The Bottom Line Summer 2020 by icbsd

2020

The

Independent and proud of it!

Bottom Line

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Flourish Staying on Course

People You Should Know: Tom Fogarty & Reece Simpson

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Feds Continue to Miss the Mark on Livestock Policy New Regulations PROVIDE RELIEF FOR USURY HEADACHE

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contents

INSIDE This Issue ICBSD 2020

FROM THE DESK OF

In the news

2 President’s Message When it Comes to Community, Our Bankers’ Interest Rates Never Vary! by Megan Olson, President & CEO of ICBSD

20 Prevent Fraudsters

3 Rebeca’s Remarks

Flourish by Rebeca Romero Rainey, President & CEO of ICBA

From the Chairman Support the ICBSD PAC by Monte Troske, Chairman of ICBSD, President/CEO of Farmers State Bank of Turton

From the Chairman From the Top by Noah Wilcox, Chairman of ICBA Legislative

7 Federal Delegate’s

Report by Emily Hofer

FROM CAPITOL HILL

9 ICBSD PAC:

Contribute Today!

10 Rounds’ Report

Feds Continue to Miss the Mark on Livestock Policy by Senator Mike Rounds

11 Staying on Course to www.icbsd.com

Advance Self-Driving Vehicles by Senator John Thune

Community spirit P.O. Box 615, Watertown, SD 57201 605.878.3040

megan@icbsd.com

12 Reliabank: Looking Back is the Key to Moving Forward

16 People You Should Know: Tom Fogarty and Reece Simpson

from Making Your Bank a Victim with these Tips

22 Teigen joins Farmers State Bank as Vice President

23 Main Street, Inc.

Acquires Marketing Technology Software Provider Onovative

24 17 Davenport Evans

Lawyers Named by Best Lawyers in America, Bender and Hertz Recognized

25 14 Davenport Evans

Lawyers Named by Great Plains Super Lawyers, Four Named “Rising Stars”

26 Your Cardholders,

Your Interchange. Are Contactless Payments Squeezing you Out? by Shazam, an ICBSD Preferred Partner

28 How Some Banks are

Easily Making Money and Helping Their Customers by Bell Bank, an ICBSD Preferred Partner

30 New Regulations

Provide Relief for Usury Headache by Charles Gullickson, Davenport Evans Lawyers

32 Get Back to Business

with Low Risk 504 Loan Packages by First District Development Company, an ICBSD Preferred Partner

34 Kickoff! A Football

Fan’s Guide to Portfolio Management by Jim Reber

ICBSD 2020 1

President’s Message From the president

“The longevity and resiliency of our community banks exists because of the interdependent relationship between a community bank and the community it serves. In order for a community bank to be successful, the community it serves must be successful too.”

Megan Olson, President & CEO of ICBSD

When it Comes to Community, Our Bankers’ Interest Rates Never Vary! Traditionally September marks the familiar transition from summer to fall, and the welcomed start of another routine school year allowing families to settle back into their normal routines. This September, things are definitely looking different as we all attempt to understand what our new “normal” looks like. Though these times of uncertainty are stressful, I remain optimistic about what is to come and the bright future of independent community banking. Historically, South Dakota’s independent community banks are no stranger to challenging times. From the Great Depression to the farming crisis of the 1980’s our community banks have witnessed and survived some of the most challenging times our nation has ever seen. Through these challenging times independent banks have served, supported and guided their communities; they have helped their communities navigate uncharted waters and come out stronger than ever before. The longevity and resiliency of our community banks exists because of the interdependent relationship between a community bank and the community it serves. In order for a community bank to be successful, the community it serves must be successful too. When it comes to community, our bankers’ interest rates never vary! When times turned tough, South Dakotans turned to their trusted community banker for help. Throughout the COVID-19 pandemic, I have witnessed the many ways in which our bank members and associate members are innovating in order to continue the interdependent relationship between their banks and their communities. From deploying new technology within the bank, updating online platforms, to meeting with customers at the local park while social distancing, our members are thinking outside the box to ensure their customers’ needs

megan@icbsd.com

2 The bottom line

are met. Times are tough, but the community bank model is built for resiliency. In the end, this mentality and innovation will make our communities stronger than they were before!

Rebeca’s Remarks Flourish From the president

“As the cornerstones of the community, community bankers offer a light in the darkness of hard times.”

Rebeca Romero Rainey, President & CEO of ICBA

September traditionally acts as “back to school” month, where, after the slower-paced dog days of summer, we settle back into our normal routines. The same holds true this year, though the image of what constitutes normal in 2020 looks incredibly different than it has previously. As we enter this new season, I hold out hope for what is to come. Bolstered by the unfailing dedication of community banks, our communities will continue to weather the storm. In response to the ongoing impact of COVID-19, community bankers will continue to unfailingly support and lift up our nation’s communities. Our role is to ensure their connectedness and long-term success. That’s precisely because the core of the community bank business model revolves around serving our communities. An ecosystem exists where, for the community bank to be successful, the community it serves must be as well. So, there’s a beautiful, symbiotic relationship that plays out where the work community banks do enriches the community, and the community’s achievements enhance the bank’s impact. That’s why this month’s National Community Bank Service Awards highlight the work of all community banks to lift up their communities during this time. This issue features many good deeds that exemplify the spirit of the community banker and the true power we have to make positive change in the communities we serve. Working together, hand in hand with our communities, community bankers make a difference. So, as we close out the third quarter of the year and begin a more intense focus on 2021 planning, I encourage each of you to explore where we go from here. How do we take this commitment to service and extend it in our communities? How can we address rebuilding from the effects of COVID-19? How can we be a positive force in diversity and inclusion; both in having the conversation and in everyday actions? How do we support our communities in new ways? These are heavy questions, but ones we will work through together to achieve a better outcome. Because as the cornerstones of the community, community bankers offer a light in the darkness of hard times. We are the community leaders who can foster a commitment to service in others around us. We can help chart the future by increasing resiliency and strength within our communities and building a stronger, more connected world—one community at a time. I see community banks leading recovery efforts and forging a path where we grow, learn and evolve together, becoming stronger as communities every step of the way. I think that’s a picture of a new normal that we can look forward to painting.

What you need to know @romerorainey

Over this month and next, ICBA is convening various leadership groups to prepare for our collective future in this new normal. From the virtual LEAD FWD Summit this month to the Directors Conference in October, we are setting the tone at the top. ICBSD 2020 3

fsbmonte@nvc.net 605-897-6532

Support the ICBSD PAC

From the Chairman Monte Troske, Chairman of ICBSD, President/CEO of Farmers State Bank of Turton When I was first asked to write this article, I was looking forward to sharing a recap of the 2020 Black Hills Annual Retreat, the annual meeting and funds raised for the ICBSD PAC. In true 2020 fashion, my

“I’d like to take a moment to highlight the ICBSD Political Action Committee and the importance of your support.”

plan was derailed. With this year being an election year, and in the absence of the 2020 retreat, I’d like to take a moment to highlight the ICBSD Political Action Committee and the importance of your support. The ICBSD is the only association in the state with a Political Action Committee

who show strong leadership and

banking. I thank you in advance for your

understanding of community banking

donations.

concerns. Without the retreat taking place, your support of the ICBSD PAC is more important than ever before. Megan and Hannah have been creative with

On a separate note, September marks the end of my term as chairman of the board. Thank you for your continued support and dedication to community banking

various events, yet their efforts only go

and making my term so enjoyable! The

so far due to limitations and concerns

new chairman of the board, Roger Weber,

dedicated to South Dakota’s independent

surrounding the pandemic. I strongly

community banks and their best interests.

encourage you and your colleagues

In a normal year the silent auction, which

September 29th virtual annual meeting.

to make a monetary donation to the

takes place at the annual retreat, serves

Please give Roger all your support, as I

PAC fund in the amount of your choice.

know he will do a great job. Details about

as the primary fund raiser for the ICBSD

Donations can be mailed to ICBSD

the meeting have been emailed. If you

PAC. Funds raised during the ICBSD PAC

PAC, Box 615, Watertown, SD 57201.

have questions, please contact Megan

silent auction are used to support the

Please help the association support

at Megan@icbsd.com or myself at

campaigns of lawmakers and candidates

the legislators who support community

605-897-6532.

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4 The bottom line

Cell Phone Number:

@ NWWilcox

From the Top

From the Chairman Noah Wilcox, Chairman of ICBA

“Our job is to help people in good times and not-so-good times. What we do for the benefit of the community is part of who we are.” There are no two ways about it: of the third quarter, I can’t

Yet, despite the unique circumstances of the pandemic, I’ve

help but reflect on what a whirlwind the past six months have

been reminded of one thing: This is nothing new; it’s what

been. Community banks have grappled with a series of seismic

we do. It’s in our DNA to serve our communities in whatever

events, including a pandemic, mandatory shutdown orders

capacity we can, and in today’s environment, that means

and processing a mindboggling number of Small Business Administration loans in one sitting. But on that last point at least, we have prevailed.

increasing our efforts. For example, in Grand Rapids, Minn., we have underwritten music, outdoor movies and other entertainment that can bring the community together in a responsible way. I’m proud to say that in any given month, we

Our sheer grit and tenacity ensured that resources made their way into our communities. In fact, we singlehandedly put more than $330 billion back into the economy in the form of Paycheck Protection Program loans, in addition to countless

have 100% of our staff volunteering in the community, but I know we’re not alone in that. As community bankers, our job is to help people in good times and not-so-good times. What we do for the benefit of the community is part of who we are.

other measures to help. In short, we have stepped up in support

It’s so ingrained in our cultures that we simply don’t think about

of our communities.

our influence. Six months ago, I would say that we, as bankers, probably took for granted how much of an impact we have, but the pandemic has crystallized our contributions. The strain that COVID-19 has placed on the human condition has reminded community bankers just how hard we work and need to

myTOP3

continue to work every day to do right by our communities and In light of all the good community bankers do, here are my top three most unusual fundraising activities this year:

1. O ffering a socially distanced, floating concert for boaters

2. U nderwriting drive-in movie nights 3. C ollaborating with community banks

to create a matching COVID-19 relief fund with the local United Way

take care of our people. You’ll see evidence of this dedication throughout this month’s issue. In fact, the National Community Bank Service Awards capture the spirit of community banking and the many forms “giving back” has taken in the COVID-19 environment. Reading these stories makes me all the more proud to be a community banker. Because, as we go about our business in the new normal, it’s not about the grand gestures; it’s about the day to day. We don’t look for the quick-hit, one-time gift. Rather, community banks are in it for the long haul. We pledge consistent support to the activities that feed the longevity of our communities, which is why we’ll rise from this pandemic stronger than ever. ICBSD 2020 5

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6 The bottom line

ehofer@msb-sd.com 605-660-4790

“Heading into an election year, our support of the PAC is very important. Our lobbyist and PAC advisory committee members are able to support candidates in South Dakota that support Community Banking. The PAC gives us a seat at the table and amplifies our voice in Pierre.”

Federal Delegate’s Report by Emily Hofer, ICBA National Director, Merchants State Bank, Freeman, SD Summer has come and gone. School is back in session. We’ll see for how long! My third quarter column for “The Bottom Line” is usually a recount of the fantastic ICBSD Retreat that should have happened in late July in the beautiful Black Hills. Our Retreat is one of my family’s favorite weeks of the year, in spite of squirrel attacks! As many of you know, I’m a social person. I think one of the young attendees at a Retreat a few years back even started calling me the “party monster.” Maybe because I’m usually one of the last bankers standing at our social hours and campfires? Needless to say, it’s been a long six months of few social gatherings, no concerts, and pitifully few live sporting events for me. I miss the interaction with my peers and friends. I’ve kept my circle tight and my few gettogethers outdoors. I’m sure many of you have also altered your “normal” routines in one way or another over the past six months. I’m sure glad we live in a state with lots of space and less people. However, I’m growing weary of virtual Zoom or MS Teams meetings, where the first five minutes are spent helping everyone remember how to use the mute button! ICBA is

gearing up virtual meetings for its Fall Federal Delegate Board and Committee leadership meetings. Although we will not gather together, our job and mission will be the same – advocating for Community Banks.

table and amplifies our voice in Pierre. Think of all the money saved by not traveling to conventions and meetings in the past six months, and consider a contribution to the ICBSD PAC and the ICBPAC.

The Q3 ICBA priorities include many coronavirus-related issues. As we transition to the PPP forgiveness stage of the game, ICBA is pressing the Treasury Department on our behalf to create simplified forms and processes. Additionally, ICBA is working on legislation that would preserve expense deductions for PPP borrowers. I am on the Safety & Soundness Committee at ICBA, and we are working towards the extension of TDR provisions, ensuring origination and/or holding PPP loans has no impact on a bank’s risk-based capital and leverage ratios, and keeping the 8% Community Bank Leverage Ratio permanent. Although we have all been thrown into a reactionary mode in the wake of COVID and the ever-changing landscape it is shaping, ICBA has not taken its foot off the gas pedal on cannabis-banking, beneficial ownership collection and reporting, credit union abuses, etc.

Ask your board members and employees to consider a gift to the ICBSD PAC and ICBPAC. Community banks employ nearly 750,000 people nationwide. Only approximately 3,000 bank employees contribute to the ICBPAC annually. Think of the impact of $5 dollars – or even only $2 – from each of those 750,000 employees to the ICBPAC!

Consider what you can do to help ICBA achieve real results for the Community Banking industry. An unfortunate consequence of our “failure to gather” this year has been a hit to the annual fundraising for the ICBSD PAC. The golf event and silent auction – two very fun events – at our Annual Retreat are the two biggest fundraisers for our ICBSD PAC. Heading into an election year, our support of the PAC is very important. Our lobbyist and PAC advisory committee members are able to support candidates in South Dakota that support Community Banking. The PAC gives us a seat at the

Community banks have risen to the call and showcased their outsized role during this unprecedented time by supporting communities and small businesses when they’ve needed it most. We need to keep that narrative going by communicating with lawmakers in Pierre and Washington, DC. I beat this drum in every column I write. We as Community Bankers are the backbones of the communities that we serve. Our grassroots efforts are more important than ever in this constantlychanging environment. For many of us Community Banking has been a rewarding and enriching experience. Ask yourself what you can do for Community Banking. I’m looking forward to a new season – a season with less regulatory changes, a season of prosperity for Main Street America, and a season of face-to-face meetings with peers and friends. Until that time comes, I hope to see you all virtually. As always, if you have any questions, comments, or stories to share, I can be reached at ehofer@msb-sd.com or 605-660-4790. ICBSD 2020 7

Contribute

Today!

The ICBSD Political Action Committee helps... provide South Dakota community banks with a strong voice in state politics through contributions to candidates for state elected offices. These contributions help ensure we have a seat at the table when issues affecting your bank are being discussed in Pierre.

Thank you for supporting the ICBSD Political Action Committee! 2020 Pac 100 Club Josh Houge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Jane Swenson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank David Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Jan Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Bob Smithback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Jeremy Keizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank David Ebbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Hugh Bartels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Mark Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Reid Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank BD Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Roger Weber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Robert Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Troy Olson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Jack Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Jeff Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Terry Torgerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Lynn Peterson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Mark Hahler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust

Contribute Our thanks in advance for your support of the PAC 100. Your PAC 100 contribution supports legislative candidates throughout our bankers’ districts. Contact Megan Olson to learn more.

Together, let ’s make it happen.

Lynn Paulson

Call me at 701.298.7138

Based in Fargo, N.D., and serving the region

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Based in Sioux Falls, S.D., serving South Dakota, North Dakota, Northwest Iowa and Southwest Minnesota

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Your checks can be mailed to: ICBSD PAC, PO Box 615, Watertown, SD 57201

ICBSD 2020 9

FROM CAPITOL HILL

Rounds’ Report

Feds Continue to Miss the Mark on Livestock Policy

Mike Rounds

United States Senator (R-S.D.)

“It’s going to take a groundswell of support and a commitment to the cause to make progress. That’s the honest truth. It’s also going to take a unified effort.” I read a quote from my local sale barn operator Bryan Hanson, the other day: “You used to be able to survive on a 100 head operation; now you have to have a full-time job and run 100 cows.” Anyone that knows Bryan or has read his market report knows that he doesn’t pull punches. I’ve known his dad, Dennis, for many years, and I’ve enjoyed that same no-nonsense style from him as well. But I’d take Bryan’s statement one step further - I’d actually contend that without another full time job, you couldn’t afford to run 100 cows. That’s a pretty sad situation if you stop and consider South Dakota’s rich ranching heritage. We have been working with other members of the Senate on a number of different livestock reform proposals. We need to build coalitions to move these proposals forward. That means gaining support from Members of Congress, as well as administration officials and outside groups. For example, on March 19 I sent a letter to the Department of Justice calling for an investigation into price fixing in the cattle market. At the time, I was joined by three other senators. Less than two months later, we had the support of 18 senators as well as President Trump and 11 attorneys general. We’ve worked hand-in-hand with Senators Chuck Grassley (R-Iowa) and Jon Tester (D-Mont.), who have led the charge to push commonsense cattle market legislation forward. I’m thankful for their leadership. However, despite the bipartisan support for meaningful reforms, even stalwarts like them have been completely jammed up by the bureaucracy and the national lobby associations that continue to protect the status quo. In the last several weeks, we demanded (and were denied) a vote on the New Markets for State-Inspected Meat and Poultry Act, bipartisan legislation that I authored with Senator Angus King (I-Maine) – and that has 11 other Senate cosponsors. Basically, this proposal would allow smaller meat processors to inject competition into the marketplace by allowing facilities with a state-inspected certification the ability to sell products across state lines. A locker in Hudson can sell to a resident of Lemmon, hundreds of miles away, but they can’t sell across the Iowa border, just 25 miles away. Additionally, the state inspection 10 The TheBottom bottomLine line

certification is equal or stronger than federal certification. The current system doesn’t make any sense. Today, we are actually giving an unfair and unnecessary advantage to the large, sometimes foreign-owned meat processing facilities. Large facilities typically pursue licensing through the United States Department of Agriculture (USDA) federal meat inspection process, which gives them a certification allowing them to sell across state lines. Recently, we saw firsthand how strong our opposition is. Apparently, their stranglehold on certain members of Congress is so tight that they wouldn’t even allow a vote. Frankly, the deck is stacked in their favor and we need to find the force to tip it over. The dysfunction in Washington, D.C., is maddening. Even commonsense proposals like this don’t get a fair shake. However, the dysfunction isn’t confined to Congress. The bureaucracy is entrenched and hard to move. These bureaucrats, who have never been to a sale barn or stepped foot on a ranch, have the audacity to claim to know better than our producers and processors. It’s going to take a groundswell of support and a commitment to the cause to make progress. That’s the honest truth. It’s also going to take a unified effort. I’ve been left to wonder: if the swamp will fight so hard about something so commonsense as state inspected locker plants - imagine how hard they’ll fight greater market transparency, Product of the U.S.A. labeling and Mandatory Country Of Origin Labeling (MCOOL). As an industry we need to reach out to consumers and leaders from other states. Consumers are being misled under the current system and there is an entire army of opponents desperately trying to keep it that way. If the COVID-19 pandemic didn’t teach us anything else, it should have taught Americans that the source of their food matters and dependence on foreign countries is dangerous. We need to expand the tent, stay the course and push together. We’re in this fight together.

FROM CAPITOL HILL

Staying on Course to Advance Self-Driving Vehicles

john Thune

United States Senator (R-S.D.)

“I’m optimistic the AV TEST Initiative will encourage the development of advanced solutions to improve vehicle safety, while providing necessary data to inform safe and nationally consistent rules for AVs.” Each year, more than 35,000 people

and Transportation, I introduced the

legislation should preserve the traditional

die in automobile accidents on our

American Vision for Safer Transportation

roles of federal and state regulators,

nation’s roads. Approximately 90 percent

Through Advancement of Revolutionary

build on DOT’s current efforts to update

of those accidents can be attributed to

Technologies – or AV START Act – which,

human error, which is why self-driving

if enacted, would provide the U.S.

or automated vehicles (AVs) present an

Department of Transportation (DOT) with

opportunity to make incredible gains

new tools to safely test and deploy AVs.

in the safe movement of people and goods on our roads. South Dakotans are already familiar with automation, which has brought several economic, safety, and efficiency benefits to the agriculture sector, and I believe South Dakota also stands to benefit greatly from the deployment of AVs.

when the companies developing them

encourage the development of advanced

are certain these vehicles can safely react

solutions to improve vehicle safety, while

to driving situations we all encounter

providing necessary data to inform safe

each day. That is why AV testing is so

and nationally consistent rules for AVs.

critical. It ensures AVs are capable of safely navigating roadways and constantly changing traffic conditions.

greatly improve mobility and quality

Vehicle Transparency and Engagement

of life for all Americans, especially

for Safe Testing, or AV TEST Initiative,

the disabled and the elderly, whose

to facilitate greater awareness and

mobility is often limited by a lack of

engagement by industry, consumers, and

viable transportation options. And this

the general public as AV testing becomes

emerging technology will also allow

increasingly prevalent across the nation.

traffic flow, making roads safer and less congested.

expand AV testing and data collection. I’m optimistic the AV TEST Initiative will

DOT recently launched the Automated

and opportunities like parking and

written with AVs in mind, and continue to

AVs will only be able to operate safely

These vehicles have the potential to

planners to reimagine civic challenges

regulatory requirements that were not

While Congress is often slow to react to new technologies, I remain committed to working in a bipartisan manner to

Importantly, this initiative will promote engagement by industry stakeholders and the public in the development of AV testing guidelines at the federal level. This engagement is critical for acceptance of AVs by the general public and to ensure that we can all feel safe around AVs undergoing roadway testing. I’m glad that DOT launched this important initiative, and I look forward to continuing my efforts to harness the

ensure a strong legislative framework

safety, quality of life, and economic

Back in 2017, when I chaired the Senate

is put in place to promote the safe

benefits of this critical emerging

Committee on Commerce, Science,

deployment of these vehicles. Any AV

technology. ICBSD 2020 11

This September Reliabank celebrated a monumental milestone: 100 years in community banking!

Looking back is

THE KEY

to moving forward by Hannah Merritt Marketing and Public Relations For David W. Johnson community banking

Reluctant to see it go, David returned to

planting trees, participating in parades

is the family business. David first began

the family business to give his career in

with their custom-made centennial float,

working at then Farmers State Bank in

banking one last try. Forty-five years later,

and hosting half-court shots at basketball

Estelline at age 14 as a janitor and later

David serves as chairman of the board

as a vacation teller. As he grew older

games. They also held a celebration in

and CEO of the bank, now Reliabank

David wanted a job in economics or

South Shore, the birthplace of the original

Dakota, with his wife, Jan, and their two

academia; he did not intend to return to

charter alongside family members of the

boys, Reid and Ethan, by his side.

the family bank. David graduated college

bankâ&#x20AC;&#x2122;s founder, Fred Beskow. Pending the

from Augustana University, then decided

This September Reliabank celebrated

pandemic, the Johnsons hope to carry

to continue his education in graduate

a monumental milestone: 100 years in

out their community celebrations, open

school. While pursuing his masterâ&#x20AC;&#x2122;s

community banking! Despite restrictions

houses and musical concerts into 2021,

degree, Davidâ&#x20AC;&#x2122;s father, Walter K. Johnson,

due to COVID-19, Reliabank celebrated

including a celebration in Estelline, the

announced plans to sell the family bank.

within the communities they serve by

location with the most longevity.

12 The TheBottom bottomLine line

CorTrust Bank created money/receipt envelopes with an uplifting message

A Family Approach Reliabank, with two-family ownership in its history, prides itself on being small enough to offer customers personalized services, yet big enough to offer the latest in innovative technology. Much of Reliabank’s innovation and ability to remain relevant during changing times stems from their family approach to business with each of the Johnsons bringing their own unique skill sets to the bank. For the last forty years Jan, who is also a bank director and committee member, has proof read and edited nearly every Reliabank document and has also served as advisor to David. “When I graduated from Augustana, I couldn’t have imagined bank ownership in my future. I always say that I love words more than numbers, but little did I know that my ‘magic with words’ would serve Reliabank so well,” said Jan. Like their father, Ethan and Reid’s careers at Reliabank began at age 14 which continued throughout their upbringing. Upon graduating college, both were employed elsewhere but eventually migrated back to Reliabank. Reid now serves as Reliabank’s marketing director, where he uses digital advertising strategies to remain on top of the latest technology and customer service trends. Ethan works in bank operations and manages the bank’s bond portfolio, which gives him the opportunity to apply research and cutting edge information to the job. Reliabank’s family approach doesn’t stop at the Johnson family members. Rather, it is deeply rooted within the bank’s culture and extends throughout their employees. ICBSD 2020 13

“Our employees have become like family to us, and they deliver service to customers as if they were family too. We pride ourselves in our low employee turn-over. We try not to let good employees get away,” said David. “We have 14 employees who have been with us for over 20 years, and many others are approaching that milestone as well. It is good to see such longevity and the consistency they bring to our organization. These employees provide a wealth of knowledge and experience from which newer employees can learn,” said Reid. David went on to say, “Banking customers have dreams for their families, their business development and retirement planning. It is a very personal thing when customers share those dreams with their banker, and we are honored to have the opportunity to serve them,” said David.

Learning from History to Power Their Future On a personal level, linking past success to today’s success is something David and Jan have always enjoyed doing together. More specifically, they have taken strong interest in renovating old buildings. You might compare their passion to that of Nicole Curtis from the TV show Rehab Addict. “Nicole Curtis loves and rehabs old buildings. I think I am related to Curtis, at least in spirit. Jan and I have placed three properties on the National Register of Historic Places, plus we have renovated the 1900 3-story Century Building in Watertown, where we live and have two other loft apartments, an art studio and a legal office. I love old buildings, but beyond that, the history of anything makes you aware and appreciate the generations of people who have come before us,” said David. Given their passion for history, it is no surprise the Johnsons have leveraged and learned from Reliabank’s 100 years of business to keep the bank moving forward. Through the years, history has taught David change is a given and innovation is a must.

“Locally, for David and the Reliabank team involvement within the communities they serve is equally important and will remain a constant in their next 100 years.”

“When I entered the business, my dad told me banking was special because we had the exclusive access to the US payment system. Today, banks compete with PayPal, Apple Pay and other providers of payment services. The history of the bank has taught me nothing stays the same; nearly everything changes. If we want to survive, we must remain innovative and relevant during changing times,” said David. Jan added, “If Walt Johnson, a respected banker in his day, could have a ‘back to the future moment,’ he would feel left behind. When he died in 1976, the public had never touched PC’s, phones had cords, and every piece of paper needed filing. All of these examples are intertwined with banking, and in the future, we will learn we can’t live without things which haven’t yet been invented.” Reliabank has embraced the ambiguity that comes along with change and has made it their mission “to provide innovative banking solutions in a changing world.” For David and the Reliabank team, innovation is more than technology.

14 The bottom line

“We have a wide array of wonderful things to offer. That obviously includes our products and services, but more importantly our people and how they provide a great customer experience.” regulator in its name. That was why banks were all named 1st National Bank (federal charter) or Farmers State Bank (state charter). That mandate ceased in about 1985 and we no longer needed “National” or “State” in our name,” explained David.

“Technology is a big part of it, but in a broader sense, it is more about product delivery. In the current Covid-19 crisis, the Federal government authorized trillions of dollars for the Paycheck Protection Program. The legislation was passed quickly and evolved daily as the law was enacted. Larger banks tried to develop software to deliver the product in a uniform, easier way, but Reliabank simply rolled up its sleeves and began taking applications long before we even knew how these loans were going to be paid or forgiven. This mentality has been crucial for us in the past six months during the pandemic, and further validates why we must remain on the forefront of change,” said David.

A Fresh Take Besides technology, Reliabank has leveraged marketing and branding throughout its years in business as two crucial strategies to remain relevant and innovative. “We have a wide array of wonderful things to offer. That obviously includes our products and services, but more importantly our people and how they provide a great customer experience. There are many banks to choose from and we want the public to know that Reliabank is a good option,” Reid said. “There used to be a federal mandate that a bank had to include its primary banking

The ceasing of the mandate was yet another change, but it created an opportunity for banks to diversify. In 1999, David recognized the changing landscape of the industry and of their customer base. In order to remain a viable, independent bank and to appeal to a variety of customers, the name Farmers State Bank was changed to Reliabank. “The significance of our name is that it is unique. Many banks have generic names, and the Reliabank name is opposite of generic,” Ethan said. Along with the name change came a new logo, too. According to David, without an effective marketing plan banks will not progress. “Everyone from Walmart, Cargill, and Apple Computer to General Motors wants to be in the financial services business. Without an effective marketing effort, a small bank will simply wither on the vine and become irrelevant,” said David.

Banking His Own History With 100 years of history behind him, David is currently writing his own chapter in Reliabank’s history. During his fortyfive years at Reliabank, David’s passion for community banking has led him to the front lines in an effort to pave the way for future generations of community bankers. Throughout his career David has been heavily involved in the ICBA,

and served on its board of directors from 1988 to 2003. During his involvement, he became a conduit through which he communicated key banking issues on Capitol Hill to Senators Tom Daschle and Tim Johnson. “Lobbying for a level playing field is simply a part of being a community banker. Governor George S. Mickelson inspired me with an impressive speech about “being in the room,” based on Teddy Roosevelt’s speech, ‘The Man in the Arena.’ The longer you are in community banking, you develop a passion for your industry and realize that if you are ‘in the room,’ it is your turn to battle forward for the benefit of your charter, your family, your community, your state and even our nation.” Locally, for David and the Reliabank team involvement within the communities they serve is equally important and will remain a constant in their next 100 years. Reliabank employees have embraced many local non-profit organizations, including Make-A-Wish South Dakota. Employees have raised money for every “wish” in a variety of ways including a paper shredding drive, golf tournament and bake sale. Reliabank is also active with other non-profits, such as Habitat for Humanity, St. Francis House, Beacon Center, and Volunteers of America, Dakotas. Recently, the Johnsons and team Reliabank proudly helped support the renovation of the historic Goss Opera House in Watertown. “Community involvement is the demonstration that our employees care about the communities where they live and work. An old saying is that bank customers don’t care what you know until they know that you care,” said David. ICBSD 2020 15

PEOPLE

you should

KNOW by Hannah Merritt Marketing & Public Relations

“My job is to talk with community bankers and understand the needs they have around information and cyber security. From there, it’s all about helping them identify and understand their risks so they can make data driven decisions that are best for their business.”

For the past three years, understanding cyber security and its impact on everyday life has been a passion for Reece Simpson. “My interest in the cyber security industry was a direct result of landing a part time job at SBS Cyber Security while attending Dakota State University in Madison. It was then that I realized I had a thirst and passion for understanding cyber related issues and how they affect our everyday lives,” said Reece. Rising through the ranks, Reece is now an account executive overseeing community banks in Nebraska and South Dakota. “My job is to talk with community bankers and understand the needs they have around information and cyber security. From there, it’s all about helping them identify and understand their risks so they can make data driven decisions that are best for their business,” said Reece. While there are many aspects to cyber security, Reece says the top three community banks should focus on for both their employees and their customers are: security awareness and cyber culture, business continuity and incident readiness, and identifying and understanding risk. Reece says educating customers and employees about cyberattacks, what they look like and how they happen, is highly important. “Every 13 seconds a business falls victim to a ransomware attack, and 90 percent of ransomware attacks are via phishing emails. Making sure that customers and employees can identify phishing emails can go a long way in mitigating that risk. SBS offers some great content on our website that provides valuable information on a number of different topics like phishing and building a strong cyber security culture within your organization,” Reece explained. 16 The bottom line

Reece

Simpson Account Executive, SBS Cyber Security

He went on to say, “The traditional business continuity plan prepared banks for events such as tornados, floods, or blizzards. Now cyber-attacks or technology outages can have severe impact on banks’ ability to serve their customers. SBS can assist community banks with the creation, maintenance, and in depth understanding of their ongoing business continuity/incident response programs. SBS also has created a proprietary tool to assist with conducting business impact analyses.” Technology plays a significant role in the banking industry making it important for community banks to become efficient at risk assessments. “Risk assessments provide vital information to the institution; they help them understand where they should spend their next security dollar that will have the most impact on risk mitigation. SBS offers a variety of tools and services for banks of all sizes to understand risk to make better business decisions.” For Reece, staying on top of new information and changes within cyber security is both fun and challenging. In a normal, non-covid world, his day includes sharing new information with community banks during onsite visits, and working hands on with bankers on to identify risks and implement solutions. Hailing from rural Ramona, South Dakota (population “about 100”), Reece recognizes the positive impact independent community banks have within the towns they serve. “What I admire about community banks is their commitment and investment into local communities. I have seen community banks sponsor youth baseball and softball teams, host community driven events, provide assistance during disasters or unplanned events, and be a beacon for cyber security awareness in their community. When I think of community banking I also think of relationships and the emphasis they put on getting to know their clients to best serve their needs.” When he’s not at work Reece enjoys golfing, spending time with his fiancé Abbi and their 15-months old Goldendoodle named Payton, being at his family’s cabin on Round Lake and following professional sports. “I am a big sports fan; I love watching my Fighting Irish and Chicago Bears disappoint me every fall, although maybe the pandemic will spare me of that this year!”

Learn more about SBS Cyber Security and the services they offer by visiting www.sbscyber.com

ICBSD 2020 17

PEOPLE

you should

KNOW by Hannah Merritt Marketing & Public Relations

“One of the services that I am most excited about is our core contract review services. This is a service we provide for banks in which we can review a bank’s core processing contract and help negotiate a fairer price, whether you are negotiating a new core contract or an existing contract.” Tom Fogarty may be an accountant, but he is far from the introverted, accountant stereotype. In fact, Tom’s social personality has carried him through a rewarding role with Eide Bailly serving the community banking industry in North Dakota and South Dakota for the past thirteen years. If you’ve had the pleasure of working with Tom, you can attest to this. As an audit partner at Eide Bailly, Tom oversees the financial institution’s practice in South Dakota, and is responsible for the overall quality of audit and consulting engagements provided by his local office. His sociable, “people person” personality has served him well with business development and staff development responsibilities, too. Prior to Eide Bailly, Tom took an unconventional career path into public accounting. After graduating from college at University of North Dakota, Tom started working in the accounting department for RDO Equipment in Fargo, ND. He did not have any intentions of working in public accounting, but after some time with the organization he quickly realized working in private industry had limited flexibility and career opportunities. After a few years at RDO Equipment, 18 The bottom line

Tom

Fogarty Audit Partner, Eide Bailly

Tom decided to pursue public accounting and obtain his MBA and CPA. With his goals set, he was determined to jumpstart his career as quickly as possible. He did so by finishing his MBA in less than a year, and shortly after landed an internship with Eide Bailly. Aside from its core audit and tax services, Eide Bailly provides a comprehensive catalog of services for community banks, including: regulatory compliance examinations and consulting, internal audits, loan file reviews, IT exams, FDICIA implementation assistance, directors’ examinations, and trust examinations, to name a few. “One of the services that I am most excited about is our core contract review services. This is a service we provide for banks in which we can review a bank’s core processing contract and help negotiate a fairer price, whether you are negotiating a new core contract or an existing contract. Each engagement can save community banks tens of thousands of dollars on their core processing contract,” said Tom. Despite having locations nationwide, Eide Bailly is highly involved with rural, community banks and the people they serve on a local level. “Community bankers are integral to the communities they serve. They not only help people buy houses and cars, but they also help business owners and investors fulfill their dreams. They are vital to a healthy

economy, and are second to none in volunteering and giving back to the communities they serve. This is what makes them unique.” In a normal, non-COVID, day Tom enjoys visiting community banks across the state, meeting new community bankers as well as catching up with others who he has known for years. “Working with banks to me is enjoyable for a number of reasons. One reason is because banks have very clean accounting records compared to other industries, which makes our audit and consulting engagements run smoothly. Also, the personnel at the community banks are great to work with – they are all very friendly, helpful, community focused, they enjoy their jobs, and enjoy a round of golf every now and then too!” When he is not working, Tom enjoys spending time with his wife of fifteen years, Tanya, and their five children – Lucas (13), Nathan (11), Landon (6) and twins Arabella and Crosby (4). “I casually play golf and tennis. I play in an adult hockey league in the winter, and, whenever I find time between work and chasing around 5 kids, I enjoy playing the electric guitar - 80’s and 90’s rock are my favorite!”

YOUR CARDHOLDERS, YOUR INTERCHANGE. ARE CONTACTLESS PAYMENTS SQUEEZING YOU OUT?

ICBSD 2020 19

Prevent Fraudsters from making your Bank a Victim with these tips by Travelers, an ICBSD Preferred Partner

Social engineering scams, such as fraudulent instruction, continue to affect consumers and businesses alike. In a bank’s case, fraudulent instruction occurs when an employee is tricked into transferring money from a customer’s account to somewhere else because a fraudster has stolen the customer’s identity and convinced the bank through emails or phone calls to move the funds. By following the best practices below, you can help prevent fraudsters from making your bank a victim.

Train your staff. The No. 1 way to prevent fraudulent instructions is to have a well-trained staff that follows procedures, verifies a customer’s instructions by calling the customer at a predetermined number, and questions things when they don’t look right. Your staff should understand not only the procedures but also why they are important. Train your staff not to deviate from procedures by taking shortcuts.

Deliver good customer service, but make customers prove who they are. Don’t hand the customer answers. In a recorded call we listened to, a bank employee was trying very hard to give the customer excellent customer service but did so at the expense of the real customer. To questions such as “Are you still at 123 Main Street?” and “Is your phone number still 555-5555?” the crook simply had to acknowledge that the information was correct. Staff should require customers to authenticate their personally identifiable information rather than acknowledge what is on file. 20 The bottom line

Know your customer. If a bank employee thinks a wire request is unusual for a certain customer, they should be empowered to dig further. We had one claim where an 80-year-old customer requested a $750,000 draw from his home equity line of credit to be wired to Australia. When asked what the transfer was for, the purported customer said he was buying a rock quarry. Unusual requests should spark increased due diligence.

Escalate suspicion. Train your staff to share suspicious calls with others on the team. Just because one customer service representative wouldn’t complete a transaction doesn’t mean another attempt won’t be made. It is important to talk among yourselves. These fraudsters are diligent, so bank employees must be, too. A consistent pattern exists: Crooks don’t stop at just

one attempt. They will keep calling back until either they get caught or there is no more money.

fraudulent transactions are real and

Make the call.

Travelers is committed to managing and mitigating risks and exposures, and does so backed by financial stability and a dedicated team – from underwriters to claim professionals – whose mission is to insure and protect a company’s assets. For more information, visit www.travelers.com or talk to your independent insurance agent about social engineering coverage.

If a customer says they can’t be reached at the phone number on file, call it anyway.

Be suspicious of bad grammar. Beware of urgency, poor grammar, the word “kindly,” and sentences that don’t make sense or use improper words. If an employee prevents a fraudulent transaction from occurring, spread the news and celebrate that success. Share the fraudster’s emailed instructions, discuss what was suspicious about them and post examples of other fraudulent instructions. This helps front-line team members remember that attempts to use social engineering tactics to generate

constant. Bank employees must remain vigilant.

ICBSD 2020 21

send your happenings to:

hannah@icbsd.com

IN the

NEWS Join us in congratulating our fellow community bankers on their recent accomplishments! Teigen joins Farmers State Bank as Vice President Farmers State Bank of Turton recently welcomed Kevin Teigen to its staff as vice president. Teigen grew up near Rugby, ND, where his brother is currently the fourth generation operating the family farm. Teigen attended North Dakota State University in Fargo where he majored in agribusiness. He returned to NDSU and earned an MBA. While attending NDSU, he met Danielle Troske of Turton and the pair married in 2008. Teigenâ&#x20AC;&#x2122;s professional journey includes nearly 10 years at Eide Bailly, with six of those years spent specializing in bank valuations. He has also worked as an insurance agent, a key account executive at a specialty electronics design and manufacturing firm focused on agriculture as well as a senior strategist at an ag software firm in Fargo. His community service involvement in the Fargo area included five years serving on a local library board, serving as an officer for both a Rotary club and the F-M Rotary Foundation, acting as an alumni adviser for an NDSU service-based honor society, and numerous other projects. He was also active in his church as a member of the choir as well as cantor and proclaimer. 22 The bottom line

Teigen began working at Farmers State Bank of Turton on July 1, and he is currently learning all facets of the business. His hiring is part of a strategic succession plan aimed at providing the organization with a future once Monte Troske, current President and CEO, retires. Troske is the third generation to operate the bank. His grandfather, Frank, began working in the bank in 1928, and his father, Ron, who is also the current owner, began working there in 1954. Ron Troske purchased controlling interest of the bank in 1971. Many other family members have also worked in the bank over the years, including his mother, Patricia Troske, three daughters, one nephew, and one sister. His brother, Mark Troske, is a member of the board of directors. Teigen and his wife live in Turton with their three children: Dominic (7), Katherine (3), and Kane (7 months). In addition to Teigenâ&#x20AC;&#x2122;s hiring, loan officer Wayne Board has been promoted to senior vice president. Board has been working at the bank since 1997.

“The purchase of Onovative further enhances Main Street’s marketing services solutions.”

Main Street, Inc. Acquires Marketing Technology Software Provider Onovative About Main Street, Inc. Since 1998, Main Street, Inc. has partnered with more than 2,100 community-oriented financial institutions to enhance account holder relationships with affordable, simple and efficient checking programs. This familyowned company is a superior provider of customer service, program performance and growth solutions to financial institutions nationwide. To better serve their clients, Main Street launched TargetSmart, a data-driven marketing program that offers comprehensive analytics, targeted direct mailing, digital integration, creative services and print marketing. For more information, visit www.mainstreetinc.com.

About Onovative Onovative creates simply powerful communication software to put control back in the hands of community banks and credit unions. Core iQ, Onovative’s primary product offering, is the first all-in-one communication platform designed specifically for banks and credit unions. For more information, visit https://www. onovativebanking.com/.

BIRMINGHAM, AL – Main Street, Inc., the leading provider of data-driven print services to community financial institutions across the nation, announced today the acquisition of Onovative, an automated marketing technology software provider based in Louisville, Kentucky. The purchase of Onovative further enhances Main Street’s marketing services solutions. Onovative’s automated marketing platform enables banks and credit unions the ability to segment account holders, communicate effectively based on their current and likely next product, and consolidate multiple marketing functions in one user-friendly platform. By strategically combining marketing automation and a customer relationship management (CRM) system with a communications platform, Onovative gives financial institutions a smarter, more affordable way to connect with account holders in the markets they serve. Ted Walton, President of Main Street, Inc. said, “Main Street’s previous investments in digital marketing and print will be significantly amplified with the addition of Onovative’s automated marketing platform. Our ability to engage consumers at every point along the consumer cycle will be a powerful tool for financial institutions and any business looking to grow relationships and revenue with their customers.” The Onovative marketing technology platform strengthens existing marketing solutions built on data, simplicity, and affordability for community banks and credit unions. This acquisition, as well as the investments made over the last six years, is evidence of Main Street’s strategic commitment to serve community financial institutions. Onovative will continue to operate in Louisville, Kentucky, under its current brand as a subsidiary of Main Street, Inc. Onovative’s founders and management team contributed significant equity to the new subsidiary and will continue to focus on growing Onovative and improving its product offerings. Onovative plans to immediately hire more developers in the Louisville community due to Main Street’s investment. “I’m incredibly proud of what our small team has accomplished over the years, and I am looking forward to building on that success,” said Michael Browning, CEO of Onovative, LLC. “Our customers have been integral in shaping our products through their feedback. Main Street’s investment and experience will allow us to react to customer feedback more quickly and grow the product faster.” ICBSD 2020 2020 23

17 Davenport Evans Lawyers Named by Best Lawyers in America, Bender and Hertz Recognized Davenport, Evans, Hurwitz & Smith, LLP in Sioux Falls, SD is pleased to announce that 17 Davenport Evans lawyers were listed in Best Lawyers® 2021 for South Dakota, in 24 different practice areas. In addition, Jean H. Bender was named “2021 Lawyer of the Year” for South Dakota in the area of Employment Law – Management, and Elizabeth S. Hertz was recognized in the inaugural edition of Best Lawyers: Ones to Watch (2021) in the areas of Appellate Practice, Commercial Litigation, and Litigation – Construction. Jean H. Bender Named “2021 Lawyer of the Year”

The following are the Davenport Evans lawyers listed in Best Lawyers® 2021 for South Dakota: Banking and Finance Law • Charles D. Gullickson • Douglas J. Hajek • Dixie K. Hieb Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law

Closely Held Companies and Family Businesses Law • Jonathan P. Brown • P. Daniel Donohue • Dixie K. Hieb • Catherine A. Tanck Commercial Litigation • Shane E. Eden • Thomas M. Frankman • Mitchell A. Peterson • Eric C. Schulte

• Robert E. Hayes Corporate Law Bet-the-Company Litigation • Robert E. Hayes Business Organizations (including LLCs and Partnerships) • Dixie K. Hieb • Brendan W. Reilly • Catherine A. Tanck 24 The TheBottom bottomLine line

• Jonathan P. Brown • Keith A. Gauer • Douglas J. Hajek • Dixie K. Hieb • Terry N. Prendergast

Elizabeth S. Hertz Recognized in the inaugural edition of Best Lawyers: Ones to Watch (2021)

Employee Benefits (ERISA) Law • Jean H. Bender • Sarah Richardson Larson Employment Law – Management • Jean H. Bender – Lawyer of the Year, 2021 • Kristi Geisler Holm Financial Services Regulation Law • Charles D. Gullickson • Douglas J. Hajek Government Relations Practice • Douglas J. Hajek Litigation – Banking and Finance • Keith A. Gauer

Elder Law

Litigation – Bankruptcy

• Sarah Richardson Larson

• Robert E. Hayes

About US Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the state’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.

Litigation – Construction • Eric C. Schulte Litigation – Insurance • Mitchell A. Peterson • Eric C. Schulte Litigation and Controversy – Tax • Catherine A. Tanck Mergers and Acquisitions Law • Jonathan P. Brown • Douglas J. Hajek • Brendan W. Reilly • Catherine A. Tanck Personal Injury Litigation – Defendants • Thomas M. Frankman Personal Injury Litigation – Plaintiffs • Mitchell A. Peterson

14 Davenport Evans Lawyers Named by Great Plains Super Lawyers, Four Named “Rising Stars” Davenport, Evans, Hurwitz & Smith, LLP is pleased to announce selection of the following Davenport Evans lawyers to the 2020 edition of Great Plains Super Lawyers. Attorneys selected were ranked in the top 5% of practicing attorneys in South Dakota. Selected to Great Plains Super Lawyers:

Trusts and Estates

P. Daniel Donohue – Estate & Probate Thomas M. Frankman – Business Litigation Keith A. Gauer – Banking Charles D. Gullickson – Banking Douglas J. Hajek – Banking Robert E. Hayes – Banking Elizabeth S. Hertz – Business Litigation Vince M. Roche – Business Litigation Eric C. Schulte – Insurance Coverage Catherine A. Tanck – Tax Selected to Great Plains Rising Stars:

• P. Daniel Donohue • Sarah Richardson Larson • Terry N. Prendergast • Catherine A. Tanck

Four Davenport Evans lawyers were selected to Great Plains Rising Stars. Each year, no more than 2.5% of lawyers in a state are selected for this honor.

Real Estate Law • Jonathan P. Brown • P. Daniel Donohue • Terry N. Prendergast Tax Law • Catherine A. Tanck

Workers’ Compensation Law – Employers • Kristi Geisler Holm

Selected to Great Plains Rising stars:

Reece M. Almond – Business Litigation Justin T. Clarke – Insurance Coverage Anthony M. Hohn – Business Litigation Michael L. Snyder – Business Litigation ICBSD 2020 2020 25

Your cardholders, your interchange. Are contactless payments squeezing you out? by Shazam, an ICBSD Preferred Partner

As we continue into summer, questions persist about how COVID-19 will affect your business and unfortunately there are no clear answers. In the payments industry, we can see things are starting to return to more normalized business volumes. That said, COVID-19 is producing some trends that have the potential to impact your bottom line. Now more than ever, noninterest income is critical. We find community banks may be considerably overspending on their debit card program due largely to network expenses. Many of these costs are within the institution’s control and warrant a second look. Contactless payments — tapping or waving a card or device — are a good example of the payments predicament highlighted by the pandemic. As we all search for ways to feel in control and safer, it’s understandable Thebottom Bottomline Line 26 The

consumers would try to reduce infection risk when paying at a physical point of sale. The transaction technology is good, it is safe, but no one’s talking about the financial risk to your bank if your debit card holders gravitate mainly to contactless. As it’s implemented today, this technology potentially limits the choices a merchant has available to route transactions to all bank partner networks. Often, that limitation means higher merchant expenses as the transaction is routed across the payments ecosystem. By the time it gets to you, the transaction can lose some of the economic value that could benefit your bank. This happens pennies at a time, but it adds up. Maximizing your debit card program’s routing choices can save your bank tens of thousands, if not hundreds of thousands of dollars a year depending on the size of your card program.

“We encourage leaders in community banking to step up and talk, not just about using the technology, but to ensure it doesn’t filter any more money away from community banks who need it now more than ever.” About SHAZAM

Set aside the question of costs for a minute and remember: The choice of transaction routing over multiple debit networks is federal law. Two years ago, the Federal Reserve clarified that a network can’t use network rules, standards, specifications, contractual agreements, technology or otherwise to inhibit the route of a transaction. This leaves no doubt the merchant, in all cases, using all technology, should have the choice to route over every debit network available to them. For years, SHAZAM has been advocating for the development of industry-wide, independent standards that would govern payments. We applaud the development of technology that opens choices for consumers when they pay. We won’t accept technology that limits choice and raises expenses.

networks and their operating rules will allow the choice. There are a lot of uncertainties right now as you reopen your doors and carry on serving your customers, perhaps in new and different ways. The issue of routing choice shouldn’t be one of those. We know what the law is. The only question is, who will join the fight to enforce it? I welcome your thoughts.

SHAZAM pioneered the PIN-debit point-of-sale transaction, still used worldwide today. We’re the nation’s only independent, member-owned debit network, processor and core provider supporting community banks and credit unions. Since we don’t answer to shareholders, we can reinvest profits in technologies our clients need as they serve the next generation of consumers. SHAZAM ensures our clients have the products and services they demand and expect in a cost-effective way. Founded in 1976 and headquartered in Iowa, we’re a leader in payments and financial technology, with a simple mission: Strengthening community financial institutions. Visit us today at shazam.net.

We welcome any organization willing to join us in the fight to maintain the choice and flexibility that have kept the U.S. payments system competitive for community banks for more than 40 years. We encourage leaders in community banking to step up and talk, not just about using the technology, but to ensure it doesn’t filter any more money away from community banks who need it now more than ever. Bottom line, other networks can support contactless payments, if only the large ICBSD 2020 2020 27

How Some Banks Are

Easily Making Money

and Helping Their Customers by Bell Bank, an ICBSD Preferred Partner

Some community banks are missing out on a money-making opportunity, and Mike LaSalle wants to help remedy that situation. As Bell Bank’s SVP/equipment finance bank channel director, Mike works with community banks on ways Bell can help you better help your customers. Most small and medium businesses occasionally lease equipment, and a majority of those businesses use community banks as a source of capital and borrowing – yet community banks hold only 1% of leasing assets in the United States. “Community banks have been sitting on the sidelines while their customers are leasing from competitors,” Mike remarks. “Bell Bank Equipment Finance allows community banks to partner with Bell to meet existing customers’ demands and prospect for new business and customers.” Community banks don’t usually offer equipment leasing, because of the complexities associated with structure and documentation as well as costs of building infrastructure with lease accounting systems. But by partnering with Bell, community banks can To find out more about how Bell Bank equipment finance can help you and your customers, contact Mike at MLaSalle@bell.bank or 952-905-5155.

take advantage of Bell’s expertise and full suite of leasing products, while generating significant income from referral fees or, should they wish, from purchasing the transaction back through a participation. “We’re more than happy to come in and price, structure, document and service the lease from start to finish, while the asset sits on the community bank’s balance sheet,” Mike notes. “The customer gets the lease, community banks keep the earning asset, and Bell does the work – at no cost or obligation to the community bank.”

28 The bottom line

Bell also provides training for bank lenders on how to present leased products to their customers, as well as marketing materials they can use to announce their leasing capability. “It’s a great program,” Mike explains. “We do all the heavy lifting, and the community bank gets to strengthen their relationship with their customer. We’re not a competitor. We’re here as a partner to help them strengthen and maintain their relationships with their customers.”

Bell Bank Committed to Correspondent Lending Headquartered in Fargo, N.D., Bell is one of the largest independently owned banks in the nation, with assets of more than $8 billion and business in all 50 states. Bell Bank Equipment Finance provides equipment leasing nationwide across all industries, with flexible terms, competitive pricing and no residual risk. With more than 30 years’ experience in equipment finance, including an extensive background in community bank leasing, credit analysis and lease structuring, Mike understands how to help community banks succeed. “I’m heavily committed to helping community banks compete against big-box banks,” Mike affirms. “The community bank model is necessary for our country. It brings relationship aspects

and a source of capital to small and medium businesses. Bell is really a large community bank, and we want to see community banks thrive.”

making and consistent communication.

Mike has worked at large banks, where decisions were made based on profitability – not relationships. That’s one of the main reasons he joined Bell in Sept. 2019.

through experience-based expertise

“Bell’s culture so closely matches the culture of banks throughout the region,” he notes. “Because Bell is independently owned, we’re able to think longer-term than our publicly traded competitors.” Based in Minneapolis, Mike serves as equipment finance liaison with Bell’s correspondent bankers and the community banks Bell works with in 14 states. “Bell enjoys tremendous relationships in our large network of correspondent banks,” comments Eric Zehr, president of Bell’s equipment finance division. “We want to help those banks and their customers get the equipment finance services they need.” Unlike a typical correspondent bank, Bell’s focus is working as your partner. With larger hold limits, Bell won’t resell your loan participation. Bell also has a team dedicated to correspondent banking, so the bank can provide flexible underwriting, competitive lending terms and prices, fast decision-

Having partnered with hundreds of community banks, Bell will help you enhance your customer relationships in participation loans, bank stock and ownership loans and equipment financing. Prior to Bell, Mike worked at another bank, running the leasing operation for correspondent bank relationships throughout the Midwest. “What I try to do every day is understand and be mindful about what they – and their customers – need,” Mike remarks. “When I’ve helped a community bank maintain or grow a relationship with one of their customers, I consider that a success.” To find out more about how Bell Bank equipment finance can help you and your customers, contact Mike at MLaSalle@ bell.bank or 952-905-5155. Bell Bank, Member FDIC, is your behindthe-scenes partner, helping you work in a larger relationship without threatening your relationship with your customer. Call 701-298-1500 or visit https://bell.bank/ business/borrowing/bank-to-bank-loans to learn more.

ICBSD 2020 29

New Regulations Provide Relief for Usury Headache It is a truism in banking that federal regulations are a burden for the industry, and bankers often cite compliance with federal regulations as a significant burden. In a rare exception to that truism, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have issued new regulations that are supported and indeed welcomed by bankers. The regulations codify the “valid and made” doctrine for bank loans and are targeted at undoing the result of a 2015 U.S. Court of Appeals decision in Madden v. Midland Funding, LLC. The facts in Madden are simple. Bank of America issued a credit card to a consumer and charged her interest that was permitted by the laws of Bank of America’s home state, and thus permitted under federal law, and federal statutes and well-established legal precedent permitted Bank of America to charge the interest provided for in the applicable credit card agreement even though the interest rate violated usury limitations in the cardholder’s home state. After the consumer made charges on her credit card and incurred interest charges, she defaulted on the account. Bank of America sold the charged-off balance to a third party, and the third

party sought to collect the charged-off balance, including accrued interest. Notwithstanding the fact that the accrued interest was permissible when charged to the account by Bank of America, the Madden court held that the third party purchaser of the charged-off account balance could not rely on that fact because the third party was not a national bank, and thus the third party could only charge interest at the rate permitted in the cardholder’s home state. The Madden decision was roundly criticized within the banking industry, and shortly after the Madden decision we wrote the article, “Madden V. Midland

written by Charles D. Gullickson

Gullickson is an attorney at Davenport, Evans, Hurwitz & Smith, LLP Contact Charles at cgullickson@dehs.com

www.dehs.com 30 The bottom line

“The Madden decision was roundly criticized within the banking industry, and shortly after the Madden decision we wrote the article, “Madden V. Midland Funding, LLC – A Nasty Speedbump for the Secondary Market?” published in the ICBSD’s The Bottom Line in 2015.”

Funding, LLC – A Nasty Speedbump for the Secondary Market?” published in the ICBSD’s The Bottom Line in 2015. Two themes appear in the criticism of the Madden decision. First, the decision was simply wrong, as a matter of legal precedent, in that it ignored the “valid when made” doctrine established by caselaw going back well into the 19th century. Second, the decision ignored the fact that the secondary market for bankoriginated loans is enormous and that banks depend heavily on the secondary market for liquidity and as a source of funding and capital for their lending activities. The Madden court seemed unconcerned that its decision might seriously disrupt that secondary market. Many critics of Madden felt that the simplest way to nullify the consequences of the decision would be a federal regulatory fix. Fortunately for bankers, both the OCC and the FDIC came to that conclusion, too, and in late 2019 the agencies issued proposed regulations that would confirm that interest rates and other fees associated with a loan,

if valid at the time the loan was made, will remain valid and enforceable notwithstanding any subsequent assignment of the loan. The OCC took final action on its proposed rule on May 29, 2020. The OCC noted that most of the comments it received on the proposed rule were favorable although some comments were submitted questioning of the OCC to adopt the rule or the need for the rule. Notwithstanding those comments, the OCC formally adopted the rule exactly in the form initially proposed. Following in the footsteps of the OCC, the FDIC took final action on its proposed rule on June 25, 2020. Both agencies’ new rules expressly provide that the permissibility of interest charged on a loan will not be affected by a “sale, assignment, or other transfer of the loan.” There is a footnote to this story that is relevant when banks engage in lending programs that rely on the involvement of third parties and transfer those

programs’ loans, and their risk, to the third party. On occasion these types of programs, and the interest rates and fees charged for their loans, become subject to challenge on the basis of which party is the true lender. The bank enjoys the privilege created under federal law to export its home state usury rates, but these types of claims allege that instead the third party involved with the program, and the purchaser of the program’s loans, is the “true lender.” The claims allege that the third party, who cannot enjoy the benefits of the exportation doctrine, must comply with the interest rate limits of the borrower’s home state. These types of claims allege that at their inception, when the loans were made, they are usurious if they violate the borrower’s home state usury limits. The new “valid when made” regulations do not attempt to address the “true lender” issue, and third parties that acquire bank loans they helped originate will not find a refuge in the “valid when made” regulations if they face a true lender challenge.

FIND BANKING SOLUTIONS WITH DAVENPORT EVANS

Contract Compliance Negotiation

davenportevans.com

info@dehs.com

Trusts

Foreclosures FinTech & Bankruptcies

Real Estate & Leasing

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Mergers & National Acquisitions Products

Financial Services Lawyers: Charles Gullickson, Bob Hayes, Keith Gauer, Dixie Hieb, Doug Hajek, Tiffany Miller, Anthony Hohn, and Terry Prendergast.

ICBSD ICBSD 2020 2020 31

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32 The bottom line

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Why should your client work with FDDC on an SBA 504 loan application? Simple. The SBA 504 Loan interest rates are usually lower than what other financial institutions can offer, and are fixed for a 10, 20 or 25 year term keeping debt service manageable. (SBA 504 rates are currently at historic lows.) Your small business client can get into his/her fixed asset purchase with as little as a 10% injection. If your client has existing fixed asset debt on their books and would like to lower their debt obligations each month, the SBA 504 Refinance program can help with that too, taking out a loan with a balloon payment coming due or with a high interest rate. First District Development Company makes the process easy. FDDC professionals work with you and your small business client to tailor a financing package that meets program guidelines and the financing needs of your client.

How SBA 504 Works An SBA 504 Loan is a partnership between First District Development Company, a Certified Development Company, the Small Business Administration (SBA), and a lender. Working with the lender, FDDC provides up to 40% of the financing for commercial real estate purchases or new construction and equipment. A lender partners with FDDC to provide 50% of the financing, while the small business ends up injecting only 10%. FDDC works with the small business client to process, approve, close and service the SBA 504 loan.

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Kickoff! A football fan’s guide to portfolio management

As the calendar turns to the fall, millions of Americans gear up for their favorite sport of football. Of course, with this being a year unlike any other, we’re still trying to figure out what it will look like. Nonetheless, what better way to usher in the new football season than to relate common gridiron phraseology to its investment portfolio equivalent? Some of this may sound like a stretch for the sticks, but perhaps you can find a loose ball in the pileup. If so, hopefully you can convert the takeaway into a visit to the sweet land of six. BY JIM REBER President and CEO of ICBA Securities

Weight room Many footballers prepare themselves for the season with frequent trips to the gym. There, they can make good use of barbells. Community bankers often utilize “barbells” to hedge their bets against rate movements. This strategy simply entails buying roughly equal amounts of very short-duration bonds and long-duration bonds. The definitions of “short” and “long” will vary from buyer to buyer, but in the end, the investor is going to be pleased with at least half of the holdings, regardless of whether rates rise or fall.

Run-pass option This recent innovation of play-calling gives the quarterback the ability to decide on the fly whether to run the ball or throw downfield. In a similar sense, investors can do the same with a do-it-yourself floater. Most municipal bonds in community bank portfolios have longer-than-average durations. Often, that is precisely the intention of the portfolio manager, as it may sync with the bank’s interest rate risk posture. However, sometimes the manager decides the portfolio is longer than desired, in which case the DIY is called. This entails the execution of a pay-fixed interest rate swap to turn the asset into a receive-floating adjustable rate bond. 34 The bottom line

Lockdown corner The best way to explain this is to lift the definition from Wikipedia: “These elite defenders cover an offensive receiver so effectively on either side of the field that the quarterback does not target the receiver being covered.” To the community banker, this means owning assets that cannot be called away or converted to cash when interest rates are not favorable (e.g., now). The way to lockdown your assets is to buy “bullets,” which have no call features, or securities such as multifamily mortgage-backed securities (MBS) that have prepayment penalties or yield-maintenance provisions.

ICBA Securities’ exclusively endorsed broker, Vining Sparks, is one of the largest SBA 7(a) poolers in the country. Vining Sparks is interested in purchasing guaranteed portions of SBA loans directly from your community bank. To inquire about selling SBA guarantees, and to view its inventory of fixed- and floating-rate SBA pools, contact your Vining Sparks sales rep or

www.viningsparks.com

Man in motion This entails sending one or more offensive players running parallel to the line of scrimmage prior to the snap to better position them for the play. In investment management, its equivalent is the purchasing of newly issued bonds that have extended original settlement dates, which further coincide with upcoming maturities of bonds currently in the portfolio. This play has been especially beneficial in recent months, as the amount of maturities and calls have outpaced new issuances, creating something of a scrum among investors.

Nickel back Sometimes a team will insert a fifth defensive back into the lineup on obvious passing downs in order to give it a better chance of covering the potential pass receivers. This “nickel package” appears in balance sheet management in the form of match-funding assets and liabilities. If a community bank strategically adds assets through an acquisition or an outright leverage, thought must be given to balancing the altered interest rate risk. Tools such as Vining Sparks’ Performance Architect can quantify the new dynamics of the balance sheet, including the impact on capital, margins and earnings.

can, however, be a buyers’ market. Make decisions early—10 minutes to go in the game is still relatively early. Late fourthquarter comebacks are hard to pull off.

Webinar series continues ICBA Securities and its exclusive broker-dealer Vining Sparks are hosting three webinars covering a range of topics in September, October and November to conclude its 2020 Community Banking Matters series. One free hour of CPE for each event is offered. To register visit viningsparks.com or contact your Vining Sparks sales rep.

Fourth-quarter rally The third quarter of the calendar year for broker-dealers is often a period of low volume. Some of it has to do with portfolio managers not taking time to identify beneficial portfolio opportunities until the figurative two-minute warning. This year especially there are plenty of good reasons to be distracted. The bad news is that there are a lot of community bankers who operate in a last-second mode. Late December is rarely a good time to be selling securities; it ICBSD 2020 35

Travelers is delivering $4.4 million in dividends to qualifying policyholders. Are you in? If your bank is a Travelers policyholder, you’re currently enjoying outstanding Independent Community Bankers of America (ICBA) benefits. If you’re not, you might want to consider the following reasons why you should be insuring with Travelers:

•

Travelers ICBA Insurance program’s Policyholder Safety Group Dividend plan has been paid for 18 consecutive years. The most recent program year produced policyholder dividends of $4.4 million – for a total of nearly $65 million in dividends paid over the past 36 years. Industry-leading risk management solutions and insurance protection tailored to community banks. Financial strength you can rely on.

To learn more, talk to your independent agent or broker or visit travelers.com.

travelers.com Travelers Casualty and Surety Company of America and its property casualty affiliates. Hartford, CT 06183 © 2019 The Travelers Indemnity Company. All rights reserved. Travelers and the Travelers Umbrella logo are registered trademarks of The Travelers Indemnity Company in the U.S. and other countries. CP-9143 Rev 12-19

36 The bottom line

All property casualty coverages may not be available in certain areas; certain lines of coverage may not be eligible for dividend payout. Dividends are not guaranteed and are subject to the approval of the company’s board of directors.

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The Bottom Line Summer 2020

Articles inside

kickoff! a Football Fan’s guide to Portfolio Management

get back to business with low Risk 504 loan Packages

how some banks are easily Making Money and helping their customers

People you should know: tom Fogarty and Reece simpson

new Regulations Provide Relief for usury headache

your cardholders, your interchange. are contactless Payments squeezing you out?

Prevent Fraudsters from Making your bank a victim with these tips

Main street, inc. acquires Marketing technology software Provider onovative

From the chairman

Federal delegate’s Report