Kentucky Banker Magazine July/August 2022 by Kentucky Bankers Association

BANKERKENTUCKY What PageJaNeedCustomersOurNowHillebrand7 JULY/AUGUST 2022 Official Publication of the Kentucky Bankers Association

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KENTUCKY BANKERS RELIEF FUND

The Kentucky Bankers Relief Fund was established in 2005, in re sponse to Hurricane Katrina, to help communities in need after natural disasters. Now, the Relief Fund is there for Kentucky com munities when natural disasters hit the Commonwealth.

Donate

• The KBA will take direction from the banks in the impacted areas to make sure the funds are distributed effectively.

• The KBA will coordinate the assistance to banks impacted, starting with bank employees and their communities.

QUESTIONS? Josh Fischer, Director of Communications, jfischer@kybanks.com

WHAT IS THE KENTUCKY BANKERS RELIEF FUND?

Donate

• Each dollar received will be used for direct assistance.

EASTERN KENTUCKY JULY 2022 FLOODING We had barely learned the extent of the tornado damage to com munities in Western Kentucky - now we are faced with yet another natural disaster to our neighbors in the Eastern part of the state. The extent of the damage won’t be known for months, but now is the time to start gathering resources to help where we can. Your contributions make a difference. We are accepting donations to the Kentucky Bankers Relief Fund to aid those impacted by the flooding. Every donation counts, no matter how large or small. Donating to this fund will show your support for the communities in Kentucky, including its bank employees, who often are the ones who ignore their own needs to help their communities first. TODAY! by Credit Card/PayPal: kybanks.com/relieffund by ACH/Wire: email Katie Rajchel krajchel@kybanks.com by Check: Kentucky Bankers Relief Fund, 600 West Main Street, Suite 400, Louisville, KY

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40202

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DETAILS ABOUT THE RELIEF FUND

• No administration fees will be taken out by the KBA.

WHO WE ARE: The KBA is a nonprofit trade association that has been providing legisla tive, legal, compliance and educational ser vices to its member institutions since 1891. KBA's directors and staff work together with its members to make the financial services industry a more effective and successful place to work. The strength of the KBA is bankers unifying as an industry to speak as one voice. WHAT WE DO: The purpose of the Kentucky Bankers Association is to provide effective advocacy for the financial services industry both in Kentucky and on a national level; to serve as a reliable and responsive source of information and education about areas of interest to the industry; and to provide a catalyst and forum for collective industry action. The KBA does this in 4 ways: 1. Government relations & industry advocacy 2. Information interchange 3. Education 4. Products and services kybanks.com KENTUCKY BANKERS ASSOCIATION 600 West Main Street, Suite 400 Louisville, Kentucky 40202 KENTUCKY BANKER is the official bi-monthly mag azine of the Kentucky Bankers Association (KBA). No part of this magazine may be reproduced without express written permission from the KBA. The KBA is not responsible for opinions expressed by outside contributors published in KENTUCKY BANKER. The KBA reserves the right to publish submissions at the discretion of the KENTUCKY BANKER editorial team. For more information, or to submit an article, pictures or pass on a story lead, contact Josh Fischer, Manag ing Editor, 502-736-1283 or jfischer@kybanks.com facebook.com/kybankers Bold frame denotes management team member. Please feel free to email us, we are here to help! Ballard W. Cassady Jr. President & pcross@kybanks.comEducationPaulamcole@kybanks.comExecutiveMiriambcassady@kybanks.comCEODebraK.StamperEVP&GeneralCounseldstamper@kybanks.comColeAssistantJohnP.CooperLegislativeSolutionsjcooper@kybanks.comCrossCoordinatorJoshFischerDirectorofCommunicationsjfischer@kybanks.com Brandon Maggard Account jschlierf@kybanks.comKBASalesJenniferdmccartin@kybanks.comBenefitDonnacmaggard@kybanks.comKenBancPresidentChuckbmaggard@kybanks.comKenBancRepresentativeInsuranceMaggard&CEOInsuranceLisaMattinglyDirectorofSales&ServiceKBABenefitSolutionslmattingly@kybanks.comMcCartinSupportSpecialistTammyNicholsFinanceOfficerHOPEoftheMidwesttnichols@kybanks.comSelinaO.ParrishDirectorofMembershipsparrish@kybanks.comTimothyA.SchenkAssistantGeneralCounseltschenk@kybanks.comSchlierfSupportInsuranceSolutionsMatthewE.Vance,CPAChiefFinancialOfficermvance@kybanks.comBillieWadeExecutiveDirectorHOPEoftheMidwestbwade@kybanks.comAudreyWhitakerInsuranceServicesCoordinatorawhitaker@kybanks.comNina K. tloladze@kybanks.comHOPEChiefTamunacguernsey@kybanks.comEnrollmentCaseyngottes@kybanks.comDevelopmentSponsorshipGottes&BusinessGuernseyandBillingSpecialistJamieHamptonEducationCoordinatorjhampton@kybanks.comMcKenzieJustCaldwellStaffAccountantmcaldwell@kybanks.comNatalieKaelin,Esq.DirectorofEducationAlliancenkaelin@kybanks.comLoladzeOperatingOfficeroftheMidwestMichelleMadisonITManagermmadison@kybanks.com Katie krajchel@kybanks.comAccountingRajchelManager

Want to advertise in KENTUCKY BANKER magazine? CONTACT Nina Gottes Sponsorship & Business Development 513-293-2467ngottes@kybanks.com ADVERTISE IN KENTUCKY BANKER WANT TO BECOME A KBA SPONSOR? Visit: kbasponsorship.com EDUCATION ALLIANCE REPRESENTATIVE Lanie W. FirstCommunityGardnerPresidentSouthernNational KBA BENEFITS TRUST COMMITTEE W. Fred Brashear, II President & CEO Hyden Citizens Bank BANKERKENTUCKY JULY/AUGUST 2022 3 KY Bankers Relief Fund 7 Chairman’s Corner 9 Straight Talk 10 ABA/FHLB 11 Debra 13 Louisville Geek: iPhones 14 Studying Innovations 16 Time for a Re-Write 18 Crypto Crackdown 23 Working Remotely 25 Power of Peer Networks 27 KY Supreme Court Clarity 29 The Digital Dynamic 30 Used Equipment into Cash THANK YOU ADVERTISERS! 2 ICBB 6 ImageQuest 8 BHG Bank Network 12 FHLB Cincinnati 17 Bankers Alliance 20 Morgan Pottinger McGarvey 22 OCCH 28 Servis 1st Bank GROUP REPRESENTATIVES Represents Group 1 Randell Blackburn Market President, McCracken County Community Financial Services Bank Represents Group 2 Michael W. Hunt, President/CEO The Sacramento Deposit Bank Represents Group 3 Greg PresidentPawley&CEO, The Cecilian Bank Represents Group 4 Michelle Coleman CEO, Bank of Edmonson County Represents Group 5 Gregory D. Goff President & CEO, First National Bank of Kentucky Represents Group 6 Charles Beach, III Chairman, Peoples Exchange Bank Represents Group 7 D. Alex PresidentCook&CEO, Hearthside Bank Represents Group 8 Anthony PresidentKinder&CEO, Peoples Bank of Kentucky, Inc. Represents Group 9 April R. ChairmanPerry&CEO, Kentucky Farmers Bank Corporation THRIFT REPRESENTATIVES Jaime FirstPresidentCoffey&CEOFederalSavings & Loan of Hazard BANK SIZE REPRESENTATIVES Represents Banks with Assets of $1B or more Elmer K. WhitakerPresidentWhitaker&CEOBank Represents Banks with Assets at Least $200 M; less than $1B H. Alexander Downing President & CEO Franklin Bank & Trust Company 2021-2022 OFFICERS & BOARD CHAIRMAN James A. Hillebrand, Chairman & CEO Stock Yards Bank & Trust Co. VICE CHAIRMAN Ruth O’Bryan Bale, Chairman South Central Bank, Inc. TREASURER Mark D. Strother, President & CEO The Commercial Bank of Grayson PAST CHAIRMAN J. Wade Berry, President & CEO Farmers Bank & Trust Co. KBA PRESIDENT & CEO Ballard W. Cassady, Jr. Kentucky Bankers Association STRAIGHTBallard’s TALK Just Stuff I Think I Know page TWODebra’s9CENTS Don’t Fear the Reaper page 11

Take a hard look at any barriers in your practices and procedures. Any thing that is done day in, and day out should not have any unnecessary hoops to jump through. Pivot your delivery channels and processes to invest in what is optimized to be easy.

- SOLUTIONS - OPTIONS - STABILITY - ACCESS - CONFIDENCE

Economic uncertainty is taking a toll on our customers.

kybanks.com KENTUCKY BANKER | 7

And finally, our customers need confidence. In times of uncertainty, our customers rely on their bank and their bankers to be grounded. Trust your teams to make decisions that can help boost our customers’ confidence in the bank and in their own financial wellbeing.

If we can empower our frontline team members to steer customers directly to a person who is ready and available to help, we all win. This means having staff in call centers and branches at the right levels, making sure everyone on all teams is ready to act swiftly, and having efficient processes that don’t slow down our path to support.

KBA CHAIRMAN’S CORNER by James A. Hillebrand Chairman & CEO, Stock Yards Bank & Trust Co. 2021-2022 KBA Chairman

Listen to your managers and frontline workers. They are an invaluable sounding board to improve how we do business. Their feedback and front-line experience help us know how our customers are changing and what they’ll need now and in the future. When we trust our teams and activate them to use their unique talents, our confidence carries on to the customers to boost their wellbeing and create customers for life.

Mental, physical and financial wellbeing are at risk in difficult times. We are in a much different place today than we were just a year ago. Everyday life is more expensive. Our customers are feeling the pain of rising gas prices and inflation among other issues that have arisen in the wake of the COVID-19 pandemic. Now forced to focus on the staples, customers are reducing home energy use, eliminating restaurant meals, canceling large purchases and putting vacations on hold.

Financial education can be powerful – and this is an area where we’re all experts. Sharing valuable insight now can create smarter and savvier customers of the future.

What Our Customers Need Now

The pandemic has caused so many unknowns making a solid founda tion is essential. We can’t predict the future. We can follow economic outlooks and try to guess what’s next, but the most important stories aren’t on the news, they’re inside your bank facilities every day.

We don’t need to reinvent ourselves to stay relevant. You know your customers and your market better than anyone else – so don’t forget what matters!

Through superior customer service and active engagement with our customers, we can ask the right questions and find answers to financial hardships. We need to set ourselves apart by taking a holistic look at what we can provide and how we can connect with our customers. Our customers need options. The definition of what support looks like for our customers is changing. The modern customer expects speed, efficiency and convenience – at a minimum. We need to go above and beyond to ensure that each customer has several delivery channels to interact with the bank to meet those expectations. The pandemic has spurred adoption of digital tools – mobile banking, online bill pay, interactive teller machines – and we now have new options and new behaviors from our customers to improve and perfect. We can still provide a high level of service and meet customer needs while allowing them to bank anywhere and anytime. Our customers need stability. Now is not the time to chase new ideas or change our personalized approach to banking. While others may say that banks need less branches and less staff, I know that the tried-andtrue relationship-based service that our bank has provided for more than 100 years will always have value. Some things never change.

We have seen tough times in the past and we’ll see them again. The hardships of the recession in 2008-2009 taught us that relationships matter. If we do our homework, dig into how we’ve historically weath ered storms, and stay true to what has proven results, we can all make it over this hump. Our customers need access. Making vital connections in a way that is easy and approachable allows us to provide the support our customers need, as soon as they need it. We must give them a clear path to experts in various lines of business, from wealth management to commercial real estate lending, to answer their questions and overcome challenges.

It is our job as bankers to support our customers’ changing needs through tough situations. How we realize their expectations and re spond can illustrate understanding, earn loyalty and shape how custom ers interact with us in the future. Our customers need solutions. Banks know how to help customers save money. We can verify that our customers are signed up for the right types of accounts, proactively investigate refinancing options, provide targeted relief and talk with our customers frankly about how they manage money.

BHG Bank Network National Seminar Join BHG Financial at the Naples Grande Resort. Hear valuable insights on how we can help Bank Network members navigate the current financial environment with our suite of innovative solutions. NAPLES, FL | OCTOBER 17–19 SCAN NOW TO REGISTER We encourage you to register early, as we anticipate this event will fill up quickly. bhgloanhub.com/KYSeminar Take advantage of a chance to meet with hundreds of Bank Network members from across the country. Jordyn Sollars // VP, Institutional Relationships 954.807.2958 • jsollars@bhgbanks.com

Just Stuff I Think I Know

My ole granny had a saying that, “money goes where it is invited.” If you want someone to put their money somewhere, you give them a reason. For example, if I want you to invest in electric cars, I give you incentive to invest in EC’s. I give you a tax discount or lower the price

If this article was being narrated, the Beverly Hillbillies theme would be a fitting backdrop. “Come and listen to my story ‘bout a man named Jed…”

There were many words of such wisdom handed down to us from that generation marked by vast learning, character, courage and faith. To day, few of us have read them. Maybe that made it easier for the worst of our human natures to corrupt our institutions with the hunger for power and wealth. If asked to name a true statesman, how long would it take you?

On the other hand, if I want you to stop investing in something, I make it unbearably expensive to make a profit. Say for example, a gas well. I may give you a permit to lease land to drill but refuse to give you a permit to drill. So, the net effect is you wasted your leasing money. Tough to make a profit that way.

Let that be fair warning that you’re about to get a load of pure Eastern Kentucky Appalachian economics, barely adulterated by an BA in Business from Transylvania University and an MBA from Van derbilt University. Supply and Demand Economics is pretty simple. It’s rooted in a few truths that never change in a capitalist society, even one in which everybody gets to choose their own truth. The Big Dog of economic truths is supply and demand. Left alone, it solves just about any problem. Any economist who can get away with being honest -- not to include the 17 Nobel laureates who said inflation was transitory -- will tell you that our capitalist econo my, if left alone, will heal itself every time. When we screw it up bad enough, there will be some pain. Sometimes it’s a bloody nose; some times a chigger bite. But, it will heal itself through the basic principles of supply and demand. To over-simplify, if the demand for bananas goes up and the supply is not there to meet that demand the price of bananas will go up. However, since you can make more money now selling bananas you will produce more bananas thus matching and exceeding the demand and the price of bananas will come down. The cycle will repeat itself until Market Equilibrium is reached (the niche where supply equals demand). At that point, the banana farmers and the consuming public have reached a “fair market price” between themselves, with no help from anyone -- especially anyone in Washington. But, therein lies the problem. Once the government interferes in sup ply and demand with things like price supports for the banana farmer, then the natural cure doesn’t stand a chance. The banana farmer has no reason to regulate his crops to meet demand. Heck, the government is going to pay them a high price no matter what, thereby destroying the organic nature of supply and demand. A list of the things government has royally mucked up with such interference would go on for pages, things like tobacco, oil, grain. To be fair, the reason is their constituents don’t like pain. We lobby Congress for quick fixes for even short-term pain, and then we reward the folks who bring home that bacon with re-election. So, we give Congress plenty of incentives to repeatedly ignore the most fundamental principle of economics (at least as under stood by Milton Friedman, one of my personal heroes).

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STRAIGHT TALK by Ballard Cassady KBA President &

bcassady@kybanks.comCEO

More About Incentives

OR make it so expensive not to have an EC that you buy one. Sound familiar?

Benjamin Franklin was famously asked by a lady waiting outside of Independence Hall in Philadelphia, “Doctor what do we have, a Re public or a Monarchy?” Franklin responded, “A Republic, if you can keep it!” I think his use of the pronoun “you” instead of “we” was telling. Franklin knew the hearts of the people he’d just left in Inde pendence Hall. They had risked everything for this republic. What he didn’t know was whether his countrymen would have the wisdom and courage to preserve it. Currently, it appears we’re trying our best not to. Unions Well, this is a doozy. Most of us agree that unions were desperately needed in the era of their founding. Some workplace conditions were inhumane and unsafe, wages were intolerably low, children were being abused in the labor force. Congress responded with enough laws and regulations to fill a library, ensuring safety and fair wages as much as anyone can (OSHA, EEOC, FMLA and a myriad of others). We formed a Department of Labor to oversee and enforce all these laws. Where did that leave unions? In search of reasons to exist, which has too often led them to create barriers to progress, innovation, self-reli ance, and the pursuit of our national interests. They’ve had a big role in increasing the cost of production to the point of driving manufacturing into foreign countries.

kybanks.com KENTUCKY BANKER | 9

Politicians are Human Human nature doesn’t change much, if at all. A founding father once wrote, “If men were angels, no government would be necessary.”

Profits Profits are the “mother’s milk” of Capitalism, stock market prices and higher wages. I had to throw in a no-brainer here.

For more information visit: fhlbcin.com/housing-programs/disaster-reconstruction-program

Inflation and Government Oversight I refer you back to #1, supply and demand. Kentuckians are Tougher than Most

ABA

The American Bankers Association (ABA) announced it will con tribute $25,000 to support flood relief efforts in Kentucky in response to the devastating flooding in Eastern Kentucky that has claimed at least 37 lives. (The ABA has also approved a $25,000 donation to the ABA Foundation’s effort to aid victims of the unprecedented June flooding around Yellowstone National Park in Montana.)

Just Stuff I Think I Know

It took COVID to show us some of the dangers that has created. But there’s no single union that has taken a greater toll than our teacher unions, who were ‘unmasked’ during COVID to reveal a level of polit ical maneuvering that showed a shocking indifference to children and their educations.

FHLB Cincinnati established the Disaster Reconstruction Pro gram as a standing response to disasters that occur within the Fifth District states of Kentucky, Ohio, and Tennessee. FHLB members can make a positive impact on their community by offering funds to assist customers in replacing or repairing homes that have been damaged due to a disaster. Households affected by natural disasters may qualify for help with repairing, rebuilding or acquiring a home through the Disaster Re construction Program (DRP). Grants of up to $20,000 are avail able to homeowners and homebuyers in declared disaster areas, and renters can qualify for $5,000 toward the purchase of a home. DRP funds are available on a first-come, first-served basis.

FHLB ProgramReconstructionDisaster

“The flooding in Kentucky and Montana has caused significant hardship for people in those communities including members of our banking family,” said ABA president and CEO Rob Nichols. “We are pleased to make these contributions in support of our friends at the Kentucky Bankers Association and the Montana Bankers Asso ciation who have really stepped up to help their neighbors.”

One thing I am absolutely sure of... Our convention this year in Marco Island should be a great event. We have some excellent speakers starting off Monday morning with Thomas Hoening, former CEO of the Kansas City Fed (1991-2011) and FDIC Vice Chairman (2012-2018) under President Obama.

Weakness Predators, both animal and human, can smell weakness from anywhere and will act accordingly.

“The Kentucky Bankers Association is deeply appreciative of ABA’s willingness to contribute to our banker relief effort,” said Ballard Cassady, Kentucky Bankers Association president and CEO. “This marks the second time in less than a year that ABA has provided a helping hand to disaster victims in Kentucky. Just like ABA’s contri bution after last year’s tornadoes, these funds will absolutely make a difference.”

To quote Sean Dietrich, writer of Sean of the South, “These people are not like other people. They are not merely muscle and blood. They are more than skin and bones. These individuals are made of the same gran ite and iron with which the Appalachians themselves were formed.” We are Kentuckians, by the grace of God. And in the name of God, we will take care of our own.

Relief$25KContributestoFloodEfforts

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10 | KENTUCKY BANKER SINCE 1891

Next up is Congressman Barr, who is a senior member of the Financial Services Committee in the House and ranking member of the sub-com mittee overseeing (among other things) monetary policy. He has been a stalwart champion for common sense banking issues. And the list of ‘not-to-be-missed’ offerings goes on, not to mention that Marco is not a bad place to be come September 17. Please travel safe, my friends. Kentucky and its banking community have suffered quite enough in 2022.

AND, our Commonwealth has suffered two of the worst natural disasters in its history, all within a year. So, what keeps our industry going and going strong?

I don’t know the answer, but it must be a sense of community. I can’t tell you the number of times that I have heard someone, usually a regulator from DC or a large metropolitan area wonder, out loud, why community banks are even interested in staying in the very ru ral or underserved communities in which many of you are located. That always makes me wonder how those same people know so little about traditional banks and traditional banking. Banks are invested in their community, not just for profits and suc cess of the bank—although banks and communities necessarily de pend upon the success of the other for their own future success—but banks are also invested in their communities because they believe in the success of the community. Bank employees are part of their communities and their neighbors are family. That is why disasters are felt so deeply by bank employees. Kentucky has more than its fair share of natural disaster this year and we still have plenty of days left before a new year arrives. Both in the areas of the earthquakes and now in the areas of the floods we hear the pain and worry in the voices of our bankers when they talk about the damage done and continuing. Western Kentucky almost seems like years ago now that we are faced with recovering the flood-dam aged communities in Eastern Kentucky. But then you realize Western Kentucky was only a few short months ago and that there is still plen ty to do. How do we assist our bank family and community families when the destruction is so great? All we can do is plow ahead. We have raised a great amount of money to assist in Western Kentucky, along with many other groups, but we have to make sure we don’t suffer from disaster/charity fatigue and forget the immediacy of the disaster in Eastern Kentucky demands. I’m sure that all of you have seen photos of bridges washed away, houses moved by the force of the water or flooded beyond the roof tops. In many cases, families and businesses lost not only everything but they are also faced with the almost unbearable task of cleaning up the wet, muddy mess of what remains and hope that they are able to get it shoveled out before the heat combined with the wet conditions lure insects, mold and bacteria which can cause diseases to everyone in that area. Many of the counties impacted by the flooding were already econom ically depressed. The flooding just worsens that situation. Many have lost homes, cars, jobs and loved ones. Businesses will not be able to reopen or rebuild until clean up and reconstruction planning has been completed. Many schools will not be able to reopen on the regularly scheduled date, if at all. County officials have expressed their fears that if people leave now, they will never come back. And, along with all of that, people are just trying to figure out a way to survive. In addition to the immediate loss to daily life, much of the rich histo ry of Appalachian life was lost in the flood. Documents, photos and memorabilia maintained by not for profits were swept away or left waterlogged by the flood waters, with no promise that any of it can be restored—it certainly cannot be replaced. Think of losing your future and your past…all while trying to sustain your now.

I hate to start out so pessimistic, but could times be any worse for banking and Kentucky?

We may or may not be in a recession heading into what may or may not be “inflation,” all depending upon which expert you ask. The regulators have suddenly decided that they are on center stage with no restrictions as to what they can require of you. Late payments are on the increase. Good employees are worth their weight in gold, but so very hard to find and, in some cases, to keep. Any fee you charge is now considered a junk fee and profits are considered evidence of your abuse of consumers despite the fact that you are a for profit institution.

“

Bank employees are part of their communities and their neighbors are family. That is why disasters are felt so deeply by bank employees. kybanks.com/relieffund

Our banks are faced with their own set of problems. Not only were many branches damaged by the flooding, but many borrowers were not technically in a flood zone, so even though their house may have been completely destroyed, they will not be covered by insurance which will almost certainly leave a substantial gap after receiving relief Thankfunds.youso much for donating to the Kentucky Bankers Relief Fund when we asked during the tornadoes. Now, we need to join together, one more time, and donate service, goods and most impor tantly funds to help our banks help their communities recover.

KENTUCKY BANKER | 11 kybanks.com

Don’t Fear the Reaper

Want to learn more? Contact your relationship manager for details. Judy Rose AVP, Relationship (513)rosejm@fhlbcin.comManager324-2789 FHLB – Ready to Serve At the FHLB, we take pride in the variety of financial solutions we offer our members. Whether you are looking to manage risk, sell mortgages, or back public unit deposits – the FHLB has products to meet your needs. Look to us for help to: • Borrow – with Advance Programs • Sell – mortgages through the Mortgage Purchase Program • Secure – public deposits with Letters of Credit

The Time was Approaching A few weeks ago, it became evident I would soon need to retire my trusty iPhone X. All the warning signs were there. I couldn’t leave the house without a charger because my battery would die before lunch. To make matters worse, my screen looked like a spider web and sometimes my beard became tangled in the chipped glass mid call, which was always pleasant. Worse, sometimes callers could not understand what I was saying. And I dropped calls. Lots of them. “Can you hear me now?”

Typical Ups and Downs My relationship with the iPhone hasn’t been perfect. Like many, we’ve had our ups and downs. I’ve been tempted to test the waters, but the process of moving all my contacts, music, photos and apps gives me anxiety. Back in the day, before smartphones took over our lives, losing all the stuff on your phone was no big deal. Today, losing everything on your phone could become the plot of a Netflix horror series.

iClouds and Backups And I’d be remiss if I didn’t share a few last words regarding iCloud and backups. In my opinion, it’s always smart to start the process by backing up your old iPhone, as you never know what might happen. If you don’t have enough iCloud storage to back up your current iPhone using iCloud Backup, Apple provides tem porary iCloud storage to make a backup. Backups, of course, also provide a safety net in case something goes askew, and additional iCloud storage space is cheap at just ninety-nine cents a month for an extra 50GB.

Quick Start Saves the Day What is Apple’s Quick Start and why is it so awesome? Before Quick Start was launched with iOS 11 in 2017, setting up a new iP hone typically meant backing up your old phone’s data, noting your old set tings and apps, loading those items on the new phone, reconfiguring your set tings (including email), then migrating all your corresponding data to the new handset. It also usually meant you had to log in fresh to all your apps, always a fun way to spend your Saturday.

With Apple’s Quick Start feature, you can point your new phone at the old one, and all your settings, apps, contacts and other data transfer to the new device. As long as iOS is up to date on both de vices and they are both on the same Wi-Fi network, Apple’s Quick Start does not require you to separately back up your data, meaning you no longer have to perform a backup of your phone ahead of time. The data and settings just transfer from the old phone to the new model. So, if you’ve been waiting to upgrade because you dread the migration process, never fear. It’s become much less painful.

Nevertheless, it was time. I went with the iPhone 13 Pro Max. The moment I turned the new phone on I was greeted with one of the most glorious messages I’ve ever seen. Keep in mind it’s been nearly four years since I upgraded to a new iPhone, so this might not be news to you. But for those of us who put off upgrading, this feels too good to be true. If this works, it’s magic.

kybanks.com KENTUCKY BANKER | 13

Disclaimer: I wrote this column with iPhone users in mind. Howev er, if you’re a green texter, you’re more than welcome to stay. I also want to preface by saying I’m no Apple fanboy. You won’t find me camping outside an Apple Store eagerly awaiting the next iPhone release. Truth be told, I’d still be rocking my Blackberry (best key board ever), but the iPhone helped end that run back in 2010, which is when I first began using Apple’s smartphone.

I put off upgrading to a new phone for as long as I could because, quite frankly, it’s a pain in the butt. Typically, the migration process took me hours to complete and I’d need to first make a backup. Usually, I’m out of iCloud storage, so Apple reminds me of that fact about a half dozen times during the process.

by Ben Lawrence, Managing Partner Louisville Geek (KBA Endorsed Vendor)

Maybe the Most Underrated iPhone Feature Ever

Cryptocurrencies and a Non-Uniform Currency System

Some Potential Risks of These Payment Technologies In theory, the new payment technologies that have emerged in recent years may help reduce costs and improve efficiencies of fi nancial transactions. They may also be used to facilitate financial transactions that could otherwise be difficult. Cryptocurrencies, however, are currently viewed more as a store of value than as a medium of exchange. Their volatile prices and exchange rates make them not ideal for payments and can result in large losses for those who view these cryptocurrencies largely as investments.

What about implications for monetary policy? Famous 20th-cen tury economist Milton Friedman said that if people are allowed to issue private currency, then a lot of private currencies will be issued. We see that today with the proliferation of cryptocurren cies—free entry has resulted in thousands of them. While an indi vidual cryptocurrency may have limited supply, the cryptocurren cy market overall does not. At least from a monetarist perspective, the question would then become: What is the money stock of the nation? This, in turn, would have implications for forecasting what the price level and inflation will be in the future. In light of the cryptocurrency wave, some have called for the cre ation of a U.S. central bank digital currency (CBDC). In January, the Federal Reserve Board of Governors released a discussion paper on the potential benefits and risks of a U.S. CBDC. This paper “invites comment from the public and is the first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system,” as stated in the Board’s press release. Accordingly, the topic is under study, but the Fed is not making any commitments regarding a CBDC at this point (2). More recently, U.S. President Joe Biden signed an executive order in March for various government agencies, including the Fed, to study digital assets (such as cryptocurrencies) and the potential creation of a U.S. CBDC, as summarized in a fact sheet related to the order.

Cryptocurrency Implications for Monetary Policy

The Importance of Studying Innovations in Payment Technologies by James Bullard, President and CEO Federal Reserve Bank of St. Louis

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Cryptocurrencies were introduced to the global economy more than a decade ago, and since then, they have inspired much re search and commentary. As a research economist myself, in addi tion to my role as a monetary policymaker, I have studied “private money” and have given talks on currency competition. For exam ple, I spoke about “Non-Uniform Currencies and Exchange Rate Chaos” at a May 2018 CoinDesk conference. Currency competition is nothing new. Globally, we have ample currencies issued by government monetary authorities, and these currencies tend to trade at volatile exchange rates. In the current en vironment, privately issued currencies (such as cryptocurrencies) are also competing with publicly issued currencies. The exchange rates between the public and private currencies tend to be more volatile than the exchange rates between various public currencies. I have argued that cryptocurrencies may be creating a movement toward non-uniform currency in the U.S.—a system that society has disliked historically. In the pre-Civil War era, the majority of the U.S. money supply consisted of privately issued banknotes (1). Publications listed and frequently updated the going exchange rates for different currencies in particular locations. Similar to to day’s global currency system, the pre-Civil War era was character ized by exchange rate chaos, with currencies constantly fluctuating against one another. People didn’t like that system, and a uniform currency was implemented in the U.S. during the Civil War. But cryptocurrencies may unwittingly be pushing us back in the direc tion of a non-uniform currency system.

Another well-known concern is that cryptocurrencies are some times used for transactions that are illegal. For instance, ransom ware attacks typically ask for payment in cryptocurrency. There fore, much of the impetus behind the technological innovation in payments seems to be coming from illegal sectors. An economist would interpret that as a form of regulatory arbitrage or illegal arbitrage, whereby people are trying to bypass a barrier that exists with ordinary financial channels. In addition, these payment technologies are unregulated by gov ernments—which some view as a benefit. From a policymaker’s perspective, the lack of government regulation and oversight has implications for financial stability of the system overall.

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Nevertheless, we at the Federal Reserve have to track develop ments in this area closely so that we can maintain price stability and financial stability and promote a strong economy in the U.S. Also, the Fed already is working toward improving the efficiency of the payments system. The Federal Reserve banks have made a lot of great progress on the development of the FedNow Service, which aims to provide real-time payment services to financial in stitutions 24 hours a day, 365 days a year. Whether the new payment technologies discussed in our 2021 an nual report are a genuinely innovative disruption that may prove useful for the nation’s financial system remains to be determined. I hope you will read our annual report and find the main essay “The Blockchain Revolution: Decoding Digital Currencies” infor mative.

(2) The Federal Reserve Bank of Boston and Massachusetts Institute of Technology are also collaborating on research focusing on digital currency.

WHEN: October 27, 2022 | WHERE: Hilton Downtown, Lexington, KY | VISIT: kybanks.com/bankinnovation

KENTUCKY BANKER | 15 kybanks.com

Cryptocurrencies, however, are currently viewed more as a store of value than as a medium of exchange.

The growing complexity of the financial industry is moving fast, with no signs of slowing. Your ability to keep up will be the key to your bank’s future success. This is where the 2022 Banking Innovation Conference comes in! The Banking Innovation Conference will provide community banks with the latest informa tion on navigating relationships with fintechs, regulatory guidance, and innovative best-practices to modernize the community banking model.

James Bullard is the president and CEO of the Federal Reserve Bank of St. Louis. The Federal Reserve Bank of St. Louis has a long tradition of providing thought leadership in monetary eco nomics. An important issue in this area today is the emergence of new payment technologies, given their potential to transform mon ey and the payments system. Therefore, our 2021 annual report examines opportunities and concerns surrounding cryptocurrency, blockchain and decentralized finance. While these payment tech nologies are new to some, economists at the St. Louis Fed have been studying innovations such as those discussed in this annual report for several years now.

Endnotes: (1) Temin, Peter. The Jacksonian Economy, W.W. Norton, 1969.

Continuing to Study Payment Technologies Technology is always changing, and it is very clear that financial intermediation will be different in the future than it is today. But exactly how this technology will be dispersed and how long that process will take remain uncertain.

Meanwhile, traditional providers—namely banks—have consolidated and reduced their number of branches, in large part because of overreg ulation. The number of banks in the U.S. has declined from over 18,000 in 1986 to under 5,200 today. The number of branches declined by 14 percent from 2009 to 2020. Simply put, a lot has changed since 1977.

The Community Reinvestment Act: Time for a Complete Re-Write

Last year the Consumer Financial Protection Bureau proposed to “add a new subpart B to Regulation B to implement the requirements of section 1071” that would create a “database that would enable stake holders to better identify business and community development needs and opportunities for small businesses, including women-owned and minority-owned small businesses”. The Consumer Financial Protec tion Bureau identified the need for changes to Regulation B that many non-bank lenders did not have to report their lending data and that “data are not standardized across agencies and cannot be easily compared.”

Statistical figures show that more than half of all mortgages are origi nated by non-depository lenders.

Summarily, the Consumer Financial Protection Bureau identified the need for a large populace of non-reporting entities to start reporting data to better understand whether low- and moderate-income neighborhoods were truly being served.

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There is now internet banking, fintechs, expanded credit union mem bership and services, private lenders and alternative financing; none of which existed in 1977.

The Consumer Financial Protection Bureau estimates that the market for small business financing products totaled $1.4 trillion in outstanding balances in 2019. The Bureau estimates that small business financing by depository institutions makes up just over half of small business financ ing by private institutions. In 2020 and 2021, COVID-19 emergency lending programs added a further $1 trillion to this value, bringing the overall size of the small business financing market up to $2.4 trillion.” “$190 billion in outstanding balances for private term loans and lines of credit was extended by various non-depository institutions, namely commercial finance companies, fintechs, and non-depository CDFIs.

All of that made sense in 1977; but the lending landscape has changed.

If Congress and federal regulatory agencies are truly concerned about depository and lending activities in low- and moderate-income neigh borhoods, they must start subjecting credit unions and other forms of non-bank lenders to the Community Reinvestment Act. Otherwise, the data submitted by banks captures only a small portion of true lending and depository activities in low- and moderate-income neighborhoods, providing stakeholders with an inaccurate depiction of what is truly happening in those communities.

When the Community Reinvestment Act (CRA) was enacted in 1977, Senator William Proxmire, who authored the CRA legislation, testified, “By redlining let me make it clear what I am talking about. I am talking about the fact that banks and savings and loans will take their deposits from a community and instead of reinvesting them in that community, they will actually or figuratively draw a red line on a map around the areas of their city, sometimes in the inner city, sometimes in the older neighborhoods, sometimes ethnic and sometimes black, but often en compassing a great area of their neighborhood.”

Using NCUA Call Report data for December 2019, the Bureau esti mates that credit unions account for a total of about $55 billion in out standing credit to members for commercial purposes.

The CRA statute requires the federal banking agencies to ‘‘assess the institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution.’’ Upon completing this assessment, the statute requires the agencies to ‘‘prepare a written eval uation of the institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods.’’ In addition, the statute requires making portions of these written evalua tions, referred to by the agencies as performance evaluations, available to the public. The statute further provides that each agency must con sider a bank’s CRA performance ‘‘in its evaluation of an application for a deposit facility by such institution.”

Banks are no longer the primary lender as they were in 1977. However, they are still the only lender subject to the Community Reinvestment Act. While the world has adapted to various new markets for lending and deposits since 1977, Congress and regulators have failed to make the same adaptations. It is time for Congress and federal agencies to realize that what made sense in 1977 no longer makes sense in its lim ited scope in 2022.

COMPLIANCE CORNER by Timothy A. Schenk KBA Assistant General tschenk@kybanks.comCounsel

If the Community Reinvestment Act is going to meet its intended pur pose, it must adapt to the modern era and require non-banking entities to be subject to the same rules as banks. Without such changes, stake holders will continue to be merely guessing as to whether low- and moderate-income neighborhoods are truly being served.

Senator William Proxmire understood banking. He was a student clerk and executive trainee at JP Morgan Chase, Chair of the Committee on Banking and was outspoken on various banking regulatory nominations when candidates lacked experience in economic or monetary affairs. It is time for regulators and Congress to take action on Senator Prox imire’s words to make the Community Reinvestment Act all-inclusive as it was originally intended and prevent all lenders from taking “their deposits from a community” and investing them in higher income com munities.

Minimizing the risks associated with program growth and new strategies. That’s Compliance Alliance. Request a demo today. Call (833) 683-0701 info@bankersalliance.orgor Holding Company of Compliance Alliance and Review Alliance Ready to let compliance culture drive your business’s transformation? Unlimited access to C/A’s attorneys and compliance officers means your staff works more confidently and spends more time with customers.

What is a crypto asset? Crypto assets are much like your every day tangible assets: cash, contracts, artwork, investments, informa tion, etc. However, crypto assets are entirely digital. Here, everyone knows that your unique address (known as a wallet address) owns those assets because of the transaction information stored on the blockchain. A dollar bill may be compared to a Bitcoin. A contract may be compared to a ‘Smart Contract’. A non-fungible token may be compared to your house Deed. Nearly every transaction made in your everyday life can be hosted on a blockchain.

What makes a crypto asset a security versus a commodity ver sus fiat currency? A ‘security’ represents an investment in a com mon enterprise with the expectation of profit solely on the efforts of others (“solely” is removed in actual practice). A crypto asset that is offered to raise capital for a start-up would likely be classified as a ‘security’.

The FRB did examine the pros and cons of a Central Bank Digital Currency (CBDC) but “does not favor any policy outcome.” And, the U.S. Treasury has offered a risk assessment of money launder ing risks in the crypto asset space. The FDIC joined the OCC and FRB in their “Crypto-Asset Policy Sprint” statement but has offered little else outside of requiring banks to notify the FDIC prior to en gaging in crypto-related activities. The CFPB broadened its own enforcement authority in this space last year, formalized in March by Executive Order. FinCEN And finally, legislation introduced in early June appears ready to assign rulemaking and enforcement authority to the Commodity Futures Trading Commission (CFTC), leaving the Securities Exchange Commission (SEC) any leftover crypto assets that are classified as securities.

The U.S. Office of the Comptroller of the Currency (OCC) con firmed in July 2020 that national banks could offer crypto custodial services. However, Acting Comptroller Chu recently publicly re marked that it is time to ‘reset and recalibrate’. The Federal Reserve Board (FRB) hasn’t released much guidance other than to say they will be releasing guidance.

What is blockchain? Have you ever worked on a document at the same time as another person or team? You can see others’ ini tials moving about on the page followed by their edits to the col laborative document. And the revision history is saved so everyone can see who made what changes. Well, this is a great analogy for ‘distributed ledger technology’ (DLT). But the key difference be tween DLT and blockchain is that there is no single authority that maintains the data (e.g. OneDrive, Google, AWS). With blockchain, there is no centralized authority holding the data, and the data is not valid unless ‘approved’ by a program that runs on many different devices around the world.

It can be difficult to understand and analyze the risks associated with crypto assets if you don’t have a grasp on some foundational terminology. Unfortunately, there’s a lot of so-called ‘gatekeeping’ in the ‘crypto community’ – e.g., folks who use overly-complicated lingo to seem more tech savvy than others. So, here are a few lay person examples to help understand the basic terms and concepts.

SWOT-ing at CrackdownCrisscrossingtheCrypto by Theo Kelly, Associate General Counsel Compliance Alliance (KBA Partner)

In the 14 years since blockchain technology’s invention, banks have been left to compete with emerging business models and new stores of value, while operating in an uncertain vacuum of regula tory guidance. The resulting whiplash of lightning-fast innovation seemingly incapacitated the U.S. regulators of currencies, commod ities, and securities. With only crisscrossing guidance offered thus far, it may seem impossible to make a risk-based decision on whether, and to what extent, a bank should adopt blockchain technology, including cryp tocurrency and web3. However, using the tried-and-true SWOT analysis, banks can establish a baseline with which to evaluate the impact the crisscrossing crypto crackdown will have on their inter nal and external environment.

The Crypto Basics...

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First, a refresher on the more recent commentary and actions by banking regulators. We know that Basel will be releasing a second consultation later this year with an eye on a “global minimum pru dential framework” to address risks associated with crypto assets. Their first consultation offered a risk-weighting methodology.

Visit the KBA’s YouTube page to listen: kybanks.com/video Register today aba.com/AgConfSA 2022 ABA AGRICULTURALBANKERS CONFERENCE November 6–9 CHI Health Center Omaha Omaha, Nebraska 70 YEARS As we celebrate 70 years of the conference we’re recognizing how far ag banking has come — and how far it can go. Join us to discover opportunities and innovations to better position your bank for future success. You’ll also experience the full return of in-person connections, learning, idea-sharing, strategizing and more. RESILIENCYCELEBRATINGIN AG

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CONTACT Tim tschenk@kybanks.comSchenk Contributions to Kentucky Bankers PAC and Kentucky Bankers Committee for State Government (each referred to as KBPAC in this disclosure) will be used in connection with state and federal elections, respectively. Contributions to KBPAC are voluntary and may not be deducted as charitable contributions. KBPAC may not accept corporate contributions. Contributions will be reported to the Kentucky Registry of Election Finance and the Federal Election Commission, as required. You may decline to contribute without fear of reprisal. You may contribute more or less than the amounts suggested and you will not benefit or be disadvantaged because of the amount contributed or the decision to not participate at all. The information being provided herein with respect to the KBA Political Action Committee is for informational purposes only and is not a solicitation by, or an invitation to contribute funds to, the Political Action Committee. Any contribution re ceived from non-eligible donors will be returned. Federal law requires us to use our best efforts to collect and report the name, mailing address, occupation and name of employer of individuals whose contributions exceed $200 in calendar year. McGarvey has received a 2022 from Martindale-Hubbell®, marking company has recognized him with

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Crypto assets generally fall into the classification of a commodity. A commodity is a resource that is nearly identical in all its instances and has a commonly known value, such as wheat. Financial commodities include identical (or nearly identical) futures and options contracts that have commonly known values. For the purposes of classifying crypto assets, ‘fiat’ is defined as the ‘lawful money’ of the United States. In other words, a currency that represents the debts of the government. You can’t pay your taxes in wheat, for example, but you can use U.S. dollars. A Central Bank Digi tal Currency (CBDC) would be classified as fiat currency.

kybanks.com KENTUCKY BANKER | 21

THE S.W.O.T.

Reputation. The bank is well-posed to trigger crisis management plans, maintains open channels of communication with relevant stakeholders, and has identified and mitigated risks associated with crypto asset environmental risk factors.

Strengths & Weaknesses Management.

Crisscrossing Crypto Crackdown

continued:

CONCLUSION Given what little we know about the future legal and regulatory land scape of cryptocurrency, a comprehensive and bank-specific SWOT analysis may offer some comfort in the uncertainty. Take some time to discuss your bank’s crypto posture with your internal and external stakeholders and analyze the relevant strengths, weaknesses, oppor tunities, and threats for your bank. Continue getting involved in the discussions surrounding the proposed laws and regulations. And take this opportunity to enhance your risk management program and Com pliance Management System to monitor and respond to the crypto reg ulatory crackdown we all know is coming.

The Board and senior managers of the bank have a clear understanding of the existing regulatory parameters surround ing crypto assets, are knowledgeable about the applicable of those rules to bank offerings, maintain an awareness of emerging changes, and have a system in place to update the bank’s operations quickly and efficiently to comply.

Competition. The bank is an early adopter of crypto products and services but may now lack resources to act upon new trends, tech nology, and opportunities.

Insurance. The bank maintains appropriate levels of insurance relat ed to all facets of crypto asset products and services.

Theodore Kelly serves as Associate General Counsel for Compliance Alliance. He holds a Bachelor’s Degree in Political Science from The Ohio State University, a Master’s in Business Administration from Franklin University, and a Juris Doctor from Capital University Law School.

Internal Controls. The bank’s internal controls are built-out and appropriately monitored and tested to manage the increased credit, liquidity, and transaction risks associated with crypto asset custody, transactions, loans, issuance, and holdings. The bank stress tests con tagion risks and enhances areas of identified deficiencies. The bank has consistent margin call triggers, procedures, and communication channels, where applicable. Evaluations of crypto assets as collateral are reviewed for fair lending purposes.

Products. The bank can market and advertise crypto asset products and services in a manner consistent with existing laws and regula tions, and an eye for fair lending and UDAAP risks. It has reviewed existing non-crypto products and services, identified the potential impacts, and updated those growth strategies to account for the inter nally driven competition.

Personnel. Personnel are excited to join a bank that offers roles in the crypto asset space; however, this area may also come with increased competition for bank personnel who maintain desirable skills in a new field.

A S.W.O.T analysis considers your internal strengths and weaknesses and external opportunities and threats. This template offers baseline considerations to review the risks and opportunities associated with the emerging crypto regulatory scheme.

Technology. The hardware and software used to transact, secure, and maintain crypto assets are well-maintained and secure. External au ditors are used to test and verify. The bank has a consistent and safe procedure for securing crypto collateral.

Legal & Compliance. The bank’s compliance management system and risk management program appropriately identify and control crypto asset risks, including the emerging regulatory scheme, and potential for increased litigation.

Technology. Rapid advances in technology offer opportunities to quickly adopt and roll-out new product offerings and services; how ever, the maintenance and security of aging software and hardware suffer, and investments in new technology depreciate quickly.

Personnel. Bank personnel are properly trained to understand and communicate the products and services offered to customers, are aware of and can appropriately mitigate the related risks, the num ber of assigned personnel is appropriate for the associated risks, and enough redundancy is built into roles to prevent any system failures that may result from termination of key personnel. Vendors undergo a risk-based due diligence review before business begins, and peri odically thereafter.

Opportunities & Threats Management. The Board and senior managers of the bank can read ily identify risks and opportunities presented by the lack of crypto asset laws and regulations.

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+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Jonathan Welty Executive Vice PresidentIJWelty@occh.org614.591.9356welcomeyour inquiries and the opportunity to discuss the benefits and features our CRA investment provides. Ransdell Living and Learning Center - Bowling Green, Kentucky Beecher Terrace - Louisville, Kentucky FUNDEQUITY 32A OHIO IS NOW CLOSED The recent closing of Ohio Equity Fund 32A at $276 million will provide over 1,775 units of affordable housing in 29 projects, enlarging OCCH’s footprint in Ohio, Kentucky, West Virginia, and Tennessee. EXCITING MILESTONE $5.9 Billion of private investor equity 1,025 developments and partnerships 60,000 units of affordable housing 0 foreclosures Catherine Cawthon, CEO & President 88 East Broad Street, Suite 1800 Columbus, Ohio 43215 614.591.9356 | www.occh.org OCCH RECOGNIZES THE SUPPORT OF FUND 32A’S INVESTORS NationalCityCFBank Bank Civista Bank Fannie FirstBankFirstFinancialFirstCommunityFirstFifthBankFieldBankFarmersStateMerchantsFarmersMae&BankNationalofDanville&MainThirdCDCFederalBankBankNationalofCanfieldStateBank Heritage WesBancoU.S.BankTheRiverHillsRichwoodPremierNationalParkSavingsMiamiNationalLCNBKeyCorporationCapitalJPMorganNationalHuntingtonBankBankBankBankBankBankBankBankBankUnionCompanyBank

While your financial team may proclaim that allowing employees to work remote is an obvious cost savings upside, recognizing the multitude of opportunities to save corporate dollars typically spent on housing workers and supplying them with a workspace, desk, computer and all the required work accessories. Consider there could be other “business costs” associated with having employees work remotely, especially those who reside in another state. So, before you kick employees out of the office to work remote under the guise of improving your bottom line, you may want to “hold your horses”, as Homer proclaimed in Book 23 of the Iliad, refer ring to Antilochus driving like a maniac in a chariot race.

We recommend that you:

kybanks.com KENTUCKY BANKER | 23

by Michael Willis, Senior Vice President SEAY Management Consultants mikewillis@seay.us

Seems like a fitting analogy, chariot races of 700 BC and the cur rent hiring climate! Remote workers are generally subject to the various laws of the jurisdictions and states where they are physically located and per form work. Failure to comply with the state and local rules such as, posting requirements, wage and hour regulations, leave provi sions, etc. can be costly to the employer. Liability for lost wages, penalties, and other damages can be real. Can you envision the TV and radio ads touting the mouth-watering attorneys seeking to represent the afflicted remote worker who was short-changed?

continued on the next page

2) Develop a Remote Work Policy; ensure that is fair to all (non-discriminatory) and communicate it thoroughly.

An overview for the employer with employees who live in and work from other states… Today’s competitive hiring environment has many businesses scrambling to not only find qualified applicants and onboard them quickly, but simultaneously working to not lose any of the present staff, especially those “Rock Stars”, who are vitally essential.

With the current hiring and employment challenges, brought on as the COVID 19 pandemic began in early 2020, many employers were literally forced into considering some of their eligible em ployee base to “work from home” or work “off-site” in order to prevent spreading the highly contagious virus which has devas tated populations around the world. This practice was primarily born out of necessity in order that many companies could continue critical aspects of the business operation in response to the health and welfare of the pandemic.

Coincidentally, allowing employees to work remote has enabled current employees and many new job applicants to specifically re quest the ability to work from a remote location, even from as far away as another state. It has also prompted some to actively seek employment with other organizations when their current employer does not offer this option.

1) Conduct an audit of current staff who are working remotely out of state; research the location for specific employment re quirements and adhere to the laws and rules of those jurisdic tions

By no means is this meant to dissuade you from providing remote work opportunities for your employees or those you wish to hire. It may very well be in your best interest and the interests of those in your employment to have this option available. However, be fore you include the practice of having employees who live and work from other states/jurisdictions in your employment plans be informed and do your due diligence to learn how this will affect each employee and your company.

3) Check your insurance coverages to ensure your remote work ers are included in the provisions and make the necessary adjust ments or arrangements if you find they are not. In order to be compliant, you will need to know the pertinent state employment laws and applicable local laws and regulations for those remote employee’s states as you might be surprised to learn that they may differ significantly from those of your present busi ness location.

Considering Allowing Remote Work for Your Employees?

Kentucky borders seven states, here are the corresponding websites where employment and labor information can be found for your em ployees who happen to reside in one of the following states:

continued:

50 Years

that surround the

the relevant websites

county or local ordinance in this here would be

ForIllinois-www.2.illinois.govMissiouri-labor.mo.govIndiana-in.govVirginia-vec.virginia.govWestOhio-Ohio.govTennessee-tn.govVirginia-WV.govlocal,countyorcityemployment

24 | KENTUCKY BANKER SINCE 1891

probably

Attempting to city, impossible…besides, you wouldn’t Hey, I’m just wouldn’t read it either, just sayin’! However, at the least can with for states Commonwealth of Kentucky!

make the time to read it anyway!

provide you

rules, regulations, or laws related to employees working from these locations, you can contact that specif ic governmental entity’s website outlining all the relevant information for labor and employment requirements you will need to know.

additional hours

different for employees who perform work

hours” in the work week.

following areas of employment that

worker

Citizens Guaranty Bank (Irvine, KY) enjoyed their 50-Year Celebration with customers on July 15. Employees, customers, and the community came together for a wonderful celebration. Since their opening in 1972, Citizens Guaranty Bank has ex panded to seven branch locations and services the communi ties of Irvine, Richmond, Berea, London, and Stanton. “We look forward to serving our communities for the next 50 years and beyond,” said Kathy Samples, Citizens Guaranty Bank CEO and Board Chair.

describe all the various requirements for every state,

It goes without saying, you do not want to get down the road and then find out you should’ve been paying that remote overtime pay for the they worked in a day, as may be case and re quired by state law where they work. This would be in addition to the federal government’s requirement to pay “time and a half for time over 40 Specifically, some of the may be significantly for from

you

another state: • Paychecks, Deductions and Garnishments & Payroll Taxes • Minimum Wage and Overtime Provisions • Worker’s Compensation, Unemployment Insurance • Leaves of Absence • Drug Testing, Background Checks • Termination-Separation of Employment • Employee Benefits, Sick Days, Work/Meal Breaks • Administrative and Poster Requirements • Employee Treatment and Resolution

being honest here…I

very

Citizens Guaranty Bank Celebrates

Bottom Line: Should you choose to allow remote working opportuni ties for your employees or new hires residing in another state, just be sure, you have all the information that will affect these employees and their employment with working for your organization. Remote Work for Your Employees?

The Power of an Intentional Network

KENTUCKY BANKER | 25 kybanks.com

by Dr. Paul Godfrey, William and Roceil Low Professor of Business Strategy BYU Marriott School of Business

Dr. Paul Godfrey (pictured below) is the Development Advisor to the Society of Bank Executives. Learn more at executives.bank

The Art of Running a Bank

Bank leaders need to sharpen a different set of skills to master today’s challenging environment, and successful leaders understand the crit ical role a vibrant peer network plays in providing perspective, iden tifying solutions, and accelerating learning. We’ve engineered the Society of Bank Executives around the con nection between meeting today’s challenges and creating a vibrant peer network that leads to solutions and success.

The training bank executives receive on the way up the organizational ladder typically focuses on “blocking and tackling”— the hard skills that constitute the “science” of running a bank. But the challenges that keep you up at night require knowledge and skill in the “art” of leading a bank – things like building teams, trust and culture, moti vating, mentoring and coaching, and creating and deploying strategy.

The Society of Bank Executives helps you develop and expand these critical skills, not just amass information. This development happens the same way we truly learn any skill - through an intentional, peer supported process that engages us “many times in many ways.” We host premier content experts virtually to expand your knowledge of the art of leadership. Then we hold a two-day in-person event, where you’ll apply the skill in simulated and real situations. We’ll put you in a group set ting where you’ll work with other bank executives on a skill-based case study, and you’ll create an action plan for your bank to focus on over the next month. You can leverage your peer group for advice and feedback, and you’ll return the favor by helping them formulate realistic and robust plans. You’ll complete the process by reflecting on your experience with that same peer group. This simple, iterative process of Learn-Apply-Reflect forms the foundation of the Society’s development program. The Society spreads this process over a sixmonth period, covering two skills per calendar year.

The aforementioned in-person event—held twice annually in con junction with our skill development program—will help you expand this vital network. In small group settings, you’ll work with other bank executives on applying the skill and creating a plan to continue to develop it in the future. In your peer group, you’ll seek and provide advice and feedback, as well as strengthen your own network. Peer groups will rotate on a regular basis to further strengthen your oppor tunity to network with other executives in meaningful ways. You’ll also have the opportunity to deepen those relationships through par ticipation in joint activities, meals, and informal discussions over the two days. If you are not managing “your father’s bank,” then your father’s ap proach to developing peer networks and executive skills probably won’t lead to success in today’s banking environment. The goal of the Society is to help you, your executive team, and your bank to learn, grow, and thrive in an ever-changing and complex marketplace.

We all have a loose network of people that we turn to for advice. Fewer of us have a vibrant professional network with executives who understand and have experienced the challenges we face in banking, and who we can be open with and turn to because they are non-com peting peers. A vibrant network doesn’t grow out of random or oneoff connections, it comes about as we intentionally develop meaning ful relationships with others, grounded in solving real problems and challenges. In today’s hyper-busy world, you don’t build a vibrant network by attending cocktail parties or networking events, but rath er through sustained interactions where you work on creating change, both in yourself and in your bank.

As you know, leading a bank today has never been more challeng ing; to borrow a phrase from an old General Motors advertisement, “it’s not your father’s bank.” You and your team work harder than ever to generate income through traditional lending activities and a growing portfolio of services, and as if that isn’t difficult enough in a post-pandemic, politically-charged, inflationary environment, you find yourself swimming in change, from climate investing and dis closures to cryptocurrencies to ever-evolving ransomware risks.

The Society of Bank Executives: The Power of Peer Networks

kybanks.com KENTUCKY BANKER | 27

by John T. McGarvey and Kami E. Griffith

Kentucky Supreme Court Offers Clarity on Future Advances and Priority of Security Interests

Morgan Pottinger McGarvey

The Kentucky Supreme Court has rendered an opinion providing clar ity on certain basic concepts of UCC Article 9: attachment; perfec tion and priority; and collateral securing future advances. The Court affirmed a Court of Appeals decision that reached the correct result but for the wrong reasons. The Kentucky Bankers Association, in conjunction with the Commercial Law Amicus Initiative, requested Morgan Pottinger McGarvey file an Amici Curiae brief in the case, Versailles Farm Home And Garden, LLC v. Harvey Haynes, et al., 2021-SC-0161-DG (June 16, 2022), which was cited in the opinion. There were no disputed facts. In 2012, Harvey Haynes signed a se curity agreement giving Jerry Rankin d/b/a Farmers Tobacco Ware house (“Farmers”) a security interest in his 2012 tobacco crop. The agreement did not contain a future advances clause. To perfect its security interest, Farmers filed a financing statement with the Ken tucky Secretary of State on October 30, 2012. In June 2013, Haynes signed another security agreement granting Farmers a security inter est in Haynes’ 2013 tobacco crop. Farmers made several advances to Haynes throughout 2012 and 2013. In July 2013, Haynes granted a security interest in his 2013 tobacco crop to Versailles Farm Home and Garden (“VFHG”). VFHG filed its financing statement with the Kentucky Secretary of State the next month. When Haynes defaulted on his loan from VFHG, VFHG ini tiated an action against Haynes and Farmers, arguing that because Farmers did not include a future advance clause in its security agree ment, VFHG’s security interest was entitled to priority on the 2013 crop.

In their Amici Curiae brief, the KBA and CLAI argued that Farm ers held the first priority security interest on Haynes’ 2013 tobacco crop under Article 9’s first-to-file-or-perfect rule. The Supreme Court agreed and found, as argued by the amici, that the intent of the parties determines attachment of a security interest in after-acquired collat eral.

More importantly, the KBA and CLAI brief made it clear that whether a later secured party reviewed a security agreement of a prior creditor is not a factor to be considered when determining priority of security interests. Article 9 does not require a secured party to provide anyone a copy of its security agreement. The brief also criticized the Court of Appeal’s reliance on KRS 355.9-210 (debtor requests for information regarding obligations secured by collateral), arguing that is not part of the priority structure of Article 9. Following these arguments, the Supreme Court held “[a] prior lender’s filed financing statement gives prospective lenders all they need to protect themselves.”

The Kentucky Supreme Court affirmed the trial court’s summary judgment in favor of Farmers and disregarded the rationale of the Court of Appeals. It found that the course of dealing between Farmers and Haynes was enough to expand the written agreement between the parties to cover the advances at issue. It further clarified that its de cision was not based on VFHG’s failure to inspect Farmer’s security agreement or search for a financing statement.

The Kentucky Supreme Court, expressly referencing arguments made by the amici, held that Article 9 does not require a secured lender to look at a previously signed security agreement or search for a previ ously filed financing statement. In doing so, the Court overruled ITT Industrial Credit Co. v. Union Bank and Trust Co., 615 S.W.2d 2 (Ky. App. 1981), a case decided under an outdated version of Article 9. The Supreme Court found that if a financing statement was filed in the correct office pursuant to KRS 355.9-501, subsequent lenders are on notice of the filing. “Failure to exercise due diligence means that lenders move forward at their peril.” The Court also noted that the Court of Appeals’ approach disregarded a core principle of Article 9 on the priority of security interests, the first-to-file or perfect rule.

KRS 355.9-322.

Thank you to the Kentucky Bankers Association and the Commer cial Law Amicus Initiative for committing their resources to helping ensure Kentucky’s banking industry has clear direction on the appli cation of the priority principles of Article 9 when taking security in terests to collateralize loans.

The Court of Appeals affirmed the trial court’s decision; however, the Court of Appeals opinion was grounded on a critical misstep in the application of Article 9. The Court suggested that VFHG could not rely on the absence of a future advance clause because VFHG failed to search the Secretary of State’s UCC records and to examine Farmers’ security agreement.

The Woodford Circuit Court ruled in favor of Farmers, rejecting VF HG’s argument that a security agreement must contain a future advance clause if the parties intend that the agreement cover future advances.

Member FDIC | Equal Housing Lender | www.servisfirstbank.com Correspondent Banking Fed Funds Management Servis1st Access Online Settlement Services Credit Card / PCard Program Correspondent Lending Holding Company Loans International Solutions De Novo & Escrow Services David House Vice KentuckyPresidentand Tennessee 901.828.6785 dhouse@servisfirstbank.com J. David Jordan Senior Vice President Chief Correspondent Operations Officer 205.423.2719 djordan@servisfirstbank.com 2500 Woodcrest Place Birmingham, AL 35209 855.881.0364 correspondentbanking@servisfirstbank.com

by Achim Griesel and Sean Payant, Haberfeld

Taking this a step further, it is imperative to understand the difference between relationships established online versus those earned through branch channels. Financial institutions that have a desire to grow need to:1) consistently increase the number of customers they serve, and 2) make sure those new relationships are profitable. The new relationships established have to become PFI relationships. To determine how online versus in-branch originated relationships com pare when it comes to profitability, we studied key metrics for accounts opened online versus those opened at the branches during the same period of time.

1. Customers who established relationships online have a tendency to be slightly more transactional; 2. However, they also have much lower balances; and 3. Their attrition is significantly higher.

Given these findings as well as the fact that 90% of consumers still prefer to establish their NEW relationships through branch channels, online openings are neither the holy grail nor the end to community banking as we know it. Our data suggests it is another – valuable –channel for community financial institutions. Admittedly, this may be different for digital only financial institutions, fintechs or mega banks – many of whom strive to compete on rate, size or technology. We, as community-based financial institutions, have to win on the playing field where we are the best, executing on the value created by genuine service and personal relationships. Given that reality, the key to earning and retaining new relationships rests with our people. As leaders, we must support them with the right tools and equip them with the skills to win – in branch as well as online!

Based on this data, what conclusions can we draw?

kybanks.com KENTUCKY BANKER | 29 The Digital

Going back a couple of years prior to the pandemic, “digital” was the latest catchphrase in banking. Accelerated by the pandemic and begin ning in March of 2020, there has not been a single day where we hav en’t had the opportunity to read even more about the digitization of the industry. From American Banker to The Financial Brand, our industry publications are flush with articles that include the word “digital.” In each case, the articles address topics such as the fintech threat, alleged changes in consumer banking behaviors or the lure of large financial institutions. If you read further, some even argue that community bank ing as we know it is headed for extinction as digital channels continue to change how consumers interact with their primary financial institu tions (PFIs). What few address is the true and sustainable role that community finan cial institutions play in our country and our communities. Community banking is a different business model than the models in large national banks or fintech companies. At Haberfeld, our business is the business of keeping community financial institutions thriving, not just surviv ing. As such, we use data to make informed decisions regarding the reality of growing a community financial institution in the digital age. Realistically, we cannot ignore the significant impact digital channels have had on banking. Consumer friendly and technologically sound digital tools are crucial to providing the customer experience desired by consumers and businesses. Based on community bank data, over 70% of customers use their debit cards, over 60% use online banking and almost half use mobile banking. In today’s environment, it would be difficult to imagine a relationship with your PFI without access to these tools. That being said, the high adoption rate of digital channels can often mislead bankers into thinking digital channels are the key to earning NEW PFI customer relationships. But is that actually true? Early in the pandemic, the data showed that the percentage of new PFI relation ships earned through digital channels, specifically at community-based financial institutions, dramatically increased. Based on the previous data, many industry publications concluded that the percentage of new PFI relationships established online tripling from just over 6% early in 2020 to over 23% in April of 2020 was a sign that the pandemic dramatically accelerated the trend to digital channels. Furthermore, the assertion was this trend would continue as it relates to growing new PFI relationships. While online openings did in fact increase, in reality, the percentage of openings utilizing digital channels spiked for two reasons: 1) many financial institutions shuttered their lobbies or significantly restricted access, and 2) in the absence of person-to-person opening options, financial institution employees actively directed consumers to online channels when available. The result – significantly fewer checking ac counts were opened through branch channels for a period of time.

CommunityDynamic:Banking in the Modern Age

Based on the data, online openings peaked at 23% in April of 2020; however, by the third quarter of 2021, they had normalized to just un der 10% of all new accounts opened, slightly above the pre-pandemic levels of 6%. The takeaway, 90% of new relationships at communi ty-based financial institutions are still established through branch chan nels.

Achim Griesel is president and Dr. Sean Payant serves as the chief strategy officer at Haberfeld, a data-driven consulting firm specializing in core relationships and profitability growth for community-based fi nancial institutions. Achim can be reached at 402.323.3793 or achim@ haberfeld.com. Sean can be reached at 402.323.3614 or sean@haber feld.com

Shane Bundy, District Sales Manager Big Iron Auction bigiron.comshane.bundy@bigiron.comCompany

30 | KENTUCKY BANKER SINCE 1891

Take Advantage of Hot Equipment Market to Convert Used

EquipmentintoCash

The scarcity of equipment is causing high demand for used machin ery. This is creating the perfect scenario for financers that want to quickly convert unused equipment assets into usable cash, or those who are working with clients considering retirement, or who simply want to secure extra cash for their operations. Lease Returns and Converting Unused Equipment Assets into Cash

As a financial services company you have unique needs and chal lenges. An online auction company such as BigIron Auctions can help with things such as determining the value of deficiencies or the condition of returned equipment at the end of a lease relation ship by conducting lease return inspections. Experienced, trained professionals can inspect returned equipment and provide you with an honest assessment along with its current resale value. Financial institutions are turning to online auctions more than ever. For times when they need to quickly convert equipment assets into cash, the weekly online auction format provides visibility for equipment on a platform with over 400,000 registered bidders. Financers can take advantage of the hot market as well as showcasing used equipment to a global buyer base, which means even more buyers bidding on equipment and increasing profits.

Additionally, financers receive data-driven targeted marketing geared towards the most likely bidders, creating a large marketable audience for equipment. This form of marketing is aligned with the specific items being sold. There are also no freight costs as equip ment is sold from its current location. We have confidence from our buyers/bidders due to the free transfer of sold items to the highest bidder. The benefits of an online auction are increasingly apparent and can help financial institutions turn assets into capital. In short, online auction providers can work with financial institu tions to build a large, marketable audience for equipment; they can quickly convert unused equipment assets into usable cash, and they can give lease return inspections to assess deficiencies. Not only that, but the auction format is attractive to bidders and yields market price due to the large sample size of potential buyers.

paign needs to be designed with those specific hurdles in mind. Typical marketing includes a presence on digital channels, print and radio. For larger items, it’s common to have outdoor signage.

If you are working with equipment owners who are contemplating the life-changing decision of retirement — or are simply looking to sell equipment they are no longer using — now is the time for them to act.

Auction houses that go out of their way to allow buyers to contact the sellers with questions or to test the equipment is a vital aspect of the process, too. Building an environment of trust and transparency will almost always yield higher returns. Sellers that are accessible to buyers will have a more confident buyer base who are willing to bid higher. Lastly, your clients should ask the auction company to provide them with the bidding history on their items post-auction so that they have full confidence in the proceedings. The online auction process can be complicated, but an honest and rep utable company can help you and your clients take advantage of the current selling market and high buyer demand which can help boost profits and get the best prices for used equipment.

When choosing an online auction provider, they should know that not all auction companies are created equal. Many traditional auction companies shifted operations to online auctions during the pandemic, but that pivot has not always been seamless. The auction house may not have the experience, the online presence or auction platform to do the best job, especially for larger auctions. Your clients could end up waiting much longer to receive auction proceeds than they otherwise would — and they may not have as many buyers bidding or the ability to obtain the best price possible for their assets. What do the best online auction companies do? They help your cli ents develop a strategy for liquidating their assets and reaching their financial goals. This means developing an entire marketing campaign around their auction. Because every auction is different or has its own unique set of challenges to overcome, sometimes a marketing cam

Greater demand in used equipment results in higher final sales prices for sellers, which provides a bigger financial return and can put them in a better financial position for retirement.

While seemingly obvious, it is also paramount to the auction’s success that people know an event is happening. Our experience has proven that most people are typically willing to travel about 250 miles to pick up purchased equipment. Your clients should also work with experi enced online auction companies that conduct Uniform Commercial Code (UCC) checks and, if a lien is found during the check, the auction company should communicate with the seller to find a solution.

Retirement Auctions and Choosing an Online Auction Provider

KENTUCKY BANKER | 31 kybanks.com

Kentucky Banker Magazine July/August 2022

Articles inside

Used Equipment into Cash

The Digital Dynamic

Power of Peer Networks

KY Supreme Court Clarity

Crypto Crackdown

Chairman’s Corner

Time for a Re-Write

FHLB Cincinnati

Straight Talk

Debra

Louisville Geek: iPhones

Studying Innovations

ABA/FHLB