15The Champion for Minnesota Bankers

2019 Annual ReportMinnesota Bankers Association

Another fiscal year has passed here at the MBA. We are happy to share this Annual Report, which provides a summary of the MBA’s activities over the last twelve months. As you review this report, you will see that your association has been extremely active. Each of the MBA’s core functions, education programming, legal and compliance support, group insurance products, communications services, human resources support and government relations advocacy, have performed extremely well. The MBA is in great shape right now, both in terms of its programming, its governance and its finances. The Board of Directors continues to provide solid leadership and thoughtful strategic direction for the association. Our committees are providing excellent ideas as well. And the MBA staff is a talented group of professionals, consistently doing a fantastic job of turning these ideas and vision into workable solutions for our member banks.The Minnesota banks are the heart and soul of their communities, helping make their customers’ financial dreams come true and driving local economic growth. Throughout Minnesota, local bankers are dynamic community leaders, well respected for their knowledge, their commitment and their ability to get things done. It truly is an honor to represent the men and women of the banking industry and to support the great work they do for our state.At the same time, we know that the banking industry faces challenges. Therefore, the MBA works tirelessly to provide the products and services our bankers need to address those challenges. The MBA is the Champion for Minnesota Bankers, and no one does a better job of representing and supporting this great industry. We are a member-focused organization, and you are the reason that we exist. If there is ever anything we can do for you, please give us a call. We want to help you in any way that we can. As always, we thank you very much for your bank’s membership in the MBA and for all your support! Your active involvement helps ensure that this association is successful. Have a great Minnesota summer.

MBA Annual Report 2019

Advocacy & Government RelationsState AdvocacyThe MBA and the banking industry had a successful legislative session in 2019. The MBA took the lead in drafting and lobbying legislation to re-route non-depository funds into the Special Revenue Fund (SRF) from the General Fund. Some funds were redirected into the SRF this session. The MBA will continue to work next session on the SRF to ensure all entities within the Financial Institutions Division are paying their fair share for their regulation and that banks aren’t subsidizing other areas within the Division. The MBA also drafted legislation to address senior financial fraud. The language would authorize banks to freeze funds when fraud is suspected and would protect the bank from liability. This bill should pass quickly next session due to the work done lobbying for it this past session. The MBA also worked on unclaimed property legislation proposed by the Department of Commerce. The MBA formed a coalition with other stakeholders and worked closely with the Department to make sure that issues of concern for banks did not pass. Staff will continue to work on this legislation next session to make sure it works for banks. Other bills of interest that the MBA focused on this session included subprime loans, student loans, payday loans and more. In all, staff reviewed 5,846 bills for their impact on the banking industry. With the help of the lobbying firm of Cook Girard and guidance from the MBA Government Relations Council, the MBA was able to protect banks from multiple pieces of legislation that would have negatively impacted their businesses.

Federal Advocacy 2018 was a big year for federal banking legislation. Congress passed the regulatory relief bill known as S. 2155. Compared to getting that bill enacted into law, the past twelve months have been relatively quiet on the legislative front.One legislative issue that has seen some action lately is marijuana banking. Many states have legalized either medicinal marijuana use (Minnesota included) or full recreational marijuana use. Because marijuana continues to be an illegal drug under federal law, banks cannot provide basic banking services to marijuana businesses. Bills in both the House and the Senate would allow banks to serve these businesses operating in states where marijuana is legal. That clarification would be a positive change, as these businesses must now operate as all cash businesses.While things are a bit slow on the legislative side, the focus has turned to the regulatory agencies, which have

been actively issuing proposed and final regulations to implement the provisions of S. 2155. The MBA attorneys have written several comment letters on behalf of our member banks. Law changes are good, but some of the benefits of a law change can be lost through the rulemaking process.For example, we welcomed one provision in S. 2155, which mandated a simplified capital rule for banks that are well capitalized. The FDIC proposed an implementing regulation giving community banks with 9 percent Tier 1 equity capital the right to choose the alternative capital plan. The MBA encouraged the FDIC to reduce that requirement to 8 percent so that more banks could benefit from the new plan. The FDIC also changed all the prompt corrective action (PCA) ratios for community banks that choose this new capital plan. The MBA urged the FDIC to leave all the prompt corrective action ratios where they are because banks choosing the new plan would be at a severe disadvantage. A bank choosing to utilize the new plan would be considered “Significantly Undercapitalized” with 6 percent capital while a bank not choosing the new framework is “Well-Capitalized” with 5 percent capital. We stated that the potential risks from this PCA change would outweigh the regulatory relief benefits of the new capital framework, meaning few banks would elect the new capital plan. If few banks adopt the plan, the hard-fought law change would be meaningless.So much of a banker’s day-to-day life is dictated by policy makers in Washington, D.C. Therefore, the MBA continues to monitor and actively advocate on all the legislative and regulatory actions happening in our nation’s capital.

Minnesota Bankers Meeting with Rep. Jim Hagedorn in Washington, D.C. Left to Right: Chris Ryan, First Security Bank, Byron; Rep. Hagedorn; David Krause, Pioneer Bank, St. James; Paul Pieschel, Farmers and Merchants State Bank, Springfield; Malachi McNeilus, Sterling State Bank, Rochester; Mark Miedtke, Citizens State Bank, Hayfield; Chuck Johnson, Root River State Bank, Chatfield

MBA Annual Report 2019

Communications & Community Outreach

Communications The MBA connects with our members through a variety of communications channels: MBA News; The Voice; Political Insight; Legal, Compliance, Regulatory and CaseWatch Bulletins; monthly print and electronic education updates; the MBA website; and through social media, including Twitter, Facebook and LinkedIn.The MBA is committed to engaging with our member bankers and we rely on member feedback to ensure that our services fit the changing needs of banking today.

Community Champion RecognitionEach year, the MBA recognizes banks for their contributions, service and support of their local communities through the Community Champion Recognition. This year, the 35 banks recognized as 2019 Community Champions worked with hundreds of organizations in their communities, providing funding, volunteers, materials, supplies, or food for their neighbors. Recipients of the recognition range in size from small community banks to large banks with multiple branches.

2019 Community Champion Recognition

$3.9 milliondollars

donated

500organizations

helped

49,000 hours of time

donated

2120 bank employees

volunteered

In total, these banks donated over $3.9 million to more than 500 organizations including the American Red Cross, Habitat for Humanity, United Way, Salvation Army, American Cancer Society, Ronald McDonald House, Special Olympics, Minnesota Business Venture, local schools, churches, and non-profits. Twenty-one hundred employees from these banks dedicated over 49,000 hours at a variety of volunteer events or programs.

665Twitter

followers

2083LinkedInfollowers

256Facebookfollowers

MBA Annual Report 2019

Minnesota Bankers Community Impact Week #BanksBuildMNIn September 2016, the MBA launched Minnesota Bankers Community Impact Week, designed to showcase the tremendous community work that banks undertake every week of the year. The third year of this campaign was another success, attracting participation by 84 banks and 240 branches impacting 145 communities. Based on feedback from the first three years of this successful campaign, the MBA has now changed the campaign going forward to Minnesota Bankers Community Impact Month to give banks an even greater opportunity to participate and help us put a spotlight on the critical role of banks in their communities.

Minnesota Bankers Community Impact Week

Participation

Banks

Branches

Communities

84

240

145

September 2019 - Minnesota Bankers Community Impact Month

SAVE THEDATE!!

Midwest Bank of Detroit Lakes Working at Becker County Food Pantry

First National Bank of Waseca Blood Drive for American Red Cross

Neighborhood National Bank Food Drive

MBA Annual Report 2019

EducationIn the MBA’s education area, the 2018-19 fiscal year saw strong attendance at foundational MBA education programs, some exciting changes to our major conferences and the successful launch of new programs to meet the ever-changing professional development needs of our member bankers. Unfortunately, it also saw the cancelation of the Women in Banking Conference due to extreme weather. However, we are pleased to report that we have rescheduled this very successful conference for July and attendance is looking strong again.

Full House at the 2019 Operations & Technology Conference

Overall, FY 2018-19 was another very active year in banker education, with 89 percent of MBA banks participating in an educational program. MBA programs attracted 2,075 bankers and 3,062 distinct registrations. We are very grateful for this continued show of support by member bankers in our educational programs.

“Loved the interactive content. I always love learning here. Valuable Information for me and my bank.” Cash Management Seminar Attendee

Here are some highlights of changes in our education offerings this past year:In August, the MBA held its first Next Generation Bankers Conference, which attracted over 60 bankers eager to learn and network as they continue to build their careers in banking. We look forward to growing this program and making it one of our premier annual conferences. In October, attendance for the MBA’s Commercial Lending School was the highest we’ve seen in the past decade. In April, the MBA convened another very successful Operations & Technology Conference. This year, the banker committee guiding the planning for this conference moved the location to the Twin Cities, while expanding the agenda to include breakouts and a “banker

innovation panel” featuring three bankers presenting on different approaches to innovation in their institutions. The conference also featured world-class presenters focused on technology changes reshaping the payments landscape. Our educational partnerships with the Small Business Administration (SBA) and the Farm Service Agency (FSA) continued to prove very popular. The SBA programs attracted over 200 bankers from across the state, while the FSA trained over 400 bankers on FSA lending.

“I have pages of bullet points to take back with me to start conversations with our teams.” Operations & Technology Conference Attendee

We are also very pleased to report the graduation of another class from the MBA Leadership Development Academy and the largest pool of applicants (24) for the class of 2020, which kicked off in June. This in-depth leadership training program has become an important feature of the MBA’s growing focus on developing the next generation of bank leaders.

EDUCATION

2,075

3,062

bankers participated in education programs

separate registrations

2019 MBA Annual Summit Participants Enjoying Topgolf!

MBA Annual Report 2019

Legal & ComplianceLegal DepartmentOver the past year, the legal department has responded to more than 2,300 legal and compliance inquiries from members. Members can email legal@minnbankers.com anytime for free and can call up to six times per year for free. Our attorneys produced 29 articles in Legal Compliance Bulletins and 12 case summaries in CaseWatch Bulletins, updated the MBA Deposit and Lending Manuals, and issued 12 Regulatory Watch Bulletins, all to help our members navigate a challenging legal and regulatory environment. Staff also wrote six comment letters on proposals that would impact the banking industry. This year, the department facilitated 35 regional compliance group meetings in 10 different locations across the state for 380 compliance professionals.

Compliance ConsultingThe MBA offers compliance consulting services, including deposit, real estate loan and privacy reviews, HMDA scrubs, advertising/website reviews, custom policy creation, compliance risk assessments, and independent testing of ACH and BSA programs. Personalized training and policy and procedure development are also offered. The MBA’s consultant, Associate Counsel Tom Boswell-Healey, is an attorney with over 20 years of industry experience. He is able to leverage his interaction with member banks throughout the state to help members identify and mitigate risks from changing regulatory demands. His experience and ability to determine compliance with both federal and state laws means that members using his services get great value.

Regulatory Watch Bulletins

Case Summaries

Articles in Legal Compliance Bulletins

Regional Compliance Groups

Legal & Compliance Inquiries

12

12

29

35

2,300+

Mike Thro, MBA Associate Counsel, Fielding Member Legal Questions

MBA Annual Report 2019

Insurance & IT Consulting

Commercial Insurance – Midwest Bankers Insurance Services (MBIS)MBIS is a jointly owned subsidiary of the MBA and the Wisconsin Bankers Association operating in Minnesota, Wisconsin, and North Dakota. MBIS specializes in providing insurance policy education, internal control consultation, best practices and insurance placement for the following insurances:

• Cyber Liability

• Directors & Officers Liability

• Financial Institution Bond

• Excess Deposit Bond

• Civil Money Penalty

• Property and Casualty

• Workers Compensation

• Mortgage Hazard

• Mortgage Impairment

• Flood Solutions

We are pleased to report that MBIS now works with over 200 community banks ranging in size from $20 million to over $8 billion in assets.

Group InsuranceFor over 60 years, the MBA Employee Benefits Trust has provided high quality dental, life and disability products to banks in the state. We put the buying power of well over 5,000 Minnesota employees together to result in lower premium rates for everyone. Bankers are our only customers and we are proud of our many long-term relationships. Our specialization in the banking industry allows us to fully understand and meet the needs of bankers. Most of our plans offer banks the choice of employer or employee paid premiums. With employee retention becoming critical in a competitive job market,

employee benefits are a great way to stand out to your employees. Many banks also take advantage of our health insurance brokerage business, which provides the best plans available in Minnesota. We are pleased to report that we now have well over 40 banks and over 1,500 Minnesota bank employees enrolled in the Iowa Bankers Benefit Plan, which we began marketing on an exclusive basis in 2014. In addition to the core employee benefit products, we also offer a vision plan that covers exams, contacts, and eyeglasses on an annual renewable basis. This plan has grown dramatically thanks to the low premiums and solid benefits.

IT ConsultingMBA’s IT consulting is designed exclusively for MBA member banks and we expanded our services this past year. We worked with banks on comprehensive strategic technology plans, business continuity plans, information security testing, audit and assessments to ensure banks are following industry best practices. The MBA’s consulting group assisted member banks with the following services:

• External Network Vulnerability Assessment

• Information Security Assessment and Audit

• Internal Vulnerability Assessment

• Social Engineering Assessment

• Vendor Management

• Technology Strategic Planning

• TRAC™ Implementation

• Security Training and Board Education

• Customer Education

• Core Banking System Vendor Evaluation and Contract Management

FinanceOur Finance Department provides support to the MBA and its affiliates including MBIS and the Employee Benefits Trust. We invest most of the MBA’s funds in member bank CDs. We solicit bids periodically, with announcements in MBA News, our website and via email.

MIDWEST BANKERSInsurance Services

MBA Annual Report 2019

Associate Members, Endorsed Vendors & PartnersThe MBA is very proud to partner with the many companies that make up our Associate Members, Endorsed Vendors and Partners. These companies specialize in providing valuable services to our member banks.

Associate MembersThe MBA counts 126 companies as Associate Members. These firms provide a wide range of products and services to Minnesota banks, including accounting, legal counsel, investment services, branch redesign and architecture, technology solutions, insurance products, cash management solutions and enterprise risk management. Associate Members also provide valuable educational content to MBA member banks through articles published in MBA News, free webinars and as faculty for some MBA educational programs.

Thank You to Our 2018-19 Sponsors!The MBA is very grateful for the sponsorship we receive for MBA schools and conferences, including the Annual Summit, Women in Banking Conference, Commercial Lending School, CFO Conference, Next Generation Bankers Conference, Leadership Development Academy, and the Operations & Technology Conference. Their support is critical to ensure that we offer the best possible experiences and greatest value to MBA member bankers. We thank the following companies and organizations for their generous support in FY 2018-19.American Bankers AssociationAscensusAutomated Systems, Inc.BancAllianceBankers Healthcare Group, LLCBarrier 1 (The Barrier Group) Bell BankBMO Harris Bank N.A.CASE Financial CliftonLarsonAllen LLPComputer Integration Technologies, Inc. Consolidated Communications Country Club BankData Center Inc. Edge One, Inc.

Eide Bailly LLP Elan Financial Services EO Johnson Business Technologies Farmer MacFederal Home Loan Bank – Des MoinesFIPCOFredrikson & ByronFTN FinancialGislason & Hunter LLPGraduate School of Banking at ColoradoGraduate School of Banking-Madison HTG ArchitectsKasasaLoffler Companies, Inc. Marco Technologies LLC Midwest Bankers Insurance Services, LLCMoneyGram InternationalNcontracts NetWork Center, Inc. NFP Executive BenefitsNorthland Securities, Inc.PCBBPresidio, Inc. Promontory Interfinancial Network, LLCPULSE, a Discover CompanyRSM US LLP SBS CyberSecurity, LLC Scenic Sign Corporation SDN Communications Sycorr The Baker GroupTravelersUMB BankUnited Bankers’ BankVanman Architects & Builders Wells Fargo BankWipfli LLP

MBA Annual Report 2019

Associate Members, Endorsed Vendors & Partners

Endorsed Vendors Through our Endorsed Vendor program, the MBA and its for-profit affiliate – MBA Insurance & Services, Inc. (MBA ISI) – selectively identify and vet products and services that have a significant potential to strengthen the business of banking in Minnesota. MBA member banks also receive discounts on these products and services, putting the combined buying power of all Minnesota banks to work for you.

The MBA proudly endorses the following products and services and we encourage you to learn more about them by clicking on the Vendor Relationships tab at www.minnbankers.com.

Ascensus Fully-Administered and Self-Administered IRAdirect

The MBA endorsement covers the Ascensus Fully-Administered and Self-Administered IRAdirect program. This fully supported, web-based program has built-in compliance systems that help ensure your bank properly establishes its IRA, HSA and ESA accounts, cutting back the number of technical errors that can occur using paper forms. Banks can choose to continue administering these accounts, or they can outsource the tax reporting and other administration functions to Ascensus by choosing the Fully-Administered option.

Kasasa Success Formula

Kasasa is the leading provider of innovative retail products, world-class marketing, and data-driven consulting to community financial institutions nationwide. MBA’s endorsement covers Kasasa’s complete Success Formula, including groundbreaking Kasasa® products, scale-driven marketing, robust analytics, compliance, training, and ongoing support.

KeyState Captive Insurance Program

KeyState Companies is a leader in helping banks form and manage a captive insurance company. Their captive insurance company program works in conjunction with each bank’s existing bank insurance coverages, giving the bank an effective way to manage some of the bank’s business risks.

Ncontracts Third-party Vendor Management

Ncontracts is a leading provider of vendor and contract management services for the financial institution industry. Ncontracts combines turnkey vendor management services with a comprehensive and fully-customizable vendor and contract management application. Insightful summaries of vendor contracts and alert notifications assist clients in proactively managing vendor relationships.

Office Depot Bank-specific Discount Program

As an Office Depot customer, you will have access to Office Depot’s exclusive Business Solutions Division website, strategic brand name partnerships, multi-billion dollar buying power, and ease in economizing your operations. Enjoy customer service from Office Depot that is unmatched in the industry. If you are an employee of an MBA member organization, you can register for an Employee Discount Account at the link found in the Endorsed Vendor section of the MBA’s website.

PartnersIn addition to our Endorsed Vendors, the MBA very selectively enters into co-marketing partnerships with vendors offering unique technology products that benefit Minnesota banks and where co-marketing provides the best solution to educate MBA members about the product and its benefits.

Discover Debit

In FY 2016-17, the MBA entered into a co-marketing partnership with Discover Debit to promote this product as a preferred debit card solution for community banks.

Everfi

The MBA partners with Everfi, the nation’s leading financial literacy software company, to bring interactive, web-based personal finance education to local students that can be privately labeled and branded by your bank. Everfi provides an opportunity for Minnesota banks to enhance their existing financial education initiatives and deliver the latest technology to local high schools, colleges, middle schools and direct to customers.

Secure Banking Solutions TRAC™ Software

The MBA continues its partnership with TRAC, an integrated cybersecurity risk management software, provided by Secure Banking Solutions. This web-based software simplifies the risk management process and allows the user to make more informed security decisions. Minnesota banks are using over 400 modules of the TRAC software.

Promontory Interfinancial Network

The MBA continues its long-standing partnership with Promontory Interfinancial Network, the #1 provider of FDIC-insured deposit placement services and the inventor of reciprocal deposits.

MBA Annual Report 2019