Independent Banker (Sepetember 2009)

TOO
TO
icba.org
THE SPIRIT OF ENTREPRENEURIAL BANKING IN AMERICA
Plus:
Innovative Ad Campaigns
Strategic-Planning Roundtable
Optimizing Efciency Ratios
CONGRESS IS POISED TO TAME THE DINO-BANKS
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I N D E P E N D E N T B A N K E R
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ICBA IndependentBanker 35
O
UT
G
e
t
t
i
n
g
the
W
o
r
d
By Alan Lenhoff
ICBA Independent Banker AdvertisingAll-Stars
FOUR SAVVY COMMUNITY BANKSUSEA VARIETY OF CREATIVE MARKETING
IDEASANDMEDIATOCREATE TOP-NOTCHADVERTISINGCAMPAIGNS
35
D
oing business with-
out advertising is like
winking at someone
in the dark. You know what you
are doing, but nobody else does.
Its not clear who said that
first, but any business that offers
products or services, including
community banks, can appreci-
ate the sentiment.
ICBA Independent Banker
chose four community bank
advertising campaigns to spot-
light for their creativity and
effectiveness as part of its annual
advertising showcase. Each cam-
paign reflects different goals,
philosophies and creativity. One
campaign is by a 157-year-old
community bank; another bank
was chartered in 2005. A third
bank seeks a bigger foothold
in mortgage lending; a fourth
strives to solidify dominance in
small business lending.
What all four campaigns have
in common is creative but rigor-
ous marketing strategies imple-
mented through a variety of
approaches. Every community
bank is unique. So is every Main
Street market. No one marketing
strategy or advertising campaign
is universally applicable. But
as these advertising campaigns
show, creativity and dedication
can help any community bank
increase its impact and market
share.
O
U T
TOO
L
TO
F I N A N C I A L R E G U L A T O R Y R E F O R M
Financial regulatory reform leg-
islation aiming to subdue sys-
temically dangerous, sometimes
predatory institutions is in the
arms of Congress. This month
congressional leaders, fresh
from town hall meetings during
an August recess and after sev-
eral summer hearings on the
Obama administrations blueprint for change, plan
to roll up their policymaking sleeves to fashion
together a consensus over a catalog of complex and
potentially far-reaching proposals that could lead
to final legislation.
22 ICBA IndependentBanker
We should not be forced to choose between allowing
a company to fall into a rapid and chaotic dissolution
or supporting the company with taxpayer money.
That is unacceptable. There is too much at stake.
Presi dent Barack Obama
J une 2009
THE ERA OF TOO-BIG-TO-FAIL FINANCIAL INSTITUTIONS, WHERE
GIANT DINOSAUR BANKS AND NONBANKS WERE ALLOWED
TO FEAST AND GROW WITH ABANDON, COULD BE IN ECLIPSE.
CONGRESS SETS OFF TO TAME THE DINO-BANKS
By Steve Verdier
ICBA IndependentBanker 23
2 ICBA IndependentBanker September 2009
contents
COVER
STORY
Making Dangerous
Dino-Banks Disappear
Congress is looking to nd a consensus this
fall on the historic nancial regulatory reform
legislation, a crucial opportunity for America
to end too big to fail. Review the state of play
for the nancial reform legislation, ICBAs
core principles on the issue and how your
community bank can get involved.
BY STEVE VERDIER
22
9
11
12
50
52
54
16
18
FEATURES
Getting the Word Out
Four innovative advertising and
marketing campaigns won community
banks new customers and prots.
BY ALAN LENHOFF
Planning Power
Dont yawn: Strategic planning can position
your community bank for protability and
productivity. Five ICBA members explain how.
BY ELLEN RYAN
COLUMNS
From the Top
Regulatory relief and lower premiums
will help us help small businesses.
BY R. MICHAEL S. MENZIES SR.
Fine Points
Get ready for a busy legislative
congressional agenda this fall.
BY CAMDEN R. FINE
Washington Watch
The trouble with the Consumer Financial
Protection Agency as currently proposed.
BY JASON KRATOVIL
Lender Life
How changes to Regulation Z will
affect your mortgage-loan process.
BY BILL ELLIOTT
Portfolio Management
Why mortgages can be an attractive
institutional investment right now.
BY JIM REBER
Vantage Point
Best practices for optimizing
your banks efciency ratio.
BY KEVIN TWEDDLE
WITH INTEREST
Newslines
On Capitol Hill, ICBA testies on
taxes and the nancial overhaul.
Tech Talk
How some banks are using Twitter.
BY SCOTT MILLS
Plus Tool Shop: Checking-account
rewards, quick demographic reports,
automated CD receipts and help
with SBA construction-loan oversight.
DEPARTMENTS
Advertiser Index
15 Minutes With
Idaho community banker John Evans talks
about working with family and motivating staff.
55
56
35
47
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ICBAonline
V I S I T I C B A . O R G F O R T H E L A T E S T N E W S A N D A D V O C A C Y
R E S O U R C E S A S C O N G R E S S D E B A T E S P O L I C Y S T E P S T O T A K E
T O E N A C T F I N A N C I A L R E G U L A T O R Y R E F O R M .
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One Mission. Community Banks.
Each year, ICBA recognizes community

banks for performing extraordinary acts of
kindnessrepairing homes, serving meals,
sponsoring local fundraisers, revitalizing
Main Street.
Now, its your turn to be recognized.
Nominate your banks community service
program for the 2010 ICBA National
Community Bank Service Awards.
Visit www.icba.org/goto/awards to
download the 2010 National Community
Bank Service Awards nomination form.
Nominations are due on December 4, 2009.
The community
you
serve
CONSUMER INFORMATION
VIDEOS FOR YOUTUBE
ICBA released three Money 101 videos on YouTube
for consumers that promote the trusted nancial
expertise and service that community banks provide.
The videos, prepared to reach consumers researching
nancial topics online, take a lighthearted approach to
information on buying a home, saving for the future and
building a relationship with a local community banker.
ICBA encourages community bankers and their staff
to share the videos online. Check them out at icba.org/
youtube.
CONSUMER SCAM RELEASE
ICBA produced another consumer news release
offering tips to guard against loan scams. The release,
Keep Your Personal Information Secure, outlines 10
warning signs of fraudulent solicitations purporting to
assist borrowers facing foreclosure or nancial trouble.
Community banks can tailor the release for distribution
in their marketplaces.
Find the release in the Consumer Education &
Resources section.
ICBA REDESIGNS HOME PAGE
ICBA recently completed the rst phase in a Web-site
redesign. The ICBA home page was reorganized to help
community bankers more easily nd the information they
need. The site also offers an improved site search engine
and landing pages. Look for more changes to come.
_________
www.icba.org ICBA IndependentBanker 5
LENDER
EQUAL HOUSING
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Young & Associates, Inc.
Consultants to the Financial Industry
Strategic Planning
Regulatory Assistance
Stock Valuations
Capital Markets
Expansion &
De Novo Bank Charters
Internal Audit
Information Technology
Recruitment &
Human Resources
Lending &
Loan Review Services
Compliance
Policy Development
ICBA HEADQUARTERS/EDITORIAL OFFICE
1615 L St. NW Suite 900
Washington, DC 20036-5623
No. 09 V
O
L
.
5
9
CUSTOM PUBLISHING
GLC Custom Publishing
900 Skokie Boulevard,
Suite 200
Northbrook, IL 60062
(800) 641-3912
P R E S I D E N T A N D C E O
John Cimba
V I C E P R E S I D E N T O F
P R O J E C T MA N A G E ME N T
A N D P L A N N I N G
Rob Davis
MAGAZINE STAFF
S E N I O R V I C E P R E S I D E N T /
C O MMU N I C A T I O N S
Karen Tyson
V I C E P R E S I D E N T /P U B L I C A T I O N S
Timothy Cook
A S S OC I A T E DI RE C T OR/P U B L I C A T I ONS
Ellen Ryan
A S S I S T A NT DI RE C T OR/P U B L I C A T I ONS
Thomas Warren
C O MMU N I C A T I O N S C O O R D I N A T O R
Michele Matthews
A C C O U N T I N G C O O R D I N A T O R
Kim Schneider
D A T A C O O R D I N A T O R
Cindy Meyer
S U B S C R I P T I O N S C O O R D I N A T O R
Diane Meyer
MA N A G I N G E D I T O R
Alan Lenhoff
A R T D I R E C T O R
Olivia Roszkowska
D I R E C T O R O F P R O D U C T I O N
Monty George
A D I N S E R T I O N C O O R D I N A T O R
Tracy Cimba
ICBA EXECUTIVE COMMITTEE
C H A I R MA N
R. Michael S. Menzies Sr.
C H A I R MA N - E L E C T
James D. MacPhee
V I C E C H A I R MA N
Salvatore Marranca
S E C R E T A R Y
Wayne A. Cottle
T R E A S U R E R
Larry W. Winum
P R E S I D E N T A N D C E O
Camden R. Fine
D I R E C T O R A T - L A R G E
Jack E. Hopkins
D I R E C T O R A T - L A R G E
Charles F. Harper
I MME D I A T E P A S T
C H A I R MA N
Cynthia A. Blankenship
P A S T C H A I R MA N
Terry J. Jorde
P A S T C H A I R MA N
David E. Hayes
C O R P O R A T E S E C R E T A R Y
Mark A. Raitor
ADVERTISING SALES
James G. Elliott Co. Inc.
626 Wilshire Blvd., Suite 500
Los Angeles, CA 90017
P R I N C I P A L
James G. Elliott
G E N E R A L MA N A G E R
Dennis Connaughton
N A T I O N A L A C C O U N T
MA N A G E R
Ted Hemminger
(213) 624-0900, ext. 1209
t.hemminger@jamesgelliott.com
S A L E S D I R E C T O R
Bob Washburn
(213) 624-0900, ext. 1205
b.washburn@jamesgelliott.com
(202) 659-8111
(800) 422-8439
E-mail: magazine@icba.org
icba.org
Published by
the Independent
Community Bankers
of America
Periodicals postage paid at Sauk Centre, MN, and additional mailing ofces. ICBA Independent Banker
(SSN-0019-3674) is published by Independent Community Bankers of America, 518 Lincoln Road, Sauk
Centre, MN 56378-1653. Member subscriptions, $40 per year. Additional member subscriptions, $20. All
other subscriptions, $75. POSTMASTER: Address changes to ICBA Independent Banker, P.O. Box 267, Sauk
Centre, MN 56378. Copyright 2009 ICBA. All rights reserved.
THE SPIRIT OF ENTREPRENEURIAL BANKING IN AMERICA
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ToP
From the
B Y R. MI C H A E L S . ME N Z I E S S R . , C H A I R M A N O F I C B A
HELPING SMALL BUSINESS
A good customer named Fran came into my com-
munity bank this week. Her companys natural-health
products sell wonderfully, but she says she would be
"going broke" if not for a loan from my community
bank. Her loan is paying for inventory, employees,
marketing and more. Small businesses like hers create
95 of every 100 new jobs. Just imagine how fast wed
get out of this recession if every Fran in America could
borrow enough capital and save enough assets to hire,
buy and create to capacity.
Community banks use both flexibility and tools
such as Small Business Administration programs to
solve such dilemmas. Our competitive advantage lies
in crafting creative solutions for each customer while
remaining prudent about risk and return.
Februarys $787-billion Economic Recovery and
Reinvestment Act contained several ICBA-backed
tax-relief measures, including immediate $250,000
expensing, the first-time homebuyer tax credit, alter-
native minimum tax relief and municipal-bond ini-
tiatives. But the country needs more. You and I
know that small businesses like Frans can turn this
economy around, but they cant do it without more of
a boost. That boost will come from uscommunity
bankersand from Congress and the White House.
How can Washington help small businesses grow
and thrive? For most, taxes are the second-biggest
budget bite after labor costs. So lets urge improve-
ments like these:
tax relief for small businesses, which employ half of
private-sector workers,
a broad five-year net operating loss carryback,
a homebuyer tax credit raised to $15,000 and
extended through 2010,
increased SBA program lending, and
preferred stock flexibility and IRA shareholder
investments for Subchapter S corporations to help
businesses raise capital.
Thats how small businesses like Frans can save
money. They also need to borrow money, of course,
and for that they come to uscommunity banks.
After all, we make half of all small-business loans
under $100,000. But were small businesses, too, and
we need help to help others.
Some of that help would
come from H.R. 2897, the
Bank Accountability and Risk
Assessment Act of 2009, sponsored
by Rep. Luis V. Gutierrez (D-Ill.).
This bill would broaden the
assessment base for FDIC deposit
insurance so that some 8,000 com-
munity banks would pay lower
premiums. The regular FDIC pre-
mium is still based on domestic
deposits. Wed have more money
to lend if the premium were based
on assets less Tier 1 capital, as the
bill calls for.
H.R. 2897 would also create a
systemic-risk premium for too-
big-to-fail institutions, making
them more accountable to the
FDIC and taxpayers. Lets sup-
port this legislation that would
make the behemoths pay their
fair shareor closer to itand
take some responsibility for their
effect on the economy and citi-
zens wallets. If your representa-
tive isnt a cosponsor, ask him or
her to become one and make this
bill into law.
Tax relief for small businesses,
regulatory relief for community
banks, freed-up capital to lend for
job retention, economic growth and
prosperitythats what will get our
economy back on track. Lets work
together to make them happen.
R. Michael S. Menzies Sr. is ICBA
chairman and president and CEO
of Easton Bank and Trust Co. in
Easton, Md.
Tax relief for
small businesses,
regulatory relief
for community
banks, freed-up
capital to lend
for job retention,
economic growth
and prosperity
thats what will
get our economy
back on track.
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you
now more
than ever.
Your community
needs
With so many mega banks facing economic crisis, consumers are desperately looking for
stability, a safe place for their money and a neighbor they can trust. As a cornerstone of
your community, you have a unique opportunity to provide the security they seek.
In turn, ICBA Services Network provides a full suite of offerings designed to keep you
stable, solvent and prosperous: investment products, credit and payment services, lending
solutions and insurance programs. Like you, weve been around a long time and well be
here when you need us.
ICBA Bancard & TCM Bank
ICBA Securities
ICBA Mortgage
ICBA Financial Services
ICBA Reinsurance
One Mission.
Community Banks.
1-866-THE-ICBA
www.icba.org/servicesnetwork
Galen PeltonGrant County Bank, Ulysses, KS
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AUTUMN FOR TOO-BIG-TO-FAIL?
Camden R. Fine is president
and CEO of ICBA. Reach him at
cam.fne@icba.org.
After a long August of scorching town-hall meet-
ings in their home districts, members of Congress are
returning this month to the highly uncertain political
climate of Washington, D.C. This years remaining
agenda for Congress and the Obama administration,
ambitious and wide-ranging, includes substantial
issues such as health care, cap-and-trade legislation,
an energy bill and the 2010 federal budget. Enacting
financial regulatory reform that addresses the dangers
from too-big-to-fail institutions is also a top priority
of both the administration and the Congress.
The administrations sweeping regulatory reform
plan, the subject of congressional hearings that ICBA
participated in this summer, represents the most
far-reaching financial legislation in 75 years. At its
heart, the plan endorses many vital ICBA policy
recommendations to rein in the megabanks and
unregulated nonbanks that have brought Americans
so much anxiety and pain during the past two years.
Community bankers should be cautious and vigi-
lant but also confident and hopeful that our posi-
tions on how to deal with too-big-to-fail will have an
impact on the national debate. The political credibil-
ity and influence of community bankers and ICBA
have never been greater in the nations capital. True
to ICBAs messages, community banks are widely
regarded as trusted, common-sense financial provid-
ers that never wavered from serving and safeguarding
their customers long-term interests.
As a result, the outlook for community bankings
policy objectives in Washingtonin stark contrast to
Wall Streetsis bright. Most of ICBAs major policy
recommendations have had powerful allies in the
administration and Congress from the outset. The
administrations reform plan, which has some trou-
bling and serious flaws, incorporates most of ICBAs
key policy recommendations. (See the cover story on
page 22 and Washington Watch on page 12.)
But, of course, its the final details that matter. In
particular, how the statutory provisions are written
and fitted together will determine how well they
address too-big-to-fail. Its still early in the lawmak-
ing process. Many legislators are still learning about
this issue and forming opinions about broad policy
objectives as well as specific measures.
As with any legislation, how
quickly the financial reform
policymaking wheels will turn
in Congress is uncertain. Its too
soon to know if lawmakers can
complete such a complex pack-
age of financial reforms this year.
Legislation could move forward in
a piecemeal fashion with a series
of targeted bills this year and next.
However, Americans are paying
close attention to this debate, and
lawmakers know it. American tax-
payers know that too-big-to-fail
was a major factor in the financial
crisis and severely complicated
the governments efforts to fix it.
Taxpayers know intuitively that
until too-big-to-fail is resolved,
their money is at risk.
After 25 years of warning poli-
cymakers about the dangers of
too-big-to-fail, community bank-
ers and ICBA have a golden oppor-
tunity to ensure that Washington
fixes it properly. So please follow
the debate on Capitol Hill closely
this fall with your staff and col-
leagues. Look for alerts from
ICBA and be ready to respond,
both in support of constructive
proposals and in opposition to
harmful ones.
The momentum to solve too-
big-to-fail is ours. Whether finan-
cial reform happens this year or
next, lets get the job done right!
Fine
B Y C A M D E N R. F I N E , P R E S I D E N T A N D C E O O F I C B A
Points
Taxpayers know
intuitively that
until too-big-to-fail
is resolved, their
money is at risk.
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ecause much ink has been spon
llsides of the political spectrum
odetermine Obamas eco ic idol
gy,e can begin to get a sense of
owcommunity banking could be
ffected by his adistrtion. The eco
omic reforms Obama prposed n
h e campaign trail
n d his work in the
.S. Seate, XCFX-
ecause much ink has been spon
llsides of the political spectrum
odetermine Obamas eco ic idol
gy,e can begin to get a sense of
owcommunity banking could be
ffected by his adistrtion. The eco
omic reforms Obama prposed on
he campaign trail and his work in
he U.S. Seate, icling involvement
n the oments economic oncen
A
s President Obamas proposals
for the sweeping financial
regulatory reform package move
this fall from recommendations
to draft legislation, several crucial
ICBA policy measures, including
some that would begin to address
systemic risks posed by too-big-to-
fail institutions, are making signi-
ficant headway. But more changes
are needed to the historic legislative
package, including additional too-
big-to-fail measures that ICBA is
recommending. (Read this months
cover story.)
One part of the administrations
regulatory reform package, to
create the new Consumer Finan-
cial Protection Agency (CFPA), is
perhaps its most dangerous element.
ICBA and our members are sparing
no efforts to educate legislators
about the potential problems for
consumers and the financial system
such an extremely powerful agency,
in its proposed form, could create.
ensuring that standard consumer
financial product or service, or
so-called plain-vanilla products,
are available to consumers.
ICBA agrees with policymakers
that existing regulatory gaps in
regulating nonbanks and Wall
Street firms need to be closed.
However, community bankers have
always offered their customers the
safest and most sound products and
services. ICBA has been vigorously
explaining why the CFPA, as
proposed, is a classic example of
a well-intended idea that would
likely result in harm for consumers
and the already highly regulated
community banks serving them
honestly and well.
By separating consumer policy
from safety-and-soundness super-
vision of community banks by
existing regulators, the CFPA
would create more regulatory
confusion without improving
consumer protections. Increased
regulatory costs and potential new
legal liabilities would be borne by
all consumers, with the conse-
quence of making many financial
products and services more
expensive for all Americans and,
possibly, unaffordable for some.
As first envisioned by the
administration, the agency would
have regulatory power over any
firm directly or indirectly providing
a wide array of consumer financial
products and services. The agency
would have sole responsibility
for examining and enforcing all
consumer financial protection
functions. The proposed agencys
reach would extend far beyond
mortgages and real-estate financing,
including consumer loans, payment
cards, overdraft protection, credit
insurance and investment and
advisory services. It would have
the power to interpret and update
regulations for existing consumer
financial-services laws, from Truth
in Lending to RESPA to consumer
privacy to HOEPA and Truth in
Savings. It could establish rules on
compensation. And it could impose
cease-and-desist orders and huge
fines and penalties.
ICBA has expressed concern to
the administration and Congress
about imposing a one-size-fits-all
regulatory approach to address
problems created by nonbank
financial providers. A core function
of the agency would be to promote
simplicity of financial products by
The Consumer Financial
Protection Agency would
create more regulatory
confusion without improving
consumer protections.
AS CURRENTLY PROPOSED, THE CONSUMER FINANCIAL
PROTECTION AGENCY WOULD HARM CONSUMERS AND
THE FINANCIAL SYSTEM IN MYRIAD WAYS. ICBA AND
COMMUNITY BANKERS ARE LEADING THE EFFORT TO
ENSURE THE BEST PUBLIC POLICY WINS OUT.
Consumer
Agency Angst
w a s h i n g t o n
BY JASON KRATOVI L
Jason Kratovil
is ICBA vice
president of
congressional policy.
Reach him at jason.
kratovil@icba.org.
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Like too-big-to-fail nancial rms
wielding excessive power in the
marketplace, the agency would
have too much concentrated
regulatory authority.
ICBA has made great strides
in educating lawmakers to agree
that community banks work with
their customers to ensure that
they are well informed about
the products and services they
choose and that they are capable
of managing them. CFPA would,
in effect, penalize community
banks and their customers for the
deceptive practices of others. And
like too-big-to-fail financial firms
wielding excessive power in the
marketplace, the agency would
have too much concentrated
regulatory authority.
Instead, ICBA has promoted
a more targeted and balanced
approach. The association
has strongly advocated that
supervision and enforcement
of consumer protections for
community banks stay with
existing regulators and that the
CFPA and existing banking
regulators jointly handle all other
consumer-protection rulemaking.
This would eliminate the need for
an appeals process to adjudicate
possible conflicts between a
banks primary regulator and the
agency.
In July, ICBA Chairman Mike
Menzies, echoing Federal Reserve
Chairman Ben Bernanke, ex -
plained to the House Committee
on Financial Services the serious
problems that would arise by
splitting safety-and-soundness
and consumer-protection regula-
tory functions. Menzies empha-
sized that consumer protections
should focus on bringing unregu-
lated nonbank entities in line with
the standard of community banks.
For example, the association
advocates that lawmakers not
require financial-service providers
to provide the basic plain-vanilla
financial products that commu-
nity banks provide, but simply
require nonbank financial-
services providers to inform
consumers that those products
are available in the marketplace.
ICBA and its members have
conveyed these concerns and
recommendations to their repre-
sentatives before and during the
August congressional recess.
House Financial Services
Committee Chairman Barney
Frank (D-Mass.) said the CFPA
would not target community
banks as the administration first
proposed. However, lawmakers
will be working out the details
of the new agency this fall.
Make your position known on the proposed
Consumer Financial Protection Agency
and other regulatory reform issues to your
representatives in Washington. Please encourage
your staff and board members to become
involved as well.
For a sample letter opposing the CFPA
and for other information on the proposed
agency, visit ICBAs Grassroots Advocacy Center
at icba.org. Click on Regulatory Restructuring
on the home page, and scroll down to find a
link to a downloadable Letter to Congress:
Regulatory Restructuring: Enhancing Consumer
Financial Products Regulation.
w a s h i n g t o n
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________________________________
N e w s l i n e s
T e c h T a l k
with
16
18
20
ICBA Chairman Mike Menzies to Congress: Our economy ... needs a real
cop on the beatplus small-business tax relief.
How banks are using Twitter for public communications.
Interest
A checking-rewards program, demographic reports and automated
safekeeping receipts.
T o o l S h o p
IB
IB
Interest with
Taking measures to reduce systemic risk and
eliminating too-big-to-fail is the best way to
protect consumers. Our economy needs
more than an early warning about possible
problems; it needs a real cop on the beat.
Mi ke Menzi es , I CBA chai rman
More Tax Relief Needed,
ICBA Tells Congress
ICBA Chairman Mike Menzies
urged Congress to craft a finan-
cial-services regulatory reform
program with more safeguards
such as procedures to downsize
too-big-to-fail institutions in
an orderly wayto reduce the
risks of overconcentration to our
nations financial system.
While praising the Obama
administrations support in its
draft program for ICBAs idea
Because the weakened economy
needs more help, ICBA urged law-
makers to complement aggressive
monetary easing by the Federal
Reserve Board by enacting a vari-
ety of small-business tax-relief
measures. Testifying before the
House Small Business Committee,
Paul Merski, ICBA senior vice
president and chief economist,
outlined several new policy mea-
sures that would expand on the
ICBA tax-relief recommendations
included in Februarys Economic
Recovery and Reinvestment Act.
ON THE HI LL
For details, see ICBAs
full testimony on icba.org.
for additional supervisory costs
and complications.
Menzies also outlined ICBAs
objections to the Consumer
Financial Protection Agency
as currently proposed to target
less-regulated nonbank financial
entities that betrayed the trust of
their customers. Rule writing and
supervision for community banks
should remain with existing bank-
ing agencies that coordinate both
safety and soundness reviews and
consumer-protection enforce-
ment, he said: Clearly a financial
institution that does not adhere to
consumer protection rules also has
a safety and soundness problem.
For more on this topic, see the From the Top column on page 9, or
read ICBAs July 15 testimony online titled, Economic Recovery: Tax
Stimulus Items that Benefited Small Business with a Look Ahead.
ICBA Urges Improvements to
the Regulatory Overhaul Plan
of imposing higher capital and
liquidity requirements on too-
big-to-fail institutions, Menzies
explained to the House Financial
Services Committee the need to
establish a separate systemic-risk
reserve fund to resolve overly
large banks and nonbank finan-
cial firms. Also, he said, addi-
tional fees should be assessed on
any insured bank affiliated with
a systemic-risk institution to pay
ON THE HI LL
Those new measures include
expanding the net operating loss
carryback to five years or more,
boosting the first-time home-
buyer tax credit and allowing IRS
shareholder investments and pre-
ferred stock issues by Subchapter
S corporations.
Merski added that unduly bur-
densome and overly aggressive bank
exams and onerous new regula-
tions on community banks must be
avoided to support small business
lending and economic strength.
Rep. Nydia
Velazquez and
ICBAs Paul Merski
N e w s l i n e s
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www.hur|uno|nunc|u|so|ul|ons.com
2009 Harland Financial Solutions, lnc. All Pights Peserved. Touche Analyzer
is a trademark ol Harland Financial Solutions, lnc.
Kim Bazzle
First vice President
Marketing
Peoples Bank
Newton, NC
Assets: S964 million
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_________________________
?
B
y now you know that Twitter
is the hot new public com-
munication medium where users,
both individuals and organiza-
tions, post messages (or tweets)
with 140 or fewer characters.
Financial institutions of all sizes
are creating Twitter accounts to
communicate with customers
and the public. The adoption of
this platform may prove to be
the fastest of any technology or
communication tool in banking.
As one might expect, the use
of Twitter accounts by commu-
nity banks varies tremendously,
as outlined in The Banking
Twittersphere, a report pub-
lished in May by the William
Mills Agency, which examined
1,176 tweets by more than 60
financial institutions over a
30-day period.
The survey revealed that com-
munity banks and credit unions,
in particular, tend to be ahead
of the curve in using Twitter
Interest with
BY SCOTT MI LLS
to share news and information.
Institutions are showing Twitter
personas, or styles, in how they
communicate, and there are
marked differences in average
number of tweets generated by
big banks, regional banks and
community banks.
Followers can be customers,
potential customers, vendors and
others. Some financial institu-
tions use Twitter as a way to
recruit new members by sharing
new account promotions and
rates, while others use it to retain
customers by sharing financial
tips or community news. Some
organizations discuss best prac-
tices among their peers.
Here are several ways commu-
nity banks are using Twitter:
Large banks posted an average
of 53 tweets per month, fol-
lowed by credit unions with
22.5 and community banks
with 8.4.
The most common tweet by
community banks was a reply
to a tweet from someone else.
Other types of tweets by com-
munity banks included these:
links to Web addresses
(24.7 percent),
corporation news, such
as earnings statements or
hirings (8.1 percent),
chatter, such as comments
on the weather or general
greetings (6.5 percent),
product promotions
(2.7 percent),
industry news, such as
comments on the recession,
regulations or personal-
finance issues (2.1 percent)
and
vendor discussions, such
as updates on new technol-
ogy (0.1 percent).
An example of a commu-
nity bank using Twitter is
North Adams, Mass.-based
MountainOne Financial Partners,
a holding company with four
community banks. Liz
Bissell, vice president, says
MountainOne has four Twitter
persona styles.
Bissell advocates creating an
editorial calendar for sending
tweets regularly, establishing
a formal bank policy on using
Twitter and educating employ-
ees on use and the banks goals.
Bissell says her companys policy
includes activities related to
Facebook and LinkedIn.
As one public relations and
communications tool of many,
Twitter will likely grow in
importance to community banks.
To use it most effectively, com-
munity banks should promote
their Twitter address across all
appropriate customer touch
points, including their Web site,
ads, branches and employee
e-mail signatures.
Because Twitter is an open
platform, anyone can follow your
community bank. Once begun,
the service should be regularly
used and monitored. Bissell says
MountainOnes marketing team
typically spends about 30 min-
utes a day managing Twitter.
Internal resources concern
many community banks, as
does the learning curve to
use the platform effectively.
T e c h T a l k
Many community banks are adopting Twitter for public communication
Do You
Tweet
more resources
For a copy of the MountainOne
Bank policy or an employee
social-media policy, contact
scott@williammills.com.
IB
IB
______________
However, numerous tools can
make the process easier, includ-
ing TweetDeck, TweetSheep,
HootSuite and ReTweet Rank.
Twitter provides a new
opportunity to communicate
with customers and prospects,
A survey by the William Mills Agency found six types
of Twitter personas that community banks adopt.
Problem SolversUse Twitter for customer service
and to interact with customers.
example tweet: @BofA_help: @kittenfacedI work for
Bank of America, is there anything I can do to help? Did the
trans post, or are they pending?
Community ActivistsPromote local events and
philanthropic activities, send weather forecasts and more.
example tweet: @1stMarinerBankMake sure to make it
to the St. Patrick Parade in Baltimore this Sunday! We are
a proud supporter.
InformersAct as consumer advocates or personal-
finance advisers.
example tweet: @mycucommunityGoodbye to business
cards? Professionals share their contact info & more via SMS
http://www.contxts.com.
CommunicatorsCharacterized by frequent retweets
and replies. These banks like to engage in discussions or
say hello to friends.
example tweet: @tonicreditunionInteresting
thermal blinds vs. heaters idea. How does that work?
Social ButterfliesHave Twitter managers who
use their accounts personally (more so than
corporately).
example tweet: @scheckingSchecking wants to know
if you saw us in Union Square this past weekend!
SidelinersPost five or fewer tweets in 30 days. In
general, these banks have reserved their name on Twitter
and are using it as a placeholder.
Texas Digitals VitalCAST
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Indoor and outdoor displays ensure
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television can be displayed side by side on LCD or plasma displays to enhance your
marketing efforts and motivate your customers while waiting in line.
particularly younger ones. In
some cases, community banks are
interacting with as many custom-
ers via Twitter as they do at their
branches. As consumer com-
munications preferences evolve,
Twitter could create new ways for
community banks to maintain their
customer relationships.
Scott Mills is president of William Mills
Agency, a public relations and marketing
frm in Atlanta that serves the fnancial
industry. His Twitter handle is @wmaScott.
IB
IB
__________
_______________
Interest with
T o o l S h o p
The BancVue premium-
rewards program allows
accountholders to tailor how
they receive loyalty rewards.
Accountholders, for example,
can receive rewards in an
automatic savings account, as
iTunes downloads or as funds
directed to charities.
A P P L E A D V E R T I S I N G
Fast Demographic Reports
S B A O N E S O U R C E
SBA Construction Loan
SBA OneSource in Denver
is offering a new construc-
tion lending service man-
agement for Small Business
Administration 7(a) loans. The
outsource service helps lenders
cost-effectively oversee con-
struction projects that receive
For details: sbaonesource.com.
B A N C V U E L T D .
Checking Rewards Program Branding
BancVue Ltd. , an ICBA
Preferred Service Provider
for premium-rewards check-
ing, is launching a nationwide
branding and advertising
campaign. The brand name
Kasasa identifies BancVues
account-rewards program,
which allows community
banks to generate deposit
growth and encourage account
holders to use cost-efficient
payment options.
BancVue supports the Kasasa
brand with local advertis-
ing campaigns for participat-
ing banks. Company officials
say a limited number of banks
will have their names associ-
ated with the Kasasa brand-
ing and advertising campaigns
launched in August.
For more: kasasa.com/learn.
Automated Safe-
keeping Receipt for
Nonbrokered CDs
Q W I C K R AT E
For more: qwickrate.com.
QwickRate, ICBAs Preferred
Service Provider for non-
brokered CDs, introduced a
feature that automates safe-
keeping receipts for issuers
and investors. The feature,
called Safekeeping Receipt,
frees institutions from relying
on paper and postage receipt
documents, further eliminat-
ing time and cost from direct
CD transactions. The ICBA-
QwickRate program provides
members with discounts on
subscriptions to the companys
nationwide nonbrokered CD
marketplace.
Customized household and market demographic reports are avail-
able from Apple Advertising in Asheville, N.C. Delivered within
eight hours, each report costs less than $250 and can feature census
data for single-county or multiple-county marketplaces and cur-
rent data or three-year projected trends. Household data can cover
income, age, debt and financial product use. Other information
includes data on number of branches and aggregate deposits.
IN ADDITION TO UNMATCHED SERVICE AND EXPERTISE, COMMUNITY BANKS OFFER
AMONG THE BESTIF NOT THE VERY BESTPRODUCTS AND WARES AVAILABLE IN
THE FINANCIAL SERVICES INDUSTRY. THEY DO THIS THROUGH A RANGE OF BUSINESS
PARTNERSHIPS AND SPECIALIZED OUTSOURCED PROVIDERS. THIS MONTHS TOOL
SHOP HIGHLIGHTS COMPANIES THAT CONTINUE TO INNOVATE AND IMPROVE THEIR
WARES FOR THE BENEFIT OF COMMUNITY BANKS.
For information: appleadv.com/demostudy.
SBA financing. The service
helps evaluate the status of
contractor license and insur-
ance status, achieve quick SBA
loan approvals and handle
compliance and cost reviews.
Management Service
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In communities across the country, Fannie Mae is committed to working with partners
like you. As part of the Making Home Affordable
SM
Program, we offer community banks
tools to support Home Affordable Refinance and Home Affordable Modification. With our
Refi Plus
TM
options, you can help Fannie Mae borrowers refinance to reduce their monthly
payments or move into a more stable loan structure, even if their loan is not in your servicing
portfolio. And our new loan modification process can help keep struggling borrowers in their
homes by making mortgage payments more affordable. For more information, please visit
www.efanniemae.com or www.financialstability.gov.
For further details on how the ICBA/Fannie Mae alliance can help you in todays challenging market,
contact your customer account manager or Tammy Trefny at 312-368-6218 or tammy_ j_trefny@fanniemae.com.
IB
IB
________________________
___________________
TOO
F I N A N C I A L R E G U L A T O R Y R E F O R M
Financial regulatory reform leg-
islation aiming to subdue sys-
temically dangerous, sometimes
predatory institutions is in the
arms of Congress. This month
congressional leaders, fresh
from town hall meetings during
an August recess and after sev-
eral summer hearings on the
Obama administrations blueprint for change, plan
to roll up their policymaking sleeves to fashion
together a consensus over a catalog of complex and
potentially far-reaching proposals that could lead
to final legislation.
THE ERA OF TOO-BIG-TO-FAIL FINANCIAL INSTITUTIONS, WHERE
GIANT DINOSAUR BANKS AND NONBANKS WERE ALLOWED
TO FEAST AND GROW WITH ABANDON, COULD BE IN ECLIPSE.
CONGRESS SETS OFF TO TAME THE DINO-BANKS
By Steve Verdier
IB
IB
We should not be forced to choose between allowing
a company to fall into a rapid and chaotic dissolution
or supporting the company with taxpayer money.
That is unacceptable. There is too much at stake.
Presi dent Barack Obama
J une 2009
IB
IB
IB
IB
___________
Join the debate. Make your position on financial regulatory
reform known to your congressional representatives in Washington,
and encourage your staff and directors to get involved as well.
To help the nations community bankers easily and effectively
communicate with members of Congress, ICBA has developed a
range of customizable letters, position summaries and background
information on financial regulatory reform. Visit icba.org and
click on the Regulatory Restructuring link under the Grassroots
Advocacy Center.
Resources to Contact Your Representatives
in June. The stakes are very high. The [public policy]
process presents both opportunities and risks. We have
an opportunity to address too-big-to-fail and finally
free our financial and economic markets from its
dangerous grip.
So far, congressional committees overseeing finan-
cial regulation have held public hearings with top
Treasury and banking agency officials in response to
the presidents plan. Those hearings, in which ICBA
has participated, have aired various viewpoints. A
few narrowly targeted bills have been introduced and
debated. However, no specific comprehensive legisla-
tive package has been introduced in Congress, and a
majority of lawmakers have not taken definitive posi-
tions on a range of policy options, including the piv-
otal measures theyll support to end too-big-to-fail.
In congressional testimony last October through
this July, ICBA has outlined core principles to guide
policymakers on financial regulatory reform. Those
principles include aiming new regulatory reforms at
too-big-to-fail banks and nonbanks, supporting mul-
tiple federal banking agencies, maintaining the dual
Nearly every pillar of our
nations regulatory framework
faces the potential for a substan-
tial, even a radical overhaul. New
regulatory standards, authorities
and government bodies are being
considered. Whatever final leg-
islative package that may emerge
from the Congress could, for
better or worse, in large mea-
sure determine how safely, resil-
iently and effectively our nations
modern financial system recovers
long term from the too-big-to-fail
contagion that was the primary
underlying cause of the financial
markets crisis.
Lawmakers must consider a
host of technically and philosoph-
ically complex policy questions
covering new regulatory ground:
What regulatory gaps must be
closed? How will systemic risk be
monitored and addressed? How
should nonbank activities be
regulated? How should financial
consumers be better protected?
Individual lawmakers and fed-
eral banking agency chiefs have
weighed in with a few different
ideas, as ICBA has with specific
core policy recommendations.
For Main Street America and
community banks, however, the
success or failure of any final
and inevitably huge financial
regulatory reform package will
be judged by how effectively it
addressesor eliminates, as
ICBA is working forthe ongo-
ing systemic dangers created by
immense and complex bank and
nonbank companies. Our country
will likely live with the legislative
results for generations to come.
America now stands at a his-
toric crossroads with financial
regulatory reform, wrote ICBA
President and CEO Camden Fine
in an open letter to the nations
community banks after the Obama
administration introduced its
financial regulatory reform plan
READ MORE:
ICBA Core
Principles
Financial
Regulatory
Reform
on page 26
(continued on page 28)
IB
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ICBA has widely communicated community bankings core principles
to achieve effective financial regulatory reform legislation.
SYSTEMIC RISK. Place systemic-risk insti-
tutions under immediate prudential supervi-
sion by a federal agency. Vest the FDIC with
authority to resolve and unwind systemically
dangerous institutions. Impose higher capital
and stronger risk-management requirements on
too-big-to-fail institutions. Eventually, downsize
institutions that could jeopardize our entire
financial system if they failed.
DUAL BANKING. Maintain the system of
federal and state bank charters to promote
a diversity of consumer choice and financial
institutions. Having multiple charter options
both federal and stateis essential for main-
taining an innovative and resilient regulatory
system.
REGULATORY DIVERSITY. Continue mul-
tiple federal banking regulators. Having multiple
federal agencies regulating depository institu-
tions provides valuable regulatory checks and
balances and promotes best practices by allow-
ing multiple viewpointsmuch like having mul-
tiple branches of government.
DEPOSIT INSURANCE ACCESS. Maintain
FDIC deposit insurance for all federal and
state chartered banks. Deposit insurance as an
explicit government guarantee has been the
stabilizing force of our nations banking system
for 75 years.
DEPOSIT INSURANCE ASSESSMENTS.
Charge systemic-risk institutions additional
FDIC-insurance premiums for the extra
risks they pose to the Deposit Insurance
Fund. Broaden the FDIC assessment base
to include all assets of insured institutions
minus their tangible equity. The amount of
assets an institution holds more accurately
gauges an institutions risk to the DIF than
the amount of its deposits. Create a spe-
cial reserve fund that remains adequately
capitalized by systemically risky financial
institutions.
CONSUMER PROTECTION. Federal bank-
ing regulators should continue both safety and
soundness oversight and consumer-protection
regulation for commercial banks and savings insti-
tutions. Limit consumer-protection supervision
by a proposed Consumer Financial Protection
Agency to unregulated nonbank financial com-
panies, and develop overall consumer protection
rules through a regulatory coordinating commis-
sion that includes federal banking agencies.
DEPOSIT CONCENTRATION. Reduce or
strengthen the 10-percent deposit concentration
cap. The current economic crisis highlights the
dangers of concentration of financial resources
in too few hands.
THRIFTS. Because savings institutions play an
essential role in providing residential mortgage
credit in the United States, the thrift charter
should not be eliminated, and the Office of
Thrift Supervision should not be merged into
the Office of the Comptroller of the Currency.
GSE FUNDING. Preserve the role of the housing
government-sponsored enterprises. To provide
safe and needed home loans to their custom-
ers, many community banks rely on Fannie
Mae, Freddie Mac and the Federal Home Loan
Banks for liquidity and asset-liability manage-
ment through the advance window.
BANKINGAND COMMERCE. Close the indus-
trial loan company loophole to maintain the
separation of banking and commerce. Mixing
banking and commerce has a history of failure
throughout the world and has led to inefficient
economies and prolonged and deep recessions.
NEW TREASURY OFFICE. Establish an Office
of Community Financial Institutions within the
Treasury Department. The office, which should
be headed by an assistant Treasury secretary,
would ensure that the unique needs and inter-
ests of community banks are being considered.
ICBA Core PrinciplesFinancial Regulatory Reform
IB
IB
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________________
banking system and ensuring that
the largest institutions adequately
contribute to the FDICs risk-
based assessments.
Among those principles of
most fundamental importance
to community banks and Main
Street America are ICBAs spe-
cific recommendations to address
systemic risks posed by too-
big-to-fail banks and nonbank
financial companies. As a result,
the Obama administration and
several key congressional leaders
have publicly embraced many of
ICBAs core policy priorities on
regulatory reform, particularly
those dealing with too-big-to-fail.
ICBA has received support from
the administration and congres-
sional allies to create consolidated
systemic-risk supervision and
impose higher capital and liquid-
ity reserve requirements on too-
big-to-fail banks and nonbanks.
ICBA has also won the adminis-
trations early support to establish
a segregated systemic-risk fund
for nondepository institutions to
cover resolution expenses as well
as a systemic-risk premium for
large depository institutions to
cover their risks to the Deposit
Insurance Fund. As Treasury
Secretary Timothy Geithner told
the House Financial Services
Committee, Right now in the
current system, its fundamentally
unfair because smaller banks are
forced to absorb a disproportion-
ate cost of intervention needed
to protect the system from, often, mistakes made by
larger institutions.
Last month, the administration also endorsed an
ICBA policy priority to create a two-tiered fee struc-
ture for regulatory examinations and compliance
oversight that would reflect the systemic risk the
largest banks present. As more evidence that commu-
nity bankers voices are being heard in Washington,
the administration proposed that banks with over
$10 billion in assets would see their regulatory
fee increases under the current banking agencies
and any proposed Consumer Financial Protection
Agency. Banks with under $10 billion in assets under
the administrations proposal would pay less for the
proportionally lower risk and regulatory costs they
create.
Additionally, the plan would require that fees
assessed on national banks with less than $10 billion
in assets could not be higher than the average charged
by states for banks of similar size, which would lower
the fees for many community banks. The Federal
Reserve or the FDIC would have no basis to impose
new fees on community banks under the proposal.
The proposal adopts the ICBA viewpoint that any
firm that engages in risky activities, or becomes so
large that its instability presents a risk to the entire
financial system, should pay regulatory fees com-
mensurate with the risk and regulatory costs it poses.
Clear evidence that community bankers voices are
being heard in Washington: Michael S. Barr, assistant
Treasury secretary for financial institutions, told the
Washington Post: The largest institutions require
greater oversight and in terms of consumers, they are
reaching many, many more with more complicated
products.
Some of these ICBA policy recommendations
are incorporated in legislation introduced in the
House of Representatives and the Senate. Rep. Luis
Gutierrez (D-Ill.), chairman of the House Financial
Services Subcommittee on Financial Institutions and
Consumer Credit, introduced a bill (H.R. 2897)
that would broaden the assessment base for
FDIC deposit insurance
premiums and create
a separate risk-based
assessment for federally
insured too-big-to-fail banks.
Sens. Mark Warner (D-Va.) and Bob
Corker (R-Tenn.), both Senate Banking
Committee members, introduced a
bill (S. 1540) that would give the
FDIC the authority to resolve,
or wind down, bank hold-
ing companies. Rep. Dennis
Cardoza (D-Calif.) introduced
a bill (H.R. 2676) to create a
America now stands at a historic crossroads
with financial regulatory reform. The
stakes are very high. The process presents
both opportunities and risks. We have an
opportunity to address too-big-to-fail and
finally free our financial and economic
markets from its dangerous grip.
I CBA Presi dent and CEO
Camden Fi ne, J une 2009
Read about
ICBAs efforts
on the pro-
posed Consumer
Financial
Protection Agency
in Washington
Watch on
page 12.
IB
IB
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Union State Bank
Everest, Kansas
Our electronic
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The community
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IB
new assistant Treasury secretary position to enhance
the voice of our nations community banks within the
Treasury Department.
The Obama administration and several senior law-
makers have also backed ICBAs recommendation to
give the FDIC special resolution authority to resolve
and unwind systemically dangerous financial firms.
But some lawmakers, including House Financial
Services Committee Chairman Barney Frank
(D-Mass.), have questioned whether such authority
and procedures should be addressed in separate leg-
islation. ICBA continues to advocate that having clear
authority and procedures in place
to unwind systemically dangerous
institutions is an essential regu-
latory component of addressing
too-big-to-fail in a cohesive and
comprehensive way.
In testimony before the House
Financial Services Committee in
July, ICBA Chairman R. Michael
S. Menzies Sr. outlined critical
ICBA recommendations to make
the administrations regulatory
reform plan effective in address-
ing the causes of the financial
crisis without creating unintended
problems for community banks
and Main Street America. For
example, ICBA recommends
that lawmakers designate the
Federal Reserve as the nations
primary systemic-risk regulator
and enhance the authority and
duties of a proposed council that
would oversee the Feds systemic-
Even in the midst of this economic crisis, the
nations community banks continue to help their
customers and communities recover. Its vital that
Congress does its part by ending too-big-to-fail and
reducing systemic risk in order to protect consumers,
local communities, and our entire financial system
from the destabilizing effects that occur when a
giant institution runs into trouble.
I CBA Chai rman R. Mi chael Menzi es ,
testi fyi ng to Congres s for I CBA, J uly 2009
IB
IB
____________
IB
IB
__________________
_______________
H
OTMEYER
M
ONSON
&
(800) 340304
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risk actions. The Financial Services Oversight Council
proposed by the administration should also be responsible
for identifying gaps in regulation and recommending which
nonbank entities should be brought under the Feds con-
solidated supervision.
To make too-big-to-fail regulation effective, ICBA also
believes that Congress should require regulators to pub-
licly identify systemically risky institutions. Congress
should also establish clear principles to identify them,
and ICBA has presented specific guidelines, whether such
an institution be a bank or nonbank. Additionally, each
large financial institution should develop an insolvency
contingency plan that a resolution authority could use in
the event of its failure.
In addition to raising the capital, liquidity and risk-
management standards of the largest financial institutions,
however, ICBA also has made it clear to policymakers
that downsizing systemic-risk institutions is an essential
step. Financial holding company premiums and capital
requirements should be increased, on a graduated basis,
for institutions $100 billion in assets and larger to protect
against the potentially huge losses they could generate and
to discourage excessive growth. ICBA spelled out a five-
year downsizing process for systemic-risk institutions,
including measures to give the U.S. Department of Justice
antitrust-like powers over the largest financial institutions.
An unwinding process should allow community banks to
acquire pieces of downsized institutions.
As with any legislation, how quickly the policymak-
ing wheels for financial regulatory reform will turn in
Congress, particularly in the Senate, is uncertain. The
Obama administration and some congressional leaders
want to pursue the ambitious timetable of enacting a
financial reform package by New Years. With the terrible
aftermath of the financial markets crisis and its lingering
economic fallout, Congress has powerful incentive to act.
For if policymakers had not allowed a few banks and
nonbanks to swell unrestrained to monster proportions,
the crisis of the past three years would never have pushed
Americas financial system to the brink of collapse as it did.
The Obama administration agrees, as do many members
of Congress and a vast number of
Americans. Continued pressure
and vigilance from ICBA and the
nations community banks could
end too-big-to-fail.
The days of dino-banks could be
numbered. Our country and Main
Street America will be safer when
they become fossils of a wilder,
more perilous financial past.
Steve Verdier is senior vice president
and director of congressional afairs.
Reach him at steve.verdier@icba.org.
Community bankers have spent the past
25 years warning policymakers of the
systemic risk presented by the unbridled
growth of the nations largest banks and
financial firms. Congress should require
the financial agencies to identify, regulate,
assess and eventually break up institutions
posing a risk to our entire economy.
Connecti cut communi ty banker Bi ll
Attri dge, testi fyi ng to Congres s for
I CBA, March 2009
IB
IB
____________
________________
_____________
2009 Freddie Mac
Freddie Mac provides the housing market with quick access
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of mortgage financing in all markets, every day, including
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Making Home Affordable Program.
IB
IB
O
U
T
G
e
t
t
i
n
g
th
e
W
o
r
d
By Alan Lenhoff
ICBA Independent Banker Advertising All-Stars
FOUR SAVVY COMMUNITY BANKS USEA VARIETY OF CREATIVE MARKETING
IDEASAND MEDIATO CREATE TOP-NOTCHADVERTISING CAMPAIGNS
35
D
oing business with-
out advertising is like
winking at someone
in the dark. You know what you
are doing, but nobody else does.
Its not clear who said that
first, but any business that offers
products or services, including
community banks, can appreci-
ate the sentiment.
ICBA Independent Banker
chose four community bank
advertising campaigns to spot-
light for their creativity and
effectiveness as part of its annual
advertising showcase. Each cam-
paign reflects different goals,
philosophies and creativity. One
campaign is by a 157-year-old
community bank; another bank
was chartered in 2005. A third
bank seeks a bigger foothold
in mortgage lending; a fourth
strives to solidify dominance in
small business lending.
What all four campaigns have
in common is creative but rigor-
ous marketing strategies imple-
mented through a variety of
approaches. Every community
bank is unique. So is every Main
Street market. No one marketing
strategy or advertising campaign
is universally applicable. But
as these advertising campaigns
show, creativity and dedication
can help any community bank
increase its impact and market
share.
OUT
IB
IB
FIRST BANK FINANCIAL CENTRE
OCONOMOWOC, WI S.
L
ocated about 30 miles
west of Milwaukee, Oco-
nomowoc is a thriving
town that predates the Civil War
and has become an exurban bed-
room community. There, First
Bank Financial Centre began
reaching out this past spring to
serve more consumers in the grow-
ing nearby population centers.
For many years, says Jodi
Schwefel, First Bank Financials
marketing director, we consid-
ered ourselves a commercial lend-
ing bank. But economic times do
not now warrant a great deal of
commercial loans. To reposition
and expand the $650 million-asset
community banks balance sheet,
she says, First Bank Financial
aimed to increase its residential
mortgage lending.
Schwefel and her colleagues
created an advertising campaign
that addressed homebuyers
through print, broadcast, online
and in-branch outlets. The
mixed-media campaign strove to
raise awareness among customers
and noncustomers that First Bank
Financial offers home-mortgage
loans and, as a result, increase the
banks portfolio of those loans.
Featuring the slogan Home
Loan Sale, the campaign stressed
the value of doing business with
a community bankpersonal
assistance and advice, free
pre-approvals, fast loan deci-
sions, people you know and
trust. Schwefel also used a logo
celebrating the banks 150th anni-
versary to underline the themes
of safety, soundness and relation-
ship banking.
The campaign consisted of
two weeks of newspaper adver-
tising in two counties that include
much of suburban Milwaukee,
a two-week radio campaign on
two major AM and FM stations
in the Milwaukee area,
an ad on First Bank Financials
Web site that offered $100 off
closing costs for consumers who
applied online,
a mass e-mail to First Bank
Financial customers who did not
have a mortgage loan with the
bank and
in-branch posters advertising
the banks interest and expertise
in mortgage lending.
First Bank Financial launched
the campaign this March and
April, seeking to capitalize on
extremely low mortgage interest
rates at the time. For a cost of less
than $14,000, the effort showed
the following results:
a 67 percent increase in visits to
First Bank Financials Mortgage
Center Web site,
12 new locked-rate mortgages
worth $19 million and
26 floating-rate loans with a
value of $6 million.
With those mortgages alone
completed, the community bank
would earn about $300,000
in revenue after advertising
expenses.
Buoyed by the campaigns ini-
tial success, First Bank Financial
continued placing the messages.
The renewed effort generated
greater return on the commu-
nity banks advertising investment
by drawing 104 new fixed-rate
mortgages and 38 floating-rate
mortgages. During the first six
months of 2009, the total value
of First Bank Financials overall
new mortgage business was $77
million.
Just as important, Schwefel notes
that mortgages not only bring
new customers but also serve as
a springboard for cross-selling
other products: With something
the size of a mortgage, you have a
great opportunity, she says. You
can work pretty easily to get their
checking and savings accounts,
CDs and money markets.
The total value of First
Bank Financials overall
new mortgage business
during the rst six
months of 2009
million
$77
Hear the Ads
To hear First Bank
Financial Centres
radio ads and read
its radio scripts,
go to icba.org/
independentbanker.
The total value of First
Bank Financials overall
new mortgage business
during the rst six
months of 2009
million
$77
IB
IB
_________
_____________________
FACT: 1 in 4 Home Movers Will Change Banks
WILL THEY CHOOSE YOU?
Cos| Eo|iv Nw Cus|oirs Aoquisi|ior Cuiuiqrs
lrorus l|r|ior o Exis|irq l|uil Cus|oirs
llvur| Movirq Ors |o Driv Corsuir lsors
lro|o| your Burk's losi|ior roi Coi|i|iv Tlru|s
Booi |l Burk o Cloio
or Nw Movrs
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Visit www.mypatria.com today.
L
oyal customers make the
best spokespersons, says
Toni Andrews. Knowing
that, Andrews, director of mar-
keting for Burke & Herbert Bank
and Trust Co., envisioned a bril-
liant advertising campaign that
a dozen one-page
Banking for the
People mini-essays
on individual cus-
tomers. Each essay
was developed into
posters and news-
paper ads. Starting
in January, the pro-
gram urged poten-
tial customers to
declare your bank-
ing independence
by moving their
business from the
big banks to Burke
& Herbert.
Some ads are
historical, stressing
the institutions role
in the community
since 1852. Most,
however, tell sto-
ries of present-day
Burke & Herbert
customers: Tony
Gee, who turned a
job as a restaurant
porter into success as a restau-
rant owner; Don and Mike Beyer,
whose Burke & Herbert mortgage
loan launched several Volvo deal-
erships; and Tsegaye Tadesse, an
Ethiopian immigrant who sends
money to Addis Ababa through
Burke & Herberts reloadable
Parrot Cardand more.
Andrews wrote the copy for
most ads and guided their con-
sistent branding and design. In
everything from the choice of
words to the choice of fonts, such
traditional values as safety and
soundness mix seamlessly with
the message that this community
bank has the latest financial offer-
ings and technology.
Most of the ads highlight a
product or service provided by
Burke & Herbert as part of the
customers personal storyfrom
mobile banking for businessman
Marty Youmans to remote deposit
capture services for landscapers
Vat and Andy Ross. Of course, the
campaign creates publicity for the
As I walk down the street or go
to meetings, Burke & Herbert
CEO Charles Collum says,
there are always comments
like, Gee, I read your last ad,
and it was very impressive.
BURKE & HERBERT BANK AND TRUST CO.
AL EXANDRI A, VA.
highlights the $1.9 billion-asset
community banks state-of-the-art
products and services through the
real-life stories of its customers.
Andrews created more than
IB
IB
______________________
__________
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_____________________________
FIRSTBANK HOLDING CO.
DENVER, COL O.
D
rive the highways in
and around Denver and
up and down the Front
Range from Colorado Springs to
Fort Collins, and you may see an
eye-catching billboard advertis-
ing budding entrepreneurs. One
advertisement promotes the ser-
vices of a math tutor, another
those of a wedding singer.
Both of those people are
real-life customers of FirstBank
Holding Co., a $9.6 billion-asset
company with 120 branches in
Colorado and several others in
the Phoenix and Palm Springs
areas.
An example of dual-purpose
advertising, the billboards are
developed and displayed by
FirstBank but feature its small-
est of small-business clients.
FirstBank COO Dave Baker and
his marketing team came up with
the piggyback concept to demon-
strate the banks support of small
business while helping its clients.
Baker says the billboard cam-
paign has contributed to a nearly
15 percent increase in the hold-
ing companys small-business
accounts. The numbers are up
on the account side, the deposit
side, Baker explains. Those are
the ones we concentrate on the
most.
The first billboards in the
program were ads featuring a
fictitious babysitter and a make-
believe piano teacher. Those ads
displayed phone numbers that
led callers to humorous messages
tied to the campaign. You try
to come up with things that are
catchy to people who are driving
along, Baker says.
When Baker and his colleagues
noticed the call volume increas-
ing, they decided to extend the
billboard campaign to use real
local businesspeople. From the
start, the campaign became popu-
lar with both FirstBank custom-
ers and the general public. TV
stations did news stories about
the campaign. And, as Baker
notes, the billboards enable his
community bank not just to say it
cares about small businesses but
to show it does.
After the billboard campaign
was under way, FirstBank came
up with a linked idea that enables
it to support more businesses than
it could ever create billboards for.
It used a cylindrical display case
in Denver International Airport,
visible in a high-pedestrian area
where local trains pick up trav-
elers. FirstBank invited small-
business customers to display
business cards in the case.
Now a third spinoff of the
campaign is under way. In late
July, FirstBank sent a direct mailer
to 80,000 small businesses in the
Denver area announcing DotFree.
With this program, the community
bank began offering a free Internet site
to small businesses as an incentive to
start a relationship with the bank.
Were demonstrating our sup-
port for small business in a tan-
gible, unique way, Baker says.
Also, its kind of fun!
increase in the holding
companys small-business
accounts.
15%
The billboard campaign has
contributed to nearly a
Were demonstrating our
support for small business
in a tangible, unique way.
Fi rstBank COO Dave Baker
local businesses involved as well
as the bank.
Theres no spin; theyre genu-
ine, Andrews says of the cam-
paigns customer stories. I have
never had a customer not allow
me to use their face and their full
identity, proudly. We have people
who are asking to be in the ads.
Any bank can run a CD ad. Not
any bank can run these ads.
According to Charles Collum,
Burke & Herberts chairman and
CEO, the campaign has corre-
lated with impressive growth.
During the first half of 2009, the
community banks assets jumped
$193 million, nearly 12 percent.
Its loan volume increased by $76
million, or 7 percent.
As I walk down the street or go to
meetings, Collum says, there are
always comments like, Gee, I read
your last ad, and it was very impres-
sive, and I met that person once.
People are reading these articles!
Increase in Burke & Herberts
assets during the rst half
of 2009
million
$193
IB
IB
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__________________
__________________
PARAGON NATIONAL BANK
MEMPHI S, TENN.
n Place | 6300 n Place | 5400 Poplar Avenue
Francis | 6005 Park Avenue | Saddle Creek | 7600 Poplar Avenue
PH 901.273.2900 | bankparagon.com
L locals.
MEMBER FDIC R
At Paragon, the customer is king, and we are the loyal subjects.
While other banks have decreed that customers must bow to
utomated utomated call call centers centers and and loan loan ofcers ofcers hidden hidden in in distant distant
ands, Paragon remains a truly local servant to the people
f Memphis.
All phone calls and loan applications are handled exclusively by
ocal Paragon bankers. Our network of ATMs is always free, and
ur online banking is easy to use. We even credit your account
he same day you make a deposit.
Chivalry is not dead in the world of banking. Just call Paragon
well slay the dragon and move your treasure to safety.
RESTORING HONOR TO
THE WORLD OF BANKING.
RESCUING
CUSTOMERS
IN DISTRESS.
Paragon Place in Place | 5400 Poplar Avenue
St. Francis reek | 7600 Poplar Avenue
ragon.com
MEMBER FDIC R
Stop compromising your dignity with frogs, and switch to the
real prince of banks. At Paragon, every phone call is answered
locally. Every loan decision is made here in town. Every ATM in
our vast network is free. Every online transaction is easy.
Get the royal treatment you deserve as a valued customer
of Paragon. Just call and recite the magic words: Rescue me
now! Well take care of the rest.
KISS IT GOODBYE AND BANK
HAPPILY EVER AFTER WITH PARAGON.
YOUR BANK WILL
NEVER CHANGE.
locals.
We were founded by bankers to oer
a comprehensive insurance solution
for nancial institutions. BancInsures
commitment to community banks
has been unswerving even as other
insurers reduced their exposure to
this market.
Peace of mind when you need
it most.
With an unmatched reinsurance
portfolio, an industry leading 25%
market share and an A- (Excellent)
rating with a stable outlook from
A.M. Best; you can count on BancInsure
to be there for your bank when you
need us most.
Take a closer look at BancInsure.
Ask your Independent Agent about
BancInsure; visit us on the web at
www.BancInsure.com or call us at
800.682.1630 to learn more about
what BancInsure can do for your bank.
5005 North Lincoln Boulevard
Oklahoma City, Oklahoma 73105
800.682.1630
www.BancInsure.com
Oklahoma City, Oklahoma 73105
We were made
for times
like these.
Everyone wins when
we work together.
IB
IB
__
____________
W
hen Paragon National
Bank was chartered
four years ago, bank
mergers and acquisitions by
larger regional institutions were
an everyday topic of conversation
in the Memphis area. There was
growing confusion, uncertainty
and frustration about what the
trend would mean to consumers
and businesses.
So Robert Shaw, president and
CEO of the $300 million-asset
Paragon National, and marketing
consultants at the Inferno agency
in Memphis felt that the best way
to establish the community bank
was to promote its quality cus-
tomer service and commitment to
relationship banking in contrast
with the impersonal, bureaucratic
treatment customers receive from
the big banks.
But how to present that mes-
sage? The merging institutions
were doing the heavy lifting
for us, Shaw says. They were
making plenty of mistakes in
customer service and marketing
communication, so they sort of
opened the door.
Given that environment,
Paragon decided to be humorous
and edgy in its display and print
ads and especially in its radio
spots. The print ads use Paragons
signature vivid red and informal,
clever copy. Many ads, both print
and electronic, take on the big
banks directly. The community
bank also used Facebook and
Twitter to distribute its ads.
The brand needs to tailor to
the personality of the bank, not
vice versa, says Inferno manag-
ing partner Tim Sellers. Part of
the personality of the Paragon
brand is being approachable.
The use of humor is appro-
priate for a group that is very
personable.
One funny 60-second radio
spot purports to listen in on a
Megabank board meeting where
the boss says hes convened his
staff because our customers hate
us. We need to find a way to make
them hate us less. In another spot,
the superheroes of the Paragon
Rescue Squad help a consumer
switch from a megabank to
Paragon. (You can hear sound
files of these and other Paragon
National ads by visiting icba.org/
independentbanker.)
Shaw is gratified that the ad
campaign has given Paragon
National a strong presence in the
community in just a few years. As
for quantifiable results, We com-
pare ourselves with several peer
groupsa local peer group, a peer
group of de novos formed in metro
areas in the southern United States
and othersand we compare very
favorably in core deposits.
Part of the personality of
the Paragon brand is being
approachable. The use of
humor is appropriate for a
group that is very personable.
Ti m Sellers ,
ad- agency partner
For more information contact Andy Burkett at 1.800.545.4274 or aburkett@csiweb.com, or visit us at www.csiweb.com
During a recent
strategic planning
session, we were
asked to identif y the
strengths of our bank.
I listed our 20-year
par tnership wi th CSI .
Gina Lotter
Gina Lotter
Executive Vice President
First National Bank
Staunton, Illinois
One of our strengths...
our partnership with CSI.
Computer Ser vices, Inc. (CSVI)
s er ves over 4600 f i nanc i al
i nsti tuti ons wi th products and
ser vices. We provide banking
solutions in both a service bureau
and an i n-house envi ronment.
Were proud to be known as
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IB
IB
_______________
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During the recession, Paragon National has shown the
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issues. And community service, including annual participa-
tion in the Relay for Life to fight cancer, has been part of the
community banks identity since its opening. But the origi-
nal advertising campaign continues, and Paragon National
remains committed to its marketing approach.
Alan Lenhof is ICBA Independent Bankers managing editor.
Cant afford the expense or personnel for an
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Want more comprehensive marketing
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IB
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IB
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_________________
FIVE COMMUNITY BANK EXECUTIVES OFFER
THEIR STRATEGIC PLANNING INSIGHTS
ICBA INDEPENDENT BANKER ROUNDTABLE
D
oes your community bank have a living, evolving strategic plan? Do you spend consider-
able time reviewing and updating it? Did your officers draw up a strategic plan years ago
and leave it on the shelf?
Whether done annually or less frequently, strategic planning provides the opportunity for
community banks to evaluate, often as an entire organization, the condition of their product and
service menus, market share, staff expertise and earnings, among other matters.
Five community bank executives from around the country, recommended by experts as effec-
tive strategic planners, took part in an ICBA Independent Banker roundtable discussion on making
the strategic planning process effective and valuable. Their insights include the adjustments they
inevitably made during the past few turbulent months of the financial markets crisis and economic
recession.
PLANNING
POWER
IB
IB
ICBA Independent Banker: What major issues
has your community banks strategic plan
focused on and why?
Harper: We have no more than five strategic goals.
Once we did nine, but that was unwieldy. The main
one is asset growth; we have a capital plan of 7 to 7.5
percent for 10 years out. Our second goal is main-
taining asset quality. For marketing, it says, Develop
and execute an effective bankwide marketing and
advertising plan.
Ford: The first thing we always discuss is whether we
want to stay independent; its always good to hear the
board say yes. Then board and management succes-
sion and possibly ownership succession; growth issues;
how to respond to the competitionthose were all
issues that were at the top of the list until this year.
Wise: A couple years ago it was what products we
needed to consider. Now its more, how do you keep
enough liquidity and enough capital, and what is
enough?
Olson: Most of it was growth, acquisition, suc-
cession, technology, marketing. But because of the
market now, branch plans have been put on hold.
Were looking at loan issues primarily.
Coleman: After a lot of changes in our delivery
processes the past few years, we were ready to cruise
along until there came trouble in the real-estate
market. Now our focus has changed to that.
IB: How does your community bank use its
strategic plan? How often do you refer to it?
Olson: Our three-year plan incorporates action
plans, assignments and timetables of three months
to a year or so. Its the year following our process that
the plan gets the most attention, but there are also
expectations that those items get resolved.
Harper: Our plan drives all our incentive plans. We
reward officers for low-cost deposits, and even tellers
are rewarded for converting check cashers to direct
deposit.
Wise: Here too, actions are incorporated into
staff goals. Branch incentives are determined by
goals that come out of the meetings, and man-
agers also have goals that are tied into our
strategic plans.
Coleman: We dont have an incentive plan.
Ford: We use the plan as a tool, among other things,
to measure board and management satisfaction or
frustration. In annual sessions we often discover
hidden issues that have escaped our focus, and we can
gauge interest in them and act accordingly.
IB: How do you review and revise your
strategic plan?
Coleman: Weve been doing strategic planning on
paper for about five years. The president chairs the
Vince Coleman, pres i dent,
S outhern Commerci al Bank,
St. Loui s , Mo.
Southern Commercial has been in busi-
ness since 1891 and has $525 million in
10 branches. The community bank serves
neighborhood retail, small business, small-
investor commercial real estate and some
homebuilders in a marketplace that extends
40 miles along the Mississippi River.
Dan Ford, CEO, Pi ne Ri ver
Valley Bank, Bayfi eld, Colo.
Founded in 1977, Pine River Valley is a
$190 million-asset community bank with
four branches in southwestern Colorado,
a marketplace with significant home
construction and some oil and gas explora-
tion. Of eight banks in its marketplace,
Pine River is the only independent locally
owned financial institution.
Justin Harper, pres i dent and
CEO, Ci ti zens Bank of Las
Cruces , N. M.
Citizens Bank of Las Cruces has $350 mil-
lion in assets in a marketplace with about
90,000 people. The bank was founded in
1970 to serve the underserved Hispanic
population.
Dean Olson, CEO, Charter Bank
Eau Cl ai re, Eau Cl ai re, Wi s .
Charter Bank has a marketplace of about
100,000 people along an interstate corridor
about 90 miles east of Minneapolis and St.
Paul. The $30 million-asset community
banks 50 employees serve a high concen-
tration of commercial businesses. It has a
strong focus in commercial real estate.
Nancy Wise, CFO, Four Oaks
Bank & Trus t, Four Oaks , N. C.
Four Oaks has been in business since 1912.
The $940 million-asset community bank
concentrates on the financial-services
needs of small businesses. With 17 offices
in rural and suburban North Carolina, the
bank is focusing on growing its balance
sheet through its bond and loan portfolios.
OUR ROUNDTABLE PARTICIPANTS
IB
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meetings. We refer to it once a year. Some years weve
reviewed it every month at board level. Is an annual
cycle common?
Ford: Thats what we do. Theres a two-month prep
period before the annual meeting midyear involving
all officerswhats important, whats working, whats
notand that ultimately creates the agenda. We leave
that meeting with 10 to 30 action items. The expecta-
tion is that well get those completed by the end of
the year. We constantly report to the board how were
reaching those goals. Then we generally cruise until
the next midyear session.
Wise: For 12 years weve reviewed the plan with an
outside facilitator, and we do a study of all employees
beforehand. The annual meeting involves not just the
board and executive officers but the regional manag-
ers, marketing, even our auditor. For me, the most
important aspect of our strategic planning meetings
is the interaction between the managers out in the
field, the executive officers and the board.
Harper: The first one12 to 15 years ago with an
outside facilitatorwas a thought exercise to resolve
our weaknesses. At the end of each year, after going
over our three-year plan with the board, the executive
management team reviews it and sets new targets.
Then they meet with the facilitator about nitty-gritty
implementation. At an annual retreat, we get buy-in
from all officers and the board, and every quarter the
executive management team spends a day making
sure were on target.
IB: Any thoughts about using an outside
facilitator?
Harper: We still use a facilitator every two years but
not the same one more than twice. We want fresh
ideas, new experiences and perspectives.
Ford: We bring in someone who deals with other
banks our size and can give us the industry norms.
Also, information we share is probably the most valu-
able thing we get out of strategic planning, so its good
to have a facilitator who can extract all that from
board members and shy officers.
Olson: That independent perspective is key. The
board may get jaded to what Im saying. When some-
one independent comes in and talks about the really
good things were doing, they have a new pride in the
bank and their own contribution.
IB: Has your plan helped you navigate the
housing bust, stock-market fall and credit
crunch?
Harper: We were fourth in our category in the last
ICBA [best performing community banks for 2008]
rankings. Earnings for the first six months of 2009
were better than for the same period of 2008.
Coleman: In St. Louis, the subprime market has
caused problems from liquidity to asset quality to
regulation. Those plus the increased cost of deposit
insurance have hurt profitability. With the board
meeting frequently, we can quickly make adjust-
ments to procedures and policies. In times of crisis,
the tactical part of your plan just goes out the
window. You need to stay focused on your mission
and your principles and make sure youre doing the
things that are most important to your sharehold-
ers and customers. Theyll reward you with their
loyalty.
Olson: Were debating whether we even want
or need a long-term strategic plan right now or
whether to get through this prolonged, damaging
economic cycle and then figure out where to go.
Ford: Weve always considered our strategic plan
a versatile document and subject to change at any
time. Thats served us well in this crisis. A lot of the
things we had talked about we just set aside and
started talking about survival issues. Our longest-
term goal right now is the next exam.
Wise: We prepare for that primarily by doing what
we do anyway to monitor our assets, liability and
capital. We had our loans stress-tested and have
identified ways of raising capital quickly.
IB: Whats your advice to other community
banks in creating, changing or following a
strategic plan?
Wise: Use an outside facilitator for fresh ideas
and perspective and for pulling information out of
everyone.
Harper: A professional facilitator is especially
important if youre just getting started. It costs
$12,000 to $15,000, but its worth it. Two, get
buy-in from the staff. It doesnt matter what I want
to do; the staff has to understand and accept it
or it wont work. Three, use it. Some banks make
a strategic plan just to satisfy the regulators, but
thats wasted effort. Ours keeps everyone focused
all year long.
Olson: Check [the facilitators] references, and
make sure the persons style fits your banks style
and needs. Weve been looking at two facilitators,
but ones style is micromanaging, questioning the
staff, crunching numbers for days and weeks, and
that costs big bucks. We dont really need that; our
staff is happy and well paidwe want big-picture
items only.
Ford: Gain as much input as you can in advance so
everybody has had a chance to voice what they want
to talk about, what parts of the strategic plan are
most important. Leave the session with well-defined
goals and timelines for completing them. Review
those as often as possible. Some years weve renewed
them every month at board level.
IB
IB
o p e r a t i o n s
LENDER LI FE
By Bi l l E l l i o t t your loan process next month?
Are you ready to adopt changes in
Z
The Power of
T
he Federal Reserve Board
amendments to Regulation
Z for higher-priced mortgage
loans (HPML) are just about
here. The rule will prohibit
financial institutions from
extending credit without regard
to a consumers ability to repay
the loan from sources other than
the collateral, require verifying
income and assets that banks
rely on to determine repay-
ment ability, severely limit pre-
payment penalties and require
escrow accounts for taxes and
insurance for at least the first 12
months (first mortgages only).
An HPML is a consumer-
purpose, closed-end loan
secured by a consumers prin-
cipal dwelling and having an
annual percentage rate (APR)
that exceeds the average prime
offer rate (APOR) for a compa-
rable transaction published by
the Fed by at least 1.5 percent-
age points for first-lien loans or
3.5 percentage points for subor-
dinate-lien loans. You can find
the APOR index at ffiec.gov.
The first two requirements of HPMLdetermining
repayment ability and limits on prepayment penal-
tiesare effective for applications dated Oct. 1, 2009,
or later and not as potentially difficult for banks as
the third.
Documentation and Fines
If your community bank is used to secondary market
documentation of income, the process for HPML
income verification will be simple. The rules are
very similar; standard third-party documents must
be used. The difficulties will occur when a bank
is unable to prove income (for instance, with self-
employed borrowers) but still wants to charge the
customer an APR that makes the loan an HPML. You
will be barred from making the HPML loan, and your
options will be to lower the APR (which might have
fair-lending implications) or to decline the loan.
The second portion of the rule (limits on prepay-
ment penalties) does not pose any issue for banks that
are not charging these penalties. For everyone else, an
HPML can have a prepayment penalty if the penalty
does not exceed two years and is assessed only for
loans whose principal and interest payment remain
constant for at least four years.
Therefore, banks could not assess a prepayment
penalty for an ARM loan with the first rate and pay-
ment change at the end of year three. The rule also
specifies that you cannot charge the prepayment
penalty if you are refinancing your own loan.
Bill Elliott is senior consultant and
manager of compliance services with
Young & Associates Inc., a community
bank consulting frm in Kent, Ohio.
Reach him at bille@younginc.com.
IB
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Prepare for Escrow
Perhaps the most difficult requirement is the escrow
provision. In many conversations with community
bankers in recent months, I have heard some varia-
tion of we are going to avoid doing these loans
because we are not going to escrow.
While I sympathize, if the bank has a potential
HPML, it has two options: Follow the HPML rules,
or lower the rate/fees to get below the HPML APR
threshold. Given the actual indices, the second option
may be much more expensive than the first.
The good news is that the escrow rules will not
begin until you have an application for a first mort-
gage dated April 1, 2010, or later. So there is time to
prepare. After that date, 12 months of escrow will be
required for all first-mortgage HPMLs.
The rule does permit cancellation upon customer
request (at the banks option) after 12 months. The
rule also permits a cancellation fee, although state
or local law might prohibit this. If your bank doesnt
offer escrow services, it might be worthwhile to
investigate any state or local laws to ensure that the
bank is in compliance with them as well.
The Mobile Home Rule
Perhaps the most odious portion of the escrow require-
ments is the mobile-home rule. Escrow will be required
for all first-lien mobile-home loans with an application
date of Oct. 1, 2010, or later. In many locales, mobile-
If your community
bank is used to
secondary market
documentation of
income, the process
for HPML income
verication will be
simple.
home owners are subject to some
sort of annual tax, often referred to
as personal property tax.
The regulation will require that
you provide escrow services for
this tax and property insurance
for loans in this category. The
presence or absence of real estate
has no effect on the requirement.
And since mobile homes are usu-
ally priced 200 to 300 basis points
above standard mortgage rates, the
potential for these loans meeting
the HPML APR is significant.
As almost no banks have escrow
capabilities on their consumer
mainframe software, continu-
ing in the mobile-home business
may carry some significant costs.
If your bank seldom approves
a mobile-home loan, it may be
appropriate to discontinue this
product line. But for those banks
with significant mobile-home loan
business, preparing for the escrow
requirement may become expen-
sive. Bank management needs to
consider how to address these
issues and others.
IB
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______________________
PORTFOLI O MANAGEMENT
o p e r a t i o n s
T
he incredible shrinking net
interest margin problem that
plagues most community banks
at the moment can in large part
be reduced to a cause-and-effect
analysis. The cause is too few high-
quality loans available at yields that
produce a fair return to the lender.
The effects are many: low returns
on assets, delinquency and loan loss
reserve issues (and by extension,
capital issues), and even asset-liabil-
ity concerns. We can also mention
loss of market share and increased
cross-selling by competitors.
There is good news on the loan
horizon. Partly due to credit dis-
ruption (or a very rational market
correction, depending on ones
point of view), community banks
can purchase high-quality loans,
often within their market foot-
prints, at yields that in many cases
exceed their own retail pricing.
The Opportunity
High-quality loans of all types,
including residential mortgage
loans and commercial real estate
loans, are available at attractive
yields. Mortgage sellers that relied
on securitizations or conduits in
the past have a significant amount
of seasoned, performing collateral
on their books available for sale.
Jumbo mortgages, in particular,
experienced spread widening
over the last year and are available
at levels that provide a significant
pickup in comparison to agency securities.
Many institutions are looking for investment alter-
natives for large cash positions (not a great invest-
ment in this market) due to deposit growth, prepays
in their securities portfolio and new capital infusions,
including TARP funds. Many community banks have
purchased loan pools to improve net interest margins,
with yields on agency securities and cash equivalents
at historic lows. Institutions can also be selective on
the product type as there are 15- and 30-year jumbos
as well as hybrid adjustable-rate mortgages (3/1s
through 10/1s) available.
Many mortgage sellers are larger institutions that
prefer to retain servicing. As a result, buyers dont
need a servicing platform to manage the purchased
loans. Also, gone are the days of all-or-none trades
where buyers had to buy the bad with the good.
In todays market, buyers can create subsets
typically $5 million or largerof larger pools and for-
mulate a pool that matches their specific preferences.
Buyers have included de novo institutions looking
to deploy capital faster than they could organically,
institutions with low loan demand and declining
margins, and community banks with excess liquidity
due to deposit growth.
Full Disclosure
The mortgage-purchasing process in todays market is
very buyer-friendly. Investors have the opportunity to
perform a loan-level review and select loans that meet
their specific credit preferencesincluding FICO
scores, loan-to-values and debt-to-income ratiosas
well as documentation type, geographic location and
term. Once loans are selected, buyers can conduct
credit due diligence where they review the credit file
and update property valuesobviously important in
the current market. (Many loan buyers elect to stay
in their market footprint, where they know trends in
property values.)
Mortgages can be an attractive investment right now
for Buying Loans
B y J i m R e b e r
Jim Reber is president and CEO
of ICBA Securities. Reach him
at (800) 422-6442 or
jreber@icbasecurities.com.
The Case
Thanks for the Help
Te expertise of Wade Walker,
ICBA Securities senior vice
president and manager of loan
trading, was invaluable to this
column. To tap his professional
knowledge personally, reach
him at (800) 422-6442 or
wwalker@icbasecurities.com.
IB
IB
_______________
____________________
Any loans not passing credit due diligence can be
excluded, and the purchase funds only acceptable cred-
its. Buyers end up with a pool of loans that meet their
underwriting guidelines and yield requirements. The
ability to manage credit risk combined with compel-
ling yields make loans an attractive asset class in todays
market.
ALCO Strategies
Asset-liability management has led some institutions
to become loan buyers. Some TARP recipients have
reinvested a portion into whole loans to better cover the
cost of capital. Asset-sensitive banks have used 15- and
30-year fixed rate loans to extend the duration of their
balance sheet. Liability-sensitive banks have used ARMs
to shorten duration. In addition, loans are not marked
to market, unlike securities, and are easily financed or
pledgeable with the Federal Home Loan Banks.
Dont Take Our Word
Bob Becotte is the chief financial officer of The
Cooperative Bank in Roslindale, Mass., a $260 million-
asset mutual association. His community bank recently
purchased a package of jumbo mortgages at yields
higher than it was advertising locally.
Becotte says The Cooperative Banks loan demand
typically involves 30-year conforming fixed rates, which
the bank then sells to Fannie Mae and Freddie Mac.
Your Expert
Resource
ICBA Securities loan
trading professionals are
available to consult with
your community banks
lending staf to identify
opportunities in purchasing
high-quality loans. Visit
icbasecurities.com or
contact your sales rep for
more details.
With conforming rates so low,
we dont want to be stuck with
fixed rates at these levels, he
says. We also had been sitting on
excess cash, which isnt paying us
anything either.
However, purchasing loans is a
new activity for The Cooperative
Bank. Weve been able to buy
loans in our market at rates
higher than weve advertised,
Becotte explains. And, we can
basically cherry-pick the products
that fit us from an A/L position,
by focusing on 15-year fixed and
hybrid ARMs.
We consider this a safe prod-
uct, and we feel were adequately
compensated on the yield side.
So, if mortgage loans in your
community banks backyard that
fit your credit criteria and your
yield bogeys are of interest to
you, they can probably be pro-
duced in attractive block sizes and
in relatively short order. ICBA
Securities loan trading depart-
ment is open for business.
The community
you
serve

Main Street.
IB
IB
BY KEVI N TWEDDLE
igher-performing community banks know
that the key to growing profitably and
building franchise value is to control what
they can and strategically manage what they
cannot. The efficiency ratio is one of the
areas in which community banks can and
should be in command.
The efficiency ratio is composed of
expense management, fee income and
net interest margin. Because community
banks have the greatest control over expense management and fee
income, lets focus on these variables. Your bank should evaluate and
manage these elements to maintain or optimize its overall earnings
performance.
How efficient is your community bank at managing its expenses?
If you havent recently assessed your personnel, occupancy and other
noninterest expenses, you probably cant answer with confidence.
Personnel expenses. The average personnel expense runs about
54 percent of noninterest expense for banks and thrifts in the United
States. Therefore, you should review staff salaries and benefits on
an annual or semiannual basis, depending on how the downturn is
affecting your banks business. Take a close look at hiring and salary
increases (freezes may be necessary for cutting costs and even saving
jobs) and items such as 401(k) discretionary matching, health benefits
and training/recruiting. Reductions in these areas would enable your
bank to better weather the economic storm and immediately improve
its efficiency.
Higher-performing banks also pay close attention to how they staff
branches in both thriving and turbulent markets. This is something that
often goes unnoticed. When was the last time you took a hard look at
your community banks staffing per branch?
High performers typically hire fewer employees to handle multiple
responsibilities and compensate them well. These banks also tie specific
incentives to actions that generate revenue to drive
better individual and bank performance.
Occupancy expenses. If you ask whether a
high-performing community banks branches are
profitable, the answer will likely be yes. However,
many average-performing banks cant answer this
question. Branch profitability plays a huge role in
overall franchise performance, yet banks dont often
analyze this factor. Occupancy expenses contribute
significantly to the equation, so evaluate them as
well on an annual basis. Small adjustments in this
area can make a big impact.
Consider average square feet per branch (how
much do you really need?), whether you can and
should renegotiate leases (after all, it is a buyers
market) and whether selling/leaseback could
provide short-term benefits. Also examine where
technology could reduce occupancy costs. For
example, voice-over-Internet-protocol technology
could save hundreds of thousands of dollars in
communications costs.
Other noninterest expenses. You can control
other expenses, such as vendor costs, that affect your
community banks efficiency ratio. Its vital to review
every vendor contract carefully and categorize each
by need. Can you rationalize each on an annual
basis? Consider economies of scale and vendor
consolidation.
FDIC premiums, an expense you cant control, are
going to go up. Develop a strategy to make up those
costs through fee adjustments or by lowering your
banks cost of funds. Another way to keep expenses
in check is to use technologies, such as remote
deposit capture, to lower payment costs.
Lastly, take full advantage of your ICBA
membership and its benefits; you may be able to
leverage association programs that reduce the costs
of supplies, subscriptions and insurance.
Fee income/revenue. When community banks
think of efficiency, expenses are top of mindbut
they dont often factor in fee income. Here are
some ways higher-performing banks generate more
revenue.
Overdraft privilege programs. These can
boost fee income (30 to 40 basis points on average
earning assets; 60 to 80 basis points on average
transaction accounts) and usually result in better
risk management.
VANTAGE POINT
Consider the best practices for optimizing
this key performance factor
IB
IB
If your bank doesnt have an overdraft
program, establish one. If it does, regularly
review competitors programs to ensure that
its capturing its share of income. Is your bank
charging comparable fees for the same items?
Is the bank down the street charging $5, $10 or
even $15 more per overdraft?
Also, keep a close eye on your community
banks waiver ratios. Sometimes a bank may
waive a charge for a good customer, but the
waiver code is put in place and never reviewed.
Such an automatic waiver may unnecessarily
forgo service-charge fee income.
Remote capture/cash management.
For commercial-oriented institutions in metro
areas, remote capture is a must have product
offering. It creates cost savings in reduced
courier expenses and is a great way to bring
in non-interest-bearing demand deposit
accounts. High performers grow small business/
commercial deposits by packaging commercial
and retail accounts and by tying loans to
deposits (and vice versa) to offer preferential
rates. The clincher is knowing the competitions
small business offerings so that your bank can
differentiate itself.
Wealth management. Consider
whether there is sufficient demand for wealth
management products (primarily comprising
trust, brokerage and insurance) in your
community banks market. Transaction activity
volume must be solid, and customers price
sensitivities must be considered. Establishing
clear benchmarks, understanding the
demographics of your market and conducting
peer analysis will be critical to success.
Every community banks efficiency ratio can
be improved by gaining greater control of
expenses and by increasing or adding revenue
streams. However, no all-encompassing ratio
applies to all banks. Each ones efficiency ratio
reflects the specific kind of business its in, so
the strength of your banks ratio will depend on
its specific operating strategy.
AME R I C A N BA N K SY S T E MS .....................................................................................38
BA N C I N S U R E ...................................................................................................................42
BA N C VU E L T D ................................................................................................................C4
CO MP U T E R SE R V I C E S I N C . .....................................................................................43
CPI CA R D GR O U P .......................................................................................................41
DA T A CE N T E R I N C . ......................................................................................................32
EL A N F I N A N C I A L SE R V I C E S ...................................................................................C3
F A N N I E MA E - MDB CO MMU N I C A T I O N S .........................................................21
F I MAC ..............................................................................................................................14
F I S E R V ...............................................................................................................................27
F R E D D I E MA C ................................................................................................................34
GO L D L E A F F I N A N C I A L SO L U T I O N S ......................................................................C2
HA R L A N D F I N A N C I A L SO L U T I O N S ........................................................................17
HO L T ME Y E R & MO N S O N ...........................................................................................33
I CBA NE T WO R K ...........................................................................................................4
I CBA NE T WO R K ...........................................................................................................10
I CBA NE T WO R K ...........................................................................................................30
I CBA NE T WO R K ...........................................................................................................53
ME T A V A N T E I MA G E SO L U T I O N S ............................................................................6
MO R T G A G E SE R V I C E S I I I , L L C ..........................................................................5
M. RAE RE S O U R C E S ..................................................................................................40
NA T I O N A L CD RA T E L I N E .........................................................................................51
OP E N SO L U T I O N S I N C . .............................................................................................46
PA T R I A ...............................................................................................................................37
PE N T E G R A RE T I R E ME N T SE R V I C E s......................................................................45
PHH ....................................................................................................................................8
PR O MO N T O R Y I N T E R F I N A N C I A L NE T WO R K L L C ...........................................1
QWI C K R A T E ......................................................................................................................44
SA N D L E R O NE I L L ......................................................................................................13
SH A Z A M .............................................................................................................................29
ST R U N K & AS S O C I A T E S L P ..................................................................................31
T E X A S DI G I T A L ..............................................................................................................19
T H E T R A V E L E R S GR O U P I N C . ................................................................................3
VI S A ....................................................................................................................................24
YO U N G & AS S O C I A T E S I N C . .................................................................................7
ADVERTISERS
i n d e x
SEPTEMBER 2009
Kevin Tweddle is executive vice
president of sales and operations,
Bank Intelligence Solutions from
Fiserv. Reach him at kevin.
tweddle@fserv.com.
IB
IB
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IB: D.L. Evans is a large, family-run community bank.
How has that influenced your career and life?
Evans: My wife and family are the most important part of my life.
I have three sons, who work in the banking business with me, and
two young grandsons. I really enjoyed the 20-plus years I worked
with my father, who recently retired from the day-to-day operations
of the bank. I have been truly blessed being able to work with my
father and my sons.
IB: What sets D.L. Evans Bank apart from other
financial institutions?
Evans: Our people. We hire the best and encourage them to excel in
their positions by providing continual training and rewarding them
for excellence. Also, our employees are the single largest shareholder
of the bank through the employee stock ownership plan. Currently
the employees own approximately 12.5 percent of the company.
I believe that you hire the best and brightest employees possible.
My employees are the banks most valuable asset.
IB: Describe your banks customer-service philosophy.
Evans: The customer always comes first. It is important for the
customer to be greeted with a smile and addressed by name.
We have developed a set of customer-service quality standards,
and all employees within the bank have been trained on those stan-
dards. It is our philosophy to recognize and fulfill the needs of our
customers, not to just sell them the product of the day.
We want to build long-term customer relationships and provide
them with all their banking needs.
IB: How do you keep your growing staff motivated?
Evans: It starts from the top. Our employees can look at the man-
agement team and see that they are involved and working with all
employees. They know that community service helps grow and
develop the bank as a community leader.
Our employees also have a sense of pride when they are recognized
in the community because they work at the bank and are appreciated
for their community involvement.
IB: If you had to walk away from community banking,
what would you do?
Evans: My family has a cattle ranch in southeastern Idaho that I
enjoy. I could find a lot of work at the ranch, like fencing, logging and
herding cattle. The pay wouldnt be that good, but I really enjoy the
Dempsey Creek Ranch.
J O H N V . E V A N S J R .
C E O O F T H E $ 8 2 5 M I L L I O N - A S S E T
D . L . E V A N S B A N K
B U R L E Y , I D A H O
15minutes with ...
IB
IB
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________________
______________
IB
IB

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