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2 COMMUNITY BaNker UpdaTe | AUGUST 2015

want to attenda webinar?

View a complete calendar andregister for CBI-sponsored webinarsand events at www.cbiaonline.org

or Call Us at 515.453.1495for more information.

Social Media Workshopincluding Local Community Bank Case Study

August 19-21

September 23-24

St. Charles, Missouri

Omaha, Nebraska

Bonus session August 19

Bonus session September 23

Presentations on:

For a conference brochure, go to www.mibanc.com and click on Upcoming Events.

Bonus Session Member FDIC

• DeliveringaRed-CarpetCustomerExperience• Fraud&PaymentSecurity• ERMThatCreatesValue• WhatShouldbeontheMindofCEOs• EMVCardRequirements• VendorManagement–TheBigPicture• MakingtheMostofSARs• TheEvolvingThreattoBankOperations• DebitFraudTrends• Andmanymore

Regulatory panel included

auGust 2015 webinar line-uP

Aug. 4 FairLendingComparativeFileReview

Aug. 5 CrossSelling&ReferralOpportunitiesfortheFrontline:StrategiestoEnhance theCustomer’sExperience&GrowtheBank

Aug. 6 NewAccountsSeries:BusinessAccountSignatureCards&Resolutions: Entities,Authority&Documentation

Aug. 11 Garnishments,Subpoenas,Summonses,Levies:HandlingOfficialDemands forCustomerFunds

Aug. 12 AdvancedCommercialLoanDocumentation

Aug. 13 CFPBIncomeVerificationRulesforSelf-EmployedBorrowers:TaxImplications forQualifiedMortgages

Aug. 18 Website&SocialMediaCompliance

Aug. 19 USPAPIssues&BestPracticesforResidentialAppraisalReviewers: AvoidingViolations

Aug. 20 BSAComplianceSeries:HowtoRedesignYourBSAProgramtoImpactYour BottomLine

Aug. 25 EmergingLeaderSeries:DebtServiceCoverageCalculationsinUnderwriting

Aug. 26 MasteringtheSBA7aLoanPart3:Servicing,Liquidation&GuarantyPurchase

Aug. 27 Facebook:UpdateonSystem,Strategies,Techniques&Tips

Aug. 31 The20MostImportantThingstoKnowAboutTRIDComplianceBeforethe RevisedOctober3Deadline

COMMUNITY BaNker UpdaTe | AUGUST 2015 3

In This Issue

August2015WebinarLineup...................... 2

Guest Feature: Making the Case for Main

StreetbyCamFine,ICBA............................. 3

Recap:44thAnnualConvention..............4-8

OnlineBoardPortals.................................... 9

8thAnnualGolfTournament.....................10

ApplePay....................................................11

ManagingAgriculturalCreditRisk.......12-15

RuralMainstreetSurvey...................... 16-18

CommunityBankersforCompliance

FallSession................................................20

LOTQuarterlyMeeting...............................20

CBIAffiliate&AssociateNews..................21

EVENTS CALENDAR8th Annual Golf Tournament...Aug. 11

LOT Quarterly Meeting............ Aug. 20

Certified Community LenderCertification Renewal............... Aug. 20

Community Bankers for ComplianceFall Session......................Sep. 22 & 23

Community Banking SummitsFall Sessions........................Oct. 13-15

LOT Quarterly Meeting.............Nov. 19

Community Bankers of Iowa1603 22nd St, Suite 102

West Des Moines, Iowa 50266Phone: [email protected]

Making the Case for Main StreetAmerica’s regulatory system unjustly favors the megabanksWritten By Camden Fine, President and CEO of ICBA

Byitsverydefinition,theword“justice”equateswithrightfulnessandjustnessofgroundorreason.That’swhythetoo-big-to-fail

regulatorydebateleavesmeperplexedandconcernedaboutthewellbeingofthisgreatnation.

Ifweareacountrybuiltuponlibertyandjusticeforall,whyisoureconomicandregulatorysystemsounjustlytiltedinfavoroftoo-big-to-failfinancialinstitutionsledbytoo-big-to-jailmanagementteams?Whyisoureconomicsystemoperatingonthemantraof“anotherday,anotherfine”?Howisthatright?Howisthatjust?HowisthatAmerican?

Takeforinstancetheforeign-exchangefinesthatwerehandedoutinMaytoJPMorganChase,Citigroup,Barclays,UBSandRoyalBankofScotland,allofwhichpledguiltytocriminalchargesthattheyactedinconcerttomanipulateinternationalinterestratesandforeigncurrencyexchange.Overthespanofseveralyears,thesebanksbilkedbillionsofdollarsfromunsuspectingcompanies,internationalinvestorsandindividualsbyalteringratesintheirfavor.

Andasweknowalltoowell,thisisn’tthefirsttimethesebankshavehadproblemswiththelaw.BothJPMorganandCitibankhavebeenheldliableformortgagesecuritiesfraud.JPMorganhasalsobeeninvolvedin‘LondonWhale’trading,therobo-signingscandal,electricitymarketmanipulation,andmunicipalbondtradingfraud.ForUBS,thiswasthethirdcriminalsettlementinsixyears.

Andtheresult?Fines.Accordingtorecentestimates,thenation’slargestfinancialinstitutionshaveaccumulatedmorethan$150billioninbankfinesandpenaltiessincethefinancialcrisis.

ButisthisenoughtostopWallStreet’swrongful,unjustdoing?Ifhistoryisanyguide,theanswerisadefinitiveno.ThisissimplyanothergovernmentslaponthewristfortheWallStreetmegabanks,andjustanotherbusinessexpenseontheirfinancialstatements.Whenwillthegovernmentrealizethatfinesdon’tworkforthesefinancialbehemothsandtheirmanagements?Finesarenothingmorethananecessarycostofdoingbusiness.

Thisiswrongandneedstostop.

Bycontrast,communitybanks—homegrownbanksthatareembeddedintheircommunitiesduringgoodtimesandbad—lending,servingandsupportingtheeconomicbackbonethatdriveslocalsmallbusiness,agricultureandconsumerfinancialstability—arebeingsuffocatedbyregulationsandregulatoryscrutinythat’schokingthelifeoutofMainStreet.

TakeforinstancethephonecallIreceivedfromthe$45millionassetcommunitybankwitheightfulltimeemployeesinatownoflessthan2,000citizenswhotoldmehisbankhasbeenswarmingwithregulatoryexaminersforweeksonend,pouncingonanyminorerrororsmallmissteptheycanfind.Orthe$83milliondollarassetcommunitybankthathadits16officersanddirectorsdraggedtocourt,andtheirassetsseizedfor“poorjudgment”inapprovingloans.HowoftendoyouseeWallStreettoo-big-to-failofficersanddirectorsdraggedintocourtforusing“poorjudgment”?Never.Evenwhenpleadingcriminallyguilty.

(Making the Case for Main Street continued on page 22)


The Week That WasRecap: 44th Management

Conference & Annual ConventionHundredsofcommunitybankers,spouses,children,andexhibitorsgatheredatCBI’s44thManagementConference&AnnualConvention,thelargestcommunitybankgatheringinIowa,heldJuly15-17,2015inOkoboji.TheConventionrepresentstheimportanceofcommunitybanks’personalserviceandcommitmenttotheircustomersandthecommunitiestheyservewiththetheme“WhereEverybodyKnowsYourName.”

ThisreunionofbankersandtheirfamiliesfromacrossIowawereinformedandentertainedbynationallyrecognizedspeakers,andshownnewproductsandservicesattradeshowexhibits.ManyattendeeshavecalledCBI’s44thAnnualConvention“thebestconferencewiththebestspeakersinalongtime”.WereyouwithusinOkobojilastweek?Ifyouskippedit,here’swhatyoumissed:

OnDay1,acquaintancesbecamefriendsonthegolfcourseduringtheMixed Pair Golf Tournament,andinfishingboatsduringthe11th Annual Catch-and-Release Tournament.ThateveningduringtheKickoff Reception,communitybankersfromaroundthestatewerehonored,andtheLeaders of Tomorrow(LOT)grouppresentedscholarshipstotwoexemplaryIowastudents.(Read more about the awards and their recipients on pages 6-8.)

OnDay2,speechesandpresentationsontimelytopicsfromhighcaliberguestspeakersinthebankingindustryprovidedadvice,newideas,andinsightthatbankersandaffiliatescanuseintheirbusinessesandtheirpersonallives.AttheBankers’ Roundtable Breakfastthatmorning,ICBAMarketingVPChris Lorencegaveabreakdownof“thoughtleadership”--theusesofsocialmedia,typesofthoughtleaders,andthestepstogetstartedoncreatingorimprovingyourbank’ssocialmediaprogram.LaterattheFirst General Session,Professor James Olsonrecountedhisandhiswife’s30yearexperienceasCIAagents,includingthetrialsofcomingoutfromundercovertofriendsandfamily.Then,motivationalspeakerChip Eichelbergerexplainedthatreevaluatingyourdailyroutineandtakingcareofyourselfisjustasimportant,ifnotmoreso,thantakingcareofyourbusiness.Histheoryofgetting“SwitchedOn”involvesworkingsmarter,notharder,andsuccessstartswithhowengagedyouareandhowwellyourespondtoadversity.

BreakoutSessionsonDay2alsoofferedbankerstheopportunitytolearnmoreaboutissuescurrentlyimportanttothebankingindustry.TheRegulators’ PanelbreakoutsessionfeaturedFederalReserveBankofChicago’sIowaRegionalDirectorJeff Jensen,IADivisionofBanking(IDOB)SuperintendentJim SchipperandFDICRegionalDirectorJames LaPierre,backbypopulardemandtoanswerquestionsonthecurrentstateandfutureoftheregulatorylandscape.SHAZAM’sSeniorVPofMarketingDan KramerandSeniorPRManagerPatrick Dixshowedusthedos,don’tdos,andNEVERdosintheirbreakoutsession“Trends In Data Breach Response”.ICBA’sChrisLorencewasbacktomediateaSocialMediadiscussionpanelincludingKaley Fleig,VPofOperations&CompliancewithIowaStateBank&Trust-FairfieldandJoleen Fleming,SeniorVPatFirstCitizensNationalBankinMasonCity.

Spousesandfamiliesweren’tforgotteneither.Ataspecial“Cheers

for Women” BreakfastonDay2,theladiesreviewedhandmadeitemsfromViBellaJewelry,andlistenedtocompanyrepresentativeHeidiKooikerrecounttheViBellastory.Laterthatafternoontheygave“A Toast to the Arts”andtouredthegalleriesatPearsonLakesArtCenter,thenenjoyedacocktailhourintheCenter’sgazebo.TheGala/Auction and TradeshowheldlaterthatnightwasanothersuccessfulfundraisingeventforCBI’sPAC.BankersandtheirfamilieswereabletoreviewproductsandservicesbyCBI’sEndorsedandAffiliateServicemembersatthetradeshow,whilesamplingvariouswinesandappetizersandparticipatingintheCBIPACsilentandliveauctions.

TheTown Hall BreakfastmeetingonDay3hadIowaSecretaryofAgricultureBill Northeyasaguestspeaker,followedbyWinnebago Industries CEO Randy PottsandCFO Sarah Nielsentogiveamorein-depthlookatWinnebago’shistory.IntheSecond General Session,IDOBSuperintendentJim SchipperreturnedtogiveareportonbankingandeconomicconditionsinIowa.HewasfollowedbyICBAImmediatePastChairmanJohn BuhrmasterwhoupdatedattendeesonICBA’sregulationpolicyeffortsinWashington.Healsooutlinedpastsuccessesandgavenoticeonfutureregulatorybattles,suchastheproposaltoreduceFedstockdividendspaidtobanksaspartofaplantofundtheHighwayTrust.

KeynoteSendoffSpeakerJeff HavenscappedoffSecond General Sessioneventswithhislaugh-out-loudpresentation“US! vs. THEM!: Understanding Millennials”.Hedetailedthedifferencesbetween“Matures”,“BabyBoomers”,“GenerationX”,and“GenerationY”(commonlyknownas“millennials”),showingthattheoldergenerationsarenotreallyasunbendingastheyseem,andthenewestgenerationsarenotlazyorunengaged,merelyisolatedinaglobalworldcausedbytheadventoftheinternet.Havensthensuggestedmethodsthatthevariousgenerationscanusetomeeteachotherhalfway.TheBankers’ Golf TournamentatBrooksNationalGolfClubthenclosedanothersuccessfulConvention.

CBI’s44thAnnualConventionhascomeandgone,buttherearemorechancestoexperienceandparticipateinCBI’svaluableandinformativeevents.If you didn’t join us at convention this year, attend the 8th Annual Golf Tournament to benefit CBI’s PAC (see more on page 10), or the Fall Community Banking Summits being held October 13-15, in Carroll, Johnston, and Algona.

Thank you to everyone who joined us “Where Everybody Knows Your Name”, and a BIG thank you to our Convention Sponsors. We couldn’t do it without you! And visit us online at cbiaonline.org to check out the Convention Photo Galleries!

Don’t miss out! Save the date for next year,July 13-15, 2016. We’ll see you then!


Immediate Past Chairman John Buhrmaster breaks down ICBA successes for community banking in Washington.

Keynote Sendoff Speaker Jeff Havens closes the Convention at

the Second General Session.

SHAZAM’s Dan Kramer discusses the latest in data breach response

issues during the Breakout Sessions.

Professor James Olson gives an account of his life as a spy for the CIA during the First General Session.

IA Sec’y of Agriculture Bill Northey at the Town

Hall Breakfast.

CBI’s 2015/16 Executive Committee. L-R: Corporate Secretary Don Hole and Nancy Hole, Treasurer Cameron Miles, Lisa Ludwig and CBI 2015/16 President Randy

Ludwig, Bonnie Dixon and Immediate Past President Rob Dixon.

Above: Fisherman pose for a group photo at the 11th Annual Catch and Release Fishing Tournament. Below: Convention attendees visit exhibits, bid

on auction items, and talk shop at the Gala/ PAC Auction and Tradeshow.

Below: Enjoying refreshments at the Kickoff Reception.

Motivational speaker Chip Eichelberger shows Convention attendees how to“Get Switched On” to improve their business and personal lives.


CommunitybankersfromacrossIowawererecognizedduringtheCBI’sawardsceremony,heldduringtheKickoffReceptionatthe44thManagementConferenceandAnnualConventioninOkoboji,Iowa.TheRobertD.DixonFounders’Award,establishedin2003,isthemostanticipatedandhighlyregardedhonoroftheceremony.MartiRodamaker,President&CEOofFirstCitizensNationalBankinMasonCitywasnamedthe2015recipientofthisprestigiousaward.ShewaspresentedwithaplaquebyRobDixon,sonofRobertD.Dixonwhoco-foundedCBI(thenIowaIndependentBankers)in1972.AboutRodamaker’scommitmenttobankingandhercommunity,anominatingbankersaid:

“By definition this award represents an individual dedicated to community banking, their community, and involvement in Community Bankers of Iowa, ICBA, and the industry in general. I can think of no one who more accurately fulfills this definition than Marti Rodamaker.”

Aftergrowingupinabankingfamilywithstrongleadershipbypredecessorswhoprovidedamodeltoemulate,Rodamakerfoundemploymentinbankingfollowinganeducationineconomicsandfinance.SheeventuallyjoinedthefamilybankandquicklyclimbedtheladderleadingtotherolesofChairman,President,andCEOofoneofIowa’sstrongestbankingenterprises.RodamakerhasvolunteeredforvariouspositionsonboththestateandnationallevelsandhasbeenactivewithICBA,becomingChairmanofsuchcommitteesasICBASecurities,DirectorofICBA

Reinsurance,ChairmanoftheLendingCommittee,andcurrentlyservesasChairmanofICBPAC.Inaddition,shehastestifiedonbehalfofICBAbeforetheFinancialServicescommitteeoftheUSHouseofRepresentatives.RodamakerhasperformedexceptionallyinleadershippositionseventuallysucceedingtothePresidencyofCommunityBankersofIowa,andwasappointedbyGovernorBranstadtotheIowaPartnershipforEconomicProgressBoardforEconomicDevelopment.TheFounders’awardwascreatedtorecognizethosebankerswhoembodycommitmentandrepresentthebestincommunitybanking,towhichtheyhavedevotedtheirlivesandlivelihoods.Rodamakercontinuesthetraditioninthisfellowshipofexcellence.

Above: 2015 Robert D. Dixon Founders’ Award recipient Marti Rodamaker poses with family at the Kick-Off Reception

of the 44th Management Conference & Annual Convention.

Above: 2014/15 CBI President Rob Dixon presents Marti Rodamaker with the Robert D. Dixon Founders’ Award.

Marti Rodamaker Honored By Community Bankers of IowaNamed 2015 Robert D. Dixon Founders’ Award Recipient

Jen Trenary Selected as the 2015 “Up and Coming Banker of the Year”Annually,onecommunitybankerisrecognizedbytheirpeersfortheirperformanceandachievementsinbankingastheUpandComingCommunityBankeroftheYear.JenniferTrenaryofRolfeStateBankwasannouncedasthe2015recipientatCBI’s44thAnnualConvention.

TrenaryisCashierofthebank,ComplianceOfficer,BSAOfficer,AssistantTrustOfficer,CommercialLoanOfficer,andfillsmanyotherroles.Aswellasinherexemplaryperformanceatthebank,Jenwas

chosenduetoherintegralinvolvementinactivitiesandpromotionofthetownofRolfe,Iowaandsurroundingareas.

AboutJen,HeidiBrown,VicePresidentofCitizensStateBankinSheldonsaid:

“In her many capacities serving the bank, along with her daily operational responsibilities, [Jen] is a member of nearly

every budget, audit, IT and seemingly endless list of committees charged with managing affairs of the bank. All this is done while meeting all the ethical and regulatory standards that we are bound by as we attend to the needs of our clientele. It is a challenging chore to balance the needs and demands of the public while meeting the supervisory expectations, but we have found her to be up to that challenge in all respects.

She projects all the same personal attributes outside the bank through her involvement in an exhausting list of community services.”

TheUpandComingCommunityBankeroftheYearAwardispresentedbytheLeadersofTomorrow(LOT).LOTisaprogramcreatedbyCBItoenhancethegrowth,leadership,andnetworkingskillsoffuturebankingleaders.LOTestablishesanetworkofleaderswhoserveandstrengthentheircommunitiesandadvocateforthecommunitybankingindustry.

Up & Coming Banker of the Year Award Committee Chair Heidi Brown presents the award to 2015 recipient

Jen Trenary.

2015 Up and Coming Banker of the Year

Award recipientJennifer Trenary of

Rolfe State Bank.


Making a Difference in Fort MadisonLee County Bank & Trust Is the

2015 Community Banking Month “Best-of-the-Best” AwardeeIndependentcommunitybanksacrossIowahaveanimportantroleandimpactintheirlocalcommunities.CBI’sBest-of-the-BestAwarddistinguishesacommunitybankinIowathatepitomizeshowcommunitybanksaremakingadifferenceonMainStreet.Theyear-roundeffortsofonebankearnedthemCBI’sCommunityBankingMonthBest-of-the-BestAward.LeeCountyBank&TrustinFortMadisonwasrecognizedasthe2015recipientduringCBI’sKickoffReceptionatthe44thAnnualConventioninOkoboji.

TheworkLeeCountyBank&TrusthasdonesendsaclearmessageabouthowcommunitybanksaremakingadifferenceonMainStreet.DuringCommunityBankMonth,theygaveout4,000miniaturecandybarsthatthewholebankhelpedwrapwithlabelsthatsaid“ProudtobeYOURCommunityBankand“ShopLocally”.Theypromotedseveralspecialprojectsduringthemonth,includingafooddrivefortheirlocalfoodpantry;afoodandcleaningsupplydriveforalocal,no-killanimalshelterandanEmployeeBookDriveforthepubliclibrarywhereover200booksweredonated.

LeeCountyBank&Trust’sthemeforthisyearwas“HelpingOurCommunityGrow”andtheyhandedoutafewhundredstarterplantstocustomers.Andon“ThankYouThursdays”,theytookturnstreatingcityemployeestobreakfast.Year-round,theytreatcustomerstowarmcookiesintheirbanklobbiesandpractice“RandomActsofKindness”.Eachmonth,twoemployeesaregivenanallowancetousetobrightenotherpeoples’days.

AstheBest-of-the-BestCompetitionwinner,LeeCountyBank&Trustreceivedthe“TravelingTrophy”,anhonorthatstayswiththebankuntilhandedovertothenexthonoreethefollowingyear.Thebankwillalsoreceiveapizzapartyfortheirstaff,hostedbyandcomplimentsofCBI.

Chad Ward, Vice President of the 2015 Best-of-the-Best Competition winner Lee County Bank & Trust, accepts the “Traveling Trophy”

from 2014/15 CBI President Rob Dixon.

44th annual cOnVentiOn tOurnament winnersfishinG tOurnament:Kris Ausborn-9-3/4”Perch

Stacey Snyder-18-3/4”SmallmouthBassJason Ryskamp-20-1/4”Walleye

miXeD Pairs GOlf tOurnament:1st Flight:

Don&ShariBakerTonyFahrenkrog,HeidiBrown

2nd Flight:SuzanneMeyers,RobDixonMary&StephenHowell

3rd Flight:Mike&BethHahn

Troy&TeriVanderStouwe

Pin PriZes:ClosesttoPin-TerryNielsenLongestDrive-JonPenceLongestPutt-MartyTrepp

bankers’ GOlf tOurnament:1st Flight:

RickAadland,BrianVanderWiltWadeGort,ScottThomson

2nd Flight:TomVanOverbeke,CharlieWalshThomasLarson,SteveVanEerden

3rd Flight:KellyPfeifer,BenYoder

TerryGreenley,TomVandeKamp

Pin PriZes:ClosesttoPin-TomLarson

LongestDrive-StevenRansdellLongestPutt-FranFleck

cOnGratulatiOns tO alltOurnament winners!

Visit our website at www.cbiaonline.orgfor complete listings.


Leaders of Tomorrow Award Two ScholarshipsProviding Scholarships to High School Seniors for Its 13th Year

Certified Community Lenders:time to renew ccl Designations

ThedeadlinetorenewtheCertifiedCommunityLender(CCL)designationisAugust 20, 2015.Visitourwebsitetodownloadthe2015RenewalApplication.

DidyouattendCBI’sCommunityBankersforComplianceSpringSeminarheldApril14&15,ortheFDICBankersCollege,heldMay5?Get 6 hours of Continuing Education credit per day if you attended one or both of these events!

TolearnmoreaboutreceivingContinuingEducationcreditsorthecertificationrenewalprocess,visitourwebsiteorcontactPretty [email protected].

VisitourwebsiteformoreinformationontheCertifiedCommunityLenderprogramandhowyoucanapply.

EmmetsburgHighSchoolstudentEmily BonnstetterwasawardedoneofthetwoLeadersofTomorrow(LOT)ScholarshipsduringCBI’sawardsceremony,heldduringthe44thAnnualConventioninOkoboji.

Apartfromachievingastellaracademicrecord,Bonnstetterearnedacommunityservicecorduponhergraduationwithafullscheduleofextra-curricularactivities,includingstudentgovernment,schoolchoirandmusicals,andparticipatingonthecrosscountry,basketball,track,softballandvolleyballteams.

Emily’ssparetimewasspentvolunteeringinsucheffortsasassistingwithchurchprograms,volunteeringatlocalfundraisersandwashingfiretrucksforthecityofCylinder.

RequirementsfortheLOTscholarshipincludewritinganessaydetailingtheroleofcommunitybanks.Emilyspokefromfirst-handexperiencewhenshewrote:

“In my hometown, community banks are much more than a place to deposit money and takeout loans. These banks place an undeniable value in membership and togetherness while providing their customers with great care. I am currently employed seasonally at one of our community banks in town, and I have received a taste of what it takes to stay active in our community. These employees place a monumental value in knowing their customers on a first-name basis.”

EmilyBonnstetterwasnominatedforthescholarshipbyKyleAuten,VPofBusinessBankingforIowaTrust&SavingsBankinEmmetsburg.

2015 LOT Scholarship recipient Emily Bonnstetter

Ryan CrewfromSpencerHighSchoolwasawardedoneofthetwoLeadersofTomorrow(LOT)ScholarshipsduringCBI’sawardsceremony,heldduringthe44thAnnualConventioninOkoboji.

Alongwithanunbelievable4.06GPA,Ryanrackedupacademickudosincluding4yearsontheHonorRoll.HealsoreceivedAcademicLettersall4years,waspartoftheTalentedandGiftedprogram,andcarriedadvancedplacementcoursesin5differentsubjects.RyanservedontheStudentCouncilandwasClassPresidenthissophomoreandjunioryears.

Ryanalsomanagedtokeepupwithmanyextra-curricularactivities,suchashisschool’sDramaandSpeechclubs,ChoirwhereheservedasSecretary,andtheschoolband.Heparticipatedonthefootballandgolfteams,aswellasearninganotherletterontheswimteam.Ryan’schurch-basedand4-Hcommunityactivitiesisalsoanimpressivelist.

Inhisessayontheroleofcommunitybanks.Ryanwrote:

“One of the best things about my local bank is that when I enter its doors I immediately recognize the employees because they are all active in my community. They each make an effort to know me and to make me feel important. My dad decided to start his own retail agronomy business after working in the field for many years. [...]My bank partners with most small businesses in the community in the same way as my father’s business because it understands the needs of each. Working together like this makes Iowa small towns work and survive.”

RyanCrewwasnominatedforthescholarshipbyDennisBauman,LendingComplianceOfficeratAckleyStateBank.

2015 LOT Scholarship recipient Ryan Crew

Save The Dates!JOin us fOr the fall

cOmmunity bankinG summits

Tuesday, Oct. 13 - 3pmCarroll, IA • Santa Maria Winery

Wednesday, Oct. 14 - 3pmWest Des Moines, IA • Sheraton Hotel

Thursday, Oct. 15 - 3pmAlgona, IA • Algona Country Club

Contact Jackie Haley at [email protected] or 515.453.1495 to learn more or to discuss sponsorship opportunities.

Featuring Olympic Wrestler and CoachDan Gable as Keynote Speaker!


Bynow,youprobablyknowthatweb-basedportalsolutionscanprovideyourboardofdirectorswithsecure,centralizedaccesstoaslewof

confidentialmaterials,includingmeetingminutes,trustandauditreports,loandelinquenciesandvotingarchives—dayornight,fromanywhere.And,boardportalsprovideasafe,simplifiedplatformforcommunicatingwithyourboard.

Indeed,boardportalsarepossiblythemostpopulartypeofonlineWebportals.Forboardmeetings,portalshavemadetheprintingandmailingofhugeboardpacketsathingofthepast.Andbeyondsavingtherelatedmonetaryresourcesandmanhours,conveningmembersonlinemeansyouneedn’tworryaboutboardreportsgettinglostinthemail.Aboardportalnotonlykeepsthesereportshighlysecure,butalsoallowsinaccuratedatatobeupdatedornewinformationadded,evenatthelastminute.

Further,postingboardmaterialsonportalsgivedirectorsplentyoftimetothoroughlydigesttheinformationandmakesoundbusinessdecisions.Andifapastdiscussionitemisbroughtup,theycanquicklysearchforrelatedtermstofindallpastreferencesintheportal’sarchives.

Otherwise,themeetingsproceedmuchthesameasalways,withtheadditionofsuchgreateradvantagesasallowingmemberswhocan’tbephysicallypresenttoseethesamematerialsandinformationasthosewhoare.

Forafinancialinstitution,communicatingwithboardmembersthroughanonlineportalisanefficient,cost-effectiveand,mostimportantly,highlysecuremeanstokeepthemabreastofallaspectsofabank’sproceedings.Directorscanviewallcurrentandhistoricalmaterialsthemomentthey’reposted,andreceivealertswhennewcontentbecomesavailable.Theportalalsosafeguardsonlinevotinganddiscussionthreads,andletsyouassignpermissionstoensuredocumentsreachonlytheirintendedaudience.

And,directorscanmonitorsuchcriticalinformationasthestatusoftroubledassets,liquidity,capitalratiosandnetincome—informationthatchangesdaily.

Butfacilitatingasafe,paperlessboardroomistrulyjustthetipoftheicebergforsecureportaltechnologies.Employeeintranetsandloancommitteeportalsalsoprovideaneffectivealternativeforsecurelymanagingavarietyofsensitivedataandapplicationsenterprisewide.TheseonlineWebportalsrequireallthesamesafeguardsasdoboardportals,includingloginandpasswordverification,toensureallmaterialsremainprotected.

Simplify Loan Committee ProceedingsAloancommitteeportalstreamlinesloanmanagementactivitiesbyprovidingaprotectedlocationforcommitteememberstosaveandstoreloandocumentssothey’rereadyforboardreview.

Forexample,thecommitteecanpostloanmaterialsonaportalworkspacethat’sdedicatedtoaparticularloan,andnotifydirectorsthattheloanrequirestheirreviewandapproval.Theboardisthenabletoreviewtheloandataonline,sharecommentswithothers,makepersonalnotationsandplacetheirdecision—whichisinstantlyavailableforviewingbytheloancommitteeandarchivedforfuturereference.

Inaddition,theloancommitteecaneasilymakerevisionsontheportalitself,allowingmemberstohostpaperlessloanreviewcommitteemeetingsandreducingtheneedtocirculatesensitivematerials.

Streamline Employee CommunicationsWhenitcomestoemployeeintranets,yourinstitutioncancapitalizeonseveraladvantages.Intranetssimplifydocumentsharingtominimizehardcopies,mailedmaterials,faxesandemails.Andwiththeirabilitytocentralizecommunicationandresourcedistribution,theyalsocanleadtoenhancedcollaborationandknowledgesharingaswellasimprovedproductivity,sinceemployeeshaveamoreefficientwayofinteractingwitheachotheracrossdepartmentsandbranches.What’smore,thissolutionprovidesanumberofhumanresourcefunctions,includingtime-keepingandattendance,vacationtrackingandpolicymanagement.

Anemployeeintranetalsooffersyourstaffproductivitytoolstobetterassign,manageandtrackworkflowsanddailytasks.

Strengthen Regulatory ComplianceAcriticalpointtorememberisthat,whenpartneringwithan(Online Board Portals continued on page 22)

Powerful Ways

Transcend the BoardroomOnline Web Portals

Written By: Bill EversSenior Business Development Director, Computer Services Inc.


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Gene [email protected]

EveryyearCBIhostsagolftournamentformemberstobuildrelationships,enjoyalittlecompetition,andraisefundsforCBI’sPAC.ThetournamentisnormallyheldeveryyearinSeptember.Thisyear,playanewcourseatanewtime!HitthelinkswithusAugust 11atHyperionFieldClubinJohnstonforCBI’s8thAnnualfourperson,bestshotGolfTournament.

NEW THIS YEAR,aBusinessSymposiumwillopentheevent,featuringapresentationonEconomicTrendsfromICBASecurities/ViningSparks,andakeynoteaddressfromI-CubsGeneralManagerSamBernabe.Prizeofferingshavebeenincreasedthisyearaswell!

REGISTRATION IS NOW AVAILABLE ONLINE!VisitourwebsiteorcontactJackie [email protected],ortoaskaboutsponsorshipopportunities.

CBIPACisCommunityBankersofIowa’snon-partisanpoliticalactioncommittee.CBI’spoliticaleffortsconcentrateondefendingtheviewsandneedsofindependentbankers,andontheissuesthatareofbenefittoIowa’scommunitybanksandtheirlocaleconomies.

August 11 • Hyperion Field ClubBusiness Symposium: 9am - NoonLunch: Noon • Shotgun: 12:30pm

CBI’S 8TH ANNUAL GOLF TOURNAMENT IS ALL NEW!

I-Cubs General Manager Sam

Bernabe will speak at the 8th Annual Golf Tournament.


Nobodylikestobethefirstonetoaparty.It’salittleawkwardand,worse,thehostoftenisn’tready.Thebetterbetistobe“fashionablylate.”Itgivesthehostalittletimetosettleinsothey’reactuallyreadytowelcomeyoutoagreatexperience.

Somecommunitybanksmaybefeelinglikethey’relatetothepartywhenitcomestotheadoptionofApplePay™.However,asitturnsout,thosebanks—andtheircustomers—willbetheoneswhoarriveintimeforthebestexperience.

WenowknowalotmoreabouttheearlymistakessomebanksmadeintheenrollmentandvalidationprocessforApplePay.Thisisn’tafaultintheApplePaysystem.Rather,theissuecomesinhowbanksauthenticatethecardbeingenrolledactuallybelongstothepersonusingit.

WhenacardholderenrollsinApplePay,therequestcantakeoneofthreepaths:red,greenoryellow.• Red—Thismeanstheenrollmentrequestisriskyandit’llbe

declined.• Green—Thisisthepathofleastresistance.Therequestisa

low-riskrequest,andthecardholder’sabletosignupusinglimitedinformationfromthecard.

• Yellow—Thisincludesenhancedauthentication,meaningadditionalcardholderIDandverificationarerequired,therebyhelpingensuretherealcardholderistrulytheoneenrolling.

TheyellowpathisoneofthebestwaystopreventfraudintheApplePayenrollmentprocess.Why?

Well,earlyon,banksreliedontheusualauthenticationmethodsusedforcard-not-presente-commercetransactions.Thatmeanttheywereallowingtokenstobeactivatedinthegreenpathwithcommonlyknownvaluessuchasthecardnumber,expirationdate,cardholdername,ZIPcodeandthesecuritycodeonthebackofthecard.BankswantedtheexperienceofsigningupforApplePaytobeaseasyaspossiblefortheircardholders.Asyoucanprobablyguess,thisledtoproblemswithfraud.

FraudsterscouldenrollastolenorcounterfeitcardwitheaseonanyiPhone®andmakepurchaseswithoutmuchfearthey’dbedetected.Theproblemwithinsufficientauthenticationduringenrollmentforthebankwhoissuedthecardis,undernetworkrules,atokentransactionistreatedlikeacard-presenttransaction.Theliabilityforanyfraudfallssquarelyontheissuer,notthemerchant.

So,howcanbanksofferarelativelypain-freeApplePayenrollmentprocesswhileensuringenhancedsecurityforcardholdersandtheirorganizations?Theanswerisintheauthenticationprocess.Followingtheyellowpathisthewayforward.

Withyellowpathauthentication,thecardholder’scardinformationissenttothenetworktoissueatokenthesamewayit’sdoneinthegreenpath.However,withtheyellowpath,thenetworkinitiallyissuesaninactivetoken.Fromhere,thebank’srequiredtoperformaverificationprocess.AtSHAZAM,we’veworkedwithfinancialinstitutionstocreateanenhancedenrollmentthatensuresastrongidentificationprocessanddrivesdowntheriskoffraudallthewhilemakingsuretheenrollmentprocessisaneasyforthecardholder.

Inthenot-so-distantfuture,authenticationmayincludeuseofthePINassociatedwiththecard,addinganotherlayerofsecuritythecardholderwouldknow,butafraudsterwouldn’t.

Newformsofpayment,likeApplePay,areofferingbankcardholderschoiceandflexibilityinhowandwheretheyusetheircard.But,it’scriticalathoroughIDandvalidationprocessistakenintoconsiderationtoensurethepaymentssystemisn’tcompromisedalongtheway.

Terry Dooley is SHAZAM Network’s Executive Vice President and Chief Information Officer. For more information on CBI Endorsed Member SHAZAM, visit www.shazam.net.

Apple Pay Written By: Terry Dooley

Executive Vice President & CIOSHAZAM

Being ‘Fashionably Late’ Isn’t a Bad Thing!

When It Comes to


Theroughly1,500agriculturalbanks1intheUnitedStatesplayacrucialroleintheU.S.financialsystembyhelpingmeetruralproducers’creditneeds(Figure 1, below).Assetsizecomparisonswithlargerfinancialinstitutionsunderstateagriculturalbanks’importantcontributionstoboththeirregionaleconomiesandtothebroadernationaleconomy.Marketconditionsinrecentyears,includingvolatilecommodityprices,escalatedfarmlandvaluesincertainregionsofthecountry,andrisingfarmproductioncosts,haveelevatedtherisksinagriculturallending,somuchsothattheFederalReserveBoardissuedsupervisoryguidanceinOctober2011onsupervisoryexpectationsformanagingagriculturalcreditrisk.2

Thisarticleprovidesahistoricalperspectiveonagriculturebankfailures,discusseslessonslearnedabouttheincreasedriskinagriculturallending,andreviewsaspectsofthesupervisoryguidanceoneffectiveriskmanagementpolicies.SincetheFederalReserveSystemsupervisesalargenumberofagriculturalbanks,itsexaminershavetheopportunitytoobserveawiderangeofriskmanagementpractices.Severalprovenriskmanagementpracticesandsomecommonmistakesobservedduringtheexaminationsofthesebanksarealsodiscussed.Thisanalysis,however,isnotall-inclusive.

Lessons Learned from a Past Farm Crisis and Common MistakesAgriculturalmarketsdeterioratedseverelyinthe1980s,affectingmanyagriculturalbanks.Althoughasignificantnumberof

agriculturebanksfailedinthe1980s,mostsurvived.3Thosebanksthatweatheredthecrisiswerecharacterizedashavingmoreconservativeandconsistentlendingstrategies,strongerriskmanagementpractices,andmoreformalizedcapitalandstrategicplanningprocesses.Infact,theboardsofthesurvivingbankshadgenerallyimplementedstrongriskmanagementframeworkswellinadvanceofadverseglobalmarketdynamics.Agriculturalbankfailuresinthe1980swerelargelyaresultofpoorlendingpractices,includingincompletefinancialandcashflowanalysis,overrelianceoncollateralvalues,poorlydevelopedlendingpoliciesandprocedures,poordocumentation,andaggressivemarketingtocustomers—withlittleconcernforcashflow.Moreover,manyborrowerswereaccustomedtoobtainingcreditwithminimalfinancialdocumentationbasedontheanticipationthatmarketpricesandassetvalueswouldonlycontinuetorise.Overall,oneofthebroadlessonslearnedfromthe1980sfarmcrisiswasthatconservativeandconsistentlyappliedriskmanagementsystemsemployedduringbothgoodandbadtimesenabledmostagriculturalbankstowithstandeventhemostsevereagriculturalmarketdownturns.

Inlookingbackatthe1980sandthemorerecentfinancialcrisis,itisapparentthatseveralcommonfactorscontributedtotheriseinproblembanks.Amongthosefactorswereweakriskmanagementpracticesandineffectiveriskcontrols.Policiesorproceduresthatdescribedthebank’srisktoleranceandprovidedtheparametersformanagingthoseriskswereoftenlacking.Therewasoftenaslowresponsetoidentifyinganddowngradingproblemloansbecauselendingpoliciesandriskmanagementprocedureswereoutdated,ineffective,ornonexistent.Inadequatetrainingofless-experiencedlendersoftenledtopoorloanunderwriting,loanstructuring,andcreditanalysis.

Withrapidlyincreasingrealestateprices,manyagriculturalbanksreliedtooheavilyoncollateralandmisjudgedfarmlandvalues.Whenconditionsworsened,borrowerequitypositionsand,ultimately,thevalueofcollateralavailabletoprotectthebankagainstlossdecreasedsignificantly.Examinersoftennotedthatcreditdecisionswerebasedoncollateralvaluesinsteadofborrowers’debtservicecapacity.Weakunderwritingcanleadtoproblemloansandloanlosses.Atmanyfailedbanks,competitivepressuresledtoinsufficientpricingforriskandrelaxedunderwritingstandards.Loanswerestructuredprimarilytomaintainbusinessrelationshipsandwerebasedon

Successfully ManagingRegardless of Agricultural

Reprinted with permission of Community Banking Connections®. Copyright 2015 Federal Reserve System.

Legal Disclaimer: The analyses and conclusions set forth in this publication are those of the authors and do not necessarily indicate concurrence by the Board of Governors, the Federal Reserve Banks, or the members of their staffs. Although we strive to make the information in this publication as accurate as possible, it is made available for educational and informational purposes only. Accordingly, for purposes of determining compliance with any legal requirement, the statements and views expressed in this publication do not constitute an interpretation of any law, rule, or regulation by the Board or by the officials or employees of the Federal Reserve System.

Written By: Nicholas Hatz, Assistant Vice President, Federal Reserve Bank of Kansas City–Omaha Branch, and Sandra Schumacher, Supervisory Examiner and Relationship Manager, Federal Reserve Bank of Minneapolis–Helena Branch


management’spreviousexperiencewithborrowersratherthanoninformationinfinancialstatements.Cashflow,revenue,andbalancesheetforecastswereoftenunsubstantiated.Lendingdecisionsbasedoninsufficientcreditanalysisresultedinbanksnotunderstandingtheirborrowers’fullfinancialcondition.Whenmarketconditionsdeteriorated,borrowerswereexposedtorisinginputcostsandunstableprices,andthebankshadnoforewarningthattheborrowerswerefacingdebtrepaymentproblems.Theproperbalancebetweenmanagingcreditriskandsupportingacustomer’sneedsiscritical.Amismatchinamortizationperiodsmaystraincashflowandrepaymentability,forcingtheborrowertobecomenoncompliantwiththetermsoftheloan.

Supervisory Expectations for Effective Risk Management PracticesAsoutlinedinSupervisionandRegulation(SR)letter11-14,abank’sriskmanagementprogramshouldbecommensuratewiththesizeandcomplexityofthebank’sexposuretotheagriculturalsector.AsillustratedinFigure2(right),SRletter11-14outlinessixkeyriskmanagementpractices:assessmentofcreditworthiness,assessmentofcashflow,underwritingstandards,creditadministrationandcontrols,loanstructure,andsoundcollateralmarginsandevaluations.Managingriskintheseareasdoesnotnecessarilyinvolveavoidingtherisk;rather,itinvolvesemployingaconsistentapplicationofpracticesproventocontrolriskeffectivelywithinawiderangeofoutcomes.

Asoundriskmanagementprogramincludesaboardofdirectorsandmanagementteamthatunderstandcurrentissues,trends,andoverallconditionsinagriculturalmarkets.Factorsgenerallyusedtojudgethestrengthofthefarmeconomy,suchascommodityprices,productioncosts,farmlandvalues,andglobalmarkets,areillustratedinFigure3(following page).Accordingly,assessingemergingtrendsforeachofthesefactorsservesasasolidbasetoidentify,measure,monitor,andcontrolagriculturalcreditrisks.Monitoringmarketfactorsandtrendshelpsmanagementandtheboardtoidentifysourcesofpotentialvolatilityandmitigateexposuretothosevariousinfluences.

Assessment of Creditworthiness and Cash FlowAsoutlinedpreviously,prudentriskmanagementpracticesarealwaysrelevant,regardlessofagriculturalmarketconditions.Insufficientcreditanalysisandinappropriateloanstructureareoftenobservedasprecursorstoaproblemloan.Inmanycases,overrelianceoncollateralratherthancashflowasasourceofrepayment,generousloantermstowardfavoredcustomers,andinadequaterealestateappraisalsandevaluationsarecommonunderwritingpitfalls.Creditqualityshouldtakeprecedenceoverloanportfoliogrowth,andabankshouldnotallowthedesireto

Source:SRletter11-14,“SupervisoryExpectationsforRiskManagementofAgriculturalCreditRisk,”availableatwww.federalreserve.gov/bankinforeg/

srletters/sr1114.htm

buildrevenuestocompromisecreditstandards.Safetyofprincipalandassuranceofrepaymentwithinagreed-upontermsshouldbeatleastasimportantasprofitingfromthetransaction.Abankcannotchargeahighenoughinterestratetocompensateforaloanthatcannotbecollected.

Anothercommonmistakeisthatcashflow,revenue,andbalancesheetforecastsaretoooftenacceptedatfacevaluebasedonaborrower’sassurancesthatthenumbersareconservative.Suchforecastsareassumptions,andtheimportanceofverifyingtheassumptions’validitycannotbeoverstated.Consistentapplicationofacashflowsensitivityanalysisisusefulindetermininganoperation’sabilitytowithstandriskanduncertainty.Financialanalysissoftware,whichisreadilyavailableandeasytouse,mayhelpbanksassessaborrower’screditworthinessandanalyzecashflow.Suchsoftwaremayprovideamorethoroughanalysisofaborrower’srepaymentcapacityandhisorherabilitytoadapttostressedconditions.Examinershavenotedthatmanyagriculturallendershaveencouragedtheirborrowerstousethesetoolstobetterunderstandtheirownoperationsandfinancialconditions.

Underwriting StandardsRelianceonoutdatedorineffectivepoliciesandprocedurescouldpossiblyexposethebanktounnecessaryrisk.Asignificantnumberofpolicyexceptionscanindicatethatabankistakingonadditional(Agricultural Credit Risk continued on next page)

Agricultural Credit RiskMarket Conditions


Source:SRletter11-14,“SupervisoryExpectationsforRiskManagementofAgriculturalCreditRisk,”availableatwww.federalreserve.gov/bankinforeg/

srletters/sr1114.htm

(Agricultural Credit Risk continued from previous page)

risksandthatunderwritingstandardsarenolongerinstepwiththecurrentenvironment.Itisimportantforbankstoadheretostrong,well-developedpoliciesandproceduresinthecurrentlendingenvironment,wherecompetitionforqualityborrowingrelationshipsremainsintense.Looseningloanunderwritingcriteriabasedonallegedoffersfromcompetitionshouldbeavoided.Whilelendersoftenstatethatexceptionsweregrantedtomeetcompetitivepressures,frequentcontraventionsofboard-approvedpolicyguidelinesmaycauseexaminerstoquestionwhethersuchloansshouldhavebeenmade.

Astrongpracticethatexaminershaveobservedduringtherecentupturninlandvaluesisthatmanylendershavenotusedthecurrentmarketassetvaluationsforlandinlendingdecisions.Bankswithstrongcreditriskmanagementprocesseshavebeenobservedsettingadollarcapperacre,generallybasedonhistoricalvalues,eventhoughrecentappraisalswouldsupportsoaringlandvalues.Inthisscenario,theborrowerisrequiredtoprovideupfrontcashorequityandadditionalcollateraltopurchasethelandandsecurefinancing,thuscreatingacushioniflandvaluesdecline.Byfollowingthispractice,thesebankshavemaintainedconservativeunderwritingstandards,unlikemanylendersintheearly1980sthatallowedloan-to-valueratiosforloanssecuredbyfarmlandtoexceed80percentbasedonthecurrent,albeitinflated,marketvalues.

Credit Administration and ControlsClearguidelinesshouldbeinplacetoidentifyandcorrectproblemloans.Delinquenciesareoftenthefirstindicationofproblemloansandusuallyreflectdeteriorationinaborrower’sfinancialcondition,suchasdecliningprofits,decreasingsales,increaseddependenceondebt,anddecreasedworkingcapital.Outdatedfinancialstatementsarealsoanindicationthattheborrowermaybeexperiencingfinancialproblems,astheborrowermaybereluctanttoprovidethebankwithcurrentfinancialinformation.Someaspectsareoutofthebank’sandfarmer’scontrol,suchasnaturaldisasters(forexample,flood,fire,hail,andcroporlivestock

disease);therefore,itisimportantforlenderstoensuresufficientinsuranceisinplacetoprotectassets.

Abankshouldalsohaveapolicythatclearlyindicateshowcarryoverdebtwillbefinancedandmonitored.Therearenohard-and-fastrulesonwhethercarryoverdebtshouldbeadverselyclassified,butthedecisionshouldgenerallyconsidertheborrower’soverallfinancialconditionandtrends.Inaddition,tohelpidentifyanysuddenmaterialincreaseintheborrower’sindebtednessordeteriorationinperformance,bankswithstrongcreditriskmanagementprocessesperformperiodiccreditbureauchecks.Finally,examinershavefoundinternalcreditriskratingstobeeffectivewhenbanksestablishloanreviewprogramstofurtherassistinidentifyingproblemloans.Whenexaminersidentifyproblemloansthatwerepreviouslyunknowntothebank,itgenerallyreflectspoorlyonmanagement’sabilitytoidentifyandcontrolcreditrisk.

Bynature,aruralcommunitybank’sloanportfolioisoftenhighlyconcentratedinagriculturallending.Recognitionofthepotentialconcentrationriskinthesebanks’capitalandstrategicplanningprocessesisparticularlyimportant.Regulatorsexpectthatmanagementortheboardwillensurethatmanagementinformationsystemsandmonitoringproceduresareformalizedandconsistentlycompleted.Monitoringofconcentrationlevelsshouldbedoneonagranularlevel,meaningthatthebankshouldmeasuremorethanabroadagricultureconcentration.Banksareencouragedtohavealoanportfoliodiversificationpolicyandsetprudentexposurelimitsforagriculturalloansbycommoditytype,geographicmarket,andindividualborrowingrelationship.Banksalsobenefitfromconcentrationreportsthataretrackedinrelationtocapitalatrisk,ratherthanonlytrackingconcentrationsbythepercentageoftotalloans.

Loan Structure and Sound Collateral EvaluationsProperloanstructureandtermsarecritical.Improperstructureortermscouldleadtoinappropriatelylongamortizationperiodsoreventolenderliabilityissuesintheeventofaloandefault.Furthermore,itisgenerallyinappropriatetofinancepermanentworkingcapitalorotherlong-termneedsusingopenlinesofcredit.Loanstofundnoncurrentassetscarrygreaterriskwhenrepaymentisgeneratedbyfuturecashflow.Instead,repaymenttermsshouldbelinkedtotheprimarysourceofrepaymentfortheloanandtheusefuleconomiclifeoftheassetsbeingfinanced.

Structuringaloantoaborrower’sbusinessplansandcyclescanensurethatpaymentschedulesalignwithcashflows.Forexample,acropoperationsetuptomakemonthlypaymentsmayhavedifficultymeetingpaymentobligations,sinceitscashflowistypicallyconcentratedinthefallandwintermonthswhentheoperationsellsitsgrainafterharvest.Inthiscase,anannualpaymentschedulewouldbemorecloselyalignedtothetimewhentheborrower(inthiscase,thecropoperation)receivesincome.However,annualrepaymenttermswouldlikelybeinappropriateforadairyoperator,whichgenerallyreceivesmoreregularweeklyormonthlycashflows.Examinershaveobservedthatmanybankswithstrongcreditriskmanagementhaveappropriatelystructuredweakerloanswithanenhancementtosupportthecredit(forexample,anoutsideguaranteethroughtheUnitedStatesDepartmentofAgricultureorFarmServicesAdministration).

Collateralevaluationsshouldbewelldocumentedandperformedatafrequencycommensuratewiththeriskcharacteristicsoftheaccount.Frequentinventoryreports,borrowingbasecertifications,andloanofficervisitationsarestrongprocessesobservedby(Agricultural Credit Risk continued on next page)


(Agricultural Credit Risk continued from previous page)

examiners.Forexample,livestockoperationsthathaveregularturnoverandvaluesthatfluctuatewiththemarketprice,suchasfeederoperations,requireperiodiccountsandinventorymonitoringtoensurethatadequatecollateralcoverageandcapitallevelsaremaintained.

ConclusionThepotentialalwaysexistsintheagriculturalsectorforreducedprofitabilityandincreasedborrowerstressbasedontheunknownanduncontrollablevolatilityinthemarketplace.Historicalhindsightprovidesexaminerswiththeopportunitytoanalyzewhathasworkedandwhathasnot.Lessonslearnedfrompasteconomicdownturnsinthefarmsectorshowthatagriculturalbanksthatpursuedmoreconservativelendingstrategiesandhadstrongerriskmanagementpracticeswithformalizedcapitalandstrategicplanningprocesseswerewellpositionedforboththeup-and-downcyclesofvolatileagriculturalmarkets.

Promptidentificationofrisksandappropriatemanagementstrategiestocontrolrisksareparamounttothesuccessofeverybank.Managingriskspresentsanadditionalchallengewhenabankisdependentonasinglesectoroftheeconomy—inthiscase,agriculture.Guidingbanksthroughgoodandbadtimesrequiresproactiveanddiligentmanagementoversight,aswellaseffectiveandinformedboardgovernance.Itremainsessentialforthefutureprosperityofagriculturalbankingthatbanksimplementprudentandconsistentriskmanagementstrategiesatalltimes,notonlyinstressedmarketconditions.

NOTES1Agriculturalbanksaredefinedasbanksinwhichfarmproductionandfarmrealestateloansequal25percentormoreoftotalloans.

2SeeSupervisionandRegulationletter11-14,“SupervisoryExpectationsforRiskManagementofAgriculturalCreditRisk,”availableatwww.federalreserve.gov/bankinforeg/srletters/sr1114.htm.

3SeeFederalDepositInsuranceCorporation,“HistoryoftheEighties—LessonsfortheFuture,”availableatwww.fdic.gov/bank/historical/history/

IowaTIB Ad1/2 pg.April 2015


July Survey Results at a Glance:• TheRuralMainstreetIndexroseabovegrowthneutral,its

highestreadingsinceJanuaryofthisyear.• Farmlandpricesdeclinedforthe20thstraightmonth,but

withwidevariationsacrosstheregion.• Onaverage,bankersreporteda6.8percentfallinfarmland

pricesoverthepast12months.• Only11.9percentofbankersreportedthatfarmloandefaults

wereupfortheyear.However,54.8percentofbankersexpectfarmloandefaultstoriseoverthenextyear.

• Retailsalesriseforthemonth.

OMAHA,Neb.–TheCreightonUniversityRuralMainstreetIndexroseabovegrowthneutralforJulyfromJune’stepidreading,accordingtothemonthlysurveyofbankCEOsinruralareasofa10-stateregiondependentonagricultureand/orenergy.

Overall:TheJulyRuralMainstreetIndex(RMI),whichrangesbetween0and100,climbedto53.4,upfromJune’sgrowthneutral50.0,anditshighestlevelsinceJuneoflastyear.

“Thisisthefourthstraightmonththeindexhasrisen,indicatinganupturnineconomicconditionsfortheregion.Improvingcroppricespushedtheoverallindexandtheeconomicoutlookhigherforthemonth,”saidErnieGoss,JackA.MacAllisterChairinRegionalEconomicsatCreightonUniversity’sHeiderCollegeofBusiness.

Farming and Ranching:ThefarmlandandranchlandpriceindexforJulyincreasedslightlyto31.4fromJune’s31.1.“Thisisthe20thstraightmonththeindexhasmovedbelowgrowthneutral.But,asinpreviousmonths,thereisagreatdealofvariationacrosstheregioninthedirectionandmagnitudeoffarmlandprices,”saidGoss.Thismonthbankerswereaskedhowmuchfarmlandpriceshadchangedintheirareaoverthelastyear.Onaverage,bankCEOsreportedpriceshadfallenby6.8percentoverthepast12months.Sevenpercentindicatedthatfarmlandpricesintheirareahadexpandedovertheyear.“Approximately14percentregisteredadeclineof1to4percent,34.9percentreportedapricereductionof5to9percentand27.9indicatedfarmlandpriceshaddecreasedby10to20percent.Theremaining16.3percentreportednochangeinfarmlandpricesovertheprevious12months,”saidGoss.TheJulyfarmequipment-salesindexrosetoaveryweak17.9from

June’srecordlow12.5.Theindexhasbeenbelowgrowthneutralfor24straightmonths.“Withfarmincomeexpectedtodeclineforasecondstraightyear,farmersremainverycautiousregardingthepurchaseofagriculturalequipment,”saidGoss.

Banking:TheJulyloan-volumeindexdeclinedto72.1from79.9inJune.Thechecking-depositindexroseto53.4fromJune’s48.0,whiletheindexforcertificatesofdepositandothersavingsinstrumentswasunchangedfromJune’s38.6.

Thismonthbankerswereaskedaboutfarmloandefaultsoverthepastyearandexpecteddefaultsoverthenextyear.Only11.9percentreportedfarmloandefaultswereupfortheyear.However,54.8percentofbankersexpectfarmloandefaultstoriseoverthenextyear.

AccordingtoPeteHaddeland,CEOoftheFirstNationalBankinMahnomen,Minn.,“Farmersareholdingtheirown,butweexpectafewdefaultproblemsthisfall.”

Butinsomeareas,farmloandefaultsremainrare.Forexample,JamesShafer,CEOofTheFirstNationalBankinTremont,Ill.,reported,“(Mybank)hasnothadafarmloandefaultinthe40-plusyearsIhavebeenhere.”

Hiring:Despiteweakercroppricesandpullbacksfrombusinesseswithclosetiestoagricultureandenergy,RuralMainstreetbusinessescontinuetoaddworkerstotheirpayrolls.TheJulyhiringindexdippedslightlytoastillhealthy60.3fromJune’s61.5.“RuralMainstreetbusinessescontinuetohireadditionalworkers.RuralMainstreetcommunitiesaregrowingjobsatasolidannualpaceofapproximately1percent,primarilyinbusinessesnotlinkedtoagricultureorenergy,”saidGoss.

Confidence:TheconfidenceindexforJuly,whichreflectsexpectationsfortheeconomysixmonthsout,expandedtoaweak46.6fromJune’s45.9.“Recentimprovementsinagriculturalcommoditypricespushedbankers’economicoutlooktoaweak,buthigherlevel,”saidGoss.

Home and Retail Sales:TheJulyhome-salesindexsoaredto73.3fromJune’s68.1.TheJulyretail-salesindexincreasedto53.4from50.0inJune.“Thismaybeasignalthatwearefinallyrecordingincreasesinretailsalesstemmingfromthedownturninfuelprices,”saidGoss.Eachmonth,communitybankpresidentsandCEOsinnonurban,

(Rural Mainstreet continued on next page)

main street economic survey

C r e i g h t o nU N I V E R S I T Y

Rural Mainstreet Economy Improves for July:More than half of bank CEOs expect higher loan defaults

Ernie Goss


(Rural Mainstreet continued from previous page)

agriculturallyandenergy-dependentportionsofa10-stateareaaresurveyedregardingcurrenteconomicconditionsintheircommunitiesandtheirprojectedeconomicoutlookssixmonthsdowntheroad.BankersfromColorado,Illinois,Iowa,Kansas,Minnesota,Missouri,Nebraska,NorthDakota,SouthDakotaandWyomingareincluded.ThesurveyissupportedbyagrantfromSecurityStateBankinAnsley,Neb.

Thissurveyrepresentsanearlysnapshotoftheeconomyofrural,agriculturallyandenergy-dependentportionsofthenation.TheRuralMainstreetIndex(RMI)isauniqueindexcovering10regionalstates,focusingonapproximately200ruralcommunitieswithanaveragepopulationof1,300.Itgivesthemostcurrentreal-timeanalysisoftheruraleconomy.GossandBillMcQuillan,formerchairmanoftheIndependentCommunityBanksofAmerica,createdthemonthlyeconomicsurveyin2005.

Colorado:Afterfallingbelowgrowthneutralforfivestraightmonths,thestate’sRuralMainstreetIndex(RMI)advancedto53.2,wellaboveJune’s48.6reading.Thefarmlandand

ranchland-priceindextumbledto12.7from29.1inJune.Colorado’shiringindexforJulydeclinedto52.9fromJune’s56.0.

Illinois:TheJulyRMIforIllinoisroseto53.6from49.7inJune.Thefarmland-priceindexslumpedto31.6fromJune’s34.1.Thestate’snew-hiringindexincreasedto60.5fromJune’s58.5.JimEckert,presidentofAnchorStateBankinAnchor,said,“Excessraininourareaissignificantlyhurtingcrops.Somesoybeanswereneverplanted.Corncropisclearlyreducedaswell.”

Iowa:TheJulyRMIforIowaadvancedto56.6fromJune’s51.8.Iowa’sfarmland-priceindexforJulyslumpedto43.9fromJune’s44.3.Iowa’snew-hiringindexforJulyjumpedto65.4from62.6inJune.

Kansas:TheKansasRMIforJulyroseto52.3fromJune’s48.2.Thestate’sfarmland-priceindexforJulysankto24.6fromJune’s26.5.Thenew-hiringindexexpandedto57.7from55.4inJune.

Minnesota:TheJulyRMIforMinnesotaroseto53.9fromJune’s

(Rural Mainstreet continued on next page)

Tables 1 and 2 summarize survey findingsNext month’s survey results will be released on the third Thursday of the month, August 20.

Table 1: Rural Mainstreet Economy One Year Ago and Last Two Months: (index > 50 indicates expansion)

July2014

June2015

July2015

Area economic index 51.8 50.0 53.4

Loan volume 79.8 79.9 72.1Checking deposits 53.5 48.0 53.4

Certificates of deposit and savings instruments 37.8 38.6 38.6Farmland prices 48.3 31.1 31.4Farm equipment sales 33.4 12.5 17.9Home sales 64.1 68.1 73.3Hiring 59.7 61.5 60.3Retail business 55.4 50.0 53.4Confidence index (area economy six months out) 42.9 45.9 46.6

Table 2: The Rural Mainstreet Economy, July 2015Percentage of bankers reporting

Up10% - 20%

Up1% - 9%

NoChange

Down1% - 9%

DownMore than 9%

Regardingfarmloandefaultsinyourareaoverthelastyear,defaultsare: 2.4% 9.5% 85.7% 2.4% 0.0%

Up10% - 20%

Up1% - 9%

NoChange

Down1% - 9%

DownMore than 9%

Regardingfarmloandefaultsinyourareaoverthenextyear,whatdoyouexpect? 4.8% 50.0% 45.2% 0.0% 0.0%

Increased 1% - 4%

No change

Decreased 1% - 4%

Decreased 5% - 9%

Decreased 10% - 29.0%

Whathasbeenthechangeinthepriceofanacreofcroplandinyourareaoverthepastyear? 7.0% 16.2% 14.0% 34.9% 27.9%

Follow Ernie Goss on Twitter: www.twitter.com/erniegossFor historical data and forecasts, visit: www2.creighton.edu/business/economicoutlook/


(Rural Mainstreet continued from previous page)

52.6.Minnesota’sfarmland-priceindexdeclinedto37.4from40.5inJune.Thenew-hiringindexforthestateclimbedto62.8fromJune’s61.0.AccordingtoPeteHaddeland,CEOoftheFirstNationalBankinMahnomen,“Cropslookgreat.”

Missouri:TheJulyRMIforMissourideclinedto47.1from49.9inJune.Thefarmland-priceindexfellto13.9fromJune’s35.0.Missouri’snew-hiringindexdecreasedto53.4fromJune’s58.8.

Nebraska:TheNebraskaRMIforJulyclimbedto50.1from48.8inJune.Thestate’sfarmland-priceindexfellto21.4fromJune’s29.5.Nebraska’snew-hiringindexdippedto56.4from56.6inJune.AccordingtoJeffreyGerhart,presidentandchairmanoftheBankofNewmanGrove,“RainfallhasbeenprettygoodinnortheastNebraska,butpivotsarebeingturnedon.”

North Dakota:TheNorthDakotaRMIforJulydecreasedto50.6from52.6inJune.Thefarmland-priceindexfellto36.5from56.0inJune.NorthDakota’snew-hiringindexdeclinedto62.4fromJune’s67.2.

South Dakota:TheJulyRMIforSouthDakotaexpandedto56.7fromJune’s52.2.Thefarmland-priceindexroseto43.0from42.1inJune.SouthDakota’snew-hiringindexroseto65.0from61.7inJune.

Wyoming:TheJulyRMIforWyomingadvancedto52.5fromlastmonth’s49.2.TheJulyfarmlandandranchland-priceindexslumpedto27.9fromJune’s32.7.Wyoming’snew-hiringindexclimbedto59.0fromJune’s57.9.

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ICBA_7169_2015 Ad Campaign_ICBA Reinsurance.indd 1 12/4/14 11:48 AM


CommunityBankersofIowaispleasedtosponsortheannualCommunity Bankers for Compliance Program (CBC).TheFallSeminarSessioniscomingupSeptember 22-23 attheHilton Garden InninJohnston,IA.ForcurrentmembersoftheCBCProgram,attendanceattheFallSessionseminarisincludedwithprogramenrollment.CBCmembersandnon-membersmaychoosetoattendjustoneorbothdaysofthisinformativeregulatorypolicyseminar.

TheCBCProgramisthemostsuccessfulandlongestrunningcompliancetrainingprograminthecountry.Itprovidesyourbankwithup-to-dateinformationontheever-changingbankregulations,aswellasguidanceforstructuringandmaintainingyourin-bankcomplianceprogram.Theprogramhaspassedthetestofregulatoryscrutinyandhasreceivedapprovalfromtheregulatoryagenciesnotonlyforitscomprehensiveness,butalsoforitspracticality.

Who Should AttendIt is essential that your bank’s compliance officer attend.Butbecauseregulatorycomplianceshouldbeapproachedfromateamperspective,manybankshavealsofounditextremelybeneficialtosendadditionalemployeestosessionsontopicsthatrelatedirectlytotheirpositionsinthebank.

FormoreinformationortoregisterforCommunityBankersofIowa’sCommunityBankersforComplianceProgramFallSession,visitourwebsiteatwww.cbiaonline.comorcontactPretty [email protected].

Reduce your bank’s regulatory risk and register today to attend!

Community Bankers forCompliance Program

Fall Seminar September 22-23

CBI Members:$350 for each 1-day session

$150 for each additional representative

Non-Members:$550 for each 1-day session

$250 for each additional representative

FALL SEMINAR SESSIONSEPTEMBER 22-23, 2015

Hilton Garden Inn8600 Northpark Drive, Johnston, Iowa

2015 Community Bankersfor Compliance Program

Register Online at www.cbiaonline.org

Learn About Community BankingLeadership and Legal Issues

LOT’s Quarterly Meeting Is August 20 TheCommunityBankersofIowa’sLeadersofTomorrow(LOT)group’snextQuarterlyMeetingwillbeheldThursday,August20from9:00amtoNoon,attheStoneyCreekInninJohnston.Sendtheup-and-comingleadersinyourbanktothiseducational,networkingevent!

BelinMcCormickattorneyMatt McDermottwilladdressattendeeswithhispresentation“Leadership,theBostonMarathonandBankLegalIssues”.McDermottwillrelatehispersonalexperiencesinrunningtheBostonMarathonwhenitwasbombedin2013,andinrunningitagainin2014.Hewilldiscusslegalissuesinthebankingindustryaswell.

Iowa Senator Matt McCoy(D-21)hasalsobeeninvitedtogiveLOTmembersanupdateontheIowapoliticallandscape.

Visitwww.cbiaonline.org/lot-quarterly-meetings.htmlformoreinformationandtoregistertoattendthemeeting.

IfyouareinterestedinbecomingamemberoftheLeadersofTomorrow,contactusat515.453.1495,[email protected],orvisitourwebsiteatwww.cbiaonline.org.


NewsfromCBIAffiliate&AssociateMembers

CommunityBankersofIowa(CBI),theIowaDivisionofBanking(IDOB),theCouncilofStateBankingSupervisors(CSBS)andtheIowaBankersAssociation(IBA)areco-sponsoringaone-dayseminar:theExecutive Leadership of Cybersecurity(ELOC).TheseminarwilltakeplaceonAugust 26 at the Sheraton HotelinWestDesMoines,from8:30am to 4:00pm.Registration is $125 per person for CBI, IBA, or CSBS members,andincludescontinentalbreakfast,lunch,breaksandseminarhandouts.

TheELOCseminarisdesignedforCEOsandseniorleadershiptodiscussthecurrentcyberthreatlandscape,thecollectionandsharingofcyberthreatintelligenceandbestpracticesincybersecuritymanagement.Thisprogramwillprovidelogical

andunderstandableideasforbankstoadoptindevelopingandmaintainingeffectivecybersecurityprograms.Thegoaloftheseminarisforyoutowalkawaymoreinformedaboutcurrentcybersecurityissues.

Who Should Attend:BankDirectors,CEOs,ChiefRiskOfficersandotherbankexecutivesareencouragedtoattend.This seminar is not designed to be a series of technical presentations. Information technology jargon will be kept to a mininum.

Formoreinformationandtoregister,visitourwebsiteandcheckouttheEducationsectiontodownloadtheeventregistrationflyer.

CBI to Co-Sponsor Executive Leadership of Cybersecurity (ELOC) Seminar - Aug. 26

CBIAssociateMemberFederalHomeLoanBankofDesMoines(FHLBDesMoines)hasannounceddetailsforthe2015StrongCommunitiesAward.BeginningonJuly20,2015,FHLBDesMoinesmembersandpartnerswillhavetheopportunitytowin$15,000topromotesmallbusinessgrowthandretentionintheircommunities.

Theawardrecognizesthevaluethatcommunitiesderivefromeconomicdevelopmentprojects,fromrecruitinganewgrocerystore,renovatingahistoricbuildingintheheartofthedowntowndistrictintoamulti-usefacility,supportingtheexpansionofatechnologyincubator,tounderstandingtheimportanceofprovidingopportunitiestosmallandminoritycontractors.

FHLBDesMoinesmembersandpartnersthroughoutthedistrict,including13-statesandthreeU.S.Pacificterritories,areeligibletoapply.TheapplicationperiodwillopenonJuly20,2015andnomineeswillbeacceptedthroughAugust 31, 2015.Theprocesstodeterminetwo$15,000winners,oneurbanandonerural,willfeatureavotingcomponentthatwillbeopentothepublic.

Formoreinformationabouttheawardorhowtoapply,visitwww.fhlbforcommunity.comorcontactMitchFastenau,FHLBCommunicationsandExternalRelationsCoordinator,[email protected].

FHLBDesMoinesprovidesfundingsolutionsandliquiditytonearly1,500financialinstitutionstosupportmortgagelending,economicdevelopmentandaffordablehousingintheircommunities.ForadditionalinformationaboutFHLBDesMoines,visitwww.fhlbdm.com.

NEW HIRES: Vantage Point Solutions

TwonewassetshavebeenaddedtotheteamatCBIAffiliateMemberVantagePointSolutions(VPS):Michele Lee,newRiskandRegulatoryComplianceManager,andPat EssigasaCreditReviewConsultant.

MicheleLeehasbeenacomplianceanalyst,internalauditorandloanofficerforlocalfinancialinstitutions.Shebrings17yearsofvaluableexperiencetoVantagePoint’sgrowingbankingdivision.Inrecentyearsshehasfocusedon

performingcompliancereviewsandservingasaliaisontoregulators.Shealsohasextensiveexperiencetrainingstaffonallregulatorychanges,andisespeciallywell-versedinconsumerlendingregulations.

With37yearsofbankingexperience,PatEssigisaseasonedveteranintheindustry.Hehasspenthiscareerasanagriculturalandbusinessbanker,acreditadministrator,andabranchmanagerandmarketpresident.HetraveledextensivelythroughoutIowaandSouthDakotaperformingcreditreviewoncommercialandagriculturalloanportfolios.Hisexpertiseincludesagriculturalandcommercialcreditanalysis,salescoachingandmanagement,creditreviewandportfolioduediligence,andloanworkoutsandproblemsolving.

Combiningprofessionalengineering,technicalexpertiseandextensiveregulatoryknowledge,VPSdesignscustomized,technicallyadvancedandeconomicallyviablesolutions.Formoreinformationvisitwww.vantagepnt.com.

Michele Lee, Risk and Regulatory Compliance Manager for VPS

Pat Essig, VPS’ new Credit Review Consultant

FHLB Des Moines Announces 2015 Strong Communities Award


(Making the Case for Main Street continued from page 3)

Communitybankersaren’taskingforeasytreatment,theyjustwanttobetreatedfairlyandjustly.IfwecontinuedownthispathofspecialdealsforWallStreetfinancialmoguls,webetterbereadyforthefrighteningconsequencesthatwillalmostcertainlyleadustoournextfinancialcrisis.

Americadeservesbetter.AmericadeservesasystemwhereMainStreetanditscitizensareallowedtothriveandaren’tsuffocatedbyamisguidedregulatoryregimethatallowstheircommunity’sprimarysourceofcapitaltodeteriorate.

Incontrasttotherelativelynewphenomenonoftoo-big-to-failmegabanks,communitybankingintheUnitedStatesisasystemthathasworkedforcenturies.Itisasystemthatisuniquetotheglobalfinancialstructureandhashelpedmakeourcountry’seconomytheenvyoftheworld.Ifcommunitybanksdon’tdorightbytheircustomers,theyfail.Theyaren’tproppedupbytaxpayers.It’stheveryessenceofafreemarketsystem—akeyprincipleofthelibertyuponwhichAmericawasfounded.

IchallengeAmerica’slawmakersandregulatorstodowhat’srightandtoholdWallStreettothesamelawsandregulationsasMainStreet.Onlythenwillwetrulyhaveaneconomicandregulatorysystemthatisbuiltuponlibertyandjusticeforall.

Following Mr. FineMore than 1,000 people are followingCamden Fine’s tweets @Cam_Fine — are you?Visit www.twitter.com/cam_fine.

(Online Board Portals continued from page 11)

onlineportalprovider,youmustperformduediligenceonyourvendor’ssecuritycontrols,includingrelatedproof,becauseexaminerswillaskforit.

Thatsaid,web-basedportalsofferseveraladvantagesfromacompliancestandpoint.Directorsgainaccesstothemostup-to-date,clickableregulatorychanges,aswellasconvenientonlinecompliancetraining.Afterall,nosingleentityismoreaccountablefor,ordeeplyaffectedby,acomplianceslip.

Portalsalsomakeexaminers’jobseasierbygivingthemgreateraccessibilitytosuchorganizedandarchivedmaterialsasboardminutesandcompliancemanuals.

Finally,onlineportalsaddstrongercomplianceandefficiencytopolicymanagement,sincetheyallowyoutopostandarchivefinancials,bylaws,trainingdocumentsandmanuals,disasterrecoveryplansandmore—andcompelbothdirectorsandemployeestoacceptordenythem,whennecessary,withasimpleclick.

Bottomline—onlineWebportalsstretchbeyondtheboardroomtobenefityourfinancialinstitution’sentirestaff,andputpowerfultechnologyatyourfingertips.Theysavetime,energyandmoneythatcanbeputtowardwhatcounts—protectingtheinstitution,employeesand,ofcourse,customersfromunnecessaryrisk.

Bill Evers serves as senior business development director for CSI Regulatory Compliance. For more information about CBI Endorsed Member Computer Services, Inc., visit csiweb.com.

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