Florida Banking May 2023

THE MAGAZINE OF THE FLORIDA BANKERS ASSOCIATION WWW.FLORIDABANKERS.COM SEPTEMBER 2020 THE MAGAZINE OF THE FLORIDA BANKERS ASSOCIATION WWW.FLORIDABANKERS.COM MAY 2023

Intercredit Bank Embracing digital banking to expand in the United States

Editorial & Executive Offices 1001 Thomasville Road, Suite 201 Tallahassee, FL 32303 850-224-2265 www.floridabankers.com Advertising & Production Offices 250 Prairie Center Dr., Ste. 300 Eden Prairie, MN 55344 952-835-2275 www.nfrcom.com For advertising information, contact Erica Nelson Advertising Sales Executive 763-497-1778 Erica@NFRcom.com For reprints or single issues, contact 800-336-1120 Statements of fact and opinion are made on the responsibility of the authors alone and do not imply an opinion or endorsement on the part of the officers or members of FBA. Florida Banking is published 11 times annually with a combined issue in December/January. Subscription price is $50 per year for nonmembers. Postmaster, send address changes to Florida Bankers Association, P.O. Box 1360, Tallahassee, FL 32302. Copyright 2023 Alex Sanchez President and Chief Executive Officer

THE MAGAZINE OF THE FLORIDA BANKERS ASSOCIATION

VOLUME 38

NUMBER 4

MAY 2023

ON THE COVER 8 �� �� �� �� �� �� �� �� �� Intercredit Bank: Embracing Digital Banking to Expand in the United States CONTENTS 4 �� �� �� �� �� �� �� �� �Chair’s Message 6 �� �� �� �� �� ��Straight Talk from the President’s Desk 14 �� �BancServ Endorsed Partner: ‘Keep It Long Enough, It Willl Come Back in Fashion’: Buydown Program Considerations 16 �� �� �� �� �� �� �� �� ��Trust Banking: The Florida Family Trust Trifecta 22 �� �� �� �� �� �� �� �� �� ��67th Annual Washington, D.C., Trip 26 �� �� �� �� ��Personal Transactions 28 �� �� �� �� �� �� �� �� �� �� �� �� ��Kudos 30 �� �� �� �� �� �� ��Upcoming Events 31 �� �� �� �� �� �� �� �� Did You Know? 31 �� �� �� �� �� Advertising Directory

8

Florida Bankers Association asanchez@floridabankers.com Pamela Ricco Executive Vice President and Chief Operating Officer Florida Bankers Association pricco@floridabankers.com Brooke Harrison Publications Director Florida Bankers Association bharrison@floridabankers.com

4

6

Bill Penney Chair Jose Cueto Chair-Elect

Fab Brumley Immediate Past Chair

Greg Nelson Second Immediate Past Chair

22

On the Cover: Intercredit Bank President and CEO Simon Cruz

Florida Bankers Association: The voice of Florida banking since 1888.

Photos by Steven Martine Photography

©istock.com: CatLane

CHAIR’S MESSAGE

RELATIONSHIPS ARE CRITICAL TO OUR ADVOCACY

BY BILL PENNEY, FBA CHAIR

I could write about our recent advocacy efforts — our 67th Annual Washington, D.C., Trip or Capitol Day + Capitol Night — but when thinking of the challenges our industry has faced (and still faces) these past months, I’ve been reminded of the importance of relationships. Advocacy is essential, and we do it well, but our advocacy and outreach efforts are only as strong as our industry relationships. We are in the relationship business. But it’s not only

grateful for our White House Briefing with Bharat Ramamurti, who we’ve continued to engage despite our differences of opinion. Our association has warm relationships with legislators on both sides of the political aisle. During our time at the Florida Capitol on Capitol Day, we met with leaders from both the Republican and Democratic parties. We split up into small groups according to our regions and sat down with our local representatives.

our relationships with customers, employees and communities that matter, but also our relationships with policymakers, regulators, our fellow bankers and the media. Relationships open doors. When the FBA organizes our many events, it’s often thanks to the association’s professional relationships — nurtured over the course of years — that score us time with busy legislators or regulators. During our

Events like Capitol Day + Capitol Night are critical for building and nurturing these relationships… because when it comes time to reach out to our leaders about critical issues, we want them to know our names. The point is, we don’t want to have a reputation for reaching out only when we need something. If that were the case, how willing would our legislators be to help? Luckily that’s not our

"ADVOCACY IS ESSENTIAL, AND WE DO IT WELL, BUT OUR ADVOCACY AND OUTREACH EFFORTS ARE ONLY AS STRONG

AS OUR INDUSTRY RELATIONSHIPS."

67th Annual Washington, D.C. Trip, FBA President and CEO Alex Sanchez spotted Sen. John Cornyn in the hallway and invited him to say hello to our group. Sen. Cornyn spoke with our entourage of 100-plus bankers for at least 15 minutes (which is pretty significant in D.C. time!), and he was not even scheduled to meet with us on this trip. We met with Florida Sens. Rick Scott and Marco Rubio, as well as 10-plus other Representatives. We had an informative meeting with Acting Comptroller of the Currency Michael Hsu. And we were especially

reputation. I’m grateful every day for the passion of our Florida bankers and more so for the history and dedication of our association. Building relationships takes time, but we are consistent and communicative. Relationships are built on trust. And this is a time to inspire trust and confidence in what we do. How can you help us nurture our relationships with our regulators and policy makers? Attend our events to network with your fellow banking colleagues and industry leaders. Reach out to your local legislators to build a relationship and earn the right to share your

4 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

TOP LEFT: From left: FBA President and CEO Alex Sanchez, FBA Incoming Chair Jose Cueto, FBA Chair-Elect Derek Jones, Senator John Cornyn, and FBA Chair Bill Penney. TOP RIGHT: FBA Chair Bill Penney (right) introduces Congressman Brian Mast. BOTTOM LEFT: FBA President and CEO Alex Sanchez and FBA Chair Bill Penney (right) with Acting Comptroller of the Currency Michael Hsu. BOTTOM RIGHT: FBA Chair Bill Penney (left) and FBA President and CEO Alex Sanchez (right) with Bharat Ramamurti, Deputy Director for the National Economic Council.

concerns and be heard. Take a selfie with them and be sure to text them the fabulous picture! Respond to the FBA’s “Calls to Action” to educate our representatives and influence their thinking on the issues that will impact our industry. And speaking of relationships… we’re excited to welcome FOX Business’ Maria Bartiromo as the

keynote speaker at our upcoming 135th Annual Meeting! The FBA is the only banking trade association in the country regularly featured on a national television network. It is always an honor to have the FBA represented on her show, and it will be an honor to hear her speak. I hope to see you in Orlando on June 11-14!

WWW.FLORIDABANKERS.COM MAY 2023 — 5

STRAIGHT TALK FROM THE PRESIDENT’S DESK

ADVOCACY THE "FBA WAY"

BY ALEJANDRO “ALEX” SANCHEZ, FBA PRESIDENT AND CHIEF EXECUTIVE OFFICER

T he Florida Bankers Association is an association that advocates, fights, and speaks up for our industry in a strong, educated and personal way. As I look back over my tenure as the third CEO of this great organization, I can rest easy that I will be passing on the leadership of a respected and active group to my successor. I will pass this great tradition to my successor, just as John Milstead (our second CEO) did to me, and as did Floyd Call (our first CEO) to John. This handoff of the baton will occur later this year. What I will stress to my successor is to conduct a strong advocacy program for the FBA; you cannot email it in. A strong advocacy program is built by personally engaging the elected officials one on one and/or with our bankers’ presence. You cannot execute or maintain a successful advocacy program while sitting in the comfort of your home, office or pool. The FBA walks the hallways of Congress in Washington and the hallways of the state capital to make a difference for you and our industry. Yes, we sometimes use the modern technologies of Zoom and Teams for our briefings, and these platforms add a different but positive element to our advocacy program. Emails and phone calls are also effective tools. But the best technique for successful lobbying is walking the hallways of Congress and wearing out the shoe leather. In my communications to you over the years, I have always included photographs to not only tell you what we were doing but also to show you. When the FBA Chair, leaders, and team go to Washington, it is all about actively engaging members of Congress in conversation to explain our issues and position. I want you, the reader of my emails, to feel like you had a seat in those conversations as we advocated for the banking system. The building of relations with elected officials is key to a successful advocacy program. When you walk the hallways of Congress as often as the FBA does, you are sending

several messages to elected officials: First, your presence in Tallahassee or Washington shows that you are engaged, concerned and involved. Secondly, walking those Capitol hallways strongly communicates to our elected officials that we are informed about what’s going on. Finally, our time walking the hallways sends the message that folks back home, where the votes are, are watching and listening. The COVID pandemic has ushered a new era of advocacy for some — doing it from the comfort and ease of their home or office. That is not the FBA way. A successful advocacy program shows members that you can fight for them whenever and wherever, including in an alleyway and perhaps getting bloodied in the

6 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

process. Strong and successful advocacy cannot be done by the pool, sipping iced tea, while pressing the keyboard of your personal computer. Any association that is successfully advocating for its members should show its members photos of who they are meeting with, and a list of the elected officials

they have met with to defend our industry and push its agenda. It is unacceptable to simply say, “We are meeting with a lot of important people behind the scenes.”The best approach is the FBA way, by involving bankers in quarterly fly-ins to Washington and walking the hallways of Congress to make a difference.

We have what it takes to address your correspondent needs.

Strategic Vision

Technology

Subject Matter Experts

We are ready to meet your needs and to deliver on our promise of Service Beyond Comparison .

Contact your Relationship Manager at 800.275.4222

bankers-bank.com

WWW.FLORIDABANKERS.COM MAY 2023 — 7

Intercredit Bank Embracing digital banking to expand in the United States

I ntercredit Bank is a Miami-based community bank with an international flavor. While the bank has strong ties to Latin America, bank leadership is focused on growing its footprint in South Florida and across the United States with digital banking technology. “I think banking is on the cusp of a total transformation. It’s the advent of technology that’s making this industry an extremely exciting place to be,” said Simon Cruz, Intercredit Bank President and CEO.“Ours is going to be a hybrid offering; though we are pushing forward with technology, we’re grounded in our traditional values of service to the community. We want to continue to service our local market while

United States. They’ve been in banking all their lives, and they understand both the U.S. market and the Latin American market. We’re poised to really grow,” Cruz said. Cruz has been in banking for more than 40 years; he didn’t choose to be a banker, rather, the career chose him. Unbeknownst to Cruz, a friend set him up for interviews with banks recruiting at their university, the Johns Hopkins School of International Studies. When he graduated, he went into international banking because it gave him the opportunity to travel and see the world. “Banking has been great. You get to see all sorts of different businesses; you get to travel, and you get to meet and help people,” Cruz said.

beginning to branch out and diversify into other areas.” Cruz credits the bank's COO Matthew Cordis and IT Manager Javier Montero, both of whom come from fintech backgrounds, with “evolving and developing the bank’s digital capabilities and ability to deliver products quickly.” He’s also grateful for the commitment of the bank’s new owners; in 2020, Intercredit Bank was purchased by Ecuadorian businessman Dr. Fidel

Cruz accepted a position with Chase Manhattan Bank on the condition that it would send him abroad. When he was sent to Barbados to serve as the country manager for the Caribbean, he requested an audit of the division and found that it was losing money.

“OUR OWNERSHIP HAS BEEN IN BANKING ALL THEIR LIVES, AND THEY UNDERSTAND BOTH THE U.S. MARKET AND THE LATIN AMERICAN MARKET. WE’RE POISED TO REALLY GROW.”

“I lived on the island for two years cleaning up the bank. And at the end of two years, we sold it, which is how I got into cleaning up banks that were in trouble and selling them,” Cruz said. “That’s what I did for quite some time.” It was this experience that brought Cruz to Intercredit Bank in 2011. He helped turn the bank around in the wake of the Great Recession, with a focus on cleaning up the bank’s credit portfolio. He also turned his attention to the bank’s international lending division, growing the bank’s local lending and adding a trade finance component. Cruz was asked to stay, and he was grateful for the opportunity to put down roots and take on the more positive role of overseeing future growth. Active in the Intercredit Bank, Continued on page 10

- SIMON CRUZ

Egas Grijalva, the majority owner of Banco Pichincha Holding Group. Founded in 1906, the holding group owns the largest private commercial bank in Ecuador in addition to banks in Spain, Colombia, Peru and Panama, as well as an agency office in Miami. Intercredit Bank is not part of the Banco Pichincha Holding Group and is separately managed and regulated. Today, the bank has five branches in Miami-Dade and $560 million in assets, serving primarily as a commercial real estate lender and residential lender to non-resident aliens. “We have an ownership that is investing large sums of money into developing a franchise here in the

8 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

Intercredit Bank President and CEO Simon Cruz

WWW.FLORIDABANKERS.COM MAY 2023 — 9

The Intercredit Bank management team. Sitting, from left: Simon Cruz, President and CEO, and William Garzozi, Chief Credit Officer. Standing, from left: Javier Montero, Chief Technology Officer, Dalmys Alonso, International Banking, Javier Martinez, Interim CFO, and Matthew Cordis, COO.

at Intercredit Bank prioritizes culture fit. There hasn’t been any turnover at the senior management level in 10 years. “You want to have knowledgeable, professional employees that enjoy coming into work and embrace the camaraderie,” Cruz said. “I thrive on bringing people together and inspiring them to do their thing.” At the heart of the bank’s values is what Cruz calls “impeccable integrity,” a heightened sense of responsibility not only to oneself but also to others. Intercredit Bank strives to be a good global steward within its community, and that mission starts at the top. The bank’s parent company in Ecuador has a foundation that gives back to its community, with the goal of improving people’s lives through housing opportunities, local development and environmental sustainability. The team at Intercredit Bank never loses sight of its important role within the community and is proud to represent an industry which has such an impact on the financial lives of its customers. “It’s phenomenal to meet interesting people who have started businesses that transform their families or communities all because somebody in a bank decided, ‘you know what, I’m going to back you,’” Cruz said. “Banking is about community.”

Intercredit Bank, Continued from page 8

community and within the industry, Cruz has served as a board member of the School of International Public Affairs (SIPA) at Florida International University and as a past Director of the Florida Bankers Association’s (FBA) School of Banking. He is presently a member of the Board of Directors of the American Bankers Association (ABA) and board member of the Center for Financial Training at Miami-Dade College. As CEO, Cruz enjoys creating a positive, uplifting culture for employees and bank customers alike. While his role requires him to think big picture, Cruz also pays attention to the details, such as using his eye for interior design to create a collaborative and comfortable office space and paying in-person visits to each bank branch. Each branch is led by managers who have lived in the community for many years; customers still follow the traditional banking model and visit the branches to take care of their business and enjoy coffee and pastries. Cruz looks to hire people who have a “good heart.” As a recruiter once explained to Cruz himself (who did not have a math or finance background), “I can teach you how to add and subtract, but I can’t teach you how to think.” Neither, Cruz went on to elaborate, can you teach someone how to be a good person. Recruiting

10 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

BANK SNAPSHOT MOTTO: IMPECCABLE INTEGRITY. EXECUTIVE HEADQUARTERS: MIAMI OFFICES: 5 ASSETS: $560 MILLION

S imon Cruz joined Intercredit Bank in September 2011. He has a distinguished banking career that spans four decades with community banks, international banks, money center banks and real estate investment firms. An active community leader for more than 25 years, Cruz has served as a board member of the School of International Public Affairs (SIPA) at Florida International University, and as a past director of the Florida Bankers Association’s (FBA) School of Banking and the Florida Export Finance Corporation. He is presently a member of the Board of Directors of the American Bankers Association and board member of the Center for Financial Training at Miami-Dade College. Cruz served as a Miami Beach Commissioner for 10 years. He graduated cum laude from Rutgers University and went on to earn a Master’s Degree in International Economics and Latin American Studies from the Johns Hopkins University School of Advanced International Studies. MEET SIMON CRUZ, PRESIDENT AND CEO

WWW.FLORIDABANKERS.COM MAY 2023 — 11

FBA FEST 2023 CELEBRATING 135 YEARS OF FLORIDA BANKING

135 TH ANNUAL MEETING FLORIDA BANKERS ASSOCIATION

JUNE 1114

THE RITZCARLTON GRANDE LAKES

O·R·L·A·N·D·O·····

WWW.FLORIDABANKERS.COM/ANNUALMEETING

DON’T MISS OUR KEYNOTE SPEAKER!

MARIA BARTIROMO FINANCIAL JOURNALIST, TELEVISION PERSONALITY, NEWS ANCHOR AND AUTHOR WEDNESDAY, JUNE 14TH

SCHEDULE-AT-A-GLANCE

SUNDAY, JUNE 11 Board Meetings* Joint Board Dinner* MONDAY, JUNE 12 Golf Outing Exhibitor Set-up Rap with the Regulators Panel

WEDNESDAY, JUNE 14 Continental Breakfast General Session & Property Insurance Panel Keynote Speaker: Maria Bartiromo Awards Luncheon Closing Reception Closing Dinner & Entertainment

TUESDAY, JUNE 13 General Session with Dr. Sean Snaith Panel Discussion on Succession Planning Networking Lunch Exhibitor Tear-down Workshops (3 to choose from) General Session on Interest Rate Risk BankPac Silent Auction

ABA & ICBA Panel Welcome Reception Past Chairman’s Dinner*

REGISTER TODAY!

*By invitation or Board Members only

WWW.FLORIDABANKERS.COM/ANNUALMEETING

BANCSERV ENDORSED PARTNER: BANKERS ALLIANCE

‘KEEP IT LONG ENOUGH, IT WILL COME BACK IN FASHION’: BUYDOWN PROGRAM CONSIDERATIONS F L O R I D A B A N K E R S A S S O C I A T I O N

BY ELIZABETH MADLEM, VICE PRESIDENT OF COMPLIANCE OPERATIONS AND DEPUTY GENERAL COUNSEL, BANKERS ALLIANCE

T he early 2000s are reemerging with its crop tops, low rise jeans, flip phones and mortgage buydowns. Deja-vu! Pre-crisis teaser rates have been reborn into mortgage buydowns, both temporary and permanent. With the housing markets remaining pricey, and rates still higher than they have been in years, many buyers are looking for assistance in any form. And as the refinancing market cools down, mortgage originators are finding innovative ways to bring business through the door. And this has led to lender, builder, and seller concessions to help close deals. Buydowns generally refer to when a borrower pays “points” upfront to reduce the mortgage rate to a level that places their monthly payments in a range they can afford. It is thought that the rate has been “bought down” from its original rate for the entirety of the mortgage by paying a lump sum upfront. The more recent trend has been for these to be seller-paid rate buydown concessions, with the seller offering to reduce to buyer’s mortgage interest rate for either the first few years (temporary) or for the duration of the loan (permanent). The seller is either contributing to the buyer’s closing costs or paying for a temporary rate buydown. What the market is seeing now is an influx of temporary buydowns, with the most common ones being a “2-1” and “1-0,” meaning a 2-percent interest rate reduction in the first year and a 1-percent interest rate reduction in the second year, or a 1-percent interest rate reduction in the first year only, respectively. Sellers, builders, lenders, or a combination of all three, put-up money to cover the difference in interest rate payments between the original mortgage rate and the reduced mortgage rate. So for a 2-1 example, the mortgage rate is reduced by 2 percent for the first year and then will step up by 1 percent in the second year, and another 1 percent in the third year to reach the actual mortgage rate at origination. It essentially works as a subsidy for the first two years of the mortgage before reverting to

the full monthly payment. And the benefits are there for consumers — it can make purchasing a home more affordable (even if temporarily) and can “buy time” for borrowers to refinance into a lower rate should interest rates fall. With permanent rate buydowns, generally, it will be a seller paying a portion of the buyer’s closing costs that are used toward buying mortgage discount points, with each point reducing the rate on average by about 0.25 percentage points, costing 1 percent of the loan amount. So if a borrower bought a $500,000 home with a 20 percent downpayment, the mortgage amount would be $400,000, with each point costing $4,000. With permanent buydowns, borrowers are historically slower to refinance given the cost/benefit decisions taking place with recouping upfront money put down for the loan versus refinancing costs associated with a new loan. But one of the biggest issues with buydowns, either temporary or permanent, is proper disclosure on the Loan Estimate (LE) and Closing Disclosure (CD). For disclosure purposes, there are specific Regulation Z contemplated buydowns: third-party buydowns reflected in a credit contract; third-party buydowns not reflected in a credit contract; consumer buydowns; lender buydowns reflected in a credit contract; lender buydowns not reflected in a credit contract; and split buydowns (see 12 CFR 1026, Supp. I, Paragraph 17[c][1] 3 through 5). Regulation Z provides numerous scenarios that determine whether the terms of the buydown should be reflected in the LE and CD. Generally, the following buydowns are reflected in the disclosures: third-party buydowns reflected in a credit contract; consumer buydowns; lender buydowns reflected in a credit contract; and split buydowns (consumer portion only). Otherwise, a third-party buydown not reflected in a credit contract, a lender buydown not reflected in a credit contract, and a split buydown (not third-party e.g.- seller’s portion) are not included.

14 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

With most of the criteria for determining whether a buydown is reflected on the LE and CD being dependent upon a credit contract, it is important to note that Regulation Z does not define a credit contract. But it is stated as being a contract that forms a legal obligation between the creditor and the consumer, as determined by applicable State law or other law. So whether or not a buydown agreement would be considered a credit contract or legal obligation between the creditor and consumer depends upon what “State law or other law” consider to be a legal obligation. Whether a buydown agreement is actually modifying the terms of a note or contract is going to depend on how it is structured and whether that note or contract So where should the terms of the buydown be reflected in the LE and CD? Unfortunately the commentary does not provide an “item-by-item” list of what parts of the LE and CD the buydown should be reflected in. The key requirement to remember is that if the buydown is required to be reflected, it must be reflected in the finance charge and all other disclosures affected by it. That includes the “Finance Charge” on page 5 of the CD (except for seller paid buydown fees as those are considered seller’s points); the “Annual Percentage Rate” on page 3 of the LE and page 5 of the CD; the “Projected Payments” table on the first page of the LE and CD; and the “Product” on the first page of the LE and CD reflecting a step rate. There are different ways proper disclosure can be done depending upon the specific loan scenario. Sometimes a buydown is money going to the borrower from the seller, while other times it is money going to the bank from the seller. These would be disclosed differently. So, the first question to ask: Who is giving money to whom, and for what purpose? A more common scenario for temporary buydowns is where the buydown is paid by the seller, and is not being reflected in the note or credit agreement as it is contracted for between the buyer and the seller. How is this properly disclosed? Well, the most common way to disclose this, since it is not reflected in the note or credit agreement, is to disclose this as a Seller Credit. Since this is not considered discount points that either the buyer or the seller are paying ultimately is reflecting that lowered interest rate. Counsel should be included in any final determinations, as well as investor requirements.

to the bank, the bank would not disclose in Section A. The bank is not involved in the scenario where a buydown agreement is solely between the borrower and the seller. Rather, the regulation and commentary do not specify that this must be disclosed in any particular way, so it is viewed generally as just a concession from the seller, which has multiple ways of compliant disclosure. Disclosing as a Seller Credit as noted above being the more common. This would be found in the Calculating Cash to Close Tables (LE & CD) and also in Section L on the CD, as it is not a credit that is paying any specific fee listed on page 2 of the disclosure. It could also be disclosed in Section N of the CD as a seller credit due at closing. If it is a situation where the buydown funds are from the seller to the bank, it would be disclosed in Section A in the Seller Paid column, and not Section H because the recipient of Section H fees are third parties, and the bank is the one receiving the fee. In this instance, the money from the seller is specifically being used to buy down the rate, which is a Section A fee, since that is paid to the bank. There are other arrangements in which the seller just gives the borrower some money to make up the difference in what the borrower is paying between Rate A and Rate B with no actual buydown of the rate taking place. This is a Section N disclosure. But in the instance in which the bank will actually be the recipient of the fee, and the fee from the seller is to pay for a specific loan cost, it should be disclosed in Section A. The remix is happening — the early 2000s are repeating themselves. But even more so now with the increased examiner focus and scrutiny on consumer harm, it is important to make sure the bank is aggressively reviewing its buydown loan programs for the risks they can bring: reputational, compliance, legal, credit, and fair lending, and diligently documenting justifiable business decisions, reviewing investor requirements, and examining for proper disclosure and fair lending implications. As the Vice President of Compliance Operations and Deputy General Counsel, Elizabeth Madlem oversees C/A’s Products and Services and plays an important part in all operational areas of C/A. For more information, call 888-353-3933 or email info@bankersalliance.org.

“BUT EVEN MORE SO NOW WITH THE

INCREASED EXAMINER FOCUS AND SCRUTINY ON CONSUMER HARM, IT IS IMPORTANT TO MAKE SURE THE BANK IS AGGRESSIVELY REVIEWING ITS BUYDOWN LOAN PROGRAMS FOR THE RISKS THEY CAN BRING.”

WWW.FLORIDABANKERS.COM MAY 2023 — 15

TRUST BANKING

THE FLORIDA FAMILY TRUST TRIFECTA

BY KELLY O’KEEFE, SHAREHOLDER, AND HANNAH MURPHY, ASSOCIATE, STEARNS WEAVER MILLER

F ollowing a 2022 package of bills signed into law, Florida has officially staked its claim as the family-trust state. In the last several years, the Florida Legislature passed three laws making Florida a prime destination for family trust creation. Florida law now allows for: (1) 1,000-year dynasty trusts, (2) optional income tax reimbursement for trust settlors, and (3) public records exceptions for family trust companies. This “Florida Family Trust Trifecta” is sure to entice affluent families to Florida, and Florida’s

common law rule from England, the original RAP invalidated property interests that did not vest within 21 years after the death of an identifiable person alive at the time the interest was created. Courts created this rule to prevent people from attaching to their bequests eternal conditions, in order to keep the dead from exerting control over property long after they are gone. The following example demonstrates the consequences of the original RAP:

Grandpa, who only has one Grandson, wants to provide for his family’s education. To do so, he drafts a will that creates a testamentary trust after he dies. The terms of the trust provide that the trustee shall distribute funds only to pay for tuition, books, and technology used in school. Grandson, therefore, cannot waste Grandpa’s fortune on trips to Vegas. Thanks to the trust, Grandson gets a quality education and learns the value of hard work. After finishing graduate school, Grandson gets a great job,

banking industry will have an incredible opportunity to provide those families with the multitude of services that they require. 1,000-year Dynasty Trusts

“IN THE LAST SEVERAL YEARS,

THE FLORIDA LEGISLATURE

The first change in Florida law designed to draw more trust clients to Florida provides for the expansion of dynasty trusts. Section 689.225, Florida Statutes, the state’s Rule against Perpetuities, was amended in 2022 to extend the maximum trust vesting period to 1,000 years, thereby allowing settlors to protect family assets for generations. What is the rule against perpetuities? The statutory rule against perpetuities (RAP) states that interests in real or personal property that do not immediately vest are invalid unless the interest vests or terminates within 1,000 years after its creation. In other words, if a gift or bequest is conditional, it must become unconditional within 1,000 years, otherwise the conditions are declared invalid. Derived from a

PASSED THREE LAWS MAKING FLORIDA A PRIME DESTINATION FOR FAMILY-TRUST CREATION.”

gets married, and has a beautiful Daughter. After Grandson dies, thanks to the common-law RAP, Daughter only has to wait 21 years for the trust funds to be distributed. Then, she can spend all of Grandpa’s hard-earned money on trips to Cabo San Lucas, leaving nothing for the next generation. Grandpa wanted to make sure the money he made in his life was used for what he valued most — education. But the common-law RAP limited how long Grandpa could control his money after death.

16 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

seasoned tax attorney before trying to DIY trust-tax reimbursements. This statute only applies to specific trusts, in a limited set of circumstances. Family Trust Companies Finally, the Florida Legislature is turning the Sunshine State into the Family Trust State by passing laws serving family trust companies, which have been permitted in Florida since 2014. What is a family trust company? According to chapter 662, Florida Statutes, a family trust company is a corporation or limited liability company that is exclusively owned by family members with the intended purpose to serve as a fiduciary exclusively for that family. Who is considered “family” is defined by law relative to their relationship to the “designative relative.” (Useful tip: If the company is licensed with the state, the definition of family becomes more expansive). However, these trust companies are not for your average Joe. State law requires that a family trust company have a capital account of at least $250,000 per designated relative, and the minimum increases with each additional designated relative. The family trust company solves a problem that the dynasty trust cannot: no matter how good your trustee is, trustees cannot live 1,000 years. In contrast, a family trust company can manage a family trust under chapter 662 for as long as the trust survives. Because Florida has equipped family trust companies with a variety of tools to streamline trust management, family trust companies could displace traditional corporate trustees in some circumstances. Accordingly, anyone who works in this field would benefit from staying ahead The Florida Family, Continued on page 18

What is the new rule against perpetuities? In 2000, the Florida Legislature passed a law extending the rule against perpetuities to 360 years after the creation of a nonvested property interest. In 2022, the Legislature extended the deadline to vest to 1,000 years. Practically speaking, this means that Grandpa can set up his educational trust to provide for his family for 1,000 years. He gets to make his money, then he gets to direct how that money is spent for a millennia. This new rule allows for the creation of “dynasty trusts,” giving people the ability to provide for their family for generation after generation. However, the benefits go beyond controlling how one’s family spends money. A dynasty trust may be used to hold stocks in family businesses, or even family homes. With a Florida dynasty trust you can assure that your family’s business will remain in the family for 1,000 years after you pass. For these reasons, and many more, many affluent families will likely view Florida an attractive place to set up their dynasty trusts. And all of these new 1,000-year trusts need 1,000-year trustees. Corporate trustees — see below for more on family trust companies — will be the only viable option for ensuring that trusts are properly managed centuries into the future. Income Tax Reimbursement The next change in Florida law that is likely to draw family trusts to Florida offers settlors an optional income tax reimbursement. In some types of trusts, the settlor is treated as the owner of the trust assets for the purposes of calculating federal tax responsibilities. This can be a great tool, potentially allowing settlors to pay the trust’s taxes

then transfer tax-free gifts to the beneficiaries. However, this responsibility to pay taxes on income the settlor will never see can be a burden. Florida’s Legislature stepped in to address that issue. Section 736.08145, Florida Statutes, passed in 2020, can make it easier for settlors to get reimbursed for taxes they pay on behalf of certain trusts. It allows, but does not require, trustees to reimburse the settlor for all or part of the taxes paid by the grantor attributable to trust income, or in some situations, pay the trust’s taxes directly. This gives trustees the flexibility to manage the trust’s funds and costs, without always foisting the tax burden on the settlor. But word to the wise — get the advice of a

Client-driven solutions for community banks. We are seasoned community bankers, helping banks more efficiently manage risk and internal work processes for successful long-term strategic growth. We tailor our solutions to your unique business needs with a hands-on approach so you can focus more internal resources on revenue generation and enhancing shareholder value in an increasingly complex and competitive industry. • Credit administration + analyst support • Proactive compliance solutions • Turnkey operational + management support

Tammy McDowell President + Founder (906) 286-0808 tmcdowell@maccreditcomp.com Kelly W. George CEO + Founder (906) 286-1445 kgeorge@maccreditcomp.com

maccreditcomp.com

WWW.FLORIDABANKERS.COM MAY 2023 — 17

trust. Anyone hoping to make use of this exemption will benefit from having an experienced litigator

The Florida Family, Continued from page 17

of changing laws by soliciting the support of an experienced government affairs professional. Public Records Exemptions The newest statute benefiting family trust companies and the families who use them is section 662.1465, Florida Statutes. Passed in 2022, the law provides that when these companies are party to litigation, they may petition the court to close court records to public inspection. This law actually exempts family trust companies from section 24(a), Article I of the State Constitution, which otherwise grants every person the right to inspect public records made or received in connection with official business of state entities, including courts. The new law thereby limits who can access these closed files to only those people who are deemed by the court to have “a specific interest in the trust, a transaction relating to the trust, or an asset held or previously held by the trust and where the court determines there is a compelling need for releasing the information requested.” This new exemption carves out family trusts from the existing “Sunshine Laws,” which otherwise recognizes court records as presumptively accessible to the public. But, buyer beware — this new law is bound to be challenged by proponents of public access to government records. The First Amendment Foundation, for example, expressed opposition to the bill on the basis that it violates open government principles. Litigation may also arise in specific cases over whether a party actually has an interest in a trust or whether a compelling need exists for releasing the information related to the

on their team. Conclusion

Florida’s legislature continues to take steps to make Florida the destination of choice for family trusts. The legal landscape will continue to evolve as the Florida Legislature passes new laws, and courts define their contours. Experienced legal professionals can guide trust professionals through the ever-changing array of advantages Florida’s trust companies afford wealthy families, while helping to navigate the pitfalls and minimize the risks present in this rapidly growing area. Kelly O’Keefe is a shareholder in Stearns Weaver Miller’s Tallahassee office. She represents professional and family member fiduciaries in complex and high-stakes estate, probate and trust disputes and litigation. O’Keefe is the President of the Tallahassee Regional Estate Planning Council, a subcommittee Chair for the Florida Probate Rules Committee, and is on the Board of Directors for the Community Foundation of North Florida and the Tallahassee Chamber of Commerce. She is regularly recognized by The Best Lawyers in America, Florida Trend and Super Lawyers magazines and is AV Preeminent Rated by Martindale-Hubbell. You can reach her at kokeefe@stearnsweaver.com.

Hannah Murphy is an associate at Stearns Weaver Miller’s Tallahassee office. She works in the

Litigation Group practicing in the areas of trusts and estates, antitrust, consumer protection, elections, and technology. Prior to joining the firm, Murphy clerked for the Honorable Mark Walker, in the Northern District of Florida, served as Editor in Chief of the Florida State University Law Review, and held various roles on a variety of national and statewide political campaigns. You can reach her at hmurphy@ stearnsweaver.com .

COMMERCIAL LOAN PORTFOLIO CONSULTING Committed. Trusted. Proven.

CEIS serves 135+ commercial lending institutions throughout the U.S. and overseas. Each of our credit professionals brings an average of more than 20 years of lending and/or executive-level experience to every

CEIS client engagement. • Loan Review Programs

• Loan Portfolio Stress Testing • ALLL Methodology Validations • CECL Implementation Project Management

Learn about what CEIS Review can do for you. www.ceisreview.com or 888-967-7380

18 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

BANCSERV ENDORSED PARTNERS

Partner with Lively to deliver a best in-class HSA experience and unlock revenue growth for your bank. Adam Berry, (208) 724-03091 adam.berry@livelyme.com

Florida Bankers Health Consortium has been helping community banks manage their benefits for more than 50 years.

Bond, D & O, Cyber Insurance Patricia Williams, (800) 274-5222 pwilliams@abais.com

Angie O’Reilly, (407) 515-2462 aoreilly@selectsourceone.com

#1 source for medical & professional loans BHGLoanHub.com/FL Melissa Whelan, (315) 559-7641 melissa@bhg-inc.com

The only nationwide independent, member-owned debit network, processor & core provider supporting community banks. Alex Jerigan, (299) 861-3802 Jerigan@shazam.net

Bank Captive Insurance | Delaware & Nevada Investment Subsidiaries | Solar Tax Credits David Guerino, (802) 233-2624 dguerino@key-state.com

Web-based portal for professionally designed & produced bank branded marketing materials in seconds. Neal Reynolds, (678) 528-6688 nreynolds@bankmarketingcenter.com

STS Group is Florida’s strongest partner for bank security, ATMS & branch automation equipment. Adam Stephens, (256) 957-8018 adams@stsgrp.com

A full suite of investment products and services for community banks through its exclusively endorsed broker, Stifel.

J im Reber, (800) 422-6442 jreber@icbasecurities.com

Comprehensive and affordable payments solutions, including credit, debit, merchant, & digital commerce. Client Relations, (800) 242-4770 bancard@icba.org

Broad range of integrated payment, marketing, & technology solutions. Mariangie Navarro, (786) 521-1355 mariangie.navarro@harlandclarke.com

Executive Benefits & BOLI Glenn Blackwood, (561) 798-5620 glenn.blackwood@nfp.com Joe Schaefer, (786) 566-9423 joe.schaefer@nfp.com

Zurich provides best-in-class solutions to help reduce FBA member bank losses and manage risk more effectively.

Discounted supplies including PPE, cleaning, furniture, print & promo solutions. Kimberly Gilbert, (855) 337-6811 Ext. 12815 kimberly.gilbert@officedepot.com

A family of bank compliance services that include compliance alliance, review alliance, & virtual compliance officer. (833) 683-0701 info@bankersalliance.org

Stanley Bernard, (410) 559-2423 stanley.bernard@zurichna.com

Ncontracts' solutions suite encompasses the complete life cycle of risk. We help you build a better bank in a constantly changing environment.

Core & Digital Banking Evaluations | Contract Negotiations | Bank Advisors for 28 Years Keith Hagen, (850) 640-2244 keith.hagen@ici-consulting.com

Receive High-Yield CRA Credit David Lenoir david.lenoir@shcpfoundation.org

Corey Polom, (413) 374-5467 corey.polom@ncontracts.com

Created by the Florida Bankers Association, BancServ Inc., provides quality products and services at a discounted rate, saving Florida banks time & money. Brian Hickey, Managing Director of Partner Relations | bhickey@floridabankers.com

We are Veritran , a global tech company devoted to simplifying banking experiences.

Through our business solutions, we inspire financial institutions to take digitalization to the next level. We are proud to be a key strategic partner for renowned clients across Latin America, North America and Europe.

Greynier Fuentes VP of Sales & Digital Strategies at Veritran.

Greynier Fuentes is the VP of Sales & Digital Strategies at Veritran, an industry leader in facilitating digital transformation. Greynier joined Veritran in 2019 and has since led Veritran’s developments and other digital efforts. Greynier’s passion for digital transformation and technology is deeply rooted in his nearly 20 years of experience in the information technology, software, banking and fintech industries. Prior to joining Veritran, Greynier served as the Chief Technology Officer at Bit Platforms and the CTO at The Pay Solutions.

Our Business Solutions

Engage your customers with the experiences they prefer. Retail Banking

Business Banking

Refresh the digital experience of the relegated business banking.

Payments Ecosystem

Lead next-generation digital payment experiences. Onboarding & Digital Identity

Security Suite

Protect your institution with multilevel cybersecurity solutions.

Connect with your customers from the very first contact.

Our key differentiators

33% faster development.

Optimum Time-to-Market Tailored business solutions with agile delivery.

Engaging UX Solutions powered by pre-developed templates and first-in-class UX standards. Tested by real users. Bank-Grade Security Built-in cyber-security features to protect business solutions. Open & Extensible Modular integration, including third-party solutions.

+4.3 app store rating of our clients’ apps.

50 billion annual transactions with 0 fraud.

20 new features per app each month.

Profit-driven Reduce OPEX with proven business cases.

373% ROI and <6 months payback.

Some of our clients

Visit us! veritran.com

67TH ANNUAL WASHINGTON, D.C., TRIP FEB. 27 - MARCH 2, 2023 PHOTOS COURTESY OF ROBERT L. KNUDSEN PHOTOGRAPHY, INC., VIRGINIA M ore than 100 bankers joined us on the annual fly-in to walk the hallways of Congress and advocate for the banking industry.

• Senator Ron Johnson • Senator Rick Scott

• Senator John Boozman • Senator John Cornyn • Congressman Blaine Luetkemeyer • Congressman Neal Dunn • Congressman Brian Mast • Congressman Mario Diaz-Balart

Led by our Chair Bill Penney and Chair-Elect Jose Cueto, the FBA raised many areas of concern in meetings with key leaders and decision-makers. Our schedule included a White House briefing with Bharat Ramamurti , a meeting with Acting Comptroller of the Currency Michael Hsu , and discussions with seven Senators, among others. We are grateful for the following leaders who made time for our group:

In all, it was a packed agenda that allowed for discussion of FBA's key issues: closing the credit union tax loophole, passing the SAFE Banking Act, and, of course, our opposition to proposals to make bankers the "climate police" for their small business customers.

• Senator Tom Cotton • Senator Eric Schmitt • Senator Marco Rubio

22 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

WWW.FLORIDABANKERS.COM MAY 2023 — 23

24 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING

WWW.FLORIDABANKERS.COM MAY 2023 — 25

PERSONAL TRANSACTIONS

PROMOTIONS / NEW HIRES DAYTONA BEACH

New York-based career included serving as an analyst at SECOR Asset Management where he analyzed, valued, and researched investments with over $20 billion in aggregate market value for SECOR’s hedge fund strategies and portfolio solutions businesses. Dario obtained his Bachelor of Science degree in finance from Lehigh University, Bethlehem, Penn., and is a Chartered Financial Analyst Charterholder, as well as a member of New York Society of Securities Analysts.

The Board of Directors of Intracoastal Bank announced the addition of Thomas (Tom) D. Gibbs to the Board of Directors. As a director, Gibbs will help make sure the bank fulfills its responsibilities to its customers and the communities it serves. Gibbs

Gibbs

is a Florida native and a third generation Volusia/ Flagler resident. He has a passion for business and the community. He is Dealer Principal and General Manager for Tom Gibbs Chevrolet. He began his full time career with the dealership in 2009. He also worked in the family business in a variety of capacities during his youth. He graduated from the University of Florida with a Bachelor’s Degree in Business Management in May 2009, and from the National Auto Dealership Association dealer academy in 2018.

PANAMA CITY

Jennifer Guynn has joined Community Bank’s Panama City office as vice president. A native of Panama City, Guynn joins with 15 years of banking experience. In her new role, Guynn will focus on growing her loan and deposit portfolio, as well as maintaining new

Gugliara

and current customer relationships within the Bay County footprint. Guynn studied at Gulf Coast State College and is currently attending Florida School of Banking through the Florida Bankers Association, class of 2024. Active in her community, Guynn has been actively involved in the Junior League of Panama City, Inc., a graduate of the 33rd class Leadership Bay Community Leadership Development program presented by the Bay County Chamber of Commerce, and served seven years as a Loaned Executive for the United Way of Northwest Florida.

Intracoastal Bank announced the addition of Vallery Skoglund to the Intracoastal team as assistant vice president and banking center operations manager. In this role, Skoglund will manage banking center operations and customer service functions for

Skoglund

the bank. She comes to Intracoastal Bank with a wealth of banking and business experience. During her 25 years in banking, she has served in various capacities including operations, customer service, and retail management. She attended St. Johns River State College and studied accounting and business. Skoglund is fervent for business and community service. She has been involved in many organizations, including ARC of the St. Johns, which serves intellectually and disabled individuals, Girl Scouts of America, and a variety of youth sports organizations.

TALLAHASSEE

Capital City Bank announced that Mike Dasher has joined its team of wealth advisors, bringing more than seven years of experience in the financial industry and 13 years of experience in charitable gift planning and development with Florida State

Dasher

NAPLES

University. Dasher will be teaming with Capital City Trust Company, Capital City Investments and Capital City Strategic Wealth to provide expertise in investment strategies, retirement planning, estate and tax planning and risk management for clients. Dasher is a graduate of Florida State University and holds a bachelor’s degree in business management. He is an active community volunteer, currently serving as a member of the Tallahassee Regional Estate Planning Council, Tallahassee Quarterback Club, Tallahassee Chamber of Commerce and Economic Club of Florida. Capital City Bank announced that Ramsay Sims has been named chief lending officer. Sims joined the team in January 2010 as an institutional banker, where he helped stimulate continued growth in the

The Naples Trust Company welcomed Mitchell Dario, CFA , senior vice president, senior portfolio manager to the team. Dario is responsible for researching, analyzing, and monitoring investment assets for client portfolios, and advising clients on investment

Dario

strategies that align with their financial goals and time horizons. Before relocating to Naples, Dario served as a senior research analyst and team lead at Bridgewater Associates in Westport, Conn. He performed investment research and analysis for large public pensions, sovereign wealth funds, and corporations on a broad range of topics, including portfolio construction and hedging, proprietary strategy design and positioning, and global market outlook. Dario’s

26 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING