Ohio Bankers League Summer 2011 Magazine by Jeff Vanik

summer 2011 issue

The Official Magazine of the Ohio Bankers League

Charting a Course to Success OBL/ILFI JOINT CONVENTION BALTIMORE INNER HARBOR SEPTEMBER 8-11

INSIDE THIS ISSUE

OBL CEO SYMPOSIUM

IN PICTURES

DO YOU UNDERSTAND YOUR OWN RISK RATING SYSTEM? SURCHARGE-FREE ATMS GIVE YOUR CUSTOMERS WHAT THEY WANT

Ohio Record summer 2011

summer 2011 issue

Contents A Comprehensive Resource for the Ohio Banking Industry

Other News

4 Chairman’s Corner 8 Random Thoughts 16 Steps of the

Features

Creating a Sense of Community 2011 CEO Symposium in Pictures

Do You Understand Your Own Risk Rating System?

Be Aware of Potential Liability When Using Social Media

Keeping the Ohio Banking Code One of the Most Modern in the Nation

Creating a Feedback Loop

Statehouse

20 The Banker’s Calendar 28 Window on the Capitol

45 Around the Industry

New Feedback Initiative to Aid Regulatory Transparency at Federal Level

Charting a Course to Success OBL/ILFI Joint Convention

Managing Compliance Risk How to be an Effective Player in the Regulatory Process

34 36

State of the Banking Union, in Ohio that is Surcharge-free ATMs Give Your Customers What They Want

Ohio Record

Get Ahead of the Crime Curve with the FinCrime Network

BancVue® Proud To Partner With Ohio Bankers League To Help Grow Community Banks

Web App Helps Connect Ohio Lenders with Ohio Small Businesses

summer 2011 issue summer 2011 Ohio Record

chairman’s corner Taking the Boom with the Bust The 1880s brought boom time in the United States. Railroads began to stretch into the badlands of the west, giving frontiersmen access to a new wealth of gold and silver in far flung places like Colorado and New Mexico. My great grandfather, W.F. Reed, was a community banker in those heady times. He followed the railroad until it stopped in Syracuse, Kansas, where he set up a community bank to serve the pioneers who formed the backbone of this economic resurgence. But with boom came bust. The railroad expansion came too quickly and the captains of industry who bankrolled it began to drop like flies. The panic of 1892 was not a good time to be a banker. The bank was getting by, but in order to survive, W.F. had to look at things differently. Branching out into commodities, he distributed alfalfa seeds, brokered land and cattle, and sold fence posts and barbed wire to farmers. This ingenuity helped him navigate the choppy waters of the spluttering economy and come out on the other side intact. With a new century came better times, and my grandfather returned to where he was most comfortable; behind his desk in the bank. There is a point to this brief window into the Reed family history. As bankers, we are only too familiar with looking adversity in the face and coming out of it stronger. The battle on interchange fees is only the most recent example. While we managed to persuade a majority of U.S. senators to unwind the harmful Durbin Amendment, it was not enough to counter the big box retailers’ campaign of misinformation. So in some shape or form, debit card price caps will come into being on July 21. But just like my great grandfather, we will find the alfalfa seeds and fence posts of the 21st century. That is what I love about

Ohio Record summer 2011

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

our great industry. We always find a way to succeed, even when things are at their darkest - and we will do so again.

try speaks with one voice we can impact national policy and this puts us in good stead moving down the road.

Trip to the Senate

Future Leaders

Earlier this year I was invited to testify on interchange before the U.S. Senate Banking, Housing & Urban Affairs Financial Institutions Subcommittee. I explained to our esteemed senators that the Durbin Amendment would not only damage our great banks and thrifts, but also hurt Ohio consumers. I was not the only banker testifying in the Senate that day. The American Bankers Association and The Independent Community Bankers of America were also both represented. The thing that struck me about the other two organizations was the ‘A’ word they both shared - America. Of the more than 60 state banking associations in the country, only one was asked to testify – the association from Ohio. As an association we are very humble. Sometimes too humble. But this kind of statement underlines the role the OBL plays in forwarding the industry’s agenda, not just at the state level but in the corridors of power on Capitol Hill. In spite of the fact that I was speaking on behalf of a smaller organization, thanks to the background work of OBL President Mike Van Buskirk and SVP Jeff Quayle, I felt as well prepared and as well received as any of the witnesses.

The last edition of Ohio Record featured a story about my junior board of directors and in doing so highlighted a cause that is very important to me – engaging the next generation of business and banking leaders. OBL Vice Chairman Court Haning – who chairs the association’s Member and External Affairs Committee – and OBL VP Mike Adelman are currently setting up a Next Generation Advisory Board for the OBL. Made up of the brightest and best of young bankers from institutions around the state, this group will help engage tomorrow’s leaders in the industry’s collective efforts. Be it grassroots advocacy, educational opportunities or networking, this is something we are very excited about.

Moving Forward Even though we obtained the support of a solid majority in the U.S. Senate, we did not win the interchange battle with the retailers. The fact that we converted 18 votes on the issue since the original vote last July however, will impact future congressional debate. I want to thank the Ohio bankers who sent more than 500 messages to our senators. When the indus-

Convention 2011 I hope you plan to join me and our friends from the Illinois League of Financial Institutions at our 2011 Convention at the Inner Harbor, Baltimore. I always hated Baltimore because they stole the Cleveland Browns but after a trip to the Inner Harbor, I realized it was actually a fun place. This year’s convention will be another great event at a top-notch location with compelling speakers. Melea Wachtman’s article on p.22 will give you the full breakdown, but this year, you will find a great location and networking, along with the usual array of interesting and useful presenters, all in one place. I look forward to seeing you there.

Creditors’ Rights Series Kicks Off in July A key measure of a financial institution’s health lies in the strength and quality of its assets. Collection and recovery actions are a vital part of preserving and maintaining that health. Effective collection and recovery actions, however, encompass far more than traditional asset searches, cold calls and demand letters. 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 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

A three-part seminar series, presented by OBL Affiliate Member, the Meyer & Kerschner, Ltd. law firm, begins this summer and will cover the major components of collection and recovery actions. Introduction to Banking Law and Effective Collections Friday, July 29, 2011, 10 a.m. – 3 p.m. Learn collection, recovery and bankruptcy basics, including when and how to garnish, replevin, and protect your bank in bankruptcy. Advanced Asset Recovery Techniques for Lenders and Collection Professionals Friday, Sept. 23, 2011, 10 a.m. – 3 p.m. Gain knowledge of advanced techniques to improve your bank’s recoveries in litigation and bankruptcy such as tips to get a debtor to pay for his own bankruptcy, freezing accounts and more. Creditors’ Rights Strategies for Complex Bank Litigation and Commercial Loan Workouts Friday, Oct. 21, 2011, 10 a.m. – 3 p.m. Understand large-dollar commercial loan workouts, complex lenderliability defense and contested bankruptcy proceedings. “Strong fundamentals are vital to successfully collecting money and protecting a bank’s assets,” said Karl C. Kerschner, Meyer & Kerschner, Ltd. “These courses will provide valued added education to collectors, managers, officers, and directors on topics that will improve the health of their banks and their bottom line, all while avoiding unnecessary liability.” Sessions may be attended individually for $129 or as a series for $349. Check the OBL Web site for content details and online registration, or contact Julie Kiplinger at (614) 340-7612 with questions.

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.

summer 2011 Ohio Record

random thoughts Checks & Balances Crucial for a Healthy Economy I hail from the school that believes the Federal Reserve System needs to be independent from political influence when it conducts monetary policy. However, our recent history argues for more public discussion about the definition of independent as it applies to government agencies. Many of us were confronted somewhere along the way in school with James Madison’s famous Federal Paper #10 in which he wrote about the importance of control of “faction” in arguing for ratification of the newly proposed U.S. Constitution. We largely take for granted the existence of checks and balances in every level of American government today. We shouldn’t. I was also taught that the federal financial safety net applied only to those institutions covered by – and who paid for – deposit insurance. In return for that insurance and access to the Federal Reserve System as a lender of last resort banks submitted to rigid rules of operation and paid fees, not just for deposit insurance, but for frequent examinations by teams of government auditors. Other financial institutions, which didn’t get the benefits, avoided most of those costs of doing business. That’s what most of us were taught. It has turned out to be fiction. The Wall Street Journal Economics Editor David Wessel wrote in his book In Fed We Trust, “After Bear Stearns the line between Fed-protected deposit-taking Main Street banks and the less tightly regulated, more leveraged Wall Street investment banks was obliterated.” When the Bush Administration first proposed TARP, an Ohio Congressman called me to ask, “What’s going on? Is this really needed?” My answer was that I didn’t know whether TARP would work, but that the markets globally had been frozen by a panic I had not seen in my professional lifetime. That panic triggered an avalanche of unprecedented actions. As we look back I

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believe we need to carefully consider how we make decisions in a financial panic and whether we need better safeguards against a very small group of individuals making bad choices. The perspective of history will help us understand whether what the Fed did averted greater economic wreckage. That’s not really the question I ask. Rather, do we have checks and balances that can allow policy makers to be nimble in a true crisis, but make it less likely that a “faction” can overrule the economic interest of the majority? I confess when the Fed began lending to non-banks, and banks around the world for that matter, I didn’t think it had the legal authority. The Fed pointed me to the words “unusual and exigent circumstances” in the 1913 Federal Reserve Act. Does that mean if the Federal Reserve finds such circumstances it can ignore all of its traditional legal limits? New York Sun Editor Seth Lipski wrote in a recent opinion piece published by the The Wall Street Journal, “Wouldn’t it be nice to have among the governors of the Fed someone who thinks about money not in terms of theories but in the constitutional terms in which the Founders thought?” Today the banking industry is governed by another federal agency, a new one, largely free of checks and balances. The Financial Consumer Protection Bureau, minted by Congress in the Dodd Frank Act, has sweeping authority to issue rules on consumer financial products and services although insurance, securities, and lending by car salesmen were all exempted by Congress. My question relates to its governance structure. It is to be headed by a director who has sole authority to issue rules. It was clear Congress wanted the bureau to be independent. It placed the bureau within the Fed, required the Fed to pay its bills, then denied the Fed any control over its operations. President Obama has appointed

Michael M. Van Buskirk President & CEO

Harvard law professor Elizabeth Warren, a long-time advocate for the concept of the bureau, as a special assistant to him and to Treasury Secretary Timothy Geitner to build the bureau. She has argued there are checks and balances, in that any rule can be overturned by a vote of the Financial Stability Oversight Council. Technically that’s true. Practically, I am not so sure. The Dodd Frank Act stipulates to overturn a rule proposed by the FCPB, two-thirds of the council’s nine members must conclude that the regulation “would put the safety and soundness of the United State banking system …at risk”. In itself the potential collapse of the banking system is a very high bar. Then consider that the FCPB director is a member of the council, presumably likely to vote for its rule. The heads of the Security and Exchange Commission, the Commodity Futures Trading Commission and an independent expert on insurance appointed by the President all are voting members. None of whom are required to have or provide any real insight into banking. The ninth member, the head of the Federal Housing Finance Agency, would presumably have only a very narrow insight. What about a new rule whose costs greatly outweigh its benefits? Would it be overturned? That seems very unlikely. Then finally consider that a new rule can only be overturned if a request to do so is filed within ten days of its initial publication in the Federal Register. Presumably that would have meant that if the design flaw in the Titanic had been discovered ten days after the blue prints were blessed the ship would still have sailed. The history of federal bank law in the United States is that we write the rules in the middle of a crisis. While the motivation is clear, so is the fact that emergencies don’t allow careful deliberation. Wouldn’t it be nice if Congress would thoughtfully review Dodd Frank to be sure one or more Titanics are not about to set sail?

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IN PICTURES

Creating a Sense of

Community

at CEO Symposium

Donned the OBL’s largest networking event, the OBL CEO Symposium drew more than 150 bankers, executives and regulators to the Hilton Columbus at Easton at the 9th annual program, May 10 & 11. The theme – addressed by both opening and closing keynote speakers – spoke about the importance of creating a sense of community and to jump-starting the economy here in Ohio. “Our great state is where the U.S. economic recovery will take shape,” The Ohio State University President Gordon Gee told attendees in his concluding remarks. Gee said the catalysts for this renaissance will “not be on the East Coast or in California, but here in the Midwest, where a fundamental resetting of the U.S. economic system will start.” Gee, the son of a banker, told the attendees, “You are at the heartland of your community; where the American dream is born … lives … and can die.” He noted that more than any other place he has lived, “Ohioans love Ohio … and they want to be here. We need to keep them here.” He stressed the importance of educating them; investing in their ideas; creating jobs and opportunities; and growing the economy. Gus Whalen, president & CEO of the Warren Featherbone Foundation, provided a similar sentiment at the opening luncheon as he said, “The only profit a company can make is the community it creates” while reminding attendees that “We are interdependent, not independent.” Interactive sessions also focused on ways to generate non-interest income, as well as the latest regulatory updates during the popular Regulatory Panel Discussion. The FDIC’s Anthony Lowe told bankers the worst is behind them and said, “We are starting to see the trend with regards to the number of problem institutions flatten out and almost become negative. The number of problem banks will likely be the smallest in three to four years (when the FDIC next reports them).” The Fed’s Stephen Jenkins added that thanks to a survey the OBL conducted last year on exam practices, the central bank has redoubled its efforts to ensure consistency among examiners. Ohio Superintendent of Financial Institutions Chuck Dolezal said that communication is the key, while Deputy Superintendent Kevin Allard noted, “When examiners are in your shop – engage them until you understand them.” Other panelists included OCC’s Bert Otto and the OTS’s Joanne Haakinson.

Susan Poling OBL Education Manager

The Regulatory Panel Discussion was as popular as ever with candid comments and Q&A from bankers

THANK YOU TO CEO SYMPOSIUM SPONSORS: OBL BankServices; BKD LLP; Banc Consulting Partners; Crowe Horwath; Gardiner Allen DeRoberts; Keefe, Bruyette & Woods; Ohio Capital Corporation for Housing; Plante Moran; and Young & Associates, Inc.

SAVE THE DATE! 8

The 2012 OBL CEO Symposium will be held Thursday & Friday, May 17 & 18, 2012 at the Hilton Columbus at Easton.

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Commodore Bank’s Jeff Danford and Park National Bank’s Dan DeLawder

OCC’s Bert Otto and OTS’s Dan McKee led a one-hour briefing on the pending merger of the two agencies at the OBL Training Center prior to the Symposium. More than 35 bankers took advantage of the open forum

Perpetual Federal Savings Bank’s Mike Melvin and Rick Hatcher, Citizens Federal S&L Assoc. of Bellefontaine

OBBT Benefits Manager Gary Sutter talks shop with OBL Board Member John Malanowski, First Federal Savings and Loan Assoc. of Lorain

OBL Board Immediate Past Chairman Tom Moore joins First Vice Chairman Court Haning and current Chairman Paul Reed for a moment with Gordon Gee, president, The Ohio State University following his comments

More than 150 industry executives attended the opening lunch with Gus Whalen who shared trials, successes and transitions of his 125 year old family business that has sold everything from featherbones to rubber baby pants

OBL Vice President Michelle Crume (not pictured) led an informative panel discussion on Generating Non-Interest Income with Tony Caruso, Coleman Clougherty, Bud Vetter and Rick Tudor. Case studies were shared from Infinex, BancVue, Barrister Title Insurance and IAC Group

Participants gathered for the first session on Succession Planning

The Ohio State University President Gordon Gee, summer 2011 Ohio Record 9 a could-have-been 3rd generation banker, told attendees that Ohio is where the economic renaissance will occur during his closing keynote address

Do You Understand Your Own Risk Rating System?

Jeff Judy Principal, Jeff Judy & Associates and Bill Stansifer

Over the years, most banks have settled into a fairly standard configuration for their risk rating systems. Typically, there are a series of descriptions of risk profiles arranged in rank ordered bands. The credits grouped together in any given band are supposed to be fairly similar in the risk of loss they present to the bank. How many bands are defined, and the numbers assigned to them, vary from one institution to another. One bank may have a 1-7 system, another a 1-10 system and another may have subsets within a grade. A risk rating of “5” might be a serious concern under one system, and a decent credit in another. But outside of those minor details, the basic configuration for risk ratings, across the country, is pretty much the same. And that basic design is not all that these risk rating systems have in common. The other risk rating feature that many, many banks share is that they

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describe one risk rating system in their policy, but actually implement quite a different system. In fact, by drifting to a more compressed, simpler risk rating approach in practice, they have forfeited many of the benefits of their original strategies.

Remember High School? You have plenty of personal experience with grading systems similar to risk ratings. After all, in most of your high school and college classes, you expected your performance to be rated on a scale. Rather than numbers, however, the scale was probably A-B-C-D-F. Your teachers, your parents, and even your future employers used those ratings both as a record of recent performance and as an indicator of probable future performance. Your grades allowed others to determine where extra attention was needed to improve outcomes. How helpful would those grades have been to you and the school if your teachers had only assigned a “C” or an “F” to every student, ignoring the other possible grades? Wouldn’t a lot of information have been lost that could have been used to achieve better results? Using just a couple of risk ratings is very, very common, even when, say, a ten-point scale is “officially” available. Many banks essentially grade credits on a

pass/fail system, regardless of what is described in policy. In spite of crafting detailed descriptions for the various risk bands, the bank simply lumps all the credits that are not yet in trouble under one number, and those that are problematic in another. Oh, sometimes one or two other risk ratings have nominal amounts in them, but in essence, it is a pass/fail system. Using a pass/fail approach, mind you, is not a problem in itself. The issues are, first, that many banks have arrived there more or less by accident rather than by conscious decision. And, second, they may be taking significant efficiency hits by lumping all of their credits into just a few categories.

Pass/Fail: Decision, or Habit? Sometimes a pass/fail approach makes sense. When you were in school, it may have been wiser to give you physical education grades based on effort, rather than on the skill you achieved in a sport. If you did the work, you passed. It can also make sense when what you are interested in is the failure rate. For instance, an insurer may be focused on two “buckets,” based on whether the item in question represents a claim or not. And that includes insurers like the FDIC. Over the years -- and especially given

heightened attention from regulators more recently – the FDIC’s tendency to think in pass/fail ways has rubbed off on many banks, even if they started with a wider range of bands in their “grading” systems. Little by little, banks have drifted into the habit of relying on just a couple of risk ratings to cover the entire portfolio.

Risk Rating and Efficiency If you are using a pass/fail system through “drift” rather than through conscious design, you may have gradually given away significant benefits that come with a multi-band approach. Most banks originally designed risk rating systems to distribute resources more efficiently. Credits that needed closer monitoring would get more attention, and less effort would go into overseeing the lowest risk credits. More granular reserve calculations would enhance financial management. That does not happen with pass/fail scales. Banks waste even more effort when they prepare policies and procedures, incorporate them into systems, and train employees on their use, only to use a very different approach in the real world. Saying one thing and doing another is rarely a good thing in business, and is certainly not the recommended approach to managing risk! With a pass/fail approach, banks also forfeit any benefits a risk rating system might offer toward loan pricing. Pricing is a wishful thought for “bad” loans. But when the vast majority of “good” loans are in a single bucket, there’s not much room for pricing discrimination.

2011 OBL Lending Curriculum Continues Jeff Judy has teamed with another nationally-known presenter, John Barrickman, to offer 10 core lending courses throughout 2011 to teach both new and experienced lenders basic and advanced lending techniques. He encourages lenders of all levels to attend, as he said, “These programs will help bankers at both ends of the spectrum, as we teach young people how to do things right; and provide more experienced bankers an opportunity to focus on areas where there is less confidence and familiarity.” • Qualitative Analysis (with Jeff Judy) – Sept. 21 • Loan Structure (with Jeff Judy) – Sept. 22 • Problem Loans (with John Barrickman) – Oct. 26 • Best Practices in Portfolio Management (with John Barrickman) – Oct. 27 • School of Commercial Lending Essentials (with Jeff Judy) – Nov. 16 – 18

Find program details and registration online or contact Julie Kiplinger at (614) 340-7612.

Fit Risk Ratings to Purpose If pass/fail really does fit your approach to risk management, that is fine. Just make sure it is a conscious decision, one that is backed up by the documents and training that guide banker behavior. But if using several “risk bands” to group credits according to the resources they will demand would boost your efficiency, then review your risk rating practices to see whether you have drifted into a pass/fail approach. The goal is to re-establish a system that works to your benefit, rather than one that simply copies what others may be doing. With finer gradations and a more detailed picture of the risk bands in your portfolio, managing risk, monitoring credits, pricing loans, estimating future performance, and managing reserves and capital all become more efficient and more effective. And isn’t that why you built that risk rating system in the first place? Jeff Judy is principal of Jeff Judy & Associates, a nationally known resource providing training and consulting services to community banks. His associate Bill Stansifer is an expert on better portfolio management through enhanced data analysis, addressing needs he identified in his roles as Chief Credit Officer for FirstMerit Corporation and as Community Banking Credit Policy Officer for Norwest Banks. For help in reaping the benefits of an effective risk rating system, please contact Jeff at Jeff@JeffJudy.com, or at (952) 903-0113.

summer 2011 Ohio Record

Be Aware of Potential Liability When Using Social Media Otto E. Elkins, Jr. Senior Attorney ABA Insurance Services

Remember when social networking was something you did only at an afterwork cocktail party? Now, social networking is something people do on the computer. Everyone seems to be connected through online networks. There are 150 million Americans on Facebook, and untold numbers of others using Twitter, YouTube, MySpace, LinkedIn and other social networking platforms. There are many ways banks can use this new phenomenon as an effective business tool. This article takes a brief look at two ways banks can take advantage of

Ohio Record summer 2011

social media, and also identifies how such use may increase the bank’s potential for liability.

To Advertise Social networking platforms are a great way to advertise. They are inexpensive, immediate and reach a large audience demographic. Of course, there is the hip factor, too. But before rushing to create a Twitter account or build a Facebook page, banks need to understand that using social networking platforms opens them to the same advertising liabilities as traditional methods of advertising, as well as new ones. Obviously, banks can be subject to regulatory issues if they post untrue facts about their rates, fees or other practices on Facebook. What might surprise some, though, is that this could be true even if it was a customer, and not the bank, who posted the inaccurate message. Remember, social networking platforms, like Facebook, allow for two-way communication.

For example, say a customer posts the comment, “I love this bank, it never charges me ATM fees.” What if, in fact, the bank’s policy is to reimburse only certain account holders $20 a month of ATM fees? Conceivably, a regulator might contend that the bank is in violation of banking regulations for displaying a misleading advertisement because it did not correct the statement. In addition to regulatory issues, banks would want to be careful that what they intended to be positive publicity does not turn negative by having disgruntled customers complaining or bashing them on their own social networking pages. The best way to avoid both of these possibilities is to be vigilant. If a bank decides to engage in social networking, it needs to be actively involved. Staff should be assigned specifically with the responsibility to check the page multiple times a day, regularly respond to comments and concerns posted on its page, and delete or correct inaccu-

rate information. If a bank does not have the resources to devote to that kind of vigilance, social networking platform settings should be established to disallow customers from posting on the bank’s page.

To Communicate Social networking platforms are a cost-effective way to communicate with customers. The more methods a bank uses to communicate, the greater level of customer service they can provide which, hopefully, in turn leads to greater customer satisfaction. For example, suppose a bank used Facebook and Twitter to inform customers that a power outage had temporarily disabled the bank’s phones? Taking the extra step to get this message out to its customers demonstrates the bank’s commitment to a high level of customer service. However, as banks increasingly communicate with customers through social networking platforms, customers may become more susceptible to phishing and smishing scams (smishing is phishing via text messaging instead of email). As customers become use to receiving communications from their bank via Facebook or text messaging, they become less suspicious of phishing or smishing messages. A bank should regularly remind customers that they will never request account information through texts or emails. Also, customers should be warned to confirm that a callback number in a message purporting to be from the bank is the bank’s actual number. These days, when customers are networking on the Internet from home, or on their smart phones in the line at the grocery store—indeed, virtually anywhere and everywhere—social networking platforms offer new, cost-effective, methods to grow and strengthen a bank’s business. But with these increased opportunities comes additional potential liability. A bank must be mindful of this as it considers if and how it will use social networking platforms. As a Senior Attorney with ABA Insurance Services, Otto E. Elkins, Jr. helped develop our new Social Networking Endorsement. Prior to joining our group when it was Progressive Insurance in 2004, he graduated summa cum laude from Cleveland-Marshall College of Law in 2001 and practiced law at Ulmer & Berne, LLP.

summer 2011 Ohio Record

KEEPING THE OHIO BANKING CODE ONE OF THE MOST MODERN IN THE NATION Superintendent, OBL Convene Working Group to Review State Banking Code Jeff Quayle OBL Senior Vice President & General Counsel

Governor Kasich has made it a priority to foster a strong banking industry in Ohio, seeking input from the OBL and Ohio bankers to make this goal a reality.

Ohio Record summer 2011

The Department of Financial Institutions and the Ohio Bankers League have formed a task force to update Ohio law as it applies to commercial banks, savings banks and savings associations. The task force is similar to a previous joint effort in the 1990s, except this time our mission will be much broader, tackling issues impacting all state chartered institutions. This project is a part of Governor Kasich’s drive to make Ohio a better place to do business. The OBL leadership is pleased that the governor has recognized that a healthy financial service sector is crucial to economic growth and job development. In addition, this task is consistent with the Ohio Bankers League’s overall goal of strengthening the state charter and ensuring there is a viable dual banking system. Now is a particularly opportune time to be undertaking this review. All of the changes in federal law and regulatory structure are encouraging banks and thrifts to rethink their strategic plans and how their charter fits their goals. Given the significant changes in federal law that have occurred over the last two decades, the task force is hard pressed to find any policy reasons or advantages to maintaining three separate state charters: commercial banks, savings banks and savings associations. Instead, we are planning to create a universal charter. This is a charter that treats all depository institutions the same as it relates to most fundamental issues such as powers, branching and regulatory oversight. The real distinction will be maintained in ownership structure. Mutual institutions have always been an important part of the Ohio financial services sector, and in fact Ohio is still home to 44 mutual institutions. One of the priorities of our working group will be to maintain provisions and structure that support mutual institutions. Much like the last time OBA and the DFI worked together to upgrade Title XI of the Ohio Revised Code, the working group has developed overall goals and guiding principals for our project: 1. Clarify the language; 2. Reflect today’s federal regulatory landscape (i.e. Dodd Frank); 3. Create Parity (where appropriate and feasible); 4. Make Ohio attractive for conversions; 5. Efficiency; 6. Maintain controls for safety and soundness; Bankers have already seen these principles at work. We have recently released our first drafts for comment addressing corporate governance and the powers and responsibilities of the board of directors. As we did during the last the last major overhaul, unless there was a safety and soundness reason to the contrary in these sections we were guided by Ohio corporate law. As a major commercial state, Ohio has a very modern, well-thought out corporate code and there is a great deal of focus by lawyers and businessmen on keeping it that way. Keeping the banking code consistent is more efficient, and will be easier for both bankers and their lawyers. Joining me on the drafting team so far have been ODFI Deputy Superintendent Kevin Allard and DFI Chief Counsel Anthony Siciliano; Heartland Bank President & CEO Scott McComb; and Bricker & Eckler Attorney Jeff Smith. As with all projects of this scope however, it is not just the regulators, bankers and lawyers in the room that will make the project successful, it is also Ohio bankers that have a good idea on how regulation and oversight can work better. Already some of you have volunteered to participate or have given us good ideas that we will incorporate in future drafts. We hope you can keep the good comments and thoughtful ideas flowing.

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summer 2011 Ohio Record

From the

Steps of the Statehouse

Michael J. Adelman Vice President of State Government Relations

Ohio Record summer 2011

The Race Is On! I really enjoy this time of year. You might not know it, but I’m a big track geek. After years of decreased physical activity, last year I ran 400 miles! My daughters seek my coaching in preparation for their annual school mile runs. Plus, I can’t help but look at the local and state meet results to see what times high schoolers are turning on 400s, 800s, 3200s or relays. Coming from a small school, I competed at some point in everything but the discus and shot put, which shouldn’t be a surprise. The quarter was my event. It’s the longest of the sprints. One full lap of the oval in top gear with no time to sandbag or regroup. Worst case, my race took about one minute. I loved the pressure build up and adrenaline rush. If you aren’t familiar with track, though, there is a lot of waiting around. There are bursts of activity and a number of field events going on simultaneously. So as a warm up, I ran a “leisurely” two-minute leg of the first event, the two mile relay. My 440 dash, as a single lap was measured in my day, was the midpoint of a meet. There was always just enough time to recover for the final mile relay and I relished the anchor leg. I recall a number of times we needed those points to win the meet. Lot of pressure for a teen. Roll the clock forward nearly 30 years and my life at the Statehouse is still a series of races and lots of pressure. There hasn’t been much time between events this year as the OBL is actively involved in nearly fifty bills. This meet has some sprints while others are longer endurance or require the focus of a high jumper. A sizeable infusion of new legislators came to the capitol ready to get at the people’s business. There have been spurts of activity debating and enacting legislative priorities. Part of this reflected pent-up frustration on the part of the House GOP being out of power for two years and a new sense of vigor having a governor from their party in control. So the House came out of their blocks hard introducing a slew of bills and firing up committees to deliberate their priority proposals. There was some sense of urgency to get some most important bills hammered out before getting bogged own with state budget bill. The Senate got off to an equally hot start. As the upper chamber they had the better part of two months to work on other legislation before taking the budget baton from the House.

OBL Insured Cash Sweep The OBL-drafted HB 209, insured cash sweep bill, was unanimously approved by the Ohio House in June. Forty more House members added their names as co-sponsors, including Speaker Bill Batchelder (R-Medina) and Minority Leader Armond Budish (D-Cleveland), bringing the total to 67 out of 99 House members. “Your members probably think these victories come easy,” said Rep. Budish. “But it’s a reflection of the hard work on the part of the OBL to educate legislators and help them see the obvious positives in legislation like this.” In his floor speech, bill sponsor Rep. Richard Adams (R-Troy) stated HB 209 would be “advantageous for our local governments, financial institutions and those that need to borrow from those institutions.” Appreciation also goes out to Sen. Hughes (R-Columbus) and nine of his colleagues for signing on to Senate Bill 173. These identical bills look like the runner for which everyone should want to root. They are a win-win-win for local governments, taxpayers and banks and thrifts. Local governments win because in addition to safe keeping large-dollar short-term public deposits with full FDIC coverage they could receive higher interest rates on their deposits and decrease their costs versus managing numerous relationships and tracking collateralization. Taxpayers win from their governments operating more efficiently, which should translate into less pressure for tax increases. OBL members win because they can raise additional deposits more cost effectively. Similar law was enacted in 2006 enabling counties and government subdivisions to leverage full FDIC coverage on their long-term large-dollar deposits. That legislation was unanimously supported by both chambers and in the five years since it became law more than $3 billion has been placed in banks and thrifts by Ohio public entities with the benefit of full FDIC insurance. We are pushing for a final vote on our insured cash sweep bill before summer recess, but if we run out of time we will continue to educate legislators on the ben-

efits so that when this race resumes we will be there to urge them to run through the tape.

Budget As is the case in odd-numbered years, the legislation receiving the most attention has been the two-year state operating budget bill. There will be equal amounts of fatigue and runner’s high when the General Assembly concludes work on this critical task, which should be by fiscal year end on June 30. House Bill 153 will address a sizable structural deficit through state agency and school funding cuts as well as decreases in revenue distributions to local governments. It also will include more tools for local government control and cost containment. Significant reforms could be enacted for Medicaid, nursing home funding and prevailing wage. Of most interest to the OBL has been the funding proposed for bank and thrift examination by the Division of Financial Institutions. Despite funding reductions, they will be able to attain full staffing while ensuring adequate training.

Redistricting/Reapportionment After the General Assembly’s summer recesses they will reconvene to approve a plan redrawing their and congressional district lines. By Oct. 5 the Republicans, who control the Apportionment Board, must reconstitute all 99 House and 33 Senate seats. Assuming a March 2012 primary election, they have until Dec. 7 to agree on congressional districts. The underlying story with congressional redistricting is that Ohio’s population relative to the others will result in the loss of two seats. This has a huge impact on decreasing the State’s clout from 18 to 16 members because those are fewer Ohioans on the various powerful congressional committees fighting for our State’s interests.

the Governor’s attention that there are inequities in the way banks and thrifts are currently taxed. We are researching and analyzing more practical approaches. Past experience reflects tax reform is more of a marathon. The most significant changes tend to occur in the context of a budget bill so that the impact of potential revenue decreases is taken into account on the spending side of the state ledger. With deliberations on the next budget bill nearing completion at the time of my writing, meaningful long-term change for the Ohio banking industry may be two years off. Yet, the prospects of a more favorable economic climate and realization that the dynamic impact of a tax overhaul can lead to increased economic activity – lending – might accelerate the timeline. Bear in mind the Statehouse meet requires stamina. It is also a team effort that requires a variety of expertise and commitment. We are looking for more bankers to testify in legislative committee in support of our insured cash sweep bill. Leveraging your relationships with local government officials encouraging them to weigh in on our behalf will go a long way to ensuring a win. Also, don’t forget that relationships matter. To that point, I’m in the process of scheduling legislator meetings with bankers back home. Please let me know if you are interested in my assistance in arranging such a meeting. Relationships started and honed through such meetings are key to our industry’s grassroots success. Let’s run hard together to the winner’s platform!

Upcoming Season Prep Like a seasoned runner preparing for the next race, your OBL government relations team is working hard on a number of other legislative and regulatory initiatives. Chief among these is tax reform. At a recent banking industry meeting we gained summer 2011 Ohio Record

IN-BANK DIRECTOR TRAINING AND NEW DIRECTOR “BOOTCAMP” UNVEILED Susan Poling OBL Education Manager

Ohio Record summer 2011

OBL In-Bank Training has expanded to a new audience. Since April 2011, in-bank director training has become available to OBL member institutions. And per recent banker request, the program has added a feature called the New Director “Bootcamp” which is focused more on basics for new bank and thrift directors. “Financial institution director education is becoming increasingly important as all regulatory agencies look for director training in the examination process,” said Julie Kiplinger, OBL manager of in-bank training. “These new programs offer appropriate director training and governance in a wide variety of areas to assist bank directors in better understanding the complex role and responsibilities of financial institution directors.” Led by Jeff Smith, partner at OBL Affiliate Member Bricker & Eckler LLP, more than a dozen training topics are offered, ranging from bank director “basics” for new directors, to a menu of topics involving directors’ roles and responsibilities generally and in such specific situations as M&A, “troubled” institutions, compensation, capital formation, corporate governance, and regulatory relations. Since the programs are tailored to address the issues and concerns facing bank and thrift directors at a specific institution, additional programs can also be developed for each institution. The program kicked off at First Federal S & L of Delta this spring with a session focusing on The Role and Responsibilities of Financial Institution Directors. President Jim Coe said, “We decided to use the League’s in-bank training for directors because it simplified the education process for our directors. It was certainly convenient getting this regulatory requirement covered in this manner, and the OBL program allowed us to have all the directors together at one time - scheduled during our regular board meeting - in a setting and format where they felt comfortable.” “The OBL In-Bank Director Training program is structured to provide a practical and pragmatic overview of the role and responsibilities of financial institution directors, and more specifically with regard to their various (and sometimes conflicting) obligations and constituencies in specific instances. It provides a forum for informal discussion of real-world issues and situations impacting directors in performance of their duties,” noted Smith. “And since no regulators, auditors, professors, or plaintiff’s lawyers are present, it presents an opportunity to speak openly and frankly about practical issues in the current banking environment.” Smith concluded, “The sessions also help to provide a reduced risk profile for participating institutions, potentially reduced insurance expenses, and ultimately a reduced likelihood of issues for the institution and its board.” For more details about the OBL’s new In-Bank Directors Training or customized OBL In-Bank Training on such topics as management, customer service and relationship banking, contact Julie Kiplinger at (614) 340-7612.

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That’s where Ohio Record comes in The New Directors “Bootcamp” offers a more basic approach to the role of the director in the business of banking, the various state and federal regulatory structures and role of the agencies, director legal and regulatory requirements and expectations, and what the role of the director is (and isn’t) in today’s banking environment.

To reach over 4,000 key banking decision-makers contact James Thurston at (614) 340-7621 or jthurston@ohiobankersleague.com.

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AUG. 16, 18 & SEPT. 7

AUG. 30, SEPT. 29, OCT. 25 & NOV. 15

CINCINNATI; OBL TRAINING CENTER, COLUMBUS; NEWARK

OBL TRAINING CENTER

Hit the Target with Frontline Evening Training Today's struggling economy means banks must operate more efficiently while still retaining and attracting customers. These 3-hour evening training sessions will assist employees on the frontline and the back office – and anywhere in between – in Serving Customers in Today’s Market; Dealing with Difficult People; and How to Handle & Overcome Objections – all in an effort to obtain stronger sales. Presented by OBL Education Manager & OBL Trainer Julie Kiplinger, along with Angie Hollerich, the material has been found to be informative and organized, with high marks for their energy and role playing discussions.

This popular series returns to assist branch managers succeed as the direction of retail banking continues to shift and accelerate toward fewer transactions and more consultation and relationship selling. Managing sales – which is about influence, inspiration, developing and coaching people – is a key part of this process. The OBL's Branch & Sales Manager Series, led by Phillip Borzelleri of Morin & Associates, will hone sales management skills for application back on the job, and provide the strategies, attitudes, and practical methods to navigate the near-term financial crisis and provide a foundation for long-term sales success.

SEPT. 20

CONTINUES AUG. 23 & 24

OBL TRAINING CENTER

GSB’s McGoffin Leads C-Level Seminar Designed specifically for presidents, CEOs, senior managers and directors, Today’s Community Bank Model: There is No “Normal” Anymore, returns to the OBL Training Center. Presented by nationally-known GSB instructor Robert McGoffin, this interactive and hands-on workshop format will be limited to 35 participants. He notes, “Don’t wait for things to get back to normal — they won’t. Business as usual will be business lost. This is a new frontier, and to succeed, bankers need to be prepared.” Attendees will receive information, answers and action strategies that can be taken back to the bank for immediate implementation to improve earnings and manage expenses.

Branch & Sales Manager Certification Series

Ohio Record summer 2011

2011 Community Bankers for Compliance Program It is not too late to reap the benefits of the nationallyrecognized, regulator-approved compliance program that features quarterly seminars covering the latest regulatory compliance and industry developments; subscription to the monthly Compliance Update newsletter; access to the toll-free Compliance Hotline for questions that arise on a daily basis; and access to the CBC members only Web page, which includes timely information and compliance tools. Register online or request a brochure today.

AUG. 25 OBL TRAINING CENTER

Business Continuity Planning 101 for Senior Management & Directors Disruptions can occur at any time for a variety of reasons and with a variety of outcomes encompassing natural disasters, technical failures and human error. From a regulatory perspective, many of the regulations today starting with GLBA mandate financial institutions have a comprehensive, enterprise-wide business continuity plan that encompasses the recovery of operations and computer systems. Well-respected presenter Susan Orr will touch upon: the differences between business continuity, disaster recovery and pandemic planning; key elements of a business continuity plan; and lessons learned from recent events across the U.S. including ice storms, tornadoes and floods.

Online Learning Savings Continues Throughout 2011, bankers can continue to take advantage of online learning opportunities for just $199 per connection, per program. Train multiple employees on a variety of compliance, lending, frontline and leadership topics – or purchase an On Demand version for multiple viewings. Check the OBL Web site for current online courses or contact Julie Kiplinger at 614-340-7612 for assistance in locating a program to fit your need.

SUMMER

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

SEPT. 29 LITTLE TURTLE GOLF CLUB

OBL Golf Classic

Seminar Favorites Return Save the dates now for OBL tried and true one-day programs that are returning to the OBL Training Center early this fall. Barry Thompson will hold the annual Bank Security Workshops, with an opportunity to attend one or two days. Jeff Judy will speak on Qualitative Analysis and Loan Structure as the lending curriculum continues throughout 2011. Jim Clarke will speak to ALM Updates, while PMC will cover the basics and advanced issues related to IRAs. • Lending Curriculum – Sept. 21 & 22 • Security Workshops – Sept. 27 & 28 • ALM Seminar – Oct. 5 • IRA Essentials & Advanced Issues – Oct. 11 & 12 For questions about these or other seminars to come, please call Julie Kiplinger at 614-340-7612 or watch the OBL Web site for details.

Little Turtle Golf Club has hosted several USGA Amateur Qualifying Tournaments and will be home for the OBL’s annual Golf Classic again this fall. The shotgun start event includes 18 holes of golf, a buffet luncheon, cocktails, dinner and an awards presentation immediately after the completion of play. Golfers may choose from two formats – play your own ball or scramble; and may register as a single player; two players; or put together your own foursome. Contact Gary Sutter at 614-340-7615 with questions.

summer 2011 Ohio Record

Creating a Feedback Loop New Online Evaluation Initiative to Aid Regulatory Transparency at Federal Level

James Thurston Editor

Ohio Record summer 2011

Opportunity for Ohio Bankers to Help Each Other with Examiners

Our friends in the nuclear power industry might disagree, but banks are easily the most heavily regulated businesses in America. The advent of Dodd-Frank means that a new regulatory tsunami will wash over our industry in the coming months and years. A tsunami that threatens to make the previous regulatory regime look like a walk in the park. Too often, our elected officials are blind to the enormous regulatory implications of what they vote for. But Ohio’s banks and thrifts – and, to be fair, the regulators who have to implement these new rules – certainly are not. To that end, it is crucial that we have a properly functioning feedback loop between our banks and the regulators. The OBL has already beta-tested an anonymous online survey tool for state banks to communicate exam feedback to the Ohio Division of Financial of Institutions. It worked well, and will be rolled out more extensively later this year. It consists of an anonymous online survey tool, completed post-exam, that will give aggregate feedback to state officials. To take the initiative to the next level, we joined with an alliance of state banking associations to create an online portal for banks regulated at the federal level. We call it the “Regulatory Feedback Initiative”. The tool consists of a confidential electronic platform where banks can anonymously provide details on their most recent examination or visitation. The information will be aggregated and analyzed on a national level so we can begin to identify discrepancies in how bank regulations are being enforced. These discrepancies could exist between different bank agencies, different geographic regions, or between different examiners within the same agency. Additionally, banks will be able to request a report from the OBL that summarizes the feedback of similarly situated banks to help them prepare for an upcoming exam. The goal is to avoid surprises, and if they occur, identify inconsistencies. Finally, bank advocates like the OBL will be armed with a statistically significant amount of hard data as we promote a better environment for our members. This data will be used to make our case with the regulators as well as members of Congress and the administration. Everyone will have enough information to know whether a member bank is receiving unfair treatment or appropriate and consistent regulatory scrutiny. The survey is powered by Allegiance, Inc. an independent third party with a reputation and track record of collecting anonymous and protected feedback from bank customers and employees. This will allow banks to shed their isolation without violating confidentiality or exposing themselves competitively. Banks will be able to access the tool through a link embedded in an email from the OBL. During the roll-out period of June 1 through August 31, we hope that every bank will provide feedback on their most recent safety and soundness and compliance exam or visitation regardless of when it occurred. After that initial database is built, we will ask banks to use the tool after each future exam or visitation. We are hopeful that a little transparency will provide some subtle checks and balances in an perhaps one-sided regulatory process. Even a slight shift in this balance could yield significant returns for our local economies and our member banks as we emerge from the recent economic crisis and assimilate the new regulatory challenges in Dodd-Frank. Watch your inbox for more details, coming soon.

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Charting a Course to Success OBL/ILFI JOINT CONVENTION SEPTEMBER 8-11 HYATT REGENCY BALTIMORE ON THE INNER HARBOR

his fall, more than 300 banking industry execs will gather along Baltimore’s Inner Harbor for the annual joint convention of the Ohio Bankers League and the Illinois League of Financial Institutions. This historic city will provide a spectacular venue for dialogue and debate about the future of our industry. Packed with thought-provoking presentations, stimulating dialogue and valuable relationship building opportunities, this year’s event promises to be another fun-filled, knowledge-sharing experience.

“Would you learn the secret of the sea? Only those who brave its dangers, comprehend its mystery!” - HENRY WADSWORTH LONGFELLOW

Ohio Record summer 2011

Melea Wachtman OBL Senior Vice President of Administration

FEATURED SPEAKERS Creating a Culture of Courage: The New Leadership Challenge As companies ask their employees to take more risks, do more with less, and try to anticipate the future, courage is becoming an ever more critical job CINDY SOLOMON, skill. The fact is safe, LEADERSHIP risk-averse organizaCONSULTANT, EXECUTIVE COACH tions are quickly being & AUTHOR replaced by organizations comprised of courageous individuals who can make difficult decisions confidently and quickly. While many believe that courage is a quality people are born with, Solomon’s extensive research shows that everyone can build their “courage skills” and help create the strong, productive culture your organization needs to succeed in today’s tumultuous business environment. But all courage is not alike. Knowing which type of courage to invoke, and when, is the key to success. Solomon unlocks the secrets to using the different types of courage effectively to embrace change, thrive on it, and meet the demands of the new world order.

Thinking Outside the Branch: Technology Trends Driving Generation Y Consumers Generation Y customers (born between 1978 and 1994) are the future of banking. They grew up with connectivity and expect their bank to provide the JACK VONDER same 24/7 communicaHEIDE, PRESIDENT, tion channel, quick TECHNOLOGY BRIEFING CENTERS, response and superior INC., CHICAGO service they experience in other areas of their lives. Vonder Heide explores the new banking technologies that Generation Y customers are excited about and how to affordably incorporate them into the bank’s existing product and service mix. You will learn about personal financial management tools, social networking trends, live auctions, person-toperson payments, comparison shopping platforms and much more.

Diversity in America: The Growing Impact on Work, Organizations and Consumers We all know that our society is becoming increasingly diverse and that no longer are cultures necessarily “melting together” into one homogenous group as in KELLY MCDONALD, past decades. In fact, AUTHOR, SPEAKER the modern phrase is AND NATIONALLY RECOGNIZED that our society has MARKETING EXPERT moved from being a “melting pot” to a “salad bowl”, with clear distinction between different cultural groups. The 2010 Census reveals just how diverse America has become. For example, for the first time in our country’s history, one in three Americans is not White. But diversity comes in many forms: racial, ethnic, gender, generational, sexual preference, linguistic, even life stage and level of affluence, to name a few. Diversity of thought helps companies stay leading-edge and proactive as well. And learning about differences in values among different groups is the key to maximizing relationships, marketing efforts and business opportunities.

What Americans Really Want… Really: The Truth About Our Hopes, Dreams, and Fears Frank Luntz is one of the most honored communication professionals in America today. Time magazine named him one of the “50 most promising FRANK LUNTZ, leaders aged 40 and POLITICAL under” and he is the CONSULTANT, POLLSTER AND PUBLIC “hottest pollster” in OPINION GURU America according to the Boston Globe. Named one of the four “Top Research Minds” by Business Week, he was also the winner of the coveted Washington Post “Crystal Ball” award for being the most accurate pundit. Luntz has written, supervised, and conducted more than 1,500 surveys, focus groups, and dial

sessions in over two dozen countries and four continents over the past decade. From General Motors to Federal Express, Disney to American Express and more, Luntz has become the go-to consultant when Fortune 100 companies need communication and language guidance. He is the author of the New York Times’ best seller Words That Work: It’s Not What You Say, It’s What People Hear that delves into the art and science of language, examining how the choice of words can change the course of history. His latest book, What Americans Really Want…Really: The Truth About Our Hopes, Dreams, and Fears examines the five things Americans want the most, what they really want in their daily lives, in their jobs, from their government, for their families, and how understanding what Americans want allow businesses to thrive. Luntz offers a glimpse into the American psyche based on strong analytics that will challenge assumptions.

Proud to be a Banker “What are you doing to rebuild the banking industry’s reputation?” asks Steve Wilson. As ABA Chairman, Wilson has made it his goal to restore pride throughAMERICAN BANKERS out the banking indusASSOCIATION try — and to restore CHAIRMAN STEVE WILSON, CHAIRMAN the industry’s damaged & CEO, LCNB reputation. “We have NATIONAL BANK, been made the villain in LEBANON, OHIO the name of regulatory reform. The national media have not taken the time to understand who we are and what we really do for our community.” The battle won’t be won by trade associations alone; real bank success must be won at the local level.

summer 2011 Ohio Record

Special Events & Activities Convention Registration Kick-off Luncheon and Breakout Sessions - Thursday, Sept. 8

Plan to arrive early to take advantage of these additional learning opportunities. Convention Kick-off Luncheon Building a Cloud Migration Strategy

Kevin Prince, Chief Technology Officer, Compushare Concurrent Breakout Sessions Survival Plan for Community Banks Steve Clinton, President, Capital Market Securities, Inc. (an affiliate of Young & Associates, Inc.) Billions Served: An Inside Look At Social Media’s Impact On Banks Tom Knapp, Senior Vice President & General Manager/Bank Solutions, Fiserv, Inc. Sponsoring a Successful Retirement Plan. Positioning Your Bank or Thrift to Compete Effectively Clarisse I. Andrus, CEBS, Senior Consultant, Pentegra The Root of the Financial Crisis? Incentive Compensation Practices after the Fall J. Bret Treier, Partner/Corporate and Finance Group, Vorys, Sater, Seymour and Pease LLP Alan D. Duffy, Associate/Executive Compensation, Vorys, Sater, Seymour and Pease LLP Enterprise Risk Management – The Other Side of Strategy Jack R. Salvetti, CPA, President, S.R. Snodgrass, A.C. Capital Alternatives for Mid-West Community Banks Tom Dooley, Senior Vice President, Boenning & Scattergood, Inc. Chad Hull, Managing Director, Boenning & Scattergood, Inc. Spouse/Guest Program Friday, Sept. 9, 9 a.m. Discover Baltimore’s Inner Harbor Join us for a special breakfast and introduction to the historic city of Baltimore then set off on your own for a day of discovery with your Baltimore Harbor Pass. The Harbor Pass offers admission to each of these favorite Inner Harbor destinations, the Maryland Science Center, Top of the World Observation Level, the Baltimore Water Taxi and the National Aquarium and more.

Ohio Record summer 2011

Shhh...It’s a Silent Auction Friday, Sept. 9, 9—11 p.m. Get ready to tap into the excitement and support the grassroots initiatives of Ohio BankPac and ILFIPEC. Auction items will be on display in the Financial Services Expo beginning Thursday with final bidding at the Dessert Reception on Friday. To donate an auction item contact: Jeff Quayle at (614) 340-7603 or jquayle@ohiobankersleague.com; or Jay Stevenson at (217) 522-5575 x212 or jstevenson@ilfi.org. Convention Golf Outing at Turf Valley $125 per person Saturday, Sept. 10, 1 p.m. (Shamble Format) Turf Valley features 36 holes of championship golf along with some of the most beautiful scenery Maryland has to offer. Against the backdrop of Ellicott City's rolling hills, the course promise to challenge every aspect of your game. Lunch will be provided for all registered golfers. Participation is limited; register early. Take a Stroll Through the Ballpark that Forever Changed Baseball! Saturday, Sept. 10 – 2:30 p.m. $10 per person Come see Oriole Park at Camden Yards from a whole new perspective. Enjoy the charm of the ballpark from club level suites, the press level, and even the Orioles dugout. Oriole Park revolutionized baseball when it debuted on Opening Day 1992. Here’s your chance to go behind the scenes of this historic ballpark and learn more about how it has continued to change the baseball fan’s experience ever since. Anchors Aweigh! Inner Harbor Dinner Cruise Saturday, Sept. 10, 7:30 p.m. (On board Chairmen’s Reception at 7 p.m.)

Join us as we set sail for an evening out on the water. Enjoy dinner, dancing, entertainment and breathtaking views of Baltimore’s glittering skyline aboard The Spirit of Baltimore. The Financial Services Expo Check out the latest in financial industry product and service providers at the Financial Services Expo on Thursday, Friday and Saturday. The Convention marketplace features more than 30 of the industry’s leading vendors. For information about exhibiting contact Mike Baker at (614) 340-7600 or mbaker@ohiobankersleague.com.

Registration fees, which include all scheduled meeting and meal functions as noted on the Schedule at a Glance, are: OBL/ILFI Members

First Registrant ..................$650 Additional Registrant ........$600 (SAME COMPANY)

Spouse/Guest ......................$350 Children (Under 18) ............$50 Non-Members

Registrant ........................$1100 Spouse/Guest ......................$575 Refund Policy

Requests for refunds must be received in writing to the sponsoring association with whom you registered no later than Aug. 31, 2011. A $150 processing fee for each registrant will be withheld for requests prior to that date. Cancellations received after Aug. 31 will not be refunded. Hyatt Regency Baltimore

300 Light Street, Baltimore, MD 21202 Tel. (410) 528-1234 Room Rates - Starting at $159/Night We have reserved a limited number of rooms at discounted rates. Make your reservations by Wednesday, Aug. 10, to secure these rates. Tel. Reservations: (888) 421-1442 For a link to Online Reservations visit www.ohiobankersleague.com. Attire

Attire for ALL business sessions and receptions - including the Closing Banquet - is business casual.

Questions? Ohio Bankers League 4249 Easton Way, Suite 150 Columbus, OH 43219 Tel. (614) 340-7595 Fax (614) 340-7596 Visit www.ohiobankersleague.com to register online.

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summer 2011 Ohio Record

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WINDOW ON THE CAPITOL Representative Jim Renacci

In this regular feature, Ohio Record introduces our elected state and federal legislators. In this edition, the spotlight is on Congressman Jim Renacci (R-16) and Ohio Senator Jim Hughes (R-16)

Rep. Renacci worked as an accountant in the health care industry for several years before forming his own managed care business and CPA firm, among many others. Throughout the course of his 30 year business career he has owned and operated over 60 businesses, created more than 1,500 jobs and employed over 3,000 people. In addition to his work in the business sector, Rep. Renacci has amassed a long record of public service. Shortly after moving to Wadsworth from Pennsylvania, he served as a volunteer firefighter for four years. From 1993-1994, he served on the city’s Board of Zoning Appeals and beginning in 1999, he served two consecutive terms as president of Wadsworth’s City Council. Upon being elected Mayor of Wadsworth in 2004, he worked to balance Wadsworth’s $80 million budget and converted the city’s multi-million dollar deficit into a surplus, without raising taxes. In November 2010, he was elected to the 112th Congress as the Representative from Ohio’s 16th district. Ohio Record: What are your first impressions of Congress, particularly your impressions on the large class of freshmen that were elected to Congress for the first time last fall? Rep. Renacci: This freshman class—the largest group of new Republicans since 1921—is special in many ways. A great many of my freshman colleagues have the real-world business experience that it takes to make Congress and the government finally operate the right way. I feel honored to serve alongside these talented and intelligent members. We are serious about cutting spending and the size of government, to get Washington out of the way and let the private sector put America back to work. There is willingness among the new members to consider any idea, Democrat or Republican, that helps us get our deficit under control and get America back on the path to prosperity. Ohio Record: What have been the surprises so far, pleasant or otherwise? Renacci: One of the first things I learned on Capitol Hill is that choices which are very clearly in the best interest of our country do not always win. Extreme partisanship and political pressure often times get in the way of what is right for America, which is a shame. Thankfully, the newer members—on both sides of the aisle—think differently than the established “old guard,” so I am hopeful that this culture will change. Ohio Record: What experience or skills from the private sector have helped you as you try to get things done in the Capitol? Renacci: I am fortunate enough to have owned, operated and invested in over 60 different businesses, so I have a wealth of past experience on which to draw in finding workable private-sector solutions to America’s economic woes. Furthermore, my training as a CPA allows me to see things through a different lens than many of my colleagues. I have worked in many different industries and taken over many failing businesses, giving me first-hand experience with the consequences of reckless government action that is oftentimes taken without concern for ripple effects throughout the economy. Ohio Record: Do you have any thoughts on Financial Services Committee activity for the rest of the year? Renacci: I expect that the Committee will focus on oversight of Dodd-Frank implementation, to ensure that the hundreds of rules, regulations, and studies mandated by the law are implemented in the least harmful way possible, with international coordination and American competitiveness at the forefront of our minds. The Committee will remain vigilant in assessing the results of this monstrous law, standing ready to improve those parts of the Act that work well, while changing those parts that do not.

Ohio Record summer 2011

Ohio Record: Tell us about some of your initiatives thus far. What are your other legislative priorities this year? Renacci: I have undertaken three major initiatives thus far in the 112th Congress. First, I have developed a bipartisan jobs bill aimed at getting the unemployed back to work. This bill, H.R. 2137, would grant states the flexibility to redeploy unemployment insurance dollars for job-training, by way of wage disbursement paid directly to employers that hire unemployed workers. In return, the employers would agree to pay wages in excess of the benefit amount that the unemployed worker would have otherwise received. Incentives are the name of the game, with workers making more than they would on unemployment, states paying less for a wage disbursement than for an unemployment benefit, and employers facing less risk in hiring a new employee, as the wages of the new employee would be partially subsidized. Next, I have introduced a bill with eleven co-sponsors, H.R. 2081, to remove the Director of the Consumer Financial Protection Bureau from the FDICâ&#x20AC;&#x2122;s Board of Directors. I have many concerns about a prudential banking regulator being governed by an agency that has no mission for safety and soundness. Furthermore, I worry about the conflict of interest that will arise when the FDIC Chairman is asked to review CFPB regulations from his seat on the Financial Stability Oversight Council. Third, and most importantly, I have worked alongside fellow freshman John Carney, a Democrat from Delaware, to create a bipartisan working group to focus on policies that will grow the economy and shrink our national debt. This group, made up of six Republican and six Democrat members, meets every two weeks to find areas of mutual agreement on economic and fiscal issues. As I said earlier, I am willing to consider any idea, from the right or left, that helps us recover from this recession, and I am pleased to work with eleven other like-minded members in hopes of developing legislation that can attract broad bipartisan support. We know that we will not agree on everything, but it is incumbent upon us to try. Ohio Record: Credit Union member business lendingâ&#x20AC;ŚDo you have any advice for bankers that are engaged in this important policy debate? Renacci: The best advice that I can give to bankers is to stay engaged and

connected with your Congressman. I am grateful to my bankers for keeping me informed and educated on issues of importance to them. I appreciate the free flow of information, as it helps me make better decisions and legislate more effectively. I was a facts-driven businessman and aim to remain a facts-driven legislator. On this specific issue, I believe that most members, especially those on the Financial Services Committee, understand and appreciate the distinction between banks and credit unions, from tax status to mission to expertise. Ohio Record: What are the main challenges facing constituents in your district? Renacci: The biggest challenge facing individuals in my district is, by far, unemployment. In Stark County, for example, unemployment jumped from 6.5 percent in 2008 to 11.8 percent in April 2010, and now stands at 9.2 percent. Combined with the recent spike in gas prices, families in my district are struggling to make ends meet. For the business community, the thing I hear the most from the employers, both large and small, in my district is concern about overregulation. Businesses are facing great uncertainty, both in the economy and in Washington. I have met with several business owners who told me that they have the capital to start growing and hiring, but do not feel confident enough about taxes or regulations to invest. As someone who has employed over 3,000 Ohioans and created more than 1,500 jobs, I know first-hand that certainty and predictability are paramount to growing any business. Ohio Record: What has been your most rewarding experience so far? Renacci: My background as a businessman and CPA has enabled me to carve out a niche on the Financial Services Committee, but, specifically, being named vice chairman of the Subcommittee on Financial Institutions and Consumer Credit has been the most rewarding experience thus far. I strongly believe in the principle that strong banks create a strong economy. Banks must be willing and able to provide consumer and business credit in order to create jobs in America, and the vice chairmanship of this important subcommittee will allow me to play a substantive role in the oversight of Dodd-Frank and other banking regulations. I am honored to be playing such a vital role in restarting our economy.

summer 2011 Ohio Record

WINDOW ON THE CAPITOL Senator Jim Hughes Senate Financial Institutions Committee Chairman Sen. Jim Hughes began his career in public service as a bailiff/court constable in the Franklin County Court of Common Pleas. He moved on to become a prosecutor in the Columbus City Prosecutor’s Office and later, an assistant county prosecutor for Franklin County. In 2000, he was selected to serve the remainder of a term in the Ohio House of Representatives and was re-elected to that post four times. In 2008, he was elected to the Ohio Senate to represent Ohio’s 16th Senate District, which includes the western portion of Franklin County. Ohio Record: Tell us a little bit about your background and how you became involved in politics? Senator Jim Hughes: I began my career in public service as a bailiff/court constable for Judge Tommy Thompson in the Franklin County Court of Common Pleas. I then became a prosecutor in the Columbus City Prosecutor’s Office, and later became the assistant county prosecutor for Franklin County. In 2000, I was selected to serve the remainder of a term in the Ohio House of Representatives and was re-elected to that post four times. In 2008, I was elected to the Ohio Senate to represent Ohio’s 16th Senate District, which includes the western portion of Franklin County.

Ohio Record: Why were you interested in becoming chairman of the Senate Financial Institutions Committee and what are your priorities for this legislative session? Hughes: My service in the Ohio General Assembly has allowed me to put my legal experience to work for the benefit of all Ohioans, especially as chairman of the Senate Financial Institutions Committee. As a State Senator, my leadership position as the chairman of the Senate Financial Institutions Committee allows for the close examination of specific issues related to the banking and finance industry. Ohio Record: Why should a banker care about public policy? Hughes: Anyone in business should be concerned about local, state and federal government and they impact their business. This can assist in business friendly decision, which in turn will help to create jobs. Ohio Record: How can bankers be helpful to you and the other members of the General Assembly? Hughes: Informing the members of the General Assembly about any issues or concerns that are encountered during day-today operation can enormously help. Also, attending the Ohio Bankers League meetings will enable everyone to stay up to date about current issues.

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Ohio Record summer 2011

The Tradition Continues ... Mark your calendar and plan to join us in Baltimore next fall.

O B L / I L F I J o i n t C o nve n t i o n Sept ember 8-11, 2011 H ya t t Re g e n c y B a l t i m o r e o n t h e I n n e r H a r b o r summer 2011 Ohio Record

MANAGING COMPLIANCE RISK

How to be an Effective Player in the Regulatory Process By William J. Showalter, CRCM, CRP OBL Compliance Services Senior Consultant

We have all noticed the increased level of regulatory changes proposed in recent years by the various banking supervisory agencies – including a number of rulemakings affecting Regulation Z that were going on virtually simultaneously. The pace is accelerating with the passage last year of Dodd Frank. Provisions of the act require approximately 250 new regulations over the next several years. To further complicate matters, Dodd Frank created a new regulatory agency – the Consumer Financial Protection Bureau – and transfers rulemaking authority for most federal consumer protection rules to it. Financial institutions can and, if they have not already, should become active and effective players in the regulation-making process. The bank’s role is to educate the regulatory agencies about how proposed regulations will impact the industry so that more amenable, less onerous rules may result.

Writing an effective comment A few tips on effectively communicating your concerns to the regulators are given below. Organize your letter for easy reference. Since the agencies often face a statutory deadline for their action and must process many comment letters, the organization of your letter can be crucial to its effectiveness. Arrange your comments to match the structure of the proposed rule to make it easier for the agency to process. Use subheadings that correspond with those of the proposal and clearly identify the sections you reference. The agency will typically have a number of people working on a proposal and will distribute relevant parts of your comments to staff attorneys and others responsible for those particular sections. One effective way to organize your comment letter is first to summarize the points you wish to make. This allows prompt identification of the part of the proposal you are addressing. Then you should spell out your points clearly, with sufficient detail to have appropriate impact, but not so much as to make your comments less forceful.

Ohio Record summer 2011

1. Be concise. Your comment letter should only be as long as it needs to be. Do not feel that you must address every item in the proposal. A tightly written, well-organized letter that focuses on the elements that most concern the commenter, as well as any you think are particularly positive, has more impact than one that rambles through all points in the proposal. 2. Provide background. Information about the type of bank or thrift you represent can provide valuable insight and perspective for the agency. Include a brief description of your bank’s size, structure, market, and any other information which may be pertinent to the proposal. 3. Concentrate on issues over which the agency has some discretion. When the underlying statute mandates a particular provision, suggesting that the agency abandon that requirement is not practical. The agency cannot simply ignore a legislative directive. Do not suggest changes that would undermine the general intent of the law implemented by the regulation. Instead, focus on how the regulators propose to implement the law. 4. Be specific. Sweeping generalizations about the impossibility of complying with a proposed regulation are not worthwhile. The agency generally is required to implement some statutory mandate and cannot disregard that responsibility.

Concentrate on operational, customerimpact, and compliance management issues. Give the perspective of your bank, rather than trying to infer what impact the proposal will have on the banking industry as a whole. 5. Make constructive comments. Give examples of problems you envision that specific sections of the proposal will cause. Explain how you feel the negative result can be avoided, or at least reduced. Do not hesitate even to rewrite a section of a proposed regulation if you think it is unclear or misses a point. Suggest a reorganization of the provisions in the proposal to make it easier to read and understand, and to apply in everyday situations. 6. Back up your position. Explain why you think difficulties are likely to occur and how the proposal would produce those consequences. Be specific and provide any facts, data, or anecdotal evidence you think will prove your point. Anecdotes can be particularly effective in helping the regulators understand the practical implications of what they are proposing. If an existing regulation is being amended, provide statistics on how much it costs your bank to comply with this particular requirement. If the proposal is a new regulation, estimated cost information would be helpful to the agency. Try to show, when appropriate, how these costs seem to outweigh the intended benefit of the regulation to your customers or the banking industry.

Impact on customers will be a central issue in rulemakings by the new CFPB, given its mandate to protect consumers. When proposed rules are likely to result in curtailment of current or new products, reduce credit availability, cause confusion, increased costs to customers, less access to customer contact staff or services, or other negative effects for customers these should be raised in comment letters and e-mails. While the regulator may not be able to implement your change as suggested, compelling, concrete details can enhance the prospect of your suggestion being adopted in some form. 7. Follow submission criteria. Send your comment letter or e-mail to the designated agency official, not another staff member that you know. Include the reference or docket number of the proposal in your letter to assure proper handling. Try to follow any specific requests which facilitate processing, such as type size or spacing. Of course, mail your letter or send your e-mail in time to reach the regulator by the due date specified in the proposal. Comments may be accepted also by facsimile or personal delivery, with special instructions. Many agencies also consider comments received after the due date, but they are not obligated to do so. Also, if the agency receives a great volume of comments, late comments slow the rulemaking process.

Exercise the Power Too often bankers choose not to participate in the regulation-making process. They say that they don’t have the time or the communication skills or don’t think they can make a difference. However, writing comment letters is similar to voting. If you don’t exercise the power you have, you can’t complain about the outcome. When you do comment, you can positively affect the design and development of regulations.

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

summer 2011 Ohio Record

State of the Banking Union, in Ohio that is There is some good news coming out of Ohio these days. While there may never be another Lebron James-like basketball talent to come out of the state, and Ohio State’s football team may be struggling under an NCAA investigation, the community banking industry in Ohio is healthy and attractive, especially when compared to neighboring states. Ohio consumers have lots of banking choices. Approximately 280 banks operate in the Buckeye State, including 223 smaller (less than $1.5 billion in assets) community banks, and another 28 larger (more than $1.5 billion in assets) community banks. The larger banks hold roughly $150 billion of deposits, and represent over 65 percent of Ohio’s deposit market share. Those large banks have shed some deposit market share in the past few years - most likely related to PNC acquiring National City, and the associated customer churn. Between 2006 and 2010, their deposit market share slid a half percent, meaning that some banks are clearly benefiting from the state’s loss of one of its banking Goliaths. Currently, only 11 Ohio-based banks have Texas ratios greater than 80 percent. By comparison, more than 60 Illinois banks have dangerously high Texas ratios. Since 2007, dozens of Illinois and Michigan banks have failed, yet Ohio has seen only five bank failures. Granted, Ohio did not experience the boom in commercial real estate lending or a condominium explosion as, say, Chicago. But the Ohio numbers are still impressive. Indeed, most Ohio banks remained profitable throughout the economic decline. Small community banks were standouts, generating returns on assets of

Ohio Record summer 2011

1.15 percent, 1.02 percent, 1.33 percent, in 2008, 2009 and 2010 respectively. During that period, they were far more profitable than Ohio’s larger community banks, likely because larger community banks did more lending on commercial real estate. There’s more good news to consider: The demographic data also looks appealing. Between 2001 and 2010, Ohio’s uppermiddle class experienced strong growth. The largest percentage increase in household income (72.1 percent) was in the $100,000 to $200,000 per year income range. During that same period, the number of households earning more than $50,000 annually increased 34.6 percent, while those earning less than $50,000 per year decreased 17.5 percent. Bottomline: The middle class in Ohio is strengthening, despite elevated unemployment in recent years. The upper middle class has experienced dramatic growth during the past decade. And the banks are healthy. Bankers hear regularly about the impending wave of banking sector mergers and acquisitions. Yet outside of FDICassisted bank failure transactions, there’s been very little activity to report. Bankers in Ohio, especially community bankers, are probably feeling pretty darn good right now. They can congratulate themselves for dodging a bullet by staying conservative and focused on serving their local communities, versus chasing greater returns via out-of-market lending. That said, it costs more to operate a community bank today than it did four years ago, a fact that could lead to more consolidation. Today’s era of rising operational and compliance costs, Ohio’s underwhelming population growth and elevated unemployment level could all create pressure on top line revenue growth and

Jacob Eisen Managing Director Headwaters MB

margins, particularly as the interest rate environment changes. Since the traditional source of capital for community banks has been – no surprise – the community, our nation’s economic downturn has undoubtedly caused a knee-jerk belt tightening. Attitudes are cautious in the midst of high unemployment, dwindling investment portfolios and declining real estate values (albeit not as significantly in Ohio as in some other states). Will those wealthy local families and business people who have supported community banks in the past continue to do so in the future? Of course, no one can be certain. One or both of these investor mindsets may change over time, making it easier for small community banks to raise capital. Until then, banks that assume that capital will automatically be available, as needed, to fund growth or another purpose, are taking a big risk. Those banks that cannot consistently grow top line revenue and build market share in the markets they serve may see their values dissipate. While we don’t know what bank valuations will be in the future, they most likely will not be the jaw- dropping levels of 2005 and 2006. Jacob Eisen is a managing director of the Financial Services team at Headwaters MB (www.headwaters.com), an independent, middle-market focused investment banking firm. He can be reached at (312) 466-5700 or jeisen@headwatersmb.com.

summer 2011 Ohio Record

Surcharge-free ATMs GIVE YOUR CUSTOMERS WHAT THEY WANT

Brian Sismour Senior Vice President Elan Financial Services

In this challenging economic climate, many consumers are looking for practical ways to cut back expenses and save money, even a couple of dollars. From cutting back on family vacations to eliminating stops at the coffee shop, cutbacks are everywhere. But rarely can a consumer save money and get more. Surcharge-free ATM transactions, such as those provided by the MoneyPass network, are the perfect example of giving your cardholders more for less. If you havenâ&#x20AC;&#x2122;t considered providing your customers surcharge-free ATM access, now is the time. ATM fees are growing. Recent announcements by some of the nationâ&#x20AC;&#x2122;s largest financial institutions indicate that $5 ATM fees can be expected in the near future. A bank that can provide cardholders with a surcharge-free option can go a long way in winning over new demand deposit accounts and building stronger relationships with existing account holders.

How to Offer Surcharge-Free When considering providing ATM access for your customers there are a few things to think about. One option is for your financial institution to install more off premise ATMs. While this can increase availability for your cardholders, it will take a large capital expense to install enough ATMs to give the coverage your customers want and need. A more practical alternative is offering surcharge-free transactions at ATMs owned by other financial institutions or organizations. This can be done one of two ways. Your bank can offer a refund program where ATM fees are refunded to some or all of your cardholders. This has proven to be successful at some financial institutions. However, fee refund programs often require significant back office maintenance and support. It may not always be practical to run such a complicated operation if staffing resources are limited. A rebate program can also become very expensive especially when your customers begin visiting those ATMs that are charging $4 and $5 per transaction. Many financial institutions find it is the most simple and affordable to join an existing surcharge-free ATM network. There are different networks available to meet varying needs of an organization. Some are regional, others are for credit unions only, and still others are all encompassing and national.

Ohio Record summer 2011

located? This may seem trivial but a family on vacation does not want to stop at a run down motel to withdraw cash! A network with ATMs located in financial institutions and reputable, safe retail locations is a must. â&#x20AC;˘ Does the network make it easy for your cardholders to locate participating ATMs? Many surcharge-free ATM networks offer online locators, mobile locators and even apps for smart phones. All of these should be accessible to your cardholders free of charge. â&#x20AC;˘ Does the network allow for shared deposits? Not many networks do, so if this is important to your bank, be sure to look into this option with the networks you are considering. â&#x20AC;˘ Lastly, does the network offer support when you need it? Of course you want a network that is run smoothly. But if an unexpected issue arises, you want to be sure you can reach someone quickly.

Selecting the Network Thatâ&#x20AC;&#x2122;s Right for You and Your Cardholders Youâ&#x20AC;&#x2122;ve come to the decision to join a surcharge-free ATM network to give your customers greater access to their cash and to save them money. But you need to consider what it means for you and your bank. Itâ&#x20AC;&#x2122;s important to look at the features of each network when choosing: â&#x20AC;˘ Do they offer access where your cardholders need it? For example, a participating bank is located in Maryland but many of its customers work in Washington D.C. It is important to this financial institution to have access in that area. â&#x20AC;˘ Is marketing support available? This is important because when you make an investment in offering surcharge-free ATM access, you need to make your cardholders aware. Something as simple as a statement stuffer or web banner may do the trick. But a good network will give you the tools to promote the network to your customers. â&#x20AC;˘ Where are the ATMs in this network

Making the Choice

customers. How you offer that depends on the needs of your bank and your budget. But no matter the method, your cardholders will thank you for saving them money one transaction at a time. MoneyPass is one of the fastest growing surchargefree ATM networks in the country and is operated by Elan Financial Services. With over 20,000 surcharge-free ATMs across the country and more than 1,300 participating financial institutions and retailers, MoneyPass cardholders are never far from a surcharge-free transaction. And with the recent addition of deposit sharing, the MoneyPass network is even better for cardholders. Marketing support, web tools and available client support make MoneyPass better for you. For more information, visit http://www.moneypass.com/financial-institutions.aspx or call Brian Sismour at (440) 309-4889.

The time is right for considering surcharge-free ATM access for your

You know banking. 9G MPQY Ć&#x201A;PCPEKCN NCY ,W WDNHV D ODZ Ć&#x201A;UP ZLWK YLVLRQ DQG IRUHVLJKW WR NHHS SDFH LQ WRGD\pV UDSLGO\ FKDQJLQJ OHJDO HQYLURQPHQW $QG LW WDNHV H[SHULHQFH WR XQGHUVWDQG KRZ FRPSOH[ FKDQJHV WR Ć&#x201A;QDQFLDO ODZV FDQ DIIHFW WKH EDQNLQJ LQGXVWU\ WRGD\ DQG LQ WKH IXWXUH )RU PRUH WKDQ \HDUV %ULFNHU (FNOHU //3 KDV EHHQ WKH ODZ Ć&#x201A;UP RI FKRLFH IRU EDQNHUV WKURXJKRXW 2KLR :H SURYLGH OHJDO DQG UHJXODWRU\ VXSSRUW VHUYLFHV WR D ZLGH YDULHW\ RI Ć&#x201A;QDQFLDO LQVWLWXWLRQV Call Jeff Smith at 614.227.2352 and learn how Bricker & Eckler can help your organization.

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summer 2011 Ohio Record

Ohio Bankers League - Ohio Records Ad - CMYK 1/2 page, 7 x 3/8 x 4 3/4â&#x20AC;? - 4.27.2011

Get Ahead of the Crime Curve with the FinCrime Network

James Thurston Editor

Ohio Record summer 2011

Banks across the country are teaming up to detect and prevent fraud with the FinCrime Network, an online database coordinated by 13 state banking associations including the OBL. “The FinCrime Network allows banks and law enforcement to work together to share information related to financial crimes,” said OBL President Mike Van Buskirk. “The network helps banks detect and prevent fraud while improving law enforcement’s ability to investigate crimes.” Since its launch ten years ago, the network has resulted in hundreds of arrests and has helped law enforcement connect crimes that occurred in multiple jurisdictions. Many participating banks have also avoided losses due to information that has been posted on the network. The network can be used by any law enforcement agency or eligible financial institution. Users can post information regarding financial crimes to a database, and the information is then distributed the information to interested participants. When an incident is posted to the network, the incident is written to the FinCrime database for future reference by investigators. An e-mail alert is then sent to other FinCrime subscribers based upon each subscriber’s interest profile and the specifics of the incident. Since the e-mail is being sent over insecure e-mail, it contains limited information regarding the incident, but it contains a link allowing users to obtain detailed information by providing their username and password. The network also checks the specifics of the newly posted incident against all past incidents. If matching information is found the subscriber that posted the original incident is notified that a new incident has been posted that may contain information relevant to their original incident. The FinCrime Network is sponsored by the OBL, along with state bankers associations in Georgia, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Jersey, North Dakota, South Dakota and Wisconsin. It is open to their member financial institutions and law enforcement. Members of the Georgia, Iowa, Nebraska, and Ohio Credit Union Leagues may also participate through the involvement of those organizations. All FinCrime users must be authenticated and approved by the network administrator or one of the sponsoring associations. To learn how your bank can participate in the FinCrime Network, visit www.fincrime.com or contact the OBL’s Brenda Arnold at (614) 340-7620.

Helping You Navigate the Compliance Frontier Few disciplines in banking are more challenging than the ever-changing landscape of regulatory compliance. The Ohio Bankers League can help you navigate the often complicated compliance frontier through OBL Compliance Services. Utilizing the experience of a highly-regarded 25-year industry veteran, the OBL now offers a wide variety of direct compliance consulting services covering a broad spectrum of federal consumer protection laws and regulations. To learn more about OBL Compliance Services contact the Ohio Bankers League at 800-686-6755.

OBL Compliance Services A SERVICE OF THE OHIO BANKERS LEAGUE

It’s all about choice. We’re flexible – You decide. In today’s competitive marketplace, benefits have become as important as compensation when hiring or retaining the best and brightest employees. That’s why we believe it’s important for you to have as much input as possible when it comes to designing your bank’s employee benefits program. With the Ohio Bankers Benefits Trust, you can pick and choose one, all, or a combination of plans you want to offer your employees and determine how you want to allocate premium contributions. Plan options mean greater cost control. For more information about the OBL health plan options contact: Gary Sutter at 614-340-7615 or gsutter@ohiobankersleague.com

OHIO BANKERS BENEFITS TRUST

Working for Banks and Bankers summer 2011 Ohio Record

BancVue® Proud To Partner With Ohio Bankers League To Help Grow Community Banks Gabriel Krajicek CEO, BancVue

“BancVue develops innovative products, marketing, and consulting solutions for community financial institutions nationwide. Its mission is focused on growing community banks.” As community banking’s market share declined from 1990 through the early 2000s, community banks faced challenges unlike anything before. At the same time, consumer expectations were evolving. Founded in 2004, BancVue recognized it could help with product innovation, world-class marketing, consulting, and training. Today, loan portfolios are contributing less to bottom-line results, placing unprecedented importance on noninterest income. A dynamic marketplace is compounding that challenge, which means Bancvue has to dig a little deeper to come up with solutions. In spite of all these challenges, we know our community bank clients have the resolve to excel. We are confident that those among you we haven’t met feel the same way. A lot of firms throw the word “partnership” around with some degree of abandon. But we could never achieve our mission by simply selling you products and walking away. To grow and win, we simply have to work together. The following encapsulate some of the ways we are doing just that.

Ohio Record summer 2011

DDAs Account Holders Desire Since 2004, the REALChecking® system has evolved into a full suite of accounts that benefit your bank and your customers with equal measure. High interest, automatic savings solutions, digital media that caters to Gen Y, charitable giving that taps into America’s generous spirit: these are the key elements that consumers find compelling about these accounts. But they are also configured to simultaneously bolster your business. Designed to make it easy for consumers to get something of value, these accounts include some simple qualifications that recoup the cost of offering their related rewards. And, these products come with expert Consulting guidance and Training programs to help your front line communicate the account benefits. Simple qualifications like making debit card purchases, accepting e-Statements, and making direct deposits increase interchange revenue and reduce service costs. This approach also encourages retention, as customers become more attached to your bank. Of course, retention opens the door for cross selling, which also help increase your share of wallet. To date, there over 1.8 million account holders in BancVue accounts.

Tools to Manage Financial Life

The power of a national brand

Sixty percent of consumers say managing their finances online in one convenient place would give them better control over their money.1 As with any product-related endeavor, it is important to first identify a need. What our research told us revealed a huge opportunity in the area of managing personal finances. These findings inspired us to develop MoneyView®, our latest innovation. This centralized, online and mobile platform drives revenues, enables cross sales and increases account holder retention. MoneyView includes Personal Finance Management, providing consumers with a panoramic view and better understanding of their financial world, including accounts, loans, credit cards, mortgages, and more. This clear view also gives banks new and important insight into account holder behavior–as well as supporting the consumer transparency that regulations increasingly demand. MoneyView’s cross sell platform makes it possible to pinpoint your marketing efforts, helping drive noninterest income and increase share of household. A built-in messaging service acts as a valuable delivery channel, deepening account holder relationships and encouraging retention. You can post your latest news, promote and cross-sell your products to generate non-interest income, and more. Customers can also track their BancVue DDA rewards. This encourages them to monitor activity related to each REALChecking account, which helps ensure they meet the cost-cutting, fee-boosting account qualifications.

What is Kasasa besides a quirky word? Much like Google or Twitter, the name itself is defined by what it represents. Kasasa is a national brand that empowers you to do things–which may never otherwise be possible–without increasing your marketing budget. Like MasterCard, Kasasa enhances the consumer's perception of your bank, while complementing your existing brand equity. On a rudimentary level, Kasasa takes the REALChecking suite of products and places them under a recognized name. Kasasa is recognizable because it’s tied to marketing and PR on a scale comparable to the industry’s biggest players. What’s more, these broad-reaching efforts become associated with your bank, complementing your brand. The more BancVue clients that embrace Kasasa, the more this collective media exposure grows. As a result, your bank reaps the benefit of nationwide exposure, lifting account acquisition, and deepening loyalty among your account holders. Institutions, who’ve already had success with the REALChecking system, have increased account acquisition by an additional 40 percent since adding the Kasasa name to their BancVue offerings.

The Ohio Connection BancVue has a strong history in Ohio and we are excited by what the future holds. One community bank in particular, Farmers Citizens Bank, has had quite a successful run with Kasasa. With $355 million in assets and seven branches, the Bucyrus, Ohio bank is thriving in a tough market. The following statistics best capture how Kasasa has impacted its business: • 32 percent increase in account openings • 25 percent of all accounts opened online • 22 percent of accounts opened by younger customers • 1.7X account profitability vs. traditional free checking “We realize that in order to stay ahead of the competition, you have to offer account holders and prospects the most compelling product,” says Farmers Citizens CEO, Coleman Clougherty. “In an age where checking accounts are regularly opened online in under ten minutes, you must offer products and services that attract quality consumers. We feel that Kasasa really is that compelling product.”

Proud to Be Affiliated with OBL We believe there is strong alignment between BancVue and the Ohio Bankers League and our ability to help Ohio community banks win in their marketplace. We look forward to deepening existing friendships, building new ones and regaining market share together. Thank you for giving us this great opportunity. Contact BancVue’s Stuart McLellan (877) 342-2557 for more details.

summer 2011 Ohio Record

Web App Helps Connect Ohio Lenders with Ohio Small Businesses

Glenn Van Valkenburgh Insurance & Financial Development Manager Entrepreneurship and Small Business Division, Ohio Department of Development

Ohio Record summer 2011

The continued growth of Ohio’s economy focuses greatly on the success of our small businesses. However, in order for those small businesses to succeed and create jobs, they must first have the resources and the tools. The challenge that faces many lenders is how to efficiently identify and connect with those small businesses that have growth plans. This is particularly true for smaller community lenders, who have limited resources to devote to new business development operations. The Ohio Department of Development is bridging the gap by utilizing web-based technology to make connections between businesses and lenders. The Ohio Business Lending Clearinghouse, administered by the Department’s Office of Insurance and Financial Development, is an innovative public/private partnership which leverages the power of technology to bring together Ohio small businesses with Ohio lenders. It uses a web-based tool that allows Ohio businesses looking for a loan to enter 12 pieces of company/loan information onto the website www.OhioBLC.com. The web app matching tool then works to pair the business with lenders that best match its needs. Businesses that are not successful in connecting with a lender will be referred to a local network provider of business development resources, such as the state’s Small Business Development Centers or the Minority Business Advisory Council. These resources provide tools and information that are vital to helping small businesses grow. The SBDC’s and the MBAC’s have many local community partners including colleges and universities, economic development agencies, chambers of commerce, and other community organizations which work to assist small businesses with their business plans. Lenders that participate in the Ohio Business Lending Clearinghouse will automatically receive electronic loan requests from inquiring small businesses, which match their service footprint and lender profile information. Lenders then have the opportunity to pursue this new business relationship. This enables lenders of all sizes and locations throughout the state the ability to quickly connect with businesses in an efficient new way. The Ohio Business Lending Clearinghouse is a free service for Ohio businesses. It operates as a nonprofit service, supported by nominal fees provided by the participating lending institutions. The Ohio Business Lending Clearinghouse has been well received by both Ohio small businesses and Ohio’s lending community. Both groups have been pleasantly surprised with the ease-of-use of the program, which was designed with input from Ohio bankers, the OBL and the SBA. Getting started as a participating lender is a simple process. To learn more about how your financial institution can get involved in the Ohio Business Lending Clearinghouse, visit www.OhioBLC.com and click Contact Us. Once your contact information and message has been provided, a representative will connect with you to discuss opportunities. See how the power of technology can help your business grow in 2011.

Looking for Non Interest Revenue? We can point you in the right direction.

Please contact Michelle Crume at mcrume@ohiobankersleague.com or (614) 340-7622 for further information. fall 2010 FINRA/SIPC Ohio Record Securities offered through INFINEX INVESTMENTS, INC. Member

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Ohio Record summer 2011

BUCYRUS

DENNISON

MOUNT VERNON

Farmers Citizens Bank announced the following promotions/appointments: Jared Butler to assistant vice president; Maura Clougherty to assistant vice president; William “Bill” Diehl to vice president; Sara Kehrwecker to assistant vice president; Doris Lambert to executive vice president; Brian McFarland to assistant vice president; Michelle Muchow to banking officer; Roger Nedolast to senior vice president; Beth Ricketts to assistant vice president; Toni Ridge to vice president; Daniel “Dan” Shrimplin to banking officer; Cynthia Sparling to executive vice president; Gene Spurbeck to senior executive vice president; Dennis Stillwell to senior vice president; and Jeff Wise to senior vice president.

The First National Bank of Dennison announced the following promotions: Kim Castello-Watson to vice president; Polly Clark to assistant vice president – data services; Brian Williams to loan officer; and Bob Wolf to vice president.

First-Knox National Bank announced the promotions of David Humphrey to manager and administrative officer and Lisa Alexander to assistant manager at the Centerburg Office.

RIPLEY Ripley Federal Savings Bank named Aaron Wood president and CEO of the bank.

SOMERSET Kim Castello-Watson

Polly Clark

Brian Williams

Bob Wolf

OBL President Mike Van Buskirk (pictured, right) attended a groundbreaking ceremony for Commodore Bank’s newest branch in Hebron. Also pictured is Commodore President & CEO Jeff Danford (left).

CLEVELAND The Federal Reserve Bank of Cleveland announced the following appointments: William Fosnight was promoted to senior vice president and general counsel and Susan Steinbrick was promoted to senior vice president and general auditor. Nearly 8,300 employees of KeyCorp participated in the company’s 21st annual day of volunteer community service on May 24. Key staff spent the afternoon participating in a wide array of community service projects in neighborhoods across the nation. Neighbors Day began in Alaska in 1991, when a group of employees volunteered for an array of service projects in their communities. The idea swept across the bank, where this year employees will donate an expected 33,000 hours worth nearly a million dollars to 900 community nonprofit organizations.

COLUMBUS First City Bank announced the promotion of Charles Cecil to president. Cecil, a career community banker, was previously executive vice president and chief operatCharles Cecil ing officer at the bank. Huntington director of economics George Mokrzan, Ph.D., was recently named vice chairman of the Economic Advisory Committee for the American Bankers Association.

MADISON, WI The Ohio Bankers League named Christopher Olney, senior vice president and chief lending officer at The Community Bank in Zanesville, recipient of the Prochnow Educational Foundation/Ohio Bankers League Scholarship for the Graduate School of Banking at the University of Wisconsin-Madison. Olney will receive a $1,250 discount from the regularly charged fees for each of the three years of the school. Michelle Ward, vice president and human resource manager at NCB in Hillsboro, was named recipient of the Graduate School of Banking’s Human Resource Management School Scholarship. Ward will receive an $800 discount from the regularly charged fees for the GSB Human Resource Management School.

MARIETTA Settlers Bank announced the promotion of Donn Schafer to president and CFO.

WASHINGTON D.C. The Federal Deposit Insurance Corporation announced that staff from WesBanco Bank, Wheeling, were inaugural recipients of the 2011 Chairman’s Award for Excellence, which recognizes the work of individuals who are instrumental in creating and promoting programs that meet the credit and deposit needs of low- and moderate-income consumers. Robert Young, Joe Flynn, LaReta Lowther, Lisa Werner, and Jayme Payton were recognized for creating excellent credit products for LMI consumers.

YOUNGSTOWN The Home Savings and Loan Company announced the following appointments/promotions: John Cunningham as vice president, commercial lending; Pamela Raidel to vice president, consumer lend- Pamela Raidel ing; and Michael Sullinger to senior mortgage loan consultant.

Donn Schafer summer 2011 Ohio Record

Focus On… OBL Business Partner ABA Insurance Services 43 Ohio Banks share $96,470 in Profits from OBL Endorsed Vendor Ohio banks that purchase D&O and fidelity bond insurance from OBL business partner ABA Insurance Services will share $96,470 in profit distributions this year. This is the program’s 21st consecutive profit-sharing distribution—$75,500,000 has been declared since the first distribution in 1991 based on the mutual program’s success and profitability. The total distributed to Ohio banks is over $2,000,000. Participating banks nationwide will receive checks this year ranging up to $51,000 with $4,000 being the average amount.

Bick Weissenrieder of Hocking Valley Bank is with Mike Read, Marketing & Sales Manager, ABA Insurance Services, Inc.

Calvin Gebhart of Citizens Bank of Ashville is with John Wells, President & CEO, ABA Insurance Services, Inc.

Licking County Banking Under Spotlight A new exhibit in Newark explains the history of banking in Licking County and highlights how the industry has changed since the first banks opened there in 1845. The exhibit fea- The Barker Family teller line tures an authentic teller line, historical anecdotes about the inception of local banks, effects of The Great Depression on banking institutions, and a timeline showing how multiple banking institutions merged, closed and thrived throughout the decades. An early ATM model and a variety of artifacts The exhibit chronicled the are also on display from local institu- history of banking in Newark tions and collectors. Jay Barker, vice president of Comerica Bank, donated the teller line to the exhibit. He told Ohio Record that it originally was part of the Bank of Pettigrew in Arkansas, but when the bank closed in 1920, his grandfather bought the teller line and put it on display. The line remained in the store until the 1980s, when Barker's family moved it to Newark and donated it to The Works, where the current exhibit is held.

Steve Wilson of LCNB National Bank is with John Wells, President & CEO, ABA Insurance Services, Inc.

Michael Lewis and Howard Boyle of Home Savings Bank are with Mike Read, Marketing & Sales Manager, ABA Insurance Services, Inc.

says Denise Penz, chief operating officer and head of the Wealth Division at Premier Bank & Trust. “With a one-size-does-not-fit-all approach and an in-house attorney on the team, the Wealth team develops and manages portfolios that weather the storms of life,” she says. “We provide disciplined portfolio management and diligent portfolio monitoring to focus on our clients’ unique investment objectives. But it’s the service that keeps them connected to our bank and prompts them to refer others.” Premier Bank & Trust’s Wealth division offers asset management, trust and estate administration, personal wealth management, personal retirement services, and private banking.

2011 American Mortgage Conference The field of housing finance is at a crossroads. As Congress focused last year on the revamp of the financial services marketplace in what became the Dodd-Frank Act, it moved to the backburner the question of reforming the Government Sponsored Enterprises and how financing homeownership will be accomplished for future generations. There are many questions...What will that marketplace look like? What will be the design of the delivery system? How will various related businesses be impacted? We can be sure that we will not see a return to the ways of the past. The recent collapse and recession have been too painful. It’s all a new frontier! WHO SHOULD ATTEND?

Trust Milestone for OBL Member Premier Bank & Trust’s wealth management division has reached $100 million in assets under management - all in less than a year since it opened. “Our team is focused on providing service that exceeds the expectations of our wealth clients. Superior service is what sets us apart and has become the foundation for this successful division,”

Ohio Record summer 2011

Financial Institution CEOs, Chief Credit Officers, as well as Senior Lending Officers for both residential and commercial divisions as well as any individual and organization impacted by the mortgage lending process will find the information provided at the American Mortgage Conference beneficial and relevant in their day-to-day operations. REGISTRATION Denise Penz

Contact North Carolina Bankers’ Amy Hornbuckle at amy@ncbankers.org or (800) 662-7044 to sign up.

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