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INDEPENDENT BANKER

THE TEXASI N D E P E N D E N T B A N K E R S A S S O C I A T I O N O F T E X A S

NOVEMBER/DECEMBER 2017VOLUME XLIII, NO. 6

®

Who Is That Masked Man?

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November/December 2017 www.ibat.org 3

INDEPENDENT BANKER

THE TEXAS

®

®

NOVEMBER/DECEMBER 2017VOLUME XLIII, NO. 6

COLUMNS 4 Up Front

CHRISTOPHER L. WILLISTON, CAE

6 General Counsel’s Corner KAREN M. NEELEY

9 Services Spotlight RONNIE A. MILLER

10 The Compliance Guy KELLY GOULART, CRCM CAMS CIA

DEPARTMENTS12 News

25 People

28 Calendars

29 New Members

29 Index of Advertisers

30 Communities

NAYLOR ASSOCIATION SOLUTIONS 5950 NW 1st Place, Gainesville, FL 32607, 800-369-6220, www.naylor.com Project Support Specialist Alyssa Woods, Publisher Heidi Boe, Sales Manager Douglas Swindler, Publication Director Doug Smith, Marketing Account Specialist Sabine Borneman, Editor Jennifer Lipner, Designer Deb Churchill Basso, Advertising Sales Reps Amy Gray, Tracy Jones, Douglas Smith

© 2017 Naylor, LLC. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. PUBLISHED OCTOBER 2017/IBT-S0617/8856

INDEPENDENT BANKERS ASSOCIATION OF TEXAS 1700 Rio Grande Street, Suite 100, Austin, TX 78701, 512-474-6889, www.ibat.org

Christopher L. Williston, CAE, President and CEO, [email protected]; Christopher L. Williston VI, CAE, Executive Vice President, [email protected]; Bonnie Kankel, Editor, Vice President – Administration & Corporate Communications, [email protected].

FEATURES 14 The Man Behind the Mask

Joe Kim King, Brady National Bank

17 Best Practices: Diagnosing Your Executive Benefit Needs ROB BARTON

20 Amazon Ate My Bank: One Man’s Vision for the Apocalyptic Future of Fintech CHRISTOPHER L. WILLISTON, VI, CAE

23 Look Before You Leap: Using Simulations in a Decision-Making Framework LESTER MURRAY

page 23

page 14

4 The Texas IndependenT Banker November/December 2017

U P F R O N T

HeroesCHRISTOPHER L. WILLISTON, CAE IBAT PRESIDENT AND CHIEF EXECUTIVE OFFICER

IT WAS A beautiful fall Sunday. As was typical then, I

had just finished a round of golf and headed toward

the house. In the faint distance I could hear the

sound of fire engine sirens racing toward their

destination. I had no idea they were heading to

my house.

That was, of course, until I rounded the cor-

ner and headed down the cul-de-sac and saw the

smoke billowing from our kitchen window. My son

was outside screaming and waving his arms franti-

cally for his mother to come home from visiting a

neighbor up the street.

Thank the good Lord for Brent. He had already

rushed inside from across the street with a fire

extinguisher, working mightily to contain the flames

on the box of books that was placed on the burners

and accidentally ignited. Once the firemen arrived,

all that was left was the cleanup of the white pow-

der residue left by the extinguisher, and worse

yet, the smoke smell that seemed to permeate the

entire house.

Neighbor after neighbor soon appeared at

our door to offer a helping hand. Several brought

fans. Others brought brooms and mops. Still oth-

ers offered to shelter us until we could tolerate

the lingering odor left behind. Heroes, all of them.

That episode, as traumatic as it was, pales in

comparison to what I know my many friends down

on the Gulf Coast and the 31 counties must be deal-

ing with in the wake of Hurricane Harvey. Stories

have poured into the IBAT offices of bank branches

destroyed, people and pets being displaced and,

of course, loss of personal belongings.

How gratifying it has been to watch the stories

of great heroism. Volunteers from across the State

and throughout the Nation who raced toward the

affected areas with monster trucks and flat bottom

boats to search for anyone needing to be rescued.

Or truck after truck, and flatbed trailers, rushing

bottled water and other supplies to evacuation

centers throughout Texas.

Now the cleanup begins. This cleanup will be

measured in years, not days.

Thoughts immediately turned to how to help

and how to make a difference with so many in need.

It was foolish to think beyond what little we can do

for our friends and colleagues in the community

banking industry. In collaboration with the Texas

Bankers Association, we decided to begin a fund-

raising campaign to help storm-ravaged banker

families.

At this writing, almost $1 million has been

received into the Texas Bankers Foundation where

100 percent of the proceeds ultimately collected

will be distributed as determined by the TBA and

IBAT Executive Committees. We have yet to learn

just how many of our banker friends have been

affected, but it is gratifying to see the industry

unite and step up in such a big way to help our own.

Nothing we can do can totally alleviate the pain

and suffering inflicted on so many. But it is great

to know that we can play a very small part in help-

ing our fellow bankers rebuild their lives, just as

we have done when other disasters have affected

those in our industry.

Besides the money, our colleagues will need our

continued prayers. We pray that their recovery is

swift so that they may begin again.

Tomorrow it could be you or me who will need

the help of others. It might be as simple as clean-

ing up fire extinguisher residue or eliminating the

smell left behind, or as traumatic as experiencing

a total loss. But it is great to know that there are

always friends to offer a helping hand.

Today, it is our turn to be heroes. ■

Contact IBAT’s president and CEO—also known as

“The Boss”—at 512-474-6889 or [email protected].

At this writing, almost $1 million has been received into the Texas Bankers Foundation where 100 percent of the proceeds ultimately collected will be distributed as determined by the TBA and IBAT Executive Committees. We have yet to learn just how many of our banker friends have been affected, but it is gratifying to see the industry unite and step up in such a big way to help our own.

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G E N E R A L C O U N S E L’ S C O R N E R

Year-End Checklist – 2017KAREN M. NEELEY IBAT GENERAL COUNSEL

• Annual report. This is prepared from

year-end call report data and should be

available to your shareholders as well as

the general public no later than March 31,

or 5 days after it is provided to sharehold-

ers, whichever is earlier.

• Proxy statement and notice of annual

shareholders meeting. Many banks have

their annual shareholders meeting in

January. If so, you need to prepare your

proxy statement, proxies, and notice

of shareholders meeting for mailing in

December.

• Identifying executive officers. Under

Regulation O certain officers are automati-

cally considered executive officers unless

the officer is excluded by a resolution of

the board of directors from participation

in major policy making functions. Do this

at the last meeting of the year or no later

than the first meeting of the next year.

• Identifying insiders. At the first board

meeting of a new board (often in January),

be sure to require directors and executive

officers to identify their related interests

as defined in Regulation O. Also, deter-

mine whether there are any “affiliates”

due to common control which would be

subject to Regulation W.

• Renew registration of residential

mortgage loan originators. The annual

renewal period means November 1

through December 31 of each year.

YEAR-END IS a time for reflecting on the successes and challenges of the prior year. For bankers, it is also a time to

complete various reports and reviews. The following is intended to help get you started on your own checklist.

It is not intended to be exclusive or to fit all situations. Many of the reports listed require use of year-end data.

Therefore, they will necessarily be prepared in January.

files are updated with current financials,

audits, SSAE-16, business continuity plans

and other data (as appropriate). Don’t for-

get to obtain current evidence of your ven-

dor’s liability insurance coverage including

General Liability, Auto Liability, Workers

Compensation AND Fidelity. If they’re

providing professional type services for

your bank (accountants, attorneys, secu-

rity companies, etc.) you should also ask

for evidence of their Professional Services

Liability/Errors & Omissions coverage.

• Review security devices and compli-

ance with Bank Protection Act. The

board should consider the adequacy of

the written security policy. Be sure you

are in compliance with the multi-factor

authentication requirements for online

banking and IVRs. The security officer

must report at least annually to the board.

• Perform Enterprise Risk Management

assessment.

• Measure inherent cyber risks and cyber-

security preparedness.

• ACH rule compliance audit. Be sure that

this is completed by December 1 each year.

• Red flag compliance report. An annual

compliance report is required by this

FCRA rule.

• Annual audit. Under the FDIC Improvement

Act of 1991, banks with $500 million

or more in total assets are required to

have an annual independent audit. An

• Year-end reports to IRS and customers.

There are a wide number of reports filed

on forms 1099 and 1098 reflecting inter-

est earned and interest paid, and W-2s

for employees, as well as other reports

such as property taken in satisfaction of

indebtedness, discharged debt, and the

like. The customers must receive their

reports by January 31 with the IRS receiv-

ing its report by February 28. Thus, the

bank’s data processing system must be

prepared to generate these reports at the

beginning of the year.

• Billing error resolution notices. Both

Regulation E and Regulation Z require

annual billing error resolution notices

or an alternative summary statement with

each periodic statement. Don’t forget that

this applies to payroll cards, too!

• Update and review appraisals where

appropriate. Don’t forget appraisals of

ORE.

• Review contingency plan, including elec-

tronic data processing arrangements. Be

sure that it includes pandemics like the

avian flu. The board should make sure that

this plan is current and meets the needs of

the institution as well as the requirements

of the pertinent regulations. Don’t forget

the Business Impact Analysis.

• Review third party vendor due diligence.

Remember that this is not a one-time

activity. Rather, be sure that your vendor


independent audit committee of outside

directors should select the auditor. Smaller

banks may also desire an outside audit and

should select their auditor.

• Policies and procedures. Many banks

review and re-approve all policies and pro-

cedures annually. The best approach is to

update if there are changes in the laws or

regulations or in the bank’s products that

would necessitate such updates. Also, if

the board wishes to re-approve all policies

every year, then it is helpful to parcel these

out through the year rather than approve

all at once at year end!

• Training. Be sure that all required train-

ing has been accomplished for the year.

Directors should receive fair lending and

other training. Again, it is better to allocate

this throughout the year rather than attempt

to cram them all into year-end.

• Review correspondent relationships.

Review your exposure to correspondent

banks; obtain copies of correspondent

banks’ financial statements and evaluate

capital condition; set exposure limits.

• Record disposal/retention. Using an appro-

priate record retention schedule in line with

federal requirements, the bank should prop-

erly store records required to be maintained

and destroy records which have expired.

Remember that FIRREA has a 10-year stat-

ute of limitations on most crimes affecting

banking. Thus, some records will need to

be retained for a 10-year period. Also, the

Customer Identification Program and BSA/

AML regulations have some specific (mostly

five-year) record retention requirements.

(Texas law requires banks to retain check

information for seven years if statements

are truncated.) However, most records can

immediately be put on microfilm, micro-

fiche, or optical disk to reduce storage

needs. Update your program to handle

e-mail as part of your bank’s records. The

Dodd-Frank Act focuses on repayment abil-

ity with regard to residential mortgages.

Violation of this Truth in Lending require-

ment could create liability for the life of

the mortgage loan. Therefore, consider

updating your record retention schedule

to include maintenance of the underwriting

file.

• Set dividend to shareholders. The bank

board of directors should review its divi-

dend policy and its financial condition to

determine whether a dividend can legally

be paid under appropriate guidelines. If so,

then the dividend should be set aside for the

year with arrangements made for payment

to shareholders. This would also be a good

time to review, and, if necessary, change

your capital adequacy policy.

• Review schedule of fees and charges.

While this is not required by law, it is a

good idea to periodically review bank pric-

ing. This is a good time to consider your

pricing strategy for accounts. But don’t

limit this review to deposit account fees

and charges. Be sure that you have good

loan rate sheets. While these should really

be evaluated more frequently,

be sure that they are

updated at least annually

and are consistent with

fair lending practices.

• Annual personnel

evaluations. Again, this

is not required by law.

However, it is a good idea

to perform annual evalu-

ations of officers. (Annual

reviews of employees have

been going out of favor in

the HR community.)

• Year-end bonus.

Review incentive

compensation

and bonus


programs. Check compliance with the mortgage anti-steering

rules in Regulation Z. MLO rules permit up to 10% of MLO’s

aggregate comp to include a non-deferred profits based plan (e.g.

year-end bonus).

• Review insurance coverage for adequacy. This includes not only the

directors’ and officers’ liability policy but also property & casualty

policies, trust and mortgage errors and omissions, workers’ com-

pensation, and the entire range of appropriate insurance coverage

for the institution.

• Review pension plan and take appropriate actions for the year. If

your bank has a pension plan, the plan committee should meet and

review investments as well as other reporting requirements for the

year.

• Holidays. National banks have the ability under federal law to

either abide by or ignore state holidays. State banks have the

same flexibility. The board of directors should set the holidays

by resolution. The best time to do this is at the December meet-

ing for the next calendar year. You may wish to use the Federal

Reserve holiday calendar. Be sure to decide whether Saturdays

and Sundays will be holidays, limited banking days, or full service

days.

The Federal Reserve standard holiday schedule mandates that

if January 1, July 4, November 11, or December 25 falls on a

Sunday, the following Monday will be observed as a holiday.

If January 1, July 4, November 11, or December 25 occurs on a

Saturday, the preceding Friday will not be observed as a holiday.

• Review and update CRA Notice and Statement. Note: A CRA Statement is not required by the regulations. If you choose to include one in your public file, do so for the benefit of community requestors—not the examiners.

• Prepare statement of bank policy with regard to civil rights and consumer compliance.

• Review and approve security policy. Appoint security officer.

• Review and approve emergency preparedness plan.

• Review and approve Affirmative Action Plan for EEOC (written plan is necessary if 50 or more employees). For other banks, consider adopting diversity policy and statement with regard to women and minority employees and vendors. Currently, this is voluntary.

• Review insurance coverage, including:

• Automobile (Owned, Hired & Non-owned or Repossessed)

• Workers Compensation

• Bankers Blanket Bond (Fidelity)

• Comprehensive General Liability

• Excess Liability (umbrella)

• Directors and Officers Liability (including Company Reimbursement and Entity Coverage)

• Bankers Professional Liability including Lender’s Liability

• Trust Department Errors & Omissions

• Fiduciary Liability

• Employment Practices Liability – including 3rd Party Harassment

• Mortgage Protection / Mortgage Impairment / Mortgage E&O

• Safe Deposit Liability and if desired, Protection for Customer’s Property in Safe Deposits

• Data Processing Equipment – damage to owned or leased equipment – hardware & software, including damage by virus

• Cyber Liability – damage to 3rd parties due to your electronic transmissions

• Property Insurance for Owned Bank Premises (including buildings, contents, ATMs, motor banks, etc.)

• Valuable Papers & Records

• Fine Arts

• OREO – Owned Real Estate – foreclosures for property AND liability exposures to loss

• Force Placed Insurance – real estate as well as other loan collateral (autos, boats, etc.)

• Employee Benefits (e.g. group term life)

• Group Creditor

• Review audit

• Review regulatory exam(s)

• Approve appraisers, auditors

• Review and approve policies and procedures

• Appoint compliance officer and BSA/AML officer

• Organize board committee structure and fee structure

• Elect officers and approve salaries

• Update strategic plan

• Set correspondent bank exposure limits

• Review vendor relationships and updated due diligence

• Complete ACH rule compliance audit by December 1

continued on page 22

882746_First.indd 1 8/23/17 9:24 PM

Annual Board Meeting Checklist


Take the Headache Out of Social Media Regulations with WatchDOG® Social ComplianceRONNIE A. MILLER BOARD CHAIR, IBAT SERVICES INC.

S E R V I C E S S P O T L I G H T

SOCIAL MEDIA PROVIDES companies the unique

opportunity to create meaningful relationships

with customers. During its infancy, such social

media sites as MySpace and Facebook were

regarded by many as a passing trend. Now the idea

that social media can still be considered a “phase”

is laughable, and more than a few naysayers are

scrambling to make up for lost time.

Because of its incredible popularity, social

media has opened a whole new world to compa-

nies hoping to capitalize on the exposure. Financial

institutions certainly have not been immune to

this digital push. However, certain regulations like

the FFIEC’s Social Media Risk Guidance, Truth in

Lending Act, GLBA and other regulatory guidelines

have tacked on additional requirements for social

media activity. This comes as no surprise, as banks

are one of the most highly regulated industries in

the United States.

While producing content around products and

services on social platforms offers proven rewards,

complying with the industry regulations surround-

ing them can be tricky. Promotional product infor-

mation, lending terms and various other posts—if

not carefully reviewed on a regular basis—have

the potential to trigger violations with dire conse-

quences ranging from fines to an enduring negative

brand image among customers.

Regularly engaging in a social media risk

assessment is the most proactive approach to

mitigating these compliance liabilities. Yet per-

forming routine assessments on your own can be

a costly operational burden. That’s why the solu-

tion, WatchDOG® Social Compliance from CSI, an

IBAT Endorsed Service Provider, has become an

industry standard.

WatchDOG Social Compliance enables banks

to remain compliant with the various social media

restrictions imposed by regulators. Catered to the

unique needs of the financial industry, WatchDOG

security software allows banks to easily manage

and maintain these compliance standards, which

saves time, money and concerns regarding poten-

tial legal and ethical risks.

While producing content around products and services on social platforms offers proven rewards, complying with the industry regulations surrounding them can be tricky.

Banks must pay close attention to what is com-

municated via social media, for both compliance and

brand reputation purposes. In addition, archiving all

social media interactions (whether it be Facebook,

LinkedIn, Twitter, etc.) is one of the most important

regulatory requirements with which to comply. Within

the WatchDOG solution, social media data is archived,

and institutions have the ability to produce instant

reports for managers, auditors, board members and

regulators.

Further, having the ability to track all social media

interactions using one program not only aids in com-

pliance, but also makes sense from a marketing per-

spective, as it lets institutions view and chart brand

reputation on all social media platforms. WatchDOG

allows users to search their brand or products on

social media to gauge brand reputation among users

from any Internet-enabled device.

Finally, the software provides for an approval pro-

cess to ensure all posts meet regulatory guidelines.

For those less familiar with social media platforms

and the strict regulations that surround them, compli-

ance can be a major, costly operational hardship. Find

out if CSI’s WatchDOG Social Compliance automated

platform can help your financial institution get the

most out of the social media conversation. ■

Ronnie Miller, board chair of IBAT Services Inc., is

president and chief executive officer of Community

National Bank in Hondo.

©iStockphoto.com/adventtr

T H E C O M P L I A N C E G U Y

(More) Final Rules on TRIDKELLY GOULART, CRCM CAMS CIA IBAT REGULATORY COMPLIANCE MANAGER

IN JULY, THE Consumer Financial Protection

Bureau (CFPB) issued final rules for TRID.

These “final” rules actually finalize the rules

proposed by the CFPB in July 2016. In the more

than 500-page release, the CFPB stated that

this final rule “memorializes the Bureau’s infor-

mal guidance on various issues and makes

additional clarifications and technical amend-

ments.” At the same time the CFPB issued this

“final rule,” it issued a proposed rule on the so

called “Black Hole” regarding a creditor’s ability

to issue a revised Closing Disclosure (CLoD)

more than four days before closing and issue

a revised CLoD within three days of a valid

changed circumstance – more on that below.

So what exactly was finalized and when are

these new rules effective? Let’s start with the

effective date – which for mandatory compli-

ance is October 1, 2018. However, creditors

are free to voluntarily comply 60 days after

being published (August 11, 2017) in the Federal

Register. Actions taken before October 1, 2018

that weren’t a violation under the original TRID

rules by lenders acting in “good faith” may

become a violation after October 1, 2018. And

I’m not sure why anyone would want to wait

until October 1, 2018 with a practice that cre-

ates uncertainty at best.

Back to what was “finalized.” The 560 pages

offer a great deal of comment and nuance for

creditors in general, and there are a number of

important points for community banks. Here

are the ones I found most relevant – some of

which may be addressed by a creditor’s forms

provider or platform processor, but compliance

officers should verify the changes in policies

and procedures.

• Clarifies that percentage disclosures are

rounded to three decimal places but no trail-

ing zeros to the right of the decimal place.

• Clarifies that a lender may issue a revised

Loan Estimate (LE) every time informa-

tion is updated, even if there is no changed

circumstance.

• As a corollary to the point above, the final rule

permits a creditor to use the initial LE as the

benchmark for tolerance comparison purposes

instead of intervening LEs and CLoDs.

• Clarifies that the expiration date requirement

for the LE is extended if the creditor offers a

longer period.

• Clarifies that if a lender does not provide a

Settlement Services Providers List, all related

charges will be subject to a 10 percent toler-

ance threshold.

• Clarifies that a revised LE or CLoD, as appli-

cable, must be issued when the rate is locked

even if there are no changes to the disclosed

terms and charges. In other words, terms and

charges are the same before and after the rate

lock.

• Clarifies that the Total of Payments (TOP)

disclosure does not include specified seller,

lender, or paid by other fees as disclosed in

the CLoD.

• Establishes that the TOP disclosure accuracy

tolerance is based on the finance charge toler-

ance – meaning an overstated TOP is accurate.

• Clarifies that for loans subject to the right of

rescission, only loan applicants are listed on

the LE and as borrowers on the CLoD – not

persons with rescission rights.

• Establishes that a creditor may offset fees and

charges disclosed on the LE and the CLoD if

Actions taken before October 1, 2018 that weren’t a violation under the original TRID rules by lenders acting in “good faith” may become a violation after October 1, 2018. And I’m not sure why anyone would want to wait until October 1, 2018 with a practice that creates uncertainty at best.


November/December 2017 www.ibat.org 11 886613_Editorial.indd 1 9/25/17 7:01 PM

the creditor knows at the time it issues the

LE or CLoD that the seller will be paying

some or all of the fee.

• Clarifies that prepaid interest is included in

the Total Interest Paid (TIP) disclosures.

• Clarifies that a principal curtailment is iden-

tified as a “principal reductions.”

Proposed Rule on the “Black Hole”The so-called “black hole” is the issue

about a creditor’s ability to issue a CLoD

instead of an LE for changed circumstance

that may take place four days or more before

closing, and issue a revised CLoD if there is a

changed circumstance more than three days

before closing. Here is what the CFPB stated

in the proposal.

As noted above and described in the pro-

posal, proposed comment 19(e)(4)(ii)-2

was intended to clarify that the reference to

Closing Disclosures required by §1026.19(f)

(1) in existing comment 19(e)(4)(ii)-1 refers

to both the initial Closing Disclosure required

by §1026.19(f)(1) and to any corrected

Closing Disclosures provided pursuant to

§1026.19(f)(2). Although the Bureau recog-

nizes that the text of proposed comment

19(e)(4)(ii)-2 could plausibly be interpreted

as also removing the existing four-business

day limit for providing corrected Closing

Disclosures to reset tolerances, the preamble

to the proposal does not describe that the

Bureau intended such a change.

…snip

In particular, the Bureau recognizes that the

current rules may lead to circumstances under

which creditors might be unable to provide

revised estimates for purposes of resetting

tolerances where the Closing Disclosure has

already been provided and there are four

or more days between consummation and

the time the revised version of the disclo-

sures is required to be provided pursuant

to § 1026.19(e)(4)(i). The Bureau believes,

however, that before finalizing a rule that

addresses this issue it is advisable to propose

more explicit language and to seek comment

so that stakeholders who understood the pro-

posal in accordance with the Bureau’s intent

will have the opportunity to provide their

perspectives on this issue.

While this is only a proposal, it appears

that based upon the language above, the

CFPB never intended for creditors to be

able to issue a CLoD instead of an LE for

changed circumstance that may take place

four days or more before closing, and issue

a revised CLoD if there is a changed circum-

stance more than three days before closing.

The “black hole” proposal issued with

the TRID final rule does provide that “under

the current proposal, creditors could use

either initial or corrected CLoD to reflect

changes in costs for purposes of deter-

mining if an estimated closing cost was

disclosed in good faith, regardless of when

the Closing Disclosure is provided relative

to consummation.”

There you have it – until the next set

of “final” rules. If you have any questions,

comments, or concerns, feel free to email

me at [email protected]. ■

Kelly Goulart, CRCM CAMS CIA, is IBAT’s regu-

latory compliance manager. Contact him at

512-275-2231 or [email protected].


Edwin Edward Zapalac, 88, of Flatonia passed away on August 16, 2017.

Zapalac served in the U.S. Navy for four years during the Korean War. He

graduated from Corpus Christi College Academy and received a Bachelor

of Business Administration from North Texas State College (now UNT).

He worked for Flatonia State Bank, Central Texas Bank and State Bank

for 48 years, serving as president for 20 of those years. Zapalac was

actively involved in his community and in the banking industry, supporting

Independent Bankers Association of Texas and Texas Bankers Association,

and he was a founder and was acclaimed to have put the “z” in Flatonia’s

annual festival, Czhilispiel.

Zapalac is survived by his wife of 60 years, Gretchen; sister Jeanette

and her husband Ervan Zouzalik; sister Mary Ann and her husband Victor

Tichacek; daughter Renee and her husband Kenneth Pavlica; daughter

Beverly and her husband Kenneth Ponder; son Thomas and his wife Melodye

Zapalac; son David Zapalac; and son James and his wife Melissa Zapalac. He

is also survived by numerous grandchildren, great-grandchildren, nephews,

nieces, other family and friends.

John Currie, 86, of Big Spring, died August 24, 2017.

Currie graduated from Texas Christian University in

1951 with a business degree and completed the School

of Banking Program from the University of Wisconsin in

1957. He was employed by The State National Bank of Big

Spring for more than 60 years. He was active in a number

of banking organizations and was an organizing director of

Texas Independent Bank in Dallas and IBAT Bond Trust in

Houston. Currie was also active in numerous community

organizations through the years. Where tax money was

spent, he was never reluctant to speak up against fiscally

imprudent proposals.

Currie is survived by his wife of 65 years, Ruth of Big

Spring; four children, Carol, Bob, Henry and Tom; seven

granddaughters; seven great-grandchildren; and sister, Ann

McComb of Austin. He was preceded by his parents and

two grandsons.

N E W S

In Memoriam

Centennial BANK Donates Bank Building to City of PlainviewCentennial BANK announced that it will donate its banking center in

downtown Plainview to the City of Plainview. The 43,000-square-foot,

multi-million dollar building will house all of the city’s municipal services

under one roof. Centennial BANK will continue to operate out of the

facility while a new, state-of-the-art community banking center is built.

“This is an exciting day for Centennial BANK, our employees and the

City of Plainview,” said Matt Kelley, Centennial BANK Panhandle and

South Plains market president. “This community has supported us since

1934, and we are ecstatic to be able to reinvest in Plainview by making a

contribution of this magnitude to the city and the citizens.”

Discussions between Centennial BANK leadership and City of

Plainview officials began in 2012. City officials had been exploring

options to consolidate their municipal operations into one build-

ing. Banking operations will continue as usual for now at the

downtown banking center while plans for renovation, construction

and relocation continue between the BANK and city officials. The

building’s transition from Centennial BANK to the City of Plainview

is not expected until the fall of 2018.

IBC Named to Forbes Most Trustworthy Financial Companies List

Forbes named International Bancshares Corporation (IBC), an approxi-

mately $12 billion multi-bank financial holding company based in

Laredo, one of “America’s 50 Most Trustworthy Financial Companies”

in a survey commissioned by the magazine. With an Aggressive

Accounting and Governance Risk score of 92 out of a possible 100

and an average score of 88 over the last four quarters, IBC made the

same list in 2012 and 2014.

“International Bancshares Corporation is proud of its long history

of success, which has inspired confidence among its customers and

shareholders,” said Dennis Nixon, International Bancshares Corporation

chairman. “We appreciate that Forbes recognizes International

Bancshares as one of America’s most trustworthy financial companies.”

IBC Bank and Commerce Bank are divisions of IBC, with 192 facili-

ties and more than 297 ATMs serving 87 communities in Texas and

Oklahoma. In 2016, IBC celebrated its 50th anniversary. IBC Bank’s

slogan, “We Do More,” reflects the bank’s dedication to the growth

and success of both its customers and the communities it serves. IBC

was ranked 46th on Forbes’ 2017 list of “100 Best Banks in America.”


Banker’s Toolbox Launches Due Diligence Manager

Commerce Street Capital Supports Small Business

PULSE Study Finds Debit Fraud Loss Rates Decline

Banker’s Toolbox, Inc. recently launched

its Due Diligence Manager solution for

beneficial ownership. This extension of

the existing BAM+ platform includes fea-

tures such as a flexible question builder

and automated periodic risk reviews.

“Beneficial ownership as the ‘fifth pil-

lar’ for anti-money laundering programs

represents the most significant regula-

tory challenge to community financial

institutions since the USA PATRIOT Act in

2001,” said John Meyer, Banker’s Toolbox

chief product officer. “It is our role as

compliance partner for our family of

customers to assist in these challenges.”

Due Diligence Manager can be

deployed both within the Banker’s

Toolbox BAM+ solution or as a stand-

alone solution to meet the requirements

of beneficial ownership. Banker’s Toolbox

also provides consulting services for

Customer Due Diligence business pro-

cesses, policies, procedures and calibra-

tion. All covered financial institutions are

required to comply with the final rule by

May 11, 2018.

The 2017 Debit Issuer Study, commissioned by PULSE, found that

U.S. financial institutions substantially increased issuance of chip

debit cards in 2016 and experienced reduced fraud losses. Since the

fraud liability shift for debit transactions took effect in 2015, around

80 percent of U.S. debit cards have been converted to chip cards.

Results also show that fraud loss rates dropped by nearly 30

percent, although it continues to be a challenge with an estimated

$900 million in debit card fraud in 2016.

“The financial services industry has taken a number of measures that

likely impacted the reduction in fraud losses for debit card issuers – includ-

ing conversion to chip debit cards, greater use of tokenization in mobile

commerce and continued investment in fraud-mitigation solutions,” said

Jim Lerdal, PULSE vice president of fraud and risk management. “It is a

balancing act because declining potentially fraudulent transactions could

lead to ‘false positive’ fraud identification, which can frustrate account

holders and potentially drive them to other methods of payment.”

Commerce Street Capital, LLC and the Small Business Investor Alliance (SBIA) gained

two wins with the unanimous U.S. House of Representatives passage of the Small

Business Investment Opportunity Act and the Investing in Main Street Act. Both bills

will strengthen the Small Business Investment Company (SBIC) program and increase

the amount of capital available for investment into small businesses. Commerce Street

Capital has raised more than $757 million for SBIC funds in seven years.

“Commerce Street has and will continue to serve an instrumental role in working

with the SBIA on the bills,” said Bobby Hashaway, Commerce Street Capital executive

vice president and chief operating officer. “Many of our banking clients have a strong

interest in supporting small business funding by making greater investment commit-

ments to SBICs, but have been constrained by an outdated statutory cap within the

Small Business Investment Act of 1958.”

In 2016, Texas-based businesses that received SBIC financing supported nearly

11,000 employees. Additionally, SBICs have invested more than $2.9 billion in Texas

over the last 10 years.

JMFA Approved as Registered CPE SponsorJohn M. Floyd & Associates (JMFA) has been certified by the National Association of

State Boards of Accountancy to be a sponsor of continuing professional education (CPE)

through the JMFA Academy.

All Academy sessions are free and offered exclusively to JMFA Overdraft Privilege®

clients at the company’s Houston training facility.

Through the Group-Live sessions, Academy attendees receive effective strategies

for maintaining compliant overdraft practices, and improving performance and service

results. Upon completion, industry professionals can receive up to nine hours of CPE

credit toward maintaining their professional certification level.

“Continuing education programs through the JMFA Academy are designed to provide

our clients with high-quality professional development and instruction to help them

improve performance and increase accountholder satisfaction through a fully compli-

ant overdraft service,” said John M. Floyd, JMFA chairman and chief executive officer.

“To reflect our commitment to excellent training and client support, all sessions are

facilitated by the company’s foremost overdraft program compliance and implementa-

tion experts.” ■

C O V E R S T O R Y: M E E T J O E K I M K I N G

Kim has been a long-time supporter of IBAT, and in October he was elected to chair the

association for 2017-2018. In this article we get to know a little about our new chairman and

his thoughts on the future of IBAT and the banking industry in general.

IBAT: So, Kim, tell us about the King family.

King: My wife Robin was raised in Brownfield, Texas and I was raised in Brady. We met

while attending Texas Tech University and married in 1976. We then moved to Bryan/College

Station, where Robin received her undergraduate degree and I completed my masters. I have

worked in banking since 1980 and Robin is a retired schoolteacher.

We have three sons: Riley, born in 1980; Montie, born in 1985; and Brantley, born

in 1989.

IBAT: Describe how you arrived at Brady National and expanded to other Texas locations.

King: After college, we moved back to Brady in 1980 and I took a job at Brady National

Bank. In 1984 we moved to Lockney, where I took a job with the First National Bank in

Lockney. In 1987 I was transferred to the First National Bank of Plainview. We returned to

Brady in 1994, and I went back to work at Brady National.

We were fortunate to be able to purchase the Brady National Bank — becoming the major

stockholder — and I became president & CEO. We acquired a Bank of America branch in Brady,

including the building which we sold. It is now occupied by the City of Brady. We acquired the

First National Bank of Ballinger in 1997. In 1999 we had the opportunity to acquire Citizens

Bank, Knox City, which included a branch in Abilene. We flipped the charter to establish the

main bank in Abilene and branch in Knox City. In 2004, we established the Bank of San Angelo

as a branch of the First National Bank of Ballinger. Also in 2004, we purchased the National

The Man Behind the MaskJoe Kim King, Brady National Bank


JOE KIM KING, like so many other IBAT members, is a banker and a

rancher. Kim’s father was a rancher and veterinarian, and Kim planned

to follow in his footsteps. He received his Bachelors in Animal Science

from Texas Tech University (where he also served as a masked rider,

the school’s mascot). After earning his Masters in Agriculture from

Texas A&M University, Kim decided to pursue a career in banking.

American Bank in Uvalde (and renamed it

Uvalde National Bank).

We sold the Citizens Bank in 2009, and sold

the Uvalde bank in 2013.

Most recently in 2013, we expanded into

the Fort Worth market with a loan production

office, FNBB Texas, with my oldest son Riley

as president.

The banks in our holding company, Texas

Country Bancshares, Inc., currently have com-

bined assets of $265 million.

IBAT: How would you define your bank’s

culture and mission?

King: “Satisfying Needs and Building

Relationships” best defines our mission. Our

culture is built around personal service, a will-

ingness to help anyone who walks in the door

and a desire to do what is in the best interest of

our customers or prospective customers. We

have developed a banking family environment

with an inherent goal of delivering excellent

service in a friendly fashion. In addition, we

make it a priority to support our community

in every way we can and incorporate this

objective into our marketing strategy.

IBAT: Describe the Brady market and how

that has influenced your loan portfolio.

King: The Brady market is fairly stable

and typical of a rural market. We have two

industries that are influenced by the oil and

gas industry: the frack sand mining compa-

nies and a local drilling rig manufacturer.

Real estate is our largest concentration,

with available housing limited and a size-

able recreational real estate influence, and

that includes absentee ownership.

Hunting is a big seasonal market that

has a positive impact on sales tax revenue.

Agriculture continues to be a part of our

economic base, although there are fewer

production operators due to consolida-

tions and increase of absentee owners for

recreational use. The current construction

of the wind farm generation project has

increased economic activity and put pres-

sure on housing availability. Our loan portfolio

has been supplemented by loan participations

from our other market locations.

IBAT: Your loan to deposit ratio averages

around 50 percent. Is that indicative of mar-

ket loan demand, competition, conservative

philosophy, or all of the above?

King: We do have strong competition in

our rural market, with one other bank’s main

office located in Brady and a farm credit bank

office to cover this area. Fortunately, our com-

petitors are very competent and follow sound

lending activities. One important reason we

chose to expand our footprint into other

markets was to grow our loans system-wide.

The key to accomplishing this goal is hav-

ing well-qualified individuals managing our

banks, branches and LPO. We are all proactive

risk managers and develop our relationships

carefully, focusing on effectively meeting the

needs of our clients. This includes our rela-

tionship with TIB-The Independent Bankers


We have developed a banking family environment with an inherent goal of delivering excellent service in a friendly fashion. In addition, we make it a priority to support our community in every way we can and incorporate this objective into our marketing strategy.

King and his wife, Robin.

A rare photo of the Texas Tech mascot holding Reveille, the Texas A&M mascot, in 1975.

King’s sons Brantley, Riley and Montie.

King and his sons working the ranch in McCulloch County.


Bank, which provides tremendous support in many areas, including

loan participations.

IBAT: It looks like the bank is fairly active in the mortgage (1-4

family) market. How have the new regulatory compliance pressures

affected your ability to make these loans?

King: Since real estate is an important part of our portfolio we

had no choice but to adapt to the increased regulatory burden on real

estate loans. Compliance costs have certainly increased as with most

banks that have continued making real estate loans. The burden of

increased regulation has been a phenomenon since the beginning of

my career. With each downturn of the economy, the normal reaction

by our legislative bodies is to create more regulations.

Unfortunately, there has been very little bifurcation of regula-

tion between too-big-to-fail banks and community banks. Increased

regulatory burden is a normal trend in banking, but the implemen-

tation must be modified to fit the size of the bank and the markets

banks serve. I believe that some legislators are beginning to realize

the negative impact excessive regulations can have on community

banks and the economy.

IBAT: What do you say to the so-called experts who say that com-

munity banks with less than $250 million in assets are an endangered

species?

King: I hope they are wrong and I believe it is obvious up to this

point that it is not true. Consider the many reports of the mega banks’

inability to control inappropriate actions of their employees and

abuse of their customers on a large scale. Community banks have

consistently practiced the theme of “know your customer” for years

and take to heart doing what is best for the customer.

IBAT: You are obviously a busy man...banking, ranching, service

to TIB and now to IBAT. How do you effectively manage all the balls

you have in the air?

King: The key is setting priorities, with the most important being

to develop and maintain a team of dedicated and competent staff. I

realize there is no way I can do all the heavy lifting and I must depend

on others to do their part to manage all that we need to accomplish. I

must be diligent in scheduling and avoid trying to control everything.

I trust my team to support me in all that we have responsibility for.

Total control can be an addictive habit that leads to destruction.

There is no substitute for good help and we are fortunate to have

such a fine group committed to doing their job. And I must make

special mention of my family for the sacrifices they make to allow

me to pursue my interests.

IBAT: What would you say your top three priorities are as you

assume the chairmanship of the nation’s largest state community

bankers’ association?

King: At this point I am still trying to sort out the priorities I believe

to be in the best interest of IBAT. There are several that I have in mind

that are critical to the future of IBAT and the association’s continued

representation of community banking.

As in our own banks, succession must be a serious consideration

with proper due diligence and research to set the stage to make the

right decision in filling the position of president and CEO. The objective

IBAT’s board must accomplish is selecting the best candidate to carry

on the remarkable leadership and accomplishments of Chris Williston.

I also believe that the expansion of IBAT’s compliance support

to community banks across the nation is a great opportunity for our

IBAT team of compliance specialist to provide a valuable service to

our industry.

We should all have legislation and regulation as a priority. It is one

of the areas of greatest concern to me and we must continue to utilize

the influence developed over the years by Chris, Steve and their team

members, along with the IBAT membership, to improve the working

environment for community banks.

IBAT: Complete this sentence: My years as chairman will be labeled

a complete success if we ...

King: … accomplish the goal of deregulation. Not just a few adjust-

ments but a complete overhaul of the current plethora of unwarranted

regulatory burden.

IBAT: I know you are not a personal fan of the legislative process,

but you understand the necessity in engaging in the process through

your own grassroots contacts and political action donations. What

would you say to other community bankers who sit out and don’t

engage in the process?

King: There is no good reason for not getting involved at some

level of participation in the political process that affects the welfare of

banking. I know all the excuses—I used them for years. If you expect

to have some influence on your future in banking, then do something

that could make a difference. Donate to the PAC, conduct a PAC drive

at your bank or business and get involved at some level. It is a lot

easier to ask for money and be involved if you are a giver. ■

Texas Country Bancshares, Inc. board of directors: Terry Keltz, Sue Owens, John Childers, Kim King (Chairman), Riley King, Kirk Roddie, Diane Scovell, Ray Dierschke, Eugene Kasberg, Greg W. Schwertner, and Mark Marshall.

King shows off his culinary expertise. The bank often uses its cooker to prepare ribs for community events.

HAVE YOU EVER been to the doctor where you’ve spent 45 minutes in the

waiting room, then 30 more minutes in the exam room, only to have the

doctor come in, quickly read your chart, say a few words and then write

a prescription? I have. Maybe the doctor diagnosed me correctly, maybe

not, but the chances of presenting a correct diagnosis could have been

increased if the doctor had better communicated with me.

When a patient visits a doctor for a

specific condition, the job of the doctor

is to properly diagnose what the medical

issue is, and then prescribe a treatment

that will address the patient’s needs. Aside

from simply observing symptoms, in order

to diagnose, the doctor should consider

the patient’s demographics and listen thor-

oughly to what he or she has to say.

Similar to a doctor’s approach to diag-

nosing a medical condition, when a bank

attempts to implement the most effective

compensation package for its key execu-

tives, they must analyze who they are trying

to compensate and discern what the most

effective strategy is for that individual.

Because every executive’s circum-

stances are different, there cannot be a

one-size-fits-all plan. As the old adage goes,

if the only tool you have is a hammer, the

whole world starts to look like a nail. Rather

than offering an executive an industry stan-

dard cookie-cutter plan, it is in the bank’s

best interest to properly diagnose the needs

and wants of the executive, then apply the

best solution to satisfy both the executive

and the strategic objectives of the bank.

Traditionally, Supplemental Executive

Retirement Plans (SERPs) or Salary

Continuation Plans have been the most

popular plans for community bank execu-

tives. These are top hat plans, reserved for

highly compensated employees, and are

designed to retain and reward those who

have contributed to the success of the bank.

Typically they begin payout at retirement

and provide an income to the executive for

a defined number of years into retirement.

The amount of the benefit can be a fixed

amount or a percentage of final salary. This

is a great benefit for executives in their fif-

ties and older, who have retirement on top

of their mind.

While these plans are still very effective

for top executives, younger executives may

have more pressing interests than retire-

ment income. For example, executives who

tend to be in the middle stages of life may

recognize the need for retirement security,

but there are other things they first need to

address. Someone like me, in their mid-40s,

would really love to have all questions about

retirement answered already. But my big-

ger priority at this stage of life is providing

a college education for my three children.

The flexibility of nonqualified deferred

compensation plans allows an individual

to determine specific dates in the future

to receive a payout. A properly designed

deferred bonus plan can schedule these

payouts at the dates that coincide with

the beginning of college for an executive’s

child, for example. These payments can

continue for each year a child is expected

to be enrolled in college. After those obli-

gations are met, the plan will continue to

defer bonuses for a future date, which will

most likely be the executive’s retirement.

Correctly diagnosing the executive’s great-

est need allows the bank to create a benefit

plan that will be a much greater retention

tool than simply offering the executive a

cookie cutter plan.

Millennials probably even require yet a

different approach. For these employees,

both retirement and college funding are

too far away to be an immediate concern.

Because these employees are in the begin-

ning stages of their professional lives and

are in the midst of paying off student loans

or purchasing their first home, executives

in this demographic typically tend to be

cash focused. Annual bonus plans meet that

need, but do nothing in terms of retaining

the executive.

In a 2016 Deloitte survey, 73 percent of

millennials said they plan to leave their

job within five years, and 44 percent plan

to leave within two years. If the bank has

found valuable millennial employees who

they need to retain as part of a succession

plan, an annual bonus is not sufficient. A

creatively designed deferred bonus plan

which delays the payment of bonuses for a

short number of years before payment can

solve this problem. If the employee leaves

they forfeit their deferred bonuses from the

last few years. This meets the employee’s

need of the cash compensation and the

employer’s desire for retention using the

carrot and stick approach that keeps the

employee moving forward and growing with

the bank.

When assessing the best elements of

the nonqualified benefit plan that best fits

your executive and your bank, there are

several options that allow for an effective

design that meet the objectives of both

parties. Will it be a defined benefit plan or

a defined contribution plan? Will it have an

incentive based element to it? Will it be paid

out at retirement or while the executive is

B E S T P R A C T I C E S

Diagnosing Your Executive Benefit NeedsROB BARTON



still in service with the bank, or a combi-

nation of both? There are many options to

choose from based on the assessed needs

of the employee. Banks often tier benefits

depending on what really motivates differ-

ent employees based on age, experience

and performance.

When prescribing an appropriate treat-

ment, a doctor should ask the patient sev-

eral questions about their condition, listen

to their responses and observe the patient

and their symptoms, in an attempt to dis-

cover what will work best. Likewise, employ-

ers should practice a similar process when

designing effective compensation packages.

Just as one medical treatment cannot heal

every patient, one compensation plan does

not fit all. By properly communicating and

finding out the needs of the employee,

employers can put themselves in a better

position to fairly compensate and retain

employees long-term. ■

Rob Barton is a managing consultant

with Bank Compensation Consulting.

He can be reached at 214-919-2927 or

[email protected].

880485_Whitley.indd 1 08/08/17 12:00 am

Exceptional IT. Real People. Bigger Purpose.

To learn more, call Brad Giddens, Business Development Executive, at 325-947-5560 or visit CalTech.com

Meet Kenny Floyd,Tier 3 Engineer and family farmer. When Kenny is not making sure his customers’ networks are running smoothly, you can spot him taking care of the farm that has been in his family since 1967.family since 1967.

Proudly endorsed byThe Independent Bankers

Association of Texas

Amazon Ate My Bank:One Man’s Vision for the Apocalyptic Future of FintechCHRISTOPHER L. WILLISTON, VI, CAE

F E A T U R E : F I N T E C H

For the last few decades, we’ve watched

our expectations of personal privacy slip

away, sacrificed to the convenience of tech-

nology. It’s been a classic “frog in the pot”

situation. A million little decisions along

the way have warmed us up to the idea of

allowing companies to track us everywhere

we go and in everything we do.

However, where and how we spend our

money is the one data point that has yet to

be fully exploited by those whose business

model is to know all there is to know about

you and me.

This financial data is the holy grail of

“big data” companies.

With new players coming out of the

woodwork each month, all focused on the

“disruption” of banking, many community

bankers are trying to figure out fintech com-

panies: What is their goal? And how do they

plan to separate you from the financial data

of your customers?

I don’t pretend to have all the answers,

but I’m watching this unfold as a student of

technology and an advocate of traditional

banking. If nothing else, I offer my unquali-

fied vision for the “end” to which financial

technology might be building.

Fintech isn’t about shiny apps, faster

loan application processing or new credit

modeling. The end goal of fintech is open

banking. Those other things are just a

means to an end.

What is open banking? It is banking free

of a central banking relationship.

There are those who believe the future

of banking ought to be free from the neces-

sary tie to traditional banks. They believe

that financial data ought to be something

AS COMMUNITY BANKERS, you sit on the last great untapped resource of the

big data era. And, while you might not fully appreciate it at this moment,

what happens to that data might just dictate the future of the community

in which you live.



that belongs to the individual and that you

and I should be able to own this data with

ultimate freedom to move about the market-

place selecting the financial services that

most meet our needs.

This means portability of my financial

life. It’s a freedom to move, not only my

money, but my financial history, with the

focus of optimizing my relationship with

those companies with which I decide to

do business. It’s a desire to control what I

give to whom, with the belief that doing so

will somehow benefit me (via customized

promotions and focused financial advice).

Clear as mud? Good. Let me illustrate

it further.

For many of us, our cell phone has

become a central and ever-present figure

in our lives. But, much of the power of the

cell phone is not necessarily in the device

itself. The cell phone isn’t the best part of

the experience (though we still shell out

hundreds of dollars for the hardware).

The power of the device is in its apps to

which the phone provides us access. That’s

where we get most of our value. The apps

are where the functionality of the device

is increased and expended exponentially.

Imagine now that your “banking rela-

tionships”—and, primarily, your deposit

accounts—are like your cell phone. They’re

important. They’re the center of your finan-

cial life. The bulk of your transactions and

profile of spending are identifiable by the

way that money flows to and from your

deposit account (assuming, of course,

that you don’t deal mainly in cash). But, as

important as your deposit accounts are,

they’re just a commodity. Like your cell

phone, no matter which model you buy or

from which manufacturer you buy it, the

core functionality is similar. The same is

true of your deposit accounts.

Now imagine that your deposit account

of record isn’t with a bank, but is, instead,

with a company—like Amazon/Google/

Apple (“A/G/A”)—that holds a fintech

“bank” charter.

From your central deposit relationship

with A/G/A, you begin to run your daily

transactions. Your payroll deposit goes

directly to your A/G/A account, from which

you pay your bills. You use the power of

Google’s new partnership with Walmart

or Amazon’s ownership of Whole Foods

to place your grocery order online, pay

using your A/G/A account and pick it up at

the curb of the store. You use peer to peer

money transfer to settle up with friends and

split the check.

Using your phone or some other device,

you pay at point of sale, instantly transfer-

ring money from your A/G/A account to

the account of that business, which has

chosen to set up their store for payment

using those platforms to avoid credit card

transaction fees. A/G/A was far too eager to

facilitate those transactions without cost

to get access to the transaction data of

the small business. Later, when they have

a good profile of the business, A/G/A will

leverage these small businesses’ cashflow

and transaction histories to qualify them

Fintech isn’t about shiny apps, faster loan application processing or new credit modeling. The end goal of fintech is open banking. Those other things are just a means to an end. What is open banking? It is banking free of a central banking relationship.

continued on page 22


continued from page 8

For 2018, November 11 occurs on

a Sunday; therefore, the following

Monday will be observed as a holiday.

• Privacy Notices. An annual notice is no

longer required for banks that only share

information with third parties under the

statutory exceptions (e.g. to complete

transaction; respond to subpoena, etc.)

and the privacy policy has not been

changed.

• HMDA key dates. Review the key dates

timeline from CFPB for changes to HMDA

data collection. http://files.consumer-

finance.gov/f/201510_cfpb_hmda-key-

dates-timeline.pdf

• Exclusions. Some rules provide for small

bank exclusions based on activity. At year

end, check to make sure loan servicing is

still below 5,000 (for small servicer), size

of bank is still $2 B in assets (small bank

QM), and foreign wire activity is still 100

or fewer.

• Property tax compliance. If your bank

does not escrow for payment of prop-

erty taxes (whether on residential mort-

gages or commercial loans secured by

real or personal property), check for

property tax payment. Remind bor-

rowers of their obligations under their

loan agreement to protect the bank

from liens. An article with helpful pro-

cedures to consider can be found at

https://www.ibat.org/pdfs/2012/04/09/

tax-lien-lender-considerations.

Year-end is a time to look back on the

successes—as well as problems—of the

preceding year. Use this time, and the

reports required, to plan ahead for an even

better 2018. ■

Karen M. Neeley, in the Austin office of Kennedy

Sutherland LLP, is widely recognized through-

out the Texas financial institution community

in the areas of regulatory and compliance law.

Contact her at [email protected].

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for small business loan products (Amazon

has already done this, amassing $3 billion

in loans to more than 20,000 merchants

since 2011).

Much of what I’ve described thus far

covers just the basics of your financial life.

Now you begin adding various components

from many vendors, just as easily as you

add apps to your phone.

Perhaps you add a mortgage from

Rocket Mortgage or a personal line of

credit from a crowdsourced lending com-

pany. Maybe you self-select a personal

financial management tool which sits on

top of your A/G/A account to help direct

your spending. Need a longer-term savings

product? Add a CD from preferred partners

to get a better rate. A/G/A’s growing profile

of your financial life means these third

party “app” providers can better target

you with the products/services that align

with your needs.

For personal lending, A/G/A might make

loans directly or source the loans, bundle

them and securitize them for sale to individ-

ual “investors” who are looking for a higher

yield savings or investment opportunity.

By now you see how disruptive this

would be for community banking, as a flee-

ing deposit base undermines the ability

of those banks to make loans in their

communities.

For consumers, the end question for

consideration, of course, is whether this

transformation of our financial lives will

facilitate a safe and reliable banking system

for the good of American commerce.

Recreating/disrupting banking is an

interesting goal, but we must ask whose

good it ultimately serves: Customers? Small

businesses? Local economies? The national

economy? The global economy?

Just as technology is reshaping every

aspect of how we live, work and play, we

can’t let those who stand to profit define

the end goals. The debate on the future of

commerce and banking is as important as

any public policy debate currently facing

our nation because where we end up can

enhance or threaten the very places we live.

As an industry, our challenge is to look

forward to this future and engage in conver-

sation about where technology and public

policy are taking us.

As community bankers, you sit on the

last great untapped resource of the big

data era. Failure to engage in defending

that resource might just mean the “holy

grail” is stolen out from underneath you.

For the future of our industry, the good of

customers you serve and the communi-

ties in which you live, let’s make sure that

doesn’t happen. ■

Christopher L. Williston, VI, CAE (clwilliston@

ibat.org) is Executive Vice President of IBAT.

Get the Most Out of Your ModelAll of that is fine as far as it goes and is cer-

tainly adequate in helping to put a check-mark

in the many regulatory boxes requiring one. But,

if management stops there, it is failing to exploit

what can perhaps be an IRR model’s most valu-

able capability. That is, giving management the

ability to view the outcomes of contemplated

changes to strategies and tactics while they are

still being contemplated, rather than waiting to

experience the results after implementation. To

some degree, this concept has already crept into

the purview of regulators as they are strongly

recommending that modeling processes include

changes in the composition and volumes of

various deposit accounts while exploring the

potential effects of alternative funding sources.

This type of simulation is less about strategy,

which management controls, and more about

the consequences that higher interest rates may

bring to bear on depositor behavior. And that is

certainly something beyond anyone’s control.

But, what about the things that manage-

ment does control, or at least heavily influence?

For instance, ideas that might successfully

reach fruition if outcomes could be known, or

missteps that might be avoided for the same

reason. Suppose management is considering

offering borrowers a new type of loan prod-

uct with characteristics that may differ signifi-

cantly from what is currently available. While

no model will be able to determine how many

customers may or may not go for the new prod-

uct, performing simulations will allow decision-

makers to quantify the effects of various levels

of acceptance. Management now has a much

better understanding of the risk/reward bal-

ance, or imbalance, of trying something new.

What about a new kind of deposit product?

Maybe a new, longer C.D. that provides for

periodic rate adjustments. What if it brings in

$5M in new money? What if it brings in $50M?

How much do various volumes affect net inter-

est income in various scenarios? What happens

F E A T U R E : I N T E R N E T R A T E R I S K

Look Before You Leap:Using Simulations in a Decision-Making FrameworkLESTER MURRAY

OVER THE LAST several years, community bankers have become well aware

of the regulatory emphasis on, and requirements of, interest rate risk

(IRR) management. Throughout the current and persistent environment

of ultra-low interest rates, regulatory mandates have expanded to include

more stressful rate scenarios under which income is projected and capital

is valued. In addition, sensitivity testing (stressing) of various modeling

assumptions has now become part and parcel of routine risk-measuring

exercises. Another regulatory condition of these efforts is that they be

conducted on a static balance sheet. Quite reasonably, examining agencies

do not want to review reports in which interest rate risk could perhaps

be masked by simple growth or changes in balance sheet composition.


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to the duration of liabilities and the economic

value of equity? Much of the mystery surround-

ing these potential changes can be cleared up

with the performance of strategic simulations.

As community bankers know only too well,

they operate in an extremely competitive environ-

ment. It’s an environment in which adaption and

innovation is not only a good idea, it’s necessary

for survival. Change for the sake of change is sel-

dom beneficial and not all innovations bring about

the desired results. By taking advantage of your

IRR model’s ability to simulate other-than-static

outcomes, community bankers can have a better

chance of finding strategies that have the great-

est chance of success, and just as importantly,

identifying the ones that don’t. ■

Lester Murray joined The Baker Group in 1986 and

is an Associate Partner within the firm’s Financial

Strategies Group. He helps community financial

institutions develop and implement investment and

interest rate risk management strategies. Before

joining The Baker Group, he worked at two broker/

dealer banks in Oklahoma City and was also an

assistant national bank examiner. A graduate of

Oklahoma State University, he holds Bachelor of

Science degrees in finance and economics. Contact:

800-937-2257, [email protected].

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CORPUS CHRISTI

Curtis Clark has been

promoted to treasury

management bank offi-

cer at IBC Bank-Corpus

Christi. In this position,

Clark will continue to

promote the commercial

and small business services offered by

the bank, including working as a customer

advocate for IBC Link, the bank’s online

business banking service. He is a U.S. Navy

veteran and has more than 15 years of

management experience. He is also a 2016

graduate of the Leadership Corpus Christi

program and was named one of Corpus

Christi’s “40 Under 40” in 2016.

DALLAS

Cody Yanchak has joined

CalTech as business

development executive.

Yanchak has worked

with community bankers

across the U.S. for over

ten years. He has a pas-

sion for helping businesses succeed and

building lasting relationships and looks

forward to helping community banks in

the Midwest remain independent and maxi-

mize their investments in IT. Yanchak stud-

ied business management at Sam Houston

State University.

FORT WORTH

Shawn Dillon has been

promoted to president of

Fitech Payments. Dillon’s

background in sales com-

bined with his knowledge

of the community bank-

ing industry has helped

him build the Fitech brand into a lead-

ing payments provider for community

banks. He was instrumental in negotiating

agreements which saw Fitech become the

endorsed merchant services provider for

Pennsylvania Association of Community

Bankers, Independent Bankers Association

of Texas, Community Banking Association

of Illinois, Western Independent Bankers

Association and Community Bankers

Association of Kansas.

P E O P L EP E O P L E

Michael Peterson, direc-

tor of sales for Fitech

Payments, has under-

taken responsibility

for oversight of IBAT’s

endorsement of Fitech’s

merchant services.

Peterson previously managed Fitech’s

partnership with the Community Bankers

Association of Illinois. He will work with

community banks in Texas to evaluate

their current merchant services program,

develop strategies to grow their revenue

and increase customer retention.

KILGORE

Michael Cozart of

the Citizens Bank

Woodlands Banking

Center has been pro-

moted to assistant vice

president and leader of

the bank’s credit analy-

sis team. Cozart has been employed by

the bank for three years. He previously

worked at Fidelity Investments where he

served in various roles including senior

fund accounting analyst. He received his

BBA degree in Finance from Texas A&M

University. In 2015, Cozart completed his

Commercial Credit Certification, receiving

the “Certificate with Honors” designation

from the University of Houston.

LONGVIEW

Texas Bank and Trust Company has

announced several promotions and

new hires.

Claude E. Henry has

been named president

of the bank’s Tyler mar-

ket. Henry joined Texas

Bank and Trust in 2010 as

executive vice president

and manager of its South

Broadway location. He holds a Bachelor

of Business Administration degree from

Howard Payne University in Brownwood

and is a graduate of the Southwestern

Graduate School of Banking at Southern

Methodist University in Dallas.

Gary Matesic has joined

Texas Bank and Trust’s

Frisco branch as senior

vice president, trust offi-

cer and regional trust

manager. Matesic holds

a Bachelor of Arts in

Accounting/Business Administration from

Thiel College and a Master of Science in

Taxation from Robert Morris University.

He is an Accredited Estate Planner (AEP®)

through the National Association of Estate

Planners and Councils. Matesic is currently

president of the Dallas Estate Planning

Council, serves on the Trust Schools

Advisory Board of the Texas Bankers

Association, is a member of the trust fac-

ulty for the Southwestern Graduate School

of Banking, and is a member and former

director of the Estate Planning Council of

North Texas.

Tim Bradford has joined

the Frisco branch of

Texas Bank and Trust as

senior vice president and

trust officer. He earned

a Bachelor of Business

Administrat ion in

Finance from West Texas A&M University.

Bradford is a Cannon Financial – Certified

Wealth Strategist; he holds Series 7, Series

66, and past Life and Health Insurance

Licenses; and is a graduate of the National

Graduate Trust School of Northwestern

University, Evanston, Illinois. He is a cur-

rent member of both the Dallas Estate

Planning Council and the Estate Planning

Council of North Texas.

Jannette Erts has joined

the staff of Texas Bank

and Trust as senior vice

president and trust officer

in the bank’s Frisco loca-

tion. Erts holds a Bachelor

of Science in Economics

from the University of Texas at Arlington,

and a Master of Business Administration

in Financial Services from the University

of Dallas. She is a CFP certificant, and is

a member of the Dallas Estate Planning

Council and the Financial Planning

Association.


Anna Laughlin has been

promoted to vice presi-

dent at Texas Bank and

Trust’s Richardson loca-

tion. She is a portfolio

manager in the branch’s

lending area where she

analyzes, manages, and maintains a portfo-

lio of commercial, industrial, and commer-

cial real estate loans. She holds a Bachelor

of Business Administration in Finance from

Stephen F. Austin State University where

she was a member of Delta Zeta Sorority.

Elissa Barbosa has been

promoted to assistant

vice president at the

bank’s Richardson loca-

tion. Barbosa attended

Brookhaven College and

has worked in banking

and financial services for over 18 years.

Her primary responsibilities include assist-

ing the bank’s DFW regional manager and

executive lending staff, serving as mortgage

coordinator, and managing the day-to-day

operations of the branch’s credit adminis-

tration function.

Kim Campbell has been

promoted to assistant vice

president in the bank’s

Van branch. Campbell

began working with First

State Bank Van, now Texas

Bank and Trust, as a teller

in 1988. She is currently involved with con-

sumer, commercial, and real estate lend-

ing. A former licensed real estate agent,

she is a magna cum laude graduate of Tyler

Junior College with an Associate of Applied

Science degree in real estate.

Linda Brooks has been

promoted to trust officer in

the bank’s investment divi-

sion. Brooks has worked

in the banking industry

for 37 years and joined

Texas Bank and Trust in

2002. She most recently worked as a trust

administrator where she manages and main-

tains a portfolio of accounts consisting of

personal trusts, court created trusts, IRAs,

and estates. Brooks graduated from Kilgore

College with an Associate degree in Business

Administration. She is also a graduate of the

Texas Trust School and the Texas Graduate

Trust School in Dallas.

LUBBOCK

Berry S. Pigg has been

appointed branch presi-

dent of FirstCapital Bank

of Texas’ new Milwaukee

Avenue branch. Pigg is a

graduate of Texas Tech

University, where he earned

a B.B.A in Finance. He later attended the

Texas Tech Banking School and Southern

Methodist University’s Southwestern

Graduate School of Banking. With more than

30 years of banking experience, Pigg special-

izes in real estate and commercial lending

and has served in the Lubbock financial

industry since 1984.

Monty Long has been pro-

moted to executive vice

president and chief finan-

cial officer at Centennial

BANK. His responsibilities

will include the manage-

ment of financial reporting,

budgeting, internal audit, corporate gover-

nance, accounts payable, capital planning

and investments. Long began his banking

career in 1995 and joined Centennial in

2001. He holds a bachelor’s and master’s

degree in business administration from

West Texas A&M University and is a gradu-

ate of the Southwestern Graduate School of

Banking at Southern Methodist University.

Centennial BANK has added three new mem-

bers to its board of directors.

Patrick Freedle is a sec-

ond-generation CPA and

tax partner with Davidson,

Freedle, Espenhover and

Overby P.C., an account-

ing firm with offices in

Kerrville and San Antonio

with more than 25 professional staff. Freedle

graduated from Texas Tech University in

1987 with a BBA in Accounting. He is active

in his community, having served on several

non-profit boards and is in his third term as

a KISD school board member.

Kevin Hunter has over

17 years of experience in

real estate brokerage and

development and currently

serves as chief operating

officer and chief financial

officer at CSW Development.

Hunter specializes in both ground up develop-

ment and redevelopment, project planning,

acquisition, renovation, leasing and man-

agement. He graduated from the University

of Texas at Austin with a degree in Finance

and Accounting. He is a Certified Public

Accountant and licensed Real Estate Broker.

Brad Morrison gradu-

ated from the Air Force

Academy with a B.S. in

Management as well as the

rank of Captain in the U.S.

Air Force. He continued

his education at Southern

Methodist University where he earned his

Master’s in Telecommunication. Morrison is

the founder and CEO of Innove, a cyberse-

curity and technology consulting company

based in San Antonio.

MIDLAND

Lorena Brown has been

promoted to assistant vice

president of loan opera-

tions with Community

National Bank. Brown

joined the bank in 2016

and is a 2007 graduate

of the University of Texas at Arlington

with a bachelor’s degree in Business

Administration with a major in finance.

Sterling Swack has been

promoted to vice president

at Community National

Bank. Swack received

a Bachelor of Science

degree in Chemistry and

Engineering from Texas

Tech University. Previously a market vice

president at another bank, Swack has more

than five years of banking and commercial

lending experience in the Lubbock and

Odessa markets.

MOUNT PLEASANT

Molly Curl has been

appointed to the board

of directors of Guaranty

Bancshares, Inc. Curl has

worked for more than 40

years in the areas of orga-

nization, compliance, loan

review, loan servicing, policy development,

budgeting, and capital strategic planning.

Most recently she served as a financial

services advisory partner with Grant

Thornton LLP. In 2016, she was appointed

by Governor Greg Abbott to a six-year term


on the Finance Commission of Texas. Curl

is a graduate of John Carroll University

with a B.S.B.A. degree in Finance and is a

Texas licensed Certified Public Accountant.

SHERMAN

Matt Brown has been

appointed president of the

Sherman loan production

office for Legend Bank.

Brown will handle commer-

cial real estate lending in

Sherman and surrounding areas. He has over

14 years’ commercial lending experience and

is a graduate of Stonier Graduate School of

Banking and completed the Texas Bankers

Association Management Development

Program. He received his MBA from the

University of North Texas and his BBA from

Austin College.

BOSTON, MA

Claiborne Kitchin has

become vice president of

global channel partner-

ships and alliances in the

commercial arm of S&P

Global Market Intelligence.

As part of this role, he is responsible for

all state banking association relationships

nationwide. He also handles redistribution

relationships and consulting and vendor

partnerships. Kitchin has been with S&P

for nine years and holds a B.A. in History

from the University of Virginia.

OKLAHOMA CITY, OK

Matt Harris, senior vice

president at The Baker

Group, has earned the

Chartered Financial

Analyst® designation

from the CFA Institute.

Harris joined the firm in 2007 as an

intern while attending the University of

Texas-Austin, where he earned a BA in

Government and Economics. In 2010, he

joined the firm’s Financial Strategies Group

at the home office in Oklahoma City, where

he works directly with bankers, examin-

ers, and auditors regarding fixed income

portfolio analysis and asset/liability

management. Harris is also involved in

the development and testing of Baker’s

proprietary bond accounting and interest

rate risk software. ■


In conjunction with Professional Bank Services (PBS), IBAT offers

the best compliance training available. Programs on Deposit

Compliance, HMDA, Lending Disclosure, Loan Compliance, and

much more, are offered as well as Compliance Updates.

November 2017 29 ACH Processing Compliance, Dallas/Irving

30 ACH Processing Compliance, San Antonio

December 2017 18 Texas Deposit Documentation, Austin 19 Texas Deposit Documentation, Temple 20 Texas Deposit Documentation, Wichita Falls

C A L E N D A R S

IBAT EVENTS & SUMMITS

COMPLIANCE SEMINARSwww.ibat.org/events/seminars

November 2017 1-2 IT Security and Fraud Summit 2-4 Certified Community Bank Director Program, Dallas 5-10 Bank Lending Institute, San Antonio

December 2017 5 Home Equity Summit 6 FDIC Outreach Program, Austin 8 FDIC Outreach Program, Dallas

January 2018 15-17 Winter Summit, Beaver Creek, CO

February 2018 5-9 IBAT Regional Meetings

March 2018 5-8 IBAT Regional Meetings

May 2018 1-3 IBAT Congressional Visit

June 2018 14-16 Leadership Conference, San Antonio

September 2018 22-25 IBAT Convention, San Antonio

October 2018 7-12 Bank Operations Institute, Dallas

IBAT hosts the following webinars in conjunction with

Financial Education, Inc. For more information, visit

www.ibat.org/events/telephone-seminars, or contact Julie Courtney,

[email protected], 512.275.2227.

IBAT WEBINARSwww.ibat.org/events/telephone-seminars

November 2017 2 CECL Loss Estimation Methodologies: Using Your

Bank’s Data History to Create Workable Options

7 Required Compliance for Commercial Loans Secured

by Real Estate

8 Auditing for Regulation E Compliance

9 When a Depositor Dies: Next Steps & Best Practices

14 Federal Government ACH Payments: Reclamations &

Garnishments

16 Accepting Powers-of-Attorney on Deposit Accounts

21 Required Compliance for the Board & Senior

Management

28 OFAC Sanctions Compliance: Update, Expectations &

Best Practices

29 Robbery Preparedness for All Staff

30 Avoiding Employee Job Misclassification Issues:

Getting It Right!

December 2017 5 Job-Specific BSA Compliance for Lenders

6 Conducting a Collections Risk Assessment

7 Disaster Preparedness, Recovery & Business

Continuity

12 Mortgage Loan Disclosure Timing Issues

13 All About 1099 Reporting Part 2: Forms 1099-INT &

1099-MISC: Vendor Payments, Prizes & Interest on

Deposit Accounts

14 ACH Risk Management & Assessment: Risks, Controls &

Ratings

19 Preparation Plan for CDD Changes to Beneficial

Ownership Rules: Effective May 11, 2018

20 New Security Officer Training: Responsibilities, Best

Practices & Skill-Building Tools

SAVE THE DATES!IBAT 26th Annual Congressional VisitMay 1-3, 2018Washington, DC

Leadership ConferenceJune 14-16, 2018San Antonio

IBAT ConventionSeptember 22-25, 2018San Antonio


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C O M M U N I T I E S

If you have

a photo to share,

email it to

[email protected].

July 24 – Woodforest National Bank gives $1 million gift to Houston Methodist The Woodlands Hospital; hospital names third floor common area – Woodforest Bank Sky Plaza. In late 2016, the bank committed $1 million to the new hospital to name its third-floor atrium space and support the hospital’s Excellence Fund. The fund advances the hospital’s highest priorities and accelerates innovative research and physician recruitment in key clinical areas.

September 18 – Chris Williston, IBAT president and CEO, and Julie Courtney, IBAT Education Foundation president, at the annual convention of the Texas Society of Association Executives in Houston. Courtney received the Professional Excellence Award from TSAE, which recognizes individuals who have made exceptional contributions to their association and demonstrate abilities for continued high levels of achievement in the field of association management. Courtney has worked for the Independent Bankers Association of Texas since 1999. She has also received her certified association executive and certified meeting planner designations. Photo courtesy of Kayla Prasek Photography.

September 17 – Christopher L. Williston VI, CAE, IBAT executive vice president, addresses attendees at the Texas Society of Association Executives annual convention in Houston. Christopher was elected to serve as TSAE chairman of the board for 2017-2018. He is the third generation of Willistons to hold that honor, following in the footsteps of his father and grandfather. Photo courtesy of Kayla Prasek Photography.

August 1 – IBC Foundation, administered by

International Bank of Commerce (IBC Bank),

donates $250,000 to University of the

Incarnate Word School of Osteopathic Medicine

(UIWSOM). The donation supports the development of UIWSOM in areas such

as the clinical skills lab for first- and second-year

medical students. Third- and fourth-year medical

students will benefit from the newly-formed

partnership with the Laredo Medical Center

for clinical rotations and residency programs

in family and internal medicine.

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