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					South Dakota Banker
Your Premier Source to South Dakota’s Financial Services Industry | April 2012




                           INSIDE . . .
                           A Lifetime of Banking and Basketball:
                           Meet First State Bank’s Jerry Altenburg Page 10
                           SDBA Associate Members Special Section Center
                           SD Bankers Advocate for Industry in Washington Page 14



   Official Publication of the South Dakota Bankers Association | www.sdba.com
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SDBA Board of Directors
                                                           South Dakota Banker
Bruce Byrum, Chairman                                      Your Premier Source to South Dakota’s Financial Services Industry
First Interstate Bank, Spearfish
                                                                                   April 2012 | www.sdba.com
Steve Hayes, Chairman-Elect
Dakota Prairie Bank, Fort Pierre
Karl Adam, Vice Chairman
Dakota State Bank, Blunt                                   Contents
Dave Zimbeck, Immediate Past Chairman                      Message from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . 4
Citibank, N.A., Sioux Falls                                Asking Our Elected Officials the Tough Questions
Term Ending April 30, 2012
                                                           From the Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Paul Domke, Heartland State Bank, Redfield
Monte Troske, Farmers State Bank, Turton                   Similarities and Contrasts of State, Federal Government
Ken Karels, Great Western Bank, Sioux Falls
                                                           South Dakota Bankers Insurance & Services Update . . . . . 6
Term Ending April 30, 2013                                 Are You Managing Your Foreclosed Property Risk?
Kim Banks, American Bank & Trust, De Smet
Ron Kristensen, Farmers and Merchants State Bank,          Upcoming Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
  Plankinton
                                                           SDBA Offers Call Report Preparation Training in May
Term Ending April 30, 2014
Bob Clair, American State Bank, Pierre                     SDBA News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Rick Rylance, Dacotah Bank, Rapid City                     Bankers, Officials Attend First
George Kenzy, First Fidelity Bank, Burke                   Administrative Appraiser Review for Non-Appraisers
SDBA Staff                                                 NDBA/SDBA Annual Convention . . . . . . . . . . . . . . . . . . . . . . 9
Curt Everson, SDBA President
                                                           Announcing Convention Keynote Speaker Mark Scharenbroich
ceverson@sdba.com

Mike Feimer, President of Insurance and Services           Banker Profile: Meet Jerry Altenburg . . . . . . . . . . . . . . . . . 10
mfeimer@sdba.com                                           A Lifetime of Banking and Basketball
Deb Gates, Administrative Vice President                   SDBA Associate Members Special Section . . . . . . . . . Center
debgates@sdba.com

Alisa DeMers, Publications Coordinator/Exec. Asst.         Washington Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ademers@sdba.com                                           SD Bankers Advocate for Industry in Washington
Nadine Kepford, IS/Business Manager                        Endorsed Vendor Spotlight – Deluxe . . . . . . . . . . . . . . . . . 16
nkepford@sdba.com
                                                           Agent for Change
Jeanine Dyce, Administrative Assistant
jdyce@sdba.com                                             Ask the Appraiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
                                                           Ethics Rule – Management
Michelle Guthmiller, Insurance Specialist
mguthmiller@sdba.com
                                                           Industry News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Mike Zolnowsky, CIC, Commercial Lines Specialist           New SBA 504 Refinancing Program
mzolnowsky@sdba.com                                        Benefits Both Small Businesses and Banks

Editor: Alisa DeMers                                       Bank Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Advertising: If you would like to advertise in South       Classifieds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Dakota Banker, contact Alisa DeMers at
ademers@sdba.com.                                          Educational Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
      South Dakota Banker is a monthly magazine
published by the South Dakota Bankers Association
that is dedicated to enhancing the banking profession
by providing useful and timely information on important
events and trends in the banking industry. Members are
invited to submit news and information.
      The advertisements within this publication do not
necessarily represent endorsed vendors of the SDBA.
With the exception of official announcements, the
SDBA disclaims responsibility for the opinions
expressed and statements made. The editor reserves
the right to refuse any advertisement or editorial copy.
Advertising rates are available upon request.
      Member banks, branches and associate members
receive one complimentary subscription. Additional
                                                                               South Dakota Bankers Association
subscriptions are available to members at a rate of $45
                                                                                 109 West Missouri Avenue, PO Box 1081
per year. The non-member rate is $90 per year.
                                                                                             Pierre, SD 57501
              Serving Bankers Since 1884                                        Phone: (605) 224-1653 Fax: (605) 224-7835
                                                                                         Web site: www.sdba.com
          Message from the Chairman


Asking Our Elected Officials the Tough Questions
By Bruce Byrum
President, First Interstate Bank, Spearfish




                   I
                        n my February article, I commented    in Washington, D.C., on March 19-21. The Summit was
                        on the spring-like temperatures we    expected to attract more than 1,000 bankers who would be
                        were having in January. Though we     briefed on key banking issues. These bankers along with
                   all appreciated the mild weather, there    their state executives would then meet with their
                   was concern over the lack of moisture      congressional delegation to discuss these issues. Though
                   and the possibility that the same dry      the procedure is the same as in the past, I sensed a
                   weather pattern would continue.            different attitude among South Dakota bankers who
                        Our concern in January has now        planned to attend the Summit. It seems they are becoming
materialized, at least through mid-March. We are              more frustrated with the political process and the
experiencing temperatures in the 60s and 70s with little      politicians of both parties. When talking with bankers
moisture and have already had large grass fires break out     from across the country, I sense this same level of
due to the dry conditions. Those of us that live in the       frustration among many of them as well.
Black Hills are concerned about the fire risk due to the          When bankers meet with their senators and
thousands of acres of dead and dying trees killed by the      representatives during this year’s Summit, I expect they
mountain pine beetle. Because the Black Hills are             will be pressuring the legislators to take a stand on
relatively densely populated, a large fire can threaten       specific banking issues. As we ask our elected officials the
homes and lives. We continue to hope for adequate spring      tough questions, the meetings could become more intense
and summer rains to keep the threat of fire low and           than in previous years. However, the stakes are high. We
provide favorable conditions for our ranchers and             need to know their positions on critical banking issues.
farmers.                                                      We need to know if they are for us or against us.
    For the last several months, the American Bankers             Under the ABA’s new leadership, the Association
Association (ABA) encouraged bankers from across the          appears to be taking a more aggressive stance on
country to attend its 2012 Government Relations Summit        defending the banking industry. Unlike the defensive
                                                              position our industry often takes, it is encouraging to see
                                                              our association actively supporting HR 3461 – the
                                                              Financial Institutions Examination Fairness and Reform
                                                              Act. This piece of legislation would actually improve the
                                                              regulatory environment of our industry. It is important
                                                              that our association protects us from harmful legislation,
                                                              and it is equally as important it initiates and supports
   Providing consistently high quality legal counsel to       passage of legislation that advances and improves our
   assist our banking clients in a wide variety of areas      banking industry.
   including:                                                     For coverage of this year’s ABA Government
                                                              Relations Summit and photos of South Dakota attendees,
         State and Federal Regulatory Compliance              see pages 14-15. Thank you to those bankers who took
         Commercial Litigation                                time away from your banks to attend this important
         Employment Law                                       gathering of bankers in Washington.
         Mergers and Acquisitions                                 Another important upcoming event is the opportunity
         Loan Documentation                                   for bankers to meet with Sen. Tim Johnson and Consumer
                                                              Financial Protection Bureau Director Richard Cordray in
         Creditors’ Rights and Bankruptcy
                                                              Sioux Falls on April 11. This meeting will provide a
         Trust Administration                                 chance for bankers to meet with Sen. Johnson in South
         Estate Planning                                      Dakota and to discuss their concerns regarding regulatory
         Real Estate Law                                      compliance. For more details on this event, read SDBA
         E-Commerce, Internet and Technology                  President Curt Everson’s column on the next page. We
                                                              hope to see a good showing of bankers at this meeting. n




                                                               Bruce Byrum is president of First Interstate Bank in
                                                               Spearfish. You can contact Byrum at (605) 642-2734 or
                                                               bruce.byrum@fib.com.

n 4 n                                South Dakota Banker n April 2012 n www.sdba.com
           From the Executive Office


Similarities and Contrasts of State, Federal Government
By Curt Everson
President, South Dakota Bankers Association




                  A
                            s I sit down to hammer out this     balanced state budget for FY2013.
                            month’s column, I find myself in         Contrast that with the schedule for the U.S. House
                            transition mode. The regular run    and Senate. The 2012 calendar for the U.S House of
                   of the 2012 State Legislative Session        Representatives listed a Jan. 17 start and Dec. 14 end date
                   ended about a week ago, and I am             with 109 actual working days where floor votes could be
                   shifting into federal mode, readying         cast. The bulk of the rest of the calendar was reserved for
                   materials for visits to Capitol Hill         members to work back at home in their districts. The
                   during the ABA’s annual Government           Senate’s calendar was similar in nature to that of the
                   Relations Summit. More than 1,000            House, but not nearly as well defined. During any
bankers from across America plan to attend.                     congressional term, the U.S. House considers and passes a
     Every year at this time, I am reminded both of the         fairly significant number of bills, very few of which are
similarities, but more so the contrasts, between how            ever agreed to in the Senate.
government operates at the state capitol in Pierre versus            No one I talk to can remember the last time Congress
our nation’s capitol in Washington. Similarities include:       enacted a budget on time. Instead, all they can generally
     l Bright people with good intentions run for elected       agree to is a continuing budget resolution. It seems
office. In every contested election, there can be only one      nonsensical to put the terms “balanced” and “federal
winner.                                                         budget” in the same sentence. It never feels like there is a
     l Those bright people who are fortunate enough to          well-defined beginning or end to the congressional
be elected learn quickly they must rely on the advice of        session. South Dakota’s legislative process is a sprint,
trusted advisors to help them decide what position to take      while the congressional relations game is a marathon.
on literally hundreds of pieces of legislation every year.           By the time you read this column, a group of 16 South
     l In Washington, members of Congress surround              Dakota bankers and SDBA staff will have made the trek to
themselves with equally bright people who willingly             D.C. to meet with the members of our delegation. It is
work very long hours reading and listening to concerns of       often difficult to measure progress on the government
parties on both sides of almost every issue. Members’ staff     relations front in Washington. But this I know: if we don’t
gather input from many different sources including senior       make the effort to shape the debate on interests of concern
executive branch staff, industry officials, and trade           to the banking industry, someone else will, and we
association subject matter experts and lobbyists.               probably won’t like the end result.
     l In Pierre, the process is a bit different in that our
part-time elected senators and representatives have no          CFPB Director Cordray in Sioux Falls on April 11
individual or personal staff. Instead, they rely on direct           Sen. Tim Johnson has invited Consumer Financial
technical input from a small group of non-partisan              Protection Bureau Director Richard Cordray to a meeting
Legislative Research Council staff. But like their federal      with bankers in Sioux Falls on April 11. The meeting will
counterparts, members of the Legislature also gather            be held at 1:30 p.m. (CDT) to 3 p.m. in Avera Hall on the
input from senior executive branch staff, industry officials,   campus of University Center North, 4801 N. Career Ave.,
and trade association subject matter experts and lobbyists.     Sioux Falls. This meeting will provide an opportunity for
     So why, for all of the similarities that exist between     bankers to hear directly from Sen. Johnson and Director
the state and federal legislative processes, is there such a    Cordray about their thoughts on consumer protection in
difference between the attitude of South Dakotans toward        the financial services space. But just as importantly,
government at the state or local level versus government        bankers will have the opportunity to air their concerns
at the federal level? Maybe it is about productivity.           about the ever-increasing costs and complexities
     Members of the statehouse in Pierre serve part time.       association with regulatory compliance.
The 2012 Session was scheduled to run for 35 working                 Bankers planning to attend the meeting should
legislative days beginning on Jan. 10 and ending March 2,       contact the SDBA’s Alisa DeMers at ademers@sdba.com
with a single day on March 19 reserved for consideration        or (800) 726-7322. There will be no charge for the meeting,
of vetoes. Memorial services for the late Gov. Bill Janklow     but advance registration is requested so that proper
knocked two days out of the schedule – days which               accommodations can be made. n
legislative leaders from both parties decided they
wouldn’t make up. Within those 33 days, the 2012
Legislature debated and took final action on 471 bills and       Curt Everson is president of the South Dakota Bankers
10 joint resolutions relating to proposed amendments to          Association. You can contact Everson at (605) 224-1653 or
the state constitution. Among the bills agreed to was a          ceverson@sdba.com.

                                   South Dakota Banker n April 2012 n www.sdba.com                                    n 5 n
          South Dakota Bankers Insurance & Services Update


Are You Managing Your Foreclosed Property Risk?
By Craig M. Collins
OneBeacon Professional Insurance, President of Financial Services




                   T
                           he challenging economic                  Mitigating the Risks
                           conditions of the last few years              Though different classes of property have different
                           has put many families out of their       risks, there are some general guidelines enabling financial
                    homes and forced businesses to close            institutions to properly manage the exposures linked to
                    shop. Nearly 528,000 homes were taken           ownership of idle properties. The following are some best
                    over by lenders in the first six months of      practices for how to best mitigate these risks.
                    2010, putting the total foreclosure rate             l Make someone accountable. A key element to
                    on track to eclipse the more than 900,000       successfully controlling the exposures that foreclosed
homes repossessed in 2009.                                          properties impose on a financial institution is to designate
     Unoccupied properties come with the potential for              an individual to accept responsibility and be proactively
significant risk. For example, in one vacant, four-story, 12-       accountable for monitoring/maintenance.
unit condominium building, a sprinkler line froze during                 l Check in with your insurance providers.
cold temperatures and burst, causing approximately                  Keeping your institution’s insurer and/or agent or broker
$300,000 in damage to eight of the condos. Another case             informed is essential. Your insurance advisor can review
involved an unoccupied single family home, destroyed in             the existing property policy and recommend the proper
a fire from a malfunction in the wiring of the stove, and           coverage and also help identify the specific hazards and
resulted in a $226,000 claim for total loss.                        provide additional risk management suggestions.
     With foreclosures on the rise, vacant structures are                l Regularly inspect the property. Conducting a
becoming a growing part of financial institutions’                  regular walk-through of any vacant properties is essential,
portfolios. Managers of these portfolios need to consider           on a weekly basis for lower value, lower hazard facilities,
how to protect such properties, as well as to plan for the          and every one or two days for higher value, higher hazard
possibility that there may be more to come.                         facilities.
     The lack of day-to-day activity within unoccupied                   l Keep fire prevention in mind. When a property
properties makes them a prime target for maintenance                comes under the control of a financial institution, the local
and crime-related losses that need to be reflected on, such         fire department should be notified immediately so they
as the following:                                                   can be aware that it is unoccupied. All flammable liquids
                                                                    and combustible materials should be removed from the
     l Fire damage. According to the National Fire                  building, and automatic sprinkler systems should be
Protection Association (NFPA), from 2003 to 2006, U.S.              maintained.
fire departments responded to an estimated average of                    l Secure the site. In addition to the fire
31,000 structure fires in vacant buildings. Many of these           department, the local police department should be
incidents were the result of inadequately maintained fire           notified. Alarm systems should remain active. Locksets
protection systems; others were the result of arson, as             and deadbolts should be changed as soon as possession is
vacant buildings are often a popular target of this crime.          taken.
     l Freeze losses. The risks associated with freezing                 l Keep detailed records. Individual files should be
temperatures are magnified in a vacant property. Without            created for each foreclosed property, documenting initial
the regular operation of heating systems or proper pipe             property condition, inspections and all maintenance
drainage, pipes may easily freeze and ultimately burst,             performed. Be sure to regularly update these records and
causing significant water damage to a structure.                    indicate any changes that occur to the property.
     l Criminal concerns. An empty structure can                         l Commit to ongoing maintenance. Avoid the
sometimes invite criminal activity. One such risk is theft          headaches associated with the escalation of day-to-day
of building components, such as copper piping and wire,             maintenance issues by identifying qualified contractors in
for sale on the scrap metal market. Vandalism can also be           advance and hiring them to provide ongoing building-
a concern.                                                          maintenance functions.
     l “Everyday” risks. In an occupied property,                        Interestingly, vacant properties can sometimes expose
routine, small hazards can be quickly identified and                owners to more hazards than those that are occupied.
repaired. But when a property remains empty for an                  And financial institutions need to take notice, as the
extended period of time, these problems may be                      number of these properties in their portfolios is growing.
undetected and therefore unlikely to be corrected in a              Nearly 528,000 homes were taken over by lenders in the
timely manner. Thus, a small, unnoticed water leak could            first six months of 2010, putting the total foreclosure rate
potentially escalate into a more frustrating and,                   on track to eclipse the more than 900,000 homes
ultimately, expensive concern.                                                                               Continued on page 20

n 6 n                               South Dakota Banker n April 2012 n www.sdba.com
          Upcoming Training


SDBA Offers Call Report Preparation Training in May

R
        ecent changes                                          lease losses by loan type and impairment method, (new
        have produced                                          schedule RI-C), RC-N reporting of past due and
        confusion and                                          nonaccrual data for purchased credit impaired loans, new
many questions                                                 items on RC-P for representation and warranty reserves,
regarding the                                                  RCM and RC-R reporting additions applicable to saving
preparation of call                                            associations, and changes and additions to call report
reports. The SDBA’s                                            instructions. Coverage will also include goodwill
2012 Call Report                                               impairment testing, (ASU 2011-08 effective 1-1-12), and
Preparation Seminar                                            restructured loans, (ASU 2011-02 effective 1-1-12).
on May 10-11 is your                                                l 2011 Revisions: All revisions will be discussed,
chance to get the                                              including auto loans, construction loans following
answers you need.                                              completion, restructured loans on RC-C and RC-N,
    This seminar, to be                                        deposit listing services on RC-E, life insurance assets on
held at the Clubhouse Hotel & Suites in Sioux Falls, will      RC-F, loss sharing agreements with the FDIC on RC-M
review each schedule of the quarterly call report with         and RC-N, and additions to RC-O. These revisions will be
emphasis on the 2011-2012 revisions, accounting changes        covered as part of the discussion of the schedules to
and regulatory guidance. The seminar will provide basic        which they relate.
training for new preparers and complete coverage of new             l Loan Classification: Classification priority with
and complex issues for experienced preparers. Annual           detailed discussion of each RC-C item.
training is highly recommended by bank regulators.                  l Restructured and Nonaccrual Assets
    This will be a day-and-a-half session with time to              l Extensions of Credit to Insiders
address individual bank questions and discuss new and               l Mortgage Lending: RC-L commitments to
more complex issues. Bankers with responsibility for the       originate and to sell 1-4 family loans reported as
entire call report should attend both days. The half day on    derivatives and RC-P mortgage loan activity.
day two, which will focus solely on the lending schedules,          l Overdrafts: Charge-offs and overdraft protection
will offer training to those with responsibility for only      plan commitments.
these schedules with less time out of the bank.                     l Other Real Estate: Accounting and reporting.
    Reporting of the following issues will be covered in            l Data for Deposit Insurance Assessments
depth:                                                              l Risk Based Capital: Risk weights for all assets and
    l 2012 Proposed Revisions: All revisions will be           off balance sheet items.
reviewed: reporting of loan origination activity, (new              For more information and to register, visit
schedule RC-U), reporting of the allowance for loan and        www.sdba.com or call (800) 726-7322. n



 Seminar Can Help Ensure Compliance of IRA Business

  O
          ver the last 37 years, millions of people have       IRA. By using hands-on training and real-life examples,
          used IRAs to save for retirement. As of June 30,     instructor Mike Nelson creates an effective learning
          2011, IRA assets totaled $4.9 trillion – up 0.7      experience for each seminar attendee.
  percent from March 30, 2011. IRAs will continue to play          After attending this seminar, you will:
  an important role in the retirement industry as more             l Understand the IRA establishment process.
  employers shift the burden of saving for retirement to           l Know how to select and complete appropriate
  their employees.                                                    IRA transaction forms.
       Now is the perfect time for your company to                 l Recall the traditional and Roth IRA contribution
  capture and retain a piece of the fast-paced IRA market.            limits.
  Help ensure the compliance of your growing IRA                   l Realize which procedures to follow when
  business by attending the SDBA’s IRA Essentials                     accepting IRA contributions.
  Seminar on May 8 at the SDBA Office in Pierre or May 9           l Understand how to process IRA distributions.
  at the Ramkota Inn in Sioux Falls.                               l Recognize the types of reports you must submit
       IRA Essentials is the perfect seminar for individuals          to IRA owners and to the IRS.
  who are just starting out in the retirement services             l Know the pertinent information you must
  industry or those who simply need a refresher on IRAs.              include on required reports.
  Attendees will learn the requirements for establishing           For more information and to register, visit
  an IRA, contributing to an IRA and distributing from an      www.sdba.com or call (800) 726-7322. n


                                  South Dakota Banker n April 2012 n www.sdba.com                                 n 7 n
         SDBA News


Bankers, Officials Attend First
Administrative Appraisal Review for Non-Appraisers
By Brian Gatzke, ARA, Education Chair, South Dakota Chapter ASFMRA



T
        he South Dakota Chapter of
        the American Society of Farm
        Managers and Rural
Appraisers (ASFMRA) held its first
seminar on administrative review of
appraisals and Dodd-Frank
implications on March 13, 2012, in
Sioux Falls.
      More than 70 banking officials
from South Dakota, Minnesota and
Nebraska attended the seminar along
with a handful of attorneys and
state/federal agency officials. The
success of the seminar can be           The South Dakota Chapter of the             Deb Gates, administrative vice president,
attributed to the South Dakota          American Society of Farm Managers and       SDBA, visits with Jeff Berg, president,
Bankers Association (SDBA) and SD       Rural Appraisers (ASFMRA) held its          ASFMRA, Barnesville, Minn., (center),
Chapter ASFMRA working together.        first seminar on administrative appraisal   and Mark Grace, ASFMRA education
Special thanks to Boyd Waara, First     review for non-appraisers.                  director/coordinator, Denver, Colo.
National Bank in Philip, for planting
the seed, and Chris Greenwalt for       discussion and education, and a             develop).
conducting the education.               survey was conducted to determine               5. General course work for
      Attendees ranged from             effectiveness and follow-up with            education and training to improve
employees of banks with years of        additional training or topics.              the review process – administrative
appraisal ordering/review/                   Following are the top topics from      review within USPAP guidelines.
evaluation experience to people with    the survey. This will help the SD               6. Names of review appraisers to
little to no experience but trying to   Chapter ASFMRA and SDBA to                  hire and conduct in-house training
determine what the new regulations      grow and develop case studies, real         seminars.
are and how they impact small and       life examples and improve the well-             7. Develop the courses and
regional banks. We want to work         being of all involved.                      education for CE approvals.
together to help improve everyone’s          1. USPAP administrative review             8. Internal management
expertise and knowledge.                training/education with hands-on            development process of ordering and
      Greenwalt, ARA, RPRA, FRICS,      examples. Residential homes for             reviewing appraisals.
is an independent instructor, review    federal related transactions;                   9. Repeat the education series
appraiser and retired administrative    commercial (business in small town          seminar in other areas across the
federal reviewer with the USDA          and large town); agriculture such as        state.
(FSA and NRCS) with past                grain handling systems, dairy,                  10. Examples of forms and
experience of the Appraisal             CAFO; rural agriculture (bare land,         related documents and resource links
Qualifications Board (AQB).             improved land, ranches/crop).               to improve the ordering and review
Greenwalt highlighted changes from           2. Highest and best use analysis       process.
Dodd-Frank, USPAP changes,              along with understanding the                    A series of reference documents
administrative review do’s and          different definitions of value to           will be made available to the
don’ts, and provided a brief            appraise and property rights (focus         attendees in the immediate future
overview of the appraisal industry.     on banking industry).                       along with a list of references and
      The president of ASFMRA, Jeff          3. Interagency and Dodd-Frank          organizations. For a complete review
Berg, ARA, Crown Appraisals,            discussions with appraisal issues and       of USPAP 2012-13, the USPAP
provided a summary of ASFMRA,           proper evaluation topics (evolving          manual can be ordered from the
changes from a federal and              topic on which the instructor is well       Appraisal Foundation at
international level, along with a       briefed).                                   www.appraisalfoundation.org.
discussion of what everyone needs or         4. How to conduct a property               Thank you to all who
desires for appraisal-related           “evaluation” for internal use based         participated, and we look forward to
education and training. One goal was    upon sales comparison analysis              working together to improve the
to develop a more in-depth              (software and the steps of how to           working skills of both groups. n

n 8 n                            South Dakota Banker n April 2012 n www.sdba.com
Annou
    uncing Convention Keynote Speaker...
             n
Announcing Convention Keynote Speaker...



                        Bike”
                  “Nice Bike”
   Mak
     king            C
   Making Meaningful Connections on the Road of Life”
                                                o
                                            Diamond
                            nsored
                         Sponsored by:       p
                                            Sponsor




                   Eide Bailly LLP
                      arenbroich
              Mark Scharenbroich
                          h             , Mi
              Scharenbroich & Associates, Minnetonka MN
                               roich     part motivational speaker, part
              Mark Scharenbroich is part motivational speaker, part
              thought-provoker and pure entertainer. More than a
                               er       pure entertainer. More
                               ment,       Bike     powerful philosophy
              passing compliment, Nice Bike is a powerful philosophy
              that acts as a catalyst to build stronger, more effective
                              catalyst    build stronger, more effective
                               s individuals          more engaged
              teams and helps individuals become more engaged and
              passionate about serving others. Nice Bike is supported
                              ut serving               Bike supported
                               tion       acknowledging, honoring
              by the three action steps: acknowledging, honoring and
                              ark       inspire you, motivate you,
              connecting. Mark will inspire you, motivate you, and
                              portance recognizing
              validate the importance of recognizing people to improve
                                                                 improve
                              eam performance.             you are
              employee and team performance. Whether you are a team
              of one, or a team of one hundred, you will walk away from
                              m         hundred, you      walk away from
                               h reinvigorated spirit for what you
              this keynote with a reinvigorated spirit for what you do as
                               eciation what
              well as an appreciation of what the other team members
              around you d .
                           do
              around you do.




                Eide Bailly LLP will be handing out
                     Bailly
                  complimentar y copies of Mark
                  complimentary
               Scharenbroich’s award winning book
               Scharenbroich’s award
                 “Nice Bike - Making Meaningful
                       Bike
                                        ad Life”.
                                               fe”.
                 Connections On the Road of Life



                                 materials available
                    Registration materials available at
                              www.ndba.com
                              www.ndba.com
A Lifetime of Banking and Basketball
Meet First State Bank’s Jerry Altenburg
By Alisa DeMers, Editor                  in Armour for the past 36 years,         the school in 1971, which was then


O
         n the basketball court and in   Altenburg plans to shoot his final       called the University of South Dakota
         the bank, Jerry Altenburg has   hoop and retire at the end of this       at Springfield. His degree was in
         dedicated his life to helping   year.                                    business education and psychology.
and working with those in his                                                          His first job out of college was
hometown community.                      Growing Up in Armour                     teaching at the high school in
    Altenburg grew up on a farm              Altenburg grew up helping with       Stickney, which is located
north of Armour and returned to the      the chores on the family farm outside    approximately 20 miles north of
area after graduating from college.      of Armour. The rural community is        Armour. For five years, he taught
His first career was teaching and        the county seat of Douglas County in     business classes such as accounting,
coaching before joining First State      southeastern South Dakota. When he       typing and shorthand. He also
Bank in Armour in 1976, where he         was around 11, Altenburg’s family        coached girls and boys basketball.
now serves as president and CEO.         moved in with to assist his                   Altenburg married his high
    Altenburg has coached various        grandmother, who was blind.              school sweetheart, Cheri Plowman,
sports over the years – mainly girls         When he was 15, Altenburg’s          in 1969. The couple actually met
high school basketball. Under his        father died of a heart attack. Through   when Altenburg was a freshman in
leadership, Armour’s girls basketball    high school, he continued working        high school and Plowman was an
team won the state championship in       on the farm for his uncle.               eighth grader.
1983, and Altenburg was named                Altenburg graduated from high             Cheri’s family on her mother’s
Girls Basketball Coach of the Year in    school in Armour in 1967 and             side (the Winter family) owned First
1983-1984.                               attended Southern State College in       State Bank in Armour. Her father,
    After working at First State Bank    Springfield, S.D. He graduated from      Ray Plowman, ran the bank and was

n 10 n                            South Dakota Banker n April 2012 n www.sdba.com
planning to retire. He convinced         Armour purchased Delmont State                  “Our bank’s longevity is due to
Altenburg to join the bank in 1976.      Bank, and a new bank was built in           our previous owners, our present
                                         Delmont in 1977.                            owners, the management and our
A Career Change to Banking                    In 1984, the Winter family sold        employees,” Altenburg explained.
     Altenburg’s first assignment at     First State Bank to H. Lauren Lewis,        “We have served our communities
First State Bank in Armour was to fill   Allen L. Lewis and Paul Jay Lewis.          through good and bad times.”
in as a teller and to work in the        The Lewis family continues to own               The bank is proud of its long-
insurance agency.                        the bank today.                             time employees, which have
     “I was really hired to do the            “When the Lewis family bought          contributed to the bank’s success.
insurance work, but they taught me       the bank, they didn’t have much             Altenburg said one challenge going
the banking end so I could do the        experience in banking, but they were        forward is that half of the bank’s
teller work and fill in as needed,”      aggressive, and we grew with them,”         employees plan to retire in the next
Altenburg reflected.                     Altenburg said.                             seven years.
     Due to changes in staffing,              First State Bank next purchased
Altenburg quickly began handling         Dakota State Bank of Tripp in 1986,         A Passion for Coaching
loans and from there worked his way      followed by Security State Bank of               Around the time his wife’s
through the various roles at the bank.   Geddes in 1989.                             family sold First State Bank to the
     In 2002, Altenburg became                Among its four locations, the          Lewis family, Altenburg said he
president and CEO of First State         bank employs 25 full-time employees         considered leaving the bank to coach
Bank. While he now handles the           and two part-time employees. First          and teach again full time. But, he was
management roles at the bank, he         State Bank is predominately an ag           then presented the opportunity to
continues to work in all areas           bank serving approximately a 30-            coach the girls basketball team in
including insurance and loans.           miles radius around Armour,                 Armour while continuing to work at
     Altenburg admits that he enjoyed    Delmont, Tripp and Geddes.                  the bank.
his time as a loan officer more than          The bank provides the usual                 “I had coached girls basketball in
the administrative side of banking,      community banking products, except          Stickney, and I was now working at
because it allowed him to work one-      trust services and ATMs. The bank           the bank,” Altenburg said. “School
on-one with his customers.               does offer debit cards and online           was going to start, and they didn’t
     Altenburg is proud of how the       banking, and each location has an           have a coach. I told them I would
bank pulled through the farm crisis      insurance agency which provides a           stay there and do it until they could
of the 1980s, which was a difficult      full line of insurance products.            find someone.”
time for banking in South Dakota.             When Altenburg started working              Altenburg coached Armour’s
     “We went through the farm crisis    at the bank in 1976, First State Bank’s     girls basketball team from 1980 to
and there was some tough times           deposits were at $9 million. Today,         1984. As he became busy with his
there in the ‘80s,” he said. “But we     the bank’s deposits have grown to           own children’s activities, he took a
got through it. We never had a           around $97 million.                         10-year break from coaching and
foreclosure.”
     Altenburg’s wife also worked at
the bank part time over the years as a
teller and bookkeeper. She retired a
couple of years ago when changes in
technology eliminated some of her
duties at the bank.

History of First State Bank
     First State Bank is proud of its
100-plus years in business and that it
is an independently, family-owned
bank. It’s motto is “A Bank Built by
Customers.”
     The charter of First State Bank
dates back to 1906. First known as
Security State Bank of Ethan, the
bank was converted to First National
Bank of Ethan in 1931. The charter
was transferred to Armour in 1937 as
First National Bank of Armour. The
bank was then converted to First
State Bank of Armour in 1960.
     In 1966, First State Bank in        First State Bank in Armour has been at the same location on Main Street since 1906.

                                  South Dakota Banker n April 2012 n www.sdba.com                                   n 11 n
returned to coach Armour’s girls
basketball team for another nine
                                                                                                            In back from left
years.
                                                                                                            are Jerry and
     Altenburg led the girls basketball
                                                                                                            Cheri
team to win the state championship
                                                                                                            Altenburg’s two
in 1983. His predecesor then led the
                                                                                                            sons, Jim and
team to another four consecutive
                                                                                                            Chris. In the
state championships. Altenburg also
                                                                                                            middle row is
coach the teener baseball team in
                                                                                                            Cheri; Jim’s wife,
Armour to a state championship win.
                                                                                                            Jodi; and Chris’
     “I enjoyed watching the kids
                                                                                                            wife, Lara. Jerry
improve and get better,” Altenburg
                                                                                                            is surrounded by
said about coaching. “It is kind of
                                                                                                            the couple’s four
like loans – watching your customer
                                                                                                            grandchildren:
grow. That is why I liked being a
                                                                                                            Chase, Brady,
loan officer. You help them and you
                                                                                                            Brinley and
teach them, and they get better.”
                                                                                                            Sydney.
     Altenburg’s passion for coaching
and working with children is evident
in his office at the bank. His “wall of
fame,” as he refers to it, is filled with
pictures of teenagers he has coached
in various sports over the years. His       though he says he isn’t any good at      defraud their customers. But, as with
office walls also boast pictures of         the sport.                               any industry, as times change, so
sports teams, newspaper clippings               Altenburg has been involved in       must banking regulations and rules.
and awards he has won.                      various community organizations               “You have to accept them and
     Altenburg has taken some of the        including the Community Club,            work them or you are really going to
key elements of being a successful          Armour Community Foundation,             be frustrated,” he explained. “I used
coach and applied them to                   Lions Club, local golf course board      to hate compliance and regulations,
overseeing the four locations of First      and the United Church of Christ. He      but finally I accepted them several
State Bank.                                 also currently serves on the Federal     years ago. I decided we are going to
     “You have to communicate,”             Reserve Community Depository             do it, and we are going to do it right.
Altenburg said about running a              Institutions Advisory Council.                “It is what it is, and this industry
successful bank. “And with the three            Altenburg has served on the          is going to be regulated, as it should
other branches, there is a team             SDBIS Board of Directors, and he         be.”
effort.”                                    hasn’t missed an SDBA Agricultural            Altenburg said today’s
                                            Credit Conference since the 1980s.       regulatory climate is no different
Altenburg’s Family Life                                                              than the 1980s when banks were
     Altenburg and his wife, Cheri,         Banking Moving Forward                   lending money to people who
have two grown sons. Both have                   When Altenburg started working      couldn’t pay it back. He said it
followed in Altenburg’s two passions        at First State Bank, he was surprised    wasn’t long before FDIC regulators
in life – education and banking.            to learn that every bank in the          came in and said banks need to make
     Their oldest son, Jim, and his         country charged the same amount for      sure a customer can cash flow before
wife, Jodi, live in De Smet. Jim is the     a timed CD. The government, at that      lending any money. These changes
middle school and high school               time, set the rates.                     then led to farm inspections.
principal and superintendent. Jim                “It didn’t matter where you              “Has it made us better lenders? I
was the youngest superintendent in          bought it, there was a maximum that      think so,” Altenburg said. “South
South Dakota, and his wife is a             you would pay,” he said. “That was       Dakota bankers for the most part are
teacher.                                    the most amazing thing that I learned    doing a great job.”
      The Altenburg’s youngest son,         when I came here. I didn’t know that          Altenburg said he doesn’t have
Chris, is a manager for Wells Fargo         as a teacher or as a farm kid.           any big plans for his retirement from
Home Mortgage in Sioux Falls. Chris’             “After deregulation in the 1980s,   banking. He may continue to be
wife, Lara, is also a teacher.              it has been continual changes. I don’t   involved on the bank’s board of
     The Altenburg’s have four              think any industry has changed as        directors. He does plan to spend
grandchildren, with a fifth on the          much as the banking industry over        more time with his family, and he
way in April, and the couple keeps          time.”                                   doesn’t rule out coaching.
busy attending their grandchildren’s             Altenburg admitted that                  “I will miss the customers and
activities. The couple has a house on       consumer protection regulations          the employees that I have worked
the river and enjoys water recreation.      have been frustrating because South      with all of these years,” Altenburg
Altenburg also likes to golf, even          Dakota banks are not trying to           said. n

n 12 n                               South Dakota Banker n April 2012 n www.sdba.com
          Washington Update

SD Bankers Advocate for Industry in Washington
By Curt Everson, SDBA President


A
         passionate group of banking
         advocates from South Dakota
         made the trek to Washington,
D.C., and joined 1,100 bankers from
across the nation at the ABA’s 2012
Government Relations Summit on
March 19-21.
    South Dakota’s group met with
Congresswoman Kristi Noem, Sen.            In back from left: Darrell Schmith, First PREMIER Bank, Sioux Falls; Rob Stephenson,
John Thune and Sen. Tim Johnson            First Dakota National Bank, Yankton; Monte Troske, Farmers State Bank, Turton;
during the afternoon of March 20 to        Kevin Tetzlaff, First Bank & Trust, Brookings; Rick Rylance, Dacotah Bank, Rapid City;
discuss our industry’s support for the David Nelson, First Fidelity Bank, Platte; George Kenzy, First Fidelity Bank, Burke;
Financial Institutions Examination         SDBA President Curt Everson; and SDBA Legal Counsel Brett Koenecke. In front from
Fairness and Reform Act and                left: Dave Zimbeck, Citibank, NA, Sioux Falls; Steve Hayes, Dakota Prairie Bank, Fort
legislation to increase the SEC            Pierre; Bruce Byrum, First Interstate Bank, Spearfish; Bob Rutten, Citizens State Bank,
registration threshold from 500 to         Arlington; and Brett Koenecke’s daughter, Arden Koenecke.
2,000 shareholders. Bankers also
expressed the need to push back on Dodd-Frank
provisions requiring bankers to register as municipal
advisors with the SEC.
    South Dakota’s bankers also did a tremendous job of
explaining why proposed legislation to expand the
business lending authority of credit unions was
unnecessary and fundamentally bad public policy. Banker
presence on Capitol Hill was particularly important this
week as several thousand credit union supporters were
also in town promoting their agenda to grow tax-exempt
lending to business instead of making loans to people of
modest means.
    Summit attendees heard from Congresswoman
Shelley Moore Capito (D-W.Va.), who is a prime House
sponsor of the bank examination reform legislation;
Virginia Senator Mark Warner; Indiana Governor Mitch                Bob Rutten, Citizens State Bank, Arlington; Dave Zimbeck,
Daniels; and political news commentator Chris Matthews.             Citibank, NA, Sioux Falls; Ryan Jensen, Sen. John Thune’s
    ABA Chairman Kell Kelly opened the Summit by                    legislative staffer; and SDBA President Curt Everson.
thanking the nearly 1,100 participants for coming to the
nation’s capital to advocate for the banking industry. “We
stand and we fall together,” said Kelly, president and
CEO of SpiritBank, Bristow, Okla. “What you say and
what you do here matters, and it’s critically important
that you know that.”
    He recalled a sermon he heard years ago in which the
preacher stressed that if a person doesn’t push, nothing
moves. “You’re here to push [for banking issues]. You’re
here because you will push. If you don’t push, nothing is
going to move,” Kelly said. “It’s critical and vital that all
of us know we carry with us the stewardship, the
importance and the future of our industry.”
    At the close of the Summit, Kelly encouraged
attendees to take up the challenge laid down by
Chairman-Elect Matt Williams of Nebraska’s Gothenburg
State Bank to grow the 2013 attendance number to 1,500.
                                                                    Monte Troske, Farmers State Bank, Turton; Rob Stephenson,
Numbers matter when it comes to carrying our industry’s
                                                                    First Dakota National Bank, Yankton; and Darrell Schmith,
message on Capitol Hill. n
                                                                    First PREMIER Bank, Sioux Falls.

n 14 n                              South Dakota Banker n April 2012 n www.sdba.com
            Washington Update




George Kenzy, First Fidelity Bank, Burke; SDBA Legal Counsel
Brett Koenecke, May, Adam, Gerdes & Thompson, Pierre; and
David Nelson, First Fidelity Bank, Platte.




SDBA Chairman Bruce Byrum, First Interstate Bank,
Spearfish; NDBA Chairman Vaune Cripe, American Bank
Center, Dickinson; NDBA Chairman-Elect Jay Feil, Starion
Financial, Mandan; and SDBA Chairman-Elect Steve Hayes,
Dakota Prairie Bank, Fort Pierre.




NDBA President Rick Clayburgh and SDBA President Curt
Everson.

                                   South Dakota Banker n April 2012 n www.sdba.com   n 15 n
          Endorsed Vendor Spotlight


Agent for Change
A community bank capitalizes on local market developments by simplifying the switch between financial institutions.



T
        he timing couldn’t have been     patent-pending service is the only        targeted radio spots, along with
        better. German American          solution in the market that               point-of-sale advertising at all offices
        Bancorp, a Jasper, Ind., based   completely takes the burden of            and prominent display on the bank’s
financial institution with 34 offices    making the switches away from the         website.
serving 12 counties across southern      customer and the bank.
Indiana, learned that one of its local        Other solutions in the market        Immediate Results
competitors had been acquired by a       claim to be a “concierge” service, but         Although German American has
larger competitor in its footprint.      there is a reason why they are called     only been offering the SwitchAgent
This presented a golden opportunity      “u-switch.” You, as the customer or       service for a short time, Balsmeyer
for German American to attract new       the banker, are the one manually          says her management team is already
customers who might be willing to        trying to figure out the forms, the       seeing positive impact across the
switch.                                  addresses, etc. to make the switches.     organization.
     At the same time, Deluxe was        You also are left with the liability of        “Our customers appreciate the
recruiting financial institutions to     figuring out the timing of when to        speed and simplicity of the
participate in a pilot program for       move certain deposits and                 experience, and it frees up our front-
Deluxe SwitchAgentSM, a new              withdrawals.                              line staff for other services that
solution designed to speed and                Deluxe’s SwitchAgent service         contribute more directly to our
simplify the switch to a new financial   uses our proprietary database to          bottom line,” Balsmeyer said.
institution.                             sequence the deposits and                      In addition to acquiring
     “We knew that the conditions        withdrawals providing the customer        customers in markets where it is
were ideal for getting new customers     with the peace of mind to fully fund      already established, German
to choose us as their next bank,” said   their new account with their new          American is using SwitchAgent to
Jane Balsmeyer, vice president and       bank. In addition, Deluxe offers a        differentiate itself in two new growth
director of marketing at German          complete program to engage your           markets for the company.
American. “And in our research, we       banker and the customer in the first           “We feel good about our decision
confirmed that one of the biggest        90 to 120 days of account opening to      to go with SwitchAgent, and overall
reservations about switching banks is    take advantage of the time period the     we are very pleased,” Balsmeyer
that it can be very complicated,         customer is most likely to buy            said. “I would recommend this
especially for those who make            additional products and services          service to other banks. Since it is a
multiple payments and deposits           from the bank.                            new service, it can be a competitive
electronically. We saw opportunity             “As Deluxe walked us through        advantage to get into the program
there.”                                  the SwitchAgent process, we began         sooner rather than later.”
                                         to understand what the customer
Fast Rollout                             would experience and we got more          Get More Accounts to Move Your
     In September 2011, just two         excited about it,” Balsmeyer said.        Way
months after learning about the new           Balsmeyer admits it was difficult        Increase competitiveness,
Deluxe solution, German American         to put such sensitive customer            customer loyalty and employee
made SwitchAgent available across        interactions into the hands of an         productivity with the full suite of
its branch network.                      outside resource. However, her            Deluxe solutions. Deluxe
     The SwitchAgent service begins      bank’s longstanding relationship          performance averages include:
immediately at account opening           with Deluxe helped make the
where the banker inquires whether        decision easier.                              Acquisition Program
or not the customer has                       “Since we have such high service         l 70 Percent Account Lift
preauthorized transactions associated    standards, it is natural for us to want       l 90 Percent Household Lift
with their account at their previous     to tightly control every customer             l 92 Percent Lift Over Control
institution. If so, the banker shares    encounter,” she said. “But, we were           l 700 Percent Return on
information about the                    familiar with Deluxe as a call center           Marketing Investment
complimentary, concierge                 and service provider that is highly
SwitchAgent service. The customer        regarded across this industry, so we          Onboarding Program
simply chooses a date and time for       knew our customers would be in                l 225 Percent More Profitable
the SwitchAgent representative to        good hands.”                                    than Business As Usual for
contact them, and Deluxe takes over           German American promoted its               New Customers Enrolled
from there. The fully-automated,         new switching service through                             Continued on page 20

n 16 n                            South Dakota Banker n April 2012 n www.sdba.com
         Ask the Appraiser


Ethics Rule – Management
By Sherry Bren
Executive Director, South Dakota Appraiser Certification Program


                    Appraiser’s Fees Based on Pending              Disclosure of Referral Fee Amounts
                    Sale Price                                          The Management section of the ETHICS RULE
                        I’m aware that an appraiser’s fee          requires an appraiser to disclose …fees, commissions, or
                    cannot be based on the amount of the           a thing of value… paid in connection with the
                    appraiser’s value conclusion. However,         procurement of an assignment. If a referral fee was paid
                    does USPAP allow an appraiser’s fee to         in conjunction with an assignment, must the amount of
                    be based on the amount of the owner’s          the fee be disclosed, or is it sufficient to simply disclose
                    estimate or a pending sale price of the        that a fee was paid?
                    subject property?                                   Disclosing the fact that a payment was made in the
     USPAP does not prohibit an appraiser’s fee from               appraisal certification and any transmittal letter where the
being based on an owner’s estimate, a pending sale price           conclusions are stated is sufficient to meet the
of the subject property, loan amount, or any other factor          requirement. However, this is a minimum requirement
outside the appraiser’s control.                                   and does not prohibit full disclosure of the amount of the
     This is in contrast to a fee based on the amount of the       fee.
appraiser’s opinion of value, which is within the
appraiser’s control. A fee arrangement based on the                    Notice: Public information regarding disciplinary
appraiser’s opinion of value violates the ETHICS RULE.             action taken against an appraiser is available upon written
                                                                   request to the address or email above. Include in the
Discounted Appraisal Fees                                          request for information the name of the appraiser and the
     Is it a violation of USPAP to offer reduced appraisal         appraiser’s city and state of residence. (Disciplinary action
fees for clients that send me a large volume of business?          may include denial, suspension, censure, reprimand or
Could I also offer a discount for the method of payment,           revocation of a certificate by the department.) n
such as collecting the fee from the borrower at the time
of inspection?
                                                                    If you have an appraisal related question that you would like
     An appraiser may establish his or her fees based on a
                                                                    to have answered in the “Ask the Appraiser” column, please
number of factors, including the amount of business
                                                                    submit it to Sherry Bren, executive director of the Appraiser
received, business relationships, method of payment and
                                                                    Certification Program, 445 East Capitol Ave., Pierre, SD
client-specific requirements. However, appraisers must
                                                                    57501, fax (605) 773-5369 or by email at
ensure that they comply with the Management section of
                                                                    Sherry.Bren@state.sd.us.
the ETHICS RULE.


Two Companies Join SDBA as Associate Members
   The SDBA encourages banks to utilize the products               Promontory Interfinancial Services, LLC
and services offered by its two latest associate members.          Contact: Steve Davis, Regional Director
                                                                   Address: 1515 N. Courthouse Road, Suite 1200, Arlington,
OneBeacon Professional Insurance                                      VA 22201
Contact: Craig Collins, Financial Services President               Phone: (515) 240-5451
Address: 601 Carlson Parkway, Suite 700, Minnetonka,               Email: sdavis@promnetwork.com
  MN 55305-5216                                                    Web: www.promnetwork.com
Phone: (952) 852-2434
Email: ccollins@onebeaconpro.com                                                                 The home of CDARS®, ICS,
Web: www.onebeaconpro.com/900                                                                    and IND®. More than 3,000
                                                                   financial institutions are members of the Promontory
                   OneBeacon Professional Insurance’s              Network, which allows them to enhance profitability,
                   Financial Services division provides            build multi-million-dollar relationships leading to
                   specialty insurance tailored exclusively        significant cross-selling opportunities, manage liquidity
for community banks. Working through South Dakota                  by selling excess deposits, lower collateralization costs by
Bankers Insurance & Services, we offer a wide range of             reducing tracking burdens and freeing up assets for more
required insurance for community banks, including                  productive uses, earn fee income and help improve ROA
property and casualty, directors and officers, professional        and ROE ratios by taking excess deposits off balance sheet
liability, employment practices and bond coverages.                and/or obtain cost-effective wholesale funding. n

                                    South Dakota Banker n April 2012 n www.sdba.com                                      n 17 n
          Industry News


New SBA 504 Refinancing Program
Benefits Both Small Businesses and Banks

C
         ommercial real estate lenders
         have been watching their         Example of Refinancing an Existing $1,080,000 Note
         loan-to-value ratios increase
as appraisals on collateral have          Current Appraised Value of Property                $1,200,000
declined during the recent recession.     New Maximum Outstanding Balance of Debt            $1,080,000      90% Loan to
Recent revisions to the Small                                                                                Value (LTV)
Business Administration’s (SBA) 504
refinancing program create a unique       Loan Structure:
and time-driven opportunity to bring      Entity                               Loan Amount      % of Loan      Security
a lender’s owner-occupied
commercial real estate portfolio back     ■ New Bank First Trust Loan          $ 600,000        50%            1st Lien
into regulatory compliance, reduce        ■ New CDC/SBA 504 Loan               $ 480,000        40%            2nd Lien
overall commercial real estate            ■ Borrower Contribution              $ 120,000        10%
portfolio concentrations, and               (equity in property)
provides an additional tool for
                                          Appraised Value of Property:         $1,200,000
lenders to offer their small business
clients.
     This program allows small
businesses to take advantage of long      to be structured like traditional 504      loan limit increases to $5.5 million for
term, fixed-rate loans to refinance       loans. With a traditional 504 loan, a      eligible manufacturing projects and
their high interest or maturing real      bank provides up to 50 percent of the      projects that incorporate energy
estate debt or existing debt on capital   project cost and holds the first lien      saving technologies.
assets. Loans under the 504 Program       position. A Certified Development               The following are some of the
are funded by the sale of 10-year and     Company (CDC) provides up to 40            primary requirements of the SBA 504
20-year bonds guaranteed by the           percent of the project cost and takes a    Refinance Loan Program:
SBA. Thus, a borrower is able to          secondary position to the bank loan.            l The small business must be
obtain attractive 20-year, fixed          The small business borrower must           for-profit and have a tangible net
interest rates, as low as 5.04 percent    either have at least 10 percent            worth of less than $15 million and an
based on the January pricing.             existing equity in the property or         after tax profit of less than $5 million
     A strong supporter, John             must inject equity of at least 10          for the previous two years.
DiMichele, president and CEO,             percent. The amount of the bank loan            l The small business must
Community Business Bank in West           must be at least as much as the 504        occupy at least 51 percent of the
Sacramento, Calif., recently stated,      loan.                                      property at the time of the refinance
“With an SBA 504 refinance loan, the           There are virtually no restrictions   application.
bank has another tool to help             on the bank’s loan with respect to              l The property must have been
maintain its relationship with a          structure or pricing. The bank’s first     acquired at least two years ago with
current client, as well as be able to     lien position, at a lowered loan-to-       commercial debt.
offer financing solutions for potential   value ratio, makes partnering with a            l The project structure must be
new clients. This refinancing             CDC on a 504 refinance loan a wise         based on the current appraised value
program is important to community         choice. The bank’s rates can be fixed      of the collateral.
banks because it provides us the          or floating. The only stipulation is            l Up to 90 percent of the
opportunity to improve our ability to     that the first lienholder loan must be     current appraised property value
service our customers, while at the       for at least 10 years for a commercial     may be refinanced.
same time reducing the risk of the        real estate loan and at least 7 years           l Existing government-
overall relationship.”                    for a 10-year equipment or                 guaranteed loans are not eligible to
     Retaining your clients and           machinery loan. The bank utilizes its      be refinanced.
making their financial position – and     own underwriting standards and sets             l Expansion projects are not
that of your bank – stronger is a win-    its own terms, interest rates and fees.    eligible to be refinanced (there is an
win situation. This is a particularly          While there is no maximum             option for refinancing under a
valuable benefit in these difficult       project size for a 504 loan, the 504       modified version of 504).
economic times.                           loan is limited to $5 million in most           Like the traditional 504 Loan
     SBA’s regulations for the 504        refinance projects just as with the        Program, the borrower may use its
refinancing program allow the loans       traditional 504 loan. The upper 504        existing equity in the property for its

n 18 n                             South Dakota Banker n April 2012 n www.sdba.com
          Industry News

10 percent equity injection. The                                                    the small business community. This
borrower is thus able to retain                                                     new program offers a powerful tool
working capital in the business.                                                    to both the banker and the small
     Should there be excess equity in                                               business owner. Bankers can
the property, the small business can                                                capitalize on the opportunity to
refinance existing qualified debt or                                                service their trusted clients while
may use the excess equity (meaning,                                                 reducing risk and small businesses
equity beyond the 10 percent                                                        can improve their cash flow and
minimum contribution) to obtain            terms must have been entered into        extend existing debt, while fueling
working capital for payment of             prior to Oct. 12, 2011.                  growth in their local communities.”
recent or projected eligible business           As with the regular 504 Loan             Do you have borrowers who
expenses. These expenses can include       Program, 504 refinance loans are         could benefit from the new 504
items such as rent, utilities, inventory   processed through CDCs, (Certified       Refinance Loan Program or instances
and other business obligations. This       Development Companies) who               where this program would benefit
significantly improves cash flow for       manage the SBA portion of the            the bank? If yes, you can contact
the borrower and could provide a           transaction for the bank and their       your local CDC for more
new source of working capital.             client. The National Association of      information. To find a member CDC
     Multiple refinancings of the          Development Companies (NADCO),           (they serve every state), visit the
original note will not disqualify the      the trade association representing the   NADCO website at www.nadco.org
project. Borrowers must demonstrate        nation’s CDCs, is actively working       and navigate to the “Find a Member”
that their loan is current and that        with SBA to promote the 504              button.
they have successfully made all            refinance program.                            It’s important to remember to act
required payments under original or             NADCO President, Chris              fast; the program expires Sept. 27,
modified bank terms for the past           Crawford, noted, “We’ve seen first-      2012, unless Congress acts to extend
twelve months. Such modifications of       hand the impact of the recession on      it. n




                                    South Dakota Banker n April 2012 n www.sdba.com                              n 19 n
          Bank Notes

Bryant State Bank Receives                opportunities for another business,     Foreclosed Property...
Community Service Award                   and building plans are underway.                          continued from page 6
     The Independent Community                “We at Bryant State Bank are
Bankers of America (ICBA) named           honored to be named as an ICBA          repossessed in 2009.
Bryant State Bank in Bryant, S.D., a      Service Award winner,” said Lee             With the continued economic
top honoree in the 2012 ICBA              Jacobson, chairman and CEO of           downturn, financial institutions need
National Community Bank Service           Bryant State Bank. “Our program         to consider how to manage vacant
Awards for the bank’s outstanding         exemplifies the core values of          properties already in their portfolios,
leadership in its community               community banking. We look              as well as plan for the possibility that
development program.                      forward to continuing to serve our      there may be more to come. Though
     “ICBA founded the National           community.”                             the risks can often be intimidating
Community Bank Service Awards                 The awards are given to ICBA        and quite costly, vacant property
program to help celebrate the             members that show longstanding          owners can take advantage of some
outstanding volunteer efforts of the      commitments to community outreach       easy-to-implement safeguards –
nation’s community banks, which           and development. n                      regular inspections, continued
exist to serve the needs of their                                                 maintenance, police and fire
customers and communities each and                                                department notifications, etc. – and
every day,” said incoming ICBA            40, 50-Year Bankers                     minimize the chance of experiencing
Chairman Jeffrey L. Gerhart,              Sought for Recognition                  and expensive loss. n
chairman of Bank of Newman Grove,         at Annual Convention
Newman Grove, Neb. “Bryant State               SDBA will honor and recognize       Craig M. Collins is the president of
Bank exemplifies what community           those bankers with 40 and 50 years of    Financial Services for OneBeacon
bank service is all about. We             service in banking at the                Professional Insurance. He has more
commend them for giving their time,       NDBA/SDBA 2012 Annual                    than 20 years of experience in the
expertise and resources to better their   Convention in Bismarck, N.D. The         financial institution industry. He can
communities and the lives of local        awards will be presented during the      be reached at ccollins@onebeaconpro
residents.”                               business luncheon on Tuesday, June       .com or visit www.onebeaconpro.com.
     Bryant State Bank was named as       12. If you know of someone who has
a national award recipient in             been in banking for 40 or 50 years,
recognition of its community              please complete the form at
development program. Bryant’s             www.sdba.com and return it to the       Agent for Change...
                                                                                                   continued from page 16
largest full-time employer, WW Tire,      SDBA by May 10.
a tire retail, wholesale and recapping         In addition, a memorial service       l   41.56 Percent Increase in Total
manufacturing company, faced a            will be held at the 2012 Annual                Accounts Sold
dilemma: the company had                  Convention for those bankers who           l   24.89 Percent Increase in
outgrown its facilities and needed to     have passed away since the last                Cross-Sell Ratio
expand, but there were no suitable        convention. If you have someone you
building sites in the community that      would like to be recognized at the         Retention
had both the space and the                service, please complete the form at       l 5 Percent Points Improvement
infrastructure to meet the needs of       www.sdba.com and return it to the            in Customer Satisfaction
the expanding business. The business      SDBA by May 10.                            l Two Year Increase in Tenure
began to explore options of moving             If you have any questions about
the expansion to a larger community       either recognition, contact the SDBA        Whether your goal is to increase
outside the area, which would have a      at (800) 726-7322. n                    consumer DDAs, improve your loan
devastating impact on the                                                         or business banking portfolios, or
community.                                                                        make your existing customer base
     This is when President Jeff Davis    Submit Your Bank Note                   more profitable, Deluxe will work
and Chairman Lee Jacobson, of                  If you are an SDBA member          with you to design a program that
Bryant State Bank, stepped in.            bank or associate member, tell us       will achieve your key objectives and
Instead of letting opportunities go       about your new employees,               consistently deliver a positive ROI. n
elsewhere, Bryant State Bank’s            promotions, community service
donation of more than 200 hours           projects, economic development           Learn more by contacting your
created expanded job opportunities,       efforts, honors and landmark             Deluxe account executive, Patrick
increased public funds and enhanced       anniversaries. Email your stories and    Pasek, at (800) 332-4234 ext. 156294
the community for generations to          photos to ademers@sdba.com or mail       or Patrick.Pasek@deluxe.com. Or visit
come. In addition, the project            to: Alisa DeMers, SDBA, PO Box           www.deluxe.com/switchagent. Deluxe
facilitated future growth                 1081, Pierre, SD 57501. n                is an SDBA endorsed vendor.

n 20 n                             South Dakota Banker n April 2012 n www.sdba.com
           Classifieds

Ag/Commercial Lender (First                   l Director, Compliance Oversight -             chief risk officer to plan, develop and
National Bank, Fort Pierre, S.D.)             Internal: MetaBank has the opportunity         implement a risk-based internal audit
First National Bank in Fort Pierre, S.D.,     for a director, compliance oversight --        plan for the entire organization, while
has an opening for an ag/commercial           internal audit position. This person           also completing annual risk assessments,
loan officer. This is a great opportunity     works closely with the chief risk officer to   preparing budgets and establishing audit
for a motivated, progressive individual       plan, develop and implement a risk-            schedules. Performs functions to direct
with three to five years of ag/commercial     based regulatory compliance internal           staff in the independent protective and
credit experience who wants to work in        audit plan for the entire organization,        constructive audits of company controls,
central South Dakota. The successful          while also completing annual risk              financial records and operations.
applicant will participate in all facets of   assessments, preparing budgets and             Oversees the documentation of
lending and branch banking with               establishing audit schedules. Executing        department and corporate records and
emphasis in agricultural loans. A strong      the compliance audit plan includes             transactions to verify compliance with
sense of business opportunities, together     scheduling compliance audits,                  applicable laws and corporate policy.
with the creativity, energy and               developing request letters and sending to      Develops, establishes and implements
enthusiasm necessary to formulate and         appropriate partners covering both the         standards of performance. Coordinates
implement business development                client and various programs, developing        the analysis of data for evidence of
strategies is essential. Opportunity for      and retaining adequate supporting work         deficiencies in controls, duplication of
upward movement. Strong analytical and        papers and testing worksheets, drafting        effort, fraud, or lack of compliance. AA/
decision making skills are required. A        internal audit reports including findings      EOE
degree in business, finance or related area   and requesting management responses.
is required. This position will give you an   The director of compliance oversight -         l Enterprise Risk Manager: MetaBank
opportunity to join a progressive banking     internal audit will also be responsible for    has the opportunity for an enterprise risk
organization that offers a competitive        summarizing findings and status updates        manager position. Under the general
salary and benefits package. Successful       on the compliance audit plan for               direction of the enterprise risk director,
applicant must pass pre-employment            management and designated committees.          the enterprise risk manager will assist in
screening including credit history and        AA/EOE                                         the documentation, implementation and
criminal back ground check. Please                                                           maintenance of a formal, proactive risk
submit resume to Shad Ludemann, First         l Director, Enterprise Risk Manager:           management program, including but not
National Bank, P.O. Box 850, Fort Pierre,     MetaBank has the opportunity for a             limited to setting performance goals and
SD 57532. EOE n                               director, enterprise risk manager              measurable objectives, identifying and
                                              position. Under the general direction of       analyzing operating and compliance risks
MetaBank, Sioux Falls, S.D.                   the chief risk officer, the director,          and coordinating the implementation of
MetaBank, Sioux Falls, has the following      enterprise risk will document, implement       risk mitigating practices. The program
job openings. Please visit our website at     and maintain a formal, proactive risk          will be based upon best risk management
www.metabank.com to view the                  management program, including but not          practices, compliance assurance
complete job description for each and to      limited to setting performance goals and       procedures, and the risk assessment and
apply online. Direct any inquiries to         measurable objectives, identifying and         mitigation needs of banking
dcorkill@metapay.com.                         analyzing operating and compliance risks       communities. Special attention should be
                                              and coordinating the implementation of         given to enhancing the bank’s
l Compliance Oversight Manager:               risk mitigating practices. The program         compliance with the Industry risk
MetaBank’s compliance oversight               will be based upon best risk management        management standards. The enterprise
manager - internal audit is responsible       practices, compliance assurance                risk manager will also be responsible for
for performing compliance audit projects      procedures, and the risk assessment and        developing collaborative relationships
as part of the annual internal audit plan.    mitigation needs of the bank. Special          with operational effectiveness,
Executing the compliance audit plan           attention should be given to enhancing         compliance and internal audit oversights
includes scheduling compliance audits,        the bank’s compliance with the industry        activities. Bachelor’s degree, a master’s
distributing request letters to appropriate   risk management standards and                  degree or equivalent is a plus. Minimum
partners covering both the client and         guidance. The director, enterprise risk        of seven years of experience in risk
various programs, developing and              will also be responsible for developing        management role in a financial
retaining adequate supporting work            collaborative relationships with               institution, prepaid, and/or credit card
papers and testing worksheets, drafting       operational effectiveness, compliance and      industry; or five years of progressive risk
internal audit reports including findings     internal audit oversights. Bachelor’s          management experience as a regulatory
and requesting management responses.          degree, a master’s degree or equivalent is     examiner. AA/EOE n
Additionally, the internal audit manager      a plus. Minimum of 10 years of
performs follow-up on the status of           experience in risk management role in a        Place Your Listing
outstanding internal audit issues. The        financial institution, prepaid, and/or         If you have a job opening at your bank or
compliance oversight manager will also        credit card industry; or five years of         something to sell, send your classified
assist with periodic reporting to the audit   progressive risk management experience         listing to ademers@sdba.com and we will
committee, development of the annual          as a regulatory examiner. AA/EOE               post it in South Dakota Banker and on the
compliance internal audit plan, and                                                          SDBA website. This service is free to
championing internal control and              l Director, Internal Audit: MetaBank           member banks. The fee is $50 for non-
corporate governance concepts                 has the opportunity for an internal            members. (150 word limit.) Questions,
throughout the business. AA/EOE               auditor position. Works closely with the       call Alisa DeMers at (800) 726-7322. n

                                       South Dakota Banker n April 2012 n www.sdba.com                                        n 21 n
           Educational Calendar


Seminars and Conferences
Bank Directors Workshop                                       l    Organizing an Effective Remote Deposit Capture
  April 3, 2012: Hilton Garden Inn, Sioux Falls                    Compliance Program
SDBA Agricultural Credit Conference                           l    Express Loan Programs
  April 11-13, 2012: Ramkota RiverCentre, Pierre              l    Business Continuity and Disaster Recovery – Executing
Legal Issues of New Account Documentation                          a Mock Disaster Drill
   April 24, 2012: Hilton Garden Inn, Sioux Falls             l    Construction Lending
IRA Fundamentals                                              l    Creating Compelling Advertising for Community
  May 8, 2012: SDBA Office, Pierre                                 Banks
  May 9, 2012: Ramkota Inn, Sioux Falls
                                                              l    Eight Habits of Effective Bank Managers
Call Report Preparation
   May 10-11, 2012: Clubhouse Hotel & Suites, Sioux Falls
                                                              Schools
NDBA/SDBA Annual Convention
  June 10-12, 2012: Ramkota Hotel, Bismarck, N.D.             GSB Human Resource Management School
                                                                April 15-20, 2012: University of Wisconsin-Madison
Loan Documentation for the Ag Lender
   Oct. 17, 2012: Clubhouse Hotel & Suites, Sioux Falls       GSB Bank Technology Management School
Loan Documentation for the Experienced Ag Lender                April 22-27, 2012: University of Wisconsin-Madison
   Oct. 18, 2012: Clubhouse Hotel & Suites, Sioux Falls       2012 Schools of Banking Operations School
                                                                 May 15-17, 2012: Schools of Banking, Topeka, Kansas
April Webinars
The following are available as live webinars and/or           Dakota School of Banking
recorded seminars. For more information and additional          June 17-22, 2012: Jamestown, N.D.
webinars go to www.sdba.com, Calendar of Events, and          SDBA 2012 National School for Experienced Ag Lenders
click on the “Search for Trainings” page.                       June 25-28, 2012: Black Hills State University, Spearfish
l   Understanding C&I Loan Structuring, Loan                  Graduate School of Banking at Colorado
    Agreements and Covenants                                    July 15-27, 2012: Boulder, Colo.
l   Protecting Your Vital Business Interests – The Value of
    SSN Verification with Absolute Personal Identification    Graduate School of Banking at Wisconsin
                                                                Aug. 12-24, 2012: University of Wisconsin-Madison
l   Business Cash Flow Basics and Global Cash Flow
    Integration Issues for Lenders and Analysts               GSB Senior Management Seminar
l   Financial Statement Projections: Going Beyond               Aug. 19-22, 2012: University of Wisconsin-Madison
    Historical Ratio and Cash Flow Analysis                   2012 School of Trust & Financial Services
l   Capital Planning                                             Aug. 20-24, 2012: Schools of Banking, Topeka, Kansas
l   Business Continuity and Disaster Recovery – 10 Proven     2012 Advanced Trust Operations
    Steps to Building an Effective Plan                          Aug. 21-23, 2012: Schools of Banking, Topeka, Kansas
l   Delegating for Effectiveness
                                                              SDBA 2012 IRA School
l   Opening Deposit Accounts for Limited Liability              Sept. 5-7, 2012: Clubhouse Hotel & Suites, Sioux Falls
    Companies: Documentation and Procedures
                                                              SDBA 2012 School of Compliance
l   Improving Your Sales Ability on the Frontline
                                                                Sept. 10-14, 2012: Clubhouse Hotel & Suites, Sioux
l   Your Funding Strategy – Meshing Non-Core and Core           Falls
    Funding Concepts for Success
                                                              GSB Financial Managers School
l   Problem Loan Identification and Prevention
                                                                Sept. 23-28, 2012: University of Wisconsin-Madison
l   How to Properly Handle, Drill, Secure and Report Safe
    Deposit Box Past Dues and Unclaimed Property              2012 Advanced School of Banking – Year 1
                                                                 Oct. 1-5, 2012: Schools of Banking, Topeka, Kansas
l   Business Continuity and Disaster Recovery –
    Conducting a Business Impact Analysis the Right Way
l   Changes to the Uniform Commercial Code: Not Again!            Program and registration information is available six to
    What You Need to Know About the UCC and                       eight weeks before each conference. For complete registration
    Upcoming                                                      information, visit www.sdba.com.

n 22 n                             South Dakota Banker n April 2012 n www.sdba.com
           South Dakota WORKS




                       South D a k o t a W O R K S meets n t e r i m
                       S o u t h Dakota WORKS m e e t s iinterim
               construction f i n a n c i n g needs for your business
               c o n s t r u c t i o n financing n e e d s f o r y o u r b u s i n e s s
                                       Low,      interest
                                       Low, fixed interest rate
                            Interest-only
                            Interest-only payments for up to 12 months
                       Subordinate
                       Subordinate collateral position behind the lead bank
                                  p       percent tot  tal
                       Finance up to 20 percent of total construction costss
                     Minimum/maximum loan amount: $20,000 to $1,000,000
                                                  third-party
                       Application fee: $100 plus third-party associated fees


    more
For more information on South Dakota WORKS or other
Governor’s Offi of Economic Development financing
             ffice
Governor’s Office              Devel
programs,
programs, call us at 1-800-872-6190 or visit us online at
www.SDreadytowork.com.
www.SDreadytowork.com.
freedom of choice



            Choose an EFT Network Invested in You




www.shazam.net                                 (800) 537-5427

				
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