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Meet Your MO Banker (see page 10) BANKER SHOW ME THE THE VOICE FOR MISSOURI’S INDEPENDENT BANKERS July 2018

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july 2018 INSIDE THIS ISSUE P.O. Box 1765, Jefferson City, MO 65102 (573) 636-2751 • www.miba.net With the exception of official announce- ments, the Missouri Independent Bankers Association (MIBA) and its staff disclaim responsibility for opinions expressed and statements made in articles published in THE SHOW-ME-BANKER. This pub- lication and other programs of the MIBA are intended and designed to provide accurate and authoritative information regarding the subject matter covered. These services are provided with the understanding that the MIBA is not engaged in rendering legal, accounting or other professional services. If legal advice is required, the services of a competent professional should be sought. While this publication makes a reasonable effort to establish the integrity of advertisers, it does not endorse advertised products or services, unless otherwise so stated. For reprints, call 800-336-1120, Ext. 7067 / 913-261-7067 or email reprints@banknews. com. THE SHOW-ME BANKER ©2018 BankNews Media. All rights re- served. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photo- copying, recording, or by any information storage and retrieval system, without written permission from the publisher.

ADVERTISING & PRODUCTION OFFICES 5125 Roe Blvd., Ste. 200, Shawnee Mission, KS 66205-2391 800-336-1120 / 913-261-7000 Bryon Howell, Director of Sales 913-261-7057 • bhowell@banknews.com Afton Rodriguez, Adv. Account Executive 913-261-7055 • arodriguez@banknews.com THE SHOW-ME BANKER is published by the Missouri Independent Bankers Association Editor: Matthew S. Ruge, Executive Director Hannah Ruge, Executive Assistant 11 12 18 BANKER SHOW ME THE 24.The Intersection of FinTech, Operations, Data Security and Compliance 26. Management Decisions andYour Insurance 27. 2018 MIBA Scholarship Recipients 30.41st Annual Convention and Exhibition Schedule 31. 41st Annual GolfTournament 32. 7 Minute Spotlight 32. Legal Eagles HotTopics Panel 33. HaveYour Received Your Prospectus? 34. Examiner Panel 34. 28th Annual Scholarship Auction 36. ThankYou 2018 Convention Sponsors 38. Dates & Events 4. Message From the MIBA President 5.From the Chairman 6.Flourish 7.View From the Capital 8.MIBA PAC Honor Roll 10.MeetYour MO Banker 12.Background On 16.The Banker’s Guide to GDPR 18.The Dawn of Artificial Intelligence 20.StrategicThinkingand InformationTechnology 22.PortfolioPower 16

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MESSAGE From the MIBA President David Alderton Peoples Bank of Wyaconda F irst, an update on Ag. crops have been planted and for the most part have emerged. Hay is coming out of the fields as we speak. It looks to be a light hay crop in our area. Rains are very spotty with some areas in our state having too much and other areas in extreme drought. For the most part, Northeast Missouri is in the extreme drought so, if anyone can, send rain our way or to others in need! This is the time of the year I start remember- ing those cold mornings sitting on a deer stand. I’m ready for that to roll around again; if for nothing else just to cool off. It’s saying 96 today and 99 for the next two days. Thank goodness for air conditioning.

Management and operations are two of the most important parts of our banks today. Management because we are in control of most everything and operations because they are the foundation of our banks. Management is ultimately responsible for everything. Management drives the direction of the bank,thesuccessofyourbank,andthefocusrequired for all the various departments to work toward the same common goal and to work as a team! Management has many different styles. Find staff who fit yours, who are committed to the suc- cess of the bank, and are proud of the success we achieve working together as a team. There is no one answer; just find what fits you and your style, and your bank.

All of this is supported by operations. Or maybe all of this supports operations! To me, opera- tions are the foundation of the bank. Try running your bank without an operations department. It’s not possible. The minute, or even second the operations department ceases to function, the bank cannot/will not function. Operations take great people among other things. Not to brag, but my operations staff are the best. Great attitudes, hardworking, respon- sible people that make great decisions, and are also fun to work with. They continually make the entire bank look good, but many times never get the credit. If there is ever a competition between operational departments at different banks, my staff is who you would want to bet on. They are second to none and I’m proud of them! As a reminder, we have some upcoming MIBA events. In July, we have our Summer Board Meeting. This will be held at Camden on the Lake. This is always a very nice, short outing for all. Immediately following and in the same location is the Emerging Community Bankers conference and golf outing. The golf outing is a nice way to spend some time with your new up and coming leaders. And afterwards, they get to listen to various speakers about various sub- jects. Your emerging community banker cannot help but learn a lot. This will better prepare them for the future by providing them both knowledge and contacts.

Then, of course, September brings our annual MIBA convention. We are expecting a record turnout this year again and a great line of vendors. Visiting with various vendors, new and old, and seeing what’s new has become one of my favorite items on my agenda. Folks, most of these vendors, whether I do business with them or not, I also consider friends. They are great people! See you all in July! Q Management and operations 4 The Show-Me Banker / July 2018

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Tim Zimmerman Chairman of ICBA CHAIRMAN From the C ommunity bankers, you did it! Through fierce persistence and determination, you achieved the final passage of landmark regulatory relief through the Economic Growth, Regulatory Relief and Consumer Protection Act. By work- ing together and pressing relentlessly for needed reforms, we will be better able to serve our cus- tomers and communities. Over many years, with ICBA leading the way, we strategized, engaged and delivered mean- ingful relief benefiting community banks of all sizes. We identified specific examples of the crushing regulatory burden we faced and offered tangible solutions through ICBA’s Plan for Prosperity.

Our advocacy included hundreds of meetings with policymakers on Capitol Hill and at the White House, tens of thousands of community banker messages to lawmakers, congressio- nal testimony, joint state association letters, petitions, articles and op-eds. Thanks to our never-say-die attitude, we achieved biparti- san reforms amid a hyper-partisan political environment. This law, detailed at icba.org/2155, follows many unsuccessful attempts. I’m sure some- where in the back of your brain they ring a bell: the Communities First Act, the Financial CHOICE Act, the CLEAR Relief Act. Time and time again, we advanced legislation through the House only to see it falter in the Senate. We refused to take “no” for an answer. We recognized the new opportunities available to us in the 115th Congress and Trump admin- istration. In meetings with officials from Congress, the Treasury Department and the White House — including President Trump himself — we found a receptive audience and finally achieved the kind of relief we’ve worked toward.

We all know there are plenty more regu- lations in need of reform. ICBA is already leading the charge in a litany of policy areas, including the Bank Secrecy Act and Consumer Financial Protection Bureau regulations, and leveling the playing field with tax-exempt credit unions and the Farm Credit System. Here’s the thing: the vote on regulatory relief helps us build our case. The strong bipartisan support we received in this debate has shown what is possible for community banks in Washington, and gives us more opportunities to advance additional reforms.

While ICBA’s quest for common-sense regu- lation continues, we can all take pride in this monumental achievement. You did it, commu- nity bankers. THANK YOU! Q www.miba.net / The Show-Me Banker 5

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FLOURISH Rebeca Romero Rainey ICBA President and CEO @romerorainey I ndependence Day seems just a little sweeter this year as we recognize the incredible community bank victory that just took the financial services industry, and Congress, by storm. Leave it to nearly 5,700 of the nation’s community banks to assert their independence in a way never seen before! It’s well known that the Economic Growth, Regulatory Relief and Consumer Protection Act is a major achievement for the nation’s com- munity banks. As you know, it was a long and arduous journey to get to this point. By work- ing together and pressing tirelessly for needed change, we will be able to better serve our cus- tomers and communities. And for community banks, that’s what it’s all about. It’s community bankers like you who were there to push this victory over the hurdles and, eventually, over the finish line. Not once did you back down and allow yourself and your commu- nity bank to be painted with the same brush as the megabanks. Not once did you waver when ICBA asked for your letters, calls, emails, petition signatures — all in the name of tiered and propor- tionate regulation for our industry.

Independence from an onerous regulatory burden is now yours because of what you do for this great industry every day, what you stand for, who you serve and the difference you make to the lives you touch. It’s your sterling reputation as a trusted local lender that allowed you to have a say on Capitol Hill when others did not. Remember that and hold on to it — just as you hold on to the independence that allows you to make loans based on relationships rather than transactions, and step up to help your community in ways that only a community bank can.

It’s our honor ICBA is proud to represent community bankers like you, who do whatever is necessary to make your community stronger and more vibrant every day. You make the American dream possible for local families, entrepreneurs, farmers and all those who depend on your community bank for their financial needs. Just as independence matters, what you do matters. So, as we celebrate the birth of our country on July 4, I also hope you think about all the ways that being an independent community bank makes you a valuable piece of the fabric ensuring our nation’s economic wellbeing. Never before has value been more appreciated and celebrated! Q 6 The Show-Me Banker / July 2018

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Congressman Blaine Luetkemeyer Missouri’s 3rd Congressional District C ommunity bankers, consumers, and members of Congress can all agree that the Bureau of Consumer Financial Protection has an honorable mission of protecting consumers from financial abuses. Unfortunately, as the community banking world knows all too well, in practice it has been an unaccountable, politically-driven agency that, until recently, has lacked appropriate management and oversight, leading to politically- driven actions and unrestrained overspending. Under former director Richard Cordray, who is now running for political office in Ohio, the moun- tain of rules coming out of the bureau crippled many community financial institutions. Thanks to the uncertainty surrounding those rules and the apparent desire to regulate through enforcement, many community banks found it difficult to do business, ultimately hurting the consumers who rely on those services.

Not only was the bureau unnecessarily harm- ing financial institutions and the consumers it was charged with protecting, it was an unac- countable behemoth spending taxpayer dollars like they grew on trees. The greatest example of this unbelievable overspending can be seen in the $215 million renovation of a space that the Bureau leased. That’s right, our hard-earned tax- payer dollars paid for luxury renovations of a building we don’t even own. Thankfully, President Trump chose Mick Mulvaney to serve as acting director after Mr. Cordray stepped down. Despite almost all of the previous administration’s hires still filling key roles at the bureau, Acting Director Mulvaney quickly began to change the culture and mission. Instead of carrying out politically-motivated attacks on industry to grab headlines, the Bureau is refocus- ing on the health and safety of the financial system in order to best serve consumers.

As the director of the White House Office of Management and Budget, Mick cannot stay at the Bureau permanently. Fortunately, President Trump has recently nominated Kathy Kraninger to serve as the next director of the bureau. A smart pick who will provide much-needed leadership to the BCFP, Kraninger has experience in the legislative and exec- utive branch, as well as in management and budget. Her past experience will serve her well as she is charged with the monumental task of managing a notoriously unmanageable bureaucracy. She currently serves as the Office of Management and Budget’s associate director for general govern- ment, overseeing a $250 billion budget over seven cabinet departments and 30 agencies, including all financial regulators. Although, not a big name in the financial policy world, I believe that with her breadth of government management experience Ms. Kraninger will bring a fresh and reasonable perspective.

TheWhiteHouseisconfidentinherstaunchsup- port of free enterprise and believes she will ensure the Bureau is responsibly managed while continu- ing the important work of protecting consumers. Under Acting Director Mulvaney’s leadership, the BCFP has taken steps to not just talk the talk, but to walk the walk, and to ensure consumer protection without assaulting financial independence. I look forward to working alongside Kraninger as she continues to lead the bureau in this direction and provide much-needed management. Q Luetkemeyer is a senior member of the House Financial Services Committee, where he serves as the Chairman of the Subcommittee on Financial Institutions and Consumer Credit. CAPITAL View From the www.miba.net / The Show-Me Banker 7

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MIBA PAC HONOR ROLL Contributors to the MIBA Political Action Committee are recognized for their generosity on the Association’s website and at the MIBA Annual Convention and Exhibition. Different levels of contribution have been set to recognize supporters of our Political Action Committee fund and to make the Association’s membership more aware of this important facet of our work on behalf of the political agenda of community banks across Missouri. Q NOTE: Personal or corporate campaign contributions to any PAC are not deductible in any amount for federal tax purposes. PRESIDENT’S FAIR SHARE LEVEL $10 per Million in Deposits up to $250M Cap • Bank of Advance • Bank of Bolivar • Bank of Hillsboro • Bank of Louisiana • Bank of Old Monroe • Bank of St. Elizabeth • Blue Ridge Bank and Trust Co., Independence • BTC Bank, Bethany • Community Bank of Pleasant Hill • Community Bank of Raymore • Community State Bank of Missouri, Bowling Green • Exchange Bank of Northeast Missouri, Kahoka • Farmers Bank of Green City • First Independent Bank, Aurora • FMB Bank, Wright City • Focus Bank, Charleston • Jonesburg State Bank • Merchants & Farmers Bank, Salisbury • Metz Banking Company, Nevada • Midwest Independent Bank, Jefferson City • Midwest Regional Bank, Festus • Northeast Missouri State Bank, Kirksville • Peoples Bank of Altenburg • Pony Express Bank, Liberty • Preferred Bank, Rothville • Regional Missouri Bank, Marceline • The Bank of Missouri, Perryville • The Bank of Salem • The Callaway Bank, Fulton • The Missouri Bank, Warrenton • The Missouri Bank II, Sedalia PLATINUM LEVEL $750 and up • Exchange Bank of Missouri, Fayette • HomeBank, Palmyra GOLD LEVEL $400-$749 • Bank of Monticello • Legends Bank, Linn • Platte Valley Bank, Platte City • Security Bank of the Ozarks, Eminence SILVER LEVEL $200 - $399 • Bank of Crocker • Chillicothe State Bank • Farmers State Bank, Cameron • Silex Banking Company, Silex INDIVIDUAL • John Allee, Tipton • Calen Bestgen, Tipton • H.E. Blankenship, California • Carl Blochberger, Tipton • David Johansen, Syracuse • Mike McGannon, Kansas City • George Morris, Kansas City • Steve Panknin, Kansas City • Chris Thompson, Kansas City • Mark Thompson, Kansas City • Paul Thompson, Kansas City • Tom Thompson, Kansas City • Bob Schatzer, Tipton 8 The Show-Me Banker / July 2018

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2018 MIBA Financial Directories are HERE! Each MIBA member will be mailed a complimentary copy, but you NEED these resource directories throughout your bank. Order now and get your extra copies ASAP! $35 each + shipping while supplies last. To order extra resource directories contact Hannah Ruge at hruge@miba.net or 573-636-2751. For online or comma-delimited editions of the directory, visit www.bankdirectoriesonline.com Bankers Security Inc. Barret School of Banking BKD, LLP Lathrop & Gage LLP Modern Banking System Stinson Leonard Street, LLP TIG Advisors Welch Systems Inc. 2018 MISSOURI MEMBERSHIP AND FINANCIAL RESOURCE DIRECTORY THANK YOU to the following Associate Member advertisers in this year’s directory: Diana Poquette, Account Executive 402.499.1011 dpoquette@unicogroup.com Directors and Officers Policy • Broad Form Entity Coverage • Three Year Non-Cancelable Policy • Employment Practices Liability • Bankers Professional Liability Policy Financial Institution Bond • Includes Internet Security • No Forms to Complete Every Year • Extended Coverage Enhancements ‘Ž›Žȱ — œ ȱŠ”ŽȱŠȱ’ě Œ Ž ǯ Trust UNICO to connect you to a full suite of insurance solutions designed to protect and grow your financial institution.

unicogroup.com 402.434.7200 YOURTRUSTED ADVISOR Covering all of Nebraska, Kansas and Missouri Questions about Cyber Security Coverage? We have Answers. Property and Casualty Coverage • Property • General Liability • Workers Compensation • Umbrella/excess liability • Business Income and Extra Expense • Specialized Coverages (e.g. ATMS, foreclosed properties) Call Today! 402.499.1011 www.miba.net / The Show-Me Banker 9

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SMB: Tell us about Your Main Bank and Branches? Where Are They Located? What Is the Market Like? PH: Our main banking center is located in the heart of his- toric Maplewood, Mo., just blocks away from the city of St. Louis. Our other five centers are located in Maryland Heights, Florissant, St. Peters, St. Charles and Affton, Mo., giving us a unique and wide-spread trade area. Our focus is on commercial lending but we also have a strong home mortgage department. With numerous banks and credits unions in the St. Louis met- ropolitan area, our competition is stiff.

SMB: What Is something Unique about Your Bank? PH: Citizens is unique because unlike so many community banks it has weathered the storms of a hundred plus years and survived. We were charted in 1915, and have come through economic ups and downs, including the Great Depression, wars and a fire. Strong management and dedi- cated staff have always been the backbone of Citizens. Customers depend on us to give the best service possible. SMB: How Did You Get Started in the Banking Business? PH: I worked 15 years as a staff accoun- tant for a retail business and then a CPA firm. When I left the CPA office, I took a job as a bank teller to “fill in” until my next accounting job. I liked banking and decided to make it my career. I have worked in several areas but most of the past twenty years were spent in internal audit. Audit gave me an understanding of all areas of banking that has really helped me in the position I have today. SMB: What Is the Most Important Thing You’ve Learned from this Career So Far? PH: Be flexible and willing to adapt. Circumstances change and people change with them. In order to serve our customers we have to continu- ally update, rethink and innovate.

SMB: Tell Us about the Bank’s Community Investment Efforts. PH: Our bank is very active in supporting community orga- nizations and activities, particularly those that revitalize neighborhoods or establish new businesses. We have special checking and lending products for individuals that would oth- erwise be “unbanked.” SMB: What Is the Bank’s Biggest Challenge in the Area of Internet Banking? PH: Cybersecurity. It’s a challenge to give our customers the products they want and provide the security they need for their information. Q MEET YOUR MO BANKER Pamela Hanners senior vice president operations & retail banking, citizens national bank of greater st. louis 10 The Show-Me Banker / July 2018

TOP MISSOURI’S BANKS BY NET INTEREST INCOME 5 1 Edward jones Trust company 10.79% 2 National advisors trust company 10.2% 3 stifel trust company, national assocation 6.96% 4 Wood & Huston Bank 4.12% 5 community Bank of Raymore 3.59% Image © eurobanks/iStock www.miba.net / The Show-Me Banker 11

Elizabeth Zuroweste By Kristin Rulon, Editor, contract publications, and Courtney matney, Intern, BankNews Media B A C K G R O U N D O N E lizabeth Zuroweste, better known as “Betty” wears many hats at Silex Banking Company and just as many outside the office. She is the COO, BSA officer, IT offi- cer and president of the holding company Silex Bancshares, Inc., loves to volunteer and is known for her homemade rolls at her church’s annual spring supper. “I don’t have an impressive background,” Zuroweste humbly admitted. She’s from a time that college degrees weren’t a crucial part of the hiring process, a common link between her and many other banking officers in smaller communities. It wasn’t about the formal education back when she started working for Silex in 1980, it was about the willingness to learn and grow with the company.

12 The Show-Me Banker / July 2018

“I learned along the way and am still learning along the way,’ she said. “Most of my learning has been through job experience and a lot of reading. I love the modern convenience of webinars for learning.” Being a life-long learner has paid off for Zuroweste. She remembers being involved with the installation of the first computer system at the bank, and as head of operations she has overseen all IT related projects ever since. It’s a job that’s never- ending, Zuroweste explained, but it’s one she enjoys — there is always something new.

Silex Banking Company opened its doors in 1892 origi- nally as Silex Savings Bank, changing its name to its current title in 1934 after purchasing the other bank in town at the time. The bank moved from its original location on Main Street (now the Senior Citizen Center in Silex, Mo.) to a new building on Second Street in 1960. This is still SBC’s location today, despite recovering from not one buty two floods. “In 2008, the town suffered a major flash flood which destroyed most of our computer equipment,” Zuroweste said. “Even with that catastrophic event, we were only closed for one day. This was due to a dedicated staff and the helping hands of many of our ‘neighbors.’” Zuroweste admits it was a learning experience for everyone involved and the bank put together a disaster recovery plan, just in case it happened again. And it did, in 2015. “This was a ‘double-flood,’” Zuroweste added, “The water came up and went down for about two hours and then rose again to its full strength. This two-hour time frame allowed employees to enter the bank and secure as many areas as pos- sible. Again, due to dedicated staff, we were open the next day, with the drive-up opening at normal time and the lobby need- ing a few hours to clean up the mud in that area.” Resilient, the bank continues to grow under leadership of its long-time employees while still meeting its customer’s needs, nurturing its 126-year relationship with the commu- nity it serves.

“We don’t just offer financial support, but also personal sup- port,” Zuroweste said. “It has been our philosophy to keep up with the latest changes in technology and product. “It is very hard for smaller community banks to offer everything out there as the fees for implementing these products can be very expensive and of course, the smaller the customer base, the more expensive it is per user. Sometimes it makes it hard to justify the cost and we may take a little longer to introduce the product, but in the end, we always do what keeps us in the playing field. One of the latest “big” features made available to our customers has been mobile deposit, which we implemented about 18 months ago, and it has been met with great response. With all these techno- logical changes and advances, one of our main focuses is keeping our customers personal information safe and that is a battle of its own.” When Zuroweste isn’t at the bank, she’s always somewhere giving back or helping her husband with their 1,000-acre farm although she admits she isn’t as helpful as she would like to be at times.

“If I was financially able, I would probably just be a full-time farm-wife. I love the outdoors and where I live,” she shared. “I wish I had more time to help my husband with farming, but my schedule doesn’t allow for much help from me. I love to bake so maybe I would go to baking school. I would also spend more time with my three children. I do enjoy volun- teering. As you can see, I am a pretty down-to-earth, simple person and it doesn’t take much to make me happy.” When she’s not on the farm, she has helped with school auc- tions, been an active 4-H club leader and PTA officer, and even managed her daughter’s softball team at one time. Today, she’s the board vice-president of the Lincoln County Council on Aging, involved in the County Fair and active with her church, including being in charge of the homemade rolls needed for its annual sausage supper.

“My job is to make the roll dough for around 900 to 1,000 people and that is a long day, but with the help of ‘rollers’ and ‘bakers,’ our group gets it done,” she said. Recently, she was asked to be a speaker at the National Honor Society Missouri State Convention at Tan-Tar-A. She spoke in six different sessions about banking and the pillars of NHS. “Our bank is very involved with helping support many local clubs, organizations and the schools,” Zuroweste shared. “Since we are in a farm community, there are not a lot of businesses to help fund school projects, but they know they can always come to us and count on support.,” Bank employees are also available to visit the local schools to help improve financial education, even offering a tour of the bank itself.

“One of the things we do when asked for a donation for prizes is donate gift certificates to local businesses. We like this approach because not only does it help the organization, but it also helps our businesses, so it serves a two-fold pur- pose. Most employees are involved in one form or another with community events, whether it is working at the event or attending and donating to the event. You will probably always see at least one employee at every event in the area.” After speaking with Zuroweste, it’s apparent it’s not just she who wears many hats; SBC’s employees have the same mental- ity when it comes to giving back to the community. “We know most of our customers, their family history, who they are related to, if there are illnesses/deaths in family, etc. When they enter the bank, they know they can depend on us to take care of their banking needs. Every decision is made with our customers in mind, from the products we offer to the fees we charge. It is always great when a customer takes the time to tell us how thankful they are that we still offer such good personal service.” Q www.miba.net / The Show-Me Banker 13

Missouri Independent Bankers Association is pleased to once again sponsor the annual Community Bankers for Compliance Program (CBC). The CBC Program is the most successful and longest running compliance training program in the country. The CBC Program will provide your bank with up-to-date information on the ever-changing bank regulations, as well as guidance for structuring and maintaining your in-bank compliance program. In addition, it provides a forum where those responsible for regulatory compliance can discuss issues and exchange ideas with other community bankers.

Membership to the CBC Program consists of the following: Quarterly Seminars. A compliance seminar is provided each quarter. The topic is selected based on the most recent industry and regulatory developments which may have an impact on community banks. Each person attending the program will receive a detailed manual, written in full narrative, that they can take back to the bank as a reference and training tool. Monthly Newsletter. The Compliance Update newsletter is sent to program members each month. It provides an update of compliance issues that impact community banks. Compliance Hotline. Members of the program may call the Young & Associates’ toll-free number or visit their Web site on the Internet for compliance questions that arise on a daily basis. Young & Associates has many qualified professionals available to answer your questions. This service ensures that your bank is just a phone call away from the information you need in order to answer your compliance questions.

CBC Members Only Web Page. This web page is reserved for banks that are registered mem- bers of the Community Bankers for Compliance (CBC) Program. In it you will find special and timely information and tools provided by Young & Associates, Inc., that can be used to enhance the regulatory compliance function at your bank. C o m m u n i t y B a n k e r s f o r C o m p l i a n c e Program Flexibility To assure that CBC member banks are getting the most out of their memberships, the program is designed with flexibility in mind. We realize that job responsibilities change quite frequently within some banks, and for this reason, membership is granted to banks, not individual bank employees. This enables you to send your bank’s compliance officer, as well as an additional representative as the topics apply to the various areas of the bank. By sending these representatives to the sessions that matter most to them, you are greatly enhancing the bank’s ability to implement compliance throughout the bank.

Who Should Attend The focus of the CBC is on regulatory compliance. It is essential that your bank’s compliance officer attend. But because regulatory compliance should be approached from a team perspective, many banks find it beneficial to send additional employees to sessions on topics that relate directly to their positions in the bank. These employees typically come from the customer service, lending, or operations departments in the bank. To support this team effort, the CBC has been priced to enable your bank to send additional employees at a substantial savings. Dates, Location, and Hotel Information February 13, 2018 May 1, 2018 August 14, 2018 November 13, 2018 Each live regulatory seminar will be held at 7KH0,%$2IILFH  + LJK6WUHHW -HIIHUVRQ&LW\Missouri /LJKWEUHDNIDVW 5HJLVWUDWLRQ  $ 0 6HPLQDU$0DSSUR[30 +RWHO2SWLRQV 'RXEOH7UHHE\+LOWRQ-&   SHUQLJKW   &DSLWRO3OD]D+RWHO  per night   5RRP5DWH&RGH0,%$ 14 The Show-Me Banker / July 2018

Bill Elliott, CRCM, Senior Consultant and Manager of Compliance With over 35 years of banking experience, Bill Elliott leads the compliance department at Young & Associates, Inc. where he conducts compliance reviews, leads compliance seminars, conducts in-house training, and writes compliance articles and training materials. During his career as a banker, Bill spent 15 years as a compliance officer in a large community bank. He has also been a lender for consum- er, commercial, and mortgage loans, and has managed a variety of bank departments including loan review, consumer/commercial loan processing, mortgage loan processing, loan and credit administration, collections, and commercial loan workout.

Dale Neiss, CRCM, Consultant Dale Neiss is a compliance consultant with Young & Associates, Inc. With over 30 years of banking experience in Denver, CO, Dale has developed and implemented compliance management systems, loan review and community reinvestment act (CRA) programs, and enterprise risk man- agement (ERM) framework for multiple banks. He has held the titles of Compliance and Loan Review Manager, BSA and CRA Officer, and Enterprise Risk Management Director. Prior to his Denver, CO banking experience, Dale began his banking career with the Office of the Comptroller of the Currency in Indianapolis, IN as an associate national bank examiner. At Young & Associates, Inc., he provides consulting and training, as well as writes articles and compliance manuals. He holds the designation of Certified Regulatory Compliance Manager (CRCM) by the Institute of Certified Bankers in Washington, D.C. Dale earned a Bachelor of Business Administration degree in Finance and Management from Kent State University. Karen S. Clower, CRCM, Consultant and Compliance Operations Manager Karen Clower is a compliance consultant at Young & Associates, Inc. Her primary responsibilities include product development and maintenance, answering compliance hotline calls, manual creation and updating, and compliance field work. Her prior banking experience includes 19 years working for a large community bank where she man- aged the mortgage lending department, including processing, underwriting, and the mortgage loan officers. She has also worked as a mortgage loan officer and credit analyst/account officer for commercial lending. Karen holds a BA in Business Management from Hiram College, and associate degrees in Banking and Finance and Business Management from Kent State University.

Seminar Presenters Regulatory Approval The Community Bankers for Compliance Program has passed the test of regulatory scrutiny. After the original program was developed in other states, the regulatory agencies recognized the increased understanding and ability to deal with regulatory issues by those bankers who were members. Since then, the program has received approval from the regulatory agencies not only for its comprehensiveness, but also for its practicality. Compliance Manuals When you attend a seminar, you want to focus on the material being presented. It is often too difficult, though, to listen to a speaker and write detailed notes at the same time. For this reason, the CBC Program manuals are written in full nar- rative. This also enables the banker to take the materials to the bank as a reference to the regula- tions and as a training manual for other employees. Risk Management The CBC is a proven method to reduce the risk of regulatory actions against your bank for reasons such as failure to establish a valid compliance management program, failure to establish compliance policies, failure to provide adequate compliance training, and failure to monitor compliance internally. In addition, with each change in regulatory compliance regulations, there is an increased risk of inadvertent compli- ance errors. The CBC reduces the possibility that these errors will occur because your employees will have a greater understanding of the regulatory requirements.

Practical Solutions Most community banks do not have the time or money to build elaborate compliance systems, but there is a solution. The CBC Program will provide practical, user-friendly compliance tech- niques and explain how they can be related to all areas of compliance. For example, setting up compliance files, developing training programs, responding to the examinations, and resolving disputes are among the areas that are reviewed. C o m m u n i t y B a n k e r s f o r C o m p l i a n c e Participant Interaction The CBC Program is designed to assist members in getting timely answers to their questions as well as testing techniques before implementation in the bank. The program provides a forum where each bank can be an active participant by asking questions and bringing concerns and compliance techniques for review by the group. This peer evaluation and two- way flow of information increases understanding and improves the bank’s effort toward a viable compliance program.

www.miba.net / The Show-Me Banker 15

By Keith Monson, Computer Services, Inc. THE BANKER’S GUIDE TO GDPR Image © roobcio/iStock T wo years ago, the European Union (EU) took an unprecedented step toward resolving the con- flict between big data and privacy. Passage of the General Data Protection Regulation (GDPR) ush- ered in a new era for individual privacy rights, but it created a potential compliance nightmare for organizations that collect and handle data. AccordingtotheofficialGDPRwebsite,“TheaimoftheGDPR is to protect all EU citizens from privacy and data breaches in an increasingly data-driven world that is vastly different from the time in which the 1995 directive was established.” The 1995 directive provided an answer to the division of privacy regula- tions across the EU, and overall, both the directive and GDPR hold tight to the idea that privacy is a fundamental human right. GDPR, with an effective date of May 25, 2018, has far-reach- ing implications. Companies in the EU have spent the past 24 months preparing for this date. However, GDPR doesn’t just affect businesses in the EU, and that’s left many American financial institutions unaware of — or uncertain about — their obligation to it.

Is Your Institution on the Hook for GDPR? The GDPR website states that the law, “not only applies to organizations located within the EU but it will also apply to organizations located outside of the EU if they offer 16 The Show-Me Banker / July 2018

Keith Monson serves as CSI’s chief risk officer. In this role, Monson maintains an enterprisewide compliance framework for risk assessment and reporting, as well as other key components of CSI’s corporate compliance program. With nearly 25 years of banking experience, he has a wide range of expertise in the compliance arena, having served as chief compliance officer for both large and small financial institutions. • Breach notification: If breached, controllers and pro- cessers must notify regulatory authorities “without undue delay” and within 72 hours of discovery. 2. Individual Rights: GDPR grants individuals substantial data privacy rights. Individuals may exercise the follow- ing rights, which controllers and processors must fulfill starting May 25, 2018: • Data access: The right to request a copy of their per- sonal data from a controller.

• Data correction and erasure: The right to request that any errors be corrected or to be forgotten i.e. have their data erased. • Data portability: The right to transfer data to another controller. 3. Governance: Chief among the GDPR principles that relate to accountability are the following: • Record keeping: Both controllers and processors must keep a record of all processing activities, and control- lers must conduct inventory audits of the same. • Data protection officer: Controllers and processors that process and/or monitor data on a large scale are required to appoint an officer and grant them the req- uisite authority to fulfill that role. • Data protection impact assessment: Those involved in high-risk processing are required to conduct this assessment.

• Designated representatives: Some controllers and pro- cessors not located in the EU, but subject to GDPR, must name a representative in the member state where the data is processed or monitored. Even if, after conducting the above analysis, your institution concludes that it isn’t covered under GDPR, you still need to understand the law’s broader implications. There is good reason to believe that the U.S. will follow the EU and enact something similar to GDPR in the coming years. Although it is difficult to predict exactly when or how such a law may come to pass, the 2017 Equifax breach and more recent privacy concerns at Facebook are but two examples of incidents that will likely spur consumers to push for greater privacy protections, and legisla- tors to answer that call.

GDPR liable or not, financial institutions should invest in ways to better protect customer data and privacy. Those that do will not only be better prepared for existing and future regulation — but also they will protect their reputations as trusted resources. Q goods or services to, or monitor the behavior of, EU data subjects.” Given this long reach, some U.S. financial insti- tutions fall under the GDPR umbrella. But which ones? The International Association of Privacy Professionals (IAPP) recommends the following three-question test to deter- mine GDPR liability. A “yes” to any of the three indicates a GDPR obligation.

1. Do you have a physical presence in the EU? Even if it’s just a small branch or office inside the EU, you are bound by GDPR. 2. Do you sell your products or services to EU citizens? If you have a premeditated strategy to sell to persons or have customers located in the EU, GDPR applies. 3. Do you use advertising technology that tracks and pro- files EU citizens? This test has the most potential to trip up American institutions. Consider whether your adver- tising strategy regularly targets EU citizens for products or services.

Security and Privacy Principles of GDPR At its core, GDPR establishes a set of three principles to protect consumer data and the corresponding privacy of its owners. The language around GDPR applies to data controllers, which include financial institutions, as well as data processors, which include all organizations that process data for controllers, such as a bank’s core proces- sor. The three principles, which apply to controllers and processors, can be organized according to the following three categories: 1. Data processing: New York University School of Law’s primer on GDPR outlines the principles that specifi- cally apply to how controllers and processors obtain and handle the data of EU subjects, including the following: • Legal basis: Controllers must meet one of five law- ful bases for processing a subject’s data. It must: be needed to fulfill a contract, meet compliance obliga- tions, protect the individual’s “vital interests,” perform a task in the public interest, and/or meet the legitimate interests of the controller, unless that is outweighed by the individual’s rights.

• Express consent: Without such legal basis, control- lers must obtain an individual’s consent, which NYU explains “must be freely given, specific, informed and unambiguous.” • Delegation to processors and sub-processors: To out- source to a processor, a controller must obtain written guarantees that the processor and any sub-processors will comply with GDPR. • Contract language and obligations: Contracts between controllers and processors must specifi- cally detail the subject matter, duration, purpose, data type, data subject categories and each party’s obligations and rights.

www.miba.net / The Show-Me Banker 17

Image © NicoElNino/iStock The Dawn of Artificial Intelligence I just returned from the spring Finovate conference in Santa Clara, Calif. If you’ve never been to Finovate, I would describe the event as speed da ng with fintech companies. To cut through the clu er (and some of the hype!) presenters are put through a rigorous applica on process and if selected are given only seven minutes to provide a live demo of their product offerings. Over the two-day conference, 70 fintech companies showcased the very latest in financial technology innova ons. Recurring themes were the power of data (data analy cs) and the evolu on of ar ficial intelligence (AI).

By Tina Giorgio, ICBA Bancard By Tina Giorgio, ICBA Bancard 18 The Show-Me Banker / July 2018

The power of big data is a concept that we are familiar with however I think we are only now just beginning to realize the potential of AI. Before I dive into present use cases, let’s warm up with a brief AI timeline. With so many possible applications, it’s hard to predict the path that AI will follow, but we can, and should, examine pres- ent-day use cases to see where things are heading. Finance Loans — AI is used to expedite loan applications and deter- mine the right loan to apply for.

Chatbots — A chatbot is a computer program designed to simulate simple conversations with humans over the Internet. Chatbots are being used for password resets and account inquiries. E-Commerce Personal Shoppers — AI is used to help online shoppers find the perfect product. Optimization - Websites and search engines are using AI for things like product placement and recommendations. Health Care Diagnosis — I already mentioned how AI is being used to diagnose cancer. It is also being used to identify sepsis in ICU patients before they show any symptoms, reducing fatality rates. Test Results — AI can analyze things like lab results, MRIs, cat scans, and x-rays faster and more accurately than humans. Agriculture Grow Boxes — AI is being used to grow disease-free crops that are nearly perfect by measuring and controlling light, tem- perature, and moisture.

Chrystina (Tina) M. Giorgio is president and CEO of ICBA Bancard®, the largest national credit card program exclusively for the nation’s commu- nity banks. She joined the company in 2016 and focuses on developing strategies to leverage the brand among current and new customers. Crop Health and Harvesting — AI can identify weeds, defi- ciencies in soil, plant disease, and optimal harvest times. AI robots are used to spray the weeds, treat diseased plants, and pick the crops. A growing number of industries are using AI and big data to do things faster with more accuracy and at lower costs. We are already seeing the deployment of chatbots and self- service technologies as a means of freeing up front line/call center staff from routine support requests. In fact, one of the Best in Show winners at Finovate was Conversation.one, a platform for conversation apps that companies can use to build and publish voice and chatbots with no programing, coding or complex integration.

In this dawning era of artificial intelligence, community banks will have many choices about how they deploy this new technology. Some banks will no doubt eschew bots and digital lending in favor of decisions made by real-life human beings, but others will opt for service that is always on. Either way, there will be an opportunity for community banks to differen- tiate themselves by offering the digital experience that best suits the expectations and needs of their customers, coupled with the unparalleled customer service and quality financial products for which community banks are known. Q www.miba.net / The Show-Me Banker 19

It has not been very long since I sat on the banking side of the table going through that same examination process. One of the items that had started to enter into discussions was “What is your strategic I.T. plan?” Thanks to the FFIEC (Federal Financial Institutions Examination Council), we now have some real guidelines to follow. In August 2017, the FFIEC released its updated handbook, and we no longer have to rein- vent the wheel before each exam to see what they might want this time. While numerous hours and articles could be spent going over the entire handbook and changes, most financial institutions know that examiners focus on the newest things from each update, and one of those new pieces is related to “strategic planning.” I think it would be good to define what exactly a strategic plan is. “Strategic planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stake- holders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization’s direction in response to a changing environment. It is a disciplined effort that produces fundamental decisions and actions that shape and guide what an organization is, who it serves, what it does, and why it does it, with a focus on the future. Effective strategic planning articulates not only where an organization is going and the actions needed to make prog- ress, but also how it will know if it is successful.” Strategic planning starts with the “end results” in mind, not how to get there. The “how to” comes in the long range planning. Many times we only look at long range planning and confuse that with a strategy. “Why is this important to understand and why would my information technology department need to know the final goal?” Well, I am glad you asked! According to the FFIEC Handbook — Management Section I.B.6(a), your I.T. Strategic Plan must, “Focus on 3 to 5 year horizon and helps ensure the FI (Financial Institution) technology plans are consistent and aligned with the FI Business Plan.” It should address the long-term goals and the allocation of I.T. resources to achieve them.

The plan must include: • Marketplace conditions. • Customer demographics. • FI growth targets. • Mergers and acquisitions. • Technology standards. • Regulatory requirements. • Cost containment. • Process improvement and efficiency gains. • Customer service and technology performance quality. • Third-party relationship opportunities versus in-house expertise. • Optimal infrastructure, including systems and software replacement. • Ability to adopt and integrate new technology. There is more to the picture as well. This specifically spells out four key factors in planning for information technology: 1. Senior management participation: Senior management should understand and support the I.T. strategic plan and establish priorities.

2. Role of I.T.: Management should clarify the role of I.T. and determine whether the current I.T. planning process STRATEGIC THINKING AND INFORMATION TECHNOLOGY What Is required for your bank and its information technology department? I n the banking world, we often outline time based on when we are between examination dates, and plans are made according to these schedules. We spend a month or two figuring out what examiners want and need, and hope that we meet all expectations and requirements. 20 The Show-Me Banker / July 2018

By Chris Sutherland, JMARK Business Solutions Image © DrAft er123/iStock enables personnel to work toward achieving enterprise- wide goals and objectives. 3. Import of I.T. Infrastructure: Management, or I.T. steering committee, should understand the relation- ship between the I.T. infrastructure and applications and the business’s strategic and operating plans. The I.T. infrastructure should directly support the goals and objectives of these plans. 4. Accurate scorecard on past performance: Management, or I.T. steering committee, should monitor past I.T. projects and initiatives after implementation to deter- mine whether the institution realized the anticipated costs and benefits. The scorecard should be based on set objective measures.

I will leave you with one last item to think on, noting that it is the natural next step: Where do we start? Every plan must include four key items: • Policies, standards, and procedures. • Inventory and classification of assets. • End-of-life management. • Business continuity considerations. While we could continue on and on about these items here are some of the highlights: • Policies, standards and procedures: o Clear and easily understandable communications to all affected parties.

o Certification that employees have read and under- stand the policies. o Flexibility to address changes in the environment. o Annual board review and approval. • Inventory and classification of assets: o Hardware. o Software. o Information / data. o Communications / connections. • End-of-life management: o Maintaining inventories of systems and applications. o Adhering to an approved end-of-life or “sunset” pol- icy for older systems. o Tracking changes made to the systems and applica- tions, availability of updates, and the planned end of support by the vendor.

o Conducting risk assessments on systems and applica- tions to help determine end-of-life. o Planning for the replacement of systems nearing obsolescence and complying with policy require- ment for implementing new systems or applications. o Developing specific procedures for the secure destruction or data wiping of hard drives returned to vendors or donated to prevent the inadvertent disclo- sure of sensitive information. • Business continuity considerations: o Management should do the following: • Identify personnel who will have critical infor- mation security roles during a disaster and train personnel in those roles.

• Define information security needs for backup sites and alternate communication networks. • Establish and maintain policies that address the concepts of information security incident response and resilience, and test information security incident scenarios. So are you ready for your next examination? Can you provide proof and “check all the boxes”? If you need help, look to a reli- able and experienced I.T. firm for guidance in both planning for strategic planning compliance, as well as the execution of your plans. Your I.T. partner should hold strategic planning meetings with FI executive management and I.T. staff, participate in all I.T. committee meetings, help you form a 3 – 5 year technology plan, conduct quarterly and annual business reviews, provide vendor management assistance with compliance in mind, and perform annual mock drill services to keep you ready for both compliance and real-world challenges to your technology plans. Strategic I.T. planning may seem daunting, but it doesn’t have to be if it is taken step-by-step, with patience and deliberation. Q Chris Sutherland, JMARK’s client relationship man- ager for the banking industry. He has spent more than 17 years supporting banking environments in roles that include information security officer, director of information technology, and systems engineer. Having worked in both banking and I.T.

www.miba.net / The Show-Me Banker 21

This answer is rooted in history and in forecasts. While the difference in yields between short maturities and longer ones is the smallest in 11 years (i.e. the curve has flattened), most bond analysts, economists and the Federal Reserve itself are predicting that we’ll see more of the same. And when it’s expected that yields will continue to converge into what looks like a straight line, the type of portfolio structure that performs the best is a “bar- bell.” This month, we review the structure and the advantages of such an exercise for your investment portfolio. Repetition and Resistance By being disciplined and deliberate about your investments’ structure, you can take advantage of today’s yields and simultaneously hedge your risk against what looks to be on the cards for the next couple of years. The barbell is simple to build and easy to evaluate later. It just requires an investor to define what it considers to be suitable short-term and long-term investments. To be sure, com- munity bankers have differing opinions on what counts as a long-term invest- ment, but generally speaking, those with durations of five years and greater are considered as being on the high end of the price-risk scale.

Once we’ve identified the target invest- ments, the portfolio manager will simply purchase roughly similar amounts of both and keep the weightings balanced through ongoing monitoring. By hav- ing a collection of bonds that are heavy on both ends of the maturity spectrum, you’ve successfully built a barbell. Classic Structure Among the bonds that meet commu- nity banks’ criteria of liquidity and credit quality are those issued by the Small Business Administration (SBA). They are direct obligations of Uncle Sam, and new issue volumes continue to set records, so the SBA market continues to broaden and deepen. Two of the more visible products are 7(a) pools, which are true floating rate instruments, and Development Company Participation Certificates (DCPCs), which are fixed rate pools with long average lives. It makes logistical sense to consider them together for a barbell. For one thing, credit quality is unsurpassed. For another, one would be hard-pressed to find two bonds with more disparate price-risk profiles. For still another, we can address premium risk that attaches to the 7(a)s by pairing them with a DCPC that is avail- able at a price below par. Finally, at this point in the rate cycle, both ends of the barbell yield much more than they would have a year ago, so an investor today has a big head start over 2017.

End of Cycle Projections We created a hypothetical barbell portfolio by modeling equal amounts of 7(a)s and 20-year DCPCs. (The latter generally are issued with 10- or 20-year maturities.) We made note of their mar- ket values and yields as of April 30, 2018, PORTFOLIO POWER Barbell Structure May Be the Right Regimen A s yields con nue to set cyclical highs during 2018, many community bankers have asked us ques ons about what to invest their next purchases in. Some of them have been surprised to hear an answer that I’ve been giving for the be er part of this decade, even though absolute yields and the shape of the curve look nothing like the 2010s.

By Jim Reber, ICBA Securities Image © fi zkes/iStock 22 The Show-Me Banker / July 2018

and in a 75-basis point (0.75%) higher environment over the next year. This rate-hike assumption was driven by both the fed funds futures market and by the Fed’s most recent projections. See Figure 1 for the more important weights and measures. These results are probably conserva- tive in that we are assuming a parallel shift upward in the yield curve. What’s more likely to happen is further flat- tening, by virtue of short rates reacting more in step with continued Fed tightening, and longer rates moving very little in comparison. A flattening would help preserve the market value of the DCPC, resulting in the price declining less than is displayed. Stretch Before You Lift As always, a word of advice from your trainer. These securities will prob- ably produce very little cash flow in the early stages, especially if the pools are new. In fact, the fixed rate securities have prepayment penalties for the first 10 years. As they season, it’s more likely the floaters will have faster prepay- ments, so you’ll need to monitor your positions to keep the fixed/floating bal- ance in place.

So, if your bond portfolio is suffering from a lack of recent energy or isn’t built to run with the tailwinds from the Fed’s monetary policy, take a trip to your favorite broker’s financial fitness center. A session in barbell lifting can help flex your com- munity bank’s economic muscle. Q Jim Reber is president and CEO of ICBA Securities, an institutional fixed income broker/dealer, and can be reached at 800-422-6442 or jreber@icbasecurities.com. Current Mid-2019 Yield 2.72% 3.05% Effective Duration 3.18 years 3.34 years Market Value 105.27 102.78 Figure 1 www.miba.net / The Show-Me Banker 23

The MM$ products will include online checking accounts, sav- ings accounts and lines of credit. MM$ wants MyBank to offer the bank accounts [which will be called the “MM$ Accounts” and make the loans (which will be called the “MM$ Credit Line”)]. MM$ will do all the work-it has the technology, the credit algo- rithms, the whole thing. MyBank just gets to hold the funds in an omnibus account (MM$ will do the subaccounting), use the deposits (except for a few basis points paid to MM$) and make part of the interest on the loans. This sounds like a perfect solution! Of course, nothing is that easy — and here are a few inquiries you should consider before making any commitments. 1. Why did MM$ contact your bank? If MM$ has no con- nection to you, your shareholders, your management or your town, be wary. It is possible that they have been turned down by other potential banks and are making this pitch to every community bank that will return their call. Make sure you understand how they have con- nected with you.

2. Complete a risk analysis on MM$ and on the proposed program. Before management becomes fully invested in the idea for this new program, and before significant financial investments are made in it (including IT, mar- keting and legal expenses) make sure you understand who the principals of MM$ are. Understand what their knowledge/background is in banking products, and the financial viability of MM$. Make sure they have not had run-ins with bank regulators. 3. What banking knowledge — bank operations knowledge — does MM$ have? If MyBank is going to outsource con- sumer products, MM$ must have actual bank operations expertise — it will need to know how products actually operate, what causes consumers to have problems and how to respond when something goes wrong. No matter how good the MM$ may be at operating the program, the bank accounts and loan products will be MyBank’s products — MyBank will have to oversee and manage By Karen Garrett, Stinson Leonard Street LLP Image © 3D_generator/iStock I t is 2018 and everyone’s talking about FinTech, RegTech and “Open APIs.” You don’t want your bank (MyBank) to get le behind. Your CFO keeps reminding everyone that MyBank needs deposits — lots of deposits. And then an impressive new start-up, Millennial Money (MM$), contacts MyBank. MM$ wants to offer financial products to Millennials with some credit problems (student loans, some late bill payments while in school).

The Intersection of FinTech, Operations, Data Security and Compliance 24 The Show-Me Banker / July 2018

MM$’s work. Many fintech companies find this kind of oversight annoying at best and worse, some find it to be unacceptable. Your regulator will require you to know what MM$ is doing, and how it operates. MM$ has to accept and understand this. 4. What security knowledge and systems does MM$ have? The MyBank IT group and/or consultants MyBank hires will perform diligence on MM$, including its informa- tion technology systems. In the process of performing diligence MYBank’s team will discover whether MM$ has secure systems and viable third party subcontractors and processors. However, in addition to the actual technology available at MM$, does MM$ understand the privacy and security culture of a financial institution? Do they have poli- cies and procedures that go beyond technology and affect the day-to-day operation and culture of MM$? Do they run background checks? Do they have fraud management sys- tems in place? Does the MM$ technology allow MyBank to have day-to-day visibility into the operations of MM$? 5. What kind of compliance expertise does MM$ have? All of the products MM$ want to offer are consumer products and these products raise significant compliance concerns — including state law concerns (even if MyBank is a national bank). Does MM$ understand that? “White labeling” deposit accounts and other bank products can work, but only if MM$ fully understands all of the compliance issues — including some subtle ones like how the term “FDIC’ has to be used in marketing, and the fair lending implications of MM$’s credit analysis algorithms. MyBank cannot be “invisible” to the customers. Customers must know where their money is deposited and who is lending to them.

6. What kind of resources does MyBank have to oversee the operations of MM$? Of course community banks can outsource services and products. However, MyBank has to have enough exper- tise and personnel available at MyBank or through consultants to knowthattheMM$programisrun- ning correctly and well—to ensure that funds deposited are attributed to the right accounts; that loans are in fact fully secured and that disclo- sure are delivered correctly. MyBank is responsible for ensuring that customer agreements and disclosures are compliant with the law. If MyBank is not certain it can manage these risks (based on its risk analysis) then it should not undertake the program. The exact form that the oversight must take will depend on the risk analysis. It could be sufficient for MyBank to receive some daily, weekly or monthly reports. MyBank could consider hiring a consulting or auditing firm to manage this oversight and report to MyBank. 7. MyBank should define what “success” will look like for the MM$ program. Once a decision is made to move forward with the MM$ program, MyBank should also be sure the business model includes financial success for MyBank. It should consider requiring certain mini- mum revenue or deposit goals within a defined period of time and have the right to terminate the relationship if those goals are not reached.

With the industry moving to a more fintech competitive land- scape, it is becoming more and more enticing to align with a technology company quickly to keep up and pass your competi- tion. A strategic pause in your decision making process can save you major financial, legal and regulatory headaches. Q Karen L. Garrett is a Partner at Stinson Leonard Street LLP. Stinson Leonard Street’s Banking and Financial Services practice provides a full range of legal services to hundreds of financial institutions including large national organizations to regional and community banks. For more information about this and other banking legal needs, please contact Karen Garrett, Partner and Co-Chair of our Banking & Financial Services Practice, at 816.691.3233 or karen.garrett@stinson.com.

DISCLAIMER: This article is designed to give general information only. It is not intended to be a compre- hensive summary of the law or to treat exhaustively the subjects covered. This information does not constitute legal advice or opinion. Legal advice or opinions are provided by Stinson Leonard Street LLP only upon engagement with respect to the specific fac- tual situations. All clear ahead. Our friendly, forward-looking pros can help fine-tune your banking strategy and bring your organizational goals into view. Everyone needs a trusted advisor. Who’s yours?

bkd.com/FS | @bkdFS www.miba.net / The Show-Me Banker 25

Concerns as a director or officer are your decisions on how your business operates. If your business lacks key policies and procedures for your daily operations, it can really impact your potential for claims. Do you have set procedures for your hiring process? Do you have a no tolerance harassment policy? Are there set guidelines for opening emails from external sources and processing money transfers? Incorporating these into your day-to-day operations and making sure your employees are properly trained on these procedures can better protect your lending institution from exposure. Some insurance companies may deny a claim if certain procedures are missing or not fol- lowed when a claim occurs. This is why it is so important to make sure that not only are the procedures in place, but that they are followed.

Have you recently analyzed your Management Liability policy to see what types of coverages and limits your current policy includes? Do you know what exclusions are in your pol- icy? Does your policy cover employment-related claims; does your professional coverage extend to your trust department? Fiduciary Liability coverage must be included to protect exec- utives for errors in administration of employee benefit plans. Loss prevention at the executive level should be a priority. Be proactive in providing thorough orientations for new direc- tors or officers, providing ongoing factual and legal principal education to existing directors or officers, communicating con- sistently internal guidelines at every staffing level, delegation of certain duties to board committees or legal counsel, keep- ing your employee handbook up to date and enforcement of all established corporate guidelines. Q Jim Ford is an Advisor for TIG Advisors. Contact our sophisticated team at TIG Advisors to discuss your Management & Operation risks at 1-800-711-8052. We would love to help you refine your strategy. S enior bank execu ve posi ons can bring many rewards, however, they can also carry significant risks that put your financial net worth at stake. Expect that every decision you make as a director or officer has the poten al to be scru nized by clients, employees, shareholders, and officers. Shareholders may file a lawsuit if they believe a decision you made adversely affected their best interest. Management Decisions and Your By Jim Ford, TIG Advisors Image © natasaadzic/iStock 26 The Show-Me Banker / July 2018

2018 Scholarship Recipients Bank of Bolivar — Brad Gregory to Kari Hickman Blue Ridge Bank & Trust Co. —Pat Campbell to Jaren Bockover, with his mother Lynn Butts-Bockover. CBSTL — Rick Bagy to Jack Fix. Citizens Farmers Bank — Randy Harms to Lauren Baalman. www.miba.net / The Show-Me Banker 27

First Bank of the Lake — Mike Anderson & Angela Jesse to Megan Jesse. Peoples Savings Bank — Toni Weaver to Hannah Weaver. Silex Banking Company — Michael Mudd to Chase Cannon. The Bank of Missouri — Adrian Breen to Evan Landewee. County Bank —Tricia Stoneking, Isabella Stoneking and Matt Cleavinger. 28 The Show-Me Banker / July 2018

Chillicothe State Bank — Taylor Rardon Exchange Bank of MO — Bud Summers and Bill Orendorff to Ivory Dobbins. Focus Bank — Glen Burnett to Miranda Erickson. Peoples Bank & Trust — David Thompson to Henry Skouby. www.miba.net / The Show-Me Banker 29

TIG Advisors ICBA KASASA Midwest Independent Bank Bank Financial Services Group Bankers Security First Bankers’ Banc Securities, Inc. Federal Home Loan Bank of Des Moines JMARK Lathrop Gage Martin Leigh SHAZAM SpencerFane Stinson Leonard Street BancMac Bank Compensation Consulting Gershman Mortgage K•Coe Isom Sandberg Phoenix & Von Gontard PC The Whitlock Co. Monday, September 10th 8:00 a.m. ~ 7:00 p.m. Convention Registration Desk Open, Exhibit Hall Foyer 10:00 a.m. GolfTournament,The Cove 4:00 p.m. Hotel Room Check In, Hotel Lobby 5:00~7:00 p.m. Opening Exhibitor Reception - Campana Hall NEW Tuesday, September 11th 7:00 a.m. Convention Registration Desk Open, Exhibit Hall Foyer 7:30 a.m. MIBA/ICBAPartnership Breakfast 8:30 a.m. 7 Minute Spotlight 8:40 a.m. General Business Session & Keynote Speaker 11:30 a.m. MIBABoard Meeting 12:00-2:30 p.m. Exhibits Open with Luncheon Walkabout, Games and Prizes 4:30 p.m. MIBAScholarship SilentAuction & President’s Reception - Granada Ballroom 6:00 p.m. SilentAuction Closes 6:30 p.m. President’s Dinner, Introductions of 2017~2018   2I¿FHUVDQG/LYH$XFWLRQ 8:00-11:00p.m. Live Music and Dance Wednesday, September 12th 8:00 a.m. Convention Registration Desk Open, Exhibit Hall Foyer 8:00 a.m. Banker/Exhibitor Breakfast Buffet, Marbella Ballroom 8:45 a.m. 7 Minute Spotlight 9:00 a.m. New SpeakerTopics/Sessions 11:30 a.m. Exhibits Open 12:00 noon Exhibits Luncheon Games, Prizes and Drawings 1:30 p.m. Exhibits Close 2:15 p.m. Lake Cruise 6:00 p.m. Celebration of Communtiy Banking Reception & Exhibit Hall Grand Prize Drawing - Marbella Ballroom 7:00-9:00p.m. Heavy Hors D’Oeuvres, MIBAMoney Game & Cash Prizes ConventionAdjourns $7,500 in Cash Prizes! Convention Schedule M I BA41STANNUALCONVENTIO N & E X H I B I T I O N EARLYSPONSORS Thank You B B BancM M Mac B B B B Ba Ba Ba Ba k k k k nk nk nk nk F F F F F F F Fi i i i in in in inan an an an i i i i ci ci ci ci l l l l al al al al S S S S S S S S Ser er er er i i i i vi vi vi vice ce ce ces s s s G G G G G Gr Gr Gr Grou ou ou oup p p p C IC IC IC IC IC ICBA BA BA BA BA BA TI TI TI TIG G G G Ad Ad Ad Ad i i i visors TITANIUM PLATINUM GOLD SILVER BRONZE 1st Advantage Bank Armstrong Teasdale BKD Bryan Cave Leighton Paisner CliftonLarsonAllen Country Club Bank CRA Partners CSPI Farmers & Merchants Bank of St. Clair Fenimore Kay Harrison Ford Fiserv Flat Branch Mortgage Services 0LGZHVW2I¿FH Pentegra Retirement Services Polsinelli Travelers Welch Systems 30 The Show-Me Banker / July 2018

On Monday, September 10th , the MIBA will hold its 41st Annual Convention Golf Tournament at The Cove Golf Course at The Lodge of Four Seasons. A picturesque 18-hole championship golf course showing off stunning lake views, the Cove offers a challenging course for avid golfers.With 72 bunkers, rolling hills and water coming into play on nine of the holes, this par-71 course is anything but tame. In typical RTJ fashion, the Cove is a target golf course putting an emphasis on getting the ball in play off of the tee.

The tournament tees off at 10:00 a.m. and will consist of competition for 1st, 2nd and 3rd Places in several flights in a Men and Women’s Mixed Scramble. Men & Women’s Competition for: Longest Drive, Closest to the Hole and Longest Putt. Entry fee includes 2 mulligans, continental breakfast, lunch, refreshments, cart and green fees. Use Convention Registration Form to sign up. (You must be a fully registered convention attendee or exhibitor to participate in the tournament.) Monday, September 10, 9:00 am. The Cove, a Robert Trent Jones Sr. signature golf course. Continental Breakfast Sponsored by: Greg Smith, President & CEO Compliments of: 41st Annual Tournament 1stAdvantageBank BankFinancialServicesGroup BKD TheBusinessBankofSt.Louis CliftonLarsonAllen CountryClubBank Farmers&MerchantsBankofSt.Clair FHLB FBBS/MIB FlatBranchMortgageServices GershmanMortgage JMARK MidwestOffice SpectrumFinancial TIG Advisors VGMForbin WelchSystems TheWhitlockCompany G Go olf q qu ue e r rs s a a n nt to o o on n, of f nd MIBA il ll h ld i A l C i G G G lf TournamentOrganization & PrizesCompliments of: Beverage Carts & Hole in One Contest Tournament MulligansCompliments of: Pre-Tournament Continental Breakfast www.miba.net / The Show-Me Banker 31

WEDNESDAY, SEPTEMBER 12TH, 2018 Missouri Independent Bankers Association’s 41st Annual Convention Paul Cambridge Armstrong Teasdale Cullen Kuhn Bryan Cave Thomas Stahl Lathrop & Gage Steven Leigh Martin Leigh MEET YOUR PANEL Larry Harris Polsinelli Elizabeth Fast Spencer Fane Bob Monroe StinsonLeonardStreet Panel Moderator: Rich Weaver, Federal Home Loan Bank 7KH/HJDO(DJOH+RW7RSLFV3URJUDPLVDVKRZFDVHRI0,%$$VVRFLDWH0HPEHUO DZ¿UPVRIIHULQJOHJDOHVHRQWKHODWHVWKRWEDQNLQJ issues. This program offers Continuing Legal Education (CLE) credits.

BeverlyWeber MartinLeigh, PC Bob Monroe Stinson Leonard Street, LLP Greer Lang Spencer Fane, LLP WEDNESDAY SEPTEMBER 12TH 2018 WEDNESDAY SEPTEMBER 12TH 2018 LEGAL EAGLESHOTTOPICS PANEL Our 7 Minute Spotlight will feature Josh Miskovich, BFS Group, and Mark Thatcher, Jr., Bankers Security. Complete your entry ticket by 8:00am to be eligible to win $1,000 cash. At 8:07am, our sponsor will draw one lucky winner and present them with $1,000 CASH! There will be two chances to win: Tuesday, September 11th, and Wednesday, September 12th.

You must be present for the entire 7 minutes to win! 7MINUTESPOTLIGHT 2018 Annual Convention 32 The Show-Me Banker / July 2018

MIBAASSOCIATE MEMBERS HAVEYOU RECEIVED YOUR PROSPECTUS? All exhibits questions should be directed to Hannah Ruge, MIBA Exhibits Coordinator at the MIBA Office: (573) 636-2751 or hruge@miba.net. Non-Member Vendor registration will not be open until mid-April. MIBA EXHIBIT HALL TRADITIONALLY SELLS OUT BY JULY 1ST! The MIBA Annual Convention & Exhibition will put you in front of a higher percentage of our CEOs and decision makers than many other trade shows. As an Association Member Exhibitor, remember you are also accorded one complimentary registration for the entire convention at no additional cost. If you have not received your copy, you can go online to www.miba.net, click on the Annual Convention link. The entire prospectus will be available to download and print, along with the application. Get your booth space request in ASAP as this exhibition hall always sells out!

REGISTER NOW! www.miba.net / The Show-Me Banker 33

September is right around the corner where we will gather for another exciting Convention & Exhibition for our MIBA Membership, family, & friends. This year’s 28th Annual MIBA Scholarship Auction on Tuesday, Septemebr 11th, 2018, is at The Lodge of Four Seasons Golf Resort & Spa Shiki. We hope you are thinking about what special gift you will donate. On Tuesday, the Exhibit Hall will close at 2:30 p.m. and the Happy Hour Reception and Silent/Live auction will begin at 4:30 p.m. in the Granada Ballroom. All registered bankers and exhibitors are invited and welcome to join the “bidding frenzie” for all items donated! If you already have your gift to donate, call the MIBA RI¿FHVDW   RUJRWR0,%$QHW!)RU0HP EHUV!$QQXDO&RQYHQWLRQ ([KLELWLRQIRU\RXUGRQDWLRQ form.

Donations to and purchases at the auction are not deductible for federal income tax purposes. COME ONE, COME ALL! HAPPY HOUR & HORS D’OEUVRES FOR BANKERS & EXHIBITORS M 2 S y O O O O t t th b b th 28thANNUAL SCHOLARSHIP AUCTION NEW FOR 2018! EXAMINER PANEL David Doering Chief Examiner Division of Finance, Jefferson City Liz Johnson Review Examiner Division of Depositor and Consumer Protection FDIC, Kansas City Susan Speake Senior Compliance Examiner Division of Depositor and Consumer Protection FDIC, St. Louis Ryan Harwell AssistantVice President Federal Reserve Bank of Kansas City 34 The Show-Me Banker / July 2018

*AmTrust of North America *ATM Solutions *Automated Systems, Inc. *Banclease *BancMac *Bancsource *Bank Compensation Consulting *Bank Financial Services Group *Bankers Healthcare Group *Bankers Security *Barret Graduate School of Banking *BKD, LLP *Brown Smith Wallace LLP *CliftonLarsonAllen LLP *CRA Partners *CSPI *Cummings, Ristau & Associates PC *Cummins-Allison Corp. *Data Business Equipment, Inc. *DCI (Data Center, Inc.) *Excubia Solutions, LLC *First Bankers’ Banc Securities *Federal Construction, Inc. *Federal Protection, Inc. *First Integrity Mortgage Services, Inc. *Fiserv *Flat Branch Mortgage Services *Gershman Mortgage *Holtmeyer & Monson *Hydeman FInancial Equipment *ICBA *Denotes MIBA Member *ICBA Securities *Jack Henry Banking *JMARK Business Solutions John M. Floyd & Associates *KASASA *Midwest Independent Bank 0LGZHVW2I¿FH *Modern Banking Systems *Monday Security Corporation *Nicklas Financial *Oppliger Banking Systems *Pentegra Retirement Services 3URPRQWRU\,QWHU¿QDQFLDO1HWZRUN//& *Raymond James *REO Xpress *RESULTS Technology Servion Mortgage *SHAZAM *Spectrum Financial Services *The Miniter Group *Tiedemann & Associates *TIG Advisors *Tipton Systems *Transfund *Travelers *USDA Rural Development U.S. Small Business Administration *VGM Forbin *Welch Systems *Williams-Keepers, LLC Over 80% Sold!

www.miba.net / The Show-Me Banker 35

Thank You 2018 Convention Sponsors! • Featured Speaker • Golf Hole • Golf Hole • Golf Towels • Golf Hole • La Salita Hospitality Suite • President’s Reception & Dinner • Preferred Customer Drawing • 2nd Giveaway/Grand Prize • Mobile App -NEW- • Golf Hole • Hole in One Contest • Pre-Tournament Speaker • Golf Tournament • Name Badges • Golf Hole • Hole in One Contest • Tournament Beverage Carts • Golf Hole • Drink Glasses • Golf Hole • Pre-Tournament Lunch • Golf Hole • 7-Minute Spotlight • Golf Hole • Auction Reception Bar • Exhibit Hall Luncheon • Exhibit Hall Game • Golf Hole • General Business Session Sponsor • Exhibit Hall Game • Auction Reception Bar • Room Key Cards • Exhibit Hall Game • Golf Hole • Golf Hole • Cruise Beverage & Snacks • Golf Hole • Closing Reception Bar • Golf Hole • Napkins • Tournament Mulligans • Golf Hole • Tote Bags • Featured Speaker e 36 The Show-Me Banker / July 2018

• Auction Reception Bar • Legal Eagle Panel • Golf Hole • Legal Eagle Panel • Legal Eagle Speaker • Legal Eagle Panel • Lake Cruise • Legal Eagle Panel • Legal Eagle Speaker • Legal Eagle Panel • Legal Eagle Speaker • Exhibit Hall Game • Exhibit Hall Game • Exhibit Hall Game • Legal Eagle Panel • 7-Minute Spotlight • Golf Hole • Golf Hole • Water Stations in Exhibit Hall • Closing Reception Bar • Complimentary Koozie Cups • Signature Card Giveaway in Exhibit Hall • Legal Eagle Panel • Legal Eagle Panel Thank You!

www.miba.net / The Show-Me Banker 37

BKD . 25 314-231-5544 | www.bkd.com/FS MIB . . 2 800-347-4642 | www.mibanc.com UNICO Group . . 9 402-499-1011 | www.unicogroup.com Welch Systems Inc . 23 800-322-2657 ext. 179 | www.welchsystems.com w Advertisers’ Index DATES & EVENTS JULY WEBINARS To register, go to www.miba.net/Education, click on 2018 Webinar Schedule, select a webinar or webinar series and pricing, view cart to confirm, then proceed to checkout. 10 Auditing Your Loan Portfolio: Consumer, Commercial & Real Estate 2 p.m. - 3:30 p.m.

11 IRA Series: Understanding IRA Beneficiary Designations, Death Distributions & Required Minimum Distributions 2 p.m. - 3:30 p.m. 12 Maintaining Required FDIC Records: Compliance, Issues & Retention 2 p.m. - 3:30 p.m. 13 Handling Federal Benefits Payments: Protections, POAs, Delinquency & Death 10 - 11:30 a.m. 17 Loan Review: Consumer, Commercial & Real Estate 2 p.m. - 3:30 p.m. 18 Marketing Series: Developing, Maintaining & Sustaining Brand Loyalty 2 p.m. - 3:30 p.m. 19 Consumer Debt Series: Reducing Consumer Loan & Collection Losses: Workouts, Forbearance, Restructuring & More 2 p.m. - 3:30 p.m. 23 Understanding Tax Reform: Community Bank Taxation in 2018 & Beyond 2 p.m. - 3:30 p.m. 24 Wire Transfer Security: Regulatory Guidance, Risk Management & Monitoring 2 p.m. - 3:30 p.m.

25 Call Report Series: Preparing Call Report Basic Lending Schedules: Coding, Classifications & Loan Loss Allowances 2 p.m. - 3:30 p.m. 26 Director Series: Assessing Credit Risk for Directors 10 - 11:30 a.m. 31 ACH Rules & Responsibilities for RDFIs 2 p.m. - 3:30 p.m. AUGUST 7-8 Branch Management Series: Part II Jefferson City, MO 14 CBC Meeting, Jefferson City, MO SEPTEMBER 10-12 41st Annual Convention & Exhibition Lake Ozark, MO 26-28 Security Conference Jefferson City, MO OCTOBER 3-4 Credit & Lending Seminar Jefferson City, MO NOVEMBER 15-16 Women in Banking Conference Lake Ozark, MO Compliance Corner, Director’s Supplement and Capitol Comments can be found on our website, www.miba.net. Look under “For Members” then “Monthly Updates.” 38 The Show-Me Banker / July 2018

Award FOR EXCELLENCE & INNOVATION PERFORMANCE | LEADERSHIP | PHILANTHROPY | INNOVATION | COMMUNITY Dear Missouri Community Bankers: What are you striving toward? New ideas? Continued economic strength? As we move into the future, community banks like yours are leading the way. BKD CPAs & Advisors and the Missouri Independent Bankers Association (MIBA) are aware of your success. For that reason, BKD and MIBA are co-sponsoring the 2018 BKD Award for Excellence & Innovation. Now in its 12th year, the award showcases the best ideas among Missouri’s community financial institutions. Nominations should show how banks demonstrate the key factors for success in today’s banking environment: exemplary performance, community leadership and entrepreneurial spirit. Previous winners have been honored for an innovative product with creative marketing support, successful philanthropic efforts and targeted community improvement projects.

This is your opportunity to be recognized as a community leader and one of Missouri’s top financial institutions. In addition, the winner will receive a $1,000 prize to donate to the charity of its choice. We look forward to receiving your nomination. Sincerely, Matthew S. Ruge, Executive Director Missouri Independent Bankers Association, co-sponsor Jason Rader, Partner BKD CPAs & Advisors, co-sponsor

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