Independent Reportthe

“Colorado banking at its best”

A PUBLICATION OF

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1900 Grant Street, Suite 1120, Denver CO 80203303.832.2000 / fax 303.832.2040www.ibcbanks.org

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in this issue...MAY/JUNE 2013

IBC Watching Your Back 3

Small Banks Will Benefit from Big-Bank Breakup 5

Silver Lining: 25th Ag and Natural Resources Conference 6

iHELP 8

IBCEF Education Programs and Webinars 9

FDIC Vice-Chairman Thomas Hoenig Keynote Speaker 10

The Next Generation of Bankers 11

Out-of-Balance Correspondent, Transit or Suspense Accounts 13

Western State School of Banking Summer Program 14

Fair Lending Guidance for Indirect Auto Lenders 15

Correspondent Lending Program through ICBA 17

BFS MINTS Available 18

Preparing for Higher Tax Rates 20

Western State School of Banking: Still Time to Register 23

Today’s Risk Management Challenges 24

Factors Shaping Payments Revolution 27

Plan for Prosperity 28

Bankers Foundation of Colorado Golf Invitationals 33

Ten Steps to Avoid Ponzi-Scheme Fraud 37

Changes to the UCC 39

IBCEF Scholarship Recipients 42

Conferences Designed by Bankers of Bankers 42

Financial Institutions’ Ops in CO after Amendment 64 43

IBC’s 82-ATM Surcharge Fee Network 46

Support the IBC’s Associate Members! 48

2012 - 2013 OFFICERS AND DIRECTORS

ChairmanJay Rickstrew, President, Alpine Bank RiflePresidentSteve Short, Chairman, First National Bank DurangoPresident-ElectTom Olson, President, Points West Community BankICBA State DirectorChuck Johnston, President, North Valley Bank

District DirectorsDistrict ADave Brewick, President, Evergreen National BankBrandon Berkley, President, Berkley BankKyle Heckman, President, Flatirons Bank

District BJim Pieters, President, High Plains BankHarry Devereaux, President, Home State BankJohn Sneed, President, Fort Morgan State BankShawn Osthoff, President, Bank of Colorado

District CBeverly Freeman, President, Colorado State Bank WalshAllan Tormohlen, Vice President, Canon National BankQuentin Leighty, Senior Vice President, First National Bank Las Animas/Monument BranchMegan Harmon, Regional President & COO, Eastern Colorado Bank

District DByron Maynes, President, First National Bank CortezAshley Burt, President, Gunnison Bank & TrustP J Wharton, President, Yampa Valley BankBoyd Hodges, President, Pine River Valley Bank

Advisory Board MembersBill Mitchell, President, Bankers’ Bank of the West

StaffBarbara M.A. Walker, Executive Director Maelynn Lewis, Administration Director, Secretary/TreasurerJennifer Lusk, Member Services Director .

IBC Legal CounselThomas Bieging and John BurrusBieging Shapiro & Barber, LLP

IBC LobbyistMary Marchun, The Capstone Group

IBC Education Foundation A 501(c)(3) Nonprofit Organization

ChairmanJay Rickstrew, President, Alpine Bank Rifle

Directors Directors continuedRocky Levkulich Kelly Malone, FHLBank Topeka – Denver OfficeKenneth So, President, Premier Bank Tammie Lowrie, BKD CPAs and AdvisorsCJ Juleff, Partner, CJ Juleff & Associates Lauren O’Connell, O’Connell Consulting GroupTennyson Grebenar, Rothgerber Johnson & Lyons LLP Ed Merritt, Jr., President, Dolores State BankPhilip J. Randell, Commercial Banking Manager, CoreFirst Bank and Trust Larry Meier, Regional President, Western States Bank

2012 - 2013 OFFICERS AND DIRECTORS

ChairmanJay Rickstrew, President, Alpine Bank RiflePresidentSteve Short, Chairman, First National Bank DurangoPresident-ElectTom Olson, President, Points West Community BankICBA State DirectorChuck Johnston, President, North Valley Bank

District DirectorsDistrict ADave Brewick, President, Evergreen National BankBrandon Berkley, President, Berkley BankKyle Heckman, President, Flatirons Bank

District BJim Pieters, President, High Plains BankHarry Devereaux, President, Home State BankJohn Sneed, President, Fort Morgan State BankShawn Osthoff, President, Bank of Colorado

District CBeverly Freeman, President, Colorado State Bank WalshAllan Tormohlen, Vice President, Canon National BankQuentin Leighty, Senior Vice President, First National Bank Las Animas/Monument BranchMegan Harmon, Regional President & COO, Eastern Colorado Bank

District DByron Maynes, President, First National Bank CortezAshley Burt, President, Gunnison Bank & TrustP J Wharton, President, Yampa Valley BankBoyd Hodges, President, Pine River Valley Bank

Advisory Board MembersBill Mitchell, President, Bankers’ Bank of the West

StaffBarbara M.A. Walker, Executive Director Maelynn Lewis, Administration Director, Secretary/TreasurerJennifer Lusk, Member Services Director .

IBC Legal CounselThomas Bieging and John BurrusBieging Shapiro & Barber, LLP

IBC LobbyistMary Marchun, The Capstone Group

IBC Education Foundation A 501(c)(3) Nonprofit Organization

ChairmanJay Rickstrew, President, Alpine Bank Rifle

Directors Directors continuedRocky Levkulich Kelly Malone, FHLBank Topeka – Denver OfficeKenneth So, President, Premier Bank Tammie Lowrie, BKD CPAs and AdvisorsCJ Juleff, Partner, CJ Juleff & Associates Lauren O’Connell, O’Connell Consulting GroupTennyson Grebenar, Rothgerber Johnson & Lyons LLP Ed Merritt, Jr., President, Dolores State BankPhilip J. Randell, Commercial Banking Manager, CoreFirst Bank and Trust Larry Meier, Regional President, Western States Bank

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IBC Watching Your BackBy Barbara Walker, IBC Executive Director

The Independent Bankers of Colorado conducted our Washington, D.C., Annual Hill Visits in April in conjunction with the Annual Policy Summit hosted by our national affiliate, the Independent Community Bankers of America. Joining me were:

• Steve Short, IBC President, FNB Durango• Jay Rickstrew IBC Chairman, Alpine Bank Rifle• Chuck Johnston ICBA State Director. North Valley Bank,

Thornton• Dale Leighty ICBA Past Chairman/IBC Past President, F NB

Las Animas• Harry Devereaux IBC Director, Home State Bank,

Loveland• Bill Mitchell, IBC Director President, Bankers Bank of the

West • Quentin Leighty, IBC Director, FNB Monument• Tom Chesney IBC Past President, President, AMG NTB • Fred Bauer IBC Past President, President, Farmers Bank

Ault

We asked Colorado’s Congressional Delegation to support the Plan for Prosperity.

ICBA’s Plan for Prosperity (PFP) is a set of legislative priorities supported by the IBC and designed to provide regulatory and tax relief for community banks to promote economic growth. Regulation should be tiered and proportionate to the smaller size, lower risk profile, and business model of community banks.

The PFP provisions include:

Mortgage Reform Exemptions to Support the Housing RecoveryReduce Annual Privacy Notice Redundancies To Cut PaperworkEase Municipal Advisor Registration Burdens To Help Serve Local GovernmentsStrengthen the Industry’s Voice with an Assistant Secretary for Community BanksReform the CFPB To Ensure More Balanced Consumer RegulationImprove Accountability in Bank Exams with a Workable Appeals ProcessOffer Relief from Accounting and Auditing Expenses for Publicly Traded InstitutionsSupport Mutual Banks with New Charter and Dividend RulesRequire Rigorous and Quantitative Justification of New RulesSupport Additional Capital for Small Bank HoldingCompaniesCut the Red Tape in Small-Business LendingFacilitate Capital Formation

among other provisions. Continued on next page

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IBC Watching Your BackContinued from previous page

Our specific lobbying issues included: Privacy Notice Relief / S. 635 and H.R. 749 Credit Union Power Grab / H.R. 688 and H.R. 719 Tax Reform Must Not Ignore Pass-Through Businesses and Individual Taxpayers Equal, Direct Access to Secondary Mortgage Market Municipal Advisor Exemption / S. 3492 New Deregistration Threshold for Savings and Loan Holding Companies / H.R.

801 End Too-Big-To-Fail Basel Iii Capital Standards / A Community Bank Exemption Adapt Subchapter S Corporation Regulations for the 21st Century / H.R. 892 Expand Small-Biz CreditCommercial Real Estate And Economic Development Act / S. 289 Expanding Access To Capital For Entrepreneurial Leaders Act / S. 511 Clear SBA Act / S. 537

CybersecurityCybersecurity Enhancement Act / H.R. 756Advancing America's Networking And Information Technology Research And Development Act / H.R. 967 Federal Information Security Amendments Act / H.R. 1163The Cyber Intelligence Sharing And Protection Act / H.R. 624

New Farm Bill Exam-Relief Legislation/ H.R. 1553 and S. 727

IBC Legislator OutreachIn January and April, the IBC and Mary Marchun, The Capstone Group—the IBC’s lobbyist—hosted a Legislator Dinner for the members on the key Republican and Democrat House and Senate business committees, respectively. Members from both the IBC and IBC Education Foundation Boards, along with other bankers, attended theses important dinners.

Our April dinner was also hosted by the Federal Home Loan Bank of Topeka and featured Guest Speaker Congressman Ed Perlmutter.

In April, we also hosted Senator Giron for an Awards Breakfast. The IBC awarded Senator Angela Giron of Pueblo with our 2012 Spirit of Independence Award. Recipients of this award are lawmakers who stand firmly in the face of opposition from political parties and special interest groups, to represent their constituent’s viewpoint at the Capitol. The recipients of this award engage actively in discussions with stakeholders to ensure that balanced public policy is reached to benefit constituents and all Coloradans. Senator actively works on and passes legislation that supports business growth in Colorado’s many communities. Small business prosperity and job creation are at the top of her public policy priorities.

Mark your calendar for the IBC’s

Annual Legislativeand Regulatory Update

with John Burrus

June 28th at 9 a.m.

Please contact Jennifer Luskat the IBC/ 303.832.2000

for more informationand registration.

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Small Banks Will Benefit From Big-Bank BreakupBill Loving, President and CEO of Pendleton Community Bank in Franklin, W.Va., Chairman of the Independent Community Bankers of America

As a community banker, I do not share concerns about the impact addressing the threat of "too big to fail" financial firms once and for all will have on our industry. In fact, downsizing and restructuring these systemically dangerous institutions is essential to removing their government-subsidized competitive advantages and restoring America's free market economic system. The fact is this: Community bankers should be more worried about what will happen to our industry if we don't act.

Right now there are two entirely different banking industries and two separate levels of risk. When you look at all the facts it's easy to see that 99.4% of the industry — I'm talking about community banks here — are clearly getting the raw end of the deal simply because they aren't able to operate in a truly free market system.

Excessive concentration in the banking industry and the "too big to fail" doctrine has led directly to systemic risks that jeopardize the safety and soundness of financial institutions across the nation. When incentivized risk-taking comes back to bite "too big to fail" firms, the federal government steps in with a taxpayer-funded rescuewhile community banks and Main Street communities suffer the economic consequences. And, when a community bank is deemed to be no longer a concern due to the economic wreckage, regulators intervene far differently than they do on Wall Street.

The "too big to fail" advantage extends beyond taxpayer backstops when Wall Street has gotten in over its head. Federal Deposit Insurance Corp. data show that while megabanks have the lowest credit quality in the banking industry, they also have the lowest cost of funding. Meanwhile, smaller community banks have both the best credit quality and the highest cost of funds. Obviously, the heavy hand of "too big to fail" is overpowering the invisible hand of free-market forces. Ensuring that no financial institution enjoys the benefit of being deemed "too big to fail" will help ensure that community banks operate on a level, market-based playing field.

Finally, truly addressing the "too big to fail" threat will help free community banks from the oppressive regulatory environment that we face every day. Much of the overwhelming paperwork burdens and regulatory red tape we endure is due to the reckless practices and misconduct of the megabanks and their tens of thousands of shadow banking subsidiaries. While these large financial firms can afford the legal teams necessary to meet the regulatory obligations they have spawned, community banks are left to redirect resources that could be used to help their communities prosper.

For community bankers, the answer to the "too big to fail" crisis is not more regulation. Innumerable regulations have already been enacted to deal with the problem. These regulations fall disproportionately hard on community banks, yet the megabanks continue to grow and our nation's financial resources continue to consolidate. Only by actually downsizing and restructuring "too big to fail" institutions— by limiting the systemic risk created by the sheer size and interconnectedness of the institutions that put our financial system and economy at risk — can we eliminate unfair competitive advantages, unleash our free markets and allow community banks to compete in the financial landscape.

Maintaining the status quo would only result in community banks' continued subjugation by the megabanks that enjoy privileged status in Washington. For the community bankers like me who want our industry to survive and thrive, we must stand together as one to break up the "too big to fail" stranglehold and ensure a future for Main Street community banking and the communities we are privileged to serve.

April 17, 2013

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SILVER LINING TO A BLUSTERY WEEKIBC Education Foundation’s 25th Annual Agriculture and Natural Resources Conference

There’s something about the IBC Education Foundation’s Annual Ag and Natural Resources Conference, the month of April, and Colorado Springs. SNOW! But the rain, hail, sleet, and snow did not hinder ordeter our participants! Over a period of a day and a half 67 bankers representing 27 banks and more than 80 attendees were informed on topics of global economics, commodities, cattle, weather, oil and gas, and much, much more!

In spite of flight delays and a midnight arrival, Dr. David Kohl,Professor Emeritus in the AAEC Department at Virginia Tech, kicked off our conference with passion and flare. His presentation on The Wild World of Global Economics highlighted key considerations: grains, oil seeds and fiber are experiencing a long profit window; however there are concerns for the livestock market; land values—will there be a correction and if so how great and where? Dr. Kohl also raised concerns regarding the low value of the dollar; low interest rates; mother nature/production concentration; global factors including China, Germany’s elections, Euro debt and the Middle East. Dr. Kohl warned all to be cognizant of what is taking place worldwide and be aware of land bubbles and crashes. His word for forecasting—volatility! Can anyone really predict in this volatile environment?

G. Brent Coan, Attorney at Law, Otis, Coan & Peters, LLC, presented invaluable information regarding oil fields and gas lands. Mr. Coan touched on oil and gas leases, mineral title, surface use issues and controversial fracking.

Brian Bledsoe, meteorologist/climatologist and Colorado native, does not believe in global warming. He claims population growth, pollution, and humanity have NOeffect on our weather. Brian provided a comprehensive review of our weather patterns for the past century and demonstrated how these patterns repeat themselves over time. When it comes to precipitation, Mr. Bledsoe is predicting a dry summer for areas south of I-70 and a normal summer for areas north of I-70 and west.

How are farmers and ranchers adapting to the ongoing drought? Dr. James Pritchett, Associate Professor, Colorado State University, provided some insight into how advances in technology, crop development/seed modification, and emerging crops are helping to bring some relief to farmers and ranchers. Costs for fertilizer, fuel and chemicals continue to affect the costs of farming.

Ag land values soared in 2012. Dr. Nathan Kauffman, Economist, Federal Reserve Bank

of Kansas City, Omaha Branch, remarked how farmland values have followed the price of corn—up! Is this a bubble that can be sustained or is there a bust about to happen? Dr. Kauffman cautioned that although agricultural credit conditions have cycled, risks still abound. Farm incomes are projected to drop sharply, crop prices are retreating, and livestock profits have yet to recover. In addition, farm debt has begun to rise, equipment is being purchased, and more debt is being used to finance land purchases.

Thank you Bankers’ Bank of the West for sponsoring a Happy Hour Thursday evening. Everyone enjoyed getting caught up and relaxing after a long day of learning. Cheers!

Continued on next page

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IBC Education Foundation’s 25th Annual Agriculture and Natural Resources ConferenceContinued from prior page

Barbara Walker, Executive Director, Independent Bankers of Colorado, began Friday morning with a state legislative update. The IBC continues to be the exclusive lobbying voice for Colorado’s community banks both at the state and federal levels with several successes during this year’s session of the legislature.

It was a pleasure having Mark Scanlan, Director Office of Agriculture & Rural Policy, ICBA, join us via webconference. Mark was unable to attend in person due to Congress’ mark-up of the 2013 Farm Bill. Mark provided insights as to what is taking place in Congress and what can be expected in this year’s Farm Bill. ICBA continues its fight on behalf of the nation’s community banks.

Dr. Stephen Koontz, Associate Professor, Colorado State University, relayed good news and not so good

news about the grains market – corn, hay, wheat, oilseeds, soybeans, etc. Dr. Koontz indicated the drought, world and domestic economies, and demands continue to wreak havoc on the markets. Dr. Koontz indicated the short-term grain pricing outlook is low for corn and soybeans, while wheat remains status quo and hay continues to increase.

Randy Blach, CEO, CattleFax cautioned that the market swings and volatility are here to stay, and

21% swings from high to low will not be uncommon throughout 2013. Randy remarked the corn crop is also critical to livestock markets. He noted that managing risk alone will not lead to a bright future, and record high prices are no guarantee of profits. On a bright note, Randy did say the world population will increase nearly 1 billion in the next decade, thus creating opportunity for the world U.S. livestock industry.

The underlying current of the conference was to not do anything crazy – stay diligent. Keep doing what you’ve been doing. Continue to track global markets – remain appraised of how and why the markets are fluctuating on a daily basis. Do not become complacent. Volatility!

Thank you to IBC and IBC Education Foundation’s Joint Ag and Natural Resources Committee Members for their continued support and dedication this conference:Russ Groshans, Colorado East Bank & Trust Jay Goddard, Points West Community BankEric Hoffner, Farmers Bank Dave Hubbard, The Eastern Colorado BankDallas Kiburz, Bankers’ Bank of the West Brett Legg, The Eastern Colorado BankTom Olson, Points West Community Bank Myron Sams, First National Bank HugoTom Tomky, Colorado East Bank & Trust

Congratulations to our prize drawing winners:Reena Shakya, Bankers’ Bank of the West Randy Wheatley, Agri-Access Mike Harvey, Community State Bank

THANK YOU TO OUR VERY GENEROUS SPONSORS!!GRAND CHAMPIONICBA Services Network

RESERVE GRAND CHAMPIONBankers’ Bank of the WestFarmer MacFHLBank TopekaGraduate School of Banking

at Colorado

DIVISION CHAMPIONINTRUST Bank, N.A.

CLASS WINNERColorado Agricultural Development Authority (CADA)Kennedy & Coe, LLCMarkus Williams Young & Zimmermann, LLC

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COLORADO BANK DISCOVERS NEW LENDING SEGMENT, DIVERSIFYING ITS ASSETS AND GENERATING REVENUEJohn Sneed, CEO of FMS Bank in Fort Morgan, Colorado, found a profitable, insured loan product in a growing market. In the process, Sneed is helping retain his best customers, attract new ones and diversifying FMS’ asset classes.

“Our bank was looking for secure assets to help fuel our growth without having to build a new lending infrastructure. It turns out that there’s a growing demand for Private Student Lending. As a community bank, we were able to work with iHELP to tap into this new market. iHELP’s variable rate, insured, turnkey Private Student Loan Program opened a new market to us,” said Mr. Sneed.

Why Lending for College?College can be expensive, but studies prove that it can deliver a significant return on investment. College graduates earn about $1.5 million more over a lifetime of earnings and have greater job growth than those with a high school diploma (Source: Georgetown University and Lumina Foundation). Pursuing higher education is the most important decision a young adult makes in determining their financial future.

Many students and their families take out a Private Student Loan as a way of filling the gap between the cost of college and family contributions, federal loans, scholarships and other types of aid. It is this group of students and families that FMS Bank is serving in Fort Morgan and Greeley and in elsewhere through their participation in the iHELP Private Student Loan Program.

Until recently, large lenders have dominated the $10 billion Private Student Loan market. Credit Unions have also become bigger participants, issuing $600 million in new loans nationwide in 2012. Community banks were kept out of the Private Student Loan market because of high barriers to entry with cumbersome regulatory and administrative requirements. Through iHELP, a program sponsored by the Independent Community Bankers of America (ICBA), community banks can access the Private Student Lending market. iHELP insures and administers the loans. This enables FMS Bank and other Colorado community banks to diversify and expand their portfolios.

Transitioning from Private Student Lending to Longer-Term Client Relationships. Moreover, helping students and recent graduates manage repayment of student loans is a great way to build relationships that can extend to mortgages and other financial services. iHELP has helped FMS Bank and other community banks to focus on the needs of local families and businesses. iHELP shares community banks commitment to providing outstanding customer service, a key advantage over the larger financial institutions. After all, FMS Bank wouldn’t entrust its customers to just anyone.

Mr. Sneed noted, “iHELP Private Student Loan products provide community banks like ours with a competitive advantage in retaining customers while attracting new ones. This creates a win-win for community banks and the students they serve, helping them reach their educational and financial goals.”

For more information about iHELP, banks can contact Jim Iannuzzi atjiannuzzi@ihelploan.com or 610.234.0592.

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IBC Education Foundation A 501(c)(3) Nonprofit Organization

2013 EDUCATION PROGRAMMINGCommercial Lenders Conference, Thursday & Friday, May 2 & 3, 2013, Eide Bailly, 440 Indiana Street, Golden, CO

2011 Appraisal Regulations Webinar, Thursday, May 16, 2013, 7:30 – 9:30 a.m.

Call Report Revisions &Updates Teleconference, Monday, May 20, 2013, 7:30 – 9:30 a.m.

Compliance Conference, Monday & Tuesday, June 10 & 11, 2013, location TBD

Appraisal Review Webinar, Wednesday, June 12, 2013, 7:30- 9:30 a.m.

2013 Legislative Update Teleconference, Friday, June 28, 2013, 9:00 – 10:30 a.m.

40th Annual Convention, Thursday – Saturday, September 26 – 28, 2013, Keystone Resort, Keystone, CO

Operations & Technology Conference, Thursday & Friday, October 24 & 25, 2013, location TBD9:00 – 9:30 am

IBCEF WEBINARSAll webinars are from 1:00 – 2:30 p.m. unless otherwise noted

How to Properly Complete & File Financing Statements: Including UCC Article 9 Rule Changes EffectiveJuly 1, 2013, Friday, May 3, 2013, 9:00 – 10:30 a.m.

Director Series: The ALLL for Directors, Tuesday, May 7, 2013Endorsement Decisions: Authority & Liability for Consumer & Business Checks, Wednesday, May 8, 2013Technology Strategies & Compliance Series: FFIEC Guidance on Cloud Computing: Considerations for

Community Banks, Thursday, May 9, 2013Line-by-Line Loan Review: Consumer, Commercial & Residential, Tuesday, May 14, 2013Vendor Compliance Issues: Risk Management, Contracts, & Accounting, Wednesday, May 15, 2013Legally Handling ATM & Debit Card Claims Under Regulation E, Thursday, May 16, 2013Real Estate Valuation: Beyond the Basics, Tuesday, May 21, 2013Achieving a Successful IT Exam, Thursday, May 23, 2013Handling ACH Origination Exception Issues, Wednesday, May 29, 2013When is an Item Payable? Stop Payments, Return Items & More, Thursday, May 30, 2013

Please contact Jennifer Lusk jlusk@ibcbanks.orgor Maelynn Lewis mlewis@ibcbanks.org

or 303-832-2000 for more information

Watch for more webinars and teleconferences coming soon!

Thank you to our IBC Education Foundation education program sponsors:

BANKERS’ BANK OF THE WEST

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IBC Education Foundation’s40th Annual Convention

Keynote Speaker:

Thomas M. HoenigVice Chairman, FDIC

Friday, September 27, 2013Keystone Resort, Keystone, CO

IBC Education Foundation A 501(c)(3) Nonprofit Organization

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The Next Generation of Bankers . . . By Ashley Burt, President, Gunnison Bank and Trust; Member, IBC Board of Directors

So your banking career is going pretty well. Your biggest clue? You’re still here. But how do we pay this forward? How can you make a difference in the future of banking, the future of kids, and have fun while doing it? High schools, teachers, students, parents, the banking industry, and your own sense of self-worth want you to get out and inspire the Next Generation of Bankers.

Banking careers have been through an identity crisis over the past few years. Once upon a time, the local banker was revered as a pillar in the community. She was the definition of fidelity, integrity, and honesty. Some folks still see us in that light, but an alarming number of young people have not been encouraged to view bankers and the banking industry in such a favorable way. The media has focused on the excesses of Wall Street and investment banks. They have focused on the fear of Too Big To Fail. All of this has taken place at the expense of the independent bank’s reputation. Since the media often won’t make the distinction, many young people don’t either. Don’t you wish you could tell them about it? Don’t you wish you could tell them that a wonderful career and lifestyle awaits them in the world of smaller, independent community banks? Well, you can.

I recently spoke to two high school classes – math classes – who were having a mini career fair of sorts. They had speakers from several professions explain the pros and cons of what they do for a living. I had a captive audience, they had a significant vested interest, and the importance of the pending decisions they would soon have to make was coming into focus for many of them. Not only was I able to dispel misinformation, I was also able to make a case for entering the world of banking – the real world of banking, on Main Street.

I enjoyed my time with the students. I think they got something out of it. If we wish to capture the best and brightest, during a time when mixed messages are being sent about our industry, then we need to become a part of the message. We need to join it with an accurate assessment of an industry we have all come to call our own – one worthy of new, energetic, top notch young minds. These minds are interested in their careers; they are interested in the “real story”, and they love inside information about how big media got the story wrong. They love stories with crazy plot twists and deceit (Google Abacas 2007-ac1). There are many opportunities to speak to students, not all of them just on career day, but they can all contain elements of the same message. Call your local high school or chat with a teacher you know, tell them what you have to offer, get involved and speak to that next generation – they are looking for answers, and we can provide some of them.

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SECURITY OFFICER’S BY-WORDOUT-OF-BALANCE CORRESPONDENT, TRANSIT, OR SUSPENSE ACCOUNTS RESULT IN LARGE LOSSESBy Charles M. Towle, Senior Vice President, Kansas Bankers Surety Company, an Associate Member of the IBC

A bank customer was having trouble with cash flow and was writing checks before he had money to fund the checks. The checks would appear on the daily overdraft listing. The loan officer for the customer gave instructions to the bookkeeper to call the customer daily letting him know how much he was overdrawn. The customer would then bring in deposits to cover the overdrafts.

This kind of event happened with Jonathan’s Veterinarian Hospital several times a month and then several times a week. Eventually it became a daily occurrence. The bookkeeper and Jonathan talked daily.

One day Jonathan could not make it to the bank and asked the bookkeeper to hold the checks until the next day. She agreed. She recorded the checks as being returned to the correspondent bank, but did not send the items to the correspondent account. The next day, Jonathan brought in a deposit to cover the checks and the held checks were charged to his account crediting back the correspondent account.

This extra-day holding method started occurring frequently. Occasionally Jonathan would not bring in deposits to cover the checks. The bookkeeper started holding more and more checks longer and longer. Eighteen months later it was discovered that over $500,000.00 in checks were being held in the bookkeeper’s drawer. Jonathan filed bankruptcy and the bank had a huge overdraft loss.

Similar situations have occurred in several different banks. On at least one occasion, the bookkeeper, and not the customer, served jail time as a result of the actions.

In each of these cases, the loss could have been prevented altogether or at the very least discovered quickly if the bank had very basic procedures in place.

The checks were neither returned to the correspondent account nor charged to the customer’s account. This resulted in the bank’s records showing a balance in the correspondent account which was higher than the actual balance in the correspondent account. In each case, the bank’s correspondent account was either never balanced or balanced only by the bookkeeper who was holding the checks.

Every bank must require all correspondent accounts, suspense accounts, and transit accounts to be balanced regularly and balanced by a second person at least monthly.

A balancing of the correspondent account, if done regularly and properly, should be a simple daily process. You list as reconciling items any amounts which the correspondent bank shows as being sent to your bank but not yet recorded by your bank. You also list any items your bank recorded as being sent to the correspondent bank which the correspondent bank had not yet received when the account statement was printed. These reconciling items should equal the difference in the balance recorded on your bank’s books compared to the balance shown on the correspondent bank account statement. If the correspondent bank recorded a different amount as sent or received than your bank recorded on its books, the errors need to be immediately researched and corrected.

If a reconciling item is more than five days old, the item needs to be researched to determine whether the correspondent bank records or your bank records are in error. There should be no reason that any reconciling amount is carried on the books for more than a couple days. The carrying of a reconciling item for more than a day or two indicates that the books of the bank are out-of-balance with the actual funds in the correspondent account.

When a second person balances the correspondent account at least monthly, such person needs to complete the full balancing process from start to finish including both the determination of which reconciling items are necessary and whether each reconciling item is valid. Simply adding up the columns to see if the reconciliation is mathematically correct is not the same as having a second person balance the account. To be an adequate procedure, the second person needs to have a complete understanding of the process and verify the validity of each reconciling item.

The over-helpful bookkeeper problem as described above is only a small part of the problems that develop when a bank chooses not to properly balance its correspondent account, transit account, or suspense account. Allowing these accounts to remain out-of-balance can result in embezzlements in banking. The correspondent account, transit account, and suspense account are used most often by dishonest employees.

Many of these embezzlements start as small amounts which the embezzler justifies in his own mind as “borrowing” the money. He simply pulls a check drawn on his own account from the processing stream to prevent the check from being processed and bouncing. The result is an out-of-balance correspondent account or transit account.

Occasionally, after payday, the employee will go ahead and run his check through processing, charging his account for the check. However, once the line is crossed, it is easier to steal money again the next time his account is short. These types of embezzlements usually start small and grow larger and larger until the theft is discovered.

These kinds of losses can be discovered quickly while they are still small if a bank uses proper procedures in balancing its correspondent, transit and suspense accounts daily and always has a second person balance the accounts at least monthly.

For more information, please give us a call at (785) 228-0000.

14

Join us June 8 – 15, 2013 on theCampus of New Mexico State University

Six reasons why the Western States School of Bankingshould be your banking school!

1. Outstanding Value - competitive tuition rate of $2,490 includes single room accommodations on the NMSU campus,

most meals, special events, and all instructional materials.2. Learn While You Work - The condensed WSSB program lets you advance your education while maintaining employment.3. Designed for Professionals - Regardless of experience or bank size, every banking professional can benefit from

this program.4. Expert Instructors - WSSB’s nationally recognized faculty members have years of

experience working at leading universities, banks, and consulting firms.5. Real World Application - Between sessions you’ll work on a series of projects that

showyou how to apply what you have learned at school to your job.

6. Geared for the Adult Student - The WSSB curriculum is designed to encourageinteraction between faculty and students while developing academic andprofessional growth.

2013 Western States School of Banking Curriculum

Freshman Year• Legal Aspects of Banking I• Sales and Marketing I• Risk Management• Banking Technology• Profitability Management• Commercial Credit

Correspondence Projects• Market Place External and

Internal Analysis• Funds Management• Credit Risk Management• Marketing Plan

Senior Year• Legal Aspects of Banking II• Sales and Marketing II• Banking Ethics• Human Resources• Banking Simulation• Team Building

About New Mexico State UniversityFounded in 1888, New Mexico State Universitybegan as an agricultural college and preparatoryschool. It has grown into a comprehensiveinstitution dedicated to teaching research and

service at the graduate and undergraduate levels. It is the onlyland-grant institution in New Mexico that is also classified asHispanic- serving by the federal government and ranked byCarnegie Foundation in the top research category, ResearchExtensive. NMSU is also home of the New Mexico’s NASASpace Grant Program. With extension and research sites inevery county, New Mexico State is developing distance-education capabilities to extend its reach to all of the citizens ofthe state. It is located in the southern New Mexico city of LasCruces.

About Las Cruces, NM A city of more than 80,000, Las Crucesis a perfect setting for a major universityand your learning experience at theWestern States School of Banking. It is

the largest city in southern New Mexico. The elevation of Las Cruces is approximately 4, 000 feet. It is located at theintersection of I-10 and I-25 in the fertile Mesilla Valleywith the Rio Grande River to the west and the 9,000 footpeaks of the Organ Mountains to the east. The MesillaValley is a part of the larger Rio Grande Valley and themountains are an extension of the Rocky Mountain chain.The region features a contrast of desert mesas, fertile farmlands and saw-toothed mountains that majesticallyreflect the breathless sunsets so common in the southwest.

Furthering your Education after Western States School of Banking

WSSB Graduates are encouraged to continue their education with the Graduate School ofBanking at Colorado. Upon graduation from WSSB, alumni can enter the Graduate School ofBanking at Colorado as a second-year student. The top graduate of Western States School ofBanking also receives a $1,250 scholarship per year for three consecutive years to theGraduate School of Banking at Colorado.

For more information please visit our website: www.wssbonline.orgor contact Nicole Keeswood by phone (505-324-2085) or email nkeeswood@wssbonline.org

15

FAIR LENDING GUIDANCEFOR INDIRECT AUTO LENDERS

By Scott Smalley, Attorney, Stinson Morrison Hecker LLP,an Associate Member of the IBC

Lenders that provide indirect auto loans through dealerships may find themselves responsible for discriminatory pricing under the Equal Credit Opportunity Act. The Consumer Financial Protection Bureau recently issued guidance indicating that they believe that many indirect auto lenders are violating fair lending standards under the ECOA and its implementing regulation, Regulation B. The guidance targets fair lending abuses arising from auto dealer markups – the common practice of permitting auto dealers to charge higher interest rates than those at which the auto lender is willing to purchase the auto loan and to share in the increased interest revenues. The guidance applies not to the auto dealers themselves, but to indirect auto lenders within the CFPB's jurisdiction - banks, credit unions and their affiliates that have assets in excess of $10 billion. While smaller banks may initially escape CFPB scrutiny, other regulators are likely to implement examination policies similar to the CFPB guidance. Additionally, the CFPB guidance may serve as another arrow in the quiver of private litigants and plaintiff's attorneys who seek to bring ECOA claims against banks and other financial institutions whether related to indirect auto lending or some other indirect lending program.

In a typical transaction, the dealer will collect information about an applicant and will forward that information to a bank. The bank may pass or it may provide a risk-based "buy rate" at which the lender is willing to purchase the loan from the dealer. Additionally, the bank may have a policy that permits the dealer to charge the applicant a rate higher than the lender's "buy rate" and to permit the dealer to share in the increased interest revenue resulting from the markup. The CFPB asserts that policies permitting such markups create a "significant risk" of pricing disparities based upon one of the bases prohibited under the ECOA (e.g. race, religion, gender, national origin, etc.).

The ECOA applies to "creditors." By definition, the term"creditor" includes not only the originating creditor, but an assignee of an original creditor who "participates in the decision to extend, renew or continue credit." According to the CFPB, an indirect auto lender will likely be considered a "creditor" under ECOA when it reviews an applicant's information and communicates its buy rate to the auto dealer indicating that it will purchase the loan at such a rate. Additionally, if the lender provides a rate sheet to a dealer establishing buy rates, and permits the dealer to mark up those buy rates, the lender may become a "creditor" when it later purchases the loan from the dealer.

To determine whether and under what circumstances an indirect auto lender is liable for pricing disparities on a prohibited basis, the CFPB will use the legal doctrines of disparate treatment (i.e. policies that intentionally discriminate) and disparate impact (i.e. policies that are neutral, but result in discrimination).Whether ECOA claims may properly be based upon the theory of disparate impact will be hotly contested. Nevertheless, CFPB and other financial institution regulators take the position that "disparate impact" policies violate ECOA.

Banks and other indirect auto lenders may assume - incorrectly, according to the CFPB guidance - that they are not liable under ECOA for pricing disparities under the Regulation B rule that a creditor can be liable for another creditor’s discriminatory practice only if it "knew or had reasonable notice" of the practice that caused the violation before becoming involved in the transaction. According to the CFPB, this provision limits liability for anothercreditor's ECOA violations, but it does not limit a creditor's liability for its own ECOA violation. The CFPB takes that position that improper pricing disparities may arise from the indirect auto lender's own markup and compensation policies, which give dealers discretion to establish interest rates without regard to creditworthiness of applicants. Thus, the lender itself may have violated ECOA and won't be able to avail itself of the exception for violations caused by another creditor.

The CFPB suggests that indirect auto lenders take steps to ensure compliance with ECOA and Reg. B. Those steps include (i) imposing controls on dealer markup and compensationpolicies, revising current policies and monitoring those policies or (ii) eliminating dealer discretion to mark up buy rates and compensating dealers in some other fashion (e.g. flat fee per transaction that has no discriminatory effect).

Continued on next page

16

FAIR LENDING GUIDANCE Continued from prior page

CFPB also recommends that indirect auto lenders develop and implement a robust fair lending compliance program in accordance with the guidelines set forth in CFPB Supervisory Highlights: Fall 2012 (October 31, 2012). Such a program has the following features: (i) up-to-date fair lending policy statement, (ii) regular fair lending training for all employees and board members, (iii) ongoing monitoring for compliance with fair lending and other policies and procedures intended to reduce fair lending risk, (iv) review of lending policies for potential fair lending violations, (v) regular analysis of loan data in all product areas for potential disparities on a prohibited basis, regular assessment of the marketing of loan products, and (vi) meaningful oversight of fair lending compliance by management and, where appropriate, the board of directors.

CFPB recommends the following additional steps for institutions with significant fair lending risks: (i) sending communications to dealers explaining ECOA and stating the lender's expectations with respect to ECOA compliance and the dealer's obligation to mark up interest rates in a nondiscriminatory manner, (ii) conducting analyses of pricing data for potential disparities on a prohibited basis, (iii) taking prompt corrective action against dealers, including restricting or eliminating use of dealer markup policies, and (iv) promptly remunerating affected consumers when unexplained disparities on a prohibited basis are identified.

This guidance is one of a number of recent indicators from the CFPB that auto lenders will be closely scrutinized. Banks and other auto lenders should closely review their existing programs to ensure that they comply with the CFPB guidance and, if appropriate, consult with legal counsel to ensure that they don't find themselves on the wrong end of an ECOA claim.

Scott Smalley Bio: Scott is an associate in Stinson Morrison Hecker LLPs Banking & Financial Services Division. Scott focuses primarily on transactional matters including general corporate law, mergers and acquisitions, bank regulatory and compliance matters, secured lending and commercial loan servicing. Scott is currently the editor of the Division’s newsletter and alerts.

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• Web-basedplatformprovideseasyfileupload,powerfulpricingengineandmore–This proprietary, robust software delivers automated pricing and product eligibility, effective communication and compliance management, automated underwriting decisions and real-time pipeline tracking and reporting. The paperless environment provides your bank complete transparency 24 hours a day, seven days a week. If opting for component fulfillment solutions, platform serves as powerful point-of-sale tool for loan officers, assisting with the conversion of leads into applications.

• Arrayofloanproducts– LenderLive works with multiple investors to ensure you have the products you need at competitive pricing. Loans purchased by LenderLive may be sold to one of its investors for servicing, with a guarantee that your customer will not be cross-sold any banking products.

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OptionalServicesIn addition to the standard Correspondent Lending Program, LenderLive also offers well-defined processing services that include the distribution of initial disclosure documents and closing coordination services. These two services are available to any bank selling loans to LenderLive.

The ICBA Mortgage Solutions program is supported by program-dedicated, seasoned mortgage lending professionals and our scalable platform, to meet the unique needs of community banks like yours. Through our program your bank can • Reduce operational costs• Increase fee income• Grow market share• Mitigate secondary market exposure and risk• Manage operational risks • Remain compliant and avoid buy-backs

ICBA Mortgage Solutions offers ICBA member banks an exclusive Correspondent Lending Program designed to support community banks concerned with balance sheet risk as well as regulatory and compliance challenges.

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###

PRESS RELEASE For Immediate Release

Contact:Brittney Oake Richard D. Pearson Jr. 731 Alexander Road, Suite 203Director of Marketing or VP Client Services Princeton, New Jersey 08540boake@bfsgroup.com rpearson@bfsgroup.com t: 609.243.9395

f: 609.243.8921www.bfsgroup.com

BFS Announces BFS MINTS Available for All BFS Clients

April 11, 2013 – Princeton, NJ – Bank Financial Services Group (BFS) formally announced the full availability of the BFS MINTS (Multi Informational Network Tracking System) for all BFS clients. This secure online portal provides full access to all information related to each client’s supplemental benefit plans and financing assets in one easy-to-use online location.

Via MINTS, BFS clients are able to easily find and retrieve all previous and current reports, plan documents, plan forms, asset and policy values, benefit statements, and compliance reporting. These periodic reports and data assist with the analysis of past, present, and forecasted future plan and financing performance.

Daniel Barbaree, BFS CFO and COO explained: “BFS has made significant investments over many years to develop a customized, robust, and secure proprietary system to enable all of our clients to have easy access to and use of all important documents and information related to their meaningful executive and director benefit plans and financing assets (investments and insurance)”. BFS President, Bill Borchert added: “We are very excited that our time and financial commitments have significantly enhanced our servicing capabilities and this clearly shows our company’s persistent focus on providing the best service platform for all our clients.”

Bank Financial Services Group is a national firm with 10 regional offices to serve every state in the U.S. BFS works exclusively with banks and financial institutions to create, manage, finance and service supplemental benefit plans for top executives and directors and offset benefit costs with tax-efficient financing strategies. BFS is the national leader in providing meaningful programs to retain the key drivers of a company’s success while significantly improving the company’s bottom-line earnings.

If you would like more information about this topic please contact Brittney Oake at boake@bfsgroup.com or contact Rich Pearson at rpearson@bfsgroup.com.

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PREPARING FOR HIGHER TAX RATES IN 2013By Jim Still, CPA, jstill@bkd.com / BKD is an Associate Member of the IBC

While April 15 has passed, it’s still a good time to think about your 2013 taxes. Effective January 1, 2013, certain taxpayers will be subject to higher tax rates and new taxes on investment income, wages and self-employment income. When Congress passed the American Taxpayer Relief Act of 2012 earlier this year, the following increases were implemented:• Top federal income tax rate for individuals increased from

35 percent to 39.6 percent. (The table at the end of this article includes 2012 and 2013 tax rates for individuals and trusts.)

• Long-term capital gains and qualifying dividend tax rates increased from 15 percent to 20 percent for individuals in the top bracket.

However, the top rates do not include the following tax increases implemented by the Patient Protection and Affordable Care Act:• A new 3.8 percent Medicare surtax on net investment

income• A 0.9 percent increase in Medicare surtax on wages and

self-employment income

We have included a chart providing an overview of the rate changes effective January 1, 2013:

Increased Top Federal Individual Income & Capital Gains RatesFor 2013 and beyond, the top individual income tax rate increases from 35 percent to 39.6 percent for taxpayers with income exceeding the following thresholds:• $400,000 single filers• $450,000 married filing jointly• $425,000 head of household• $225,000 married filing separately

In addition, taxpayers with income above these thresholds are subject to a tax rate increase from 15 percent to 20 percent for capital gains and qualifying dividend income. The threshold amounts are indexed for inflation for tax years after 2013.

Additional 0.9% Medicare TaxThe additional 0.9 percent Medicare tax applies to taxpayers with self-employment income and wages exceeding the following thresholds:• $250,000 married filing jointly• $125,000 married filing separately• $200,000 for all other individuals

These thresholds are not indexed for inflation for tax years after 2013. Individuals with wages and self-employment income use three steps to calculate the additional Medicare tax:

• Calculate the additional Medicare tax on any wages in excess of the applicable threshold for the filing status, without regard to whether any tax was withheld.

• Reduce the applicable threshold by the total amount of Medicare wages received—but not below zero.

• Calculate additional Medicare tax on any self-employment income in excess of the reduced threshold.

New 3.8% Medicare SurtaxThe 3.8 percent Medicare surtax is assessed on the lesser of a taxpayer’s net investment income or modified adjusted gross income less an applicable threshold. Modified adjusted gross income is generally the amount reported on the last line of page 1 of Form 1040. The modified adjusted gross income threshold amounts for individuals are:

• $250,000 for married filing jointly and surviving spouses

• $125,000 for married filing separately• $200,000 for single filers and heads of

household

The thresholds are not indexed for inflation.

Net investment income is defined as the sum of the following:• Gross income from interest, dividends,

annuities, royalties and rents, other than income derived in the ordinary course of a trade or business to which the tax does not apply

• Other gross income from trades or businesses to which the tax applies, e.g.,passive activities

• Net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business to which the tax does not apply

The following is then subtracted:• Deductions properly allocable to such

gross income or net gain.

Continued on next page

21

PREPARING FOR HIGHER TAX RATES IN 2013Continued from prior page

Certain types of income are excluded from the definition of net investment income, such as self-employment income, W-2wages, most active trade or business income, gain on the sale of an active interest in a partnership or S corporation after certain adjustments, gain on sale of principal residence (to the extent gain is excluded from taxable income) and IRA or qualified plan distributions.

Continued on next page

22

PREPARING FOR HIGHER TAX RATES IN 2013Continued from prior page

If you have any questions about these tax increases or would like to discuss potential planning opportunities, contact your BKD advisor.

BKD, LLP is a national CPA and advisory firm that delivers its experience and service with a deep understanding of your business, your needs and what it takes to improve your business performance. BKD’s approximately 2,000 personnel, including approximately 250 partners, are based in 30 offices serving clients in 50 states.

BKD, LLP with offices in Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky,Mississippi, Missouri, Nebraska, Ohio, Oklahoma & Texas

111 S. Tejon St., Suite 800 • Colorado Springs • 719.471.42901700 Lincoln St., Suite 1400 • Denver • 303.861.4545

231501 San Juan Blvd., Ste. 201 Farmington, NM 87401 www.wssbonline.orgPhone: (505) 324-2085 Fax: (505) 326-5027 Email: wssb@wssbonline.org

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Year I – Banking Law $195

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Risk Management $120

Credit Risk Management $395

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Year One Banking Law - 6Instructor: Tom Beiging

Year Two Banking Law - 6 hoursInstructor: Tom Beiging

Banking Technology - 6 hoursInstructor: Dr. James Nelson

Risk Management - 4 hoursInstructor: Slim McWilliams

Credit Risk Management - 11Instructor: Jeff Judy

Macroeconomics - 4 hours Instructor: Richard Hamm

Alumni Refresher and Director Education!

The Western States School of Banking is now offering Alumni

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24

TODAY'S RISK MANAGEMENT CHALLENGES FOR FINANCIAL INSTITUTIONSBy Jim Hartzog Senior Commercial Lending Expert and Product Manager Harland Financial Solutions, an Associate Member of the IBC

Today’s economic conditions and uncertain outlook have led to a realignment of priorities and goals for all financial institutions. Risk management has always been among the highest responsibilities of senior management. But too often, the practice of risk management has been to apply the same tools and practices used in the past without critical examination to determine if they are still useful or appropriate in the current environment. A crucial component of risk management must include periodic reviews of risk management practices to ensure they adapt to the changing landscape.

Senior management needs to periodically review and “maintain the pulse” of the following areas:

• Borrower and loan risk rating process • Exception and loan covenant tracking • Portfolio risk analysis and reporting • Procedures and policies

How is this accomplished? Data, data, data. The philosophical assertion, “Data leads to information, information leads to knowledge” is as true as ever for today’s financial institutions.The difficulties start when trying to design the necessary processes and procedures to collect the right data and to identify the correct technologies to implement and support those processes.

Start From the TopThe business and analytical needs must drive the risk-management framework; the reports, models and data. Too often this process gets turned around, and financial institution reports and analytical models get driven—not by the desired output—but by the data available. Financial institutions need to answer the following questions in order when developing risk management systems:

1. What are the necessary risk management decisions? 2. What information and reports are needed to inform my

decisions? 3. How do I measure the risk parameters that flow into my

reporting? 4. What data do I need to collect to perform my risk

measurements?

Far too often, financial institutions try to develop risk management systems based on information that they

already collect and store in an easily accessible format. A top-down review of risk management needs will allow for the identification of shortcomings.

The need to capture the data for good risk analysis will drive day-to-day financial institution procedures and operations. As an example, loan to value is a crucial risk factor in commercial real estate lending. For most institutions, the host system does not capture collateral-level data. For this data to be available for risk analysis, someone along the line must enter this data into a separate database for it to be available for risk analysis and reporting.

Bottom-Up Data FlowOnce the top-down risk-management framework is in place, the risk-management execution requires a bottom-up data flow. Risk assessments at the borrower and loan level are aggregated to the entire portfolio.

This requires consistent application of policies and procedures across the entire organization. Well-designed and implemented technology solutions will provide the mechanisms to enforce consistency and reinforce a common risk management culture.

Risk RatingBorrower and loan risk ratings need consistent application for risk ratings to be useful. By capturing relevant data, the financial institution can develop objective models that minimize “judgment call” ratings that, historically, do not reflect the probability of default as accurately as necessary. The best practice is to develop a dual rating system that separates borrower ratings and loan ratings. This allows for identifying borrower-specific and loan-specific risk factors and leads to more granular analysis.

Continued on next page

Senior management must understand their financial institution’s risk management framework and systems, and they must be prepared to adjust their practices as conditions change.

25

TODAY'S RISK MANAGEMENT CHALLENGES FOR FINANCIAL INSTITUTIONSContinued from previous page

Objective risk rating models are easy to refine in changing conditions, whereas retraining personnel to adjust their habits and practices in applying judgmental models usually leads to a period of inconsistency, as financial institution staff become accustomed to the new thinking. Periodic reviews should be done by dedicated audit staff. Their guidance reinforces consistent risk rating practices across the organization.

Exception and Loan Covenant TrackingMost institutions do not have systems that automatically track exceptions and covenants. Rather, this is a manual (i.e., time consuming, expensive and error-prone) process, where a person reviews a paper file and transcribes his findings into a spreadsheet that is later merged into a report from the host. A well-designed technology solution will automate this process, with the relationship and loan level data available to the portfolio analysis solution. This saves on the time, expense and errors inherent in a manual process.

Portfolio ReportingOnce the appropriate processes and systems are in place to gather data for risk management purposes, the next step is put that data to use. An important aspect in portfolio monitoring that is frequently overlooked is having the ability to compare data month over month or quarter over quarter to identify trends in the portfolio performance. Looking only at month-end data cannot provide the same level of management oversight as reviewing an entire year’s worth of data side by side. Data integrity is a key challenge when it comes to portfolio reporting; transferring data each month into a spreadsheet for reporting is no longer a best practice.

ConclusionSenior management must understand their financial institution’s risk management framework and systems, and they must be prepared to adjust their practices as conditions change. Successful implementation of such a framework requires:

• A consistent understanding among staff of the financial institution’s risk management principles and practices.

• Robust and flexible technology systems that gather the relevant data and allow the financial institution to adjust risk-management practices as needed.

Jim Hartzog can be reached at james.hartzog@harlandfs.com.

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JUNE EVENT—AN OPPORTUNITY TO INVEST IN INDUSTRY KNOWLEDGE EXPERTS TO ADDRESS MYRIAD FACTORS SHAPING PAYMENTS REVOLUTION

by Bankers’ Bank of the West Bank Card Division

In late 1975, pop singer Neil Sedaka’s recording of “Breaking Up is Hard to Do” peaked at number eight on the U.S. Billboard charts. Although the Billboard charts have long since gone extinct, some freshening up of Sedaka’s hit lyrics could give the song new meaning to those of us in the financial services industry. The revised title would be “Keeping Upis Hard to Do.” It could become the anthem of every beleaguered community banker who wears multiple hats in this era of growing complexity, advancing technology, evolving consumer expectations, and regulatory pressures.

Helping community bankers stay current with developments in the bank card and electronic payments arena is the purpose of the 2013 Bankers’ Bank of the West Bank Card Conference to be held at the Curtis Hotel June 13 and 14. Since 1998, BBW has presented this information-packed event to give community banks direct access to some of the foremost subject-matter experts on topics like electronic payments, technology innovations, fraud management, product marketing, regulatory matters, and more.

Among the topics to be addressed at the June conference are:

Front-and-center regulatory challenges, anticipated legislative pressures, and other developments. Presenter: Kim Ford, First Data

Consumer expectations and the great transition: Understanding what consumers really want in payments. Presenter: Shelly Belville, First Data

Attracting and retaining small business customers: Packaging and promoting bank services. Presenter: Trent Fleming, Trent Fleming Consulting

EMV: Is your merchant equipment ready? Presenter: Tim McWeeney, VeriFone

What’s next in ATMs? Presenter: Rob Evans, Nautilus Hyosung America, Inc.

Enabling the next wave of fraud management. Presenter: Mark Craeger, VISA

Financial crimes, counterfeiting, and major fraud investigations. Presenter: United States Secret Service

EMV—are you ready? Presenter: Tony McGee, CPI Card Group

Prepaid industry update—where is it headed? Presenter: Scott Daniels, Metapay

The two-day conference is education-driven. Between sessions and during meals, however, participants will have ample opportunities for peer networking, exploration of the exhibit hall, and one-on-one discussions with vendors. What’s more, attendees are invited to take part in an enjoyable evening tour of Denver’s Sports Authority Field on June 13. (On second thought, maybe keeping up is not always so very hard to do.)

Early registration is encouraged, and bankers need not be current customers of BBW to participate. The conference announcement and registration form is available at www.bbwest.com. For answers to conference- or card-related ques-tions, call 800-601-8630 or email MaryAnn Elliott-Supples, SVP, at msupples@bbwest.com.

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Plan for Prosperity

A Regulatory Relief Agenda to Empower Local Communities

February 2013

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Plan for Prosperity: A Regulatory Relief Agenda to Empower Local Communities America’s 7,000 community banks are vital to the prosperity of the U.S. economy, particularly in micropolitan and rural communities. Providing 60 percent of all small business loans under $1 million, as well as customized mortgage and consumer loans suited to the unique characteristics of their local communities, community banks are playing a vital role in ensuring the economic recovery is robust and broad based, reaching communities of all sizes and in every region of the country. In order to reach their full potential as catalysts for entrepreneurship, economic growth, and job creation, community banks must be able to attract capital in a highly competitive environment. Regulation calibrated to the size, lower-risk profile, and traditional business model of community banks is critical to this objective. ICBA’s Plan for Prosperity provides targeted regulatory relief that will allow community banks to thrive by doing what they do best – serving and growing their communities. By rebalancing unsustainable regulatory burden, the Plan will ensure that scarce capital and labor resources are used productively, not sunk into unnecessary compliance costs, allowing community banks to better focus on lending and investing that will directly improve the quality of life in our communities. Each provision of the Plan was selected with input from community bankers nationwide and crafted to preserve and strengthen consumer protections and safety and soundness. The Plan is not a bill; it is a platform and set of legislative priorities positioned for advancement in Congress. The provisions could be introduced in Congress individually, collectively or configured in whatever fashion suits interested members of Congress. The Plan is a flexible, living document that can be adapted to a rapidly changing regulatory and legislative environment to maximize its influence and likelihood of enactment. Provisions of the Plan include: Support for the Housing Recovery: Mortgage Reform For Community Banks. Provide community banks relief from certain mortgage regulations, especially for loans held in portfolio. When a community bank holds a loan in portfolio, it has a direct stake in the loan’s performance and every incentive to ensure it is affordable and responsibly serviced. Relief would include: Providing “qualified mortgage” safe harbor status for loans originated and held in portfolio for the life of the loan by banks with less than $10 billion in assets, including balloon mortgages; exempting banks with assets below $10 billion from escrow requirements for loans held in portfolio; increasing the “small servicer” exemption threshold to 20,000 loans (up from 5,000); and reinstating the FIRREA exemption for independent appraisals for portfolio loans of $250,000 or less made by banks with assets below $10 billion.

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2

Strengthening Accountability in Bank Exams: A Workable Appeals Process. The trend toward oppressive, micromanaged regulatory exams is a concern to community bankers nationwide. An independent body would be created to receive, investigate, and resolve material complaints from banks in a timely and confidential manner. The goal is to hold examiners accountable and to prevent retribution against banks that file complaints. Redundant Privacy Notices: Eliminate Annual Requirement. Eliminate the requirement that financial institutions mail annual privacy notices even when no change in policy has occurred. Financial institutions would still be required to notify their customers when they change their privacy policies, but when no change in policy has occurred, the annual notice provides no useful information to customers and is a needless expense. Serving Local Governments: Community Bank Exemption from Municipal Advisor Registration. Exempt community bank employees from having to register as municipal advisors with the SEC and the Municipal Securities Rulemaking Board. Community banks provide traditional banking services to small municipal governments such as demand deposits, certificates of deposit, cash management services, loans and letters of credit. These activities are closely supervised by state and federal bank regulators. Municipal advisor registration and examination would pose a significant expense and regulatory burden for community banks without enhancing financial protections for municipal governments. Creating a Voice for Community Banks: Treasury Assistant Secretary for Community Banks. Economic and banking policies have too often been made without the benefit of community bank input. An approach that takes into account the diversity and breadth of the financial services sector would significantly improve policy making. Creating an Assistant Secretary for Community Banks within the U.S. Treasury Department would ensure that the 7,000 + community banks across the country, including minority banks that lend in underserved markets, are given appropriate and balanced consideration in the policy making process. Balanced Consumer Regulation: More Inclusive and Accountable CFPB Governance. Change the governance structure of the CFBP to a five-member commission rather than a single Director. Commissioners would be confirmed by the Senate to staggered five-year terms with no more than three commissioners affiliated with any one political party. This change will strengthen accountability and bring a diversity of views and professional backgrounds to decision-making at the CFPB. In addition, FSOC’s review of CFPB rules should be strengthened by changing the vote required to veto a rule from an unreasonably high two-thirds vote to a simple majority, excluding the CFPB Director.

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3

Relief from Accounting and Auditing Expenses: Publicly Traded Community Banks and Thrifts. Increase from $75 million in market capitalization to $350 million the exemption from internal control attestation requirements. Because community bank internal control systems are monitored continually by bank examiners, they should not have to sustain the unnecessary annual expense of paying an outside audit firm for attestation work. This provision will substantially lower the regulatory burden and expense for small, publicly traded community banks without creating more risk for investors. Separately, due to an inadvertent oversight in the recently-passed JOBS Act, thrift holding companies cannot take advantage of the increased shareholder threshold below which a bank or bank holding company may deregister with the SEC. Congress should correct this oversight by allowing thrift holding companies to use the new 1200 shareholder deregistration threshold. Ensuring the Viability of Mutual Banks: New Charter Option and Relief from Dividend Restrictions. The OCC should be allowed to charter mutual national banks to provide flexibility for institutions to choose the charter that best suits their needs and the communities they serve. In addition, certain mutual holding companies – those that have public shareholders—should be allowed to pay dividends to their public shareholders without having to comply with numerous “dividend waiver” restrictions as required under a recent Federal Reserve rule. The Federal Reserve rule makes it difficult for mutual holding companies to attract investors to support their capital levels. Easier payment of dividends will ensure the viability of the mutual holding company form of organization. Rigorous and Quantitative Justification of New Rules: Cost-Benefit Analysis. Provide that financial regulatory agencies cannot issue notices of proposed rulemakings unless they first determine that quantified costs are less than quantified benefits. The analysis must take into account the impact on the smallest banks which are disproportionately burdened by regulation because they lack the scale and the resources to absorb the associated compliance costs. In addition, the agencies would be required to identify and assess available alternatives including modifications to existing regulations. They would also be required to ensure that proposed regulations are consistent with existing regulations, written in plain English, and easy to interpret. Additional Capital for Small Bank Holding Companies: Modernizing the Federal Reserve’s Policy Statement. Require the Federal Reserve to revise the Small Bank Holding Company Policy Statement – a set of capital guidelines that have the force of law. The Policy Statement, makes it easier for small bank holding companies to raise additional capital by issuing debt, would be revised to apply to both bank and thrift holding companies and to increase the qualifying asset threshold from $500 million to $5 billion. Qualifying bank and thrift holding companies must not have significant outstanding debt or be engaged in nonbanking activities that involve significant leverage. This will help ease capital requirements for small bank and thrift holding companies.

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4

Cutting the Red Tape in Small Business Lending: Eliminate Data Collection. Exclude banks with assets below $10 billion from new small business data collection requirements. This provision, which requires the reporting of information regarding every small business loan application, falls disproportionately upon community banks that lack scale and compliance resources. Facilitating Capital Formation: Modernize Subchapter S Constraints and Extend Loss Carryback. Subchapter S of the tax code should be updated to facilitate capital formation for community banks, particularly in light of higher capital requirements under the proposed Basel III capital standards. The limit on Subchapter S shareholders should be increased from 100 to 200; Subchapter S corporations should be allowed to issue preferred shares; and Subchapter S shares, both common and preferred, should be permitted to be held in individual retirement accounts (IRAs). These changes would better allow the nation’s 2300 Subchapter S banks to raise capital and increase the flow of credit. In addition, banks with $15 billion or less in assets should be allowed to use a five-year net operating loss (NOL) carryback through 2014. This extension of the five-year NOL carryback is countercyclical and will support community bank capital and lending during economic downturns. The Independent Community Bankers of America®, the nation’s voice for nearly 7,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit www.icba.org.

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BFC Bankers Foundation of Colorado

Annual Western Slope Golf Invitational Monday, June 3, 2013Cobble Creek Golf Course, Montrose, CO

Annual Front Range Golf Invitational Monday, August 5, 2013Highlands Ranch Golf Club, Highlasnds Ranch, CO

Please Become a Valued Supporter of Our Annual Fundraising Events!Since 2001, the Bankers Foundation of Colorado, a 501(c)(3) charitable organization, has granted matching gift requests of $126,000!Unfortunately, sometimes bad things happen to good people. Community bankers in Colorado have stepped up to support financially individuals and families in their communities who have suffered hardships. These requests have included hardships resulting from accidents,medical issues, natural disasters, and deaths. The BFC’s matching gift program assists Colorado’s community banks help their communities.

Please visit our website at www.bankersfoundationofcolorado.org for more information.

We invite you to support the BFC’s matching gift program by sponsoring one or both of our invitational fundraisers.For each invitational, sponsorship levels and benefits* are as follows:

* Platinum Sponsor includes 4 registrations $1,500.00* Gold Sponsor includes 2 registrations $1,000.00* Silver Sponsor includes 1 registration $500.00* Bronze Sponsor $499.00 and under

Annual Western Slope Golf Invitational Monday, June 3, 2013Please checks payable to Bankers Foundation of Colorado

Return this form with full payment by May 10, 2013 *Bankers Foundation of Colorado

1900 Grant Street, Suite 1120 / Denver, CO 80203www.bankersfoundationofcolorado.org / 303.832.2000

AGENDA8:00 a.m. - Registration

9:00 a.m. – Shotgun Start1:00 p.m. Buffet Lunch and Awards Presentations

Annual Front Range Golf Invitational Monday, August 5, 2013Please checks payable to Bankers Foundation of Colorado

Return this form with full payment by July 10, 2013 *Bankers Foundation of Colorado

1900 Grant Street, Suite 1120 / Denver, CO 80203www.bankersfoundationofcolorado.org

303.832.2000

AGENDA

11:30 a.m. – Registration / Warm-Up11:45 a.m.-12:45 p.m. – Putting Contest / Buffet Lunch

1:00 p.m. – Shotgun Start5:15 p.m. - Award Presentations and Cash Bar

* Sponsors of a BFC invitational will be recognized during the invitatonal and in BFC promotionals.Sponsors who want to be recognized during both the BFC’s June and August invitationals

must submit their registration form with full payment by May 10, 2013.The Bankers Foundation of Colorado Board of Directors thanks you for your generous support!

KRISTIN GODFREY STEVE ZUPAN ROBERT HAMBY, CPA JON JORGENSON DAN ALLENShareholder President Fortner, Bayens, Levkulich President Chairman & CEOStinson Morrison Hecker LLP Legacy Bank & Garrison, PC Jon Jorgenson, LLC Mile High Banks

RYAN JOHNSON RANDY YOUNGER ALICE VOSS DAVE ARMBRUSTERSenior Vice President President Executive Vice President & CFO Executive Vice PresidentRedstone Bank FNB of Hugo-Limon Bankers Bank of the Wesr Grand Valley Bank

RICHARD FULLER CHUCK JOHNSTON SCOTT SEXSON KENNY STUMPFPresident President & CEO Regional Vice President Senior Vice PresidentAlpine Bank North Valley Bank Central States of Omaha Farmers Bank Ault

ROB HOLT CHRISTINE HASLAM, CPA BARBARA WALKERSenior Vice President Haslam Tax & Accounting Executive DirectorCentennial Bank Services, LLC Independent Bankers of Colorado

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Bankers Foundation of Colorado’sAnnual Front Range Golf Invitational

Mark Your Calendar Now for Monday, August 5, 2013!Highlands Ranch Golf Club is an 18-hole semi-private golf club featuring a Hale Irwin designed championship golf course. The course, which opened in 1998, features a great variety of immaculately groomed holes. The 7179 yard par 72 layout,

boasts expansive bentgrass greens that many say are the best in the region. Ideally located just 15 minutes south of Downtown Denver and 10 minutes west of the Denver Technology Center, the course is easily accessible.

Take highway C-470 west from I-25 to Lucent Blvd., proceed south on Lucent Blvd. for approximately 1/2 mile, turn right on Town Center Drive and proceed west about 1/4 mile to Creekside Way, turn right and you are there:

9000 Creekside Way, Highlands Ranch, Colorado / Phone: 303-471-0000

Annual Golf Invitationals are the Foundation’s primary fundraisers. Please consider participating by playing,hole sponsorship, and donating to the Foundation during these events.

The Bankers Foundation of Colorado is a charitable organization established for Colorado community banks to support financially families and individuals in the communities we serve who are suffering hardships.

Please visit our website at www.bankersfoundationofcolorado.org to learn more aboutthe Foundation’s matching gift program.

Please visit us at www.bankersfoundationofcolorado.orgfor tournament registration and sponsorship information.

Bankers Foundation of Colorado’sAnnual Western Slope

Golf InvitationalMark Your Calendar!

Monday, June 3rd, 2013Cobble Creek Golf Course

Montrose, COThe Foundation’s Annual Golf Invitationals

are the Bankers Foundation of Colorado’s primary fundraisers.Please consider participating by playing, hole sponsorship, and donating to

the Bankers Foundation of Colorado during these events.

The Bankers Foundation of Colorado is a 501(c)(3) charitable organization established by Colorado community banks to provide financial support to families and individuals in the

communities they serve who are suffering hardships.

Please visit our website to learn more about the Foundation’s matching gift programand for tournament and sponsorship information.

www.bankersfoundationofcolorado.org

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TEN STEPS TO AVOID PONZI-SCHEME FRAUD(Part 1)

Ponzi-scheme frauds over the last several years have filled the news. From Bernie Madoff to less-infamous perpetrators, the variety of schemes seems endless. Banks and trust companies who serve as custodians or trustees of self-directed IRA’s and other non-discretionary accounts often are the “last man standing” in these schemes. ThePonzi-scheme perpetrator may be in prison or on his way, with client funds long since lost.Unfortunately, this can mean a trustee bank or trust company becomes the target of customers seeking recovery, even though the customer is the one whoselected the Ponzi-scheme perpetrator to be hisinvestment manager or financial representative.

Here are ten steps that your bank or trust company can take to avoid becoming the next target of a Ponzi-scheme fraud, or a co-defendant in a suit by Ponzi-scheme victims.

1. Avoid “Alternative Asset” Investments. Many Ponzi schemes involve an investment vehicle like a limited partnership or limited liability company. The entity may or may not be real, but one fact always is the same: only the entity’s manager or sponsor controls the funds. The customer’s funds typically are paid in exchange for sale of an interest in the real or fake entity. Suchinterests may qualify as securities, but are not registered or listed on any exchange. As such, they are considered “alternative” or non-marketable assets. Avoid them. Your bank can offer self-directed IRA’s or other non-discretionary accountsthat restrict customer-selected investments to a menu of pre-approved and registered securities such as mutual funds.

2. Maintain Independence From the Sponsor. Your bank may become a target of Ponzi-scheme plaintiffs if the bank, its management or staff have business or personal ties with the investment sponsor. If the sponsor is a bank customer, for example, you may be accused of ignoring a conflict of interest in order to help the sponsor at the expense of your other customers. Or if your management has personal or social relationships with the sponsor, you may be accused of looking the other way in the face of red flags. Avoid these

scenarios by maintaining complete independencefrom the sponsor.

3. Update Your Account Forms. Your bank uses standardized account forms. These forms place responsibility for self-directed investments on the account owner. So you are safe, right? Wrong. Many standardized forms do not plainly designate the investment sponsor as the client’s authorized agent and representative. Standardized forms alsomay fail to spell out the customer’s responsibility for any decisions or actions of the investment sponsor selected. Standardized forms also may include sweeping promises that plaintiffs later seize upon,like a promise by the custodian that it will comply with any rule or regulation applicable to the account. Update your account forms with the help of qualified counsel.

4. Obtain Basic Due Diligence on the Sponsor. Even if your account form clearly disclaims responsibility for the customer’s selection of the sponsor, as it should, consider obtaining basic due diligence information on the sponsor. After all, that person is the designated recipient of account funds. Is the sponsor licensed? Has the sponsor been the subject of customer complaints? How long has the sponsor been in the business? What is the sponsor’s reputation in the community? Don’t send account funds to someone you know nothing about.

5. Inform Account Owners of the Bank’s Limited Role. Many bank customers fail to read account forms that explain the services that the bank will or will not provide. Ponzi-scheme perpetrators love to lure victims by misrepresenting to them the custodian’s role, suggesting that the custodian is watching over their investment. In your marketing and sales literature, make clear that the custodian’s role is very limited, and that it is the customer’s responsibility to monitor the investment they have selected.

Tobin D. Kern is an attorney in the Trial and Banking and Finance groups at Sherman &

Howard, LLC. You can reach Mr. Kern at303-299-8384 for further information.

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It’s more than business. It’s personal.

Expect More. Advantage.

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39

CHANGES TO THE UNIFORM COMMERCIAL CODE – PART IBy Beverly L. Edwards, Esq., The Rocky Mountain Law Group, LLC, an Associate Member of the IBC

In 2012, the Colorado Legislature enacted H.B. 12-1262. H.B. 12-1262 (the “Act”) makes significant amendments to the secured transaction provisions of the Uniform Commercial Code (“UCC”). The Act will go into effect on July 1, 2013.

This Article will not attempt to address the numerous changes made to the UCC by the Act. This Article, which is in two parts,is intended to briefly summarize portions of the Act and generaltransitional rules. Readers should consult the Act and/or legal counsel.

SUFFICIENCY OF NAME OF DEBTOR

A major portion of the Act amends the provisions of the UCC which address the sufficiency of the name of the debtor in a financing statement. Issues have arisen over whether a debtor has been adequately identified – either an entity or an individual – and therefore whether a financing statement is valid under the UCC. The Act is an attempt to more explicitly define what constitutes a “sufficient” name for the debtor in order for the financing statement to perfect the secured creditor’s security interest..

If the debtor is a registered organization, the proper name for the debtor on the financing statement is the name on the formation record filed with the Secretary of State. Care should be taken to not rely on the business database records with the Colorado Secretary of State, but rather to go to directly to the original source of the name for the organization such as the Articles of Organization or Articles of Incorporation (subject to any official amendments).

If the collateral is being administered by the personal representative of a decedent, the financing statement should identify the name of the decedent (as indicated on the Court’s Order appointing the personal representative in the probate case). In addition, the financing statement must also indicate, in a separate part of the financing statement, that the collateral is being administered by a personal representative.

If the debtor is an individual, the financing statement is sufficient if it provides 1) the individual name of the debtor, 2) the surname and first personal name of the debtor or 3) the name of the individual as shown on the current Colorado driver’s license.

For an organization created by legislation, the source of the name for the debtor is the statute that created the entity.

If the collateral is held in a trust that is not a registered organization, then the financing statement must identify the name of the trust specified in its formation documents. If no name is specified, then the financing statement must identify the name of the settlor of the trust. There also must be a statement in a separate part of the financing statement indicating that the collateral is held in a trust. If the financing statement is only identifying the settlor of the trust, then there also must be a statement in a separate part of the financing statement providing additional information sufficient to distinguish the trust from other trusts with the same settlor and also indicating that the collateral is held in a trust.

THE TRANSITIONAL RULES WILL BE DISCUSSED IN PART II OF THIS ARTICLE

Beverly L. Edwards is a member of the law firm of The Rocky Mountain Law Group, LLC. Bev was recently selected by American Lawyer Media and Martindale-Hubbell as a “2013 Top Rated Lawyer”. With the selection, Bev was featured in the January 2013 issues of the American Lawyer Magazine and the National Law Journal. The January 2013 issues of these publications highlighted women attorneys who have achieved the AV® Preeminent™ peer review rating, which is the highest rating in legal ability and ethical standards, and who have achieved leadership status in their profession.

The attorneys at the Rocky Mountain Law Group have represented lenders for over 30 years, and can be reached at (303) 597-0202, or by e-mail at bedwards@rmlawgrp.com.

Please visit the firm’s website at www.rmlawgrp.com.

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THESE GUIDELINES, TERMS, AND CONDITIONS ARE SUBJECT TO CHANGE  

LOAN

STEP CREDIT        

How it Works: Take out a $200 loan and make fixed monthly payments for six months. Accion will report your payment history to the

credit bureaus. On-time payments will help improve your credit score and you may be eligible to apply for a larger

business loan from Accion. Your loan officer will provide technical assistance to build or repair your credit through

coaching and referrals and can assist you in requesting a free copy of your credit report.

How to Qualify: You must own a business or have the intention of starting one.

Credit Requirements

Low or no credit score is ok

Collections less than 6 months old must be paid or resolved

No open tax liens or civil judgments

No repossessions in the last 12 months

Cannot be in active bankruptcy or mortgage modification

How to Apply:

Submit a loan application online at www.accionco.org or by

fax to 1-877-620-1853

Schedule an appointment with Gwendolyn Bonilla, Loan

Officer, 720-951-4532, gbonilla@accionco.org

Additional information you will be asked to provide:

Copy of valid driver’s license or photo ID

Home utility bill

Verification of employment (if employed)

Your landlord’s name and phone number (if renting)

The names and phone numbers of two personal references

Establish or rebuild your credit with a $200 Credit Step Loan

Accion New Mexico • Arizona • Colorado is an award-winning nonprofit organization dedicated to providing the tools you need to operate, grow or start your business.

www.accionco.org 1-800-508-7624

Fernand  Loumouamou  exemplifies  the entrepreneurial  spirit.   Despite  losing  his  family and  home  to  war  in  his  native  Congo,  Fernand survived  10  years  in  a  refugee  camp  before arriving  in Tucson  in 2008 with the support of the International Rescue Committee.  Fernand wanted to return to the farming he had known in his home country,  but  did  not  have  the  resources.   Accion provided  Fernand  with  a  $200  loan  in  2009  to start  a  landscaping  business.   Fernand  quickly repaid  this  first  loan  and  has  received  five additional  Accion  loans  for  purposes  such  as buying  a  used  truck  for  his  business.   Today,  he has a  thriving one‐man business and a  small plot of land.  Reflecting on what he has achieved since arriving  in  the  U.S.  and  the  assistance  he  has received  from  Accion  and  other  community organizations, Fernand says, “I am a rich man.” 

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Thank you Accion Partners! Accion had a record lending quarter in the 1st quarter of 2013 (48 Loans for $621,000 in Colorado!) and we couldn’t have done it without your partnership. To give you an idea of our progress, in 2010 we provided 52 loans for $500,000 for the entire year in Colorado. Our growing team, 3 full time staff and 3 interns, is serving more entrepreneurs in more counties across the state. Thank you for your support in helping us grow! Through your support, we’ve been able to fund: two breweries, a manufacturing firm, a food truck, a remodeling company, carpet cleaners, a Mary Kay business, an engineering firm and many more in Mead, Centennial, Golden, Arvada, Thornton, Commerce City, Loveland, Littleton, Aurora, Glenwood Springs, Colorado Springs, Pueblo West and

Denver. Remember, in addition to lending, we support our clients through partnerships with great organizations like the Mi Casa Resource Center and Samuel Adams. We hosted a free tax workshop with Mi Casa in March and Samuel Adams is helping one of our clients, James Howe, get national exposure for his great Jamaican food stand, as part of their Brewing the American Dream partnership with Accion. We’re hoping to host another Speed Coaching event in Denver this summer in partnership with Samuel Adams, we’ll be sure to keep you in the loop!

Brewing the American Dream client James Howe

Tax workshop at Mi Casa Resource Center If there is anything we can ever do for you, please don’t hesitate to ask! As you run into entrepreneurs who can’t quite qualify for a traditional business loan at this current time, please consider Accion as an option. We can fund startups (and established businesses), acquisitions, restaurants, commercial real estate deals in loans from $200 up to $300,000. Thanks for all you do in helping us support small businesses in Colorado. Have a great day, The Accion Colorado Team (Jesse, Justin & Gwen)

Jesse Golland | Regional Senior Loan Officer| Accion New Mexico · Arizona · ColoradoCell: 303.968.5685 | Main: 1.800.508.7624 | E-Fax: 877.690.3437 |

jgolland@accionco.org | www.accionco.org | @accionnm_az_co

Lending. Supporting. Inspiring

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The IBC Education FoundationCongratulates Scholarship Recipients McCorkendale and Alpin

On April 23, 2013, the IBC Education Foundation (IBCEF) and Colorado’s independentcommunity banks announced the recipients of our 18th Annual Scholarship Competition in conjunction with Colorado MoneySmart Week.

The recipient of our child of a bank employee category is Jayme McCorkendale, sponsoredby High Country Bank in Salida, where her mother works. Jayme graduated from SalidaHigh School and plans to attend either Colorado State University or the University ofColorado – Colorado Springs. She plans to major in Biomedical Science. The recipient of our bank customer category is Slator Alpin, sponsored by Alpine Bank, who graduatedfrom Telluride High School. He plans to attend Colorado School of Mines and major inEngineering.

We wish both Jayme and Slator much success in pursuing their educational goals.

Requirements of the scholarship competition are: a cumulative GPA of 3.0 or higher; attendance at apublic or private Colorado university, college, junior college, community college, vocational/tradeschool; a banking relationship at an IBC member bank; and completion of an application and essayquestion. The IBCEF awarded a total of $2,000 in scholarships. Scholarships were awarded in two categories: a bank customer and a bank employee or child of a bank employee. Each recipientreceived a one-time $1,000 scholarship.

IBC Education Foundation A 501(c)(3) Nonprofit Organization

Conferences Designed by Bankers for Bankers!

Compliance ConferenceMonday and Tuesday, June 10 and 11, 2013

Hilton Garden Inn Denver Tech Center, Denver

40th Annual ConventionThursday – Saturday, September 26 – 28, 2013

Keystone Resort, Keystone

Operations and Technology ConferenceThursday and Friday, October 24 and 25, 2013

Location to be determined

Watch for additional information coming soon. Mark your calendars today!!

43

OTIS, COAN & PETERS, LLC

FINANCIALINSTITUTIONS’OPERATIONSINCOLORADOAFTERAMENDMENT64By Michael C. Payne, Esq. Otis, Coan & Peters, LLC, an Associate Member of the IBC

Notwithstanding the fact that passage of Amendment 64 madethe possession, distribution and cultivation of limited quantitiesof marijuana by persons twenty-one years and older legal underColorado law, the laws of the United States of America still deemsuch activities to be illegal. This fact restricts the ability offinancial institutions in the State of Colorado to transact businesswith persons or business engaged in any of the foregoingactivities. Indeed, due to the nature of existing federal law and theinterrelatedness of the myriad federal agencies responsible forimplementing and enforcing same, Colorado’s financial institutionsare unable, if not prohibited,from lending money to marijuana-related enterprises,accepting collateral that is associated with marijuana-related enterprises and/or holding deposits of monies that flow through marijuana-related enterprises.

The purpose of this article is not to provide the reader with anexhaustive laundry-list of all of the potential pitfalls that await afinancial institution that transacts business with a marijuana-related enterprise, but to advise the reader of some of the mostconcerning aspects of such a relationship. In researching thisarticle, the author spoke with representatives of financial institutiontrade groups, banking regulators and internal bank complianceofficers, all of whom uniformly voiced grave concernsregarding the prospect of financial institutions lending money toor accepting deposits from marijuana-related enterprises,particularly given the novelty of the intersection of statewide legalization of marijuana with federal laws prohibiting the same.

First and foremost, financial institutions should concern themselveswith the 18 U.S.C. § 1956, titled “Laundering of Monetary Instruments.” This statutory provision states, in pertinent part, “[w]hoever, knowing that the property involved in a financialtransaction represents the proceeds of some form of unlawfulactivity, conducts or attempts to conduct such a financialtransaction which in fact involves the proceeds of specifiedunlawful activity with the intent to promote the carrying on ofspecified unlawful activity … shall be sentenced to a fine of notmore than $500,000 or twice the value of the property involved inthe transaction, whichever is greater, or imprisonment of not more

than twenty years, or both.” Under this statute, afinancial institution cannot lend money to, cannotextend credit to, and cannot accept money frompersons or business that are actively involved inmarijuana-related enterprises, since such enterprisesare specifically prohibited by 21 U.S.C. § 801, etseq. (the “Controlled Substances Act”). To do sowould violate 18 U.S.C. § 1956 because the financialinstitution would be intentionally promoting the carrying on of acts in violation of Controlled Substances Act.

Additionally, a financial institution that lends to or accepts deposits from amarijuana-related enterprisecould also potentially be inviolation of the ControlledSubstances Act itself by servingas an accomplice to orconspiring with a principal to

violate said act. Furthermore, it is possible that such an institution could be deemed in violation of the Racketeer Influenced and Corrupt Organizations Act(18 U.S.C. § 1962) (“RICO”) because acts involvedin dealing with controlled substances are deemedracketeering activities and because a valid argumentcould be made that such an institution aided in the procurement of income derived from a pattern of racketeering activity.

In the event that a financial institution is suspected tobe in violation of 18 U.S.C. § 1956, it and its customers would be subject to federal asset forfeiturelaws. Specifically, 18 U.S.C. § 981, titled “CivilForfeiture” states, in pertinent part, that real orpersonal property involved in a transaction orattempted transaction in violation of federal money laundering laws (or property traceable thereto) issubject to forfeiture to the United States AttorneyGeneral. Additionally, 18 U.S.C. § 982, titled“Criminal Forfeiture,” provides for a similar penaltyif a person is convicted of an offense under 18 U.S.C.§ 1956. Further, 21 U.S.C. § 853 provides forcriminal forfeiture of property constituting or derivedfrom any proceeds obtained in violation of the

The purpose of this article is not to provide thereader with an exhaustive laundry-list of all ofthe potential pitfalls that await a financialinstitution that transacts business with amarijuana-related enterprise, but to advise thereader of some of the most concerning aspects ofsuch a relationship.

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Controlled Substances Act, whereas 18 U.S.C. § 1963 providesfor criminal forfeiture of property constituting or derived fromproceeds obtained in violation of RICO. Notwithstanding the fact that a federal trial court judge in Massachusetts recentlyrejected the Justice Department’s effort to seize a family-ownedmotel due to what the judge said was a lack of a substantialconnection between the motel and the forfeitable crimes, thestatutes themselves and the weight of authority appear to indicatethat federal seizure of assets is a strong possibility for those that arefound to be in violation of federal money laundering, racketeeringor controlled substances laws. In essence, if a financial institutionwere to loan money to a marijuana-related enterprise and acceptinventory, proceeds or even commercial real estate as collateral,then such collateral would be subject to seizure, thereby causingsuch loan to be wholly unsecured. Similarly, cash deposits arisingfrom marijuana-related operations would also be a forfeiture risk. Even when a lender’s collateral consists of commercial property,and said property is leased to a marijuana-related enterprise, said collateral is subject to federal seizure.

In addition to the imposition of criminal sanctions and the seizureof its property, financial institutions need also consider that 12U.S.C. § 1818 provides for the very real possibility that theirstatus as insured depository institutions could be terminated bythe Federal Deposit Insurance Corporation (the “FDIC”) if said agency were to determine that transacting business with marijuana-related enterprises constituted an unsafe and unsound bankingpractice. Given that as recently as June, 2011 the U.S.Department of Justice articulated, in an official memorandum, aninclination to enforce the Controlled Substances Act against“persons who are in the business of cultivating, selling ordistributing marijuana and those who knowingly facilitated thoseactivities,” it is not unreasonable to assume the FDIC wouldconsider engaging in such transactions unsafe and unsoundpractices. This is especially true when the U.S. Department ofJustice’s memorandum also expressly stated that “[t]hose whoengage in transactions involving the proceeds of such activity mayalso be in violation of federal money laundering statutes and other federal financial laws.”

Another consideration that financial institutions need to keep inmind is that by virtue of the federal Bank Secrecy Act (31 U.S.C. §1501, et seq.), they are obligated to assist U.S. government agencies in detecting and preventing money laundering. Specifically, theBank Secrecy Act requires financial institutions to keep records ofcash purchases of negotiable instruments, file reports of daily aggregate cash transactions exceeding $10,000, and to reportsuspicious activity that might signify money laundering or othercriminal activities. In essence, financial institutions engaged inlending and/or depository relationships with marijuana-relatedenterprises have an obligation to report such customers to theFinancial Crimes Enforcement Network, which is a lawenforcement agency of the U.S. Department of Treasury. Clearly,this is an unworkable Catch-22. One can even imagine ascenario where a financial institution that voluntarily engaged inbusiness with such customers and then mandatorily reported such

activities pursuant to the Bank Secrecy Act couldbe subject to common law claims asserted by its customers.

Simply put, due the nature of federal law, there is noworkable way for financial institutions to transactbusiness with marijuana-related enterprises, nor isthere any workable way for such enterprises toprocure valid financial services. While certainmembers of Colorado’s legislature and anAmendment 64 task force appointed by GovernorHickenlooper have recently explored the idea of astate-owned bank or credit union devotedexclusively to the marijuana industry in Colorado,such a concept has been deemed unfeasible. Even astate-owned bank likely needs to be connected to theUnited States’ payment system. Given federalregulation of the payment system, checks from astate-owned bank could not be deposited in otherfinancial institutions, credit/debit cards could not beissued and funds could not be wired to/from otherfinancial institutions. In short, such a state-ownedbank would be an island unto itself and could onlyaccept cash deposits at only its own branches. Otherproblems with such an arrangement includeColorado’s constitutional prohibition against state-owned corporations, the amount of capitalnecessary to start a bank and operating without FDIC insurance.

In summary, because lending to, extending credit toand accepting deposits from marijuana-related enterprises remains a violation of federal law,financial institutions in Colorado are unlikely toengage in or continue relationships with persons or businesses that are involved, directly or indirectly, with such enterprises. This means thatlenders and borrowers alike should closely inspect thenature of their relationships and the uses of theircollateral, lest they be found to be in violation of federal law and/or have their collateral seized by federal authorities. Michael C. Payne, Esq. Otis, Coan & Peters, LLC 103 W. Mountain Ave., Ste. 200 Fort Collins, CO 80524 970-225-6700 (T) / 970-232-9927 (F) mpayne@nocolegal.com / www.nocolegal.com Denver - Fort Collins - Greeley

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IBC’s 82-ATM SURCHARGE FREE NETWORK! Updated March 2013

The Independent Bankers Network is IBC’s alliance of community banks that helps solidify your customer base by offering your customers access to 82 surcharge-free ATMs throughout Colorado and in Kansas.

As a member of the Independent Bankers Network, you waive surcharges to the customers of banks belonging to our network, while retaining the option to charge non-member customers who use your ATMs.

Our alliance means that community bank customers will remain with their community-based banks, yet be able to access a broad choice of surcharge-free ATM locations.

LOCATIONS Alamosa First Southwest Bank 720 Main Street Alamosa First Southwest Bank 3333 Clark Street

Bennett Valley Bank & Trust 110 Centennial Drive Berthoud Home State Bank 310 Mountain Ave.

Brighton Valley Bank & Trust 4900 E. Bromley Lane Brighton Valley Bank & Trust 30 N. 4th Avenue Brighton Valley Bank & Trust 2380 E. Bridge Street

Buena Vista Colorado East Bank & Trust 725 Hwy 24 Buena Vista Colorado East Bank & Trust 438 US Hwy 24 S

Canon City Canon National Bank 816 Royal Gorge Blvd. Canon City Canon National Bank 2101 Fremont Drive

Canon City Legacy Bank 1010 Royal Gorge Blvd. Center First Southwest Bank 2060 E Highway 112 Colorado City Canon National Bank 1 N. ParkwayColorado Springs Canon National Bank 3204 W. Colorado Avenue

Colorado Springs Canon National Bank 518 N. Chelton Road Colorado Springs Legacy Bank 1580 E. Cheyenne Mountain Blvd. Commerce City Valley Bank & Trust 6990 E. 72nd Avenue

Cortez Dolores State Bank 744 East Main Cortez First Southwest State Bank 1510 East Main

Dacono Colorado East Bank & Trust 801 Flying CircleDel Norte First Southwest Bank 555 Cedar Street

Denver Bank of Denver 530 S. Holly Street Denver Bank of Denver 810 E. 17th Avenue Denver Bank of Denver 405 16th Street

Denver Valley Bank & Trust 6171 N. Washington StreetDolores Dolores State Bank 101 6th Street

Englewood Front Range Bank 3594 S. Logan Fairplay Colorado East Bank & Trust 351 Hwy 285 Falcon The State Bank 7495 McLaughlin Road

Florence Canon National Bank 401 E. Main Street, Unit A Fort Collins Home State Bank 303 E Mountain Fort Collins Home State Bank 3227 Timberline

Fort Collins Home State Bank 2337 S. Shields Fort Morgan FMS Bank 1505 E Burlington (2 ATMs) Fort Morgan FMS Bank 520 Sherman Street Frederick Valley Bank & Trust 450 Oak Street

Granada Colorado East Bank & Trust 108 E. Goff Street Holly Colorado East Bank & Trust 101 N. Main Hudson Valley Bank & Trust 580 Dahlia Street Hugo First National Bank Hugo 321 4th Street

INDEPENDENT BANKERS OF COLORADO

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IBC’s 82-ATM SURCHARGE FREE NETWORK!LOCATIONS

Keenesburg Colorado East Bank & Trust 550 E. Woodward La Junta Colorado East Bank & Trust 310 E. 3rd

La Junta The State Bank 124Colorado Avenue La Salle Colorado East Bank & Trust 207 1st Avenue Lakewood Front Range Bank 13013 W. Alameda Parkway

Lamar Colorado East Bank & Trust 101 W. Pearl Lamar Legacy Bank 210 E. Olive Street Leadville First Mountain Bank 409 Harrison Avenue Limon First National Bank Hugo – Limon Branch 981 2nd Street Loveland Home State Bank 935 N Cleveland

Loveland Home State Bank 1355 E. Eisenhower Blvd Loveland Home State Bank 2695 W. Eisenhower Blvd Loveland Home State Bank 300 E. 29th Street Loveland Home State Bank 2842 SE Frontage Road Loveland Home State Bank 2000 N. Boise

Loveland Home State Bank 2842 SE Frontage Road (2 ATMs) Lyons Valley Bank & Trust 304 Second Avenue Mead Colorado East Bank & Trust 141 Main Street

Pagosa Springs First Southwest Bank 643 San Juan Pagosa Springs First Southwest Bank 249 Navajo Trail Drive Pueblo Canon National Bank 101 W. 5th Street Pueblo Canon National Bank 76 W. Dunlap Drive Pueblo Canon National Bank 2 Amherst Avenue Pueblo Colorado East Bank & Trust 1515 Fortino Avenu Pueblo Colorado East Bank & Trust 94 S. Tiffany Drive Pueblo Colorado East Bank & Trust 1219 S. Prairie Avenue Pueblo Legacy Bank 101 N. Main Street Pueblo Legacy Bank 101 N. Main Street (Drive-up) Pueblo Legacy Bank 730 Desert Flower Blvd. Pueblo West Legacy Bank 7 E. Spaulding Rocky Ford The State Bank 301 N. Main Street Severance Colorado East Bank & Trust 399 4th Avenue Springfield Colorado East Bank & Trust 1030 Main Street Strasburg Valley Bank & Trust 56641 Colfax Avenue Stratton Colorado East Bank & Trust 141 Colorado Avenue Westminster Valley Bank & Trust 11145 Sheridan Blvd. Wiley Legacy Bank 220 Main Street

Windsor Home State Bank 7499 Westgate Drive Yuma Colorado Community Bank 615 W. Eighth Street

Elkhart, KS Colorado East Bank & Trust – Elkhart 432 Morton Street Tribune, KS Colorado East Bank & Trust – Tribune Hwy 96 & Hwy 27

For information about how your bank can join our network, please call Heidi Saba at 303-399-8929 or heidi.saba@vantiv.com!

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SUPPORT THE IBC’S ASSOCIATE MEMBERS!Accounting/Compliance

BKD, LLP 303-861-4545Betzer, Call, Lausten & Schwartz LLC 303-296-2900Eide Bailey, LLP 303-986-2454Fortner, Bayens Levkulich & Garrison, PC 303-296-6033Iverson & Associates, LLC 303-949-7702Kennedy & Coe, LLC 970-685-3463Richey, May & Company, LLP 303-720-6131SMARTER risk management 816-728-2912Stockman Kast Ryan Co. 719-630-1186

Advertising*Grayco/a Division of AccuSource Solutions800-992-0304

Check Printing*Harland Clarke 800-525-8848

Computer Products/ConsultingAccuSystems 719-583-8004BankOnIt 405-605-3901Computer Services, Inc. 970-212-7104*FIS/ProNet 602-337-3371ITCS Consulting, LLC 303-586-1609Qwinix Technologies 303-459-2760

ConsultantsBKD, LLP 303-861-4545Betzer, Call, Lausten & Schwartz, LLC 303-296-2900The Baker Group 405-415-7200Bank Strategies 303-618-0056Eide Bailey, LLP 303-986-2454Expert Business Development 610-771-2121Fortner, Bayens, Levkulich & Garrison, PC 303-296-6033iHELP Private Student Loan Program 303-621-2533Iverson & Associates, LLC 303-949-7702Kennedy and Coe, LLC 970-685-3463Richey, May & Company, LLP 303-721-6131Three Way Business Loan Consultants 720-475-1480

Correspondent Banking ServiceBankers' Bank of the West 303-291-3700FHLBank Topeka - Denver Office 303-893-3452The Independent Bankers Bank 972-650-6000INTRUST Bank 800-732-5120

Data Processing21st Century Financial Services 866-398-2178Computer Services, Inc. 800-545-4274Fiserv 505-890-8449Harland Financial Solutions 800-815-5592*Integrated Bank Technology 303-308-9930Jack Henry Banking 417-235-6652

EFT/ATM/Card Processing/Merchant Services*Bankers’ Bank of the West 303-291-3700Harland Financial Solutions 800-815-5592*ICBA Bancard/TCM Bank 800-242-4770Jack Henry Banking 417-235-6652*PULSE 713-223-1400*Vantiv 303-399-8929

Equipment/Supplies*Grayco/a Division of AccuSource Solutions 800-992-0304Chubb 303-295-1066

Human Resources/Management and TrainingExpert Business Development 610-771-2121

Insurance/Benefit ServicesBank Financial Services Group 303-489-1844Central States Family of Companies 303-290-8901Clark Consulting 888-728-3265Financial Designs Ltd. 303-832-6100ICBA Reinsurance 888-790-6615The Kansas Bankers Surety Co. 785-228-0000*Travelers** 720-200-8416

Investments/Trust ServicesColorado Housing and Finance Authority 303-297-7329D A Davidson 303-764-6021FTN Financial 800-456-5460Gill Capital Partners 303-296-6260*ICBA Securities 800-422-6442Investment Centers of America 701-250-3234St. Charles Capital 303-339-9099The Baker Group 405-415-7200

Law FirmsBieging Shapiro & Barber (IBC Counsel) 720-488-0220Fairfield and Woods, PC 303-894-4416Markus Williams Young & Zimmermann, LLC 303-830-0800Otis, Coan & Peters, LLC 970-225-6700Rocky Mountain Law Group, LLC 303-597-0202Rothgerber, Johnson & Lyons, LLP 303-623-9000Sherman & Howard, LLC 303-299-8384Spencer Fane & Grimshaw, LLP 303-839-3800Stinson, Morrison & Hecker, LLP 303-376-8400

IBC Lobbying and Public RelationsThe Capstone Group (IBC Lobbyists) 303-860-0555

MarketingO’Connell Consulting Group 303-795-3539

Other Products and Services1st Reverse Mortgage USA 303-854-3035Colorado Lending Source 303-657-0010*DataCard Group 303-754-2054The City of Denver / Office of Economic

Development 720-913-1521FIMAC Solutions 303-320-7597Financial Forensic Services 303-974-5610*ICBA Mortgage 800-253-5356Motel Man Management & Receivers 303-422-4298Promontory Interfinancial Network 303-706-9265

** Offered through IBC-Insurance, LLC, an insurance agency affiliate of the IBC – also offering loan protection plans; fee income generating plans; and St. Paul’s SelectOnesm Insurance Program. Call 303-832-2000 for more information.

*IBC Preferred Providers