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UW-Platteville Student Launches Career in Banking with Assistance from WBF Scholarship

Last spring, Jenna Raisbeck was awarded the Wisconsin Bankers Foundation’s (WBF) Agricultural Banking Scholarship. Originally from Lancaster, Wisconsin, Raisbeck is now a junior at the University of Wisconsin–Platteville and holds a position as a credit analyst and branch marketing liaison at Community First Bank in Platteville.

This inaugural scholarship awarded two individuals attending accredited Wisconsin universities with career interests related to agricultural banking/finance a $1,000 scholarship towards their education. WBF is excited to soon announce the recipients of 2021’s Agricultural Banking Scholarship, which accepted applications in the fall.

Raisbeck was raised understanding the importance of agriculture to her local community, despite not living on a farm herself. As a credit analyst, she works closely with farmers and their credit and has come to realize the need for having good agricultural finance professionals and resources for farmers. Not only does her current position allow her to explore finance and banking, but it also combines her interests in the agricultural industry and helping her community.

Along with receiving the scholarship from WBF, Raisbeck also had the unique opportunity to enter the bank as an intern. “Most companies target graduating seniors for full-time positions, but hiring younger students as interns or tellers can be just as important,” she says. “In my experience, the bank has been able to teach me a lot since I started out so young and with little experience. They know what areas I am interested in and eventually can help me prepare for the right position.”

Following her graduation this January, Raisbeck plans to continue her banking career long term. Through opportunities such as job shadowing, she has decided to pursue lending because it will allow her to work closely with customers, utilize the financial skills established through her time as a credit analyst, and help customers reach their goals.

“Being the recipient of the Wisconsin Bankers Foundation Agricultural Banking Scholarship has benefited me by helping lighten my financial burden that comes with attending college,” says Raisbeck, “This has allowed me to focus more time on my courses which is important to my career. Without successfully completing these finance-focused courses, I would not be able to pursue the career I want long-term, nor would I be able to be in the position that I am now. Getting this recognition for all my hard work from the WBF means a great deal to me and motivates me to continue to push myself to be the best I can be.”

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SBA Releases New Procedure for SBA Loan Review of Partial Approval Forgiveness Decisions

On January 28, SBA released Procedural Notice 5000-827666 regarding SBA loan reviews of PPP Lender partial approval forgiveness decisions. The notice outlines a new process to allow PPP Borrowers to request an SBA loan review of partial approval forgiveness decisions issued by their PPP Lenders. The procedures in the notice apply to loan forgiveness decisions submitted by Lenders to SBA through both the regular forgiveness process as well as the Direct Borrower Forgiveness process. The notice is effective January 27, 2022.

The notice reiterates the process for a partial approval forgiveness decision and the steps that need to be taken by the Lender when it receives a forgiveness application from a Borrower. The notice also outlines a new process for borrower requests of SBA loan review of a partial approval forgiveness decision.

Starting from the effective date of the notice, when a Lender receives a forgiveness remittance from SBA on a partial approval decision, including where the Lender required the borrower to apply for forgiveness in an amount less than the full amount of the loan, the Lender’s post-forgiveness remittance notification must inform the borrower that the borrower has 30 calendar days from receipt of the notification to seek, through the Lender, an SBA loan review of the Lender’s partial approval decision. Within five calendar days of a Lender’s receipt of a borrower’s timely request for an SBA loan review, the Lender must notify SBA through the Platform. The Lender’s notice to SBA of the borrower’s timely request for review must include a copy of the Lender’s notice to the borrower of the reason(s) for the Lender’s partial approval decision. SBA reserves the right to review the Lender’s decision at its sole discretion.

Additionally, within 30 calendar days of the date of the notice, Lenders must notify all of their borrowers on loans that previously received a partial forgiveness remittance from SBA as a result of Lender partial approval decisions, including where the Lender required the borrower to apply for forgiveness in an amount less than the full amount of the PPP loan, that the borrower has 30 calendar days from receipt of the Lender notification to seek, through the Lender, an SBA loan review of the Lender’s partial approval decision. Within five calendar days of the Lender’s receipt of a borrower’s timely request for an SBA loan review, the Lender must notify SBA through the Platform. The Lender’s notice to SBA of the borrower’s timely request for review must include a copy of the Lender’s prior notice to the borrower of the reason(s) for the Lender’s partial approval decision. Again, SBA reserves the right to review the Lender’s partial approval decision at its sole discretion.

In either circumstance, if SBA selects the loan for an SBA loan review as a result of the borrower’s request, the borrower must continue to make payments on the remaining balance of the loan, and the loan is not deferred.

If SBA determines, as a result of the SBA loan review, that the borrower is entitled to forgiveness in an amount greater than the Lender’s partial approval decision and SBA has previously remitted a partial forgiveness payment to the Lender, SBA will remit an additional forgiveness payment to the Lender to make up the difference. SBA will issue an additional Notice of Paycheck Protection Program Forgiveness Payment (Payment Notice) to the Lender.

If the SBA loan review results in a higher forgiveness amount, but less than full forgiveness, SBA will also issue a final SBA loan review decision to the Lender. The Lender must provide a copy of the Payment Notice and, if applicable, the final SBA loan review decision, to the borrower within 5 business days of the remittance and comply with applicable requirements of the Lender Responsibilities Notice. If a borrower has begun making payments on their loan and the SBA loan review results in full forgiveness, the Lender must refund all payments made by the borrower.

If the SBA loan review results in a higher forgiveness amount, but less than full forgiveness, the lender must re-amortize the PPP loan and refund any excess payments made by the borrower.

Note: PPP Borrowers that have received full denial forgiveness decisions from their Lenders should continue to follow the process outlined in the Interim Final Rule on Loan Forgiveness Requirements and Loan Review Procedures as amended by the Economic Aid Act (86 FR 8283, February 5, 2021), as amended.

Lenders may call the Lender Hotline at (833) 572-0502 for live assistance regarding PPP access and support, policy questions and procedures, and Capital Access Financial System (CAFS) and SBA’s Electronic Transmission (E-Tran) systems support. Questions concerning the notice may be directed to the Lender Relations Specialist in the local SBA Field Office.

Notice 5000-827666 is posted on the WBA website.

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Recent WI Supreme Court Cases Affirm DNR Authority to Place Permit Restrictions on Farms and High-Capacity Wells

The Wisconsin Supreme Court (Court) recently decided two cases to allow the Wisconsin Department of Natural Resources (DNR) to place permit restrictions on large livestock farms and high-capacity wells as a way to protect Wisconsin’s water. The issue in both cases is whether DNR had the authority under Wisconsin law to issue permits with conditions. 

In both cases, the Court looked to language used in Sec. 227.10(2m) Wis. Stats. and determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope. As a result of the two decisions, DNR was given broader authority than many believed was permissible since enactment of 2011 Wisconsin Act 21 (Act 21) because the agency actions authorized by the Court are not specifically stated in the statute sections in question. The following is a summary of the two cases.   

Kinnard Farms  

In the first case, Kinnard operates a large, concentrated animal feeding operation (CAFO). Kinnard wanted to expand its dairy operations by building a second site and adding 3,000 dairy cows. The expansion required Kinnard to apply to DNR for reissuance of its Wisconsin Pollutant Discharge Elimination System (WPDES) permit to include both the original site and the proposed expansion. DNR approved the application and reissued Kinnard’s WPDES permit.  

Persons (petitioners) living near the CAFO sought review of the reissued WPDES permit because of their proximity to the farm, had private drinking wells, and were concerned the proposed expansion would exacerbate current groundwater contamination issues. The petitioners alleged that the reissued WPDES permit was inadequate because, among other things, it did not set a “maximum number of animal units” or “require monitoring to evaluate impacts to groundwater.”  

DNR granted the petitioners a contested case hearing and the matters were referred to an administrative law judge (ALJ). Kinnard filed for summary judgment alleging DNR lacked statutory authority to impose the conditions, citing Act 21. The ALJ denied the motion and conducted a four-day evidentiary hearing during which community members who lived or worked near the CAFO testified about contamination of well water and the impact the contamination had on their businesses, homes, and daily lives. Based upon evidence presented by residents and experts, the ALJ determined that DNR had “clear regulatory authority” to impose the two conditions disputed upon Kinnard’s reissued WPDES permit.  

Ultimately the matter was argued to the Court. The issue in the case involved sec. 227.10(2m), Wis. Stats., which dictates that “[n]o agency may implement or enforce any standard, requirement, or threshold…unless that standard, requirement, or threshold is explicitly required or explicitly permitted by statute or by a rule that has been promulgated in accordance with this subchapter.” (emphasis added). The parties disputed the meaning of “explicitly required or explicitly permitted” in the context of DNR imposing conditions upon Kinnard’s reissued WPDES permit.  

Kinnard asserted that explicit means specific, and that in the absence of statutory or administrative authority, DNR must first promulgate a rule in order to impose the conditions upon its reissued WPDES permit. The DNR and petitioners counter that such a reading of “explicitly required or explicitly permitted” was too narrow, and that Kinnard had overlooked the explicit, but broad, authority given to DNR in Secs. 283.31(3) – (5) Wis. Stats. to prescribe such conditions.  

The Court first looked to dictionary definitions of the term “explicit” and revised Sec. 227.10(2m) in context and determined explicit authority can be broad in scope. The court next examined the text of Secs. 283.31(3) – (5), and related regulations, to determine whether DNR had explicit authority to impose an animal unit maximum and off-site groundwater monitoring conditions upon Kinnard’s reissued WPDES permit. The Court held that while the statute sections do not specifically state an animal unit limit or off-site ground water monitoring, DNR did have explicit authority to prescribe both conditions when it reissues the WPDES permit.  

The Court determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope.   

High-Capacity Wells 

In a second case, the Court also reviewed whether Sec. 227.10(2m) Wis. Stats. allowed for DNR to consider the potential environmental effects of proposed high-capacity wells when such consideration is not required under Sec. 281.34(4) Wis. Stats.  

For some types of wells, DNR is required to follow a specific process in its environmental review of a well application. For other types of wells, a specific process is not required; however, DNR often still considers the potential environmental impact of a proposed well when considering a well application. Eight well applications in dispute in the case where the type that no specific environmental review was required. DNR did have information that the wells would negatively impact the environment. DNR approved the eight applications knowing of the wells impact having concluded it did not have the authority to consider the proposed wells’ environmental impact. 

Clean Wisconsin and the Pleasant Lake Management District (collectively, Clean Wisconsin) appealed DNR’s action arguing DNR’s decision was contrary to the Court’s decision in the Lake Beulah Management District v. DNR (2011 WI 54, 335 Wis. 2d 47, 799 N.W.2d 73) case. In Lake Beulah, the Court held that DNR had the authority and discretion to consider the environmental effects of all proposed high-capacity wells under the public trust doctrine when it determined that a proposed well would harm other waters in Wisconsin.  

DNR argued the Lake Beulah court case was no longer good law because Act 21 had since become law and the law limits an agency’s action to only those “explicitly required or explicitly permitted to state or by a rule.” The eight well applications were for the type of wells for which there was no formal environmental review under Sec. 281.34 Wis. Stats. DNR had also relied on a past Attorney General opinion which stated the agency could not rely on the public-trust authority and could not rely upon the Lake Beulah case as that would not withstand the requirements under Wis. Stats. Sec. 227.10(2m) (OAG-01-16).   

With respect to the high-capacity well applications, the Court ruled in favor of Clean Wisconsin having determined DNR has explicit authority, based upon its broad public trust authority under Secs. 281.11 and 281.22 Wis. Stats., to determine the environmental impact of high-capacity wells despite the fact that Sec. 281.34 does not specifically state such requirement. The Court’s finding reaffirmed the Court’s Lake Beulah decision despite enactment of Act 21.  

Take Away from Cases 

The interesting and concerning parts of the decisions is that after the passage of Act 21, many took the revised language of Sec. 227.10(2m) Wis. Stats. to mean that for an agency to act, the action had to be specifically stated or provided for within statutory language or administrative rule. If the action was not within such language, the agency would first have to promulgate a rule or otherwise change statutory language for the agency to take the actions desired.  

However, given how the Court has interpreted “explicit” in the two cases, that may not be the case. It is possible that because of the two Court decisions, an agency make act regardless of the action not being stated within statutory language or administrative rule. Instead, it is possible an agency may rely on its broader authority for action.  

Financial institutions should keep the decisions of the two Court cases in mind when considering whether an agency has the authority to act in a particular manner. Financial institutions should be cautious that just because an action is not specifically found within statute or rule, the action may still be authorized under a broader, explicit authority. Despite the passage of Act 21, agency action could be broad.  

As is often the case, one should read the dissenting opinions of both cases. The dissenting opinions outline the concerns of many regarding how broad an agency may act despite Act 21, despite the fact the agency’s actions were not specifically stated within statute or administrative rule in connection with reissuing an WPDES permit or when approving the type of well applications involved in the high-capacity well case, and despite the Court’s previous decision under Tetra Tech EC Inc. v. Wisconsin Dep’t of Revenue, 2018 WI 75, 373 Wis.2d 2387, 890 N.W.2d. 598. The decisions appear to give back to agencies potentially broad authority.  

Conclusion 

In both cases, the Court looked to language used in Wis. Stats. Sec. 227.10(2m) and determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope. As a result of the two decisions, DNR was given broader authority than many believed was permissible since enactment of Act 21 and Tetra Tech. Financial institutions need be aware of the Court decisions and be cautious that just because an action is not specifically found within statute or rule, the action may still be authorized under an agency’s broader, explicit authority. 

Clean Wisconsin et. Al v. Wis. Dep’t of Natural Resources, 2021 WI 71 (Kinnard Farm) decision may be viewed at: https://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=386188  

Clean Wisconsin and Pleasant Lake Mgmt. Dist. v. Wis. Dep’t of Natural Resources, 2021 WI 72 (High-Capacity Wells) decision may be viewed at: https://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=385454  

By, Ally Bates

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Reimagining the Bill Pay Experience

How financial institutions can meet evolving consumer expectations

Financial institutions are witnessing a rapid evolution in bill pay fueled by nonbank competitors, COVID-19 and constantly rising consumer expectations. It’s a complex challenge that calls for flexibility and a willingness to expand the definition of bill pay beyond the basic task of paying a bill.

The pandemic is driving rapid innovation and accelerating the use of digital tools. However, for years before COVID-19, large fintechs had emerged to focus exclusively on consumer payments, including bill pay.

By working from the outside, fintechs could focus on payments without consideration of existing banking infrastructure, integrations and other factors that financial institutions must keep in mind. Fintechs have used that advantage to innovate and connect with consumers, and that is a challenge to traditional financial services companies to up their game.

Financial institutions, though, have their own advantages. Zelle® is a prime example of recapturing person-to-person (P2P) payments and expanding to small-business payments with a real-time, convenient and secure service.

But every payment is under the microscope. Consumer expectations are going through the roof as people look for more convenience, ease of use and more advisory experiences. While that started in areas such as P2P, transfers and disbursements, heightened expectations are expanding to bill pay.

Financial institutions can continue to innovate and deliver on customer expectations when it comes to the next generation of payments. Here’s how.

Become an Extension of the Biller

The question for financial institutions around bill pay is how to make it more modern and intuitive.

Let’s say I go to my cellphone company’s site to pay the bill and notice it’s much higher than usual. The site will show me why. Maybe one phone in the plan exceeded the data cap.

That leads to prompts: Do I want to change my plan? Do I want to upgrade? Did I know I’m eligible for a new phone? Suddenly, my cellphone company is offering a complete advisory experience. And, like most people, I almost always go to the cellphone company’s site – or any other biller’s site – to make a real-time or last-minute bill payment using a credit or debit card.

Financial institutions recognize their bill pay experiences don’t always measure up. There are gaps in the user experience and payment features. But they also recognize their legacy technology does the foundational things well.

The benefit of financial institution bill pay is it’s a consolidated experience, a place where consumers can go to pay all their bills. They don’t have to remember all the different passwords or put payment reminders in their calendars. The fact that a financial institution can do all of that in one place is a value proposition that resonates.

But then people experience it and say, “Oh, I can’t pay with my card. I can’t make last-minute payments. And I’m not getting the advisory experience I’m used to.” So they don’t make the switch to the channel.

Closing the gaps to offer the same benefits and services as biller sites requires financial institutions take advantage of their strong foundation while adding flexibility to deliver a modern, intuitive user experience.

Leverage Data to Offer Meaningful Insights

Financial institutions know who people are paying. So why not streamline the bill pay setup process by presenting those billers to consumers right from the start?

Financial institutions can also identify other relevant billers in a user’s area to serve up as possibilities. Biller setup is the first step, and when financial institutions leverage data and analytics to be more advisory, they have a higher likelihood of engaging consumers.

The possibilities of how financial institutions can use data keep expanding. Eventually, leveraging data and analytics to close gaps in the experience will lead to predictive reminders.

With those reminders, financial institutions may see that a consumer paid a biller on the 15th for the past three months. But this month, the consumer hasn’t scheduled the payment. So on the fifth of the month, for instance, the financial institution could ask the consumer if the payment should be scheduled.

The focus is on using data to be smarter and make people’s lives easier, whether through automatic payments or notifications and alerts.

Embrace Real Time

When financial institutions are proactive, they’re anticipating what’s next in terms of meeting consumer expectations. Real-time bill pay is on the horizon.

It starts with a request to pay, which is an actionable alert indicating a payment is due. The user receives the request to pay from the biller through the financial institution and can pay the bill immediately. When the user responds with “pay now,” a real-time confirmation is delivered, creating a sense of comfort and trust for the consumer that the payment was made.

For processing the real-time payment, there are several methods available and others on the horizon, including direct settlement real-time networks, such as The Clearing House and the FedNowSM Service, and the card networks.

The goal is to give consumers the most real-time payment choices with the most billers. That’s the next generation of experiences, and the industry is at the doorstep of a new world for bill pay.

Building on a Strong Foundation

At its heart, the bill pay challenge facing financial institutions filters down to one basic task: creating a comprehensive, enriched experience that meets consumer expectations.

The bill pay environment right now is complex, with emerging competitors and accelerated expectations, especially during a pandemic. But financial institutions are well-positioned to take the next step in bill pay.

They have the trust and loyalty of consumers and an established foundation of technology and data that competitors lack. Closing those user experience gaps and embracing the next generation of bill pay is how financial institutions can bring together the best of both worlds for consumers.

By, Cassie Krause

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Meet Andrew Harmening: New Associated Bank President and CEO Talks Business Strategy, WBA, and Cheese Curds

Harmening_AndrewAndrew Harmening, who now splits his time between Green Bay and Milwaukee as the newly appointed president and CEO of Associated Bank, was born in Chicago and grew up in Indiana, and most recently lived in Ohio in his previous role as senior executive vice president of Huntington Bank. Harmening is no stranger to Wisconsin — he has been coming to the state for family reunions and events for over 30 years. His wife has family in Stratford and his daughter is attending the University of Wisconsin-Madison, so he comes to the state with a familiarity of local communities both small and large.

Associated Bank has been the official bank of the Green Bay Packers since 1919, and the prospect of coming to Titletown was one of the draws for Harmening. He enjoys the energy of the area and getting to know the people who make it a vibrant place. Harmening’s first day at Associated was April 28, and he has spent much of his time since then talking with colleagues across the organization — more than 300 and counting, mostly face to face.

“We’re in a people business,” said Harmening. “Our colleagues have pride in Associated Bank and are active in their communities.” He emphasized that the personal relationships built between employees and customers are an important way the bank differentiates itself from Fintech competitors. He noted that the bank earns trust from customers in a way that can’t be achieved by Fintechs. 

As Harmening maps out a strategic plan, he is intent on listening to colleagues and customers. He says he has been given license by fellow colleagues to “be bold” and wants to grow in ways that makes sense specifically for the organization and its customers. With regard to digital banking and technology, Harmening stresses that the objective is to “build stuff for your customers — don’t just build tech for the sake of it.” In addition to digital banking solutions, he mentioned small business and commercial banking as potential areas for growth, all while keeping community involvement at the forefront.

When asked where Associated Bank is headed over the next several years, Harmening stressed that they first need to get through the next 6–12 months. “This is the first pandemic we’ve experienced in our lifetimes,” he noted. “The pandemic, isolation, and returning to the office are all people-centered things.” He said the team worked hard on supporting small business owners hurt by the pandemic through the Paycheck Protection Program (PPP), and their spirit of human interaction still matters. He said flexibility for employees returning to the office in the building will also matter — success coming out of the pandemic will depend on keeping colleagues, customers, and the company in mind.  

“I really would emphasize first things first,” said Harmening. “Not ‘how did it make you bigger?’ but ‘how did it make you better?’” He said there’s no avoiding the scale question, it’s just a matter of getting it right. Harmening credited his predecessor Phil Flynn with having a risk management foundation in place, so there were no surprises, and there is a strong foundation on which to build.

Harmening emphasized that Associated Bank employees and board members alike are passionate about remaining independent. Associated Bank is the largest bank holding company headquartered in Wisconsin, with its history tracing back to 1861. With approximately 4,000 colleagues, serving over one million customers, more than 220 banking locations serving more than 120 communities throughout Wisconsin, Illinois and Minnesota, and commercial financial services in Indiana, Michigan, Missouri, Ohio and Texas, Associated Bank is the largest Wisconsin-based member of the Wisconsin Bankers Association (WBA).

Harmening looks forward to working with WBA and appreciates that the organization offers an open line of communication. He said a major benefit of a trade association is learning from peers and being able to find out if other banks are going through similar things. He also values the opportunity to have a voice alongside other WBA members and the collective advocacy for Wisconsin’s banking industry. After 12 years of experience with the Consumer Bankers Association, including service on the board, Harmening has a strong familiarity with trade associations and looks to continue Associated Bank’s longstanding tradition of being an active WBA member.

Harmening likes to stay active and healthy, as evidenced by his occasional laps throughout the office while on conference calls. Outside of work, he enjoys playing tennis, walking, and hiking outdoors. One of his proudest feats is climbing Mt. Ventoux in France, a mountain over 6,200 feet high, made famous by its bike trail in the Tour de France. Harmening and his wife are empty nesters, who are eagerly exploring the local restaurant scenes of Wisconsin. They have already discovered some favorite spots around Green Bay and Milwaukee. As any Wisconsinite can appreciate, Harmening raved about his newfound affinity for cheese curds — squeaky, fried, yellow, or orange — he loves them all.

By, Cassie Krause

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Inflation Very Strong Again in June, Biggest Price Increases Tied to Reopening; Inflation Will Slow Dramatically in Second Half of Year

  • The CPI jumped 0.9% in June, with the core CPI also up 0.9% over the month. A few categories experiencing strong demand and limited supplies coming out of the pandemic boosted inflation over the month.
  • Inflation as measured on a year-ago basis was at the highest levels in decades. However, this is overstated because of comparisons with the period of weak prices at the beginning of the pandemic.
  • Inflation will slow in the second half of 2021 as supply starts to catch up with demand.
  • With the current pickup in inflation due largely to one-time factors, the Federal Reserve is not expected to raise the federal funds rate until mid-2023.

The consumer price index for urban consumers jumped 0.9% in June from May, the biggest one-month increase since June 2008. The consensus expectation was for a 0.5% increase. The core CPI, excluding food and energy prices, was also up 0.9% over the month. This was the strongest one month of core inflation since the early 1980s. Overall CPI inflation was 0.6% in May, with core inflation at 0.7%.

Prices once again rose quickly for goods and services that are experiencing strong demand, but also supply disruptions, coming out of the pandemic. Used car and truck prices jumped 10.5% over the month, the biggest one-month gain ever (going back to 1953), after increases of 10.0% in April and 7.3% in May. The increase in used car prices alone accounted for more than one-third of overall inflation in June. New car prices were up 2.0% in June, lodging away from home costs were up 7.0% over the month, and airfares rose 2.7%, after a 7.0% increase in May. Energy prices rose 1.5% in June, including a 2.5% increase in gasoline prices. Food prices rose 0.8% over the month.

On a year-ago basis overall inflation was 5.4% in June, with core inflation of 4.5%, the fastest pace since 1991. However, this overstates inflation, because prices declined in March and April of 2020 when the pandemic came to the U.S. The overall CPI was up 4.7% in June from February 2020, before the pandemic, with the core CPI up 4.2% over the same period. Used car prices were up an astonishing 45% in June from a year earlier, rental car prices were up 88%, and auto insurance was up 11%. On the flip side, medical care costs were up a scant 0.4% in June from a year ago.

The headline inflation numbers have been eye-popping in recent months, but underlying inflation remains under control. Once again a few categories—used vehicles, airfares, rental cars, hotels—are experiencing huge price gains because of the recovery from the pandemic, and once again comparisons with weak prices a year earlier are overstating inflation. Both factors will wash out of the data in the near term. Used car prices are temporarily elevated because of very strong demand from stimulus payments, people returning to work, and limited supplies of new cars; used car supplies are also very low. Used car prices will fall back to earth later this year as new car production picks back up.

Similarly, airfares will decline as the airlines add capacity. And gasoline demand has picked up more quickly than supply as people return to work and start traveling again, but eventually higher prices will induce more oil production, resulting in lower energy prices. Also, comparisons with the period of very weak prices in the early stages of the pandemic will fade from the data, slowing inflation on a year-over-year basis.

Monthly inflation will be much slower in the second half of 2021 than in the first half of the year as demand pressures from the economic reopening fade and supply starts to catch up as businesses increase production. Year-over-year inflation will also be softer in the second half of the year. The Federal Reserve has made it clear that it views the current high inflation as due to transitory factors and will not tighten monetary policy until inflation is consistently at or above 2%, excluding one-time factors. (The Fed uses a different price index, the personal consumption expenditures price index, which tends to run a bit slower than the CPI.) PNC does not expect the next increase in the fed funds rate until mid-2023.

The big concern is that current high inflation gets built into consumers’ and businesses’ expectations, leading to higher long-run inflation, as happened in the 1970s. However, the temporary nature of current inflation pressures, and Fed watchfulness, should prevent this from happening.

Faucher is PNC's Chief Economist.

By, Ally Bates

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Developing an ISAP, ASAP

Five critical steps to maintaining a secure network.

Keeping your network secure in the current climate of internet assault is no small job.

Think back – how little has changed. In 2001, server-based worms were estimated to have cost private industry almost $3 billion. Code Red alone infected 359,000 servers in under 14 hours, and within 24 hours of Nimda, 50 percent of the infected hosts went offline. Fast forward to today and the exponential increase in breaches, how much is really that different?

These attacks reinforced the need for every organization to develop an information security action plan (ISAP). Doing this first involves evaluating, assessing, and auditing the existing security environment to identify major and minor problems (your inventory). Without knowing and understanding the current security posture, it is impossible to identify the most cost-effective solutions to deploy.

Veteran and well-trained security professionals realize there is no ‘silver bullet’ in information security. Following and adjusting to an industry security framework will keep you secure today and into the future. Using proper diligence to understand an organization’s security needs goes a long way in improving protection.

The following are critical first steps for building an ISAP to create a better defense in an increasingly dangerous cyberworld.

Creating Security Policy

First, create a clearly defined security policy that is strictly enforced. Understand that security goes beyond desktop PCs and ensure that the use of all laptops, copiers, fax machines, modems, and even printed information is included in the policy. Supply the policy to everyone in the organization, educate all employees about it, and enforce it consistently.

The policy is the roadmap to good security, and every employee should review it annually, be provided with opportunities to ask questions, and fully understand the policy. They should acknowledge their understanding of the policy in writing. The policy must become a standard part of the company culture and be enforced at the highest level. Not consistently enforcing policy can be worse than having no policy at all, because it could be used against the company (in litigation) to show that policy is not taken seriously in all cases.

Identifying Risk, Deploying Security

Second, identify an acceptable level of risk and deploy the appropriate level of security. It is no longer adequate for management to proclaim ignorance about potential vulnerabilities in the environment. Due diligence requires management to exercise sound judgment in protecting the environment consistent with the information being processed (i.e., the more sensitive the information, the more safeguards need to put in place).

After assessments have been performed, there are essentially three measures that can be taken. They are to reduce the risk (perform remediation), transfer the risk (take out insurance), or accept the risk (identify cost justification).

If overall risk reaches an unacceptable level, appropriate remediation steps must be taken to get the exposures reduced in severity. If that cannot be done, documentation must be created to identify justification for accepting the risk, or possibly insurance can be purchased to transfer the losses associated with the risk to another organization.

Implementing Verification

Third, access to internal hosts must be controlled and monitored. Are employees only given access to what they need to perform their specific job? Are logs reviewed daily for inconsistencies and abnormalities?

Since many security breaches can be attributed to ‘insiders,’ or exploit by a bad actor of an insider, trust no one. “Zero Trust”; it is important to live by an access philosophy of ‘least privilege’. Verify everyone and everything. Only give users the access they need to do their job. Not only must the data be protected and accountability of who is accessing it be maintained to ensure privacy, but simply tracking problems and events that occur in an environment are easier if it is possible to determine who has access to specific information. Even though incidents of access from outside a company get all the publicity, the most critical protection remains inside. Insider abuse of email or unmonitored internet access can cost in several ways beyond the lost employee time, bandwidth, and potential for viruses or worms.

Supplement the authentication and authorization system with audit trails and intrusion detection systems and use an incident response plan to follow up on suspicious activities and anomalies. Logs can be very large and contain enormous amounts of extraneous information. It is important to install tools that help sift through the abnormalities or make it possible to identify what a normal log looks like and flag unusual activity. Regular review of system logs can mitigate risk. This can include the implementation of modern extended endpoint detection and response solutions.

Testing Upgrades and Patches

Fourth, vendor upgrades and software/hardware patches should be tested adequately before migrating to production. Anti-virus tools should be deployed and automatically updated with new signature files.

Changes are constantly occurring in the environment. New software can introduce new vulnerabilities and it is well-known that some software companies do not create secure applications or operating systems. Be sure to have clear documentation to migrate all changes to production and a contingency plan should problems occur.

Malicious code continues to be a major problem for organizations. It is no longer adequate to simply install an antivirus tool and assume your problems are alleviated. It is not adequate to assume the user will behave properly to protect their desktop and company data. Today’s generation of protection must not be dependent on signatures and needs to consider other layers of information: users, files, hosts, and the network. Throw in deception technology and you have a robust solution.

Handling Any Defaults

Fifth, be sure default accounts, passwords, and settings have been appropriately handled in operating systems, routers, databases, and applications.

Keep in mind that almost all operating systems, including third-party applications, come with sample files, many of which are extremely dangerous. Almost any operating system and many application system installations require a powerful ‘administrative’ or privileged account to complete installation. This account is shipped with a default password, which often is not changed by the network, system, or application administrator. It should be changed immediately at initial installation even on test systems. If the account needs to remain in existence, it should be tightly locked down, audited, and, if possible, have its default name changed. In addition, it should not be used on a routine basis for administration. Individual administrative accounts should be assigned to authorized users with proper access requirements granted, training provided, and responsibilities understood.

In summary, there are numerous measures that can be taken to ensure a company’s infrastructure can protect its information assets. This all creates the requirement for a thorough information security action plan. A certified, qualified, well-trained chief information security officer can usually lead a corporation along a path to protected information assets and a secure business environment.

To learn more, call or email Ken Shaurette, FIPCO's Director – Information Security and Audit, at 800-722-3498 ext. 251 or itservices@fipco.com today.

 

By, Ally Bates

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Fifty Years and Counting: Reflections on a Lifetime Career in Banking

Dedicating decades of knowledge and experience to the industry is viewed differently depending not only what the worker gives to the role, but what the role provides the worker in return — to put it in the words of Mark Twain, “Find a job you enjoy doing, and you will never have to work a day in your life.” The WBA-member bankers who have been honored in the 50-Year Club have a perspective on this that can only be had as a result of over half a century in banking. We spoke with some to gather their insights on the industry, their expectations for the future, and how their career may have looked different if they had not followed the path they did.  

Fifty Years and Counting 

For Bill Censky, co-founder and former president of Investors Community Bank, Manitowoc, a lot has changed in recent decades. From an evolution in technology to an increase in mergers and acquisitions, he noted he feels as though he has seen it all since his start in 1969. 

“A major part of an any line of work is about changing as you see things change in your industry,” said Censky. “The economy, business operations, and any other situational things have to change. Banking is no exception.”  

Censky retired from his role as president of Investors Community bank in 2016 and as board chair last year, but his involvement at the bank and in his community has certainly not taken a rest. As of now, he is still a board member at the bank and treasurer of a men’s homeless shelter. All of this, he says, ties back to the reason he got involved in banking in the first place. 

“I don’t particularly like doing the mundane jobs,” he said. “I like actively working toward making a difference.” 

Mark Schowalter, former EVP/COO of Port Washington State Bank (PWSB), enjoys making a difference in many of the same ways and has always been drawn to building customer relations. When he started his career back in 1970, he recalled Friday nights, pre-Automated Clearing House, before direct deposit and electronic banking. He described what he said felt like each and every customer in the bank lobby. The lines were hectic, the driving lanes were always backed up, and it was one of his favorite experiences.   

“You got to meet everyone, see everybody, and catch up with them,” Schowalter said, “and it was a good way to build relationships with customers. It’s quite a bit different now, the way banking is conducted. But back then, it was very much face to face.”  

When I spoke with Schowalter, he was preparing for a board meeting later that afternoon. Although he has also retired, remaining part of the industry is something he could not imagine otherwise. He is still the director and vice chair of PWSB, and serves on the bank’s board of directors.  

“I’ve volunteered for many organizations over the years, civic and nonprofit, to help support the quality of life in our communities,” he continued. “So, my working at the bank has really fueled that. I continue to do this today, and you really appreciate how everything works in our markets and how so many things depend on each other. My present involvement with our communities has just been continuing to help where I can.” 

While many bankers who have dedicated over 50 years to the industry continue to offer their knowledge and skills however they can, not all of them have entered retirement. Rita Derks still serves as the assistant vice president at the Thorp branch for Northwestern Bank, where she has worked since 1989. She said she has probably worked in the banking industry for another “15-or-so years” on top of that, but time just flies when you enjoy your job and the people around you. When asked what her favorite part of her position is, it isn’t hard to see why. 

“The best part is being able to help people,” said Derks. “You gain so many friends and customers, people you know and people you don’t know. This is an industry where you get to be there for people when they need you, and that’s been one of the greatest parts of my career.” 

Expectations for the Future of Banking 

After spending over 50 years in banking, there are many industry achievements these individuals are proud of. Looking ahead, there are a few things they expect to see accomplished at some point in the next 50 years, too. Schowalter’s hope is short, simple, and shared with countless others: keep the community bank relevant. 

“Anything that would ensure that community banks continue to be relevant and valued is what I’d like to see,” said Schowalter. “We are the financial engines of the communities. Things like regulations, how the public perceives what we do, our access to different resources, they all play a part in being successful and keeping the community bank relevant.” 

Fairness was another theme that came up regarding future objectives. As Censky put it, it’s not only something he wants to see in the next few decades — it’s something he believes should have happened decades in the past. 

“A level regulatory playing field has been near the top of all banking lists since deregulation of the 1980s,” Censky said. “This will become even more important if tax rates go up…The level playing field is not just about credit union or Farm Credit System taxation — the need for banks to have regulations dropped that are out of date are stopping us from competing with fintech companies, who have little interest in communities.” 

For others, the answer is not a simple one. Derks began her response by stating this would be a question she was unable to speak on. Still, her follow-up emphasized how a lot of people feel about the industry’s expectations. With so many recent advancements, the rapid pace at which they’ve come, and a global pandemic that has pushed everything even further, expecting anything right now can feel strange.  

“What do we need to do in the future?” Derks asked. “I don’t know. I don’t know what’s coming, but if it’s anything like the change we’ve seen in the past few decades, it’s a completely different world. Life happens quickly, and there’s not an industry that exists where you can just sit back for the ride; you have to keep up with the pace. Good or bad, it seems that’s just how it goes.” 

If Not Banking – What Else? 

Imagining 50 years in any position can seem daunting, but I was assured the accomplishment is worth each moment once that time and energy has been dedicated to a community you truly care for. To place their lifetime in banking into a new perspective, I was curious to know — if not banking — what other career would they have considered spending their 50 years in. Unsurprisingly enough, none of the answers strayed too far from the significant roles they have played the industry.  

“I have always loved technology,” Censky said. “I enjoyed my IT-related classes in school and the IT-related projects at the bank, whether it was learning how to use the bank’s first computer, an Apple II+ in the early 80s, or selecting and purchasing new banking terminals or networks or selecting a new core system or managing a conversion or using MCIF to extract data to drive sales. I love being efficient and getting rid of the unproductive and mundane parts of our work.” 

In many ways, some bankers have spent more than their own lifetime in their career — family-owned and closely held banks have multiple generations of a family establishing and building the bank. It can be challenging to envision another role outside of the family business. 

“It’s a hard question,” Schowalter admitted. “I’m a fourth-generation banker along with my brother Steve. He and I grew up in the business. I can say that along the way, I never really considered anything else. All the years I worked with the bank, I volunteered with nonprofits, and you come to appreciate the work they do. I think the nonprofit sector would have really appealed to me as something I would have liked to be more involved in.” 

Derks had a rough idea of what else she would have liked to do, but raised an excellent point in the process: if the jobs that have become so widespread today were available decades ago, would you be performing a completely different task right now?  

“Probably something in the accounting or investment areas, because that’s what I’m used to doing,” said Derks. “It’s strange because there is so much more to offer in terms of a career nowadays, and so many of the major jobs today weren’t even prevalent back when I was starting out. If some of these jobs today had been around back then, I probably would have been interested so long as it had numbers involved.”  

Even with hypotheticals, each banker said they are more than happy with the time they have spent with the banking industry and couldn’t imagine a career spent anywhere else. Although the trend of staying in one position for an extensive period has declined, they have high hopes for the future of banking and the lifetimes that will be dedicated to the achievements and changes of Wisconsin’s financial services. 

“It’s a little different today,” said Schowalter. “I don’t know if we’ll see as much [tenure] as we used to. People don’t seem to stay in one place or one career for that long, but bankers are part of great communities and the chance to grow with them is rewarding. I’d like to think longevity speaks to the strengths of the industry, and I hope that continues another 50 years from now.”  

By, Alex Paniagua

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2021 Is Looking up for Farmers, Ag Bankers

Wisconsin farms generally have fared well through the first half of 2021, as higher prices for products, increased exports to China, and pandemic payments have provided a financial boost.

Although a dearth of precipitation during spring and much of early summer has caused some nervousness in the southern half of the state, recent and expected rain could lessen those concerns.

As always, Wisconsin bankers said, it’s important to stay well-connected to their ag clients to monitor the ebb and flow of farming – even when things are mostly looking up.

“Overall the farm economy is what I would call steady and improved,” said Amber Keller, senior vice president and director of ag banking for Town Bank in Clinton. “It’s improved from the standpoint that we have a lot of opportunity to lock in a profit this year, even into ’22.”

The state is coming off a year in which many farms saw strong earnings because of a good growing season and government stimulus money intended to aid businesses and farms during the Covid-19 pandemic. The previous five years were a struggle for many farmers.

“It seems like right now for the most part we’re in a demand market,” said Bradley J. Guse, senior vice president/agribusiness banking for BMO Harris Bank in Marshfield. “By that I mean the agriculture products are in demand for various reasons. Part of it is that China has imported a lot of things as they rebuild their hog industry. That is starting to take more and more product, whether it be corn or soybeans."

China also is buying products from dairy farmers, particularly whey protein to feed piglets.

"As that industry rebuilds that pipeline has had to get refilled, so that’s created some excess demand," Guse said.

Pork output in China declined 21% in 2019 after an outbreak of African swine fever hit the country and its breeding stock declined. The downturn lingered into 2020.

As China builds back with a new model, “It appears some of this is going to be pretty sustainable, not just filling the pipeline,” Guse said.

Dairy farms also could benefit from a growing appetite for “cheese tea” in China and elsewhere, Guse said.

According to The Dairy Alliance, cheese tea, also called milk cap tea or cheese mousse tea, is a cold tea topped with a foamy layer of milk, sweet or salty cream cheese, and whipping cream sprinkled with sea salt. The tea itself typically is green or black tea.

Cheese tea was first seen in Taiwan 11 years ago, with market vendors combining powdered cheese, milk, and salt with whipping cream to form a foam to top cold tea, The Dairy Alliance said in an article on its website. In 2012, the trend made its way to China, which swapped the powder for real cream cheese and fresh milk, the dairy organization reported.

Nicholas Felder, vice president of commercial/ag banking for MidWestOne Bank in Lancaster, said farm exports to China have increased, especially since the U.S. elections. In addition, government aid has been helping Wisconsin farmers.

“The federal stimulus funding from last year into the spring, and then higher commodity prices the last half of last year and first half so far this year, has really strengthened some balance sheets,” Felder said.

Keller said low interest rates and stronger land values also are factors in a healthier outlook for farms right now.

“Those low interest rates really keep things stable out there, and the outlook is stable for a while yet, until we know which way our economy is tracking in terms of inflationary concerns,” Keller said.

Keller said land values have been rising.

“That buoys the farmers’ balance sheet so when he goes to his banker to borrow money, he has borrowing power,” she said.

The dry weather in much of spring and June in the southern half of the state has made some farmers wary, but it’s not considered a major hindrance to a good growing season yet, ag bankers said. Rainfall over the weekend and storms expected this week could mitigate that concern.

“As a whole it’s dry but the crops still look pretty good,” Guse said.  "I always feel like the biggest crops we have in Wisconsin usually happen when we have a dry spring because it drives the roots deep, and then if we get some timely rains later on to get the crop going, we get some really good-sized crops.”

A map from the National Drought Mitigation Center showed that as of June 22, more than half of Wisconsin – largely the southern half of the state – was considered to be in a moderate drought. The worst-hit areas were in the extreme southeast and the lower southwest. The precipitation last week and early this week (week of June 27) is expected to reduce short-term dryness, but additional soaking rains are needed to alleviate the drought, the federal weather agency said.

A drought would be particularly concerning to farmers who might not be able to grow their own feed crops, and then would have to buy them at a time when prices are up, Felder said.

“Soybean meal has gone from $290 a ton to $430 a ton. Corn is up from a little over $3 a year ago to $6.50 today,” he said. “You’re seeing the user – the consumer of crops – have a little more furrowed brow because they aren’t sure of what’s next. If they don’t get a crop and they have to buy to replace a short crop, they’re going to be paying significantly higher prices than they would have a year ago.”

The timing of the rainfall is important, ag bankers said.

“Corn is typically pollinating in July and soybeans are typically seeding pods in August – the little bean is filling the pod,” Keller said. “It needs rain during August to fill those pods so that there is a bean of a size that is saleable. So we do need timely rain in July and August to make this crop.”

The dryness this spring and early summer did result in some “hay hoarding” – sellers hanging on to reserves until the weather picture becomes clearer.

“Farmers will harvest typically four crops of hay in a summer. Corn and soybeans, you harvest once a year, where with hay, we’re taking four cuttings off of that field,” Keller said. “And if we don’t get rain, we don’t get much in a cutting. And if we don’t get much hay in one or two cuttings, now our hay is half of what it was in any other year.”

If a drought is serious and farmers are stressed, bankers have a lot in their tool box to help them get through it. But farmers need to take steps on their own, such as buying crop insurance and marketing their products well, to make sure they succeed.

“Proactive wins,” Guse said. “If were sitting to wait for a loan to go bad before we try to collect it, we’re probably too late.”

Said Keller: “We really look at all remedies that make sense. But at the end of the day, the client still needs to be operating a viable enterprise and using a viable business model where we can say, yes, this operation is going to be successful long-term and they just hit some bumps in the road here.”

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com. 

By, Ally Bates

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Quick Signage Making Juneteenth a Federal Holiday Raising Questions under TILA

President Joe Biden signing a bill into law on June 17, 2021, to create Juneteenth National Independence Day so close to the actual legal holiday date has raised questions for lenders and consumers with scheduled loan closings today. The newly created law is also impacting consumers currently in the midst of a right of rescission waiting period.

Under the TILA and Regulation Z, lenders need to comply with certain timing rules regarding the delivery of key disclosures and for rescission. Those time periods hinge on the definition of “business day” for which there is a general definition and a precise definition of the term.

Under the precise definition, a “business day” is “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.”

The new law amends 5 U.S.C. 6103(a) to add “Juneteenth National Independence Day, June 19” as a specified legal public holiday. As a result, the new date (June 19) is not a business day under Regulation Z.  Because June 19 is a Saturday this year, the holiday will be observed today, June 18, making today a “business day” under the precise definition. The technical result means an extension of the time period for the delivery of key disclosures and for rescission.

Lenders across Wisconsin have loans scheduled for closing today and have loans which require the three-business day right of rescission waiting period to run its course before the bank may allow for loan disbursement.

Until further guidance is issued by CFPB, but based on guidance released late yesterday by the FDIC, WBA believes that banks have discretion to decide whether they will be open today and that if a bank decides to remain open, then loans scheduled for closing and disbursement today may continue as planned since it would be detrimental to the consumers involved in the transactions to postpone the loan closing. For loans that are currently in a rescission period, WBA recommends lenders take the conservative approach and add a day to the rescission period.

WBA also reminds lenders that Regulation Z right of rescission rules provide that “a consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bear the signature of all consumers entitled to rescind.” This may be something to consider if the facts and circumstances warrant, as determined and documented by the consumer.

WBA will update the membership if further instruction regarding TILA is released by CFPB or other regulators.

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Madison, WI 53718

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