Archive for month: September, 2022

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From The Fields: Expect Turbulence

By Nicholas Felder

“Ladies and gentlemen please make sure your seat belt is securely fastened and your seat backs and tray tables are in their full upright position.” As many of us know, these instructions are for the safety and soundness of all those aboard commercial aircraft during what might not be a perfect landing. Well, we might all want to heed that advice and reiterate that to all our customers as soon as possible.

As of the date of this article, the American grain producer is facing $6.60 corn (which oscillated from $4.85 to $7.60 down to $5.65 now $6.60) and $13.94 soybeans (same $12.50, then $15.85, then $12.85, then $14.75, now $13.94) which isn’t all bad! However, all the pilots (and the passengers alike) who are flying across the 2022 crop year aren’t exactly sure where the runway is located and in what condition it stands. As they peer down towards harvest and post-harvest, they must deal with a dense layer of fog comprised of inflation, a strengthening dollar, global unrest, weather, mid-cycle fall elections, and the USDA’s export sales reporting system that went down just as these markets couldn’t get any more volatile. Basis spreads between new and old crops are leading the charge to what looks like a pre-harvest rally. However, the Dow and S&P markets are falling precipitously, leading some experts to believe a demand drag on domestic use is the next big hurdle for the 2022 and 2023 crop marketing cycles. Sell now or later? And, if that wasn’t enough, producers and lenders looking at the 2023 growing/feeding/milking year are facing decisions on things like fertilizer and chemical pricing, even before the ’22 crop really starts to turn away from its summer green. Can we really achieve a “soft landing” of any fashion in this environment? It’s the question both farmers and politicians are struggling to answer.

Change and interruption are inevitable in a global and electronic economy. Too many hands in the pot waiting to grab their “fair share,” while people and animals across the globe fight to find their next meal. However, preparation and a good commodity marketing offense is the best defense for headwinds of the nature noted above. It really all begins with cash flows that are created well before final planting decisions made. Then, regularly updating the living, breathing document as itemized expenses change or planting and crop maintenance is completed so it can be an accurate tool to price whatever commodity being produced. These strategies don’t have to be complex; just planned and emotionless. Nickels saved through discipline and, many times, luck create opportunities to land as softly as anyone is able in today’s environment. A producer can’t farm next year if he doesn’t make it through this year.

We all know that equity may be the key to growth, but liquidity is the key to longevity. As we transition into the autumn harvest season, your fellow banking professionals ask that you be that trusted advisor who is slightly risk averse, but supportive of growth and profitable ventures. There is still money to be made and balance sheets will improve if producers are intentional in their actions and lenders the same. The sky can be prevented from falling if we work together!

Thank you all for your service to the industry, diligence and support of America’s producers, and presence within your local communities. Wishing all a safe harvest season!

Nicholas Felder is vice president, commercial and ag banking, with MidWestOne Bank in Lancaster. Felder currently serves on the WBA Ag Section Board of Directors.

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Executive Letter: Fending Off Interchange Restrictions

Rose Oswald PoelsBy: Rose Oswald Poels

As many WBA members know, our Association has been fighting off proposed interchange regulation for over a year. At the state level, WBA and banking advocates from throughout Wisconsin successfully halted AB 587/SB 572, which called for the prohibition of interchange fees on the tax portion of a transaction. While grassroots involvement by Wisconsin bankers has helped us clear one hurdle, it is clear that retailers and legislators alike are prioritizing moving this issue forward at both the state and federal levels.

In late July, Sen. Dick Durbin (D-IL) and Sen. Roger Marshall (R-KS) introduced the bipartisan Credit Card Competition Act of 2022 (S.4674). The proposed legislation — which is largely opposed by members of the American Bankers Association (ABA), Independent Community Bankers Association (ICBA), and banking trade associations from across the U.S. including WBA — would require banks exceeding $100B to offer customers at least two networks to process credit cards — one of which is required to be a provider other than Visa or Mastercard. According to Durbin, this proposed legislation “injects competition into the Visa-Mastercard duopoly.”

Last week, the House companion to the Credit Card Competition Act of 2022 (H.R.8874) was introduced by Rep. Peter Welch (D-VT) and Rep. Lance Gooden (R-TX). Again, legislators claim that this proposal will cut costs for businesses and families.

Although Wisconsin’s community banks are not the current target of this proposed legislation, the Credit Card Competition Act of 2022, active now in both the U.S. Senate and House, will require a complete and costly overhaul of the U.S. payment system that every consumer and institution will feel the impact of.

In addition, credit card merchants would be given the ability to force transactions to cheap, less secure networks; more Americans would lose access to valued cash-back and reward programs that drive spending or credit altogether; and with an increase in regulation, the independence and competitiveness of community banks is put at risk.

For the sake of our current financial system, the security and choice of all consumers, and the continued prosperity of community banks across the state and country, I encourage you to join WBA in opposing these two proposed legislative actions.

Grassroots advocacy is a critical component of WBA’s advocacy efforts as we need banker involvement to help ensure the industry’s voice is heard. Please make time to call your House Representative or email them a message — let them know that you stand with the best interest of our communities and customers in mind. You can easily take action now on ICBA’s website and ABA’s website. Your engagement has time and time again proven vital and highly effective in fending off threats to our industry. Thank you in advance for your help informing our congressional delegation of these concerns.

If you have any questions regarding how these proposals will impact Wisconsin community banks or wish to designate an Advocacy Officer to assist the Association in coordinating regulatory, legislative, and community advocacy efforts, please contact WBA Vice President – Government Relations Lorenzo Cruz or me.

ABA Website ICBA Website
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The Path of an Accidental Banker

By Jennifer Sobotta

Attending and enjoying the June BOLT Summer Leadership Summit, listening to the speakers, and connecting with old and now new friends makes me think of how I got to be where I am today. This year’s BOLT Summer Leadership Summit made me think of it even more as we talked about career pathing. So much so, that during my next turn at the podium I introduced myself as “Jen, the Accidental Banker.”

During my studies at the University of Wisconsin-Stevens Point back in the 90s, I had no intention of going into banking. I wanted to be a marketer after all and didn’t (and still don’t) care for numbers enough to be a lender. That was how I looked at banking back then — only the positions that you would see walking in as a customer.

My senior year, with the help of UWSP Career Services, I sent over 80 resumes, had 30 interviews, nine second interviews, and three job offers. Not one was in the financial services industry.

My first real job was on a marketing team at a rural hospital/nursing home. It was very community focused and located in a lovely rural area. I had the chance to learn from an experienced leader more than tactical marketing, but the art of navigating internal meetings, public relations, and community events.

When it came time to look for more growth with another company, a friend recommended a local bank that was expanding. I took a chance and happily joined the team at the end of 1998 with a lot to learn. My mentor there had led teams at a few other banks previously and shared her expertise constantly. My path to where I am today wasn’t straight, but it was paved by leaders willing to share. That’s an important lesson.

Within two years, that mentor retired, and I took a leap of faith that I could be the next marketing director. The bank took a chance on me and invested in me as I grew as a leader. They sent me on to the ABA School of Bank Marketing & Management and countless other conferences and seminars to learn new methods and software to fine-tune my craft. Through the years, I built my team up to three in the marketing department, and the bank grew to $500 Million in assets and 14 locations. Yet, it was again time to move on to the next challenge.

I received a call from an old colleague, a lender who I didn’t always have a chance to talk with much. He told me about the opening at Forward and encouraged me to apply. That gentleman has risen to the role of president and is the leader I now report to. A great lesson that every interaction with people is important — you don’t know when and what is noticed.

The past 12 years have been a blur, much like when you are speeding down a highway. I’ve seen the same level of investment in me as a team member and more in all of us as leaders. We all challenge each other to innovate, to remove the traditional roadblocks, and push back at the naysayer mindset sometimes found in financial services. We understand that banking isn’t a transaction, it’s now an experience.

Forward is now approaching $1 billion in assets with 12 locations, seven insurance offices, and three investment offices. When I look around, there are many accidental bankers like me with the list growing each year.

As the current Building Our Leaders of Tomorrow (BOLT) Board chair and thinking of the time spent working with and learning from the Wisconsin Bankers Association (WBA), we are all lucky to have this resource. From serving on the Marketing Committee, then as its chair to being part of BOLT and now proud to be this year’s chair, I wonder what will be next. Where else can I continue to learn and lead through that process?

One final lesson that has stayed with me for over 20 years. My 90-year-old grandfather swung a golf club for the first time as I was practicing in the yard after his birthday party. Knowing he would never play a course, I asked him why even learn to swing the club. He told me, “you never stop learning until you leave this earth.” Best lesson ever.

I may not have chosen initially to be a banker, but the path I’ve taken has been created by the lessons of leaders around me. Good luck on your journey.

Interested in attending the next BOLT Summit?

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Sobotta is vice president – marketing director at Forward Bank in Marshfield

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Legal Q&A: How Should Your Bank Approach Contracting With Minors?

Bank policies, procedures assist in determining the risk associated with minors

By Scott Birrenkott

Q: Can Banks Contract with Minors

A: Yes, depending on policies and procedures.

WBA frequently receives questions regarding the ability of minors to enter into a contract. No rule or regulation prohibits a bank from contracting with a minor. However, a minor can escape liability under the contract. Meaning, a minor could avoid liability from a bank seeking to hold a minor accountable for terms under the contract. Thus, banks are free to enter into contracts with minors, but must decide so as a matter of risk.

The ability of a minor to escape liability or void a contract is often referred to as the doctrine of incapacity. This is a common law term, meaning, generally, a concept under the law that is derived from judicial precedent rather than statute. As such, there is no specific rule governing contracting with a minor. It also means that there is no specific point at which a minor is deemed “competent.” If a minor attempts to escape liability under contract, it would be up to the bank to attempt to enforce the contract against the minor, and up to a court to decide.

It is important to understand the theory behind the doctrine of incapacity. Generally speaking, the theory is that a minor has not developed enough to understand the significance of contracting and thus may potentially escape liability. Because it is not readily defined, a court could find that someone who has attained the age of 18, or older, still hasn’t matured enough to understand that significance and might be permitted to void the contract.

When it comes to minor accounts, WBA generally recommends that banks consider the use of a WUTMA account. A WUTMA account is created under Wisconsin’s Uniform Transfers to Minors Act, which provides certain requirements, procedures, and responsibilities. Thus, it creates a means for a bank to open an account with an understanding of what rules apply to the relationship between the minor, the adult custodian, and the bank. While WUTMA provides for this certainty, banks should be careful before opening custodial accounts that are not governed by WUTMA, as it would leave questions as to how the account would be handled.

As a result, banks must decide, as a matter of business and policy, whether they are willing to contract with minors. This includes both deposit and loan account relationships. For the above reasons, financial institutions should consult with their policies and procedures regarding contracting with minors.

For any questions on this, or other matters, you may reach WBA legal at wbalegal@wisbank.com or 608-441-1200.

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Executive Letter: A Sneak Peek at the Society of Bank Executives

Rose Oswald PoelsBy Rose Oswald Poels

The Society of Bank Executives, a nationwide organization for building new connections and accessing accelerated programing related to leadership, is looking ahead to the official launch in January 2023. Currently, the Society is comprised of over 120 executives from 15 states, including several from Wisconsin, and these bankers are participating in the pre-launch cohort this fall.

As I have announced in previous publications, the Society was established by several banking trade groups across the country — including WBA — to promote individual professional development. The initiative focuses specifically on granting C-suite bankers the opportunity to network among peers, attend relevant and flexible education seminars by experts, and enhance critical leadership competencies and skills.

As we all work to navigate within our ever-evolving industry, I encourage you to consider the importance of taking part in opportunities such as the Society of Bank Executives. Unlike other leadership seminars, the program offers bankers not just the education, but the relationships and soft skills necessary to masterfully lead our banks. In addition to studying, analyzing, and applying knowledge learned during the four-month program, bank executives will form invaluable networks among peers outside of our markets.

Although the pre-launch session is in full swing, Wisconsin bankers are invited to join the Society during its third meeting in Sun Valley, Idaho. The three-day event focuses specifically on the power of peer groups, and will kick off on October 19. I encourage bank executives who have not already registered for Society membership to consider utilizing this opportunity to garner a sneak peek of what’s in store for programing as the initiative formally launches in January.

Thank you to those Wisconsin bankers who have already registered as a member the Society. If you would like to learn more about the Society and how its program could impact your bank, please visit executives.bank/home. Additionally, if you are interested in taking part in the Society’s upcoming in-person educational event in Sun Valley, please click here for details on how to register.

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September 2022 Compliance Journal

The September 2022 WBA Compliance Journal is now available. In this edition, WBA Legal covers Part 1 of a two-part series regarding contracting with minors. In this first part, readers will find a series of Q&As regarding WUTMA accounts and a new reference chart. The publication also includes a summary of recently published agency rules and notices and other important compliance-related updates for bankers.    

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Regulators Look to Mitigate Climate-Related Financial Risk

Wisconsin bankers prepare for forthcoming legislation, guidance

By Hannah Flanders

An increasing number of Wisconsinites are growing concerned about climate change and its effects on the state’s key economic sectors — agriculture and forest product, fisheries, and outdoor tourism and recreation. Each year, these sectors continue to be negatively impacted as a result of increasing temperature, humidity, precipitation, and extreme weather events.

In an effort to preserve America’s unique, natural resources, promote public health and safety, and extend the positive growth in our economies, regulators across the country have turned their focus to understanding climate-related financial risks. In January 2021, President Joe Biden issued an Executive Order relating to protecting public health and the environment. As a result, many key banking regulators and Wisconsin officials have announced advisories, statements, and proposals of their own to aid banks and other industries in mitigating the effects of climate change on the economy.

Ensuring Consistency

As sectors and jurisdictions in the financial system become increasingly more intertwined and supervisory and regulatory authorities continue to assess climate-related financial risks, the Financial Stability Board (FSB) has published draft recommendations in an effort to promote consistency throughout the financial system as well as to assist financial institutions in managing and mitigating climate-related risks. Final recommendations from the FSB are expected in the fourth quarter of 2022.

The Financial Stability Oversight Council (FSOC), in addition to establishing the Climate-related Financial Risk Committee (CFRC) which assists in identifying, assessing, and mitigating climate-related risks to the financial system and developing common approaches and standards, the Council has recently released recommendations to FSOC members — including the U.S. Securities and Exchange Commission (SEC), the Federal Reserve Board (FRB), and the Federal Housing Financing Agency (FHFA) — regarding their action on climate change data, disclosure, and scenario analysis.

While several agencies, including SEC and the Office of the Comptroller of the Currency (OCC), have already acted on risks related to climate change, Acting Director of the FHFA Sandra L. Thompson said in a statement released in December 2021 that FHLBanks are encouraged to designate climate change as a priority and actively consider its effects in their decision
making. The FHFA also created a new Conservatorship Scorecard which assesses Fannie Mae, Freddie Mac, and Common Securitization Solutions on their ability to promote sustainable and equitable access to affordable housing while operating in a safe and sound matter.

Proposed Federal Legislation

Both the OCC and the Federal Deposit Insurance Corporation (FDIC) have issued draft principles that provide framework for the management of climate-related financial risks by banks with more than $100 billion in total consolidated assets.

Although either draft has yet to be finalized, the Wisconsin Bankers Association (WBA) issued a comment letter in June to members of the FDIC warning of the potential negative impact this draft may unintentionally have on smaller, community banks and the communities they serve.

In addition to commenting on the FDIC’s draft principles, WBA joined the Independent Community Bankers of America (ICBA) and several state banking associations from around the country in expressing concerns related to the FDIC’s proposed statement of principles highlighting the effects of large financial institutions being pressured or required to “de-risk” their loan portfolios. The ruling in its current state has the potential of excluding lawful but climate disfavored customers or industries from the financial system.

This year, the SEC has also proposed two climate-related disclosure rulings that Wisconsin bankers should consider for investment purposes. The first proposal — the Enhancement and Standardization of Climate- Related Disclosures for Investors — focuses specifically on requiring registrants to include certain climate-related disclosures in their registration statements and periodic reports.

While the approach to release climate-related disclosures through existing SEC requirements is appreciated, in its comments, WBA highlighted that Wisconsin’s financial institutions, publicly traded or not, have successfully managed credit-based risk for decades and that this proposal is primary built on supplying non-financial information that many businesses do not have the resources to provide.

In addition to recommending that SEC repeal said proposal in its own comments, the Association joined nearly 100 supporting groups in signing onto the House Small Business Committee’s Republican-led letter to SEC demanding the rescission of the proposed ruling.

The second — Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance (ESG) Investment Practices — amended the ruling and forms under the Investment Advisors Act and the Investment Company Act. This would require certain advisers, investment companies, and business development companies to provide additional information regarding their ESG investment practices. Comments on this ruling were due August 2022.

Wisconsin-Specific Efforts

In Wisconsin, Governor Tony Evers has highlighted combatting climate change is a key priority for the administration. Earlier this year, the Governor’s Task Force on Climate Change — a coalition of representatives from industries and communities across the state — recommended the creation of the Office of Environmental Justice within the Department of Administration (DOA).

The Office, supported by the first state-level chief resilience officer (CRO) in the Midwest — now serves as the state’s principal office in coordinating agency frameworks, strategies, and policymaking to ensure state action does not have an adverse or disparate environmental effect on under-resourced communities.

Additionally, the Wisconsin Department of Financial Institutions (DFI) has so far only released an ESG investing advisory which includes an overview of its effects and what investors should consider. However, as climate-related risk becomes an increasing concern for industries and communities across the state, Wisconsin bankers should expect that state-level advisories, guidance, or legislation may be forthcoming.

While no hard and fast ruling yet stands for banks related to climate-related risk disclosures either at the federal or state levels, WBA advises bankers to be aware of the potential for upcoming regulation on the topic.

View WBA’s recent comment letters by visiting wisbank.com/CommentLetters. For questions on legal developments or regulations related to climate change or other compliance matters, please reach out to WBA legal at wbalegal@wisbank.com or 608-441-1200.

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2022 WBA Management Conference Recap

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