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Online lendingTime to Get in the GamePg. 6
It’s Almost Here!reGister nOw
Also In This Issue....
strategic PlanningPg. 7
adequate
2 COMMUNITY BaNker UpdaTe | JULY 2015
want to attenda webinar?
View a complete calendar andregister for CBI-sponsored webinarsand events at www.cbiaonline.org
or Call Us at 515.453.1495for more information.
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GOVERNMENT & AGENCY BONDS MUNICIPAL BONDS | MORTGAGE BACKED SECURITIES
PUBLIC FINANCE | MUTUAL FUNDS/EQUITIES CORPORATE BONDS | MUNICIPAL BOND CREDIT REVIEW
BOND PORTFOLIO ACCOUNTING & ANALYSIS ASSET/LIABILITY MANAGEMENT
July 2015 webinar line-uP
July 7 RegulatoryOversightofThird-PartyVendors:DueDiligence,Management &Contracts
July 8 MandatoryComplianceRegulationsfortheFrontline
July 9 ManagingE-SIGN,E-Statements&E-Disclosures
July 14 DirectorSeries:UnderstandingtheBoard’sRoleinCyberSecurityRisk
July 15 MasteringtheSBA7aLoanPart2:Documentation,Closing&Funding
July 16 CommercialAppraisalReviewPart2:SalesComparisonApproach
July 21 YourCustomerHasFiledBankruptcy,NowWhat?
July 22 RegulationEMadeEasy
July 23 EmergingLeaderSeries:DevelopingYourUDAAPProgram:Policy,Procedures, RiskAssessment&Audit
July 28 ConstructiontoPermanentLendingCompliancewithCFPBRules:Including ChangesImpactedbytheNewIntegratedDisclosureEffectiveAugust.1,2015
July 29 CallReports:LendingSchedulesRC-C,RC-N&RI-B
July 30 AdvancedACHSpecialistSeries:DoesYourOriginatorAgreementMeetNACHA RuleRequirements?
COMMUNITY BaNker UpdaTe | JULY 2015 3
In This Issue
July2015WebinarLineup......................2FromtheEVP&CEO...............................344thAnnualConvention.....................4-5
OnlineLending........................................6AdequateStrategicPlanning..................7FromtheTop............................................8FinePoints...............................................9RuralMainstreetSurvey................ 10-12 Building A New Foundation….
Justasyourcommunitybankisthefoundationsupportingaprosperouscommunity,sotooarethenextgenerationofcommunitybankleadersthefoundationofourindustry.YourboardofdirectorsidentifiedthiscriticalfactoroveradecadeagoandCBIhasbeenhardatworksupporting,encouragingandbuildingthenextgenerationofcommunitybankers.
TheLeadersofTomorrowpeergroup,astheonlymulti-functionnetworkinggroupinIowa,haspreparedover300bankersforthenextstepintheircareersincluding7CEO’ssofar.Theylearntoleadandoperatetheirgroup,practiceandlearnleadershipskillsandconnectwithothersimilarbankersacrossthestate.Ifyoubankhasneverhadanyonejointhegroup,thereisnotimelikethepresenttostartsomeoneinyourbankdownthepathtoleadership.AnumberofLOTbankerswillbeattheAnnualManagementConferenceinOkobojiandtheywouldbepleasedtosharewithyouthebenefitsoftheirgroup.LookforthemhostingtheWineandCheesereceptiononThursdaynight.
Likewise,theencouragementofbankemployeechildrenisanothermethodtoexposeyoungpeopletoacareerinbankingandtheLeadersofTomorrowscholarshipprogramhasgivenover20bankemployeechildrentheopportunitytopursuehighereducationaswell.
TheCBICouncilofPresidentssawthisissueasanopportunitytosupportourindustrybyforminganeducationalfoundationtofurthertheseprograms.Since2012,theCBIEducationalFoundationhasenabledourscholarshipprogramstogrowandexpand.Asatax-deductible501(c)3FoundationwearecontinuingoursupportforfinancialliteracybysponsoringtheGovernor’sConferenceonFinancialLiteracy,increasethedollaramountsfortheLOTscholarshipsandthisyear,implementingTheCBIFoundationInternScholarshipProgram.
ThisexcitingprogramplacescollegeJuniorsincommunitybanksforthesummer,wheretheyareexposedtoallfacetsofcommunitybankinganduponsuccessfulcompletionofaprescribedcontentoutline,willbeawardeda$1000scholarship.Wehaveanumberofbanksparticipatingintheprogramthisyearandareanxioustoseetheoutcome.Inaddition,manymemberbanksandindividualshavemadecontributionstothefoundationinsupportoftheseprograms.
Thefutureofcommunitybankingdependsonbuildingthebankersoftomorrow,andwithyourhelpandparticipation,CBIwillleadtheway.
CompletedetailsofalltheseprogramsareavailableontheCBIwebsiteatwww.cbiaonline.org.
EVENTS CALENDAR44th Management Conference &Annual Convention............... July 15-17
8th Annual Golf Tournament...Aug. 11
LOT Quarterly Meeting............ Aug. 20
Certified Community LenderCertification Renewal............... Aug. 20
Community Bankers for ComplianceFall Session......................Sep. 22 & 23
Community Banking SummitsFall Sessions........................Oct. 13-15
LOT Quarterly Meeting.............Nov. 19
Community Bankers of Iowa1603 22nd St, Suite 102West Des Moines, Iowa 50266Phone: [email protected]
Iowa Land Records
The InvictusConsulting Group
Welcome NewCBI Members!
The Community Bankers of Iowawould like to welcome the following companies to the association, and
thank them for their support:
4 COMMUNITY BaNker UpdaTe | JULY 2015
There’s Still Plentyof Time To Register!Join the Family Reunion atthe 44th Annual Convention
CommunityBankersofIowa’s44thManagementConferenceandAnnualConventionrepresentstheimportanceofcommunitybanks’personalserviceandcommitmenttotheircustomersandthecommunitiestheyservewiththetheme,“Where Everybody Knows Your Name.”TheConventionstrivestounitecommunitybankersthrougheducationfromnationallyrecognizedspeakers,accesstothelatestproductsandservices,andnumerousopportunitiesfornetworking,camaraderie,andtheexchangeofideaswithcommunitybankersstatewide.
TheConvention’sEntrees(GuestSpeakers)includeformerCIAoperativeProfessorJim Olson.OlsonwillopenthefirstGeneralSessionwithhispresentation“A Different Kind of Career: Under Cover in the CIA”.TofollowisChip Eichelbergerwho’llshowyouhowtorecapturethepowerofmomentumandgeneratehigh-achievingemployeesduringhismotivationalspeech“Get Switched On”.
KickingofftheSecondGeneralSessionisJim Schipper,SuperintendentoftheIowaDivisionofBanking,giving“Iowa’s Banking Perspective”.ICBAImmediatePastPresidentJohn Buhrmasterisnext,addressingattendeesoncommunitybankingissuesatthenationallevelduringthe“ICBA Update”.OntheConvention’sclosingday,SendoffSpeakerJeff Havenswillfillinthegapsregardinggenerationalissueswithahilariouskeynoteaddress“US! vs THEM!: Understanding Millennials”.
AdditionaleducationthatyoucantakebacktoyourbankandutilizewillbeprovidedbytheConvention’sSide Dishes(Break-OutSessionSpeakers.)Theever-popularRegulators’ Panelisbacktodiscussexaminationandcomplianceissues.ThepanelfeaturesIADivisionofBankingSuperintendentJim Schipper,RegionalDirectorJames LaPierrewithFDIC’sKansasCityRegionDivisionofSupervisionandConsumerProtection,andIowaRegionalDirectorJeff JensenfromtheFederalReserveBankofChicago.Navigating“Emerging Trends in Data Breach Response”isDan Kramer,SHAZAM’sSeniorVPofMarketing&MerchantServices.ICBA’sExecutiveVPandChiefMarketingOfficerChris LorencewillalsobeonhandtodiscusssocialmediamattersattheBankers’RoundtableBreakfast,andwillbebacktomoderatethe“Social Media Discussion Panel”break-outsession.
SitinattheTown Hall BreakfasttomeetIowa’sLeadership:IowaHousemembersRep. Chip Baltimore(R-District57)andRep. Tom Sands(R-District88),andSecretaryofAgricultureBill Northeywillbethere.ThengoonajourneywithRandy PottsandSarah Nielsentolearnaboutthisyear’sIowaShowcasefeaturedbusinessWinnebago Industries.
ThroughouttheConventionthereareseveralAppetizers:recreationalactivitiesandopportunitiestonetworkwithyourpeers.SpousesandfamilymembersareallstronglyencouragedtoattendtheGeneralSessionsaswell;presentationsby
July 15-17, 2015
John Buhrmaster
ChipEichelberger
Dr. JamesOlson
JeffHavens
General Session Featured Speakers
Come to CBI’s 44th Annual Convention to See This
BillNorthey
SarahNielsen
RandyPotts
ChipBaltimore
Town Hall Breakfast Speakers
TomSands
COMMUNITY BaNker UpdaTe | JULY 2015 5
thisyear’sspectacularspeakerlineupwillbeinformative,enlightening,andentertainingforALLConventionattendees!Alsoontherecreationandentertainmentrosterare:
• The Eleventh Annual Catch and Release Fishing Tournament: SpendthemorningatthewateringholeduringtheTenthAnnualFishingTournament.Thetournamentisopentomen,womenandyouthsovertheageof16withvalidIowafishinglicenses,whethernoviceorexperiencedfishers.Theprofessionalguidesknowwheretofindthebigonesforyou,andwillevenbaityourhooks!
• Mixed-Pair Golf Tournament: Tee-offatBrooksNationalGolfClubduringtheMixedPairGolfTournament.Thetournamentisafour-person,bestshotmatch.
• Kick-Off Reception: Hoistaglass!JointheConventionCommitteeattheMajesticPavillioninArnoldsPark.ThereceptionwillhonortherecipientsoftheRobertD.DixonFounders’Award,theUpandComingBankeroftheYearAward,theLeadersofTomorrow’sScholarshipwinners,andthewinneroftheCommunityBankingMonthBest-of-the-BestCompetition.
• Wine & Cheese Reception:AneveningofnetworkingbeginswiththeWine&CheeseReceptioninArrowwood’sWimbledonRoom.Sip,share,andbuildrelationshipswithotherIowacommunitybankerswhileyoulearnaboutthemanyservicesourpartnersoffertostreamlineyourbankingbusiness.MakesuretovisiteachboothtobeeligibletoentertheGrandPrizedrawingheldduringtheGalaReception!TheWine&CheesereceptionissponsoredbytheLeadersofTomorrow.SwingbytheirstationtoseeiftheLOTgroupisrightforyouoramemberofyourbank.
• Gala Reception & PAC Auction:Enjoyfoodstationsguaranteedtosatisfy,thenplaceyourbidsattheGala’ssilentandlivePACAuctions!AllproceedsfromtheauctionsupportCBI’sPACandremaininthestateofIowa.ParticipateinthePutting Contest,thenvisitthe“Photo Finish”photoboothtocapturememoriesofyourtimeattheConvention.Don’tforgettotakelotsofselfies!
• Bankers’ Golf Tournament:Hittheafter-hourspartyatthefinaleventoftheconference.EnjoylunchatBrooksNationalGolfClubfollowedbyashotgunstartforthefour-person,bestshotBankersGolfTournament.
SpecialDessertsarealsoscheduledforspouses.Firstit’sHappy HourduringtheWelcome Reception & “Cheers for Women” Breakfast,wheretheycanenjoyaspecialbuffetofquiche,freshseasonalfruitandassortedpastries.HeidiKooikerfromViBellaJewelrywillrecounttheViBellastorywhiletheladiesbrowsebeautifulhandmadejewelrycraftedbyartisansinIowa,Mexico,andHaiti.Later,theycanheadtoA Toast to the Arts: A Trip to Pearson Lakes Art Center.SpendanunforgettableafternoontouringtheCenter’ssixgalleries,artstheatre,interactivegallery,libraryandeventshall.Then,they’llnametheirpoisonandproposeatoasttofellow-tourgoersatanexclusivespouses-onlycocktailparty.Here’s to your health!
There’ssomethingforeveryoneatCBI’s44thManagementConferenceandAnnualConvention.Join us at the Family Reunion and be a part of spreading the community banking message!
Additionalinformationandregistrationisavailableonlineatcbiaonline.org.IfyouhaveanyquestionsabouttheConvention,[email protected].
By the time Convention is over,everyone will know YOUR name.
We hope to see you there!
DanKramer
JamesLaPierre
ChrisLorence
JeffJensen
JimSchipper
Breakout Session Speakers
Amazing Speaker Lineup!
Gather on the greens at the 44th Annual
Convention’sMixed-Pair and
Bankers’ Golf Tournaments.
Enjoy refreshments, learn about new products, and bidon luxury items at the Gala / PAC Auction / Tradeshow.
Connect with Iowa leadership at the Town Hall Breakfast.
6 COMMUNITY BaNker UpdaTe | JULY 2015
Doyourememberthedayswhenfinancialinstitutions(FI)didn’thavewebsites?Forthosemillennialsouttherewhojustfelloutoftheirchair,yes,therewasatimewhenbanksandcreditunionsdidn’thavewebsites.Whatweheardinthosedayswasthatcommunity-basedbankingwasarelationshipbusinessandthatFI’sknewtheirclientbasesowelltheydidn’t“need”awebsite.Itcertainlywas,andstillis,arelationshipbusiness.But,canyouimagineanFIoperatingwithoutawebsitetoday?Ididn’tthinkso.Whataboutthedaysbeforecellphones?IfIhadadollarforallofthepeopleIheardsay,“I’llnevergetoneofthose”,whonowown,notonlyacellphonebutatabletaswell,I’dbewritingthisblogpostfromabeachsomewhereinsteadofmyoffice.Thepointis,timeandtechnologycontinuetomarchon.FI’sarefindingnewanduniquewaystoconnectwiththeircustomersandmembers,andasinnovationincreases,productofferingsincreaseaswell.Unfortunately,sincetherecession,non-FIcompetitorshaveemergedwithinthelendingmarketplaceandhavemovedaheadofFIsinanumberofways.
Youcanpaybillsoropenacheckingaccount,butcanyourequestfinancingdirectlyfromyourFIswebsite?Probablynot.Whatif
you’reasmallbusinessownerandneedfinancingrelatedtoyourcompany?Evenmoreunlikely.Infact,wesurveyedanumberofFI’slastyearandlessthan8%hadanykindofmechanismforabusinesstorequestfinancingonline.Yet,weknowthatpeopleareincreasinglyusingtechnologytodomosteverythinginlife;includingfindingsourcesoffinancingandcredit.Theexplosionofonlinealternativelendersoverthelastseveralyearsisproofenoughofthatfact.Consequently,thenumberofloansdoneonlinewiththesetypesoflendershasanexponentialgrowthcurveattachedtoit.Still,FI’shavebeenslowtoreactandevenslowertocompete,eventhougheveryinstitutioniscryingoutforloandemand.Maybeyou’veseentheseheadlinesfromrecentperiodicals:
“Why Your FI Needs a Digital Lending Platform—Now”“Community FI’s Need Sleeker Approach to Small-Business Lending”
“FI’s Conspicuously Scarce in Supercharged Online Loan Field”
Thisboldbutnecessaryleapforwarddoesn’trequireanFItochangeitscreditcultureorlendingstandards,itsimplybegsfortheinstitutiontomeettheborrower’sneedsinanewanduniqueway.Itasksyoutoleveragethetechnologychannelsthatyou’vealreadyinvestedin,butinwaysthataremeaningfultothosewhowishtoaccessyourservices.Onlinebanking,forexample,wouldn’tbeaverypowerfultoolifwhenyouloggedin,youhadtocalltogetmoreinfo,orclickonthe“ContactUsforMoreInfo”button.Whyshouldyourloanproductsbeanydifferent?Thinkaboutitthisway,thetopthreeresponsesfromborrowerswhenaskedwhattheyarelookingforinalenderareusually:
• Makeiteasyformetoapply• Givemeaquickinitialresponse• HelpmegetthecapitalIneed,evenifyoucan’tdoityourself
AskyourselfifyourFI’sloanmethodologymeetsthoseresponses.Ifnot,it’stimeforyoutogetinthegameandstopsittingonthesidelines.Somedaywe’llalllookbackandrememberthedayswhennobodyofferedloansonlineandwonderwhattooksolong.
Robb Nielsen (717) 369-0139 • [email protected]
www.protectmybank.com
• InformationSecurityAudit
• DesignedExclusivelyforBanks
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Online LendingTime to Get in the GameWritten By: Mark Messick, Profitstars
COMMUNITY BaNker UpdaTe | JULY 2015 7
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Onceagain,regulatorsarezeroinginoninadequatestrategicandcapitalplanningprocessesatmanycommunitybanks.
TheOfficeoftheComptrolleroftheCurrencylisted“strategicplanningandexecution”asitsfirstsupervisorypriorityforthesecondhalfof2015initsmid-cyclestatusreportreleasedinJune.ThatechoesconcernsfromtheOCC’ssemiannualriskperspective,whichfoundthatstrategicriskwashighformanybanksasthey“struggletoimplementtheirstrategicplanseffectively.”
FDICChairmanMartinJ.GruenbergsaidinMaythatregulatorsexpectbanks“tohaveastrategicplanningprocesstoguidethedirectionanddecisionsofmanagementandtheboard.Iwanttostresstheword‘process’becausewedon’tjustmeanapieceofpaper.”
Hesaidthateffectivestrategicplanning“shouldbeadynamicprocessthatisdrivenbythebank’scoremission,vision,andvalues.Itshouldbebasedonasolidunderstandingofyourcurrentbusinessmodelandrisksandshouldinvolveproperduediligenceandtheallocationofsufficientresourcesbeforeexpandingintoanew
(Strategic Planning continued on page 14)
Regulatory Scrutiny Focuses on Adequate
StrategicPlanning
Written By: Lisa Getter and Adam MustafaInvictus Consulting Group
8 COMMUNITY BaNker UpdaTe | JULY 2015
key under the matWritten By: Jack Hartings, Chairman of ICBA
TherejectionoftherecentMasterCard-Targetsettlementshowedussomethingthatmanyofuscommunitybankershaveknownforalongtime-thatpenniesonthedollarisneveragooddealforanyone.
WhenTargetagreedtoreimburseaffectedMasterCard-issuingbanksroughly$19millionfollowingtheretailer’smassive2013databreach,whichincurredsignificantcostsforthousandsofcommunitybanks,itgavecommunitybanksachoice-eitheracceptthemeagersettlementorcontinuethecostlyandriskyroadoflitigation.AsICBA’sCamFinewroteinanAmericanBankerop-edonthesubject,“talkaboutbeingcaughtbetweenthedevilandthedeepbluesea.”
Neitheroptionwasparticularlydesirable,andtherejectionofthesettlementprovedit.Thisiscertainlyacaseof,“it’sbetterifitdidn’thappeninthefirstplace.”
Andwhilewecouldwishthatdatabreachesneverhappened,orwereathingofthepast,weknowthattheyareaveryrealthreattocommunitybanksandourcustomers.That’swhyyouknowalltoowellwhyICBA’sdatasecurityprinciplesaremoreimportantnowthanever(seesidebar).
Ascommunitybankers,weknowourcustomers,butit’smoredifficulttoprotectthemwhenwedon’tseethematthepointoftransaction.Wedependonsystemsthatuselogicandtrendstospotirregularities,buttheyareneverfoolproof.Whiletechnologyisamazing,it’snotalwaysperfect.
Thesamegoesforcybersecurity.Communitybanksareheldtoanincrediblyhighstandardinprotectingourwebsitesandsensitiveinformation,andweshouldbe-we,andmostimportantly,our
customersdependonus.Butit’sachallengeforbanksofallsizes.Andaswehaveseenoverandoveragain,cyberthievesarealwaysevolving.
Andwhilecommunitybankscanhavethemostsecuresystemsinplace,wecan’tstopthere.Weneedtocontinuetoeducateourcustomerstoprotecttheirpasswords,logincredentialsandpersonalinformation.Notdoingsoleavesthekeyunderthefrontdoormat.Andwhilebusinesscustomerswant24/7accesstosendACHandwires,thereisacostandvulnerabilityassociatedwiththat.
Weliveinaworldwhereeveryonewantseasy,real-timetransactions,butthereisatremendouscosttoprotectthoseuser-friendlysystems.WhileIknowcommunitybanksareuptothechallenge,weneedtobemorethanafewstepsaheadofthetechnology.Weneedtokeepmovingbecausecyberthievesarelurkingbehindus.
JackHastingsisChairmanofICBA,andPresidentandCEOofThePeople’sBankinColdwater,Ohio.
tOPfrom the ICBA’s Data Security Principles
• The costs of data breaches should ultimately be borne by the breached party.
• All participants in the payments system-including merchants-should be subject to Gramm-Leach-Bliley Act-like data security standards.
• A national data security breach and notification standard should replace the current patchwork of state laws.
• Unnecessary barriers to effective threat-information sharing between law enforcement and the financial and retail sectors should be removed.
• While community banks and other financial institutions continue to move to chip technology for debit and credit cards, these technologies alone may not have prevented the recent retailer breaches and do not protect against fraud in “card-not-present” transactions.“...we need to be more than a few steps
ahead of the technology. We need to keep moving because cyberthieves are
lurking behind us.”
COMMUNITY BaNker UpdaTe | JULY 2015 9
Letfreedomring.Leteconomiclibertyandopportunityflourish.LetcreditflowonMainStreet.Thismonth,ontheheelsofcelebratingournation’sbirthtosecurepersonalfreedomandeconomicopportunity,IndependentBankerhighlightsrecentlysuccessfullendingbycommunitybanks.Themagazine’scoveragerepresentssnapshotsofourindustry,becausetherearefartoomanyworthycommunitybanklenderstohighlightinanysingleissue.Sothecoverageispartrecognitionofandtributetothepivotalrolecommunitybanksplayindeployinglocaldepositstosupportpeopleandlocaleconomies.
Available,affordablecreditistheindispensiblelubricantinournation’smightyeconomicengine.Inimmeasurablydiverseways,creditempowersprogressandhelpsfulfillindividualideasanddreams—thefoundationofAmericanopportunity,freedomandprosperity.Knowledgeable,responsivelending—alongwithprocessingsecurepaymentsandsafeguardingsavings—isfundamentaltotherelationship-basedmodelallcommunitybanksfollow.
Everycommunitybankwants—andinfactcountson—itscustomerssucceedingfinanciallyasmuchormoretomorrowastheydotoday.Inherently,thatinvolvesresponsiblyprovidingcredittoasmanypeopleaspossiblewhoneedit.Oftenwhenotherfinancialinstitutionsfailtomeetconsumers’needs,it’scommunitybanksthatstepuptoprovidethecreditthathelpsMainStreetsucceed.
However,anunderlyingstorylineamidthismonth’sIndependentBankercoverageishowhardcommunitybanksmustworktodaytocontinuetoprovideresponsible,neededcreditonMainStreet.Atalmosteveryturn,fromcounterproductivecompliancerequirementstomisfitprudentialmandates,one-size-fits-alloverregulationisimposingcostlyburdensthataredistractingifnotdownrighthinderingcommunitybanksfromtheirprimaryroleofprovidinguseful,job-creatingcredit.
Fortunately,ICBAandcommunitybankershavesecuredseveralimportantandunprecedented
exceptionsforcommunitybanksfromsome,butnotenoughof,thenewestDodd-FrankActprovisionsandmandates.Butthosesensiblepolicyvictoriesonlystemmedatideofexcessiveregulationalreadyweighingdowncommunitybanks.ThetruthisthatmanymisdirectedregulationsdesignedforWallStreetmegabanksandnonbankscontinuetoshackleMainStreetcredit,asindicatedbynumerousindependentstudiesandamountainoftestimonyfromMainStreetcommunitybankers.Theevidenceisclearandoverwhelming,andtodayfewpolicymakersinWashingtondenyit.
WithconstantinputandencouragementfromICBA,Congresscontinuestoworkonlegislationtoprovidemeaningfulregulatoryreliefforcommunitybanks.ManymeasuresderivedirectlyfromICBA’sPlanforProsperitypolicyproposals.Allofwhichwouldfreecommunitybanksfromregulationtrulyaimedatmegabanks,andmanyoftheproposalswoulddirectlyhelpcommunitybanksfocustheirlimitedtimeandresourcesonMainStreetlending.America’sconsumers,families,smallbusinessesandanyonewithapersonalstakeinoureconomywillbenefitfromthemeasures.
That’sourprimarymessagetoCongressaswe—withhelpfromyouandeveryoneatyourcommunitybank—pushtosecuremeaningfulregulatoryreliefthisyear.Forsomanyimportantreasons,forsomanypeople,letcreditflowonMainStreet.Letfreedomring!
freedom and lendingWrittenBy:CamdenFine,PresidentandCEOofICBA
Following Mr. FineMore than 1,000 people are following Camden Fine’s tweets @Cam_Fine— are you? Visit www.twitter.com/cam_fine.
finePOints
“Every community bank wants - and in fact counts on - its customers
suceeding financially as much or more tomorrow as they do today.”
10 COMMUNITY BaNker UpdaTe | JULY 2015
June Survey Results at a Glance:• TheRuralMainstreetIndeximprovedtogrowthneutral,
highestsinceJanuaryofthisyear.• Farmlandpricesdeclinedforthe19thstraightmonth,but
withwidevariationsacrosstheregion.• Almostoneinfivebankers,thesameasinMay,reported
negativefalloutfromtheavianfluoutbreak.• Morethanone-thirdofbankersthinktheFederalReserve
shouldwaituntil2016toraiseinterestrates.• Homesalessoaredforthemonth.
OMAHA,Neb.–TheCreightonUniversityRuralMainstreetIndexforJuneroseslightlyfromMay’sweakreading,accordingtothemonthlysurveyofbankCEOsinruralareasofa10-stateregiondependentonagricultureand/orenergy.
Overall:TheRuralMainstreetIndex(RMI),whichrangesbetween0and100,climbedtogrowthneutral50.0fromMay’s49.0.
“Thisisthethirdstraightmonththeindexhasrisenandthatindicateseconomicconditionsareimprovingintheregion,thoughtheyremainweakbyhistoricalstandards.ThestrongdollarisweighingonagriculturalcommoditypricesandfarmincomefortheRuralMainstreeteconomy,”saidErnieGoss,JackA.MacAllisterChairinRegionalEconomicsatCreightonUniversity’sHeiderCollegeofBusiness.
Farming and Ranching:Thefarmlandandranchland-priceindexforJunedeclinedtoitslowestlevelsinceNovemberoflastyear.Theindexdeclinedto31.1fromMay’s39.7.“Thisisthe19thstraightmonththeindexhasmovedbelowgrowthneutral.But,asinpreviousmonths,thereisagreatdealofvariationacrosstheregioninthedirectionandmagnitudeoffarmlandprices,”saidGoss.
TheJunefarmequipment-salesindexmatchedMay’srecordlow12.5,whichwasdownfromApril’s15.6.Theindexhasbeenbelowgrowthneutralfor23straightmonths.“Withfarmincomeexpectedtodeclineforasecondstraightyear,farmersremainverycautiousregardingthepurchaseofagriculturalequipment,”saidGoss.
Banking:TheJuneloan-volumeindexdeclinedto79.9from79.6inMay.Thechecking-depositindexroseto48.0fromMay’s43.8,whiletheindexforcertificatesofdepositandothersavingsinstrumentsfellto38.6fromMay’s39.7.
ThismonthbankCEOswereaskedwhenshouldtheFederalReservebeginraisingshortterminterestratesandwhenwilltheFedbeginboostingshortterminterestrates.Approximately12.8percentofbankerssaidtheFedshouldimmediatelybeginraisingrates.Ontheotherhand,morethan34percentofbankersrecommendthattheFedwaituntil2016topushrateshigher.
HoweverintermsofexpectedrateincreasesbytheFed,almostone-thirdanticipatearatehikebytheFed’sSeptember2015meeting.Approximately40.4percentexpectaninterestrateincreaseinthefourthquarterof2015.Approximately27.7percentexpecttheFedtodelayarateincreaseuntil2016.
Hiring:Despiteweakercroppricesandpullbacksfrombusinesseswithclosetiestoagricultureandenergy,RuralMainstreetbusinessescontinuetoaddworkerstotheirpayrolls.TheJunehiringindexwasunchangedfromMay’s61.5.“RuralMainstreetbusinessescontinuetohireadditionalworkers.Whiletherateofnewhiringishealthierinurbanareasofeachstate,RuralMainstreetcommunitiesaregrowingjobsatasolidannualpaceofapproximately1percent,”saidGoss.
Confidence:Theconfidenceindex,whichreflectsexpectationsfortheeconomysixmonthsout,expandedtoaweak45.9from41.5inMay.“Theavianflucombinedwithlowagriculturalcommoditypriceshavehadnegativeimpactsonbankers’economicoutlook,”saidGoss.
“Forthelasttwomonths,wehaveaskedbankersaboutthefalloutfromtheavianfluoutbreak.LittlechangedbetweenMayandJunewithalmostoneinfiveofthebankers,or18.8percent,reportingnegativeimpactsfromtheoutbreak,”saidGoss.
ButaccordingtoPeteHaddeland,CEOoftheFirstNationalBankinMahnomen,Minn.“TheBirdFluhasbeentoughonMinnesota.”
Home and Retail Sales:TheJunehome-salesindexjumpedto68.1fromMay’s66.0.TheJuneretail-salesindexincreasedtoaweak50.0from49.0inMay.“Wehaveyettomeasureanysignificantupturninretailsalesstemmingfromthedownturninfuelprices,”saidGoss.
Eachmonth,communitybankpresidentsandCEOsinnonurban,agriculturallyandenergy-dependentportionsofa10-stateareaaresurveyedregardingcurrenteconomicconditionsintheir
(Rural Mainstreet continued on next page)
main street economic survey
C r e i g h t o nU N I V E R S I T Y
Rural Economy Improves to Growth Neutral:No Spread in Negative Impact of Avian Flu
Ernie Goss
COMMUNITY BaNker UpdaTe | JULY 2015 11
(Rural Mainstreet continued from previous page)
communitiesandtheirprojectedeconomicoutlookssixmonthsdowntheroad.BankersfromColorado,Illinois,Iowa,Kansas,Minnesota,Missouri,Nebraska,NorthDakota,SouthDakotaandWyomingareincluded.ThesurveyissupportedbyagrantfromSecurityStateBankinAnsley,Neb.
Thissurveyrepresentsanearlysnapshotoftheeconomyofrural,agriculturallyandenergy-dependentportionsofthenation.TheRuralMainstreetIndex(RMI)isauniqueindexcovering10regionalstates,focusingonapproximately200ruralcommunitieswithanaveragepopulationof1,300.Itgivesthemostcurrentreal-timeanalysisoftheruraleconomy.GossandBillMcQuillan,formerchairmanoftheIndependentCommunityBanksofAmerica,createdthemonthlyeconomicsurveyin2005.
Colorado:Afterrisingabovegrowthneutralfor11straightmonths,Colorado’sRuralMainstreetIndex(RMI)hasfallenbelowthe50.0thresholdforthelastfivemonths.TheRMIdidimprovefromMay’s47.7to48.6forJune.Thefarmlandandranchland-
priceindextumbledto29.1from50.9inMay.Colorado’shiringindexforJunedeclinedto56.0fromMay’s62.4.
Illinois:TheRMIforIllinoisroseto49.7from49.2inMay.Thefarmland-priceindexslumpedto34.1fromMay’s42.9.Thestate’snew-hiringindexdecreasedto58.5fromMay’s59.2.
Iowa:TheJuneRMIforIowaslippedto51.8fromMay’s52.1.Iowa’sfarmland-priceindexforJunefellto44.3fromMay’s52.3.Iowa’snew-hiringindexforJunedippedto62.6fromMay’s62.9.
Kansas:TheKansasRMIforJuneroseto48.2fromMay’s47.5.Thestate’sfarmland-priceindexforJuneslumpedto26.5fromMay’s33.9.Thenew-hiringindexdippedto55.4from55.6inMay
Minnesota:TheJuneRMIforMinnesotaroseto52.6fromMay’s50.1.Minnesota’sfarmland-priceindexdeclinedto40.5from42.0inMay.Thenew-hiringindexforthestateclimbedto61.0from58.8inMay.AccordingtoMarkHewitt,CEOofNorthwoods
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Tables 1 and 2 summarize survey findingsNext month’s survey results will be released on the third Thursday of the month, July 16.
Table 1: Rural Mainstreet Economy One Year Ago and Last Two Months: (index > 50 indicates expansion)
June2014
May2015
June2015
Area economic index 53.6 49.0 50.0
Loan volume 74.6 79.6 79.9Checking deposits 50.9 43.8 48.0
Certificates of deposit and savings instruments 39.4 39.7 38.6Farmland prices 49.1 39.4 31.1Farm equipment sales 35.0 12.5 12.5Home sales 66.1 66.0 68.1Hiring 63.2 61.5 61.5Retail business 51.8 49.0 50.0Confidence index (area economy six months out) 55.5 41.5 45.9
Table 2: The Rural Mainstreet Economy, June 2015Percentage of bankers reporting
SignificantCosts
Cost but not significant Little or no cost A positive from higher
livestock prices
Regardingthecurrentavianorbirdfluoutbreak,whathasbeentheimpactthusfartoyourareaeconomy? 6.3% 12.5% 79.2% 2.1%
ImmediatelyAt the next
meeting of rate setting committee
At the September 2015
meetingFourth
quarter 2015 2016
WhenSHOULDtheFederalReservebeginraisingshortterminterestrates? 12.8% 6.4% 8.5% 38.3% 34.0%
ImmediatelyAt the next
meeting of rate setting committee
At the September 2015
meetingFourth
quarter 2015 2016
WhenWILLtheFederalReservebeginraisingshortterminterestrates? 0.0% 2.1% 29.8% 40.4% 27.7%
Follow Ernie Goss on Twitter: www.twitter.com/erniegossFor historical data and forecasts, visit: www2.creighton.edu/business/economicoutlook/
12 COMMUNITY BaNker UpdaTe | JULY 2015
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BankinParkRapids,“Slowrecoveryfromtherecessioncontinues.Wearenotyetbacktopre-2007growthlevels.Loandemandcontinuestobeweak.”
Missouri:TheJuneRMIforMissourigrewto49.9from48.0inMay.Thefarmland-priceindexforJunedeclinedto35.0fromMay’s36.2.Missouri’snew-hiringindexadvancedto58.8fromMay’s56.5.
Nebraska:TheNebraskaRMIforJuneincreasedto48.8from47.8inMay.Thestate’sfarmland-priceindexfellto29.5from39.0inMay.Nebraska’snew-hiringindexdippedto56.6fromMay’s57.6.
North Dakota:TheNorthDakotaRMIforJunedecreasedto52.6fromMay’s53.9.Thefarmland-priceindexfellto56.0from74.9inMay.NorthDakota’snew-hiringindexdeclinedto67.2fromMay’s72.0.
South Dakota:TheJuneRMIforSouthDakotaexpandedto52.2fromMay’s50.5.Thefarmland-priceindexdecreasedto42.1fromMay’s44.5.SouthDakota’snew-hiringindexroseto61.7from59.8inMay.
Wyoming:TheJuneRMIforWyomingadvancedtoaweak49.2fromlastmonth’s48.2.TheJunefarmlandandranchland-priceindexslumpedto32.7fromMay’s42.3.Wyoming’snew-hiringindexdippedto57.9fromMay’s59.2.
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businessline.Further,thereshouldbefrequent,objectivefollow-uponactualversusplannedresults.”
Inwritingaboutstrategicrisk,theAtlantaFederalReserve’ssupervisionandregulationdivisionsaidthat“asoundstrategic planningprocessisimportantforinstitutionsofallsizes,althoughthenatureoftheprocesswillvarybysizeandcomplexity.”Thearticlenotedthattheprocess“shouldnotresultinarigid,never-changingplanbutshouldbenimble,regularlyupdated(atleastannually)andcapableofrespondingtorisksandchangingmarketconditions.”
Giveneconomicchangesandincreasedmarketcompetition,communitybanksmustunderstandhowtoconducteffectivestrategicplanning.Thisismoreimportantnowthanever,saysInvictusConsultingGroupChairmanKamalMustafa.
Thesmartestbanksareusingnewanalyticstodeveloptheirstrategicplans–notbecauseofregulatorypressure,butbecauseitgivesthemanedgeinthemarketplaceandaviewoftheirbankstheycannototherwisesee,Mustafasaid.
“Strategicplanningisuselesswithoutincorporatingcapitalplanning.Themosteffectivecapitalplanningisbuiltfromthe
resultsofstresstesting.Thesecriticalfunctions–strategicplanning,capitalplanningandstresstesting–mustbeintegratedifabanktrulywantstounderstanditsfuture,”hesaid.
Headvisesbankstousethesamefundamentalmethodologyforbothcapitalplanningandstrategicplanning,orelsetheywillruntheriskofgettingmisleadingresults.
OCCDeputyComptrollerforSupervisionDarrinBenhartalsoadvisescommunitybankstousestresstestingtodetermineifithasenoughcapital.“Boardsalsoneedtomakesuretheinstitutionhasadequatecapitalrelativetoallofitsrisks,andstresstestingcanhelp,”hesaidinaFebruaryspeech.“Wealsotalkabouttheneedtoconductstresstestingtoassessandinformthoselimitsasbankmanagementandtheboardmakestrategicdecisions.Themostvaluableandoftenmostdifficultriskmanagementdecisionisknowingwhentosay“no”becauseyouhaveexceededyourrisklimits,”hesaid.
TheOCCsaysthatmanycommunitybanksarestrugglingto“executestrategicandcapitalplansgiventhecurrentoperatingenvironment.”Examinerswanttomakesurethatbankboardsandseniormanagementhavedevelopedadequatestrategic,capitalandsuccessionplanningprocesseswithrealisticplansandappropriateriskcontrols.