendent, Consumer Finance, ODFI, “The School provided a good definition for all skill levels.”

NOV. 21 & 22

NOV. 30 – DEC. 2

OBL TRAINING CENTER

NEW DATES!

Advanced BSA School Solve problems! Address advanced BSA subjects such as inaccurate suspicious activity report filings, BSA management issues and staff educational deficiencies. Make decisions regarding monitoring of the program. Participate in case study and classroom discussion led by Bill Elliott of Young & Associates, Inc. Students at the NEW Advanced BSA School will receive a complicated case which will touch all aspects of a bank’s BSA program. Space is limited and value is at a premium!

FALL

Please see the OBL Web site for a complete listing of currently scheduled events or to sign up for the programs listed below.

Lenders Comprehensive Guide to Mortgage Loan Compliance During the last few years, both Congress and the various federal regulators have crafted revisions to some of the regulations that have been a part of our lending lives. Due to an overwhelming response, this spring workshop is returning to the OBL Training Center this fall covering the latest information available on all aspects of mortgage compliance that a lender should know. The S.A.F.E. Act, Compensation & Application Issues, Processing & Underwriting Requirements, as well as Loan Closing Rules, and other topics such as the Home Mortgage Disclosure Act will be featured.

QUARTERLY SEMINARS OBL TRAINING CENTER

2012 Community Bankers for Compliance Program For the third year, the OBL will present the nationally-recognized Community Bankers for Compliance Program with Young & Associates, Inc. CBC Program participants benefit from quarterly one-day seminars, subscription to a monthly Compliance Update publication, and access to a compliance hotline and compliance home page with the latest in regulatory updates. Bankers select the quarterly seminar date that works best for their bank – but the BANK is the member – so different employees can attend the program each quarter. Watch the OBL Web site for details or contact Julie Kiplinger at 614-340-7612 for registration information.

Save the Dates – 2012 • Economic Summit – Feb. 15, The Renaissance Hotel • D.C. Fly-in – Feb. 28 to March 1 • Bank Marketing Conference – March 1 & 2, OBL Training Center • HR Conference – March 8 & 9, OBL Training Center • BSA/AML Conference – March 27 & 28, OBL Training Center • Technology Conference – April 12 & 13, OBL Training Center • Director Workshops – April 17, 18 & 19, Regional Locations TBD • CEO Symposium – May 17 & 18, Hilton Columbus at Easton • OBL Bank Management School – Sept. 16 – 21, OBL Training Center

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The Need for Courageous Jeff Quayle OBL Senior Vice President, General Counsel & Managing Director, Ohio Bankers Benefits Trust

Ohio Record fall 2011

Those of you that were fortunate enough to attend this yearâ&#x20AC;&#x2122;s OBL Joint Convention heard a number of interesting speakers, including one that spoke about courageous leadership. I thought it would be a good idea this quarter to discuss how the OBL has applied those principles in our activities in the past year, particularly in our advocacy on behalf of the industry and in the important services we have offered to OBL members. As we surveyed the battlefield after the President signed Dodd-Frank last summer, it was clear that much work needed to be done through the regulatory process. On several issues in the past year, OBL has been the only Ohio trade association to step up and lead the charge on important issues impacting all financial institutions. Most notably, in coordination with Congressman Renacci, the OBL surveyed all segments of the market to determine the true cost of interchange transactions. The real, substantiated data provided by bankers was crucial in the policy discussions that resulted in a Federal Reserve regulation nearly doubling the permissible rate allowable to bankers. Just as importantly, the credibility established by that process motivated policymakers to ask OBL to continue to monitor the usefulness of the small bank exemption. On legal issues, OBL has again been the leader and the state association to step up where the industry needed us. This summer the Cuyahoga County Court of Appeals released an adverse opinion challenging the validity of the 365/360 method of calculating interest in commercial loan contracts. Nationally, this is the only court to step off in this direction. Worse, there is likely similar language is in some of your contracts, because the language at issue was utilized in most of the forms and documents used in Ohio for the last several years. Given these considerations, the OBL filed a brief, supporting the bank asking the Ohio Supreme Court to review the case. As of this writing we are still waiting for a decision from the Supreme Court. I also want to mention the positive developments and strong improvements in our collective health insurance operation, the Ohio Bankers Benefits Trust, during the past year. The health trust is the single most important service OBL offers to our members, touching nearly 2,000 bankers and their families at nearly 80 OBL member banks. With the help of our strong staff and the valuable input of our trustees, the plan was strengthened this past year. The fundamentals and financial statements of the plan were improved so that future generations of bankers will be able to continue to look to our health plan for health, dental, vision, life and disability coverage. In upcoming editions of the magazine, we will be sharing some of the important transitions and upgrades we are making to both improve the plans and lower the cost of benefits for you and your employees. While we are pleased with all the accomplishments this past year, we are never satisfied. We know that more is possible and more will be required in the months ahead. The most important element of our success however is you, the Ohio banker. Without your input our success would not be possible. Thank you to those that have been engaged in your association this year. Whether it was supporting your PAC or participating in one of our district meetings or other programs, we hope you will continue to be engaged in the months ahead. If you havenâ&#x20AC;&#x2122;t been involved we hope you will consider signing up.

FINRA: The New Bank Regulator Wannabe Under new rules issued by the Financial INdustry Regulatory Authority, community banks and other small businesses are now required to register new electronic notices every time they declare a stock dividend or take other meaningful actions that could impact shareholders or share price. In some respects, this creates a new registration requirement for nonSEC registered companies. With the blessing of the SEC, FINRA has adopted a new rule requiring non-SEC registered companies to file an electronic notice for each major corporate action. This will include such steps as dividends (or other distributions), stock splits or a rights or subscription offering. Generally, issuers need to file this notice 10 days prior to record date. There is a $200 fee associated with each timely filing required by the rule. However, these fees escalate rapidly to as high as $5,000 for late filings. From

FINRA’s perspective, it is small businesses’ responsibility to publicize key actions that will impact stock price, even if they are not listed on an exchange. Many banks that have their stock traded on the over-the-counter markets have been filing these notices in a paper form, so for these banks this process is not new. It appears however that under the definitions in the FINRA rules, this requirement may now extend to smaller banks that have just had a local broker make a market in their stock. FINRA adopted this new process effective March 14 this year without much lead time or public notice outside of licensed brokers, so community banks just started getting the FINRA notices this summer. There are several problems with this recent action. First, it is unclear which companies will be defined as publically traded and therefore have to comply with

these new requirements. Second, from bankers’ perspective, this is a new regulator increasing the costs of doing business at a time when the banking business has never been more challenging. Furthermore, unlike other small businesses, all banks and thrifts file vast amounts of information quarterly, which is already publically available. Finally, FINRA did a very poor job publicizing these new requirements. As a result, many banks received no notice in advance of the important annual meeting season when many of these actions are normally taken. For these reasons OBL is taking the lead, working with FINRA and other policymakers exploring ways to mitigate the adverse impact of this new policy. In the meantime, if you have taken or are contemplating any of the noted major corporate actions, consult with your market maker and attorney.

IDEAS TECHNOLOGY

RESULTS RES SULT SU LTS LTS T Great TTechnology echnology echn Ser Services vices for Banks www.cocc.com 888.678.0444

fall 2011 Ohio Record

In this regular feature, Ohio Record introduces our elected state and federal legislators. In this edition, the spotlight is on Speaker of the Ohio House Bill Batchelder and Ohio Representative Dick Adams.

Window on the Capitol Speaker of the Ohio House Bill Batchelder (R-69)

Speaker of the Ohio House William G. Batchelder returned to the Ohio House of Representatives in 2007, having previously served in the Ohio House for 30 years. He currently is serving his third consecutive term and was elected by his colleagues to serve as House Speaker during the 129th General Assembly. Speaker Batchelder graduated from Medina High School in 1960. He later received a bachelor’s degree from Ohio Wesleyan University in 1964, as well as a Juris Doctorate from The Ohio State University College of Law in 1967. Speaker Batchelder has established a long career in practicing and teaching law. He spent 31 years of his professional career at the Williams and Batchelder Law Firm in Medina, Ohio, while serving as an adjunct professor of law at the University of Akron Law School and as an adjunct professor at Cleveland State University Levin College of Urban Affairs. Additionally, Representative Batchelder has served as a judge for the Medina County Common Pleas Court, a judge on the Ninth District Court of Appeals from 1999 to 2005, and as a presiding judge on the same court of appeals from 2000 to 2001. During his tenure at the Ohio House, Speaker Batchelder has been recognized numerous times with the Watchdog of the Treasury Award. He also received the 4-H Meritorious Service Award and the Friends of 4-H award.

learned firsthand the importance of customer service and interaction, something banks must do well every day of business. I graduated from Ohio Wesleyan University and later from The Ohio State University College of Law in 1967. After a year of working in the Ohio Senate, I ran for state representative. It was my privilege to serve the citizens of Medina County for over 30 consecutive years before briefly serving as common pleas judge and for 6 years as an appellate judge. Upon my retirement from my judicial post, I returned to my “first love,” and was elected once again to represent the people of Medina County in the Ohio House of Representatives.

Ohio Record: Tell us a little bit about your background and how you became involved in politics? Speaker Batchelder: It has been my honor to serve Medina County for nearly 34 years as State Representative; I was born and raised in Medina and it has always provided my family with wonderful opportunities. As a young man, I was fortunate to work as a teller in my local bank – the old Phoenix. It was there that I

Ohio Record: What priorities remain for the 129th General Assembly? Batchelder: The continued development of the Marcellus and Utica shale drilling is an important priority for this General Assembly. These rich natural deposits are poised to help Ohio grow economically in terms of the jobs it will bring. Ohio needs good paying jobs to replace all of the manufacturing jobs that have been

Ohio Record fall 2011

Ohio Record: The General Assembly had a very active first half of the year. Of which accomplishments are you most proud? Batchelder: I am most proud that our members were able to reach an agreement on a state budget that filled an unprecedented $8 billion deficit. Working with the Governor and our colleagues in the Ohio Senate, were able to fill that deficit without raising taxes on the hardworking people of Ohio. We felt that it was important to focus our budget talks on creating jobs and reforming the inefficiencies of government, rather than asking a public that was already suffering through a very difficult economic situation to give more to the government. We were then able to pass a repeal of the death tax an roll back the income tax. Because our members had the courage to make tough decisions during this time, we have laid the foundation to have a more prosperous and job-friendly economy in this stay for years to come.

lost. In addition, reforming the manner in which primary and secondary education is funded is another priority. The students of today are the workers and taxpayers of tomorrow and we need to make sure they are receiving a solid education. Pension reform is another priority; Ohio’s retired workers need to be assured they are being protected and that Ohio will safeguard their retirement. The Ohio Legislature needs to ensure Ohio’s pension systems are on solid footing and able to meet the obligations required of them. Ohio Record: Why should a banker care about public policy and how can they be helpful to you and the other legislators? Batchelder: Sound fiscal policy is often the cornerstone of any overall public policy package that we as legislators will put together. It is important for the banking community to care about public policy because the actions taken by the General Assembly involving regulation and fiscal policy have a direct impact on the

banking industry and its day-to-day operations. As such, Members of the General Assembly need to be properly educated on the financial procedures of the banking systems and bankers have the ability to provide that information. As policy-makers, we are often tasked with creating responsible regulations and laws on a wide variety of subjects; from milk pasteurization procedures to corporate insurance. We cannot effectively do our job without the input of experts and professional in those fields, banking being no exception. While some of our members bring a financial background to the legislature – for example Richard Adams, Chairman of the Financial Institutions, Housing and Urban Development Committee – the others will need to learn the inner workings of the financial markets in order to make the best informed decision for their constituents. It is crucial that bankers assist in that education process.

Rep. Dick Adams (R-79) State Representative Dick Adams is serving his second term in the Ohio House of Representatives. He represents the 79th House District, which includes Miami County and portions of Darke County. Representative Adams, a director of OBL member Unity National Bank, previously served two terms as Miami County Commissioner. He has a long history as an educator, having served as a high school agriculture instructor for Northwestern High School, vice president of Clark State Community College and founding superintendent of the Upper Valley Joint Vocational School District. An active participant in community activities and organizations, Representative Adams has served on numerous professional, community and church boards. Most notably, he served as chairman of the National Association of Community College Trustees Board and as president of the Ohio Association of Community Colleges Board. He was a trustee for Edison Community College for 18 years, acting as chairman for three years. He currently serves as the chairman of the Miami County Republican Party Central Committee. Ohio Record: Tell us a little bit about your background and how you became involved in politics? Rep. Adams: I was reared on a dairy farm. I attended OSU where I received my Bachelor of Science, Masters, and Ph.D. After college, I decided to teach high school full time and become a part-time instructor at community college and private university. I became Vice President of the Community College and also the school superintendent. I viewed elected office as a community service, and served 2 terms as a county commissioner and almost 3 terms on the Board of Elections. I am currently serving my second term as a State Representative. In addition to serving on several

volunteer boards I have been a member of a community bank board since 1988. Ohio Record: What are your priorities this year? Adams: My background as a bank director and serving on the board of a community economic development board prompted my interest in membership on the FIHUD committee which resulted in Speaker Batchelder appointing me as Chairman. My priorities are to examine and analyze legislation that will promote the free enterprise system, limit regulation to the level necessary for the orderly function of business at the community level and provide the basis for community citizens to have confidence in our banking system including the correlation to housing and urban development. Oho Record: Why should a banker care about public policy? Adams: Every person including persons in business and banking should be cognizant of what is happening in public policy. Being informed is the first step in helping to shape public policy to be responsive to the needs of the community served, the stock holders, employees, and especially the customers. How can bankers be helpful to you and the other members of the General Assembly? Adams: I believe public policy is improved when those affected by the legislation have been involved in the creation and shaping of legislation. Effective laws and regulations need the input of those who have experience in the practicum. It takes time to be invented by the people, but is necessary to legislation characterized by practicality and utility.

fall 2011 Ohio Record

From the

Steps of the Statehouse

Michael J. Adelman Vice President of State Government Relations

Ohio Record fall 2011

Success = Showing Up Summer is over with school underway and the General Assembly back in session. With my increased time in the car traveling the state this year I took up audio books. Though a big fan of reading, my discretionary time for a good book is in short order. Discovering audio books has been awesome. Whether it’s thirty minutes here and there darting around town or making the three hour jaunt to Andover the solitude with a good audio “read” has been enjoyable and informative. Look me up on LinkedIn for a full list of my books enjoyed this year. My reading interests have always been more history and biographies versus fiction...though I’ve read everything by Clancy and a lot of Grisham. Because I really value my time and live a purpose-driven life, my reading in recent years has mainly focused on leadership and organizational relationships. Guess it’s the old Eagle Scout pursuing self improvement or parent in me looking for every nugget of wisdom to pass on to anyone who will listen. I recently listened to “Showing Up for Life: Thoughts on the Gifts of a Lifetime,” by Bill Gates Sr. I disagree with much of his politics, but as you’d expect the root theme is the classic Woody Allen quote, “Eighty percent of success is showing up.” As bankers around the state can attest, I did a lot of “showing up” this summer. Facilitating eleven meetings in member institutions with bankers and their state senators and representatives was very rewarding. The bankers who participated know these meetings are critical to our industry’s ongoing Statehouse success. The meeting hosted by OBL Director Martin Cole – President & CEO at the Andover Bank – must be singled out, though. They really know how to show up: Martin packed his board room with over twenty people including his board of directors, officers and other employees. It was quite impressionable on his legislator. What impresses me in meetings like this are the obvious relationships that exist between the legislators and the bankers in their communities. There is no way I can replace the credibility OBL members have spent their careers and lifetimes building. My purpose largely is to reinforce and supplement. That is why the OBL needs its members to “show up” and be engaged in every aspect of our grassroots strategy. Our success ties back to your hard work back home.

Showing up more at the Statehouse OBL Board Member Martin Cole, President & CEO at the Andover Bank, recently hosted a legislative meeting with Representative Casey Kozlowski

With the General Assembly resuming business at the Statehouse I’m now on the road less. Rather than listening to my audio books on the drives between legislative district meetings I’m back in committee hearings testifying and reading legislation. I know that the OBL membership is counting on me to show up to advocate for their interests and it looks like it will be a busy fall session.

Insured Cash Sweep

Governor asks “What can we do to help?”

Chief among the OBL’s initiatives is the insured cash sweep bill we drafted and have been championing through the legislative process this year. We’re at a halfway point on the bill with the House having passed their version (HB 209) with an impressive 94-0 vote and an astounding 68 co-sponsors. While that bill was weaving through the House’s process, the Senate took up an identical version (SB 173). Two key changes arose in the Senate making our bill that much more attractive to public entities and depositories alike. First, in addition to counties and government subdivisions, the bill would allow state public deposits to be redeposited. Second, it would permit public deposits to be redeposited in either reciprocal or one-way transactions. Both of these changes would be made to the proposed short-term cash sweep program as well as the existing CD program in statute. Witnesses testifying in support of the OBL bill included Norm Schnipke, SVP, The Union Bank Co. in Columbus Grove; Michael Gampp, President & CEO, American Savings Bank in Portsmouth; Jeff McCuen, Treasurer/CFO, Worthington City Schools; and Geoffrey Phillips, Clinton Co. Treasurer. We are working diligently with the House and Senate to encourage swift enactment of the insured cash sweep bill so it can move on to the Governor for signature enabling public entities and depositories to benefit. Though simply showing up doesn’t guarantee success, it’s a prerequisite. Being visible around the Statehouse prepared to testify in committee and meet with state officials to advocate our position is what they’ve come to expect. You can count on the OBL to show up.

Gov. Kasich has asked the OBL to weigh in with suggestions on what the State of Ohio can do to help. The OBL’s Past Chairmen’s Council took the initial crack at creating a short list of issues state officials could pursue that would be meaningful to Ohio’s banking industry. These bankers will be the core members of several task forces we’ve been asked to create to develop specific recommendations. Five overarching categories that resonated for more thorough analysis: 1. Jobs – This must be the number one focus to get our economy back on track. There is too much widespread uncertainty preventing businesses from investing and hiring. Our interest in jobs encompasses (a) banks and thrifts as critical local economic development partners, (b) the viability of our customers to meet their financial obligations, and (c) the banking industry itself as a significant employer of Ohioans. We are proud to be bankers and wish to instill interest in the next generation to become bankers as well. 2. Taxation – The tax burden shouldered by Ohio’s banks and thrifts is a significant impediment. There is interest in reconfiguring the tax regime to provide relief so that banks and thrifts are not penalized for increasing regulatory capital requirements. Various credits might also be created to incentivize certain behavior and alleviate pressure from the current structure. 3. Strengthen the state charter brand – There are multiple facets to this issue relating to the long-term viability of the state regulator; current value of the state charter and potential to attract nationally chartered banks or thrifts; and an opportunity to recreate an environment where the state charter is an incubator for innovation. Considerable collaboration is occurring in this category with the OBL and Division of Financial Institutions partnering to review, rewrite and update Ohio’s banking statute. There are related issues that must be explored so that state examiner salaries are competitive and that their training is robust enough to ensure confidence in Ohio’s banking system. 4. Regulatory relief – Government risk continues to mount on banks and thrifts as well as other businesses operating in this state. What Ohio might lack in terms of more advantageous warm weather could be overcome by making bold changes to its overall business climate. There is interest in determining where duplicative, outdated or misguided laws and regulations can be updated, refocused or repealed. Banks and thrifts are themselves small businesses and will benefit from reforms geared to the general business community. 5. Foreclosures – the process must be accelerated and be made more efficient. We view this opportunity as the start of a process. Bankers with whom I’ve spoken recognize Gov. Kasich is doing everything possible to make Ohio a business friendly state. This coupled with a favorable Statehouse environment presents us a unique opportunity to improve Ohio’s environment for banking.

fall 2011 Ohio Record

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Ohio Record fall 2011

The Next Big Thing Is Here Structured CDs are a natural fit for financial institutions and their conservative customer base

Paul A Werlin President Human Capital Resources

Structured CDs seemed to come out of nowhere. But they quickly became, arguably, the hottest products in the bank channel. Sometimes called market-linked CDs, or equity-linked CDs, these products have displayed amazing growth over the last several years. They belong to the family of products collectively known as “structured investments,” which also includes esoteric products like reverse convertibles, buffered return enhanced notes and reverse exchangeables. As such, many banks chose to keep these seemingly complicated and risky products out of their shops. But over a relatively short period of time, market-linked CD sales have exploded across all channels, including banks. While there are many iterations of the products, they all share a few basics: They’re not securities or insurance, but at their “core” have an FDIC-insured CD protecting principal; they typically have maturities of three to seven years; and their return is tied to an index, a basket of securities or commodities. “In 2005, some $17 billion in market-linked CDs were issued in the U.S.,” according to Keith Styrcula, founder, and chairman of New Yorkbased Structured Products Association. He says that StructuredRetailProducts.org (the association’s data provider) estimates that $50 billion of structured products were sold last year, a 62 percent increase over 2009. A big part of this growth was in bank sales of market-linked CDs, he says. So what’s behind the rapid rise of sales of market-linked CDs in banks? Styrcula believes there are several reasons. “These products are a natural fit in financial institutions,” he says. “They’re a natural fit for the conservative customer base. And the fact that a FINRA license, nor any license, is a requirement has helped fuel growth.” Certainly, this is part of the story, but Serge Troyanovsky, managing director and head of Retail Distribution North America, Structured Solutions Group at BNP Paribas, had other reasons as well. “We firmly believe in the strong potential of market-linked CDs in the bank channel,” says Troyanovsky. “Traditional CD buyers have seen rates drop to such low levels that they are looking for alternatives. They are willing to give up a small guaranteed rate in favor of the opportunity of getting 8 percent, 9 percent or more.” fall 2011 Ohio Record

Paris-based BNP Paribas Bank, the largest banking group in the world, launched its structured business in Europe about 20 years ago and for 10 years it has provided structured investment hedges to other leading issuers in the U.S. It also provided hedges to four of the six largest market-linked CD issuers in the U.S. With its acquisition of Bank of the West, it began offering market-linked CDs in the U.S. about 18 months ago. Fabrice Hugon, managing director and head of Structured Equity Sales, also at BNP Paribas, noted that banks now account for almost 50 percent of their market-linked CD business. “Education has a lot to do with our sales, whether it’s provided by the issuer or by an intermediary. If advisors aren’t comfortable with a product, if they aren’t confident about key features and benefits, nothing will happen.” Stephen Amarante, president and CEO of Infinex, a third-party marketing firm based in Meriden, Conn. that serves about 200 financial institutions, agreed with the importance of education but had an additional explanation for the strong sales growth. “So many asset classes suffered over the past three to four years. Market-linked CDs meet the needs of the traditional CD buyers who aren’t happy with current interest rates, who want the ability to participate in market increases but avoid any downturns. They’ve had enough losses in the markets. These products aren’t for everyone, but we think they should be an important part of every FA’s product arsenal.”

There’s little doubt that it takes more than just making the products available to generate the focus and motivation to really sell these products. According to Alan Blank, president and CEO of Midwood Financial Services and the first independent distributor to offer market-linked CDs to banks in the U.S., support is critical. “To us, support is wholesaling, and that means one-on-one [meetings] with FAs for training, product knowledge, sales ideas and support, support, support.” He says that his nine wholesalers spread across the country meet with every FA at least once every six weeks. Blank estimates that Midwood sold more than $1 billion in structured investments in 2010 and predicts a 50% growth for the firm this year. While some bank FAs have seen their market-linked CD business explode, others are taking a more cautions approach. Robert Fradette, a 20-year veteran advisor now with Chelsea Groton Bank in Connecticut, says that about 5 percent of all his clients own market-linked CDs, all of which happened in the past two years. “There’s been much more interest lately,” he says. “With low bank CD rates and riskaverse conservative clients who still want guaranteed principal, many of my clients like the possibility of getting more. They’re not for everyone, but I think market-linked CDs will be 10 percent of my business this year.” Fradette also notes the importance of support. “It’s not enough to just dump information on FAs using the Internet or mailers. I support the firms that support me,” he states. “Some of these products

The OBL/Infinex Partnership Through the OBL’s partnership with Infinex, member banks have a boatload of smart investment tools available to leverage the many opportunities that are available in the current market. Formed in 1993 by community banks, Infinex has assisted more than 140 banks implement successful investment programs. Expert consultation, hands-on assistance, and low up front costs make this the ideal program to increase your fee income. Whether your bank is setting up a new investment program or has an existing program in place, this exciting partnership offers a solution. For more information on how to offer structured CDs and other investment products at your bank, call Michelle Crume, Ohio Regional Director, Infinex Financial Group, at mcrume@infinexgroup.com or 614.340.7622.

Ohio Record fall 2011

can be pretty complicated and a good wholesaler can better explain how the product works and help me better present it to the right clients.” With sales continuing to grow at double-digit rates, there is not much that can realistically derail sales, according to those who commented for this article. “If fixed annuity rates rise, some sales will go here,” says Amarante. “But this will just slow the rate of growth, not kill it,” he added. Blank at Midwood agrees that rising interest rates could slow sales, but only a little. “Even if interest rates go up, the manufacturers will adapt and adjust as they have in the past with guaranteed coupons, or add new features to the products to keep them attractive.” Styrcula has a different perspective. “If interest rates rise, it means the terms of market-linked CDs will become more attractive and competitive against fixedrate CDs.” He also believes that the educational effort being made will continue to fuel growth for years to come. With market-linked CDs here to stay, there may also be an opportunity for other structured investments in banks. “I think there’s a place for principal-protected notes in banks,” Fradette notes. “While they don’t have the FDIC principal protections, they do have the guarantee of the issuer, and in many ways they can be a good alternative to traditional fixed income investments like corporate bonds. While there is some concern of suitability and reputation risk when banks sell these, of course, they have to be suitable and appropriate for the client. There will have to be a greater focus on suitability,” Fradette adds. Blank was more positive: “Certain types of structured notes will do well in banks,” he explains. “Some structured investments, where the risk/reward ratio is similar to mutual fund investments, and which are simple to understand are already doing well in the RIA space. We think they will do well in banks too. It’s only a matter of time.”

The Infinex Experience Do you earn enough revenue from your investment program? Infinex has the most competitive payouts in the industry. We provide your program with local support, and quarterly program consultations, supporting your mission to serve your clients and increase program profitability. We believe in providing you with tailored solutions to help your financial institution stand out in today’s changing marketplace.

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There are no “one size fits all” solutions for successful investment programs. Infinex is focused on the needs of financial institutions and their clients. For more information please call: Michelle Crume Ohio Bankers League, VP Infinex Investments, Regional Director 614.340.7622 | mcrume@infinexgroup.com

Award Winning Technology Platform

The Bank Technology Edition

Thinking Outside the Branch Technology Trends Driving Generation Y Customers Jack Vonder Heide President Technolgy Briefing Centers, Inc.

Ohio Record fall 2011

Most banks do an excellent job serving traditional customers. They offer checking, savings, CDs and money market accounts together with loan products, IRAs and a variety of investment choices. Branches are conveniently located and staffs are trained to be friendly and helpful. For customers who prefer the online channel, account information, bill payment and other basic functions are available. As traditional customers age, banks are beginning to focus on Generation Y as a key source for new business that will sustain the bank’s franchise in future decades. Bankers are quickly discovering that this generation is different…much different…than traditional customers. Serving this new generation well will require significant adjustments to existing strategies. Generation Y consists of those 70 million Americans born from the early 1980s through the mid 1990s. The oldest members are in their early 30s while the youngest are finishing high school. Generation Y grew up with technology. They are accustomed to receiving information instantly. Exams in many universities, colleges and high schools are now administered using tools like Scantron (www.scantron.com) and ExamView (www.einstruction.com). These tools allow tests to be scored in a matter of seconds with results available to students shortly after completion. In class, teachers ask questions and students respond using i>clickers (www.iclicker.com). The results are immediately displayed in pie-chart form on a large screen in the front of the classroom. Most members of Generation Y have never conducted traditional research using books and note cards. The Internet is their primary tool, providing instant access to dozens or hundreds of relevant source documents. Nearly every member of Generation Y has a cell phone or smartphone. Almost none have traditional landline phones in their homes. Text messaging is the primary method of communication between individuals and it is not uncommon to send and/or receive over 1,000 messages per month. Texts can be sent and viewed almost anywhere (at work, at home, in class, in church, etc.) without the need for an actual conversation. Many text while driving. Nearly ninety percent of Generation Y Americans have Facebook accounts. This is the platform of choice for social interaction. If someone decides to host a party, an invitation is composed on Facebook and sent electronically to invited guests. R.S.V.P.s are sent in the same fashion. During the party, guests take digital photographs with their smartphones and immediately upload them to Facebook, making sure to “tag” each photo with the names of individuals appearing in it. Banks wishing to attract Generation Y customers must adapt their products, services and delivery to provide accurate, high-value, actionable information in a friendly, flexible and instantaneous manner using the same communication channels customers use for other parts of their lives. Mobile banking, person-to-person payments and point of sale payments using a smartphone are essential offerings. In addition, a robust, regularly updated Facebook page gives Generation Y prospects the sense that your bank is a “cool” place to do business. Many

banks also use Twitter to broadcast valuable information quickly. YouTube channels allow the bank to provide instructional videos on various financial topics. Perhaps the most attractive service a bank can provide to this new generation is online personal financial management (PFM). Over five million Generation Y consumers now use Mint (www.mint.com) to manage their financial lives. There are dozens of other PFM tools on the market and in various stages of development. The customerâ&#x20AC;&#x2122;s financial transactions (deposits, card swipes, checks, savings, 401K contributions, etc.) are loaded into the PFM tool in real time. The customer can provide financial goals and the tool will then provide step-by-step instructions for achieving those goals.

For example, the customer may set a goal of reducing existing student loan debt by $5,000 in the coming year. The PFM tool may suggest that the customer reduce monthly restaurant meals by one third and cancel Showtime or HBO on their cable TV subscription, applying the savings to the debt reduction goal. Since the tool has access to every part of the userâ&#x20AC;&#x2122;s financial life, it can provide a wide variety of detailed, customized options. Banks that provide a rich PFM solution, state of the art mobile capabilities and a robust Facebook presence should attract plenty of Generation Y customers. As your bank rolls out new offerings that customers find highly satisfying, it is important to ask those satisfied customers to share their feelings with others. Services

like Yelp (www.yelp.com), Yahoo Local (local.yahoo.com) and others provide a place for consumers to evaluate their experiences with banks, restaurants and other establishments. Generation Y consumers trust these reviews and regularly consult them prior to doing business. Generation Y is the future. Itâ&#x20AC;&#x2122;s important to develop a sound, detailed strategy to attract and retain this key segment of potential customers. About the author: Jack Vonder Heide is one of Americaâ&#x20AC;&#x2122;s leading authorities on technology and advises banks around the country. He recently gave a keynote presentation at the 2011 OBL/ILFI Joint Convention in Baltimore. Jack may be reached at jv@tbchq.com or 630-789-8222.

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fall 2011 Ohio Record

the Next Generation In the summer of 2010, the OBL Board’s Member and External Affairs Committee began exploring opportunities to engage the next generation of bank leaders. It was clear to them the long-term health of our industry relied on embarking on such a mission. The vision resulted in an exciting new initiative that launched in July – the Next Generation Advisory Board. NGAB is the venue to ensure the longevity of the Ohio banking industry. Populated by 14 young bankers nominated by their CEOs, NGAB will engage the next generation of bank leaders by exposing them to the Ohio banking industry’s most important endeavors so that they can be developed into go-to bench strength while we leverage their expertise and insights to find solutions. We owe it to our members to maximize peer-to-peer networking opportunities so that they are never flying blind. That is to say there is a wealth of insight within the industry that must be better captured and disseminated so bankers can best prepare for the next exam and make informed decisions on the purchase of the latest technology or contract for that new service to make their institution that much more responsive to customer needs. Additionally, the OBL Board of Directors has made it clear they are looking for fresh ideas. The next generation holds the key. The OBL board’s First Vice Chairman – currently Court Haning chairman, president and CEO of the Peoples National Bank of New Lexington – will liaise between NGAB and the full OBL board. Michelle Crume and I will serve as the OBL staff point persons. I expect NGAB to push their association in some new and exciting ways. Since their July launch meeting, the inaugural group of young bankers has been building NGAB from the ground up.

Ohio Record fall 2011

Rather than being prescriptive, the OBL Board handed them a “blank canvas.” They determined their leadership structure and organized a handful of committees they saw as priority areas to focus attention. These energetic bankers are still hard at work developing a mission, deciding on term limits, and shaping other critical governance structures. They are also formulating lists of issues and tasks for their committees to spearhead. With two meetings under their belts and a series of committee meetings conducted, the impressive group has hit the ground running and is taking this endeavor seriously. They bring a refreshing portfolio

Chairman Sean Whalen, US Bank Vice Chairman Nichole Zesiger, First National Bank of Dennison Recorder Maura Clougherty, The Farmers Citizens Bank Krista Beyke, Minster Bank Elizabeth Daniels, Mechanics Bank Twila Demongeot, Antwerp Exchange Bank Kimberly Giddings, Andover Bank

Michael J. Adelman Vice President of State Government Relations

of perspectives from banking and other professional pursuits. Their energy is infectious and their interest in being more involved for the Ohio banking industry’s benefit is promising for our future.

Erin Krawsczyn, Farmers Bank Matt Layer, LCNB National Bank David Malanowski, First Federal Savings of Lorain Joenee Purcell, Liberty National Bank Kelby Schmucker, Farmers & Merchants Nicole Sinclair, American Savings Bank Jill Taylor, The Peoples National Bank

NGAB has organized into five committees: •Government Relations – Chair: David Malanowski. •Education – Chair: Joenee Purcell. •Communications & Technology – Chair: Nichole Zesiger. •Workforce Development – Chair: Erin Krawsczyn. •R&D – Chair: Matt Layer.

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fall 2011 Ohio Record

Boosting your Bottom Line with Community Banks get New Option for BOLI and Executive, Director Benefits BY JAMES THURSTON, EDITOR

The Ohio Bankers League recently endorsed Banc Consulting Partners – a firm made up of the most experiencec independent consultants from the former Clark Consulting – as its exclusive provider of Bank Owned Life Insurance and executive and director benefit plans. The firm will continue to serve Ohio community banks in due diligence on Bank Owned Life Insurance as well as advising member institutions on how to attract and retain top executive and director talent. “Lou Moore, managing principal of Banc Consulting Partners and has served the Ohio community bank market well for nearly 20 years,” said OBL BankServices Executive Director Mike Baker. “His experience and attention to building long term relationships will serve OBL members well.” Banc Consulting Partners is a national firm with two offices in Ohio. The firm currently has five principals and a stable of experienced producers and client relation-

ship personnel located in Cleveland and Columbus, OH, Atlanta, GA, Birmingham, AL, Moorestown, NJ and Minneapolis, MN. Collectively, the firm boasts over 500 community banking clients and nearly $2B of BOLI under management. “Our focus is simple; our clients come first,” said Lou Moore, “We will continue to assist clients with their BOLI needs and offer creative solutions for rewarding and retaining community bank executives and directors.” OBL Chairman Paul Reed, a Banc Consulting Partners BOLI client, cited the firm’s customer service and attention to detail as what makes it stand out from other providers. “Lou Moore is a trusted partner to Farmers Bank,” said Reed, president & CEO of Farmers Bank and Savings Company in Pomeroy. “He helps us meet key financial goals, manage benefit liabilities and enhance shareholder value.” “Our dedication to client service will

| www.bancconsultingpartners.com

not be matched in the industry,” commented Amy Strapp a 20 year client relationship manager located in Ohio. “To date we have converted nearly 100 percent of our current client’s plan administration functions without a glitch. When our clients need answers, we can provide them on a real-time basis.” Moore added, “We are an Ohio company, that employs Ohio residents and will remain focused on Ohio community bank relationships”. For more information contact Moore at (440) 356-8860 or Baker at (614) 340-7600.

Insured Cash Sweep A New Savings Product Providing Community Bankers With A Competitive Edge BY ERICH BUCKENMAIER, REGIONAL DIRECTOR, PROMONTORY INTERFINANCIAL NETWORK, LLC

The economic turmoil and uncertainty of the last few years continue to have a major impact in the financial marketplace. The appetite among institutional investors for safe and liquid investments is strong and will likely remain so for the foreseeable future. The Federal Deposit Insurance Corporation has put in place regulations that will give some depositors extra protection through 2012. Under its new rules,

Ohio Record fall 2011

through December 31, 2012, the FDIC will provide unlimited deposit insurance coverage for certain qualifying noninterestbearing transaction accounts, including noninterest-bearing traditional checking accounts. But in order to take advantage of this protection, a safety-conscious investor has to choose to keep money in an account that does not earn any interest. Fortunately, banks that are members of the Promontory Network can offer their

customers an alternative – ICS, a savings product that provides access to multi-milliondollar FDIC insurance and interest. Using Promontory’s new ICS (or Insured Cash Sweep) service, banks can provide a savings product to businesses,

nonprofits, and many other large-dollar depositors, and can keep the full amount of deposits on balance sheet through a true reciprocal deposit arrangement. Through ICS, customer funds can be swept from a transaction account at their relationship institution into interest-bearing savings accounts (money market deposit accounts) at multiple banks. And each relationship bank maintains full control over its customer relationships and sets the rates it offers to customers for funds placed through the service. ICS is a new tool that can help community banks to compete head-on with the largest financial institutions for money market mutual fund monies that may be “in play.” Additionally, ICS enables participating banks to compete on dimensions other than price – in particular, by featuring access to a level of security greater than any bank (regardless of size) can offer on its own. While a bank’s current suite of cash management products may include the basics, adding ICS can help financial institutions take care of their most valuable customers. With ICS, banks can offer large-dollar depositors, such as businesses and public funds (in states that permit the use of the service) all these benefits at once: yield, peace of mind, and the ability to make multiple monthly program withdrawals. And unlike money market mutual fund sweeps and short-term bond funds, ICS lets banks keep the full amount of customer funds on their balance sheets. Additionally, when customers adhere to program limits, ICS reduces many of the ongoing collateralization and tracking burdens associated with repo sweeps and collateralized deposits – making ICS a great alternative from both the bank’s and the customer’s perspectives. All of this makes ICS the most convenient deposit sweep service. If you want to learn more about this great new service, visit Promontory’s website at www.promnetwork.com, or contact Erich Buckenmaier at 866-776-6426, ext. 3354 (toll-free), or by email at ebuckenmaier@promnetwork.com.

fall 2011 Ohio Record

Coming together to tame benefit costs. In today’s competitive marketplace, benefits have become as important as compensation when hiring or retaining the best and brightest. But health insurance doesn’t come cheap. The Ohio Bankers Benefits Trust was developed in 1952 to mitigate health benefits costs by bringing bankers together. When we harness the collective resources of Ohio’s banks and thrifts, everyone wins. For more information about the OBL health plan options contact: Benefits Manager Gary Sutter at 614-340-7615 or gsutter@ohiobankersleague.com

OHIO BANKERS BENEFITS TRUST

Ohio Record fall 2011

or the Newest Member of the OBBT Team, Plan Administrator Erin Husslein at 614-340-7617 or ehusslein@ohiobankersleague.com

Working for Banks and Bankers

The Bank Technology Edition

Locking the Back Door You know it’s bad when the Simpsons cartoon series can instruct us on security. But here we are, considering the example of Montgomery Burns, the Simpson’s maniacal owner of a nuclear power plant, as he runs a gauntlet of body scans and password challenges required to enter his palatial office. Once inside, Burns notices a rickety screen door open to an unprotected field behind the plant. I mention this in the context of our most recent hacker headline – “Google Mail Hack is Blamed on China” (Wall Street Journal, June 2, 2011). After reading through the ominous description of a brewing international incident, I saw that the victims had merely been tricked into sharing their Gmail passwords through a phishing attack. The irony really struck a nerve. Security mongers have built careers out of characterizing cyber criminals as super smart 24/7 monsters intent on one thing – gaining access to your online credentials to steal everything precious in your life. But in reality, the criminals are merely exploiting our inattentiveness. How many times has your bank said it will never ask for your user name, password, social security number, date of birth or other personal information in an email? How many times have you supplied that information anyway? In a mock phishing experiment, the New York Office of Cyber Security & Critical Infrastructure Coordination sent fake phishing e-mails to nearly 10,000 state employees with the goal of tricking them into surrendering their passwords. More than 75 percent of the recipients opened the e-mail, 17 percent followed the

link, and 15 percent attempted to enter their passwords. How can any anti-phishing software and detection service compete with a user’s willingness to open bogus emails, follow bogus links, and enter our online credentials? It is the literal equivalent of Montgomery Burns’ rickety screen door behind his super-secure nuclear power plant. Given our tendency to overlook the most basic red flags, how can a bank or credit union help protect consumers from cybercrime? One answer may be training. Just as banks and IT companies regularly engage in security training for employees, you might consider training your customers as well. Clever online games have been designed to educate consumers about links to fake websites and other security risks. Training products, such as Wombat Security (www.wombatsecurity.com) have been shown to reduce the likelihood of users falling for a phishing attack by approximately 50 percent. Rather than jump on the security training bandwagon as today’s cure-all, banks and credit unions should think of Wombatsecurity and other training providers (Terranova -www.terranova.com) as ways to freshen their approach to security awareness in order to keep customers engaged. After all, the public tires easily, and eventually, even the most creative solutions will become wallpaper – increasingly easy to ignore. You might consider including information from ‘OUCH!’, the monthly SANS Institute newsletter (www.securingthehuman.org), to help your customers through practical issues, such as ‘Securing

Kevin Hamel Security Manager COCC, Inc.

Passwords,’ ‘Staying Secure while Traveling’ and ‘Using your Smartphone Securely.’ You might also consider holding a security contest and awarding the winner an eye-popping prize – something to grab everyone’s attention. The point is to make security a central focus of your institution’s service delivery. Frankly, it has to be. The prevalence of portable devices and the spread of social media have created more systems and platforms to secure than ever before. The days of securing a customer’s technology with simple antivirus software are long gone. If you succeed in enlisting your customers in your security efforts, your bank or credit union will become more of a beacon of safety and soundness for your customers’ assets. That’s a great position to be in, because you will hold their trust for generations. Unfortunately, the alternative is an unsustainable, Simpsons-style irony – the hyper-secure front entrance sabotaged by a rickety back door to unprotected cyberspace. Kevin Hamel manages Security for Avon, Conn. based COCC, Inc., (www.cocc.com), a 44 year old firm and OBL affiliate member specializing in outsourced information technology and support.

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Ohio Record fall 2011

CELINA William Martin was appointed as president and CEO of Mercer Savings Bank. Martin replaced J. Douglas Temple, former president, CEO and director of the bank, who announced his retirement after 30 years at the helm.

CLEVELAND The Federal Reserve Bank has announced the following promotions/appointments: Maria Bowlin to assistant vice president in the Facilities Management Department; Matthew Hite to assistant vice president in the Financial Support Services Department; Paul Kaboth to vice president and community affairs officer in the Community Development Department. KeyBank has announced that Peter Wheeler has joined its Global Treasury Management Group as senior vice president and healthcare segment team leader. Wheeler will be responsible for managing a sales team to support Key’s healthcare industry vertical. He will also be responsible for working with the product management team to create cash management solutions to meet the specific needs of the healthcare industry.

COLUMBUS Huntington Bank announced that Helga Houston is joining the bank as chief risk officer, replacing Kevin Blakely when he retires at year end. She will join Huntington’s leadership team and report to Stephen D. Steinour, chairman, president and chief executive officer of Huntington.

DELAWARE DCB Financial Corp, parent holding company of The Delaware County Bank and Trust Company, Lewis Center, Ohio (the “Bank”) announced that Ronald Seiffert was appointed president and Ronald Seiffert chief executive officer of DCB Financial Corp and The Bank. Seiffert was also elected to the board of directors of both DCB Financial Corp and The Delaware County Bank and Trust Company. Seiffert has over 30 years of banking and leadership experience. He previously served

as executive vice president and national head of business banking for Bank One Corporation. Prior to joining Bank One, Seiffert established a 23 year career with Huntington Bancshares, Inc., which culminated in his appointment as vice chairman, a position he held from 1997-2002. Seiffert has experience in leading every major line of banking including commercial, retail, mortgage and private banking services. The bank also announced that Brian Glidden was elected first vice president of the Central Ohio Chapter of Risk Management Association.

GAHANNA Scott J. Hinsch, Jr. has joined F & M Credit Services as managing consultant.

UPPER ARLINGTON Matthew Hohl was promoted to vice president at The Arlington Bank. Hohl joined the bank in 2004 as its loan servicing manager. He was promoted to assistant vice president Matthew Hohl in 2008. In addition to his current responsibilities as vice president, managing the loan servicing department, Hohl serves on the bank’s compliance, information technology and asset classification committees.

TIPP CITY Dr. Andrew Davidson, O.D., has been elected chairman of the board at Monroe Federal Savings. Dr. Davidson is an optometrist and co-owner of the Tipp Eye Center. He is a graduate of Ohio State University and has been a member of Monroe Federal’s Board since 1995. Dr. Davidson’s election followed the retirement of previous Chairman George Timmer.

WEXFORD OBL affiliate member S.R. Snodgrass, A.C is pleased to announce the addition of a new shareholder, Michael Peduzzi, CPA. Peduzzi is a principal with the firm’s Consulting and Outsourcing Groups in Michael Peduzzi

their King of Prussia, PA office. He plays a key leadership role in the firm’s Eastern Pennsylvania and Middle Atlantic markets. His previous accounting and financial management experience includes executive management and corporate audit positions at SEC-reporting financial institutions, along with serving as a CFO at a college.

YOUNGSTOWN The Home Savings and Loan Company announced the following appointments/ promotions: Kevin Culp to commercial lending officer serving the Cleveland market area; David Pelz David Pelz to area sales manager and senior mortgage loan consultant.

ZANESVILLE The Community Bank and CommunityBanc, Inc., the bank’s holding company, named Terry Goss as chairman of the board and Michael Steen as vice chairman of the board. Terry Goss Goss is the owner and President of Goss Supply Company, serves as vice president of the Zanesville Museum of Art Board of Directors, and board member of the Muskingum/ Zanesville Chamber of Commerce. Michael Steen Steen joined The Community Bank as CEO and president in 2001 and was appointed to board of directors in 2006. He has 35 years of experience in marketing and management of financial institutions, serves as board member of the Muskingum/Zanesville Chamber of Commerce, and is treasurer and board member of the Muskingum County Community Foundation.

fall 2011 Ohio Record

Focus On…The Andover Bank The Andover Bank President and CEO and OBL Board Member Martin Cole has announced the following promotions: Diana Engelhardt was promoted to executive vice president of finance and operations. Engelhardt is a graduate of Youngstown State University with a bachelor of science degree in business administration with a major in accounting. She is also a Certified Public Accountant. She began her Andover Bank career in 2007 and has worked for 20 Diana years in financial accounting and auditing for Engelhardt several financial institutions and accounting firms. She is a 2009 graduate of LEADERship Ashtabula. Diana lives in Erie with husband, Rob and sons Christopher and Jonathan. Stephen Varckette was promoted to executive vice president of lending and retail banking. Varckette began his Andover Bank career in 1995 as branch manager of the Jefferson Banking Center and has worked in the financial services industry for 24 years. He is a graduate of Kent State University at Ashtabula with an associate’s degree in Business Management. He Stephen is a 2001 alumnus of the Graduate School of Varckette Banking at the University of Wisconsin.

Kimberly Giddings was promoted to senior vice president of operations. Giddings has worked in the banking industry since 1997, and began her Andover Bank career in 2001 as the Austinburg Banking Center manager. She is a graduate of Edgewood Senior High School and holds a Bachelor’s degree from Edinboro University of Kimberly Pennsylvania. Giddings has completed the OBL Giddings School of Consumer Lending, is a 2007 graduate of the OBL Blythe School of Banking and 2008 graduate of the Community Bankers of Ohio Emerging Leader program. Daniel Weber was promoted to vice president of branch administration. He began his Andover Bank career in 1995 and has served the Jefferson community as the Jefferson Banking Center manager since 2000. He is a graduate of Jefferson High School and holds a Bachelor’s degree in Finance from the University Daniel of Akron. He is a licensed insurance agent and Weber has completed the Consumer and Real Estate Lending Essentials program through the OBL as well as the Blythe School of Banking. Dan is a 2003 graduate of LEADERship Ashtabula and is a Board Member for the Jefferson Chamber of Commerce. He lives in Jefferson with wife Theresa, daughters Courtney, Brittany, son-in-law Ben and grandson, Hunter.

Ohio Record fall 2011

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