DDOS: WHAT YOU NEED TO KNOW - UTAH BANKERS ASSOCIATION
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Issue 2. 2014 spring
OFFICIAL PUBLICATION OF THE UTAH BANKERS ASSOCIATION
DDoS: What You
Need to Know
Because not all solutions
are black and white. TM
Understanding
what makes you unique. TM
www.swlaw.com
BRIAN D. CUNNINGHAM 801.257.1954 BCUNNINGHAM@SWLAW.COM
GATEWAY TOWER WEST | 15 WEST SOUTH TEMPLE | SUITE 1200 | SALT LAKE CITY, UT 84101
DENVER | LAS VEGAS | LOS ANGELES | LOS CABOS | ORANGE COUNTY | PHOENIX | RENO | SALT LAKE CITY | TUCSON
UBA Board of Directors
2013/2014
CHAIRMAN
Anthony J. Hall
President & CEO, Lewiston State Bank
Lewiston, UT
VICE CHAIRMAN
Greg A. Winegardner
Utah Regional President, Wells Fargo
Salt Lake City, UT 6 16
2ND VICE CHAIRMAN
Kelvin L. Anderson
President & CEO, Optum Bank
Salt Lake City, UT
IMMEDIATE PAST CHAIRMAN
Louise P. Kelly
President & CEO, EnerBank USA
Salt Lake City, UT
PRESIDENT
Howard M. Headlee
President, Utah Bankers Association
Salt Lake City, UT
COMMUNITY BANK ADVISORY CHAIRMAN
R. Tod Monsen 4 Tax Reform... Rise Up and 13 Bank Kudos
15
CEO/President, Rock Canyon Bank
Provo, UT
Swing Away
Tax reform is a political process, and Bankers on the Move
16
INDUSTRIAL BANK ADVISORY CHAIRMAN
Lee A. Carter politics is driven by fear - fear of
President & Chief Operating Officer, UBS Bank USA
Salt Lake City, UT
losing power. Tech Talk - DDOS: What You
By Howard Headlee, President
Need to Know
5
REGIONAL BANK ADVISORY CHAIRMAN
Michael Morris DDoS, or distributed-denial-of-service
EVP, Real Estate Banking Group, Zions Bank Washington Update: Teaching attacks, seem to be the focus of every
Salt Lake City, UT
Sound Financial Habits one’s attention right now, and rightly
BOARD MEMBERS The 2008 financial crisis taught us many so—we have seen huge increases this
lessons, one of which is the importance year.
Paul Andersen By Stephanie Chaumont, CISA, CISSP, Security+
of an informed consumer – one who
18
President & CEO, Gunnison Valley Bank
Gunnison, UT can distinguish a loan that is good and
A. Scott Anderson appropriate for him or her from one that Not Perfect: Perfecting Security
President & CEO, Zions Bank
Salt Lake City, UT
is not. Interests in Water Shares
By Frank Keating, President and CEO, American Recent developments require banks to
Russ Barney Bankers Association take extra precautions in attempting to
6
VP & Regional Business Banking Manager
Bank of the West, Salt Lake City, UT
perfect security interests in shares of stock
Compliance Corner: held in water companies.
20
Robert M. Bowen
President and COO, Brighton Bank Clarification and Helpful Tidbits
Salt Lake City, UT
The new servicing rules are in full swing Interest Rate Risk:
Douglas DeFries
President, Bank of Utah
and there is still much confusion on who A Priority for 2014
Ogden, UT
is required to comply with what rule, As we move into a new year, the US
when the servicer needs to send disclo- economy continues to plod along at a
Lewis Goodwin sures and what needs to be included. slow and steady pace.
President & CEO, Green Dot Bank
22
Provo, UT Courtesy of Compliance Alliance
Mark D. Howell
President - Intermountain Banking
AmericanWest Bank, South Jordan, UT
8 Regulatory Feedback Initiative
The Next Banking Crisis
Talent Risk?
Allows Bankers to amke their In 1997, the McKinsey & Company
Damon G. Miller
Utah Market President, U.S. Bank Voices Heard consulting firm proclaimed that “the war
Salt Lake City, UT for talent” would separate winners from
The Regulatory Feedback Initiative is a losers in the years ahead. Sixteen years
Ron Ostler powerful tool in the form of a confiden- later, the banking industry is on the cusp
President, Comenity Capital Bank
Salt Lake City, UT tial electronic survey which allows of losing the war.
bankers to anonymously provide details By Richard J. Parsons
Joe Stroud
General Counsel, GE Capital Bank on their most recent examination or
visitation, creating a new level of trans-
24
Salt Lake City, UT
parency in the examination process.
Jill Taylor
District President, KeyBank
Should You Offer Instant
By Howard Headlee
Salt Lake City, UT Card Issuance?
Paul F. Thome
President & CEO, Sallie Mae Bank
Salt Lake City, UT
12 2014 is Off to a Good Start for Six Questions to Ask
The ability to offer instant card
the UBA Education Department issuance at branches once involved
Louise Zeenati
SVP & CFO, The Village Bank with Two very Successful having to print embossed cards on-site,
Saint George, UT
conferences which meant expensive printing
processes.
Craig Zollinger The Bank Executive Winter Conference
28
President & CEO, JPMorgan Chase
Salt Lake City, UT is a great companion to the UBA
Convention in Sun Valley, providing for UBA Associate Members
relevant business discussions and great
networking opportunities.
spring 2014 3
The Bottom Line
By Howard Headlee, President, Utah Bankers Association
Tax Reform... Rise Up and Swing Away
I
have been searching for an analogy the slightest amount of respect. In fact, largest credit unions, but Dave Camp isn’t
that Congressman Dave Camp will un- his proposal is intended to wipe banks afraid of us.
derstand. This is what came to mind. out. His long awaited contribution to
tax policy reform is nothing more than a Why should he be? We are the nice guys.
In the bottom of the eighth inning of politically motivated extermination order We volunteer in the community, we
game six of the 1984 World Series, on the banking industry. contribute to charities. We take time to
baseball’s premier reliever and San Diego carefully explain issues to our Congres-
Padre, Goose Gossage faced the Detroit The proposal violates the first principle sional delegation. But when it comes to
Tiger’s Kirk Gibson with two men on and of tax policy – Horizontal Equity – the war, and make no mistake, Camp’s tax
first base open. Anyone in their right equal treatment of competitors. The reform proposal is a declaration of war on
mind would have walked Gibson. But power to tax is the power to destroy, es- small banks, we are not well armed.
Gossage had no respect for Gibson; he pecially when government uses its taxing
was confidant he could strike him out. power to give favor to one taxpayer over That’s why we have created Friends of
He even used the words, “I own him.” another, to pick winners and losers in the Traditional Banking. We have identified
marketplace. over 4,500 Friends of traditional banking
Tiger manager Sparky Anderson couldn’t in all 50 states who are ready to make a
believe it. He kept telling Gibson over It’s hard to get bankers excited about direct, personal contribution into two
and over, “he don’t want to walk you!” things. They pride themselves on being Congressional races this year. Our goal
The message was clear – Gossage isn’t able to adapt and succeed regardless of is to identify more than 10,000 Friends by
afraid of you – then he gave him the sign this June. Think of that, if each Friend
to “Swing Away.” contributes just $100 dollars into the
Gibson took the challenge and proceeded
Our goal is to identify same race this November, we could drive
$1 million into a single Congressional
to hit one of the longest home runs I have more than 10,000 race. In fact, I believe that in time, we
ever seen in Tiger stadium. The Tigers will identify up to 100,000 Friends of
won the game and the World Series and Friends by this June Traditional Banking! Now that’s a game
one of the best relievers in the game will changer, kind of like a three run homer
forever be remembered as an overconfi- in the bottom of the 8th inning to win the
dent fool. what the government dishes out. But World Series.
Dave Camp’s tax reform proposal is not
For the past year, Dave Camp, Chairman just another misguided regulation, it is So what are bankers going to do? Sit
of the House Ways and Means Commit- a death sentence for traditional banks. back, play nice and pretend that the
tee, has been working on Tax Reform. There is simply no way they can survive Chairman of the House Ways and Means
Reforming our tax code is critical to over the next several decades if they are Committee didn’t just try to wipe us out?
getting our economy back on track and forced to compete with tax-exempt insti- Or are we going to step up to the plate,
the federal budget under control. It is tutions 10 and 20 times bigger. “Swing Away” and make some mem-
one of those every half-century exercises bers of Congress regret their disrespect?
that will dictate the fate of the American But here is the most important thing for America needs strong banks; American
economy for the next 50 years. If done bankers to understand. Tax reform is not Families need good jobs that come from
correctly, it is an opportunity to fix poli- an academic process. If it were, tradition- a strong economy. That can only happen
cies that have become unfair or inefficient al banks would be just fine. Tax reform is when our tax policy promotes growth and
over time. a political process, and politics is driven fair competition. Traditional Bankers
by fear - fear of losing power. So just need to rise up and demand better from
But like Goose Gossage, Dave Camp like Goose Gossage and Kirk Gibson, tax reform; step up and “Swing Away!” n
has made a horrible miscalculation. His first base is open, there is absolutely no
proposal does not afford bankers even tax policy justification for exempting the
4 www.uba.org
washington update Financial Capability Month. (For a list
of participating banks, and for free lesson
Teaching Sound
plans and other resources, visit aba.com/
Engagement.)
This program allows bankers to accom-
Financial Habits
plish several worthy goals at once. By
visiting school classrooms, youth centers,
after-school programs and more, you and
your colleagues provide practical lessons
and share knowledge to encourage and
By Frank Keating, President and CEO, American Bankers Association inspire young people to develop healthy
lifelong financial management skills.
You also are putting your skill set to use
to help address a serious problem in our
nation – the lack of financial know-how --
that could threaten the economic stability
of America. The 2008 financial crisis
taught us many lessons, one of which is
the importance of an informed consumer
– one who can distinguish a loan that is
good and appropriate for him or her from
one that is not.
Finally, your participation also helps
demonstrate two important truths about
the industry: that local bankers are there
to help customers in all of their families’
milestone events, and that banks have
a stake in the economic growth, health,
and vitality of their communities. These
are two features of banking that consum-
ers, through surveys and focus groups,
have told ABA they value, so let’s remind
B
them of those facts.
efore getting a driver’s license, teens savings accounts, banks give tomorrow’s
in states across the country have to adults the knowledge and experience they You have probably heard me say that I
gain both relevant experience and need to safely manage money. This is a view banking as a white-hat industry.
demonstrate a basic proficiency in driving critical building block to helping them Banks are critical to the success of com-
a car. That can mean classroom training meet their financial goals in life – from munities across America. In fact, bank
and instruction, and keeping a log of buying a house to retiring comfortably. community engagement is critical to the
hours driven with an adult in the car, as And helping consumers meet their finan- success of our nation’s economy.
well as hours behind the wheel with a cial goals is what banks do.
specialized instructor. Teach Children to Save is just one of
If your bank hasn’t yet engaged in finan- several ways ABA tries to drive that point
The goal of course is to ensure that when cial education, I encourage you to explore home. I hope you’ll take part and in the
they do hit the open road, young drivers ABA’s annual Teach Children to Save process help the next generation safely
are less likely to harm themselves and program. It is a popular and turnkey way navigate the road to financial freedom. n
others. They have a basic understanding to share lessons about the importance of
of the rules of the road, respect for their saving and managing money – lessons
fellow drivers -- and pedestrians -- and are that banks have delivered to six million E-mail Frank Keating at
able to independently make good deci- youth since ABA created the program in keating@aba.com
sions. The end result – fewer accidents 1997.
– benefits all.
This year’s Teach Children to Save Day
Our industry’s financial education is April 11. Bankers across the country
programs work much the same way. By have registered to make school pre-
providing kids with practical lessons on sentations on that day and throughout © 2014 American Bankers Association. All rights
personal finance, and encouraging starter April, which is also being celebrated as reserved. Reprinted with permission.
spring 2014 5
COMPLIANCE CORNER
Clarification and Helpful Tidbits
Courtesy of Compliance Alliance
T
he new servicing rules are in full swing Reverse mortgages and loans secured by a
and there is still much confusion on timeshare plan are exempt from this re-
who is required to comply with what quirement as well as any loan for which the
rule, when the servicer needs to send disclo- consumer debtor has filed for bankruptcy.
sures and what needs to be included. There Sample forms are provided in Appendix
were servicing changes to both Reg Z and H-30(A) – (D) of Regulation Z.
RESPA:
RESPA Changes:
Reg Z Changes:
1024.35 – Error Repletion Procedures
1026.20(b) – ARM Disclosures The amendment lays out new rules when a
Any servicer of a closed-end ARM must now Qualified Written Request includes a notice
provide an initial disclosure between 210 and of “error.” An error is defined as:
240 days before the initial payment adjust- (1) Failure to accept a payment that
ment and a subsequent disclosure between 60 conforms to the servicer’s written re-
and 90 days prior to each adjustment (includ- quirements for the borrower to follow in
In response to the plea for
ing the initial adjustment if the first notice making payments.
help from banks across the was an estimate). The regulations provide a (2) Failure to apply an accepted payment
Commonwealth and the shorter window of 25 days for the subsequent to principal, interest, escrow, or other
Nation, Compliance Alli- notice if the lookback period is less than 45 charges under the terms of the mortgage
ance was formed to increase days and the loan was originated prior to loan and applicable law.
January 2015. (3) Failure to credit a payment to a bor-
the effectiveness of banks’
rower’s mortgage loan account as of the
compliance programs and
Note: This requirement applies to all loans, date of receipt in violation of 12 CFR
to facilitate broad industry even loans originated prior to 2014. Model 1026.36(c)(1).
initiatives directed at address- forms can be found in Appendix H-4(D)(1)- (4) Failure to pay taxes, insurance premi-
ing a variety of compliance (4) of Regulation Z. ums, or other charges, including charges
functions for member banks that the borrower and servicer have vol-
1026.41 – Periodic Statements for Resi- untarily agreed that the servicer should
and concerns of common
dential Mortgage Loans (small servicers collect and pay, in a timely manner as
interest. The primary goal
exempt) required by §1024.34(a), or to refund an
of Compliance Alliance is to For any closed-end consumer transaction escrow account balance as required by
provide quality compliance secured by a dwelling, the amendment re- §1024.34(b).
services and allow more quires a periodic statement that includes the (5) Imposition of a fee or charge that the ser-
hours for the bank’s com- amount due, an explanation of the amount vicer lacks a reasonable basis to impose
due, a past payment breakdown, transac- upon the borrower.
pliance personnel to focus
tion activity, partial payment information, (6) Failure to provide an accurate payoff
on strategic bank-specific
contact information, account information balance amount upon a borrower’s
functions. and delinquency information (if applicable). request in violation of section 12 CFR
In each edition, Utah Bank- Alternatively, the servicer can provide a 1026.36(c)(3).
coupon book that includes the amount due, (7) Failure to provide accurate information
er will provide a short article
contact information, account information to a borrower regarding loss mitigation
from the Compliance Al-
and information on how the customer can options and foreclosure, as required by
liance. obtain the other information that would §1024.39.
otherwise be required on the periodic state- (8) Failure to transfer accurately and timely
ment. information relating to the servicing of a
6 www.uba.org
borrower’s mortgage loan account to five business days after making the deter- if any. The contact must be followed up
a transferee servicer. mination. with a letter by the 45th day of delinquen-
(9) Making the first notice or filing cy.
required by applicable law for any judi- 1024.37 – Force-Placed Insurance
cial or non-judicial foreclosure process The new force-placed insurance rules Model clauses for the letter can be
in violation of §1024.41(f) or (j). now require a 45 day notice to the found in Appendix MS-4 of RESPA. A
(10) Moving for foreclosure judgment or borrower prior to charging them for the lender is exempt from the requirement
order of sale, or conducting a foreclo- cost. In addition to the 45 day notice, a if the borrower is either in bankruptcy,
sure sale in violation of §1024.41(g) second “reminder” notice needs to be sent or the servicer received notice from the
or (j). at least 30 days after the first notice but customer asking the servicer to cease
(11) Any other error relating to the ser- more than 15 days before assessing the communication and the servicer is subject
vicing of a borrower’s mortgage loan borrower for the insurance. If the force to the FDCPA, or state law otherwise
placed insurance remains on the loan for prohibits communication with the bor-
Upon receipt of the error notice, a ser- a subsequent year, then a renewal notice rower.
vicer has five days to acknowledge the must also be delivered at least 45 days
receipt and generally has 30 business days before assessing a charge for the following 1024.40 – Continuity of Contact (small
to conclude an investigation and respond, year. servicers exempt)
but only seven business days if the error Servicers must now assign specific per-
was a failure to provide an accurate pay- These notices are similar, but separate sonnel to a delinquent borrower by the
off balance (number (6) above). from the notices required under the flood 45th day of delinquency and provide their
insurance regulations. However, unlike contact information to the borrower. The
Once a request from the borrower is flood, a lender may send the initial 45 personnel responsible must be empow-
received, the servicer may not charge a day notice prior to expiration of the ex- ered to provide accurate information
fee or require a payment as a condition of isting policy and force place immediately regarding the loan, any loss mitigation
responding to the notice of error and may after the policy expires (as long as proper options, the status of a loss mitigation
not, for 60 days, furnish adverse infor- notice was given). application and other information
mation to a credit agency regarding any surrounding the loan. This is meant to
payment that is a subject to the error. A model notice can be found under Ap- provide a single point of contact for all of
pendix MS-3 of RESPA. the borrower’s inquiries.
Servicers do not need to conduct an inves-
tigation for duplicative notices of error, an 1024.38 – General Servicing Policies 1024.41 Loss Mitigation Procedures
overbroad notice or a notice of error that (small servicers exempt) (small servicers exempt, except for the
was delivered more than a year after the Requires servicers to maintain policies 120 day foreclosure rule)
servicing was transferred or the mortgage and procedures designed to ensure that This new section imposes certain time
discharged. However, a notice of the the servicer can: 1) assess and provide requirements for disclosures, evaluations
determination will still need to be sent timely and accurate information to the and appeals of loss mitigation applica-
within five days of making the determi- borrower; 2) properly evaluate loss miti- tions, but it in no way requires a lender to
nation. gation applications; 3) facilitate oversight offer any such program. In addition to the
of, and compliance by, service provid- new disclosure and timing requirements
1024.36 – Requests for Information ers; 4) facilitate transfer of information for loss mitigation, the amendment more
Upon the receipt of a qualified written during servicing transfers; 5) and inform importantly imposes a restriction on the
request for information, a servicer has borrowers of the written error resolution referral to foreclosure. A servicer, small
five days to acknowledge the receipt. The and information request procedures. This or large, may not make the first notice or
servicer then has 10 business days from provision also provides a record reten- filing for a foreclosure unless:
the request to respond to an information tion period of one year after the loan is 1. The borrower is 120 days delinquent
request for the identity of and contact transferred or discharged regarding all on the note;
information of the owner or assignee of servicing records or actions taken on the 2. The foreclosure is based on the
the mortgage, and 30 business days to loan. borrower’s violation of a due-on-sale
respond to any other request for informa- clause; or
tion. (NOTE: Parts 1024.39-41 only apply to 3. The servicer is joining the foreclosure
a mortgage secured by the borrower’s action of a subordinate lienholder.
The servicer does not need to respond, principal residence)
however, to any request that is du- A significant omission is the right to
plicative, confidential or privileged 1024.39 – Early Intervention Require- foreclose if the borrower is delinquent on
information, irrelevant, overbroad or ments for Certain Borrowers (small taxes or is in default for any reason other
unduly burdensome, or the request was servicers exempt) than a failure to pay. So while the borrow-
delivered to the servicer more than one The new rule requires a live person to er may technically be in default for not
year after the transfer of service or the make contact with the borrower by the paying them, the borrower has no right to
loan was discharged. A servicer need only 36th day of delinquency and inform them initiate foreclosure unless the note is 120
send a notice of this determination within of any loss mitigation options available, days past due. n
spring 2014 7
Even more noteworthy is a victory
achieved in early 2012, when significant
discrepancies in the way fair lending
regulations were being enforced na-
tionwide were uncovered due to the
Regulatory Feedback Initiative. Based
on data received from over 1,000 surveys
completed in 2011, national fair lending
criticism rates varied among the four
federal regulatory agencies by up to 40%.
It was discovered that a regional office of
one regulator had a fair lending criticism
rate above 70%, while another regulator’s
nationwide criticism rate was 20%. After
this information was shared with the reg-
ulator’s director, the criticism rate in the
regional office decreased dramatically, to
under 30%.
Identifying inconsistencies in how
banking regulations are being enforced
has never been more important, given the
avalanche of new requirements resulting
Regulatory Feedback from the Dodd-Frank Act. As many of
the rules recently became effective, both
regulators and the industry are working
Initiative Allows Bankers
to understand and implement the new
requirements. Bankers have the power to
help ensure that the new regulations are
consistently enforced across the country.
to Make their Voices Heard
By Howard Headlee
The continued success of the Regulatory
Feedback Initiative depends on banks
integrating the survey into their ongoing
regulatory compliance processes, by com-
I
pleting a survey immediately following
nconsistency is among the top Bankers need not be concerned with the each regulatory exam or visitation. One
concerns bankers have regarding anonymity of the survey. Data cannot be of the primary benefits of the Initiative
examinations and visitations by their traced back to the reporting bank, as it is is the ability to identify discrepancies
regulators. Rather than coping with these reported only in aggregate form. Partic- in “real time”. Bankers have a unique
inconsistencies and the uncertainty re- ipation in the survey will not violate the opportunity to improve the industry’s reg-
garding what issues will be covered in an confidentiality requirements associated ulatory climate and truly hold examiners
examination or how a regulation will be with any exam. The federal banking accountable, by making their voices heard
enforced, as well as wondering whether regulatory agencies have reviewed the after each exam.
the bank down the street has a similar questions within the survey and have
exam experience, bankers can take action raised no concerns regarding confidenti- When sufficient data has been gathered
with the Regulatory Feedback Initiative. ality; rather, the agencies have expressed from the survey, participating banks may
strong interest in viewing the aggregated also request a report from their state
The Regulatory Feedback Initiative is survey results. bankers association that summarizes
a powerful tool in the form of a confi- the feedback of similarly situated banks
dential electronic survey which allows The Regulatory Feedback Initiative has (based on asset size, primary federal
bankers to anonymously provide de- already achieved success in helping to regulator, region, etc.),which can serve as
tails on their most recent examination improve the quality of banks’ examina- a powerful resource in exam preparation
or visitation, creating a new level of tions. Based on two years of survey data, efforts. n
transparency in the examination pro- the Initiative found that the proportion
cess. Survey results are aggregated and of survey respondents who were “very More information about the Regulatory Feedback
analyzed to identify discrepancies in how satisfied” with their safety and soundness Initiative can be found at: http://www.allbank-
banking regulations are enforced, and to and compliance exams by the OCC rose ers.org/initiative.html.
help avoid misguided regulatory treat- from 17% in 2012 to 22% in 2013.
ment.
8 www.uba.org
THERE ARE A NUMBER
504
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CLIENTS SUCCEED
One important number for you to remember is 504—
as in SBA 504 loans. Contact Mountain West Small
Business Finance and help your clients get a flexible
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rate, and that require only 10% down.
Use your SBA 504 loan to:
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See more Utah small business
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Call today to see how easy it is to work with
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help your clients succeed! 801.474.3232 | mwsbf.com
spring 2014 9
How can you improve bank exams?
TRANSPARENCY.
ACCOUNTABILITY.
PREDICTABILITY.
Tired of exam surprises?
By taking our survey you are providing anonymous feedback
that will be used to hold regulators to consistent standards.
More than 2000 bankers have already participated.
Take a stand. Take the survey.
Utah Bankers Association
a proud member of
Take the RFI survey at www.allbankers.org
*
*RFI = Regulatory Feedback Initiative
10 www.uba.orgGrand Tetons by Henri Moser, “Utah’s Wild Beast” (1876-1951)
Guiding you through
the Peaks and Valleys
Guidance and Solutions for Financial Institutions
Unique Vision ● National Perspective ● Local Focus
Find out how Callister Nebeker & McCullough can meet your needs. Call 801.530.7300 or visit www.cnmlaw.com.
spring 2014 112014 is off to a good start for the UBA Education
Department with two very successful conferences
J
anuary 16 and 17, Ag bankers and Morby, Family Farm Succession Plan- insights and explored challenges with
their Ag customers met in St. George ning; Greg Greathouse, Water Rights; attendees during general and breakout
for the annual Ag Outlook and and Brandon Willis from the USDA who sessions. Some highlights included Com-
Conference, jointly sponsored with Utah provided an update on Crop Insurance. missioner Ed Leary; Jim Chessen, ABA;
State University. The conference kicked The conference wrapped up with the Dr. Quincy Krosby, Prudential Annu-
off with two fascinating tours in the St. much-anticipated annual Ag Outlook pre- ities; Scott Hildenbrand, SandlerO’Neill
George area including the Washington sented by Dillon Feuz, USU and James + Partners; Gary Vickrey, Tanner; Joe
County Water Treatment Plan and the Robb, Livestock Marketing Information Sullivan, Market Insight; and Steve Ford,
newly opened Family Dollar Distribution Center. son of President Gerald Ford. Featured
Center, an 817,000 square foot, 60-foot this year was a reception and private
state-of the-art facility that services nine The 3rd Annual Bank Executive Winter showing of one of the largest collections
surrounding states and boasts of over Conference February 11 and 12 at the of the priceless 2,000 year old “Dead Sea
10 miles of conveyor. During dinner, at- Little America Hotel in Salt Lake City Scrolls”at the Leonardo Museum. The
tendees were entertained by the Tuacahn was packed with two days of relevant, Bank Executive Winter Conference is a
High School “Titan Guitar Ensemble” forward-thinking topics dealing with great companion to the UBA Convention
and heard from John Blanchfield, Amer- the economy, balance sheets, technol- in Sun Valley, providing for relevant busi-
ican Bankers Association. On Friday, ogy, regulatory issues, and much more. ness discussions and great networking
top-notch speakers and topics includ- Governor Gary Herbert keynoted the opportunities. n
ed Randy Julander, Weather Forecast conference, followed by an impressive
Update; Tyler Finlinson and Cameron lineup of experts who shared their
Mark Your Calendars and
Plan to Join Us
June 29 - July 2, 2014 in
Sun Valley, Idaho
Utah and Montana Bankers
Association’s 2014 Convention
12 www.uba.orgBank Kudos
Bank of American Fork Named Most Celtic Bank Named Utah’s Largest SBA 7(a)
Active Mid-sized SBA Lender Lender for Fiscal Period Ending
February 28, 2014
Celtic Bank was named the largest SBA 7(a) lender in Utah for
the fiscal period beginning October 1, 2013 through February
28, 2014 by the SBA Utah District Office. Celtic Bank ap-
proved $15.6 million in gross SBA loans during the 5-month
period. In January 2014, Celtic Bank was recognized by the
U.S. Small Business Administration as the most active 7(a)
medium-sized lender (assets of $200 million to $1 billion) in
Utah for FY2013.
“Utah is well-known for being one of the best states in the
nation for small businesses. The pro-business climate in Utah
combined with a strong economy and talented workforce
makes Utah a breeding ground for entrepreneurship and
innovation. Celtic Bank is proud to be a member of the Utah
business community and to finance the growth of Utah’s small
businesses,” said Craig Calafati, Executive Vice President of
Business Development at Celtic Bank. n
David L. Brown, First Utah Bank,
Announces His Retirement
David L. Brown has announced his retirement after 45 years
in banking, the last 15 of which have been served as President
Utah’s Community Bank Leader Sees Small Business Lend- & CEO of First Utah Bank. Mr. Brown will remain on the
ing as Key to Economic Growth Bank of American Fork has Bank’s Board of Directors upon his retirement from day to day
been selected by the U.S. Small Business Administration as the functions. An Open House was held in Mr. Brown’s honor on
most active medium-sized lender (between $200 million and February 25th at Red Butte Gardens. n
$1 billion in assets) in the Utah District Office 504 Third Party
lending category for Fiscal Year 2013. In Fiscal Year 2013 (Oc-
tober 1, 2012 – September 30, 2013) Bank of American Fork
made SBA 504 loans totaling $7,834,840.
Eleven Greater Salt Lake Nonprofit Groups
Awarded U.S Bank Foundation Grants
The recognition was presented by Stanley Nakano, district U.S. Bank, through the U.S. Bank Foundation, is awarding
director, U.S. Small Business Association, Utah District Office, more than $40,000 in grants to 11 nonprofit organizations in
to Bank of American Fork. Richard Gray, senior vice president the Greater Salt Lake. The grants are being awarded for orga-
of SBA lending, accepted the award on behalf of the bank. nizations that support arts and culture, economic opportunity
and education in the Greater Salt Lake community.
“One of the most vital functions community banks serve is
helping small businesses grow and thrive,” said Gray. “As an “These organizations improve the quality of life for their cli-
organization deeply invested in the neighborhoods where we ents and the community at large,” said Damon Miller, presi-
live, work and raise our families, Bank of American Fork is dent of U.S. Bank in Utah. “The U.S. Bank team is honored to
proud to partner with local companies to strengthen the finan- help support them and their programs the make our communi-
cial vibrancy of our communities and the state.” ty a better place to live.”
Artistic and cultural enrichment grants are awarded to organi-
The bank has now grown to more than $1 billion in assets and, zations and programs that build audiences for the arts, espe-
according to FDIC reports, is the largest community bank in cially among underserved populations, bring select and limited
Utah. n civic amenities to underserved, rural communities or promote
the arts in education.
Bank Kudos — continued on page 14
spring 2014 13 Bank Kudos — continued from page 13
Economic opportunity grants support organizations that provide Zions Bankcorporation Receives 12
affordable housing, encourage self-sufficiency and assist eco-
nomic development.
Greenwich Excellence Awards
Zions Bancorporation has received 12 Greenwich Excellence
Awards for the year ended 2013. The awards are based on more
Educational grants are provided to innovative programs that
than 30,000 market research interviews with companies in the
help low-income and at-risk students succeed in school and
United States. Of the more than 750 banks evaluated, only 34
prepare for post-secondary education, provide financial literacy
were cited for distinctive quality in middle market banking and
training or offer effective mentoring programs.
43 were given awards in small business banking. Only 14 banks
in the country received 10 or more Excellence awards, including
The organizations that received grants from the U.S. Bancorp
Zions.
Foundation are:
• Ballet West – Arts and culture; economic;
• Boys & Girls Club of Utah County- Education;
• Guadalupe Center Educational Program Inc. – Education;
• University of Utah KUED Channel 7 – Education;
• Ogden Symphony-Ballet Association – Arts and culture;
• Ririe-Woodbury Dance Foundation – Arts and culture;
• University of Utah – Pioneer Theater – Arts and culture;
• Utah Food Bank – Education; and
• SPLORE – Education.
In addition, grants were awarded to United Way of Salt Lake
City and United Way of Utah County.
The U.S. Bank Foundation contributes to the strength and
vitality of local communities through partnerships that improve
the educational and economic opportunities of low- and mod-
erate-income individuals and families and enhance the cultural
and artistic life of the communities in which U.S. Bancorp
operates. n
“We are honored to have been recognized once again by these
awards for what we believe are some of the best products and
services available in the industry,” said Harris Simmons, Zions
Bancorporation chairman and CEO.
Zions received awards in the following categories:
Middle Market Banking ($10 million to $500 million in annual sales)
• Overall Satisfaction
• Western Region Overall Satisfaction
• Relationship Manager Capability
• Overall Satisfaction – Treasury Management
• Western Region Overall Satisfaction – Treasury Management
• Customer Service – Treasury Management
Small Business Banking ($1 million to $10 million in annual sales)
• Overall Satisfaction
• Likelihood to Recommend
• Relationship Manager Capability
• Western Region Overall Satisfaction
• Overall Satisfaction – Treasury Management
• Western Region Overall Satisfaction – Treasury Manage-
ment n
14 www.uba.orgBankers on the Move
Brad R. Baldwin assumed the role as President & CEO of Andrea Moss has been promoted to Executive Vice
First Utah Bank filling the seat vacated by David L. Brown’s President of Operations and Risk Management
retirement. Mr. Baldwin comes to the Bank with over 30 years’ Division for Zions Bank. Moss joined Zions Bank
experience in banking, law, and real estate. in 2013 as director of the division, and is respon-
sible for developing and leading an enterprise risk
Ross Burton was recently named as Compliance management program. Additional responsibilities
Officer for Town & Country Bank. He served as include overseeing bank operations, business con-
Compliance Officer for nearly a decade at SunFirst tinuity, operational risk management, vendor management, and
Bank, and also has extensive experience in bank incentive compensation.
operations, human resources and real estate lending.
Prior to this appointment, Burton managed Town & Kelly Peterson has been hired by Zions bank
Country’s Concierge Banking Group as Operations Manager. as senior director of its Commercial Real Estate
Banking Group. Peterson manages all aspects of
Melisse Grey has been promoted by Zions Bank commercial real estate lending, including loan rec-
to Executive Vice President of Small Business and ommendations, loan production and credit policies
Consumer Product Management. In her new posi- and procedures. Peterson previously managed Bank
tion, Grey ensures the bank offers a wide range of of America’s commercial real estate banking division in Nevada,
competitive products, oversees regulatory compli- and most recently served as an executive advisor for East West
ance of these products, and works to speed delivery Bancorp, Inc. of California.
of technology solutions. Grey began her career with Zions Bank
in 1992, opening the Park City Private Banking office. She then Scott Petty has been promoted to Vice President of
managed the bank’s Executive Banking Division, and went on to Business Development in the Asset-Based Lending
serve as a region president managing 23 financial centers in Salt Group at Celtic Bank. Petty will be focused on
Lake County. business development of the bank’s asset-based
lending and factoring programs. Petty began his
Brian Hobbs was recently promoted to Senior Vice President & career at Celtic Bank in 2009 as a Relationship and
Retail Banking Manager for First Utah Bank. Mr. Hobbs will Operations Manager in the bank’s Asset-Based Lending division
have direct responsibility for Retail Banking including branch and more recently served as the Credit and Operations Manager
staffing, inside sales, consumer lending, and operations. Brian and Lead Underwriter.
is a proven leader who embraces the Bank’s culture and brings
positive attitude to his role. Scott Snow has been promoted by First Utah Bank to Vice Presi-
dent & Senior SBA Officer.
Jason Hutsenpiller was recently hired as Vice Presi-
dent, SBA Loan Officer for Town & Country Bank. Rich Stevenson has been promoted by Zions Bank to Executive
During the past five years he served as business Vice President of the Real Estate Banking Group. In his new
lending manager for a Utah credit union, where position, Stevenson oversees all commercial and residential real
he led that institution in becoming one of the top estate and construction lending, directing and coordinating senior
three SBA lending credit unions in Utah for three lenders in both departments. Stevenson joined Zions Bank in
consecutive years. With over 15 years of combined 504 and 7(a) 1995. He previously worked as director of regional credit for the
lending experience, Hutsenpiller is widely recognized for his SBA Real Estate Banking Group.
lending expertise.
Lamont D. Tingey, EVP/Chief Retail Officer for First Utah
Rhonda Kilbury was recently hired as Vice Presi- Bank, has accepted new responsibilities. In addition to retaining
dent & Operations Manager at Town & Country his responsibility as the direct manager of the Retail Area Manag-
Bank. She began her banking/mortgage industry ers, the Bank’s Calling Officers, and Kent DeHart of the Business
career in 1983, and has worked at various financial Banking Department, Mr. Tingey’s duties will now also include
institutions in Minnesota, Arizona and Utah. The the direct oversight of the Bank’s Construction Loan Depart-
recipient of several customer service awards, Ms. ment, Leasing, and Mortgage Departments. n
Kilbury will have responsibility for Town & Country’s unique
Concierge Banking platform.
spring 2014 15EDP Graduating Class Honored
Tech Talk-
DDoS: What You Need to Know
By Stephanie Chaumont, CISA, CISSP, Security+
D
DoS, or distributed-denial-of-ser- already flooded your network and attack, especially if your customer
vice attacks, seem to be the focus of accomplished its purpose. You need base relies heavily on online services.
everyone’s attention right now, and this traffic stopped earlier in the chain, These services could all potentially be
rightly so—we have seen huge increases like at your ISP level. ISPs are now unavailable for a few hours (and even
this year. There are different ways to carry offering special anti-DDoS packages a few days), so you’ll need to expect
out a denial-of-service attack, but the term and technologies, so it’s worth exam- a higher volume of calls. Having a
generally includes attacks that are meant ining. If your web server is hosted by prepared response for your call center
to interrupt or suspend services connected a vendor, make sure that vendor is do- to give during this time can also help
to the Internet (for a period of hours to ing what they can to limit attacks (e.g. with any customer concerns. Includ-
days). talking to their ISP about anti-DDoS ing alternate operating procedures for
packages and technologies). services normally accessed online in
One example is to flood a bank’s website 2. If your institution does not have call- your BCP also will help mitigate some
with incoming messages that essentially back verification procedures in place of the damage that an outage could
overload the site and prevent customers for all wire and ACH activity, then cause.
from accessing it. This is a big concern you should strongly consider imple-
to financial institutions because this type menting those during a DDoS attack. As with all areas of information security,
of attack is often used as a distraction This is to protect you in the event the you will best be prepared if you assess
to prevent institutions from identifying DDoS attack was implemented as a the risk, implement layers of security, and
some type of fraudulent activity occurring distraction while someone submits ensure your incident response procedures
during the service interruption. fraudulent wires or ACH batches. are adequate. If you look at these types
If your institution does currently of attacks with the thought that it’s not a
Protecting your payment systems during implement call-back verification for matter of if, but when, then you’ll be ready
DDoS attacks should be your primary fo- transactions over a certain amount, for attackers and will have procedures in
cus. Here are a few things your bank can you might consider lowering that place to seamlessly protect your customers
do to protect you and your customers from threshold during a DDoS attack. and to continue conducting business as
DDoS attackers: 3. Include DDoS procedures in your normally as possible. n
1. Have DDoS protection conversations Business Continuity Plan. Those pro-
with your ISP or with your Internet cedures need to be things your institu- Stephanie Chaumont is a security and compliance
consultant for CoNetrix. CoNetrix is a provider of
banking vendors. Having an Intrusion tion will plan on implementing should
information security consulting, IT/GLBA audits
Detection/Prevention System (IDS/ you become the target of a successful and security testing, and tandem—a security and
IPS) in place is a great tool to have, attack, like the call-back verification compliance software suite designed to help financial
but if you want to prevent DoS or listed above. You might also consider institutions create and maintain their Information
Security Program. Visit CoNetrix at www.conetrix.
DDoS attacks, stopping them at your expanding your call center or custom- com.
IDS is probably too late as traffic has er service personnel during a DDoS
16 www.uba.orgIssue 4, Ja
® nuary 20
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Magazines | Newsletters | Annual Reports
spring 2014 17Not Perfect:
Perfecting Security Interests in Wa
R
ecent developments require banks to Code (UCC).3 For the past few decades, After these amendments, it was under-
take extra precautions in attempting the law on how to perfect a security in- stood that water shares were real property
to perfect security interests in shares terest in water shares has been somewhat rights that could be transferred like certifi-
of stock held in water companies. Water fluid (pun intended). As a result, lenders cated securities in accordance with Article
is essential in Utah’s arid climate. Not have made their best guess on how to 8 of the UCC. From this, lenders logically
surprising, Utah water rights carry a hefty perfect. concluded that a security interest in water
price tag. For decades, Utah lenders have shares could (and should) be perfected
used borrowers’ valuable water rights to The issue arose in 1989 when the Utah by taking possession of stock certificates
collateralize loans. Borrowers common- Court of Appeals held that water shares pursuant to Article 9. Despite this, in
ly pledge their shares of stock in water qualify as an “instrument” under Article addition to possession, many lenders also
companies as collateral for loans. Most 9 of the UCC, and, therefore, perfection is included a description of the water shares
banks willingly accept such pledges, but accomplished by possession.4 Five years in a recorded deed of trust.
many misunderstand how to perfect their later, in the Cahoon case, the Utah Supreme
security interest in the shares, and a recent Court overruled the Utah Court of Appeals In January 2014, perfection of water
decision by the United States Bankruptcy and held that a share of stock in a water shares was brought back into the spotlight.
Court for the District of Utah (Bankruptcy company “represents an interest in real The Bankruptcy Court analyzed “the
Court) further complicates perfection.1 property and is therefore not a certificated proper method to perfect a security interest
security under [Article 9 of the UCC].”5 in water shares.”7 Acknowledging that the
Water shares in Utah do not automatically In 1996, the Utah Legislature responded Utah Supreme Court had not addressed
run appurtenant (i.e., tied) to land.2 An to Cahoon and amended the Utah Code to the impact of the 1996 amendments on
owner of water shares, therefore, does not clarify that “the right to the use of water ev- Cahoon, the Bankruptcy Court attempted
convey ownership of water shares by deed, idenced by shares of stock in a corporation “to predict how the Utah Supreme Court
but, rather, by transferring possession of shall be transferred in accordance with the would rule on that question.”8 After a
the water shares in accordance with Ar- procedures applicable to securities set forth thorough analysis, the Bankruptcy Court
ticle 8 of the Utah Uniform Commercial in [Article 8 of the UCC].”6 held that the 1996 amendments require
1
See West v. Lee (In re Anderson), Adv. Proc. No. 12-2348, 2014 WL 172222 (Bankr. D. Utah Jan. 15, 2014).
2
Utah Code Ann. § 73-1-11(4).
3
Id. at §§ 73-1-10(2), 70A-8-301.
4
Associates Fin. Servs. Co. of Utah v. Sevy, 776 P.2d 650, 652 (Utah Ct. App. 1989).
5
Salt Lake City Corp. v. Cahoon and Maxfield Irrig. Co., 879 P.2d 248, 252 (Utah 1994)
6
Utah Code Ann. § 73-1-10; see also Utah Code Ann. § 70A-8-409 (explaining that Article 8 of the UCC applies to shares of stock in a water company).
7
West, 2014 WL 172222, at *8.
8
Id.
18 www.uba.orgpredict that the Utah Supreme Court conduct a title search on all lands served
would rule that possession of water shares by the water company for recorded deeds
is not perfection of a security interest, of trust that include the borrower’s water
but its reasoning calls this method into shares; (ii) properly describe the water
serious question. The court predicted that stock certificates in a deed of trust re-
the Utah Supreme Court would hold that corded against real property served by the
perfection of a security interest in water water shares (note that the land may not
shares can be accomplished by including be collateral for the loan in some instanc-
the shares in a recorded deed of trust.11 es); (iii) take possession of the water stock
certificates; and (iv) provide written notice
The Bankruptcy Court’s decision poses to the water company that the lender has
several challenges for banks. For example, possession of and a security interest in the
if a borrower owned several parcels of real borrower’s water stock certificates.
property within the service area of a water
company, how would a potential lender be While there is room for clarity in the law,
able to determine whether another lender wise lenders should take steps to review
already had a properly perfected security their loan portfolios and change their
interest in water shares that are still in the origination protocols to ensure that they
possession of the borrower? The poten- properly perfect valuable security inter-
tial lender would essentially have to run ests in water shares. Lenders also should
a title report on all of the parcels owned consider consolidating resources to lobby
by the borrower within the service area of the Utah Legislature to clarify that security
the water company to determine whether interests in water shares are perfected by
another lender already had recorded a possession, just as certificated securities
ater Shares
deed of trust against one of the borrower’s under Article 9. n
parcels and whether that deed of trust de-
scribed the water stock still in the posses-
Brad Cahoon is an environmental
sion of the borrower. This process would lawyer at Snell & Wilmer L.L.P.
be burdensome, expensive, inefficient, who represents a variety of clients
and is ripe for errors. Possession, on the throughout the country. He focuses
on achieving his clients’ business
water shares to be transferred pursuant to other hand, provides the lender with some objectives by applying his extensive
Article 8 but that the 1996 amendments assurance that the water shares have not experience in environmental, natural
did not overturn Cahoon and did “not been pledged to another lender. And per- resources, water and zoning law. Brad has a record
fection by possession (not just transfer by of using his litigation, administrative, regulatory
transform water shares from real property and government relations skills to protect his clients
to personal property, nor do they require possession) appears to be what the Utah from arbitrary, capricious and abusive action by
the result that inclusion in a trust deed Legislature had in mind in 1996. federal, state and local governments. His clients
is no longer a valid method to perfect a include financial institutions, manufacturers, oil,
In light of the recent Bankruptcy Court gas and mining companies, ski resorts, ranchers,
security interest in water shares.”9 In other wireless telecommunications carriers, developers,
words, the Bankruptcy Court held that (i) decision, it would be wise for lenders to chemical companies, drycleaners, landowners,
Cahoon is still good law; (ii) water shares review their loan files for loans secured by water companies, government entities and public
are not certificated securities as defined water shares and to review their protocols interest groups. Brad received his Juris Doctor from
the University of Utah, and earned a B.A. from
under Article 9; (iii) water shares are real for originating loans secured by water
Brigham Young University. He is listed in The Best
property rights; (iv) the 1996 amendments shares. In an abundance of caution, if a Lawyers in America® and Chambers USA: Ameri-
apply to the transfer of water shares but lender has taken water shares as collateral, ca’s Leading Lawyers for Business®
not perfection of security interests in water the lender should possess both the water
Doug Farr is a commercial litigator
shares; and, accordingly, (v) the Utah Su- stock certificates and a recorded deed of with a background in bankruptcy at
preme Court would rule that 70A-9a-313 trust properly identifying the water shares. Snell & Wilmer L.L.P. He represents
does not require possession to perfect a If the lender does not have possession clients from a broad range of indus-
of the stock certificates, it should take tries, including financial services, real
security interest in water shares.10 Accord- estate, and insurance. His experience
ingly, the Bankruptcy Court determined immediate steps to obtain possession. If spans from representing creditors
that a security interest in water shares may the lender does not hold a recorded deed through the complexities of bankruptcy cases to
be perfected by including the shares in a of trust identifying the shares, the lender litigating zoning and water law disputes. Doug
should consider approaching the borrower received his Juris Doctor from Brigham Young
recorded deed of trust.” University, where he graduated cum laude. He also
about recording a modified deed of trust earned a B.A. in anthropology from Brigham Young
While not binding precedent for Utah while the borrower is willing to work with University.
Courts, banks should seriously consider the lender (i.e., before a default). If a lend-
the Bankruptcy Court’s decision. Im- er accepts water shares as collateral for
portantly, the Bankruptcy Court did not new loans, it should do the following: (i)
Id. at *9
9
Id. at *9.
10
Id. at *10.
11
spring 2014 19Interest Rate Risk:
A Priority
for 2014
The Banking Environment Spotlight on Interest ant. There is a consensus among regulators
A
s we move into a new year, the US that the essential risk for banks stems from
Rate Risk long-term (or high duration) assets funded
economy continues to plod along at Not the least of these challenges is that
a slow and steady pace. Things are by non-maturity deposits that have surged
of potential interest rate risk (IRR). into bank balance sheets in the wake of
getting better, but we’re still far from where Regulatory agencies have once again ele-
we were before the “Great Recession” the Great Recession. The influx of “surge
vated IRR as a focal point for examiners, deposits” has regulators concerned about
began. Meanwhile, the banking land- as evidence suggests that many financial
scape has improved markedly as earnings the potential for fast rising interest expense
institutions are taking on higher levels from rate sensitive liabilities. At the same
clocked sixteen consecutive quarters of interest rate risk. Balance sheets have
of year-over-year increase. Returns on time, asset values could come under great-
changed noticeably in recent years as er pressure than in past rate cycles because
assets remain below pre-recession levels, loan demand has been weak and short-
but they’re higher than a year ago and effective durations are relatively high. The
term rates have hugged historic lows. price risk of some investment portfolios
comfortably above one percent. Much of This could leave them significantly ex-
the improved performance comes from has increased significantly in the past few
posed to a sustained increase in interest years due to lengthened maturities, options
healthier asset quality. Loan losses have rates.
declined to levels not seen since 2007, and risk, and declining yields.
provisions have fallen nearly forty percent. In October, the FDIC released an FIL on
All of this is good news, but make no mis- Sensitivity to Market Risk. Simultaneously, Management Tools
take; banks face a multitude of challenges the OCC conducted a webinar to address The regulatory concerns should cause
ahead. the IRR issues they thought most import- bank mangers to ponder several questions
20 www.uba.orgYou can also read
