KENTUCKY BANKS SHARE THEIR COVID-19 STORIES
KENTUCKY BANKER #KyBanksShine #WeAreKyBankers facebook.com/kybankers
Melissa Lee Knight, President Farmers National Bank of Lebanon
We’re Gonna Get Through This! Kentucky Banks are Leading the Way GOT YOUR MASK? WE DO. SEE PAGE 18 SPECIAL EDITION / SPRING 2020 KENTUCKY BANKERS ASSOCIATION
#KyMasksToRemember
STRONGER TOGETHER Today, more than ever, a strong Correspondent Banking partner is vital to Kentucky’s Community Banks. At The Bankers’ Bank, our experienced lenders stand ready to help keep Kentucky Open For Business. Q. Could a Short-Term Bank Holding Company Loan support your need for additional Liquidity? Q. Are you experiencing high volume requests for the SBA Paycheck Protection Program?
Stephanie Oerther CHIEF CREDIT OFFICER
soerther@bbky.com Office: 800-248-3229 ext. 229
Brandon Feltner
SENIOR LOAN OFFICER
bfeltner@bbky.com Cell: 606-233-1259
Q. Would your bank benefit from a Low Interest Federal Funds Line of Credit? If you answered yes to any of the questions above, contact us today for assistance.
Need Advice?
Our Lenders can provide expert financing and credit analysis advice. This service is provided at no cost, and available to customers and non-customers alike. It is our pleasure to help Kentucky’s Community Banks in any way we can during this unprecedented national pandemic emergency.
"Stronger Together"
www.bbky.bank
f JOIN OUR FACEBOOK COMMUNITY! The coronavirus pandemic has impacted all our lives and delivered unprecedented challenges across our communities. There will be some good that will come of this, and we’re already seeing stories of resilience and inspiration. We’d like to share those stories and pictures on our Facebook page. There are three categories in which you can participate:
tions to answer about you, your bank and your community. Send us pictures in support of your answers!
#KyMasksToRemember While there will certainly be times we’d like to
#KyBanksShine Take photos of your employees working during this crisis and tell us stories about how your bank was able to help a small business stay in business or helped an individual or family make it through all of this.
forget, there are also times that we will want to remember, like wearing masks. Send us a picture of you wearing your mask and send us a couple sentences about what you will remember about this time in history, and maybe mention someone, or some group, you would like to thank. See page 10 to see some of the submissions.
#KyBankerSpotlight We have introduced a Kentucky Banker Spotlight feature to our emails and Facebook page. We want to share all the extraordinary effort Kentucky banks are giving during the coronavirus crisis. Email Josh Fischer, KBA Director of Communications, and he’ll send you four ques-
TO SUBMIT Email Josh Fischer, KBA Director of Communications, your pictures and stories with the hashtag(s) listed above designating the category of your submission. You may submit for whatever category you want, and submissions will be posted in the order they are received.
#KyMasksToRemember Glenn M Meyers, Executive Vice President, Citizens Federal S&L: We all need a laugh right now. My son, Ian, had a project for school. They had to make a mask out of something they had at home. You might not be able to tell, but he used the KBA eyeglass cleaner. HA! It has a double purpose, clean your glasses and you won’t be able to cough on anyone!
STAFF DIRECTORY Ballard W. Cassady Jr. President & CEO bcassady@kybanks.com
Timothy A. Schenk Assistant General Counsel tschenk@kybanks.com
Debra K. Stamper EVP & General Counsel dstamper@kybanks.com
Jamie Hampton Education Services Coordinator jhampton@kybanks.com
Matthew E. Vance Chief Financial Officer mvance@kybanks.com
Paula Cross Education Services Coordinator pcross@kybanks.com
Selina O. Parrish Director of Membership sparrish@kybanks.com
Tamuna Loladze Chief Operating Officer, HOPE of KY tlodadze@kybanks.com
Natalie Kaelin, Esq. Director of Education nkaelin@kybanks.com
Tammy Nichols Finance Officer, HOPE of KY tnichols@kybanks.com
Billie Wade Executive Director, HOPE of KY bwade@kybanks.com
Katie Rajchel Staff Accountant krajchel@kybanks.com
Josh Fischer Director of Communications jfischer@kybanks.com
Casey Guernsey Enrollment and Billing Specialist cguernsey@kybanks.com
Miriam Cole Executive Assistant mcole@kybanks.com
Chuck Maggard President & CEO, KenBanc Insurance cmaggard@kybanks.com
John P. Cooper Legislative Solutions jcooper@kybanks.com
Lisa Mattingly Director of Sales & Service, KBA Benefit Solutions lmattingly@kybanks.com
Michelle Madison IT Manager mmadison@kybanks.com
Brandon Maggard Account Representative, KenBanc Insurance bmaggard@kybanks.com
Steve Whitlow Systems Engineer swhitlow@kybanks.com
Donna McCartin Benefit Support Specialist dmccartin@kybanks.com
Nina K. Gottes Sponsorship & Business Development ngottes@kybanks.com
Audrey Whitaker Insurance Services Coordinator awhitaker@kybanks.com
FOLLOW US ON FACEBOOK! facebook.com/kybankers
Jennifer Schlierf Sales Support, KBA Insurance Solutions jschlierf@kybanks.com
KENTUCKY BANKERS ASSOCIATION | 600 West Main Street, Suite 400, Louisville, Kentucky 40202 | kybanks.com
2019-2020 OFFICERS & BOARD Chairman Lloyd C. Hillard, Jr. Chairman of the Central & Southern KY Region, WesBanco, Frankfort
Represents Group 6 Darin L. Young, President & CEO, Century Bank of Kentucky, Lawrenceburg
KBA Vice Chairman J. Wade Berry President & CEO, Farmers Bank & Trust Company, Marion
Represents Group 7 Steve Tolliver, Market President, The Monticello Banking Company, Harlan
KBA Treasurer James A. Hillebrand, CEO, Stock Yards Bank & Trust Company, Louisville KBA Past Chairman David M. Bowling CEO, Citizens Union Bank Shelbyville Ballard W. Cassady, Jr. President & Chief Executive Officer, KBA, Louisville GROUP REPRESENTATIVES Represents Group 1 Randell Blackburn Market President McCracken County Community Financial Services Bank, Benton
Represents Group 8 Anthony Kinder, President & CEO, Peoples Bank of Kentucky, Flemingsburg Represents Group 9 Andrew Jones, Regional President, Community Trust Bank, Ashland THRIFT REPRESENTATIVES Shanda L. Smith, President & CEO, Blue Grass Federal Savings & Loan, Paris BANK SIZE REPRESENTATIVES Represents Banks with Assets of $1B or more Elmer K. Whitaker, President & CEO, Whitaker Bank, Lexington
Represents Group 2 J. Jason Hawkins President & CEO, First United Bank and Trust Company, Madisonville
Represents Banks with Assets at Least $200 M; less than $1B David W. Hobbs, President River City Bank, Louisville
Represents Group 3 John W. Key President, Commonwealth Bank & Trust Company, Louisville
EDUCATION ALLIANCE REPRESENTATIVE
Represents Group 4 Michelle Coleman, CEO, Bank of Edmonson County, Brownsville Represents Group 5 Gregory D. Goff President & CEO, First National Bank of Kentucky, Carrollton
Lanie W. Gardner, Community President, First Southern National, Central City KBA BENEFITS TRUST COMMITTEE REPRESENTATIVE W. Fred Brashear, II, President & CEO, Hyden Citizens Bank, Hyden
KENTUCKY BANKER is the official bi-monthly magazine 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 contact Josh Fischer, Managing Editor, 502-736-1283 or jfischer@kybanks.com
KENTUCKY BANKER COVID-19 PANDEMIC 2020 SPECIAL EDITION 3 KBA Facebook 7 Chairman’s Corner 8 2020 Sponsors 9 Straight Talk 10 Education Update 11 My Two Cents 12 Showing Green 16 Bear Hunt 17 Home Federal Bank 100 18 #KyMasksToRemember 19 Compliance Corner 23 NCONTRACTS 31 ImageQuest 32 ARE YOU IN THE GAME?
SUBMISSIONS jfischer@kybanks.com ADVERTISE ngottes@kybanks.com RESOLUTIONS POLICY $250 per resolution. Includes 2 additional copies of the issue your resolution is published. Technical requirement: PDF or jpeg with high resolution (300 dpi). Please include billing info and email: jfischer@kybanks.com
Linda Gordon Town & Country Bank and Trust
Would you
LEND
to this OBGYN?
BHG did in 2020.
And you could have bought it from us! OBGYN IN KENTUCKY 12 YEARS LICENSED INCOME: $942,932 FICO: 730 LOAN: $57, 995 TERM: 10 YEARS
Our 19 years of relationships and multiple industry-leading partners bring more than 15,000 coveted borrowers to BHG each month. Our borrowers have stunning credentials and the majority are considered essential in this economy. That’s why BHG is the number one place for a bank to buy the best professional and medical loans in the U.S. • Record volume: $429M funded in Q1 2020 • 4–6.5% return for your bank CONTACT BRIAN MULLETT bmullett@em.bhgbanks.com • 315.217.5593 or visit bhgloanhub.com/KY *Loan characteristics from BHG borrower. Photograph is not actual BHG borrower.
• $0 bank loss on BHG Core loan portfolio • State-of-the-art loan delivery platform
KENTUCKY BANKS & THE COVID-19 PANDEMIC CHAIRMAN’S CORNER by Lloyd C. Hillard, Jr. WesBanco / 2019-2020 KBA Chairman
An Unprecedented and Unexpected Challenge At the beginning of 2020, I looked forward to enjoying my role as Chairman of the KBA, as it would lead to my retirement on September 30, 2020.
“
However, I was quickly reminded that I was not in control! On January 13, 2020, I had surgery for a ruptured appendix, plus a second surgery to clear an abscess. This resulted in a 14-day stay in the hospital (not recommended for anyone). Upon my release, I was required to stay home for another two weeks. This was not a great way to start the year - an unexpected challenge!
After settling back into my work routine for a couple of weeks, a new unexpected and unprecedented challenge came to the forefront - the coronavirus! It soon became called the “invisible enemy” and its impact was extraordinary. It closed down our global economy and our entire world went into shutdown mode. This is something that will be embedded in my memory forever and will have a lasting impact on how we do business in the future. It is also a reminder that we must have a plan for the unexpected. I have been inspired by the fortitude of community banks across the Commonwealth. Their individual stories of how they are taking positive action to protect their employees, assist their customers and help the communities they serve deal with this unexpected challenge can make us all proud. Wearing masks, displaying green and keeping each other safe are just a few things I’ve seen around Kentucky that makes this state great.
Being there for our customers in these difficult times is what makes Kentucky banks great. This “invisible enemy” energized our creative juices and community bankers again set the example of leadership! Accordingly, I salute each and every one of you. I am also proud of our team at the KBA. They have done a yeoman’s job in providing resources, conducting conference calls, working with state and federal agencies, working with our congressional delegation and answering questions from community bankers across the state. Debra Stamper requires a special “shout
Being there for our customers in these difficult times is what makes Kentucky banks great.
out” as she keeps us constantly informed and up to date! Ballard and his team are once again in the forefront of advocating for community banking! In addition, I want to especially acknowledge the leadership and support of Senate Majority Leader Mitch McConnell and Congressman Andy Barr for their leadership and assistance. Please take the opportunity to thank them. My hope is that soon we will be able to gradually transition back to some kind of normality. The impact on individual community banks remains to be seen; but I truly believe we will come back stronger than ever! The “invisible enemy” has given us pause to think about the little things we take for granted: our fellow workers (many of whom are working remote), visiting neighbors, going to church, Friday night dinners at our favorite restaurant, attending and supporting our favorite sports team, visiting your great barber or hair stylist, attending KBA events and many more. I hope we are all grateful that we still live in the greatest country in the world and believe we will get through this together. Stay safe!
CHAIRMAN’S CORNER | OVERTIME ARE YOU IN THE GAME? SEE pages 32-33
KENTUCKY BANKER Spring 2020 Special Edition | 7
THANK YOU! 2020 SPONSORS The KBA is here for our sponsors during these unprecedented times where in-person networking has been put on pause. We are here for you to do whatever we can to offer engagement opportunities to our sponsors in alternative ways. Please Contact Nina Gottes ngottes@kybanks.com or (502) 736-1284 for more details on becoming a event sponsor.
COLONEL Box Lake Networks Duncan Williams Federal Home Loan Bank Glia Technologies Morgan Pottinger McGarvey OCCH Housing Investment Partnership of KY Shazam, Inc. BLUEGRASS Anthem Blue Cross Blue Shield Kentucky ATM Solutions, Inc. Boenning & Scattergood Dean Dorton Technology HC3 John M. Floyd & Associates Merchant’s PACT NewGround SBS CyberSecurity, LLC Unified Technologies
THOROUGHBRED Ameriprise Financial Services Bankers Healthcare Group, Inc. CSI Deluxe Financial Services Haberfeld ImageQuest LLC NContracts NetGain Technologies PNC Capital Markets, LLC Profit Resources, Inc. Raymond James Stifel Financial Velocity Solutions, LLC Works24 COMMONWEALTH Carr, Riggs & Ingram, LLC DA Davidson & Company Jackson Kelly, PLLC KraftCPAs PLCC Performance Trust Capital Partners / Banks Street Partners Promontory Interfinancial Network, Inc. Taylor Advisors, Inc. TIB- The Independent Bankers Bank
KBA Community: The coronavirus pandemic has brought many changes and challenges, and is creating a new normal for all of us. But, in any and all operating environments, FHLB Cincinnati is focused on remaining a reliable partner to our members. We thank you for your membership, and it is times like this that confirm the strength of our cooperative partnership. We look forward to continuing to serve you! Sincerely, Andrew S. Howell, President and CEO
Building Stronger Communities Kentucky | Ohio | Tennessee www.fhlbcin.com
“
STRAIGHT TALK by Ballard Cassady KBA President & CEO bcassady@kybanks.com
Moving From Navigator to Lighthouse
“
But it’s becoming clear that our members will also need us to function as a lighthouse, doing all that we can to shine a light on the perils that can only be avoided with plenty of warning.
I have watched over the last several weeks as bankers in Kentucky and across the country have “worked themselves to the bone” as my ole granny used to say! No one, anywhere, can say that bankers all across this country didn’t come to the call of their government and their communities when needed.
We are very fortunate to have Congressman Andy Barr and Senate Leader Mitch McConnell in our corner, but even they aren’t immune to the bureaucracies in Washington. They and their staffs (BIG shout out to Tiffany Ge in Senator McConnell’s office and Dan Taylor in Congressman Barr’s office) are pushing every day to get the SBA and Treasury to pick up the pace of guidance on all issues.
But, that’s today! What’s next?
That question is the one haunting me all day and every night when my head hits the pillow. I know our members and the KBA will face whatever comes, and we’ll do what’s right in the right way. But what will that look like? Until some answers become clear enough to help inform our next steps, a good night’s sleep will be hard to come by. So, the KBA is committing all our resources to getting you the best advice, counsel and direction that can be had. At our virtual group meetings, we will have Dr. Paul Godfrey, William and Roceil Low Professor of Business Strategy at BYU Marriott School of Management, joining us for what he sees as the possible future business strategies specifically for Kentucky banks. How specific? We’ve spent hours on the phone with him making sure his preparation will account for all issues affecting Kentucky’s economy, including our state and community demographics and Fed data on exports/imports and manufacturing as well as small businesses. The result should be specific enough to be extremely useful to you and your communities but also general enough to address the needs we’ll share with the rest of the country –– no one will be spared this new normal. We have also lined up some exceptional thinkers on business strategies and on the legal ramifications of expanding services like lobby access.
What changes can we expect from FDIC insurance premiums due to EIP checks or PPP loan proceeds sitting in checking accounts? When will banks get their loan fees? What happens when a customer goes into default with the 100% guarantee? These are just a few of the daily conversations going on all around us. Debra Stamper has been a great resource for our banks on navigating through the PPP process. She has acquired superstar status among some of our peer associations! That type of support will continue for the foreseeable future. But it’s becoming clear that our members will also need us to function as a lighthouse, doing all that we can to shine a light on the perils that can only be avoided with plenty of warning. So, to that end, continue to share with us your needs, concerns, fears and solutions. That’s how we will make the most of our Association in protecting our industry and our Commonwealth.
Meanwhile, we’ve been gathering your concerns daily –– whether the local economy, operations cost in a low revenue environment, personnel issues, or reputational risk on loan defaults –– and pushing those through to our Congressional members and our consultant staff. KENTUCKY BANKER Spring 2020 Special Edition | 9
KENTUCKY BANKS & THE COVID-19 PANDEMIC EDUCATION UPDATE by Natalie Kaelin KBA Director of Education nkaelin@kybanks.com
Here For You, Now More Than Ever We are certainly living in times I could have never imagined. In the Education department, we are all working from home, communicating as often as possible, and trying to adapt to these changed times. We wanted to give you an update of where we are and what we are doing.
It’s difficult to sit at a computer for training for an entire day, so we are thinking outside the box to allow for better training virtually. We hope this will allow us to keep offering the varying education we always do with the same excellence we always have.
First of all, our bankers are our priority, so our focus is providing everything you may need in the realm of Education. We have postponed most in-person programs through June, and we are hard at work figuring out the best way to still provide training to our bankers. We have been offering webinars throughout this time, but we are also going to attempt to reschedule some of our postponed training as webinar series.
We have also limited our emails so that you are getting the most current and important information for your bank - look for our Education Alliance E-bits email every Tuesday which will have our most current offerings and information.
For example, we had a CFO Conference scheduled for May which has now been canceled as an in-person program. We are working with the speakers to create a four-week series, same day and time which will provide all the information from that conference.
Remember, you can always go to kybanks.com (homepage shown below) to see all the Education information there as well. It is also a wonderful resource for navigating the COVID-19 pandemic. At the end of the day, what I want you to know, is we are here for you, now more than ever. If there is something we can do, please let us know.
kybanks.com / website updated daily / pictured: homepage on May 12, 2020
KENTUCKY BANKS & THE COVID-19 PANDEMIC MY TWO CENTS by Debra Stamper KBA EVP & General Counsel dstamper@kybanks.com
Reflections on a Pandemic I’m going to be honest; I haven’t had much time to reflect on anything. PPP loans have pretty much taken all of my time. But here are some of my thoughts, in no particular order of importance.
EMBRACE TECHNOLOGY
IN-PERSON BANKING Having said all of this, I don’t believe in-person business is gone. I just think that we have to be prepared for future situations where remote business is required.
Kentucky must embrace electronic signatures, notarizations, filings and other transmissions of business. We have been baby stepping into this world and that is not fast enough. COVID-19 slipped up on us, caught us unaware and showed us EXACTLY where we are deficient. Let’s not allow this to happen again!
KBA EVENTS
BUSINESS DOES NOT STOP
I MISS PEOPLE
County clerks MUST accept technology in a uniform manner. Last year we passed some legislation on electronic filings. It was voluntary for the clerks. That is no longer acceptable. Business does not stop when a disaster hits and all parties involved must be ready. If the clerks do not have the capacity to adopt procedures for technology, we need to allow for a central filing system, just as we have for UCC-1’s.
I miss seeing friends and family. I am a social person. I love to host informal get togethers, cook-outs and such. These last, going-on 3 months, are no fun!
PUSH FOR CHANGE Other agencies must be pushed to accept digital signatures and filings as well. Federal and state agencies such as FNMA and Freddie also need to be pushed to change their processes and procedures. They have waited too long and we saw the chaos created.
IMPROVE TITLE SEARCHES In addition to digital signatures and electronic filings, county clerks must be required to get at least a minimum of 30 years of deed/mortgage recordings online for title searches. Many county clerks’ offices have already done this and there is no reason the rest cannot.
I miss seeing you. I am sorry that we have had to cancel events. Networking is valuable. We will figure this out. In-person meetings will start up again, probably smaller meetings, with more “social distancing” at first and later events and conferences.
FACEBOOK DIY I am really tired of seeing friends’ posts on Facebook showing their most recent DIY accomplishments during the COVID-19 quarantine. What job do they have that they can work from home and still have time to remodel the bathroom on Wednesday and build their children a life-size play city on Thursday ??!!??
THIS TOO SHALL PASS As they say…this too shall pass…what doesn’t kill us makes us stronger…a rolling stone gathers no moss…a stitch in time saves nine…it’s like herding cats…the early bird catches the worm…absence makes the heart grow fonder…make hay while the sun shines…and... ...the PAC is still a strong tool…don’t forget!
FLEXIBLE WORK ENVIRONMENTS Our offices have to be flexible. Work will not go on as usual. Both employers and employees have seen that they can work from home (and often with more production/efficiency) and that will become the new expectation. Zoom has taught us that we can have in-person meetings quickly and easily. Even before this situation, employers found that most employees would take work-from-home days over a raise. That sounds like a win-win.
BRING VALUE Banks may need less employees going forward. This may be bad news for employees and for your community. But it also allows for employees to look for new ways to bring value to the bank. Everyone needs to find a model that works for their community and their customers. Employees have to find a way to bring a new value to the table. If you design it and it brings value to the bank, it will bring you more passion when performing your job! KENTUCKY BANKER Spring 2020 Special Edition | 11
KENTUCKY BANKS & THE COVID-19 PANDEMIC
SHOWING GREEN IN HONOR OF COVID-19 VICTIMS Kentucky banks, in support of COVID-19 victims and healthcare workers who are on the front lines of the coronavirus pandemic, have been displaying green to show compassion for their fellow Kentuckians.
12 | KENTUCKY BANKER Spring 2020 Special Edition
KENTUCKY BANKS & THE COVID-19 PANDEMIC
VIRTUAL GROUP MEETINGS
Group Meetings Become Zoom Meetings
2019-2020 KBA Chairman, Lloyd C. Hillard, Jr., Chairman of the Central & Southern KY Region for WesBanco (Frankfort), kicks off 2020 Group Meetings on Zoom. Dr. Paul Godfrey, William and Roceil Low Professor of Business Strategy at BYU Marriott School of Management, spoke to attendees at the first Virtual Group Meeting.
A special thanks to these Group Meeting sponsors: ImageQuest Box Lake Networks Clark Schaefer Hackett Profit Resources, Inc.
KENTUCKY BANKER Spring 2020 Special Edition | 13
+ Billion 4.5 of private investor equity
$
47,750
OCCH Investment Partners
units of affordable housing
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + BB&T + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Central ++ ++ ++ ++ ++ +Bank ++ ++ ++ +& ++ +Trust ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +City ++ ++ + National ++ ++ ++ ++ ++ ++ ++ + ++ ++ ++ ++ + Bank + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + Community Trust Bank + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Farmers ++ ++ ++ ++ ++ ++ +National ++ ++ ++ ++ ++ ++ +Bank ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Fifth ++ ++ + Third ++ ++ ++ ++ +CDC ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + First Financial Bank + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Heritage ++ ++ ++ ++ ++ ++ +Bank ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Huntington ++ ++ ++ ++ ++ ++ ++ ++ +CDC ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + JPMorgan Capital Corporation + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + Bank ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Kentucky ++ ++ ++ ++ ++ ++ ++ + ++ ++ ++ ++ ++ ++ ++ + + + + + Sheppard ++ ++ +ACD ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + Highland ++ ++ ++ ++ +Village ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + + + + + + + Louisville, ++ ++ ++ +Kentucky ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + Highland ++ ++ ++ ++ +Heights, ++ ++ ++ + Kentucky ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ +Key ++ + ++ +CDC +++ +++ +++ ++ + ++ + + ++ + ++ +++ +++ +++ ++ + ++ + ++++++++++++++++++ + ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ + ++ + ++ +++ +++ +++ ++ + ++ + + ++ + ++ +++ +++ +++ ++ + ++ + ++++++++++++++++++ ++ ++ ++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++ + +++++++++ ++ + + +++++++++ ++ +
840
developments and partnerships
0 foreclosures
I welcome your inquiries and the opportunity to discuss the benefits and features this CRA investment provides. Jonathan Welty Vice President 614.224.8446
+ + + + + + + + + Life + + + + Insurance +++++++++++++++++++++ Nationwide ++++++++++++++++++++++++++++++++++ Company ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++
+ + + + + +Exchange + + + + + + + + + Bank +++++++++++++++++++ Peoples ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ + + +Bank +++++++++++++++++++++++++++++++ PNC ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ Republic + + + + + + +Bank +++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ + + + + + + + + +State + + + + + Bank ++++++++++++++++++++ Springfield ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ ++++ + + + + +Bank + + + + +& + +Trust ++++++++++++++++++ Stock Yards ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ U.S. + + +Bancorp + + + + + + + +CDC +++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ +++++++++ +++++++++++++++++++++++++ WesBanco Bank ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++
Peg Moertl, CEO and President 88 East Broad Street, Suite 1800 Columbus, Ohio 43215 614.224.8446 | www.occh.org
KENTUCKY BANKS & THE COVID-19 PANDEMIC
SHOWING GREEN IN HONOR OF COVID-19 VICTIMS Kentucky banks, in support of COVID-19 victims and healthcare workers who are on the front lines of the coronavirus pandemic, have been displaying green to show compassion for their fellow Kentuckians.
1
2
3
4
5
1. Planters Bank 2. Citizens Bank of Kentucky 3. First Community Bank of the Heartland 4. First State Bank 5. First State Bank
KENTUCKY BANKER Spring 2020 Special Edition | 15
Bear Hunts During the Pandemic are Uniting Kentucky Communities Amid Coronavirus With families all around Kentucky abiding by social distancing guidelines, local banks have been participating in neighborhood “bear hunts” in their communities. Taking a page from Michael Rosen’s 1989 children’s book We’re Going on a Bear Hunt, some Kentucky banks have been placing teddy bears in their windows to create a scavenger hunt-esque activity for kids who are stuck at home. While taking walks or drives around the neighborhood with their parents, kids in participating communities can have some fun by keeping an eye out for bears! Is your bank putting bears in your windows? If so, send us your pictures and we’ll put them on our Facebook page.
3 2
1. Bank of the Mountains 2. WinFirst Bank 3. West Point Bank 4. Citizens National Bank of Somerset 5. Town & Country Bank 6. Whitaker Bank
1
4 6
5
16 | KENTUCKY BANKER Spring 2020 Special Edition
6
KENTUCKY BANKS & THE COVID-19 PANDEMIC
HOME FEDERAL BANK FINDS A WAY TO CELEBRATE 100 YEARS Home Federal Bank was planning to commemorate their 100th year anniversary this May, but with COVID-19, they have quickly shifted their plans of celebration to immediate actions in support of the small businesses, individuals and the communities they have served since 1920.
HOME FEDERAL BANK SAID:
1
The first way was to have each of our branches start a weekly order with a local restaurant. With this, we are supporting 5-7 restaurants each week. This has been a great way to not only support the restaurant owners and staff, but it’s also a way to support our employees who have been working so hard as well.
2 3
The second way we have supported small businesses is by giving away $10,000. We had each employee select a local business or individual to send a personalized message to, letting them know we are thinking of them during this difficult time. We sent out a total of 100 cards with a crisp $100 bill as an extra surprise, symbolic of our 100th year! And the third way to show our support was to extend the SBA/PPP loans to our area businesses that have been impacted by COVID-19.
CONGRATULATIONS! FROM THE KBA Congratulations to everyone at Home Federal Bank for the century of service to your community, and all that you are doing now in support of your community!
KENTUCKY BANKER Spring 2020 Special Edition | 17
#KyMasksToRemember
1
1 2
1
3
3 4 1. Citizens Union Bank 2. KBA EVP/General Counsel Debra Stamper 3. Town & Country Bank and Trust 4. First Peoples Bank and Trust 5. KBA Casey Guernsey, Katie Rajchel, Selina Parrish
5 18 | KENTUCKY BANKER Spring 2020 Special Edition
5
#KyMasksToRemember
1 1
2
2 1. First Federal Savings Bank of Kentucky 2. First National Bank of Russell Springs 3. Kentucky Bank
3 KENTUCKY BANKER Spring 2020 Special Edition | 19
Wishing You Well… Over our 100+ year history, Boenning & Scattergood has managed to help our clients through many difficult market environments. As we navigate these turbulent waters and keep transactions moving forward, we welcome the opportunity to connect with you to address any questions you may have on how the COVID-19 outbreak is impacting your bank and its strategy.
Charlie Crowley charlesc@boenninginc.com (216) 378-1430
Chris Chapman cchapman@boenninginc.com (216) 378-1297
Chad Hull chull@boenninginc.com (610) 832-5310
Tony Latini alatini@boenninginc.com (610) 832-5312
As one of the nation’s leading community bank market makers, we can also help advise you on everything from market trends and dividend policy to appropriate stock buybacks, effective shareholder communication, and more. We remain focused on building long-term relationships and stand by ready to help your management team and board during these challenging times. We wish only the best for you and your families. If we can be of any assistance, please let us know. Thank you and stay safe!
Our investment bankers look forward to helping you in 2020. Please call us. To receive our REGIONAL BANKING STATS REPORT, please email us.
Boenning & Scattergood, Inc. is a trusted advisor and partner to the region’s community banks. www.boenninginc.com • Member FINRA / SIPC
During COVID-19, did you mobilize a remote workforce? Did this mobilization create any security holes?
COVID-19 forced workforces which are designed to be in-person and client-facing to mobilize quickly. During this unprecedented time, your organization may have seen IT security holes after mobilizing. Dean Dorton’s cybersecurity team can provide your organization with penetration testing which assesses the effectiveness of implemented security controls (whether technical or administrative) to prevent, detect, or respond to a threat actor or threat action. Our certified cybersecurity team members have been providing penetration testing services in the financial industry for over a decade. Our penetration testing approach is highly customizable and can be conducted in either a complete “kill chain” emulation or broken up to emulate individual tactics in specific scenario based testing. Our services are designed to meet the rigorous requirements outlined for financial organizations and we can do everything remotely via our secure, encrypted testing platform.
Contact us to fill the gap on any IT security or compliance the situation has caused. Gui Cozzi
■
gcozzi@ddaftech.com
Mike Gilliam
■
mgilliam@ddaftech.com
deandortoncyber.com
KENTUCKY BANKS & THE COVID-19 PANDEMIC COMPLIANCE CORNER with Timothy A. Schenk KBA Assistant General Counsel tschenk@kybanks.com
As we all deal with changes related to Covid-19, it provides many of us additional time to reflect on compliance practices. Please feel free to reach out to me at tschenk@kybanks.com with any questions you may have! Is there a regulatory statute that requires banks to return paid off notes and mortgages to consumers? I have been searching and have been unable to find anything regarding this requirement. There are no federal laws on the issue and it is strictly a matter of state law. In terms of the mortgage, KRS 382.365 requires you to release the mortgage within 30 days of satisfaction. However, there is no requirement to return the mortgage but you are required to “send by regular mail a copy of the lien release to the property owner at his or her last known address within seven (7) days of the release.” Essentially, you must send the customer a copy of the lien release. The law on notes is a little less clear. KRS 355.3-501(2)(b)(3) says that, “Upon demand of the person to whom presentment is made, the person making present must sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.” Through that rule you are not required to send the customer the note stamped as paid, but you should provide the customer with a receipt that the note is paid. Most banks find that the easiest way to comply with this rule is to return the note or a copy of the note stamped as paid. We want to change the branch hours. I am not familiar with the requirements for changing branch hours in Kentucky and am looking for guidance. Is that something you can provide or guide me to where to look? There is no specific statute on point but most banks provide thirty days of notice. That is a conservative approach based on the administrative regulations and 808 KAR 15:030. However, there is justification for as short as five days of notice or even zero days of notice if impractical. KRS 286.3-193(3) reads: A bank, or an office thereof, may, because of an emergency or any other reason deemed sufficient by the bank, close on any day or days which it would normally be open for business by giving five (5) business days’ notice of the closing to the public by posting a statement to that effect in a conspicuous place in the office of the bank which will be closed unless the giving of the notice is impractical because of the existence of an emergency or other condition. Based on that statute, if you have a reason deemed sufficient by the bank, you could argue that five business days, or even zero business days, notice is sufficient based on the circumstances.
QUESTIONS & ANSWERS Is the KY Notice of Free Choice of Agent and Insurer disclosure required for consumers only, or commercial/ag loans also? KRS 304.12-150 states: Every debtor, borrower, or purchaser of property with respect to which insurance of any kind is required in connection with a debt or loan on the property shall be informed by the creditor or lender of his or her right of free choice in the selection of the agent and insurer through or by which such insurance is to be placed. The statute appears to require it with every loan regardless of type. A review of case law further affirms that position. In short, you still need it on commercial and farm loans. I have discussed with you before on working with mortgage customers right now. If we were to increase the maturity of a loan by three months do you think we are okay? Our mortgages state that we are covered for renewals and extensions and our Flood Determinations are for the life of the loan. If you are extending the maturity date, you are likely going to have to re-run flood certifications. As 12 CFR 339.3, titled, Requirement to Purchase Flood Insurance Where Available, states: (a) In general. A bank shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the overall value of the property, securing the designated loan minus the value of the land on which the property is located. Additionally, 12 CFR 339.9, titled, Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance, states: (a) Notice requirement. When a bank makes, increases, extends, or renews a loan secured by a building or a mobile home located or to be located in a special flood hazard area, the bank shall mail or deliver a written notice to the borrower and to the servicer in all cases whether or not flood insurance is available under the Act for the collateral securing the loan. Your mortgage may state that it covers for life of the loan, but you will still need to re-run your flood certification to meet the regulatory standard.
Ultimately, it is a business decision, but so long as you are changing the hours and not closing the branch, zero to thirty days of notice should be sufficient depending on the circumstances. KENTUCKY BANKER Spring 2020 Special Edition | 21
Visit our COVID-19 Business Strategies HUB at www.dinsmore.com/covid-19/ for our latest legal insights.
Social distancing is not preventing our attorneys from helping Kentucky’s community bankers to keep their operations moving forward and preparing for what will certainly come in the relatively near future. Whether you need legal guidance from banking governance and operations, to loans and loan workouts and modifications, or to borrower bankruptcies
MARTIN B. TUCKER
MICHAEL G. DAILEY
CHRISTIAN GONZALEZ
Lexington
Cincinnati
Columbus
(859) 425-1013
(513) 977-8644
(614) 628-6921
and restructurings, we are here to help.
DINSMORE & SHOHL LLP • LEGAL COUNSEL OFFICES IN: CA • CO • CT • D.C. • FL • GA • IL • KY • MA • MI • OH • PA • WV ADVERTISING MATERIAL. SERVICES MAY BE PROVIDED BY OTHERS. ©2020. All rights reserved.
Examiners Want to Know: Does Your CMS Ensure Consumer Protection & Compliance? Regulators aren’t messing around when it comes to consumer protection and compliance. That’s the message the FDIC sent in an enforcement action against a Wisconsin community bank that demonstrated weaknesses in its consumer protection and compliance program. While the EA doesn’t go into the details of what went wrong, it makes it clear the bank has to improve the following areas of its compliance management system (CMS). • Board oversight and commitment • Dedication of adequate resources • Due diligence and oversight of third parties • Anticipation and response to changes in laws/regulations, market conditions, and products and services offered • Due diligence reviews of product life cycle • Identification of compliance risks • Management of identified risks (including self-assessments) • Response and remediation of deficiencies in compliance risk management • Ongoing compliance training for all staff • Compliance monitoring and reviews It also needs to add: • A compliance coordinator authorized to cross departmental lines, correct deficiencies, and report directly to the board. • A compliance committee that meets at least monthly, reports to the board, and has at least one senior manager and one independent director. • Ongoing training and sufficient time and resources for the compliance coordinator and committee. CFPB Bulletin on Minimizing Consumer Harm The FDIC isn’t alone in focusing on consumer protection and compliance. In March the Consumer Financial Protection Bureau (CFPB) updated a 2013 bulletin on “responsible conduct” that can minimize harm to consumers. The bulletin emphasizes the importance of compliance culture and notes that the bureau “will favorably consider” responsible conduct when dealing with violations of consumer protection law.
• Self-reporting. Prompt self-reporting demonstrates commitment to compliance. • Remediation. Responding quickly when violations are discovered, including a root-cause analysis, to reduce the likelihood of future violations. • Cooperation. Going above and beyond the required response for cooperating with the CFPB. Preventing Consumer Harm with Your CMS Preventing consumer harm is among the top goals of financial regulators. That goal is best accomplished with streamlined CMS. The primary functional regulators agree that there are three essential categories in an effective CMS: 1. Board and management oversight of change management 2. A compliance program 3. Violations of law and consumer harm. The first two items encompass an institution’s CMS. The third one helps measures its effectiveness. It’s easy to have compliance issues if there isn’t a strong compliance program and board and management oversight. In theory, any product or service could pose consumer harm—including those offered by third parties on behalf of the financial institution. Violations are assessed on the pervasiveness of the violation, root cause, severity of the consumer harm and duration. The greater the weakness in the CMS or consumer impact and the longer or more severe the violation (or consumer harm), and the number of overall violations. Smart institutions recognize that failure to follow applicable laws and regulations poses a substantial financial and reputational risk. They have strong internal controls to ensure policies, procedures and systems are reliable, effective and compliant. They ensure that individuals are accountable for their actions. Banks and credit unions need to carefully review internal controls to ensure they are effectively mitigating risks throughout the institution— and catching mistakes before regulators do. The threat of regulatory action for institutions that fall short is anything but empty.
Factors the CFPB will consider include: • Self-assessments. Efforts to prevent and detect violations of consumer financial law early.
ncontracts.com KENTUCKY BANKER Spring 2020 Special Edition | 23
KBA PARTNER | COMPLIANCE ALLIANCE
A Solemn Farewell to Regulation D’s Convenient Transfer Restrictions by Michael Perez, Associate General Counsel KBA Partner, Compliance Alliance Effective April 24th, 2020 the Board of Governors of the Federal Reserve System (“Board”) did away with a longstanding, and, in the opinion of some, outdated rule in Regulation D. The Interim Final Rule amended Reg. D by deleting the six convenient transfers and withdrawals restriction that has become synonymous with savings accounts. Additionally, recent guidance has further clarified aspects of the rule change raised by the Interim Final Rule. Because the rule change puts the ball in each depository institution’s court, in terms of whether to continue enforcing transfer restrictions, banks are now left at a crossroads with compliance considerations in proceeding down either path. With the Reg. D restrictions being antiquated for years due to changes in the industry, what precipitated Reg. D’s amendments now? In the Interim Final Rule, the Board noted an “ample reserves regime” monetary policy shift, which led to the Board reducing reserve requirement ratios to zero percent effective March 26, 2020. As a result of the elimination of reserve requirements on all transaction accounts, the Board stated that the distinction between transaction accounts and savings deposit accounts was no longer necessary. Lastly, the Board pointed to disruptions caused by COVID-19, which in turn has caused many depositors to have an urgent need for access to their funds by remote means. Because the Board pointed to recent developments as a bases of the change, as well as its timing amidst the COVID-19 pandemic, has led some to question whether the Reg. D changes are permanent or only temporary in order to provide relief during the current crisis. The Interim Final Rule as currently written did not indicate that these changes are temporary. Additionally, The Federal Reserve Banks (“Banks”) further clarified in a recent FAQ that the Board does not have plans to re-impose transfer limits but may make adjustments to the definition of savings accounts in response to comments received regarding the Interim Final Rule as well as potentially in the future, if warranted. With the question of the Interim Final Rule’s permanency being somewhat clearer, it is worth noting that many changes caused by rule are indeed clearly explained. For example, the rule explains that enforcement of the changes is not mandatory. Instead, it is completely up to each bank whether to suspend enforcement of the six transfer limit and even provides that a temporary suspension is an option. Additionally, the rule allows a certain amount of flexibility in that a bank that suspends enforcement of the transfer limits can either continue to report these accounts as savings deposits or alternatively report them as transaction accounts for purposes of the FR 2900. Further, the rule does not require reclassification or name changes for effected accounts. Because it is up to each bank on whether to suspend enforcement of the six transfer limits, one of the most frequent questions we have received is whether notice is required when suspending enforcement. Neither the Interim Final Rule nor relevant guidance regarding the Reg. D changes have specifically stated notice is required. Additionally, Regu-
lation DD only requires advance notice in certain circumstances which suspension of transfer limits would not trigger. Even though not specifically required by regulation, providing notice is considered a best practice from a customer relationship and UDAAP perspective when significantly changing the terms of an account. Additionally, for those institutions that will be suspending enforcement of the transfer limitations only temporarily, generally Reg. DD would require advance notice when re-implementing the transfer restrictions, as this would adversely affect the consumer. We have heard from many banks that plan to temporarily suspend enforcement of restrictions plan on providing a statement notice informing the customer of the change and indicating the date on which the restrictions will be re-implemented. Another issue presented by the change is whether it is necessary to amend account agreements. While the Interim Final Rule does not specify the manner in which account agreements may be amended, the issue of whether they should be amended remains open. If choosing to suspend enforcement of the restrictions, this would arguably lead to a conflict between the depository institutions practices and the current terms of the account agreement. Additionally, even if not suspending enforcement of the restrictions, it is common to cite Reg. D as a source of the restrictions, which is no longer the case anymore. Either of these issues could cause compliance issues for a depository institution and therefore should be taken into consideration in determining how to proceed. Lastly, it initially appeared that the Reg. D amendments had caused an unintended consequence concerning Regulation CC. Because Reg. CC defines “account” by referencing Reg. D’s amended definition of “transaction account”, it appeared that this had caused a conflict within Reg. CC and presented a question of whether saving deposit accounts were now subject to Reg. CC. The Board clarified the impact of the Reg. D amendments on Reg. CC in a recent FAQ. The Board provided that because Reg. CC continues to exclude savings accounts from Reg. CC’s “account” definition, the amendments did not result in savings deposits now being covered by Reg. CC. While banks still have to decide whether they will suspend enforcement of the restrictions as well as tackle compliance considerations either way, ultimately the elimination of the convenient transfer restriction will relieve banks choosing to suspend enforcement the burden of having to monitor for excessive transactions. Additionally, for bank’s opting to suspend enforcement, the changes will benefit account holders by providing greater accessibility to funds. While there will be effort and resources required in implementing these changes, overall it appears the Reg. D changes have the potential of providing a net benefit to banks and account holders alike. Michael Perez, presently serves as Associate General Counsel for Compliance Alliance. He holds a bachelor’s degree in Business Administration in Finance from the University of Texas McCombs School of Business. He attended Baylor Law School.
KENTUCKY BANKS & THE COVID-19 PANDEMIC | KEEPING IT CLEAN 1. Citizens Union Bank 2. First Community Bank of the Heartland 3. Commercial Bank of Grayson 4. Farmers National Bank of Lebanon
1
4 2
3
KENTUCKY BANKS & THE COVID-19 PANDEMIC | SIGNS OF THE TIMES
KBA_StockYardsBank-HlfPgAd_Aug2018.pdf 2 8/16/2018 3:39:49 PM
Count on us…
JAMES BROWN James Brown has over 25 years of banking experience in Retail, Small Business, Corporate and Correspondent Banking.
(502) 625-9330 james.brown@syb.com
CORRESPONDENT BANKING LENDING SERVICES Holding Company Lending » Acquisition Financing (BOTH WHOLE BANK & BRANCH) » Stock Buy Back Financing » ESOP Financing » Additional Capital for Growth & etc. Fed Funds Lines of Credit Loan Participations Commercial Credit Cards & Purchasing Cards DEPOSIT & TREASURY SERVICES DDA Accounts Fed Funds Sweeps Accounts Certificates of Deposit Wire Transfer / ACH INTERNATIONAL SERVICES Foreign Exchange (BOTH CHECKS & WIRES) Letters of Credit (IMPORT, EXPORT & STANDBY) Import & Export Advisory Services MEMBER FDIC
EQUAL HOUSING LENDER
WEALTH MANAGEMENT & TRUST Retirement Plans (401K, PENSION & MORE) Investment Management Insurance Financial & Estate Planning Trust Partnering NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
THIS IS AN ADVERTISEMENT
FAMILIES FIRST CORONAVIRUS RESPONSE ACT – A BRIEF OVERVIEW The Families First Coronavirus Response Act became effective April 2. The Department of Labor published regulations on April 6. This is a brief overview of the portions of these complex and hurriedly written statutes and Thomas C. Fenton regulations addressing sick pay and leaves of absence. Implementation will be similarly complex and hurried. That the regulations create limitations not found in the statutes will not ease application. EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT (“EFMLA”) EFMLA creates a new category of leave that DOL calls “Expanded Family and Medical Leave” (“EFML”). Any employer with fewer than 500 employees (per capita and not on an FTE basis) is covered. Anyone employed for at least 30 days is eligible. (A business with fewer than 50 employees may claim exemption in certain circumstances.) EFML is available now. An employee may take EFML if he or she has a “qualifying need related to a public health emergency”, that is, the employee is unable to work (or telework) due to a need to care for his or her child whose school or place of care has closed, or the child care provider is unavailable, but only if no other suitable person is available. EFML can be up to 12 weeks, but not beyond December 31. The first ten workdays of EFML need not be paid. The employee may elect to substitute any accrued vacation, personal leave, or medical or sick leave. If EFML runs longer than ten workdays, it becomes paid leave at two-thirds of regular pay but not more than $200 a day and $10,000 in the aggregate. EFML is an addition to FMLA. With standard Family and Medical Leave available for an employee’s serious health condition, or for an employee to care for his or her spouse, child, or parent who has a serious health condition, EFML will often overlap a standard FMLA leave.
LEXINGTON
mpmfirm.com
EMERGENCY PAID SICK LEAVE ACT (“EPSLA”) EPSLA mandates “paid sick time” for COVID-19, which DOL confusingly calls Paid Sick Leave. Paid Sick Leave is available now. All employees employed by a covered employer (fewer than 500 employees) are eligible, with no required minimum time of employment. Paid Sick Leave is available for COVID-19 related reasons if the employee is unable to work (or telework) and he or she: (a) is subject to a government quarantine or isolation order; (b) has been advised by a health care provider to self-quarantine; (c) is experiencing symptoms and seeking a medical diagnosis; (d) is caring for an individual who is subject to quarantine or self-quarantine; (e) is caring for his or her child whose school or place of care has closed, or the child care provider is unavailable, but only if no other suitable person is available; or (f) is experiencing any other substantially similar condition specified by Health and Human Services. However, if the employer does not have work for the employee, Paid Sick Leave is not available for reasons (a), (d), or (e). The Paid Sick Leave benefit is the equivalent of two weeks’ pay, with limits that vary according to the reason. For an isolation order, self-quarantine, or experiencing symptoms ((a), (b), and (c) above), the per day maximum is $511, with a ten-day aggregate of $5,110. For caring for an individual or child, or for another condition specified by HHS ((d), (e), or (f) above), the benefit is two-thirds of regular pay up to $200 a day with a ten-day aggregate of $2,000. EFML and Paid Sick Leave lapse with termination of employment and there is no compensation for unused benefits. Similarly, all EFML and Paid Sick Leave benefits lapse without compensation upon expiration of EFMLA and EPSLA on December 31, 2020.
LOUISVILLE
Morgan Pottinger McGarvey is a leading banking and finance law firm representing financial institutions, businesses and individual clients throughout Kentucky and Indiana.
NEW ALBANY
KENTUCKY BANKS & THE COVID-19 PANDEMIC | SBA LENDING
PPP SUCCESS! Kentucky’s community banks stepped up for their communities as they worked tirelessly for small businesses that desperately needed help during the pandemic. These are just a handful of the banks who assisted small businesses with the Paycheck Protection Program (PPP).
During difficult times, lean on those you trust. Banking & Finance Law | Employment Law | Real Estate Law Representing Kentucky banks since 1974.
For more on how we can help, visit mpmfirm.com.
LEXINGTON
LOUISVILLE
NEW ALBANY
mpmfirm.com
KENTUCKY BANKS & THE COVID-19 PANDEMIC
United Community Bank of West Kentucky
Kentucky, United we stand, together we will get through this! Factory Built Home Loans for Your Bank Affordable Housing Solution for Well Qualified Borrowers Turnkey Indirect Lending Minimal Risk due to Triad’s expertise, stringent underwriting criteria, and borrower strength Deliver diverse, secure and profitable loan portfolios with little to no additional FTE allocation
Triad Financial Services is trusted by borrowers, dealers, realtors, and lending institutions alike. We’ve helped families realize their dream of home ownership for more than 50 years.
For more information, visit TriadFS.com.
NMLS #1063
KENTUCKY BANKER | TECHNOLOGY
Move Your Team Off VPN and Onto More Secure Remote Work Technology by Jay Mallory, Executive Vice President ImageQuest When the COVID-19 restrictions took effect, your bank successfully transitioned your employees to work from home. Or did you? Do you feel confident your banking team is staying secure and compliant while working from home? The potential for security gaps rises when workers leave your secure network environment. This gap grows the more extended a work-fromhome edict is in effect. If you have employees remoting in from home through a VPN, your internal IT staff or outsourced IT provider may not know: • If your employee’s computer has the latest security patches and updates. • If your employee is the only one using the machine. • What sites are being accessed by your employee. • How secure the employee’s home Wi-Fi connection is. • Whether the employee’s machine is being scanned regularly by security software. Even if your employees are following compliance regulations, you may be unable to document that compliance for an auditor. We have a solution that resolves those issues – one that even controls who uses the machine. It’s called Desktop-as-a-Service, or virtual desktop. We have regulated customers who have been using it successfully for a while now, so it’s no longer a ‘bleeding edge’ solution. Desktop-as-a-Service, also known as DaaS, hosts all your data, your applications – everything on your current on-premises server and computers – in the cloud. Your team works with what’s called a “Thin or Zero Client” – a device that has nothing stored or loaded on it except software to access your cloud environment.
Employees simply log in to an application on their desktop, which offers extensive physical and cybersecurity through many layers of protection, including two-factor authentication. Redundant power and internet, plus failover to another data center, add more resiliency than hosting your data in your server room. All security, including backups, updates, and patches, are done through the one location, so any time an employee logs in to work, he or she is accessing the latest, patched version of the software application. The Cloud data center also provides regulatory compliance. We use data centers with a SOC 2 Type 2 attestation, which means their data practices and policies are audited annually to ensure they follow best practices in data security and privacy. Unless someone creeps up and takes a photo of a screen, it is almost impossible for data to be stolen from a remote worker using DaaS. This alleviates the concern of a laptop full of client information being stolen from a car – or burgled from the employee’s home. Setting up DaaS allows complete customization in terms of who can access what records and files, further enhancing compliance with data regulations. Having one location in the cloud ensures your IT team retains the control it needs to keep your bank compliant and secure – no matter where someone is physically working. When this restricted era caused by COVID-19 ends, DaaS will continue to be useful because of the tremendous location-agnostic flexibility it provides your bank team. It will be easier on your capital expense budget too. DaaS costs become a predictable monthly recurring cost on your operating budget. And DaaS gives you a longer lifecycle for desktops and laptops. DaaS can be an excellent solution for modern banking. Contact us to learn more about how it would work specifically for your bank.
Whether your loan officer is in the office or working from home, he or she sees the same screen and can do the same work. When they review a loan application or payment status, the document remains in the cloud, and any notes or comments on the file also stay in the cloud. On a broadband connection, workers should see no delays.
imagequest.com
There is no on-machine storage, no one copies files to their laptop to take home, or stores them “locally” (on a hard drive or another device.) It is all in the cloud. KENTUCKY BANKER Spring 2020 Special Edition | 31
CHAIRMAN’S CORNER | OVERTIME CHAIRMAN’S CORNER by Lloyd C. Hillard, Jr. WesBanco / 2019-2020 KBA Chairman
ARE YOU IN THE GAME? In the world of sports, all athletes want to be in the game. UNDERSTAND YOUR CUSTOMERS They don’t want to stand on the sidelines or sit on the bench. They want to contribute, be a part of the action and A key is to understand your customers’ wants and needs bring home the victory! and develop the delivery channels that they demand. Convenience and technology play a key role in customer satBeing involved, working as a team member and making a isfaction. In addition, the battle for the “customer” has indifference is an inherent part of all of us. tensified.
This is especially true in our chosen industry: COMMUNITY BANKING!
The winner in this new digital age of banking will be “who controls the customer relationship.” A key question is: Will your bank be your customers’ first stop when they need banking services?
As community bankers, we have the opportunity to support and make a difference in the lives of our employees, our CREATE A COMPELLING CULTURE customers and the communities we serve.
An intentional focus on culture at every single touch point - each time and every time - is the key to customer engagement, retention and delivering a memorable experience. A At our 2019 Convention at the Greenbrier, I talked about compelling culture plays a major role in winning the “custhe importance of staying relevant and competing. It’s not tomer relationship.” an option, but a necessity if we are to survive in this fastpaced, ever changing global economy that we are a part of. USE TECHNOLOGY EFFECTIVELY Is your bank in the game?
The main challenge is to learn how to survive, excel and win. How do we do this?
Technology is changing at an ever increasing pace. Simply investing in the latest trend is not the best answer. Your technology investments must be directly related to the Here are a few thoughts on some essential steps that must products, services and delivery channels demanded by your be taken, if you are to be relevant and compete: customers. STAY ENGAGED
DISTINGUISH YOURSELF
Be involved and a leader in your community and in community banking. The KBA offers all kinds of opportunities for engagement. Take advantage of what is offered.
This can be accomplished in many different ways. It can be geographic market(s), products and services, delivery channels, customer engaging banking centers or the “WOW” customer experience, or a combination of all of these alternatives. Given that competition is just no longer across or down the street, this is very challenging.
UNDERSTAND YOUR MARKET What is your current market? What do you want your market(s) to be? The answer to these questions are the key in determining your strategy, your competition, what products and services are required to be successful, and delivery alternatives.
You must be proactive in putting your bank in the forefront. How do you differentiate your bank? Would your bank be the first mentioned if you took a poll of individuals and businesses in your market(s)? continued on the next page
32 | KENTUCKY BANKER Spring 2020 Special Edition
“
CHAIRMAN’S CORNER | OVERTIME
“
“The achievement of an organization are the results of the combined effort of each individual.” - Vince Lombardi
DEVELOP STRENGTH
and community are ever changing. As community bankers, you must also be willing to step back, re-evaluate and take Develop strong risk management, compliance, operational a different course of action. and financial control systems and processes that fit our size STAY THE COURSE and complexity. This is an absolute necessity! As a heavily regulated industry, strong internal controls are essential. It is also essential that you understand, effectively manage, monitor and mitigate risks inherent to the financial services industry. Hire the right people to make sure this happens! EXPECT THE UNEXPECTED
You don’t win a championship in the first game of the season. Progress is made one game at a time. The same is true in achieving the strategic goals for your bank. Follow the plan, move forward one step at a time, and persevere.
“
Things happen that are not expected and can cause disruption. A good example is what we’re facing now with the COVID-19 pandemic and its disruption.
Henry Wadsworth Longfellow said it this way: “The heights by great men reached and kept were not attained by sudden flight, but they, while their companions slept, were toiling upward in the night.”
And we all remember the financial crisis that was a significant disruption! This illustrates the fact that we are in a global economy; we are impacted by what happens in our world. Unexpected disruptions create uncertainty, concern BE AN ADVOCATE and the fear of the unknown.
Be a leader in your community, be proactive and involved There is no quick or easy answer. As a community bankwith the legislative process on a state and national level, er, you must stay calm, keep informed and communicate and be a supporter of the KBA. vital and timely information to your Board of Directors, employees and your customers. I hope that each of you want to be in the game! If you are to be relevant, compete and be successful, you must underYou should have a team in place to evaluate, monitor, make stand what it takes to be a winner. decisions and coordinate communications. All areas of your bank can be affected and your team should include BE PLEASED, BUT NOT SATISFIED personnel qualified to monitor the potential impact on employees, customers, bank liquidity, financial performance, Remember, be pleased, but not satisfied - there’s more the loan portfolio and third party vendors. work to do. As always, be proactive and be a leader in addressing unexpected challenges! BE FLEXIBLE Sometimes we make wrong decisions. Admit them and take the appropriate action. Your markets, customer base KENTUCKY BANKER Spring 2020 Special Edition | 33
@kybankers #WeAreKyBankers
WE ARE KENTUCKY BANKERS!
Citizens Bank of Kentucky
