Credit Insurance IS IN A GREAT STATE with American National and Dial Dunkin & Associates

Since 1992, American National Insurance Company (American National) and Dial Dunkin & Associates have provided credit insurance to more than 200 independent banks throughout the state of Texas. You can offer credit insurance products confidently. Customers trust their independent Texas banks, and independent Texas bankers trust American National and Dial Dunkin. We use our combined experience of more than 76 years to provide quality service to you and your customers. American National Insurance Company has been evaluated and assigned the following ratings by nationally recognized, independent rating agencies. The ratings are current as of July 31, 2013. A.M. Best1 – A Standard & Poor’s2 – A

AMERICAN NATIONAL INSURANCE COMPANY DIAL DUNKIN & ASSOCIATES Credit Insurance Division | P. O. Box 9007 1305 Stuart Place Road League City, TX 77574 Harlingen, TX 77580

Ratings reflect current independent opinions of the financial capacity of an insurance organization to meet the obligations of its insurance policies and contracts in accordance with their terms. They are based on comprehensive quantitative and qualitative evaluations of the company and its management strategy. The rating agencies do not provide ratings as a recommendation to purchase insurance or annuities. The ratings are not a warranty of an insurer’s current or future ability to meet its contractual obligations. Ratings may be changed, suspended, or withdrawn at any time. For the most current ratings view the full rating reports on American National’s Internet site at www.anico.com. 1 – A.M. Best’s active company rating scale is: A++ (Superior), A+ (Superior), A (Excellent), A- (Excellent), B++ (Good), B+ (Good), B (Fair), B- (Fair), C++ (Marginal), C+ (Marginal), C (Weak), C- (Weak) and D (Poor). 2 – Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Form CID-195 8-13 Form THE TEXAS INDEPENDENT

VOLUME XL NO. 3 BANKER MAY/JUNE 2014

22 Business Continuity Planning By Christopher Williston & Kelly Goulart

24 Back to the Future: 29th Annual Leadership Conference

26 FASB's CECL Model: How to Prepare for Changes By Tim McPeak & Ed Bayer

30 Mobile Matters: How Mobile Devices Affect Your Banks and Customers By Jeff Multz

32 Search Engine Optimization: Where Are You? By Bruce Moore, D. Eng.

Bonnie Kankel / Editor in Chief Mary E. Lange / Contributing Editor Darlene Revers / Advertising Manager Leslee Walker / Advertising Assistant John Wilson / Cover Design/Illustration Barbara Jezek / Design/Production

IBAT’s bi-monthly magazine, The Texas Independent Banker, welcomes letters from readers. The Texas DEPARTMENTS Independent Banker, May/June, Volume XL, Issue 3. Published bi-monthly by the Independent Bankers Association of Texas, 1700 Rio Grande Street, Suite 100, 4 Up Front Austin, TX 78701, 512/474-6889, FAX 512/322-9004. 16 Personnel Update Inquiries should be sent to the Editor. Editorial guidelines are available upon request. Advertising rates may be Foundation Footprints obtained by contacting Advertising Sales at 800/749- 6 Association News 4228 or 512/474-6889. Advertisements do not imply 18 sponsorship by IBAT. ©2014 by the Independent Bankers Services Solutions Association of Texas. No part of this publication may be 8 IBAT Calendar reproduced in any form without written permission of 40 the publisher. Opinions expressed in this publication do not necessarily reflect official policy of the Independent 10 Frontline Leadership Bankers Association of Texas. 40 IBAT Around the State General Counsel’s Corner 12 41 Advertising Directory Interest Rates 14 46 Compliance Guy Quote: Yoda

May/June 2014 www.ibat.org ★ 3 UP FRONT

Reflections

ntering the parking garage of the United Bank build- Not even after the great economic fallout and subsequent con- ing my mind was racing a thousand directions. I still solidation of banks in Texas in the mid and late 1980’s did we don’t recall the short journey from my parking spot to see such a great divide. the elevator that would take me to the 7th floor. So In the wake of the current financial crisis community bank- much so, by the time I entered the double white doors ers find themselves attempting to absorb an avalanche of regula- Eof the Independent Bankers Association of Texas offices and was tion brought about by the greed and ambivalence of a few who greeted by the receptionist, I wasn’t sure I even parked in the threw caution and risk to the wind and the interests of the finan- correct space on the assigned floor. cial system with it. Is it any wonder that we now question the It was my first day as IBAT’s CEO. April 1, 1989. Being just future of the community banking industry without regulatory thirty-four, I wondered if I was truly ready. It wasn’t that I lacked bifurcation of the industry? confidence in my abilities. To the contrary, I was certain my pre- Yes, a lot has changed since that first day of April in 1989. vious twelve years’ experience in the industry had prepared me But in many ways it feels as though I am just starting all over for this day. But it was all on me now. Although active in state again. Gone is the trepidation of one’s first day on the job, legislative matters, the organization had laid largely dormant for replaced with the great challenge of restoring some semblance years leaving most of its members searching for relevance. of regulatory certainty again. Just five short weeks had passed since my meeting and sub- We may have a divided industry but IBAT is not a house sequent hiring by IBAT’s executive committee. They made it divided. We remain committed to our tried and true mission of clear that they were prepared to expend the necessary resources aligning ourselves with any constituency that shares our inter- to elevate the awareness of IBAT’s mission and reconstitute its ests in preserving this great indus- service offerings to the members. And so the task began. try we call community banking. This month marks my twenty-five year anniversary with We have the resources and a belief the association. It hardly seems possible that time can move so that good will come to those who swiftly; almost as fast as the organization’s culture has had to put the interest of consumers and adapt to the ever changing and emerging needs of its member- the long term stability of the fran- ship. But one thing has not changed. That is, IBAT’s complete chise above everything else. and total advocacy exclusively for community banks. We will not waiver from our Every association executive should have it so easy, where long term objective of achieving decisions driving the direction of the organization are black and regulatory bifurcation and consid- CHRISTOPHER L. white and are not clouded by competing interests of the mem- eration that regulation that is good WILLISTON, CAE, is bership. Having been exposed to great torment and uncertainty for the large may not be so good for President and Chief of such competing interests, I can speak first hand that such the small. Executive Officer of the uncertainty leads to compromising one’s position on issues large Even if it takes us another Independent Bankers and small. twenty-five years to get there. Association of Texas. Never in the history of the industry has the competing inter- Now, I wonder where I parked ests of the mega banks and community banks been so evident. my car? ★

4 ★ The Texas Independent Banker May/June 2014

IBAT ad Jan May-June 2014_ol.pdf 1 3/28/14 3:03 PM

FOUNDATION FOOTPRINTS

Fighting for the Cause

Local Excellence — One Teacher At A Time in 2010. Now a retired HS teacher from Longview, Texas, she First, thank you so much for putting our is an important member of the faculty of the IBAT Teach the request last month into action. We received the Teacher Program™. This program provides instructional meth- highest number of nominations EVER for the ods to engage teachers and students in practical conversations 1. Teaching Excellence in Financial Literacy Awards. about personal financial management. More than 25 entries in so far (100% increase over last year) 1. Determine want versus need and thankfully they are still flooding in on this last day! This is 2. Think about consequences no small feat; for those who participated, there are several steps 3. Remember the government gets part of your pay — the interaction with the local superintendents, then select- 4. Pay yourself first ing the teacher, then a good banker nominator — not a small 5. Make a budget effort and we thank you so very much. True community bankers 6. Use credit wisely find a way to connect with their local schools and outstanding 7. Treat your money like a business teachers! 8. Don’t forget about interest The banker comments included in each application tell 9. Protect yourself C their own story: 10. Don’t be afraid to ask for help M • This is such a great cause. (Gay Davis, Citizens Bank- Y Henderson) For a full description, go to www.ibat.org/consumer-tips- CM

• It might interest you to know that Bruceville-Eddy ISD is archives. MY

using the Banking Is program sponsored by First National CY

Bank of Moody to teach financial literacy to all students in 3. Financial Literacy Summit CMY

grades 9 through 12…250 Students!!! (Glen Thurman-FNB Don’t miss attending or sending your designated financial K Moody) literacy champion to the 2014 Financial Literacy Summit on • Thank you so much for allowing us the privilege to nomi- July 24–25 in Dallas. This impressive event is held each year at nate. (Natalie Needham, Citizens Waxahachie) the stately Federal Reserve Bank of • Thanks for sponsoring this Awesome Award. (Norma Longo- Dallas. If you have not attended a ria, FNB Eagle Lake) meeting there it will be a bonus for • Our teachers can impact our students in so many ways, but your attendance at the Summit. I do not always receive the credit they deserve. (Stacie Smith, have always enjoyed conversa- Happy State Bank) tions with banker friends and the program is educational, enjoyable, So now the hard work begins for our panel of judges. We will and worth your time. announce the winners after this magazine has gone to press, but Finally, we are so grateful for watch the web and IBAT e-news for the selection of winners. the support you provide to the IBAT Education Foundation. Many 2. Personal Finance Principles Every Child Should Know other organizations ask us about As we are coming to the end of another school year, the the programs we provide that have WILLARD J. STILL is timeless principles of personal finance can be promoted in your been so successful. When they do the Board Chairman banks and your internal and external newsletters, websites, local it is another reminder that we are of the IBAT Education so fortunate to have the support of radio and civic speeches. Take a look at the IBAT Consumer Foundation and Vice Tips for April, which lays out 10 principles for Financial Lit- True Texas Community Bankers Chairman of American eracy Month. We asked one of our core instructors for the IBAT who believe in our mission. Bank, N.A. in Waco Teach the Teacher Program™ for her insights. Judy Haley won You are the best…thanks for the IBAT Teaching Excellence in Financial Literacy Award back all you do! ★

6 ★ The Texas Independent Banker May/June 2014 IBAT ad Jan May-June 2014_ol.pdf 1 3/28/14 3:03 PM

C

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CM

MY

CY

CMY

K SERVICES SOLUTIONS

ICS and CDARS Positioning Your Bank for the Long Term

or banks, the industry aggregate loan-to-deposit (LTD) $4 million in public fund deposits and more than $3 million ratio remains depressed and very near its lowest level in retail customer deposits. On average, the bank was able to in the past 10 years — 69.0% for banks with more than attract one new ICS customer per month over a twelve-month $1 billion of assets and 73.6% for those with less than period. Combined, these efforts have primed the bank for suc- $1 billion of assets. cess by reducing the cost of funding; locking in long-term, valu- FBut the current glut of deposits will not last forever. Many able customers; and opening up new cross-selling opportunities. in the industry see loan demand picking up and expect competi- Financial institutions across the country are using ICS and tion for deposits to increase. CDARS to replace higher-cost funding (e.g., repurchase sweeps How can your bank stay ahead of the competition and be and letters of credit). They are also using enhanced relation- ready to fund future growth? As a member of the Promontory ships from CDARS and ICS Reciprocal deposits to capitalize Network, your financial institution has at its disposal power- on cross-selling opportunities. And they are substituting collat- ful tools for attracting eralized deposits with ICS and CDARS and retaining depositors. deposits, which enable them to repurpose With ICS®, the Insured funds invested in collateral into higher- Cash Sweep® service, earning assets, reduce collateral-tracking and CDARS®, your bank can offer customers the security costs, improve asset liquidity, and lower the risk of shortfall due associated with access to FDIC insurance, the return they seek, to collateral-value deterioration. and the flexibility they desire. These services provide access All of this makes ICS and CDARS smart choices for bank- to multi-million-dollar FDIC insurance on funds placed into ers today and tomorrow. To learn demand deposit accounts (through ICS), money market deposit more, please visit www.promnet- accounts (through ICS), or CDs (through CDARS). work.com, or call (866) 776-6426 Your bank sets the interest rate earned on customer deposits ext 3432 or ext 5810. ★ placed through the services and, with respect to ICS, can even set the rate to zero if desired. But your bank doesn’t have to wait for higher interest rates to begin reaping the benefits of ICS and CDARS. Both services can help improve your bank’s bottom line today. ROGERS POPE, JR. By offering ICS as a cash management solution, one com- is Chair of the IBAT munity bank was able to generate over $14 million in ICS depos- Services Board and Vice its over a twelve-month period. ICS provided this bank with Chairman and Chief the opportunity to bring approximately $7 million back onto Operating Officer of Texas its balance sheet from an off balance sheet sweep account that Bank and Trust, Longview. it had previously placed with a large investment bank. It also was able to capture over $7 million in additional ICS customer deposits. The new, large-dollar relationships consisted of over

8 ★ The Texas Independent Banker May/June 2014

FRONTLINE LEADERSHIP

Another Great Year for the Leadership Division

ell, they say that time flies, and I guess that’s true. us benefit from the efforts that those funds are used for. We still It seems like only yesterday that I was beginning have funds coming in and some of you may conduct your PAC my term as your Chairman, but almost a year later, Drive at different times of the year, but we have been successful here we are. What a truly wonderful honor and in increasing the participation. Although we are not at 100%, experience to have the opportunity to lead this we are making progress. Several of our Associate Members con- WDivision. ducted PAC Drives in their organizations. Thank you to you Some very special “thank yous” to my dear friends and all! members of the Executive Committee — Michael Moores, Mark Many of us just recently returned from our annual mem- Sheffield, Doak Crabtree and Brandon Bartek; to the IBAT ber Congressional visit to Washington D.C. What a great trip! Leadership Division Board of Directors; to the IBAT Board of Although politics is not a favorite topic for many of us, and Directors and Executive Committee; to the entire IBAT Staff; the political process is long and arduous most of the time, it is to my Alliance Bank family; to my family — Kristin, Carter, important that we let our voices be heard. We have to protect Kate and Claire; and to all of you who passed along words of those things that are most important to our industry, so that we encouragement along this journey. It has been a pleasure! can continue to serve the needs of our customers and communi- ties the best way we know how. The Leadership Division Conference is coming up on us quickly. Scheduled for June 26–28 at the J.W. Marriott Hotel and Conference Center in San Antonio, we have a fabulous lineup of speakers, breakout sessions and entertainment. Now that all of the Regions have converted to the new Leadership Division structure, one of the things we will do at the Confer- ence is have roundtable discussions regarding PAC, Membership and Events involving those members from all Regions. If you haven’t had a chance to register, I would encourage you to do so. You don’t want to miss out! Kevin, Carter, Kate, Claire and Kristin Monk with Jase Robertson of “Duck Dynasty” at the 2013 Again, many thanks for the Leadership Conference. support and confidence in my abilities, it has been an honor. I Now on to business! Welcome to my friend Hazem Ahmed leave you with one last Leadership of Integrity Bank in Houston, who will be joining the Leader- quote: ship Division Executive Committee as Secretary/Treasurer in June. Hazem is a current member of the Leadership Division KEVIN MONK “A leader is best when people Board of Directors and has recently been a very integral part in is Chairman of the barely know he exists, when his the success of our Dream Vacation sales benefitting the IBAT work is done, his aim fulfilled, Leadership Division and PAC. they will say: we did it ourselves.” Senior Vice President at Speaking of the PAC…we had a very successful Bank PAC — Lao Tzu, Chinese Philosopher Alliance Bank in Sulphur Drive in the month of March. As you are aware, the Leadership Springs. Division had an initiative this year to encourage those member Until we meet again…God banks who traditionally have not conducted a PAC Drive to do Bless! ★ so with a simple goal of $1,000 each. Traditionally, only about 20% of the member banks conduct a bank PAC Drive, yet all of

10 ★ The Texas Independent Banker May/June 2014

GENERAL COUNSEL’S CORNER

A Legal Potpourri

n the rush to deal with the humongous changes put into a bank is federally insured to be enough to create the federal play by the Dodd-Frank Act, let’s not overlook the many contractor status. But other ways you could fit this characteriza- other laws and regs that hang over a banker’s head. Here are tion are through sale or redemption of savings bonds, servicing just a few that have recently crossed my desk. of federally insured student loans, or serving as a depository of Record Retention Schedules for Email Federal funds. So, why do you care? I Don’t be surprised if your auditor asks you for your record First, if you have over 50 employees and are a federal con- retention guide for email. Worse, don’t be caught with decades tractor, you must have an affirmative action plan. Second, of emails when a “litigation hold” is sent to you as a result of a recent amendments to the rules relating to hiring vets and peo- lawsuit and discovery requests. Alternatively, a policy that clears ple with disabilities require federal contractors to affirmatively out email boxes every 30 days (with no archive) can be equally recruit, hire, train and promote qualified veterans and people disastrous. with disabilities. And finally, President Obama has issued an The real dilemma with regard to this issue is that “email” Executive Order on February 12, 2014 establishing a minimum is not itself a record. Rather, it is a medium of communication. wage of $10.10 per hour for “new” federal contractors. Rules are The contents of the email are the record that must be retained. expected by October 1. Hopefully, the “new” requirement will Some emails are the current day equivalent of a message slip, effectively grandfather banks. letting you know that Mr. Brown would like for you to return his Mortgage Loan Originators call. Others are simply efforts at setting up a meeting or confer- Bankers have been focused on the Dodd-Frank Act require- ence call. You might reasonably keep these only long enough to ments relating to their MLOs that went into effect January 1, get that call organized. 2014. But many have somehow By contrast, you may have emails that represent collec- overlooked the Department of tion efforts with delinquent borrowers. Or email (hopefully of Labor reversal of the treatment of the secured variety) may be the “cover letter” by which you are MLOs under the Fair Labor Stan- transmitting documents or proposals. These communications dards Act (FLSA). These employ- truly are documents that you should save. ees are now considered by DOL to The tough discipline that needs to be put into place is effectively be “order takers” and the practice of “profiling” emails to clearly categorize them for thus not exempt from the overtime appropriate archiving. Thus, the IT department needs to partici- and recordkeeping requirements of pate in the email record retention planning. Find out what kind the FLSA. If you are paying your of systems can be readily installed to sort and save or discard MLOs commissions as well as sal- KAREN NEELEY emails. Identify the types of messages that are transmitted and received her BA and ary, then their hourly rate determi- determine the appropriate retention period for each. Remember JD from the University nation for purposes of the overtime that the flip side of record retention is record destruction. Be of Texas at Austin. calculation is a bit tricky since it sure that the system to discard emails when they have “aged out” She is a director for can change weekly. is also in place. the Texas Association (Continued on page 41) of Bank Counsel and Federal Contractor Status General Counsel for the Surprise! Your bank is probably considered to be a “federal Independent Bankers contractor.” Some pronouncements consider the mere fact that Association of Texas.

12 ★ The Texas Independent Banker May/June 2014

INTEREST RATES

Strategic Bond Swaps Maximize the Optimizing Risk and Reward in Investments rudent management of a community bank investment same or higher than today. Meanwhile, from a tax standpoint, portfolio requires an approach that starts with strategic Uncle Sam will pick up 34% of the loss (assuming a fully taxable analysis of the balance sheet, and then moves to tac- bank) so that an institution can reduce tax expense in a good of Your Bank tical decision-making. This sort of top-down method year so they don’t have to in a bad year. Here are some further first requires a look at the bank’s asset/liability pos- ideas on bond swaps: We’re serious about banks who are serious Pture in order to identify exposures to interest rate risk. Once Duration Adjustment Swap: The purpose of this swap is simply this is done, the investment portfolio can then be used as a to move in or out on the yield curve to either take advantage about minimizing their upfront expenses. That’s vehicle for managing that risk. To do this properly, an invest- of better relative value or to alter the position of the portfolio why we’re offering a six-month free trial of our ment officer must be prepared to actively manage the portfolio with respect to potential price risk. Right now the yield curve is entire service package. by rebalancing and restructuring the bonds to achieve the opti- steep, so some banks may wish to extend duration simply to pick mal risk/reward profile for the market conditions that exist at up yield. Others may need to rein in their overall duration to the time. shore up their interest rate risk exposure. Duration adjustment is Interest Rate Risk Monitor ; Asset/Liability Analysis Quarterly Interest Rate Risk Strategy Some banks still pursue a “buy-and-hold” strategy for bonds. a textbook asset/liability management strategy for banks that are Your management team will find that The Baker Our quarterly Interest Rate Risk Strategy provides a This passive management style can potentially result in substan- too asset (or liability) sensitive and need to extend (or shorten) Group’s quarterly review of the loan and deposit template for the effective discussion of your current tial opportunity costs and underperformance. At least once a the net duration of their assets. information outlined in the Interest Rate Risk Monitor and future investment and asset/liability position. year, portfolio managers or investment committees should eval- Relative Value Swap: At any given point in time, some sectors and Asset Liability Analysis is an effective tool in Investment and Asset/Liability Policies uate the overall posture of the investment portfolio and make of the bond market offer better value than others. Moreover, the managing your risk and any adjustments that are dictated by changes in balance sheet relative advantage of the different sectors (as measured by their The Baker Group will assist in the development and mix, tax considerations, or the risk position of the bank. The yield spread relationships) is constantly changing. Mortgage- Advanced Portfolio Monitor review of policies to ensure optimal integration with best time of year to make such adjustments is at the turn of a backed securities versus municipals, callables versus MBS… all The Advanced Portfolio Monitor is a key monthly your management system. year when the bank can do tax loss swaps as well as restructure of these relationships should be report that we utilize to help you measure, monitor, and manage the overall risk and of Securities Selection the portfolio for better efficiency. monitored as markets move. Savvy The selection of securities used in the development your investments. When considering adjustments to the portfolio, it’s impor- portfolio managers will take advan- of your portfolio is critical to the achievement of tant to clearly outline the pros and cons of selling securities. If tage of the changing relationships Investment Portfolio Accounting goals and managing interest rate risk. a bond is currently on the books at an unrealized loss, remem- and do swaps that sell what is rich The Baker Group will provide you with accurate, The Baker Group specializes in identifying the best ber that selling it now involves simply taking today what is an and buy what is cheap compared easy-to-read reports that are delivered electronically relative value in the market through competitive bids actual loss of income spread out over time… you either take the to historical averages. As always, to you each month. and offerings that will fit your financial institution. loss now or take it later. For example, consider a $1mm agency each bank will have a different sec- bullet with a one-year maturity that has a $10,000 unrealized tor allocation that is optimal for To obtain the resources you need to maximize the of your bank, call our Financial Strategies Group loss. Let’s say the book yield on this bond is 2%, yet the market them given their liquidity and cash at 800.937.2257 today and ask for Ryan Hayhurst. yield is now 3%... a difference of 1%. If we do the multiplication, flow needs, tax position, etc. Here $1mm X 1% X 1 year, we come up with $10,000, the amount of again, a big-picture view of the bal- JEFFREY F. CAUGHRON the unrealized loss. So the choice is to either sell the bond or to ance sheet is necessary. is Associate Partner with hold it — lose $10,000 today or $27 each day for a year. Either Muni Tax-Loss Swap: Banks The Baker Group LP way, it adds up to $10,000. should always be looking at their If we choose to sell today, we can be certain of the yield we tax position and working with their will achieve on the reinvestment of the proceeds. If we wait for accountants to optimize their after- Winning the Performance Challenge maturity, we must accept some uncertainty and risk. Where will tax performance. Each bank has its rates be in one year? Are we willing to bet rates will be higher? own unique set of circumstances, In a sense, waiting for maturity is a bet that rates will be the (Continued on page 41) Member: FINRA and SIPC Oklahoma City, OK Austin, TX Birmingham, AL Indianapolis, IN Salt Lake City, UT Springfield, IL 14 ★ The Texas Independent Banker May/June 2014 The Baker Group LP is the sole authorized distributor for the products and services developed and provided by The Baker Group Software Solutions, Inc.

TBG-TX-05-2014-FreeTrial1.indd 1 3/14/14 11:36 AM Maximize the Performance TRIAL of Your Bank

We’re serious about banks who are serious about minimizing their upfront expenses. That’s

why we’re offering a six-month free trial of our entire service package.

Interest Rate Risk Monitor®; Asset/Liability Analysis Quarterly Interest Rate Risk Strategy Your management team will find that The Baker Our quarterly Interest Rate Risk Strategy provides a Group’s quarterly review of the loan and deposit template for the effective discussion of your current information outlined in the Interest Rate Risk Monitor and future investment and asset/liability position. and Asset Liability Analysis is an effective tool in Investment and Asset/Liability Policies managing your risk and performance. The Baker Group will assist in the development and Advanced Portfolio Monitor® review of policies to ensure optimal integration with The Advanced Portfolio Monitor is a key monthly your management system. report that we utilize to help you measure, monitor, Securities Selection and manage the overall risk and performance of The selection of securities used in the development your investments. of your portfolio is critical to the achievement of Investment Portfolio Accounting performance goals and managing interest rate risk. The Baker Group will provide you with accurate, The Baker Group specializes in identifying the best easy-to-read reports that are delivered electronically relative value in the market through competitive bids to you each month. and offerings that will fit your financial institution.

To obtain the resources you need to maximize the performance of your bank, call our Financial Strategies Group at 800.937.2257 today and ask for Ryan Hayhurst.

Winning the Performance Challenge

Member: FINRA and SIPC | www.GoBaker.com Oklahoma City, OK | Austin, TX | Birmingham, AL | Indianapolis, IN | Salt Lake City, UT | Springfield, IL| 800.937.2257 The Baker Group LP is the sole authorized distributor for the products and services developed and provided by The Baker Group Software Solutions, Inc.

TBG-TX-05-2014-FreeTrial1.indd 1 3/14/14 11:36 AM PERSONNEL UPDATE ARE YOU READY TO TAKE YOUR DEBIT PROGRAM IN A FRESH, NEW DIRECTION

Keiser Coker McBrayer Matthews Clarke Springer

Gartz Taylor Hood Bjork Best R. Pope Jr

Dallas Laura Steele has taken on the title of president and COO. SWACHA has announced its 2014 Board of Directors. Steele was previously executive vice president and COO of the Charlie Schuchardt, executive vice president of Frost Bank organization. She joined SWACHA in 2013 and is a veteran in San Antonio, succeeds Andy Littlejohn, president of City of the financial services industry with more than 20 years of National Bank in Taylor, as chairman of the board. Martin Bell, experience. executive vice president of Guaranty Bond Bank in Mount Pleasant, has been elected vice chair of the board, and Rhonda Fort Worth Kleinecke, chief financial officer of TDECU in Lake Jackson, Cliff Keiser has been promoted to president at Meridian has been elected Secretary-Treasurer. Each officer will serve a Bank Texas. Keiser joined the bank in 2006 as executive vice one-year term. president of energy lending. A graduate of Louisiana State Uni- Kenneth Clayton, president of Western Bank in Artesia, versity, he earned a BS in Petroleum Engineering. In addition to New Mexico was elected to a three-year term on the board. his executive management duties, Keiser is also responsible for Rhonda Festervand, senior vice president of Allegiance Bank building and monitoring a balanced portfolio of energy related Texas in Houston, and Brandy Young, senior vice president of relationships. He brings over 30 years of banking and lending OmniAmerican Bank in Fort Worth, were each appointed to experience. fulfill two unexpired terms. Donovan Shand, senior vice presi- Cory Coker has joined Colonial Savings as senior relation- dent of Comerica, and Peter Davey, vice president of Capital ship manager. In his new position, Coker will be responsible for One, were appointed as advisory directors. portfolio development and maintenance as well as commercial In addition, Dennis Simmons, CEO of SWACHA, has loan origination. He will also assist with the cultivation of Colo- announced he will retire from his position as of December nial’s small business banking in the DFW area. Coker has more 31, 2014, after 18 years with the association. Simmons joined than 14 years of experience in commercial and retail banking, Welcome to Different. SWACHA in 1996 as director of training and education. He A place where breakthrough Frisco was promoted to president and CEO in 2001. Under his leader- ideas are born. Ideas to help grow your ship, SWACHA has broadened its membership base to include Kelly McBrayer has joined Texas Republic Bank as vice business. Like the PULSE Discover Debit approximately 1,000 financial institutions throughout Texas, president, commercial lending. She will work in the bank’s new Louisiana, New Mexico, Georgia and several other states. Sim- branch in Richardson. Her responsibilities include managing program offering a fresh approach to signature debit mons was recently honored by NACHA with the Distinguished a variety of existing relationships as well as developing new with superior economics, brand flexibility and strong fraud Service Award for his many years of service dedicated to the commercial business in the DFW market. McBrayer earned a prevention tools. Find out why Discover Debit is a better choice support of the country’s ACH Network. (Continued on page 42) for signature debit at

© 2014 DFS 16 ★ The Texas Independent Banker May/June 2014

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© 2014 DFS

10205683-1_8.5x11_4C.indd 1 3/26/14 1:30 PM

JOB 10205683 10205683-1 • Pulse Duped from 10204979-1 by lc IBAT MAGAZINE SIGN POST PRINT PRODUCER: MATT SHULER Production 1:PULSE:Jobs:Billable_Jobs:10200000_Jobs: PROJECT MANAGER: MARSH 8.5"w x 11"h 9"w x 11.5"h 7.5"w x 10"h ACCOUNT MANAGER: WARREN Page 1 of 1 Date: 3/25/14 Proof # ART DIRECTOR: 4/C Revised by: lc CPS CheckOut: ______3/28/14 PUBLICATION & INSERTION DATE: Agency Approvals: INITIALS DATE INITIALS DATE IBAT Magazine Ad - May/June Issue Proofreader ______Project Mgr. ______Copywriter ______Acct. Sup. ______Art Director ______Prod. Mgr. ______Creative Director ______Client Approval: INITIALS DATE Account Exec. ______ASSOCIATION NEWS

IBAT Board Renews Endorsements with Abound Resources and Diebold The IBAT Board of Directors is pleased to announce that it has approved renewals of its endorsements with Abound Resources and Diebold at its first quarter board meeting. “Abound Resources serves a critical need for IBAT member banks and deliv- ers exceptional value through technology consulting, contract negotiation, vendor selection and performance improvement,” IBAT Services Vice President — Busi- ness Development, Gordon Moore, com- mented. “Diebold’s leading-edge solutions and single point of contact with Integrated Services offer community banks reliability they can count on and a reduced burden TRUST TEXAS BANK was named Small Business of the Year by the Victoria, Texas Chamber of Commerce. The bank, which opened in 1921, has five branches in the South Texas cities of as it relates to vendor management.” Cuero, Victoria, Yorktown and Kyle. L-R: Tiffany Martinez, Jay Howard, Jennifer Crockett, Sean Curt Nelson, President of IBAT Garcia, Debbie Humphries, Jared Bittlebrun. Services, added, “the integrity of IBAT’s endorsements is earned as a result of staff’s Diebold and Abound play in enhancing All Automated Financial cash due diligence and we are proud to have the profitability and competitive position machines will be converted to the the Board’s continued confidence in the of our member banks.” Cardtronics brand. significant role endorsed providers such as ★ ★ Texas Bankers Hall of Fame Cardtronics Acquires Assets of Names Four Honorees Automated Financial The Texas Bankers Hall of Fame has Cardtronics has grown its U.S. ATM selected Tieman H. Dippel, Jr., Tom C. estate to 66,400 ATMs — the result of Frost, Joseph M. Grant, and Rogers Pope, adding 2,100 merchant ATM contracts Sr. as this year’s honorees. when Cardtronics USA, Inc. acquired the The Texas Bankers Hall of Fame was ATM business assets of Chandler, Ari- established by the Smith-Hutson Endowed zona-based Automated Financial, LLC. Chair of Banking at Sam Houston State Delivering growth to Cardtronics’ University in Huntsville to recognize out- Independent Merchant ATM business, standing bankers who have served their as well as additional diversification to industry, community, and state. the company’s global ATM portfolio, the Tieman H. Dippel, Jr. serves as chair- Automated Financial transaction also man and CEO of Brenham Bancshares, TECHMECCA WINNERS L-R: Joe Mengden, helped the company establish a sales and Inc., and Dippel Venture Capital Corpo- Tradition Bank; Cody Yanchak, First service office in Arizona. In recent years, American Payment Systems. Joe won the ration. Tom C. Frost is chairman emeritus gun from FAPS’ raffle at TechMecca. Said acquisitions by Cardtronics have added of Frost, which offers banking, insurance Cody: “The first and only time I have ever regional hubs for the company in New and investments through more than 110 walked into a bank with a gun…and it was acceptable.” Jersey, Minnesota, Oregon, California financial centers across Texas in the San and now Arizona. Antonio, Austin, Corpus Christi, Fort

18 ★ The Texas Independent Banker May/June 2014 Worth, Houston, Dallas, and Rio Grande Sealy, Caldwell and Waco Designated Main Street Cities Valley regions. Joseph M. “Jody” Grant Staff of Independent Bankers Association of Texas (IBAT) joined Texas First Lady is the founder and chairman emeritus of Anita Perry and representatives of the Texas Historical Commission (THC) for the Texas Capital Bancshares and founder, Texas Main Street Program’s 2014 First Lady’s Tour. The tour, an annual event celebrat- chairman and partner of BankCap Part- ing Texas Main Street communities, visited Sealy, Caldwell and Waco. ners. Rogers Pope, Sr. serves as chairman The THC’s Texas Main Street Program is a revitalization program for historic down- of the board of Texas Bank and Trust in town and neighborhood commercial districts. Today, there are 87 official Texas Main Longview, Texas. Street programs in communities of all sizes and in all areas of Texas. During her time as First Lady, Mrs. Perry visited 49 cities and designated them as Main Street Cities. IBAT has sponsored the First Lady’s Main Street Tour for the past 20 years, visit- ing 82 cities. “Community banks have long been the lifeblood of many cities and towns across Texas and we are proud of their contributions to help local communities prosper and main street businesses thrive,” said IBAT President and CEO Chris Williston. (Continued on page 20)

Best of Community Banking Competition Deadline June 23 Highlight your bank’s involvement in your community and the exceptional projects you’ve undertaken during the past year by entering the 2014 Best of Commu- nity Banking Awards competition. This is an opportunity to put the “best of the best” efforts of IBAT members on display. Entry categories include Architec- tural Design, Financial Literacy, Commu- nity Service and Marketing. Entries are due in the IBAT office by 5 pm on June 23, 2014. A panel of judges will review each entry and all Gold, Silver and Bronze awards will be displayed dur- ing the Annual IBAT Convention. Gold Award winners will be recognized at the Best of Community Banking Awards Lun- cheon on September 29 at the Worthing- ton Renaissance Hotel in Fort Worth. For more information, go to the IBAT website or call Mae Beth Palone at 800- 749-4228. Chris Williston and Anita Perry at the Main Street Tour stop in Sealy.

May/JuneMay/June 2014 2014 www.ibat.org www.ibat.org ★★ 19 19 ASSOCIATION NEWS cont’d In Memoriam First Data and The Members William R. “Bill’’ Sinkin passed away February 3 at the age of 100. Sinkin was a philanthropist, activist, banker, entrepreneur, teacher, father and husband, who had a penchant for bow ties. He was elected president Group Offer Streamlined of Independent Bankers Association of Texas for 1978-1979. EMV Implementation Sinkin obtained a business degree from the University of Texas at Austin in 1934 and returned to San First Data and The Members Group Antonio to work at his father’s wholesale clothing manufacturing company. He later went into banking and (TMG) are offering an expedited EMV helped start Texas State Bank and Texas Bank North, both of which he sold in 1987. As the banks’ CEO, he to qualifying financial institution clients. focused on giving loans to small and neighborhood businesses on the East and South sides, areas that had The streamlined program enables TMG’s previously not received much attention from financial institutions. clients to launch their EMV programs Sinkin is widely credited with bringing HemisFair ‘68 to fruition, an event that many say was the catalyst quickly, efficiently and with reduced com- that changed the face of San Antonio. He was the fair’s first president, and reportedly devoted 1961 to selling the concept to every bank in the city and raising sufficient funds for planning the celebration. plexity. First Data has qualified with both Although Sinkin retired in 1987, he did not stop working. He opened his own consulting firm, William R. Visa and MasterCard to offer the expe- Sinkin and Associates. In 1999, he launched Solar San Antonio to promote renewable energy awareness and dited EMV credit card issuance program. development. “Offering this expedited process from Sinkin is survived by two sons, Lanny and Richard, and by three grandchildren and three great- First Data helps make the transition to grandchildren. EMV less burdensome for our clients,” Brandon Kuehl, product manager of Elizabeth May passed away February 28 after a 71-year career in banking. TMG, said. “By partnering with the right Elizabeth attended Centenary College in Shreveport, LA and the University of North Texas in Denton, organizations, our clients can get EMV where she studied opera and vocal arts. cards in market more quickly, giving them In 1943 she went to work at the First National Bank of Bonham and remained with the bank through its a competitive edge with today’s tech- many changes in management and ownership. She became Assistant Vice President and was “The Grand savvy consumer.” Lady” of customer service and public relations for the American Bank of Texas. In addition to her loyalty and devotion to the bank and its customers, Elizabeth was a dedicated public servant, working tirelessly for many To take advantage of the program, organizations in the community. clients must meet eligibility requirements In 2011 a coworker at the bank nominated Elizabeth for the Independent Bankers Association of Texas outlined by the card networks, including “Making a Difference Award.” The panel of judges decided that Elizabeth May had done a lot more than make the prior successful completion of a U.S. a difference – she had made a lifetime of difference to the bank and her community. To pay tribute to her, the chip-issuing project. Financial institu- judges created a new award: the Lifetime Community Star Award. tions qualify for the streamlined process Elizabeth is survived by her two daughters, Faye May Wedell and Vicki May Horne; two granddaughters, if they choose the same personalization six great-grandchildren, two nieces, and many grandnieces and grandnephews. She is also survived by her parameters and the same chip certified valued companion, James Renfroe. under the express program. ★ IBT Transitions to Cloud Technology IBT recently launched its new- est cloud-based technology — i2Suite — that will provide cost-effective ways to drive growth, increase efficiency and improve customer experiences. Demand for i2Suite includes i2Core account pro- cessing, i2OLB online banking, i2Mobile mobile banking and i2Payments (end-to- end debit card, bill payment and treasury management) with comprehensive finan- cial reporting. “IBT is dedicated to using modern cloud technology to drive growth and suc- cess,” Mike Golebiowski, president of IBT, said. “It will continue to provide commu- nity financial institutions with unparal- leled integration, features and functions for product development.”

20 ★ The Texas Independent Banker May/June 2014 NORTHSTAR BANK OF TEXAS Texas First Bank Chairman of the Board Texas City. That’s why I am proud to be Joins Church on Habitat for Chuck Doyle and his son, Texas First associated with the bank’s staff.” Humanity Project Bank president and chief executive officer Texas First Bank has 24 locations and Christopher Doyle, with the award. more than 250 employees with branches On March 15, NORTHSTAR BANK “I have to give all the credit to Chris in Galveston, Harris and Chambers coun- OF TEXAS and Denton Bible Church and the employees at all of the locations ties. It is expanding to Liberty County joined together to start a 12-week Habi- because we have some great people,” and two additional locations. Texas First tat for Humanity project in Denton, TX. Chuck Doyle said. “We do the same things Bank also owns a mortgage company and This is the second project the two orga- in all our communities, not just here in insurance firm. ★ nizations have partnered on to represent their commitment to the community. “This important project is something we enjoy participating in as a group,” Tony Clark, president and chief executive offi- cer of NORTHSTAR BANK, said. “It is especially rewarding to not only be work- ing together out in the community, but to know that a family in Denton is benefit- ting from this great program.” ★ LegacyTexas Bank Ships 650 Care Packages to Troops LegacyTexas Bank in Plano recently shipped 650 boxes to United States mili- tary personnel stationed around the globe. Bank branches served as drop-off loca- tions for donations and employees while local Scouts and the North Texas Chapter of Blue Star Mothers helped assemble and ship packages filled with toiletries, notes, magazines, snacks, boxes of Girl Scout cook- ies and more. This was LegacyTexas Bank’s most successful drive yet. “The community has been very sup- portive of Lone Star Salute for several years, but this year was extraordinary,” Phil Dyer, president of LegacyTexas Bank, said. “The gifts and messages for men and women serving our country were over- whelming and the letters of thanks from our troops make it clear how much these packages are appreciated.” ★ Texas First Bank Named Small Business of the Year Texas First Bank has been recognized as the Texas City-La Marque Chamber of Commerce’s Small Business of the Year. In addition to recognizing business success, the award noted Texas First Bank’s contri- bution to community support. Members of the chamber’s board and staff surprised

May/June 2014 www.ibat.org ★ 21 Business Continuity Planning

By Christopher Williston & Kelly Goulart

ver the last few years, there is no shortage of issues which might of distress, or in the event of scheduled Texas community bank- be affected. While the bank might rally employee time off. ers have learned first-hand to ensure that frontline interactions with the importance of disaster customers are covered, there is likely to Develop a Continuity Plan preparedness. In the wake be an overall disruption in the continu- Every department knows its strengths of disasters like Hurricane ity of some business operations. It might and weaknesses. Rather than relying on Rita, the Bastrop wildfires be impossible to ensure that business con- management to develop a plan for busi- and the fertilizer plant explosion in West, tinues as usual, but there are a few things ness continuity in each department, Owe have all seen the devastating effects that community banks can do to prepare have employees take the lead with their that natural and man-made disasters can for this scenario. individualized understanding of business have on communities and the ability of processes. As part of this planning, ask Texas businesses to serve their customers. Cross-Training employees to identify critical versus non- While much has been written on Cross-training of employees in dif- critical tasks in the day to day workflow. the necessity for disaster preparedness for ferent tasks is always a good idea, even In the event of a catastrophic staffing these types of catastrophic events, many though it will never be exhaustive enough occurrence, it might be necessary to inter- community banks live under a different to cover every aspect of the bank’s opera- rupt non-critical products or services. but serious threat: over-reliance on key tions. The Society of Human Resource Additionally, have departments personnel. Managers recommends that employees submit a written plan to management What would you do if 25-50% of your “swap” or exchange jobs for a defined detailing what would be required for their bank’s employees suddenly contracted the period of time. In addition to providing departments to continue operations with flu? That’s exactly what happened to one natural backups for employees, it also 25% and 50% of employees out of the IBAT member bank (which will remain gives them the opportunity to contribute bank. unnamed) in late 2013. Tellers, loan offi- at a different level of bank operations and cers and senior staff alike were suddenly expands employee skill sets. Risk Assessment and without warning absent from the While cross-training might result in Extraordinary times call for the bank bank for days at a time. more training time for each employee, it to reexamine its risk profile and determine In this kind of nightmare scenario, can prove to serve the bank well in times (Continued on page 44)

22 ★ The Texas Independent Banker May/June 2014

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Wednesday, June 25 5:30pm – 7:30pm Opening Reception with 2:00pm – 5:00pm Leadership Board of Exhibitors and Purse and Directors Meeting Toy Auction 2:00pm – 5:00pm Conference Registration Friday, June 27 3:00pm – 5:00pm Exhibitor Table 7:30am – Noon Conference Registration Top Setup 7:30am – 9:30am Buffet Breakfast 6:00pm – 9:00pm Leadership Board of 8:15am – 9:15am Breakout – Operations Directors Reception and 8:15am – 9:15am Breakout – Sales & Marketing Dinner 8:15am – 9:15am Breakout – Lending 6:00pm – 9:00pm Associate Member Advisory Council Meeting and Dinner 9:15am – 9:30am Refreshment Break 6:00pm – 9:00pm Leadership Board of 9:30am – 10:30am General Session – Directors Child Care Being a Rebel at Work: Lessons from a CIA Leader Thursday, June 26 – Carmen Medina 7:30am – Noon Golf Tournament – 10:30am – 11:30am General Session – TPC San Antonio Bank to the Future: 10:00am – 1:00pm Exhibitor Table Top Setup The Current State of 10:00am – 5:00pm Conference Registration Community Banks – Chris Williston 1:30pm – 7:30pm Exhibitor Table Tops 11:30am – Noon Changing of the Guard & 1:30pm – 2:30pm Connecting Leaders Breakout Awards – Membership June 26–28, 2014 Noon – 12:30pm Buffet Lunch Served by the & Spa 1:30pm – 2:30pm Connecting Leaders Breakout Leadership Board of Directors – Events JW arriott an ntonio ill ountry Resort 12:30pm – 2:00pm General Session – 1:30pm – 2:30pm Connecting Leaders Breakout The Art of Leadership – PAC – Daryl Johnston 2:00pm – 2:45pm Opening General Session – 2:30pm – 5:30pm Afternoon Free Exhibitor 2-minute stage demos, booths 1-18 5:30pm – 6:30pm Hospitality Suites 3:15pm – 4:15pm General Session – 6:30pm – 10:00pm Friday Night Family Fun – Your Network Matters: Dinner & Dancing The Art of Maximizing the featuring Aaron Watson Business Relationship Saturday, June 28 – Thom Singer 8:30am Farewell Breakfast 4:00pm – 6:00pm Kids Money Camp 4:30pm – 5:30pm General Session – Exhibitor 2-minute stage demos, booths 19-36

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By im eak & d Bayer

he December 2012 issuance of the Financial Account- ing Standard Board’s (FASB) latest proposal brought about the Current Expected Credit Loss (CECL) model. With it came a number of changes and controversy, as banks recognized the Tpotential of an increase in allowance lev- els as a result of the changes to how losses are estimated. While many banks, associations and firms submitted comment letters to provide feedback to the FASB on the model, it is ultimately left in the Board’s hands to determine the final model and the associated implementation timeline. It is expected that the FASB will release final guidance in 2014, with implementa- tion coming some years later. Despite the uncertainty, there are several steps to take now to prepare for the proposed changes.

Overview of the CECL Model The draft proposal from the FASB is broad in scope and would have impacts beyond the calculation of the ALLL for financial institutions. However, there are three key departures from current guidance, as they relate to the ALLL calculation. 1) Forward-Looking View — The proposal requires that forward-looking information and forecasts are considered for the estimation of credit losses. This is a critical change from the current model’s reliance on “incurred” losses to estimate loss rates. 2) Longer Time Horizon — Loss esti- mates would use the lifetime of the credit

26 ★ The Texas Independent Banker B’s CECL Model How to Prepare for Changes

By Tim McPeak & Ed Bayer

instrument as the time horizon as opposed Ways to Prepare for the as it may prevent hunting down historical to the next 12-month period. These fore- FASB Changes data down the road. casted estimates will need to be defensi- Improve Data Collection Here’s a chart that shows the new ble, which could be particularly challeng- No matter the final details of the new data pieces that could be required with ing for longer term loans. guidance, banks will need more robust the CECL model. Some banks may need 3) “Probable” Threshold Removed data on their loan portfolios, borrowers up to 1000 times more data to comply. — The “probable” threshold for loss rec- and external economic factors to make If banks don’t improve data collec- ognition used in the current guidance is supportable estimates of credit losses going tion and only maintain aggregate histori- removed, leaving institutions to evaluate forward. And, they can begin gathering cal charge-off calculations for loss rates whether or not a loss exists at that time that data now to ensure access to the right (versus migration analysis), they will pro- for the financial asset. The removal of this data and to establish processes to collect duce a much more subjective calculation. threshold could accelerate the timing for information on an ongoing basis. Loan-level detail for proper justification when institutions are required to recog- Specifically, if it isn’t already being will not exist. nize impairment. captured, loan-level data like historical Evaluate Third Party Solutions These changes relate primarily to balances, risk ratings, charge-offs and for Data Collection the FAS 5 (ASC 450-20) portion of recoveries should be collected. Addition- A common obstacle faced by smaller the allowance calculation, as it appears ally, other data that could be correlated banks is the ability to improve and collect that the current methodology for spe- to loan losses should be collected as well. data in such a robust form. For those fac- cific impairments under FAS 114 (ASC Examples include national, regional and ing this obstacle, a common solution has 310-10-35) will be largely unchanged. local economic data; borrower financial been using a third party software solution Though it is difficult to estimate without data and real estate metrics such as price for assistance with the ALLL calculation. finalized guidance from the FASB, the indexes. At this stage, it is likely better to An ancillary benefit of using software is its overall impact of these changes would err on the side of too much information, (Continued on page 28) likely mean an increase in the overall reserves banks need to hold. The move to a longer time horizon in particular could have a significant impact on required reserves. In addition to the potential for higher reserve rates, banks will also likely face additional compliance burdens. Many already spend significant time and resources on data collection and modeling for their ALLL calculation, but they could see this increase under the new methodol- ogy. For smaller banks, the complexity of the new standards could necessitate the engagement of outside consultants and heavier reliance on their existing accoun- tants and auditors.

May/June 2014 www.ibat.org ★ 27 FASB's CECL Model cont’d first in February 2013 and again in Febru- Spreadsheet-based models may need to integration with the core system, which ary 2014. be significantly reworked to accommo- Model Flexibility makes data available for a variety of multi- date the new guidance, so limiting hard As current ALLL models are updated dimensional reports. coded cells and maintaining clear docu- each month or quarter, consider the Another consideration for a third mentation on the model will be critical. potential changes and try to make cur- party software solution is the transition to This is especially true when there has rent models flexible enough to adapt. the CECL model. Most third party ALLL been turnover in staff, and the original providers, like Sageworks, are already planning adjustments to align with the new guidance (once it’s released). While transitioning from a spread- sheet-based incurred loss model to a software-based incurred loss model can be a complicated transition, switching to the CECL model at the same time could further complicate the transition and increase associated costs. Capital Planning Most analysts believe that the CECL model will increase a bank’s allowance reserve between 10 and 50 percent, requiring a one-time capital adjustment. Bankers agree with this expectation, as noted in a Sageworks survey conducted

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28 ★ The Texas Independent Banker May/June 2014 author of the model is no longer with the Conclusion web-based suite of solutions to streamline institution. credit analysis, risk rating, portfolio stress Despite the uncertainty regarding testing, loan administration and ALLL Utilize Available Resources the final guidance and timeline, finan- estimation. Sageworks’ risk management Keeping an open dialogue with cial institutions can take the previously team of consultants also assists clients examiners, auditors and other external discussed steps to get ahead of the curve with the implementation of their ALLL consultants and vendors on the proposed and be better prepared for the potential methodologies. To find out more, visit changes will be critical to understanding changes from the FASB. These institu- https://www.sageworksanalyst.com/. ★ the eventual compliance requirements tions should utilize available resources, and the impact on reserve levels. These develop a set of talking points, improve professionals likely have some familiarity data collection and look into their capital Tim McPeak is a director for the financial with the institution and can therefore be a planning, especially if a one-time allow- institutions division at Sageworks, where he consults on risk and portfolio management with sounding board or advisor as the proposal ance adjustment looks probable. Further, financial institutions nationwide. Previous to is modified and eventually finalized. it is critical that ALLL methodologies are his current position, Tim led Sageworks’ stra- Keep in mind the appropriate level flexible enough to incorporate potential tegic partnership program, through which the changes quickly and easily. Taking these company partners with consulting, loan review, of model sophistication for each institu- accounting and other professional services tion. As the details of the CECL model steps now can reduce the headaches once firms. are confirmed, there could be a push from the FASB releases the final guidance and these outside resources toward highly timeline for implementation. sophisticated models and analytics that Sageworks is a financial information Ed Bayer is the managing director of business development and market analysis at Sage- are more appropriate for large financial company that works with financial insti- works, where he is responsible for revenue institutions. For community banks, the tutions, accountants and private-company generated in our financial institution market. He focus should be on how their current pro- executives across North America to col- previously served as a senior risk management consultant, with a primary focus on allowance cesses can be modified and expanded to lect and interpret financial information. for loan and lease losses (ALLL) and stress comply with the new guidance. Thousands of bankers rely on Sageworks’ testing loan portfolios.

May/June 2014 www.ibat.org ★ 29 Mobile

o be, or not to be mobile, Banking applications generally use SSL antivirus. The most popular mobile bank- that is the question. Either encryption for securely transporting pri- ing malware, Zitmo, steals financial trans- way, you’ve got a problem. vate documents via the Internet, but 90 action information so the attacker can Thirty-two percent of percent of the tested apps initiated several later go into the user’s account and steal U.S. adults bank online via non-encrypted connections during their funds. Zitmo forwards all incoming SMS their mobile phones, accord- operation. This could allow an attacker messages to a remote Web server so the ing to an August 2013 report to intercept traffic and create a fake logon attackers can grab your mobile transac- from the Pew Research Center. Mobile prompt. Cybercriminals create and make tion authentication numbers, or mTANS, Tbanking has doubled since 2011. Last available in third-party stores versions of defeating your security control. year, Juniper Research reported there banking apps that look and act just like were 590 million mobile banking users your authentic banking apps, but they Take Arms Against a Sea of Troubles and expects the number to hit 1 billion by have malware hidden in them. To prevent While there is nothing you can do 2017. Need help running all this mobile that from happening, you should advise to ensure the security of mobile banking, banking? There’s an app for that. Aye, customers to go to your home page and you can take the following steps to help there’s the rub. Mobile apps — both iOS click on a button that sends them directly prevent fraud. and Android Apps — have vulnerabilities to either the Apple or Android store to that could provide attackers with personal download your mobile app. •Provide users with policies and adviso- identifiable information of your custom- ries so they are well-informed of your ers, including the current location of their Mobile Malware mobile banking guidelines. mobile devices. Insecure Web apps and No mobile device, whether com- • Manually audit and assess applications mobile apps can allow attackers to inter- pany issued or otherwise, should ever be before launching them. cept customer data and sensitive company allowed to connect to your network in any • Provide users with additional levels of data in transit and at rest. manner because if there is any malware security like multifactor authentication on the mobile device, it could infect your services and text message notifications. Mobile Applications network. Mobile antivirus is not 100 per- • Ensure all your applications are built Having conducted several tests on cent effective and can easily be disabled. with secure data transmission stan- hundreds of mobile banking applications, Many mobile applications have malware dards, secure data storage and applica- security researchers have discovered many built into them. When users download tion logging. of them are susceptible to various attacks. the apps, the malware can disable the (Continued on page 45)

30 ★ The Texas Independent Banker May/June 2014 How Mobile Devices Matters Affect Your Banks and Customers

By Jeff Multz

May/June 2014 www.ibat.org ★ 31 Search Engine Optimization Where are you?

By Bruce oore, D.

32 ★ The Texas Independent Banker May/June 2014 Search Engine O Where are you?

By Bruce Moore, D. Eng.

o prepare for a sales call on Search engine optimization is one providers won’t start to scan and index a small bank, I Googled of those things that is easy to do—if you your website until you register the domain the bank’s name. The one I know how to do it. There are nine basic name with them. Registration must be wanted didn’t appear on the steps: done by an IT person who has the system first page, or the second. I 1. Register your domain with authorities to put a small randomly named couldn’t find anything on this Google Webmaster Tools HTML file into the root web page of the bank until my third Google 2. Register your old domains server. The search engine uses this file to query. Clearly, this bank had not done 3. Update regulatory filings prove that the person registering the site Tthe basics of search engine optimization 4. Create a site map and register it with is actually the site owner. (SEO). Most Texas banks rank at the top Google Webmaster Tools Once the site is registered, the search of the page for a name query on Google, 5. Repeat the preceding steps with Bing engine will start to scan and index it over Bing or both. Unfortunately, some Texas Webmaster Tools a period of several days. The sections that banks cannot be found when searching 6. Review Webmaster Tools reports follow discuss basic things that you should for them by name on Google and Bing, let periodically do to control what gets scanned and alone by “bank city.” 7. Make sure that metadata is filled in how to improve you website’s position in This article is for executives at these 8. Improve your site with structured data search results. banks, for associate members whose busi- 9. Set up Google Places ness doesn’t show up on a name search in Register Your Old Domains Google and for loan officers trying to help Register Your Domain With About ten percent of Texas banks Google Webmaster Tools a borrower improve a business’s market- have changed domain names and redi- ing. If your bank’s Google results don’t Purchasing your domain name (your- rect to a new domain name. Make sure to look like the results for the Google query bankname.com) from Go Daddy, Network keep both the new and old domain names “bank of the west,” you’ve got the basic Solutions or one of the many web hosting registered with each search engine, and SEO work done, but there are probably firms does not register the domain name make sure to modify the settings on the two items addressed in this article that with the various search engine providers; old domain’s search engine registration so you haven’t done. Google, Bing and the other search engine (Continued on page 34)

May/June 2014 www.ibat.org ★ 33 Search Engine Optimization cont’d that the search engine knows to redirect old index references to the new domain Where are you? name.

FORCE YOUR ENTIRE SITE TO HTTPS Update Regulatory Filings Make sure to update the domain Google, all large banks and many smaller banks have changed their websites to force the name that is used for regulatory reports — use of the encrypted HTTPS protocol whenever someone tries to connect using the unencrypted HTTP that is the domain name that will be used protocol. Why are institutions doing this for parts of a website that don’t have sensitive information? by third party bank analysis websites. A When a customer connects via an unencrypted session, it is possible for a criminal to attack a cus- surprisingly high number of Texas banks tomer visiting a bank’s website WITHOUT compromising the bank’s website. A criminal could attack have obvious typos in the domain name your customer and obtain login credentials and neither of you will know it until the customer bounces a check or looks at a bank statement and discovers missing funds. that is present in the FFIEC database, Without going into a lot of details, using an encrypted HTTPS session makes it significantly more and another significant minority have old difficult to do this—that is why Google and large institutions have already moved to the encrypted domains listed in regulatory filings. HTTPS protocol for all traffic. Part of the algorithm for search rank For the same reasons, vendors to banks should consider converting to using the encrypted HTTPS is based upon other sites linking to your protocol for their websites, to make it more difficult for criminals to attack bank personnel. site; if the link at a third party analysis Converting to HTTPS requires obtaining and installing an SSL certificate. All banks should opt for an site is based upon the website that is listed “Extended Validation Certificate” which will cost a few hundred dollars, while small businesses can in FFIEC data, it will point to the wrong reasonably use a less expensive low validation certificate for a site that doesn’t allow online ordering. location and you won’t get any benefit For the latter, StartSSL.com provides a free low validation certificate, while Comodo, GeoTrust, Tawte, Go Daddy, Verisign and other vendors provide similar certificates at relatively low cost. from the third party link. Create a Site Map and Register It With Google Webmaster Tools You’ve probably seen a “site map” link on many web pages and wondered why on earth people put this page out there. It isn’t for humans — it’s for the robots that scan and index your website. Include information about how frequently each page is updated, as this will influence experience perspective how frequently the search engines scan your site. For instance, the page with your inter- est rates should probably show an update frequency of daily or weekly, while the page with your loan application probably BKD National Financial Services Group would show a monthly or longer update frequency. Once you’ve created the site maps, 90+ YEARS register them with Google Webmaster Tools, and add a reference in your robots. What are you reflecting on? Improving shareholder value? Reducing risk? Increasing txt file (for an example, look at the bot- capital? You need ideas. We can help. BKD brings more than 90 years of tom of https://www.bankofamerica.com/ experience to the table, and the advisors of BKD National Financial Services robots.txt). This will tell the search engine Group can help you manage change, make wise decisions and stay compliant. robots how often to scan each of the pages Experience how our expertise can help give you a better vantage point. on your website. Debbie Scanlon Jon McDowell [email protected] // 713.499.4600 [email protected] // 210.341.9400 Repeat the Preceding Steps Doug Van Meter bkd.com With Bing Webmaster Tools [email protected] // 405.606.2580 Once you’ve completed the steps to register your website with Google (Continued on page 37)

34 ★ The Texas Independent Banker May/June 2014

Associate2014 Members Anniversaries 25 years American National Insurance Company ★ League City, Texas 20 years Elan Financial Services ★ Pittsburgh, Pennsylvania Fox, Byrd & Company, PC ★ Dallas, Texas FTN Financial ★ Memphis, Tennessee John M. Floyd & Associates ★ Baytown, Texas The Baker Group ★ Austin, Texas 15 years Abound Resources ★ Austin, Texas Chandler Signs ★ Dallas, Texas Commerce Street Capital, LLC ★ Dallas, Texas CSI (Computer Services, Inc.) ★ Austin,Texas Equias Alliance, LLC ★ Plano, Texas Jack Henry & Associates ★ Monett, Missouri MPA Systems, Inc. ★ Sanger, Texas Raymond James/Morgan Keegan ★ Memphis, Tennessee SHAZAM ★ Irving, Texas Steven H. Shimotsu, CPA ★ McAllen, Texas SWBC, Financial Services Division ★ San Antonio, Texas 10 years Bank Compensation Consulting, Inc. ★ Plano, Texas Bank On Hold ★ Edmond, Oklahoma Briggs & Veselka Co. ★ Houston, Texas I.T. Works ★ Houston, Texas Jackson Walker L.L.P. ★ Austin, Texas Southwestern Regional Insurance Center ★ Houston, Texas Search Engine Optimization cont’d what metadata is missing from your site. Set Up Google Places At the very least, each page should have a Webmaster Tools, you will have covered Once your website is in order, you description tag and a keywords tag. the search engine set-up for most of the should begin to look at locality improve- As your site is scanned by the robots, web searches in the United States. To get ments to search and potentially set up the webmaster tools will start to list the most of the remaining searches, register Google Places. This may help for queries terms that the search engines are using to with Bing. The process and mechanics are like “bank grapevine texas” and is used to index the site; if there are concepts and very similar. get a Google map display of branch loca- terms that aren’t listed, look at the con- tions as part of the search results. Review Webmaster Tools tent of the actual pages and improve the Reports Periodically copy to make sure that relevant terms are Summary Once you have your site registered included in the text of the articles and The steps in this article provide the with the various search engines, an product descriptions on your site. basic search engine optimization steps employee should be assigned to review that will get your bank or business listed at Improve Your Site With Structured Data at least the Google webmaster tools each or near the top — when someone is look- day, starting with the “Security Issues” Once you have the content on your ing for your organization by name, but not section. If the Google or Bing robots find site set up and the basic metadata in place, necessarily by “bank and city.” The steps malware on your site, you have an “all you can start to enhance how your site is in this article should be viewed as a start- hands on deck” level problem. Don’t be displayed by the search engines. To do ing place for making sure that your bank like Target and discover malware weeks this, start to set up structured data which can be found on the Internet. ★ after the compromise. is sometimes referred to as micro data or breadcrumbs. If you Google “bank of the Bruce Moore received his Bachelor of Science in Chemical Engineering from the University Make Sure That Metadata is Filled In west” you will see a well organized search of Michigan, his Doctor of Engineering from Once you have your site registered result for the Bank of the West web page Southern Methodist University and his banking as the first result. This is probably due to education at the Southwest Graduate School to be scanned and indexed, it is time to of Banking. He is the owner of Moore Software turn to the content of your website. Use a good implementation of structured data Services, LLC, where he develops statistical the various webmaster tools to tell you on the Bank of the West website. and optimization software.

Leaders in Mergers and Acquisitions

While the strategic business objectives that drive major corporate transactions may vary, the need for experienced, effective legal counsel remains constant. The mergers and acquisitions practice of Hunton & Williams LLP helps senior business leadership negotiate the increasingly complex M&A path, from initial planning, structuring and negotiation of a deal, through due diligence and regulatory approvals, to completion of the project and postclosing integration. • For 2013, according to SNL Financial, the lawyers of our financial institutions corporate and regulatory group have been involved with over five percent of all bank M&A transactions. • In 2013, we were ranked #1 for the fifth time in seven years in SNL Financial’s league tables for bank and thrift legal advisers, by number of deals and ranked in the top five for cumulative deal value. • We have been recognized as a leading M&A practice by Chambers USA and have received multiple M&A Atlas “Deal of the Year” awards. For more information, visit www.hunton.com. © 2014 Hunton & Williams LLP • www.hunton.com

Atlanta • Austin • Bangkok • Beijing • Brussels • Charlotte • Dallas • Houston • London • Los Angeles McLean • Miami • New York • Norfolk • Raleigh • Richmond • San Francisco • Tokyo • Washington

May/June 2014 www.ibat.org ★ 37 IBAT’s 40th Annual Convention SEPTEMBER 27-30, 2014 Worthington Renaissance Hotel • Fort Worth

SCHEDULE OF EVENTS

Saturday, September 27 4:00-6:00pm Chairman’s Tailgate Party Evening Free Sunday, September 28 7:00-7:30am Devotional 11:00am-12:00pm Regulator Roundtables 12:00-3:00pm General Session (includes lunch) 3:00-5:00pm Exhibits 5:00-7:00pm Reception with Exhibitors Evening Free Monday, September 29 7:30-9:00am Informational Breakfast featuring Exhibitor Stage Demos 9:00-11:00am Exhibits 11:00am-noon Learning Labs 12:15-2:00pm Best of Community Banking Awards Luncheon 2:00-3:00pm Learning Labs 3:00-4:45pm General Session 5:00-6:30pm Hospitality Suites 6:30-9:30pm 26th Annual PAC Auction 9:30-11:30pm Songwriters’ Late Show Tuesday, September 30 7:30-8:30 am Banker to Banker Resource Sharing 8:45-9:45 am Learning Labs 9:45-11:45am General Session & Annual Meeting (includes Brunch)

EXHIBITORS

Abound Resources, Inc. Comptroller of the Currency First American Payment Systems MG Architects AccuSource Solutions Computer Services, Inc. First Data Online Banking Modern Banking Systems Advantage Health Plans Trust Condley and Company, L.L.P. Garland Heart - Security / Compliance Nicola Banking System, Inc. Amerisource Funding, Inc. Consultants + Builders, Inc. / Consulting Outsource ATM The Baker Group CSPI Glory Global Solutions PrecisionLender BancVue Curtis 1000, Inc. Graduate School of Banking at Promontory Interfinancial Network, LLC Bank Compensation Consulting, Inc. D + H Colorado PULSE Bank Financial Services Group Davis Kinard & Co, PC Gulf Coast Business Credit Quest Analytics Bankers Healthcare Group, Inc. DEI Incorporated Harper & Pearson Company, P.C. Reynolds Williams Group BankOnIT Dell Inc. Holman Capital Corporation SHAZAM Briggs & Veselka, Co. Dell SecureWorks Investment Professionals, Inc., (IPI) SNL Financial CalTech Deluxe Corp. J. B. Lloyd & Associates, LLC Subchapter S Bank Association Cardtronics Diebold John M. Floyd & Associates SWACHA Catalyst Financial Company Equias Alliance LEVEL5, LLC Texas Department of Banking CenterState Bank Farmer Mac Main Street Checks, Inc. TransFund 38Chandler ★ The Signs Texas Independent BankerFederal May/June Home Loan 2014 Bank of Dallas MEA Financial Enterprises, llc Verafin CONVENTION SPONSORS as of 4/25/14 Experienced Correspondent Bankers TITANIUM SPONSOR(S) $50,000 and above The Baker Group If you are a current or retired correspondent PLATINUM SPONSOR(S) $20,000-49,999 banker and have built a solid trust with Texas PULSE bankers we’re interested in visiting with you. GOLD SPONSORS(S) We have other experienced bankers on our $10,000-19,999 Advantage Health Plans Trust team and are building a presence a Texas. Deluxe Corp. Federal Home Loan Bank of Dallas Part and full time positions available. SILVER SPONSOR(S) Contact Robert Mendez at 405-570-2723 $5,000-9,999 BKD, LLP Bracewell & Giuliani LLP Diebold Hunton & Williams Padgett, Stratemann & Co., LLP DEGREES IN BANKING Contact us for a free brochure. BRONZE SPONSOR(S) 866-BEARKAT or (936) 294-3764, email: [email protected] $1,500-4,999 AccuSource Solutions shsu.edu/see/banking American National Insurance Company SAM HOUSTON STATE UNIVERSITY Amerisource Funding, Inc. COLLEGE OF BUSINESS ADMINISTRATION Crowe Horwath LLP D + H Davis Kinard & Co, PC Dell Inc. Dell SecureWorks Equias Alliance Federated Investors, Inc Fenimore, Kay, Harrison & Ford LLP First American Payment Systems Frost Bank Independent Community Bankers of America Kennedy Sutherland LLP MG Architects Rosenthal Pauerstein Sandoloski Agather LLP TIB-The Independent BankersBank Register now! Verafin Yennik, Inc. Leadership Conference BLUE RIBBON SPONSOR(S) June 25–28, 2014 $750-1,499 The Bankers Bank Catalyst Financial Company Condley and Company, L.L.P. JW Marriott • San Antonio The Genesis Group Hill Country Resort & Spa Subchapter S Bank Association SWACHA May/June 2014 www.ibat.org ★ 39 March 19–20 IBAT Education presents 2014 Advanced Credit Anal- ysis Summit in Dallas. March 21 IBAT speaks at the meeting IBAT of the East Texas Compli- ance Group in Tyler. March 24 AroundA The IBAT Board of Directors holds its quarterly meeting the in Dallas. The IBAT Leadership Divi- sion Board conducts its State quarterly meeting in Dallas. and beyond March 25 IBAT Education presents Key Factors for Your 2014 BSA/AML Program in San Angelo. The IBAT Services Board of Directors holds its quarterly March 12 meeting in Dallas. IBAT Regional Meetings in March 26 Corpus Christi, Houston and IBAT Education presents Kilgore. Key Factors for Your 2014 IBAT Education presents BSA/AML Program in Fort 2014 Mortgage Lending: Stockton. Start to Finish in Tyler. March 26–27 March 13 IBAT Education presents IBAT Regional Meetings in 2014 Sales Culture Summit Sulphur Springs and Dallas. in San Antonio. February 3–4 February 13 March 2–6 IBAT Education Foundation March 27 IBAT presents TechMecca in IBAT Education hosts IBAT attends ICBA’s annual presents 2014 Mastering IBAT Education presents Key Austin. 2014 Mastering HMDA in convention in Honolulu, HI. HMDA in Tyler. Factors for Your 2014 BSA/ AML Program in Marfa. February 4 Lubbock. March 11 March 18 IBAT Education hosts the February 15 IB AT Regional Meetings in IBAT Education presents IBAT joins Texas First 2014 Anti-Money Launder- IBAT Education Founda- Galveston, Schulenburg and Credit Analysis Summit in Lady Anita Perry for the ing and Bank Secrecy Act in tion presents the Teach Harlingen. Dallas. Main Street Tour to Sealy, TM Caldwell and Waco. Houston. the Teacher Program in IBAT Education presents IBAT Education presents Key February 5–6 Edinburg. Moving Forward with Dodd- Factors for Your 2014 BSA/ IBAT meets with key Con- February 20–21 Frank Rules in 2014 in Tyler. AML Program in Brenham. gressional and Regulatory IBAT Education hosts Hold, officials in Washington, Fold or Raise? An M&A D.C. Workshop for Community IBAT Calendar February 9–11 Banks in Dallas. IBAT hosts Winter Summit February 23–24 May September XIV in Lake Tahoe. IBAT participates in the SWGSB Assembly. 20 Leadership Division Region 1 Golf 27–30 IBAT Convention, Fort Worth February 10–12 Tournament, Amarillo IBAT Services participates February 25 October 22 Leadership Division Regions 3 & 4 in Deluxe Exchange ‘14 IBAT Education hosts the 12–17 Bank Operations Institute, Dallas Client Conference in Boca Castroville Area Cluster Pro- Networking Event, Dallas 31 Certified Community Bank Directors Raton, FL. gram: Key Factors for your 22 Associate Member Networking Event, Program February 11 2014 BSA/AML Program. Dallas IBAT Education hosts Mov- February 26–28 November ing Forward with Dodd- IBAT hosts the pre-ICBA June 1 Certified Community Bank Directors Frank Rules in 2014 in Convention Program in 3–4 Bank on Boot Camp Program Lubbock. Maui, HI. 26–28 Leadership Conference, San Antonio February 12 March 1 6 Investment & Asset/Liability IBAT Education hosts 2014 IBAT Education Foundation July Management Summit Mortgage Lending: Start to presents the IBAT Teach 24–25 Financial Literacy Summit 13 Leadership Division Region 8 Finish in Lubbock. the TeacherTM Program in Networking Event, Austin Wichita Falls. August 16–21 Bank Lending Institute, Austin 14–15 Operations Compliance Summit 28 Appraisals Summit For information about any of these programs, contact Julie Courtney at 800-749-4228 or 40 ★ The Texas Independent Banker May/June 2014 [email protected], or visit www.ibat.org. effective date. Remember, too, that POAs GENERAL COUNSEL’S CORNER created under prior law are judged under cont’d from page 12 the law in effect when they were created. ADVERTISING DIRECTORY The final POA kerfuffle involves the Checks and Unauthorized Signatures Texas Supreme Court decision in Norwood Customers are still supposed to review v. Texas Finance Commission in which the their bank statements and report unau- court effectively invalidated the ability to AccuSource Solutions thorized signatures. And customers still use a POA to close a home equity loan. www.accusourcesolutions.net p 13 The POA must have been executed at the don’t do that. Then when the account AHPT gets badly overdrawn, they come in to the lender, an attorney’s office, or title com- www.advantagehealthplans.com p 35 pany. Because of the difficulty of proving bank to question why. At this point, the ANICO customer realizes that (a) their significant that up, most title companies simply won’t www.anico.com p 2 other, (b) someone taking care of grand- close a home equity loan on a POA. ★ The Baker Group dad, or (c) the company’s bookkeeper www.gobaker.com p 15 [pick the one that fits!] has been embez- The Bankers Bank zling for years. Obviously, this is not the INTEREST RATES www.thebankersbank.com p 20 customer’s fault and so they expect the cont’d from page 14 bank to restore all of the stolen money. but generally the Tax Code allows for a Bank On It www.bankonitusa.com p 39 (Does this sound familiar?) loss on the sale of securities to be deducted Your deposit account agreement for tax purposes. Moreover, for a taxable BKD, LLP www.bkd.com p 34 should (and doubtless does) contain a bank, the interest income from reinvest- provision admonishing the customer to ment is allowed to be earned tax free if Caltech review statements and clearly stating that www.caltech.com p 21 the proceeds are used to purchase munici- unauthorized check transactions must be pals. The bottom line is that the bank can FAPS reported within 60 days after the state- www.first-american.netp p 7 recoup a tax-deductible loss with tax-free ment date or they will be cut off. Such a FWIT provision is consistent with Texas law and income. This strategy in particular is best www.fwitexas.org p 28 statements by the Texas Supreme Court. executed at the turn of the year in order to have an entire twelve months to recover Granville Financial Group In short, the cost is not that of the bank www.granvillegrp.com p 29 but rather on the customer. any loss. Cash Flow/Liquidity Management Swap: Hunton & Williams But don’t forget that if the disputed www.hunton.com p 37 transaction is a debit card one, the rules To a large extent, investment portfolio from Regulation E will apply if this is a management is simply the management IBAT Services www.ibat.org/services p 9 consumer account. However, remember of cash flows. Just as we look at rate sen- that if the customer gave the debit card sitivity for the overall balance sheet, we IBT, Inc. www.ibtapps.com p 5 to someone and authorized her to use it, must also take a macro view of the port- that person can continue to use it (at least folio and pay close attention to the posi- JMFA in the eyes of the bank) until the bank is tioning of cash flows for reinvestment. www.jmfa.com p 48 This involves creating and maintaining a informed that the authorization has been PULSE revoked. schedule of maturities, prepayments, and www.pulsenetwork.com p 17 other sources of principal return that will Bottom line: the bank may have Sam Houston State University defenses to these claims! optimize the risk and reward of reinvest- www.shsu.edu p 39 ment in future months and years, regard- Smith Hamilton Powers of Attorney less of the direction of interest rates. Cash www.smithhamiltonllc.com p 11 On January 1, 2014, the Estates Code flows for many securities, callable bonds, and MBS in particular, are moving targets Transfund (chapter 752) new power of attorney www.transfund.com p 47 form went into effect. Apparently a lot because of the options risk. This makes it of folks didn’t notice this since custom- critical that the profile be monitored and

ers are still bringing in old style forms to measured for changes in rates, and adjusted

open up accounts. The good news is that with bond swaps when necessary.

the POA law doesn’t create an exclusive The Baker Group has always main- form. Nonetheless, the new section on tained that active portfolio management

“Important Information for Agent” really has distinct advantages if it is done properly.

should be a part of any new POA after the (Continued on page 42)

May/June 2014 www.ibat.org ★ 41 INTEREST RATES cont’d from page 41 We work with clients to develop a sound decision-making process and well-defined goals as well as reporting systems that allow for pre-trade analysis or scenario simula- tions. The tools and processes for making better decisions and achieving optimal performance are available, and now is the R. Pope Sr Steinmetz Martin Wilmeth time to take advantage of them. ★ Since 1979, we’ve helped our clients improve decision-making, manage interest rate risk, and maximize investment portfolio performance. Our proven approach of total resource integration utilizing software and products developed by Baker’s Software Solu- tions* — combined with our solid investment experience and advice — makes us the invest- ment firm of choice for many community Stegemoeller Whitaker Crawford Barrow financial institutions. For more information, Longview contact Jeff Caughron at The Baker Group: Texas Bank and Trust has announced 800-937-2257, www.GoBaker.com, or several promotions. email: [email protected]. Kevin Hood was named president *The Baker Group LP is the sole autho- and chief operating officer. For the past rized distributor for the products and services year, Hood has served TB&T as senior developed and provided by The Baker Group executive vice president and as a senior Software Solutions, Inc. lender. In his new role, he will assist in the overall management of the $1.9 bil- Kuehl Mullens lion bank and its 19 branches. PERSONNEL UPDATE cont’d from page 16 In announcing Hood’s appointment, B.A. in Business from Baylor University professional service firms, including legal, board chairman Rogers Pope, Sr. added and an M.B.A. with a concentration in accounting, medical architectural and that the change in senior leadership was Finance from University of North Texas. consulting. He holds a BBA in Finance influenced, in part, by the decision of Previous experience includes completion from the University of Houston. Howard Hackney to return to retire- of a formal credit training program and Chris Springer has been promoted ment this year. Though Hackney will step subsequent work in real estate, SBA and to banking officer/commercial lender at down from day-to-day management, he USDA lending. Integrity Bank. Springer joined the bank will remain a consultant for and director Houston in 2011 as credit analyst. He holds a BBA of the bank. Wanda Matthews has been promoted in Finance from Texas A & M University. Randy Bjork, chief financial offi- to senior vice president of operations for Randy Gartz has joined Community- cer, has been promoted to senior execu- Integrity Bank. She will manage the loan Bank of Texas as executive vice president, tive vice president. Bjork, manager of the operations and deposit operations of the commercial lending. Gartz will work to bank’s accounting and risk management bank, including wire transfer, ATM debit expand the bank’s commercial lending division, joined the bank in 1994. A cer- cards and fraud. Throughout her 31 years relationships in the greater Houston mar- tified public accountant, he has served in of banking experience, Matthews has ket. He earned his BBA in Finance and the role of chief financial officer for the worked in the areas of loan operations, Accounting from Texas A&M. bank and its parent holding company deposit operations, technology, project Irving since that time. management, risk management and pro- Kathy Taylor has joined Banc State- Shane Best, chief lending officer, cess engineering. ments, Inc. as vice president of marketing. has also been promoted to senior execu- John A. Clarke has joined Integ- Taylor will utilize her creative acumen to tive vice president. Best joined TB&T in rity Bank as senior vice president. With spearhead brand development and man- 1989. As chief lending officer, he oversees over 32 years in Houston banking, Clarke agement, strategic analytics and market- all lending activities of the bank, which will focus on commercial lending to ing organization. include consumer, commercial, and real

42 ★ The Texas Independent Banker May/June 2014 estate loan origination and relationship senior vice president of Vista Bank; he has Plano management. been with the bank for ten years. Sharon Mull has received the Shelby Texas Bank and Trust also announced Troy Stegemoeller has been pro- Distinguished Service Award at Legacy- that Rogers Pope, Jr., will transition from moted to chief lending officer where he Texas Bank. The employee of the year his previous role as chief operating officer now oversees all lending activities. Ste- award is named after LegacyTexas Chair- to chief executive officer in conjunction gemoeller has been with the bank for 24 man Pat Shelby. Mull joined the bank with his vice chairman duties. Rogers years, and is a graduate of the LSU Gradu- as a loan secretary in 1977, and recently Pope, Sr. will continue to serve as chair- ate School of Banking of the South, and retired as an executive lending assistant in man of the bank, as well as chairman and of Texas Tech University. the bank’s commercial loan department. chief executive officer of the bank’s par- Matt Whitaker has joined Vista Bank San Angelo ent holding company. as business development officer where he Mark Edens has joined CalTech as will work to increase client value by build- Lubbock the firm’s new operations manager. Edens ing relationships on trust and integrity. He Vista Bank has announced several has worked for the past six years in the is a graduate of Texas Tech University. promotions and new hires. energy sector in west Texas as a regional John D. Steinmetz has been pro- Marion business leader. He received a BBA with moted to president. Steinmetz has been Joyce Damerau, vice president and a Finance Major from Midwestern State with the bank for six years and previously cashier of Marion State Bank, has com- University in 2005. In his new role, Edens served as the market president. He will pleted 50 years working in the banking will be responsible for strategic develop- oversee all banking activities, direct the industry. Damerau began her banking ment and accounting management. planning and achieving of strategic goals, career in 1963 in the bookkeeping depart- San Antonio and will be responsible for all employee ment at Seguin State Bank & Trust Co. Christine Walters has been promoted and client relations. She joined Marion State Bank in 1973, to chief financial officer of Investment Cheryl Martin has been promoted working as a teller and bookkeeper. In Professionals Inc. Promoted from IPI con- to senior vice president. Martin has been 1978 she was named cashier, and later was troller, Walters has over 20 years of expe- with the bank for 32 years. appointed secretary to the board of direc- rience in the accounting sector and holds Matt Wilmeth has been promoted to tors and then vice president. (Continued on page 44)

Do You Tweet? Twitter 101 Video Series Now Available

Last year, IBAT’s Strategic Planning Committee charged All of the videos can be found on IBAT’s website at www. staff with developing resources to help community bank- ibat.org/twitter-101. Videos available are: ers better understand social media. In particular, the com- • Creating an Account • Following and Finding Followers mittee identified Twitter as an area of interest for bankers • Composing a Tweet to consider due to its value for grassroots interaction • Reply, Retweet and Favorite with lawmakers. As a result, IBAT staff have developed • How to Use Hashtags five short instructional videos to help community bankers All of the videos are 1-3 minutes in length. If you have questions or sug- answer the basic questions, “What is Twitter?” and “How gestions for topics to be covered in future videos, contact Christopher do I use it?” Williston at [email protected], 512-275-2208.

May/June 2014 www.ibat.org ★ 43 PERSONNEL UPDATE cont’d from page 43 her FINOP designation. She joined IPI in 2008, and earned her BS in Account- ing from Eastern Illinois University and an MBA from Illinois State University. As controller, Walters is responsible for all aspects of the accounting and finance department; as FINOP, she is also respon- sible for regulatory reporting. Thank you Waco First National Bank of Central Texas has named a new president and three to our 2014 Regional Meeting Sponsors! executive vice presidents. Randall Crawford has been elected LUXURY CLASS president, and Joe Barrow, Sloan Kuehl The Baker Group and Steve Mullens have been promoted to executive vice president. FIRST CLASS Crawford served the bank as execu- Bank Compensation Consulting tive vice president for the past 18 years. The Bankers Bank He will be the chief operating officer and Dell chief financial officer. Barrow and Kuehl Dell SecureWorks will direct the bank’s lending activities. Deluxe Corp. Barrow will continue his role as president Federal Home Loan Bank of the Woodway-Hewitt location. Mullens First American Payment Systems will focus on the operations and technol- Granville Financial Group ogy side of the bank. Jim Haller, execu- The Todd Organization tive vice president, will continue to direct the marketing activities of the bank. ★ BUSINESS CLASS BKD, LLP Doyen Sebesta Ltd. L.L.P. Business Continuity Planning cont’d Equias Alliance how it will minimize risk for the duration ICBA of the catastrophic staffing event. This John M. Floyd & Associates might require the bank to cut back on PULSE the number of daily reconciliations made by staff, possibly extending some out COACH to every other or every third day, where AccuSource Solutions possible. Advantage Health Plans Trust In other cases, banks might consider Bracewell & Giuliani, LLP shutting down the lobby and funneling all Catalyst Financial Company transactions through the drive through Diebold or vice versa, ceasing the opening of new Fenimore, Kay, Harrison & Ford LLP accounts or the acceptance of new loan applications. You still need to provide CARGO essential services to your customers, but Abound Resources you might have to get creative about American National Insurance Company how you are going to provide those ser- BOK Financial vices. Any task that is reliant on staff- Harper & Pearson Company, P.C. intensive verification (including wire MG Architects transfers) should be considered for inter- Pattillo, Brown & Hill, L.L.P. ruption to protect the bank from undue risk while handling the bare minimum for (Continued on opposite page)

44 ★ The Texas Independent Banker May/June 2014 ACH customers. Even if staff who usually WELCOME NEW MEMBERS handle those processes are not out of the bank, shutting down those services for a ® temporary period of time will free them up AFFILIATE MEMBERS and their attorneys. With the current regulatory to handle other tasks. Kevin Mutscher, Shareholder climate, the firm is engaged in assisting clients with Betts, Walters & Mutscher, P.C. matters involving the FTC, the CFPB, and the Texas Back Up Partnerships Brenham, TX Attorney General. If you haven’t already done so, you Sterling Broadbent, Principal CCG Catalyst Consulting Group might consider entering into an agree- Sterling Compliance Services Paul Schaus, President ment with another community bank to Austin, TX Phoenix, AZ www.ccg-catalyst.com serve as a backup processor. While this Steven Damiani, VP Business Development will depend on being able to find a bank Infinex Financial Group CCG Catalyst is a bank consulting firm providing using the same platform program, doing so San Antonio, TX strategic direction and focused guidance for banks. will add an extra level of protection and CCG Catalyst’s team of industry specialists assist cli- ASSOCIATE MEMBERS ents as a trusted advisor in strategic services related allow for certain operations to continue BOK Financial to all areas of banking — lending, finance, retail, in the most dire of circumstances. ★ Sarah Graves, Vice President operations, M&A, technology, ERM, compliance, Tulsa, OK marketing, and business development. Christopher Williston VI is IBAT’s Senior Vice www.bokf.com President – Communications; Kelly Goulart is Smith Southern Equipment, Inc. IBAT’s Regulatory Compliance Manager. BOK Financial Corporation is a 25 billion in assets dba Smith Hamilton financial holding company with retail banking oper- Jeff Braselton, President ations in eight states in the southwest United States. Houston, TX Mobile Matters cont’d Through BOK Financial’s Correspondent Banking www.smithhamiltoninc.com Department we provide a full suite of products to • Examine your current Web and mobile Smith Hamilton is Texas owned and operated, and meet your financial needs, including traditional cor- now in 18 states! We’re the largest independent bank application designs at least quarterly, respondent bank products as well as International, equipment and service company in Texas. We sell and test the apps directly through the FX, Mortgage, Consultant Services and Mineral and service ATMs, cash recyclers, drive-in, alarm, Management. BOK Financial is one of the largest user-interface. video access control, safes & vaults, locks, BR and most well-established North America Fiduciary • Assess the security and compliance protective barriers, and more! Ask about our ATM mineral managers. Our products are nationally com- risks of your entire mobile application, Outsourcing Program! petitive, but delivered locally to meet the specific the backend systems and network it needs of our customers. Contact: John Smithson, Valesco Industries connects to, and the interactions and Correspondent Banking, 918-588-6034; Sarah Bud Moore, Managing Director data flows between them. Graves, Mineral Management, 913-904-8776. Dallas, TX www.valescoind.com • Conduct a detailed manual technical Bush & Ramirez, PLLC testing and targeted source code review Keith Wier, Shareholder/Attorney Valesco Industries invests subordinated debt and to expose vulnerabilities which are not Houston, TX equity in lower middle market businesses. Our apparent from end-user interface test- www.bushramirez.com investments supplement senior debt loans where cash flow financing is needed. Valesco’s capital Bush & Ramirez represents the financial services ing only. comes primarily from 53 regional and community industry in litigation and regulatory/compliance • Have an independent security con- banks, located mostly in Texas. We focus on invest- matters nationwide. Its client base includes debt sultant assess your app’s security from ments in manufacturing, distribution, and select busi- buyers and asset purchasers, auto finance compa- ness services. ★ the app itself to your backend support- nies, payday lenders, and third party debt collectors ing systems and the communications in-between. • Test Internet-facing systems that sup- port the mobile application. When all else fails… • Work with an expert who can tell you exactly what you need to do to Does your cyber fix holes in your apps to protect your insurance offer the network and data, and to be compliant with industry regulations. ★ broadest coverage

Jeff Multz is Director of Midmarket North Amer- available? ica at Dell SecureWorks. Dell SecureWorks, a global information services security company, Contact the IBAT FS Team to learn more about cyber insurance. helps organizations of all sizes reduce risk, 800.749.4228 www.ibat.org improve regulatory compliance and lower their • IT security costs. For more information, con- tact [email protected].

May/June 2014 www.ibat.org ★ 45 THE COMPLIANCE GUY

By Kelly Goulart

Know Any Compliance Officers Looking For A Job? ot a month goes by that I don’t get a call from a be dynamic and not static, so it should be subject to regular bank saying something along the lines that “My review and updating. It should also include specific risk compliance officer has ______(quit, retired, trends for each product or service. Those trends, coupled found another job) and I need to find another with the inherent risk and likelihood of occurrence, one fast!” direct the resources of the compliance officer. Regularly That becomes a bigger problem when updating your risk assessment will direct resources and the bank has built a compliance program provide a plan going forward for staff and the new around an individual rather than as a critical function compliance officer when one is hired. Sign up for debit processing with Nof the bank. In other words, if the bank’s compliance The third pillar is testing and monitoring officer informs senior management that he or she is “... for performance. Using the written compliance and get instant issue for headed out the door!,” has the bank planned for that program and the risk assessment, the compliance inevitability by having a compliance function rather function should continue with testing and moni- than a compliance person? The loss of an experi- toring without a named compliance officer. This Instant-issue allows you to make new and replacement debit cards in your branch lobby enced compliance officer can certainly degrade the vital part of the compliance function should not using secure, table-top equipment. Once the card information is entered into the system, compliance function, but it should not disable it. stop because a single person leaves the employ- it only takes about a minute to produce a personalized debit card. Your cardholder Compliance professionals often talk about ment of the bank. the “four pillars” of an effective Bank Secrecy Act / anti-Money The fourth and final pillar is the compliance committee. I leaves the branch with a new debit card in hand and ready to use! Laundering program. If you aren’t a compliance nerd and have am a big fan of a compliance committee. The regulatory compli- never heard of the pillars, bear with me. Those “pillars” function ance workload really is too much for a single person to handle, For a very limited time, will provide equipment, project management even in a small bank. The compliance officer can direct and as must-haves for holding the BSA/AML roof up. That same kind expertise, installation and training to financial institutions that sign up for EFT processing of approach can be used for ensuring that a bank — regardless of steer the committee, but the involvement of other product and the size — has a compliance function and not just a compliance service segment managers can be extremely helpful. The dis- – all at no extra charge! officer. Senior management and the board should be asking what semination of knowledge and responsibilities means the com- pliance function is not dependent exclusively upon any single are the essential pillars of a compliance program, and build an But hurry! This offer may expire in an instant! effective compliance program using those pillars. individual. A compliance committee also serves to help the compli- The driving questions for the compliance officer and senior ance officer feel less overwhelmed, and that’s a major concern Since 1975, TransFund has been providing bank management are (1) What are the risks?; and (2) What these days and may even be the reason your compliance offi- can be done to mitigate that risk? cer left. Even if it is just two or three other individuals talk- EFT processing to community financial That brings us to the first pillar: a written compliance pro- ing every month or quarter with the compliance officer, don’t institutions. Our mission is to help gram. At a minimum that written program defines roles and underestimate the value. A compliance committee can also help maximize EFT profitability for our responsibilities, sets out objectives for the identification of risk, to develop talent from within. Regulatory compliance is not for establishes accountabilities for all bank employees including everyone, but for those who have the knack it can be tremen- clients, while providing new and senior management, and provides for the direct board oversight dously rewarding. A compliance committee can help identify exciting products and services to of the program. The written program is probably the single most and encourage those individuals to pursue a career in regulatory help clients grow. important pillar of the compliance function. When (not if) the compliance and perhaps become the bank’s next compliance compliance officer leaves, the program remains, and if it was officer or at least a competent interim compliance officer while running smoothly it will continue to operate until a new com- you search for your next compliance officer. That internal focus pliance officer can be found. recognizes the fact that, for a variety of reasons, internal talent The second pillar is a formalized risk assessment. There are rather than outside talent may be better suited to and able to a number of ways to accomplish a risk assessment, but there is step into the role of the compliance officer. no required process. At the very minimum it should address each So have you given any thought to that day when your com- Call TransFund today at 405.401.9469, product and service, outline the inherent risk (or exposure) for pliance officer knocks on your door and says “Can we talk?” ★ 713.446.5292, [email protected], each of those products and services, and provide a probability for [email protected] or visit the occurrence of that risk. The risk assessment is intended to Kelly Goulart is IBAT’s Regulatory Compliance Manager.

46 ★ The Texas Independent Banker May/June 2014 INSTANT GRATIFICATION.

Sign up for debit processing with TransFund and get instant issue for free!

Instant-issue allows you to make new and replacement debit cards in your branch lobby using secure, table-top equipment. Once the card information is entered into the system, it only takes about a minute to produce a personalized debit card. Your cardholder leaves the branch with a new debit card in hand and ready to use!

For a very limited time, TransFund will provide equipment, project management expertise, installation and training to financial institutions that sign up for EFT processing – all at no extra charge!

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Call TransFundd todaytodtoodadayayy atat 4405405.401.9469,005.5.44001.1.994469, 713.446.5292,92,2, [email protected],[email protected], [email protected] oorr vvisitissit www.transfund.com.sfuunndd.c.cocomomm.. The government changed the rules, making most overdraft programs obsolete.

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