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Independent and proud of it!

Bottom Line

2019 Retreat Celebrating a strong history, and a bright future Innovation Station How to stay up to speed

Bank Local. Train Local. Member Spotlight: Using Alternative Data

Portfolio Management: Seller’s Market?

Culture... Simplified.



Directors anD ManageMent conference

eye on agriculture November 13, 2019

For more information and to register visit


SIoux FallS CoNveNtIoN CeNter a block of rooms has been reserved for your convenience. Call 605-331-0100 and reference ICbSD conference to reserve your room.


Brian and Darren Hefty, Hefty Seed/Ag PhD


INSIDE This Issue ICBSD 2019


People you Should Know

2 President’s Message Cybersecurity Awareness Month: Tips for Safeguarding Sensitive Data by Megan Olson, President & CEO of ICBSD

14 ICBSD Board of Directors 15 Meet our New Board

3 Innovation Station

How to stay up to speed by Kevin Tweddle, Chief Operating Officer, ICBA Services Network


From the Chairman Meet the New ICBSD Chairman: Monte Troske by Monte Troske, Chairman of ICBSD, President/CEO of Farmers State Bank of Turton


From the Chairman From the Top by Preston Kennedy, Chairman of ICBA Legislative

7 Federal Delegate’s

Report by Emily Hofer


8 Progress Report

by Representative Dusty Johnson

9  2019 PAC Contributors 10 Rounds’ Report October is Cybersecurity Awareness Month by Senator Mike Rounds

11 Rural America Cannot Be Overlooked by Senator John Thune

Community spirit

12 Bank Local. Train Local. P.O. Box 615, Watertown, SD 57201 605.878.3040

b y Larry Williams, President and CEO of Community Bankers Webinar Network

13 Meet our Newest Bank Member First Fidelity Bank

Members Jodi Eich, Valerie Anderson, Greg Fargen by Hannah Merritt ICBSD Marketing & Public Relations In the news

16 2019 Annual Retreat

Recap Celebrating a Strong History, and a Bright Future.

22 Culture Simplified by Jaime Taets, CEO of Keystone Group International 24 In The News

Join us in Congratulating our Fellow Community Bankers on their recent accomplishments!

28 CorTrust Bank

CorTrust Named Top Bank in South Dakota by Forbes Magazine

29 Member Spotlight

Davenport Evans Using Alternative Data

30 Seller’s Market

A Guide to Finding Liquidity Among Your Holdings by Jim Reber, President and CEO of ICBA Securities

32 Dwight Larsen is Named New CEO and President of United Bankers’ Bank

34 Directors and

Management Conference Eye on Agriculture Speakers ICBSD 2019 1

President’s Message From the president

Megan Olson, President & CEO of ICBSD

Cybersecurity Awareness Month: “Educating ourselves and our customers about account security and cyber threats is something we all must be conscious about if we want to reduce the risk of sensitive information being exploited for criminal use.”

Tips for Safeguarding Sensitive Data In recognition of National Cybersecurity Month in October we, along with the Independent Community Bankers of America, want to share a few simple steps and reminders you and your bank customers can take to safeguard sensitive data when making purchases online, and what to do if you suspect your information has been compromised. Educating ourselves and our customers about account security and cyber threats is something we all must be conscious about if we want to reduce the risk of sensitive information being exploited for criminal use. Our bank members take great care in handling customers’ sensitive information. Yet, it is equally important to equip customers with practical steps they can take to help strengthen our nation’s cybersecurity ecosystem and avoid falling prey to identity theft and fraud this holiday season. There are steps consumers can take to reduce their chances of becoming a victim of identity theft or fraud. Please share these steps throughout your network, and encourage your bank customers to: • Enable the strongest authentication tools offered by their bank. Popular authentication methods include biometrics, security keys and single-use codes. • Use complex passwords and differentiate them across multiple platforms. For example, customers should use one password for their online bank account and another for their email account. • Do a system check. Purge unused apps and outdated or sensitive information stored in old files and emails and ensure all software on internet-connected devices is current. Consumers can also make sure their account has not been compromised by taking the following steps: • Check bank statements regularly to ensure the purchases are legitimate. • Read the fine print when purchasing items online. Often a website or application will ask for permission to save account information. • Stay vigilant. Be mindful when shopping online and look for signs of illegitimate websites. Spelling or grammatical errors, missing contact information, and suspicious URLs or email

addresses are all red flags. Learn more about how to protect your digital life during National Cybersecurity Awareness Month by visiting

2 The bottom line

Innovation Station How to stay up to speed

From the COO  Kevin Tweddle, ICBA Chief Operating Officer of the ICBA Services Network

“As community bankers, how do we keep up – or even get ahead – of the rapid pace of change? We at ICBA have given considerable thought to these questions and have created and curated several resources to help.”

Many community banks are grappling with digital transformation. While advances in technology are nothing new, the speed at which these shifts are occurring can make it hard to manage. As community bankers, how do we keep up – or even get ahead – of the rapid pace of change? We at ICBA have given considerable thought to these questions and have created and curated several resources to help.

ThinkTECH Network and core processor guide It is essential to understand that the future of community banking entails engaging with core processors and partnering with fintechs for innovation. To that end, we created the ICBA Core Processor Resource Guide and ICBA ThinkTECH Network. The guide focuses on helping community banks cultivate strategic partnerships with their core processors. Specifically, it provides practical steps and insights for managing that relationship and ensuring it aligns with your bank’s long-term business goals and objectives. Another valuable tool is the ICBA ThinkTECH Network, a curated directory of community bank-friendly, vetted fintechs. The resource provides comprehensive company profiles that include solutions, reviews and testimonials to help facilitate partnerships.

ThinkTECH Accelerator We want to foster dialogue between community bankers and fintechs, especially early stage fintechs that are solving specific problems for banks. With that goal in mind, ICBA launched its first ThinkTECH Accelerator in late 2018 as a means to educate fintechs about community banking and create an outlet for community banks to engage directly with fintechs to identify challenges and potential solutions.

Publications and social media Reading is another critical tool for educating yourself about industry developments and cultivating innovation. I recommend a two-pronged approach: reading industry publications and Twitter, which I use as an educational source. When I speak at conferences, I include a list of approximately 20 publications and Twitter feeds I read regularly. Included on my list are American Banker, FinXTech, the Financial Brand and EPC News, as well as Mobile Business Insights, FMS and the Community Banking Brief. I follow fintech and thought leaders on Twitter, both inside and outside the industry. A few of my favorites are @Chris_Skinner, @JimMarous, @leewetherington and @rshevlin.

ICBA conferences and educational events

ICBA conferences and resources are valuable tools for staying current. Two that are top of mind are our annual conference – ICBA LIVE – and Community Banker University. We also sponsor two conferences: the FinXTech conference, held in September, and the Fi FinTech conference, hosted annually each November, both of which I recommend. The race toward innovation will only accelerate. Avoidance isn’t a strategy. Educate yourself now and continue to educate your team as you look for new ways to innovate. ICBSD 2019 3

Meet the New ICBSD Chairman: Monte Troske

From the Chairman  Monte Troske, Chairman of ICBSD, President/CEO of Farmers State Bank of Turton

FAST 605-897-6532

“Despite centuries passing our institutions remain the cornerstone of our rural communities. With that comes great responsibility. With every challenge we face, there is an opportunity to improve rules and regulations for the next generation of community bankers.”

FACTS n Fun Fact: Monte is a third generation banker. n Family: He and his wife, JoAnn, have been married for 38 years. They have three daughters and four grandchildren

By the time you read this article, school will be back in session, fall sports will be in full swing and the row crop harvest will be underway. Good Lord willing, we will have better harvest weather than the weather, all spring and summer. South Dakota is a special place where traditions run deep in our history, our people aren’t intimidated by hard work, and understand the value of giving back to their communities. The same can be said about the independent banking community. Most of the independent community banks in South Dakota were chartered over one hundred years ago. Today, the doors to many of these rural banks remain open for business and have adapted to change in order to continue to support their local communities. This is what makes community banking special. It is also why I am passionate about the ICBSD and community banking. Despite centuries passing our institutions remain the cornerstone of our rural communities. With that comes great responsibility. With every challenge we face, there is

4 The bottom line

(2 more on the way).

an opportunity to improve rules and regulations for the next generation of

n Activities:

community bankers. In doing so, we are

Monte enjoys watching and playing

protecting our rural economies and the

all sports! The years have reduced the

communities which we serve.

playing sports to pickleball and golf.

I am proud to be writing this article as

n Hometown:

chairman of the ICBSD board of directors. Independent community banks play a vital role in the local economies throughout

Born and raised in Turton, SD. n Community involvement:

our great state. As chairman, it is my

•S  DBA Board of Directors – 6 years

job to ensure the ICBSD continues to

•N  ESDEC board – 3 years

educate South Dakotans on the power

•T  urton volunteer fire fighter and treasurer – 37 years,

of banking local and the positive impact

•S  t Joseph Parish council and

to ensure the association is taking every

•D  oland School Board – 6 years,

step possible to ensure legislators are

•D  oland Alumni Scholarship board –

that is had within a community by keeping

business manager – 24 years,

money close to home. It is also my job

18 years,

privy to the many challenges we face, and advocate for change that levels the

6 years (3 years President)

playing field for all within our industry. I look forward to the next year as chairman. I thank you for this opportunity and invite you to contact me with any questions, comments or concerns you might have.

•F  isher Grove Country Club board –

•T  urton Board of Trustees – 22 years


From the Top

From the Chairman  Preston Kennedy, Chairman of ICBA

“Together, we will spark change, and I look forward to the compliance and regulatory achievements to come.” Back in the 1980s in my home state of Louisiana, we were faced

and there needs to be a clear path for community banks to

with a lending crisis that coincided with an oil bust, real estate

service these businesses – one without restrictive, arduous

declines and bank closings. Regulators took a hardline approach

reporting protocols.

back then, which led to very contentious relationships.

Community Reinvestment Act (CRA) modernization is another

But that low point led to new beginnings. Today, community

critical area of interest. We’re working with a 42-year-old

bankers have built a working relationship with regulators

regulation that feels unnecessary to community bankers. If we

and legislators based on dialogue. Because of that, bankers

don’t reinvest in our communities, we don’t exist! As years have

benefit from a better appreciation of regulatory and legislative

passed, this regulation’s fine print has created a lot of red tape

responsibilities, and regulators and lawmakers gain deeper

and gray areas. ICBA is advocating revisions that would provide

insights into what we face on a daily basis.

greater transparency during the examination process and

This open communication has landed us critical victories. Just

consistency in examination and supervision.

look at the success we’ve had in working with Congress to roll

Finally, Bank Secrecy Act (BSA) and anti-money laundering

back excessive regulatory burdens through S.2155 and procure

(AML) reform is also atop the priority bucket. While community

significant tax relief for both C corporation and S corporation

bankers see these topics as of utmost importance, the weight

community banks via the Tax Cuts and Jobs Act.

of excessive reporting needs to be lifted. Our hope is to work

But our work continues as we explore today’s most challenging compliance topics. Take cannabis banking. With the U.S. legal cannabis market valued at $11.9 billion in 2018 and anticipated

with policymakers and law enforcement to find a solution that reduces bank burdens but also increases the effectiveness of our efforts.

to expand at a compound annual growth rate of 24.1% from

As I peruse this month’s issue, these themes pervade, and I

2019 to 2025, the market is vastly outpacing financial services

read it with a renewed sense of optimism fueled by our recent

regulation and compliance. Community banks face significant

successes. Together, we will spark change, and I look forward to

hurdles in banking the legitimate businesses that are involved,

the compliance and regulatory achievements to come.

The most significant regulatory and compliance advocacy priorities for community banks include:


1. 2. 3.

Cannabis banking CRA modernization

BSA/AML reform ICBSD 2019 5




Join fellow bankers and innovators at ICBA LIVE to support the community banking industry. This is the ultimate gathering for community bankers serious about starting the new decade with supercharged networking, education and exploration. 6 The bottom EARLY line REGISTER TO RECEIVE PERKS: WWW.ICBA.ORG/LIVE2020

#ICBALIVE2020 605-660-4790

“ICBPAC is only as strong as the bankers that support it and we need your help. When we are on a more even playing field in how we support our friends in Washington, we will have a more competitive voice and a fighting chance to protect our banks and our franchise value.”

Federal Delegate’s Report by Emily Hofer, ICBA National Director, Merchants State Bank, Freeman, SD

Summer is always a fun time. I enjoy sunny weather, baseball games, pool parties, grilling out, and the ICBSD Annual Retreat in the beautiful Black Hills. This year was no exception. We had a fantastic retreat with a few new twists, thanks to the planning of our Pres/ CEO Megan Olson. In addition to the fun, she and our board work hard to find timely, valuable resources and education for the bankers in attendance. This year we also had the privilege of hosting ICBA Immediate Past Chairman, Tim Zimmerman. He echoed the message that I am constantly trying to convey – keep telling our Community Banking story! August was recess time for our elected officials in Washington, DC. Did you schedule a meeting on Main Street? Faceto-face meetings are the best way to tell our legislators our story. Did you attend any Town Hall sessions? I try to attend a few of those each August. ICBA has a fantastic step-by-step resource called “Meetings on Main Street” that serves as a guide to setting up and hosting meetings with our legislators. As time is a

commodity, another way to help get the word out regarding all of the good work that Community Banks do is to support the ICBPAC. As a fellow community banker in South Dakota, please join me in supporting the Independent Community Bankers Political Action Committee®, the only national federal political action committee dedicated exclusively to promoting Community Banking. This vital program directly impacts our industry and the communities we so proudly serve.

value. As part of ICBA’s leadership, I strongly believe that supporting ICBPAC is the best way to invest in the future of our industry, and I have already contributed. Can I count on you to join me by making a personal contribution of at least $100 today? Thank you in advance of your support. Please contact Martina Dashner or Dan Redinger at (800) 422-8439 or icbpac@ with any questions. Let’s keep telling our story! I can be reached at or 605-660-4790.

Each day, legislators on Capitol Hill are bombarded with lobbyists promoting rhetoric from credit unions, Farm Credit and Wall Street mega-banks. Community Banks need to work together to support legislators in Congress who will listen to the challenges our banks face every day. Particularly, if we want to fight the unfair tax advantage of the credit unions, we need to collectively do more. It is no coincidence that their PAC’s massive war chest of $5.1 million spent last cycle on federal races has helped them play defense on our grassroots efforts. While ICBPAC was only able to spend $1.7 million last cycle, we have had many legislative victories to show for it. Just think if we were able to do more! ICBPAC is only as strong as the bankers that support it and we need your help. When we are on a more even playing field in how we support our friends in Washington, we will have a more competitive voice and a fighting chance to protect our banks and our franchise

Details on Page 9



ICBSD 2019 7


Progress Report

Dusty Johnson

“South Dakota’s congressional office was fully staffed in D.C. and in the state by January 3, and we didn’t waste any time getting started.”

United States Representative (R-S.D.)

I was back in South Dakota for the August work period. While I don’t believe Congress should adjourn with so many critical issues facing our country, I wanted to give you an update on my work so far, several months into my first term. I was sworn in when the government was partially shut down, so my term didn’t exactly start off smoothly. The shutdown lasted far too long, but ultimately, I was proud to vote for a bill President Trump supported that reopened the government and secured some needed funding for border security. Even though the government was shutdown, our team hit the ground running. South Dakota’s congressional office was fully staffed in D.C. and in the state by January 3, and we didn’t waste any time getting started. We worked hard to get a seat on the House Agriculture Committee and eventually, we got that seat. Much to my surprise, I was also named Ranking Member of the Agriculture Subcommittee on Nutrition and Oversight. As Ranking Member, I’ve participated in subcommittee hearings on food stamp work requirements and asset testing eligibility. Not long after that hearing on asset testing and the abuses that are taking place, USDA issued a rule to reform this process. That was a big win for increased accountability. When spring flooding hit South Dakota, my team knew there would be repercussions on the ag industry. I visited farms, toured damage zones, and hosted roundtables with producers to get their feedback. After hearing from producers, I introduced the FEEDD Act, which allowed USDA to move up the November 1 harvest date for cover crops on prevent plant acres. My team and I worked with USDA for weeks and I was thrilled when Secretary Perdue adjusted the November 1 harvest date to September 1. This decision was a win for South Dakota, and for all farm states. I ran for office to work for South Dakotans and I always have our state’s best interest in mind – that’s why my first trip as a Congressman was to the southern border. I saw the problems first-hand and agree with President Trump – our border is in crisis. Our efforts have already secured more than $5 billion for the wall and $4.5 billion to address other issues, like humanitarian assistance, at our southern border. The president has asked for $8 billion more starting October 1, and I support him. I voted against amnesty legislation and stood by the president when he asked Speaker Pelosi to include funding for the border in appropriations packages. Many of the bills I’ve supported have passed the U.S. House of Representatives. Just this week, the House passed the Autism CARES Act, the Stopping Bad Robocalls Act, and the Emergency Medical Services for Children Act. I am a cosponsor of each bill and hope to see them signed into law. Earlier in my term, I introduced the Tribal School Federal Insurance Parity Act. I was pleasantly surprised when I learned I would have the opportunity to testify in favor of my legislation. I look forward to seeing this legislation move through committee and bring a much-needed fix to tribal schools. It has been an eventful and productive time in office so far, but there is obviously more to be done. At our six-month mark, I had my team fill out a survey to see what I can improve on as an individual and what we can work on as a team. I’d love to hear that same feedback from you! If you have suggestions or think we can do better, please give us a call, message me on Facebook, or write in at I am ready to get to work while I’m home in South Dakota and look forward to seeing many of you!

8 The bottom line



The ICBSD Political Action Committee helps provide South Dakota community banks with a strong voice in state politics through contributions to candidates for state elected offices. These contributions help ensure we have a seat at the table when issues affecting your bank are being discussed in Pierre.

Thank you for supporting the ICBSD Political Action Committee! PAC 100 Contributors: Robert Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Jeffery Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Donald Threadgold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Mark Hahler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Lynn Peterson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Jack Hopkin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Boyd Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Todd Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust McKinzie Hopkins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust John Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Terry Torgerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Troy Olson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Roger Weber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Jay Gekas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Kou Vang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CorTrust Monte Troske, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Ron E. Troske . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Mark R. Troske . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Rory Troske . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Terry J. Vogel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Wayne Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Farmers State Bank of Turton Hugh Bartels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Claire Konold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Mark Tetzlaff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Jan Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank David Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank David Ebbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Mark Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank Bob Smitback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliabank

Together, let ’s make it happen.

Todd Holzwarth Call me at 605.321.9197

Based in Parker, S.D., serving South Dakota and North Dakota

Why choose Bell as your bank’s lending partner? As your partner, we share your values. You’ll find the community banking service, integrity and trust you’re used to. Commercial & ag participation loans Bank stock & ownership loans Bank building financing Business & personal loans for bankers

We do not reparticipate any loans.

Contribute Our thanks in advance for your support of the PAC 100. Your PAC 100 contribution supports legislative candidates throughout our bankers’ districts. Contact Megan Olson to learn more.

Perry Rassler

Denise Bunbury

Jeff Restad

Mary Voss

Tom Ishaug

763.242.7518 608.234.1438 320.759.8401 515.577.0070 701.866.4676 Based in Minneapolis, Minn., serving Minnesota and Western Wisconsin

Based in Madison, Wis., serving Wisconsin and Illinois

Based in Alexandria, Minn., serving Minnesota

Based in Des Based in Fargo, Moines, Iowa, N.D., serving North Dakota serving Iowa and Nebraska and Minnesota Member FDIC


Your checks can be mailed to: ICBSD PAC, PO Box 615, Watertown, SD 57201

ICBSD 2019 9

21102 AD Independent Community Bankers of SD 2019 Update_Holzwarth_Todd.indd 5/10/19 1:53 PM 1


Rounds’ Report

October is Cybersecurity Awareness Month

Mike Rounds

United States Senator (R-S.D.)

“We are relying on technology to make our lives more convenient and support our national security, but with that reliance come risks to our privacy and security. This month, I encourage you to review your cybersecurity habits and make necessary changes to protect yourself and your family from harmful cyberattacks.” National Cybersecurity Awareness Month takes place every October. It is a good opportunity to review our online security habits on both our personal devices and at work. We are more connected than ever, and while it is nice to have quick and easy access to the Internet, it also means we are putting more information into cyberspace that can be used against us by bad actors. The Department of Homeland Security has announced this year’s Cybersecurity Awareness Month theme is “Own IT. Secure IT. Protect IT.” More Americans are online than ever before. It’s important we take a look at our own cyber practices to make sure we are protecting ourselves from cyberattacks. If you use any smart devices, take special precautions to secure your information. This can include making separate passwords for each device, checking the apps tied to each device on your smartphone to manually manage how much information you share with each device, secure your home Wi-Fi network with a strong password to prevent outsiders from accessing your devices and make sure to keep up with security and software updates. Keep in mind, whenever you purchase any kind of smart device for your home or vehicle, the company you buy it from will have access to sensitive information about you. Best practices for online cybersecurity include creating separate strong passwords for every account you open. Turning on multifactor authentication for all accounts is another good habit. It can stop hackers from accessing your information by creating another obstacle to get through if they’ve already found out your password. Don’t connect to public Wi-Fi to check your online bank account or shop online, as it is easier for hackers to access your bank account or credit card information more easily on a public network. Lastly, be cautious about opening emails or social media messages from people you do not know and don’t click on hyperlinks unless you can confirm the message came from a safe source. The overwhelming majority 10 The Bottom bottom Line line

of security compromises are a result of human error – opening an attachment or link sent from an attacker. Finally, we should remember that poor cyber hygiene cannot only have very negative consequences for individuals. As chairman of the Cybersecurity Subcommittee of the Senate Armed Services Committee, I am deeply concerned about how poor cyber hygiene in our defense industrial base can enable bad actors to access critical military information. For example, this year, the Department of the Navy released a report showing it had weak cyber defenses (to include in some cases poor cyber hygiene), which could allow hackers to access intellectual property and other sensitive military information. While the report is concerning, I’m glad the Navy recognized the need to increase security. The other branches of the military should follow suit with the same type of self-assessment, as it is unlikely these challenges are limited to just the Navy. When the report came out, I spoke with Secretary of the Navy, Richard Spencer, to commend him for being forthright about their findings. It’s never easy to admit shortcomings, but identifying them and finding solutions to them is what will make our country stronger. Among the issues that Secretary Spencer is working hard to address is poor cyber hygiene, which even if limited to a small number of people, can have devastating consequences for the Navy’s defense industrial base. We are relying on technology to make our lives more convenient and support our national security, but with that reliance come risks to our privacy and security. This month, I encourage you to review your cybersecurity habits and make necessary changes to protect yourself and your family from harmful cyberattacks. Additionally, I encourage the Department of Defense to make a top priority of improving the cyber hygiene of the defense industrial base. For more information about National Cybersecurity Awareness Month, visit


Rural America Cannot Be Overlooked john Thune

United States Senator (R-S.D.)

“According to the FCC’s recent broadband deployment reports, the number of Americans lacking access to a fixed broadband connection has continued to decline, but this issue will continue to be a priority for me until we’ve closed that gap entirely for everyone who wants access to broadband.” The Federal Communications Commission (FCC) recently announced that it was authorizing nearly $5 million to invest in expanding rural broadband access across South Dakota. FCC Chairman Ajit Pai, who visited South Dakota with me in 2017, said that he was “excited to see the benefits for rural residents who live all across the country.” He went on to say, “In South Dakota, this round of funding takes another step toward closing the digital divide, providing access to digital opportunity to nearly 900 more unserved rural homes and businesses.” This might come as a surprise to folks who don’t live in the heartland, but believe or not, there are still many places in America that don’t have basic cell phone service, let alone high-speed rural broadband. This technology obviously exists, though, which is why I so strongly share Chairman Pai’s commitment to “closing the digital divide” in rural America, particularly in parts of South Dakota that have been underserved or unserved all together over the years. This effort means so much more than ensuring customers can stream their favorite Netflix show a little bit faster. For many families and businesses, having access to reliable broadband services

means connecting to the world in ways they haven’t been able to do before. It means tapping into markets that have been unreachable or accessing information that has been beyond their fingertips for far too long. Long story short, it means bringing these communities further into the 21st century. I became chairman of the Senate’s Subcommittee on Communications, Technology, Innovation, and the Internet earlier this year, and the very first hearing I convened was on the state of rural broadband in America. I wanted the subcommittee and the rest of my Senate colleagues to hear directly from South Dakota companies that are helping lead the way in expanding access to rural broadband, so I invited representatives from Golden West Telecommunications and Midcontinent Communications, which will be

responsible for most of the infrastructure work related to this latest round of FCC funding, to participate. Their insight was invaluable, and the work they’re doing in this space should be applauded. According to the FCC’s recent broadband deployment reports, the number of Americans lacking access to a fixed broadband connection has continued to decline, but this issue will continue to be a priority for me until we’ve closed that gap entirely for everyone who wants access to broadband. As folks in South Dakota know, rural America has a lot to offer, and with the potential for new and more efficient broadband infrastructure, there will be even more meaningful opportunities for advancements in health care, agriculture, education, economic development, and more. ICBSD 2019 11

Bank Local Train L cal Buying local makes sense. Banking local

than ever before, all with a wide array of

is critical to South Dakota’s economy.

pricing structures. As your team weighs the

Community banks depend on their

options, remember that when you purchase

neighbors and local businesses to bank

training through ICBSD, your dollars go

local and to that end, they are passionate

toward a shared mission for community

about providing an unbeatable customer

banks in the state of South Dakota. While

experience. ICBSD shares that same

you may find lower prices from other

passion with community bankers.

training sources, those dollars are often

The Economic Growth, Regulatory

funneled out of South Dakota to the benefit

Relief, and Consumer Protection Act

of private companies or even other states’

has been in effect for over a year now.

associations. Buyer beware.

From most bankers’ points of view, it is simply the Regulatory Relief Act. This is

BY Larry Williams President and CEO of Community Bankers Webinar Network

understandable given that we spent a staggering amount of time and money anticipating, preparing, and training on a veritable onslaught of regulations. When S.2155 took effect, many community bankers celebrated by easing up on their

The Community Bankers Webinar Network is privileged to have a longstanding partnership with ICBSD to bring you the top webinar-based training in the nation. We spend countless hours researching and curating the best and most relevant regulatory and procedural training content

training and refocusing on getting deposit

in the industry. And we stand behind

and loan customers through the door.

our webinars with a 100% satisfaction guarantee. Check out ICBSD’s webinar

While regulatory pressure may have eased

offerings by visiting and clicking

a bit, it’s important to note that regulators

Webinar Schedule under the Events tab.

continue to assess whether your bank’s staff is staying ahead of current regulatory

Thank you for buying local by supporting

issues and compliance best practices. To

the Independent Community Bankers of

this end, there are more training choices

South Dakota.

Larry Williams is President & CEO of the Community Bankers Webinar Network. Larry Spent over 20 years as a community banker with the last 7 years focusing on commercial lending as a Chief Credit Officer and Chief Lending Officer. Contact Larry directly at or by telephone at 406-442-2585 if you would like to learn more. 12 The bottom line

Meet our Newest Bank Member



First Bank Chartered

January 5, 1905

Burke Bonesteel Colome Gregory



Murdo Platte Winner

What sets your bank apart from your ‘mega bank’ competitors? We are proud to be a family-owned community bank. We are strong enough to stand on our own, giving customers all the products and services they need, yet small enough to understand and appreciate the real-life needs of the people we serve.

Community involvement is a huge part of independent banking! In what ways is First Fidelity Bank involved in the communities it operates in? From the top to the bottom, our organization has a serious commitment to volunteerism and charitable giving. Our employees are also elected officials, firefighters, coaches, and EMTs. They are nonprofit leaders and community volunteers, and they fill these roles because the bank not only encourages it verbally but also supports it with action.

Fun fact about First Fidelity Bank: In the 1930s during the depression, the bank shut down for a short period and depositors lost some money. (Lowell) Louis Lillibridge tracked down any who had lost money and paid them back. If he could not track them down, he donated the money to the local library.

ICBSD 2019 13

Board of Directors


Monte J. Troske Chairman

Roger Weber Vice Chairman

Preston Steele Past Chairman

Emily Hofer ICBA National Director

President, Farmers State Bank

Market President, CorTrust Bank

Chairman of the Board, American Bank and Trust

Chief Financial Officer, Merchants State Bank

Tu rton

Si oux Fa lls

H ur on

F ree m a n

Brian Gilbertson Secretary/Treasurer

Dillon Kjerstad Director

Josh Hogue Director

Senior Vice President, The First National Bank

Vice President, First National Bank

President, Reliabank Dakota Headquarters

S i oux Fa ll s

P hill i p

Wat ertown

Dean Schwartz Director

Valerie Anderson Director

Jodi Eich Director

Greg Fargen Director

President/Director, Campbell County Bank

Vice President, Farmers State Bank

Chief Operating Officer, Rivers Edge Bank

President, BankStar Financial

H errei d

C anton

H oward

Brooki n g s

14 The bottom line

Jodi Eich


you should

KNOW by Hannah Merritt Marketing & Public Relations

Rivers Edge Bank – Jodi Eich is the Chief Operating Officer at Rivers Edge Bank, a community bank with five locations in SD and one location in IA. One of the bank locations is in her hometown of Howard, SD, so she has enjoyed getting to spend a little more time back home. Jodi has been with Rivers Edge Bank for almost 14 years and has been in banking for the past 22 years. She has been on Rivers Edge Bank’s Board of Directors since 2011 and its Holding Company’s Board of Directors since 2010. She graduated from the University of South Dakota in 1998 with a Bachelor of Science degree in Business Management with a Finance Emphasis and obtained a Master of Business Administration degree from USD in 2005. Jodi and her husband, Darin, who is the elementary and intermediate school principal in Lennox, SD, have four active boys – Peyton is a junior in high school, Conner a freshman, Talen a sixth grader and Griffin a first grader. She also enjoys volunteering at church, school, sporting and community activities.

Valerie Anderson Farmers State Bank of Canton – Valerie is a third generation banker at her family owned bank, Farmers State Bank of Canton. She is the Vice President and focuses mainly on lending compliance and real estate, consumer, agriculture, and commercial lending. She’s a Certified Community Bank Compliance Officer and a Certified Bank Chief Financial Officer. She’s also on the Board of Directors. She married her husband Moe this past January. They live in Canton and have two spoiled “kids”, a cat and dog! She loves to cook, travel, and spend time with her family especially her nephew as she is a new aunt. She is a member of Canton Rotary and she is on Augustana University’s MBA and Business Department Advisory Board.

Greg Fargen

meet our

new board members

BankStar Financial – Greg has spent the last 18 years of his banking career in his current position as Market President for BankStar Financial in Brookings. A native of Flandreau, he is a graduate of both SDSU and USD. He and his wife Lora, have two grown children. Son Ryan of Brookings, daughter Kelli and son-in-law Johnny Olson of Fairmont, MN. They have 2 granddaughters, Quinn Olson 3, and Kylee Olson 1. In addition to spending time with the grandchildren, Greg enjoys golfing, reading and attending SDSU activities. Like all community bankers, Greg has been active in community organizations including the Chamber of Commerce, Junior Achievement, church council, service clubs, Prairie Family Business, and is a long time member of the Brookings City Planning Commission.

ICBSD 2019 15


EST. 1983


16 ICBSD The bottom 2019 line














L r et r t ea



Thank you sponsors The mission of the ICBSD and our annual retreat wouldn’t be possible without the support of our sponsors! If your bank is looking for a specific product or offering – whether it’s insurance, cybersecurity or anything in between – we encourage you to support these folks who support us!



n SHAZAM, n Bell



n Travelers


n Federal

Home Loan Bank of Des Moines

n Eide


n Dakota

Homestead Title Insurance Company

n Bankers’

Bank of the West





n The

First National Bank in Sioux Falls

Celebrating a strong history, and a bright future.

n NuSource

Taking place in the heart of the Black Hills, the ICBSD Annual Retreat is the cornerstone for community banking. Now in its 37th year, our retreat offers the perfect combination of relaxation in the great outdoors, networking between our banking and associate members, and education sessions for South Dakota’s community banking professionals and their families. Every year, our retreat speakers and education topics are hand chosen by the ICBSD Education Committee, which is entirely comprised of bankers. This ensures our topics are relevant, and attendees can bring content back to their institutions.





n United

Bankers’ Bank

n Spectrum n West



Gate Bank Mortgage

ICBSD 2019 2019 17

This years retreat took place at Sylvan Lake Lodge. Education topics and presenters included: • “The New Age of Strategic Planning” with Jaime Taets of Keystone Group International • “A Vision for Keeping it Local: Succession and Ownership” with Don Nolan of Rivers Edge Bank and Jim Johnson of R&J Financial Corporation • “The Changing Landscape of Liquidity”, Michael Erhardt, ICBA Securities • “A Day Without Cyber Security” with Nick Podhradsky of SBS CyberSecurity • “The Age of Social” with Darrell DeWinter of VGM Forbin • “Faster Payments” with Kassi Arana Quimby, Federal Reserve Bank of Chicago • ICBA National Report with Timothy Zimmerman, Immediate Past Chairman, ICBA

18 The Bottom bottom Line line




EST. 1983









L r et r t ea




ICBSD 2019 19


O C t r a e h i #


0 2 t a e r t e R e k a L n a v l y #S 20 The Bottom bottom Line line

The Deadwood Lodge D e a d woo d , SD


July 30 – Aug. 1


te the DTaION !


ICBSD 2019 21

Culture… Simplified.


CEO of Keystone Group International

78% of executives say culture is among the top things that add value to their company, but only 15% said their culture is where it needs to be.1 The word culture has become a bit of a buzzword, but that doesn’t mean business leaders should not be thinking about it; a strong and healthy culture has become an increasingly important aspect of an organization’s success. As the dynamics of the workforce evolve, healthy cultures can lead to recruiting and maintaining top talent as well as producing the highest performance and results out of employees. Changing culture is not easy, but understanding and impacting culture does not have to be hard. 87% of organizations cite culture and engagement as one of their top challenges, and over 47% of people seeking a new job cite culture as the main reason they want to leave.2 There is no one-size-fits-all approach to culture, so your strategy should be customized to your organization, your business model, and your values. Before change can happen, leaders and organizations need to understand the key truths about culture. Key Culture Truths:

1. Culture does not need to be hard and ambiguous Culture is hard because we don’t understand the factors that impact it. When we break it down, it becomes clearer and actionable. The first step is understanding the factors that impact culture and identifying how to positively impact those factors

2. Culture is not one thing Culture is a combination of many factors. If we try to look at it as a singular force, it becomes overwhelming and difficult; however, if we look at it as a combination of factors that we can work on, it becomes manageable and sustainable.

3. Culture and strategy are heavily intertwined Top Talents look for companies that have great culture as their #1 desire, so we cannot view strategy and culture as two mutually exclusive things. As our strategy and culture become 22 The bottom line

more intertwined, business results increase, and healthy culture evolves.

Culture Strategy Intersect (CSI Model)

4. It can be simplified, but that doesn’t make it easy The goal is to simplify the factors so your organization can create a plan for improvement, but the work resides in executing on that improvement. As leaders, we can’t avoid the things that are hard; those are the things that typically have the greatest impact.

5. Culture is not self-sustaining Improving culture does not happen with “random acts of culture”; it happens with consistent actions that improve incrementally. If we stop focusing on it, our culture will continue to change, but it will not change the way we want it to.

6. It has a high ROI, and it can be measured Improving culture can have a greater ROI than many other areas of a business model, and it can be measured. The goal is to break it into factors that we can measure and improve. Companies with an engaged culture have 30% greater customer satisfaction levels.3

7. Culture’s not built overnight; it takes time and evolves If we want to drive sustained culture change, we must stick to it. While this shouldn’t take focus away from other areas of business, we can’t expect it to be successful without time and dedication. Culture is built one brick at a time and needs to be sustainably managed. To help organizations understand these truths and how to start the journey of improving their culture, Keystone developed a model to help Simplify Culture. The Culture Strategy Intersect (CSI) Model was created to help organizations align their strategy and culture in a simplified approach. We believe that culture and strategy are not separate initiatives; they impact each other and can create a competitive advantage when we manage them as one broader approach. The goal of this model is to simplify culture to a set of factors that allow an organization to identify areas of strength and opportunity, to drive sustainable improvement in their culture, and to create a positive impact on their strategic results. Before you can measure improvements in each factor, you must establish your current culture baseline and create a long-term view and plan for culture change. Culture is not self-sustaining; building and maintaining a healthy culture requires a plan that

includes continuous improvement year-over-year and quarterby-quarter. According to the 2016 Global Human Capital Trends by Deloitte University, 82% of respondents believe that culture is a potential competitive advantage for their organization, but fewer than one in three executives (28 percent) report that they understand their organization’s culture. As leaders, this is the gap we need to close for the future health and performance of our organizations. To get the full CSI Model and Sustainment Process as well as questions and exercises to initiate culture improvement discussions within your organization, download the pdf here: At Keystone, we are driven to change the conversation about Culture and Workforce Retention because workforce dynamics are changing at a rapid pace. The companies that figure out how to create and sustain a healthy culture will have a competitive advantage in the years to come.

Reach out to us at or if we can help.

Source (1-3): Suarez, Pedro. “10 Stats That’ll Make You Prioritize Company Culture.” Five to Nine. September 11, 2018.

ICBSD 2019 23

IN the

NEWS Join us in congratulating our fellow community bankers on their recent accomplishments! featuring.... • Reliabank • BankWest • Dacotah Bank • Main Street • CorTrust Bank send your happenings to:

24 The bottom line

Congratulations Barb! Barb Kranz, Loan Assistant, celebrated 10 years with Dacotah Bank.

BankWest Celebrates 130 Years Left to Right: VP of Strategic Initiatives Becky Burke, Chairman of the Board, President and CEO Charles H. Burke III, Ali Burke, and Fraud Risk Manager Bob Burke

Congratulations on Your Promotions Reliabank recently promoted two Senior Vice Presidents to help lead the bank. Joshua A. Hogue has been named President of the bank and Jeremy Keizer has been named Sioux Falls Market President. Hogue joined the bank in January 2012 after seven years with 1st Fidelity Bank of Platte. Hogue earned an undergraduate degree from Dakota State University and a Master’s degree in Banking & Financial Services from Northern State University. He completed the Graduate School of Banking – Madison in 2016. Keizer joined Reliabank in January 2010. He earned a Bachelor’s degree in business economics from South Dakota State and also completed the Graduate School of Banking – Madison in 2016.

Joshua A. Hogue President

4 Under 40 Nominee Jeremy Keizer Jeremy Keizer, Former VP at Reliabank’s Sioux Falls location was named one of the nominees for the 4 under 40 in the Sioux Falls Young Professionals Network!

Jeremy Keizer Sioux Falls Market President

ICBSD 2019 25

Main Street, Inc. Successfully Completes System & Organization Controls (SOC) 2 – Type 2 Assurance Engagement Birmingham, AL, September 18, 2019 – Main Street, Inc., a data-driven analytics and print solutions provider, today announced the successful completion of a System & Organization Controls (SOC) examination. This achievement showcases the suitability of the design and operating effectiveness of its controls relevant to security and confidentiality of Main Street’s Printing and Mailing systems utilized to process users’ data

and the confidentiality of the information processed by these systems. The controls provide reasonable assurance that Main Street’s service commitments and system requirements were achieved based on the trust services criteria. The engagement was performed by an independent certified public accounting firm, Insyte CPAs, LLC, based on the Standards for Attestation Engagement, as defined by the American Institute of Certified Public Accountants (AICPA).

Ted Walton, President of Main Street, Inc. said, “Information security is top of mind for our business partners as well as the consumers they serve. This SOC achievement is a testament to the priority Main Street places on safeguarding data and the systems that house it. Our commitment to security is constant and we will continue to make investments to ensure the integrity of our systems.”

About Main Street Main Street partners with over 2,100 community-oriented financial institutions to provide data-driven solutions. Our affordable, effective check program designed to meet the needs of financial institutions like yours is easy to manage and leaves out the hidden fees you’ll find in other programs. But we don’t stop there. Our TargetSmart data-driven marketing program offers tools to help you win in today’s market with our simple, 3-step process for gaining account holder insights, reaching potential account holders with marketing programs, and measuring the effectiveness of your efforts to give you growth power you never thought possible.

For additional information, visit

26 The bottom line South Dakota Division of Banking Announces the Promotion of Jordan LaBrie The South Dakota Division of Banking is proud to announce the promotion of Jordan LaBrie to Training Director – Banking. Jordan will continue to participate on examinations, but will be assisting more with administrative functions, including oversight of the Division’s Career Enhancement Program. Jordan started with the Division in 2011 and works out of Pierre.

The future of South Dakota Community Banking looks bright!

Larry Ness of First Dakota National Bank Recognized at SDSU Hobo Days Celebration Larry Ness of First Dakota National Bank – Yankton was recognized for his philanthropic endeavors at the South Dakota State University Hobo Days Celebration. Ness, a Sinai native and a 1963 Brookings High School graduate, earned a degree in economics, is chief executive officer of First Dakota National Bank and First Dakota Financial Corp. in Yankton. He became president of the then-troubled bank in 1983. Today, it is the 38th largest ag lender in the nation and Ness was named 2018 Banker of the Year by NorthWestern Financial Review. Ness also has been committed to the advancement of his alma mater. He has served on the SDSU Foundation’s Council of Trustees since 2007. Ness and his wife, Diane, have contributed more than $5 million to SDSU, making them among the 10 most generous individual donors in SDSU history. In addition, First Dakota National Bank has given nearly $2 million to SDSU.

Larry Ness First Dakota National Bank

Today, the Ness Division of Management and Economics at SDSU bears his name, but that was at the insistence of then President David Chicoine, not the aspiration of Ness, according to Steve Erpenbach, president of the SDSU Foundation. Erpenbach noted Chicoine approached Ness 10 years ago about the university’s interest in significantly expanding its resources devoted to economics, management and entrepreneurial studies. Ness committed to providing the leadership gift, making a mid-seven-figure commitment. At the fundraising kickoff, he stipulated that all donors be recognized equally with no mention made of gift amounts. “For Larry, it was always about the power of the idea and the potential of the initiative. It was never about public adulation,” Erpenbach wrote.

ICBSD 2019 27

CorTrust Bank Named Top Bank in South Dakota by Forbes Magazine Sioux Falls, SD, July 9, 2019 –

and conditions, branch services, digital

CorTrust Bank is proud of their

CorTrust Bank has been named the

services and financial advice.

Community Banking roots and the value

“Our commitment to our customers

this recognition places on banking

reaches beyond the monetary aspects

local. Providing the latest technology

and into the lives and communities in

and meeting customers’ financial needs

which we live, do business and raise our

continues to be a priority for CorTrust

top bank in South Dakota by Forbes Magazine. Part of the South Dakota fabric for almost 90 years, CorTrust Bank has locations in 16 South Dakota communities and 4 Twin Cities locations.

families,” said Jack Hopkins, CorTrust

Bank as we work to navigate, lead and

Forbes partnered with the market

Bank President and CEO. “Recognition

research firm Statista and surveyed more

by Forbes magazine shows specifically

than 25,000 people in the U.S. about

the great customer service and skills

their banking relationships for the second

of our employees, and the impact they

annual look at Best-In-State Banks.

have in their communities. We are glad

Banks were rated based on customer

our customers see these qualities and

recommendations and satisfaction, as

continue to choose CorTrust Bank as

well as 5 key areas including trust, terms

their financial partner,” stated Hopkins.


grow Community Banking in South Dakota. For the complete Forbes Magazine article, Best-in-State Banks, visit

About CorTrust Bank Since 1930, CorTrust Bank has served the needs of individuals and businesses throughout 16 South Dakota Communities and 4 Minnesota locations with 26 branch locations. What started as a small operation serving the needs of local farming families in Artesian, SD, has today grown into a fourth-generation family-owned community bank with over $886 million in assets and $115 million in equity and reserves. CorTrust serves Eastern South Dakota with locations in Aberdeen, Arlington, Artesian, Bowdle, Freeman, Gayville, Leola, Letcher, Mitchell, Mt. Vernon, Pierpont, Sioux Falls, Tabor, Vermillion, Webster, and Yankton as well as Blaine, Brooklyn Park, Delano and Woodbury, Minnesota. Pending regulatory approval, the Sioux Falls-based bank will acquire First Minnesota Bank, which is based in Minnetonka and has 11 branches throughout the Twin Cities region, which will grow our footprint to 15 locations in Minnesota.

28 The bottom line

Member Spotlight

UsingMEMBER Alternative SPOTLIGHT Data In a recent blog post published on August 9, 20191, the CFPB gave an update on its first No-Action Letter regarding the use of alternative data. The post underscored the CFPB’s goal of increasing consumer access to credit and encouraged lenders to use alternative data to generate credit profiles for consumers who cannot produce a credit score. However, lenders should be informed and cautious in using alternative data to make credit decisions. Although the CFPB has refrained from endorsing specific variables to be used in credit underwriting, banks must be sure that their use of alternative data is compliant with applicable laws. This article will summarize the CFPB’s position on alternative data, and highlight potential compliance issues. The CFPB has estimated that millions of Americans are either “credit invisible, meaning they have no credit history with a nationwide consumer reporting agency” or have credit profiles that are too old to produce a credit score. Consumers who cannot generate a credit score are often unable to access affordable credit or any credit at all. As a solution, the CFPB has encouraged banks to consider using alternative data as a way to expand access to credit. “Alternative data” is used to describe consumer information which would not ordinarily be found in the credit files of traditional credit reporting agencies. Alternative data, such as a consumer’s monthly utility payment history, can give banks a clearer picture of an unscored consumer’s financial profile. The CFPB has attempted to study the impact of alternative data through its 2017 NoAction Letter to Upstart Network, Inc. As a condition of the No-Action Letter,

the company agreed to model a risk management and compliance plan which would address the impact of using alternative data in credit underwriting. In its August 9, 2019 blog post, the CFPB reported that the 22 month study resulted in a 27% increase in approved applicants and lower average APRs occurring across race, gender and ethnicity. As such, the CFPB encouraged lenders to continue “to develop innovative means of increasing fair, equitable, and nondiscriminatory access to credit, particularly for credit invisibles . . .”

Lenders could easily run afoul of the ECOA if, for example, their credit writing algorithm included education history, but negatively scored consumers who attended historically minority serving institutions. Therefore, as bankers proceed into the bold new world of alternative data, it is essential that they ensure that their use of the data is compliant with the law. 1

 atrice Ficklin and Paul Watkins, An updated on P credit access and the Bureau’s first No-Action Letter, Consumer Financial Protection Bureau (Aug. 9, 2019) blog/update-credit-access-and-no-action-letter/.

However, banks should exercise caution in using alternative data. Although the CFPB encourages the use of alternative data, it also instructs lenders to maintain a “compliance management program that appropriately identifies and addresses risks of legal violations.” Lenders should ensure that their use of alternative data complies with the Equal Credit Opportunity Act (ECOA), its implementing regulation, Regulation B, and other applicable laws. To confirm compliance, banks must be knowledgeable of the variables and algorithms used to generate alternative credit scores—even if the data was collected and analyzed by a third party. To make matters more complicated, the CFPB has not published an approved list of the type of data which may be permissibly used in underwriting decisions. Rather, the bureau stated that Upstart Network, Inc. used “various categories of alternative data, including information related to borrower’s education and employment history,” but explicitly refrained for endorsing particular variables or modeling techniques in credit underwriting.

written by Olivia R. Karns Karns is an Associate Attorney at Davenport, Evans, Hurwitz & Smith, LLP in Sioux Falls, SD Contact Olivia at 605-357-1266 ICBSD 2019 29


Market A guide to finding liquidity among your holdings “If a community bank owns some winners and some losers, and it decides it needs to sell, it can manage the impact on current year earnings very easily. As 2019 progresses, it’s clear that industry earnings will be quite good, so it is entirely possible that a bank may choose to realize some losses on sales of bonds now, and push that income (and tax liability) into future years.”

BY JIM REBER President and CEO of ICBA Securities

Quick: What’re the most saleable assets on your community bank’s balance sheet? If you get this wrong, you need to be running a “not-for-profit depository financial institution.” Bonds, of course. Most people I talk to consider the liquidity feature a close second (to safety) in importance when contemplating a purchase. That feature has come into play for thousands of community banks in the last several years, as loan demand has outstripped deposit growth. Between December 2013 and December 2018, investments as a percent of assets dropped from 23% to 18% for the community bank industry as a whole. While most of the decline was simply maturing bond proceeds being reallocated into loans, some portion was outright securities sales to fund new credits.

Assist: Federal Reserve You may also have noticed that your bonds’ prices have risen in 2019. Since rates peaked last November, there has been a strong market rally across the entire yield curve, particularly beyond two years. For example, if you had purchased the new fiveyear Treasury note last November, you would now have a nearly five-point gain in that bond. Yields in that sector are down around 125 basis points in about seven months. That has essentially wiped out unrealized losses in community banks’ bond portfolios. As of the end of June, the average portfolio was worth slightly more than the collective 30 The bottom line

book prices of the bonds. What that means in practice is that you probably own some bonds at higher prices than they’re currently worth, and others at lower prices. And this is exactly what you should hope for. If a community bank owns some winners and some losers, and it decides it needs to sell, it can manage the impact on current year earnings very easily. As 2019 progresses, it’s clear that industry earnings will be quite good, so it is entirely possible that a bank may choose to realize some losses on sales of bonds now, and push that income (and tax liability) into future years.

Priced to sell Assuming for the moment that a community bank is ambivalent about booking any gains or losses, and is instead more focused on the creation of a liquidity pad, there is a basic rule of portfolio management that needs to be applied to achieve maximum benefit. This is the concept of the “take-out yield.” Take-out yield has several other nicknames like market yield or give-up yield, and what it quantifies is the yield that a purchaser of your bond would get, if you were to sell that bond today. The lower the take-out yield, the more efficiently you have sold your bond. Economically, the seller will have to re-employ the proceeds at a return higher than the take-out yield for the sale/reinvestment to make sense. So a wise portfolio manager will resist the temptation to cash in gains, unless the sale item results in a low take-out yield. Your broker should readily identify the take-out yield on any security that you’re thinking about selling at the same time you receive a bid.

Keep these in mind There are a couple of other variables that could impact if, or what, your community bank might sell. One is that you likely can’t sell a bond that was designated Held to Maturity on purchase date. That alone is a good reason to classify 100% of your bonds as Available for Sale. Another widely under-reported fact of the bond market is that liquidity will dry up as we approach a quarter or year-end. How much this affects prices is difficult to quantify, but I would recommend not bidding anything within two weeks of the end of a reporting period. Also, you likely have other liquid assets on your balance sheet, besides your investments. There is a robust secondary market for most performing loans, beyond conforming residential mortgages. Government-guaranteed sectors such as SBA 7(a) and USDA loans can be efficiently sold. And even non-guaranteed loans can fetch attractive prices, especially in the current yield environment. A final thought: usually, yield spreads widen as interest rates fall. They have not yet widened out noticeably from the peak in rates late last year, at least on many sectors that are popular with community banks. This includes callable agencies, munis and straight pass-through mortgage-backed securities. All of which makes the mid-2019 bond market an attractive time to consider targeted sales.

MBS performance history ICBA Securities’ exclusive broker Vining Sparks publishes mortgage market prepayment commentary each month, including tables on recent performance for some of the more popular MBSs. Visit or contact your Vining Sparks sales rep for more details.

Bid thee well! ICBSD 2019 31

Dwight Larsen

Larsen, 56, will be the third president to take the helm at UBB since it was founded in 1975 as the nation’s first bankers’ bank providing correspondent services exclusively to independent community banks.

Dwight Larsen is Named New CEO and President of United Bankers’ Bank Dwight R. Larsen, with more than 30-plus years of experience in bank management, regulatory affairs and education, will become the new CEO and President of United Bankers’ Bank (UBB) and its holding company, United Bankers’ Bancorporation, Inc. (UBBI), according to an announcement today by the bank’s Board of Directors. “Dwight is an outstanding fit for UBB’s culture of product excellence and customer service – not only for the UBB we see today but also for where we believe the bank must go to meet the challenges of tomorrow,” said Bryan Grove, Chairman of the UBB Board and President of American State Bank in Grygla, Minn. “He has built his career on the highest levels of integrity, an openness to new ideas and opportunity for others, and outstanding communication skills.” Larsen, 56, will be the third president to take the helm at UBB since it was founded in 1975 as the nation’s first bankers’ bank providing correspondent services exclusively to independent community banks. The appointment culminates an extensive national search to replace William Rosacker, who retired in April after leading UBB for 34 years. “This is an incredible honor and exciting opportunity for me to lead the finest correspondent banking team in the nation,” Larsen said. “Right from its inception as America’s first bankers’ bank, UBB has led the way with so many product, service and technology innovations. Not only do I intend to continue that tradition,” Larsen said, “my goal is to take UBB even further and become the nation’s premier bankers’ bank.” Larsen is already a familiar name and face to many in the banking community. He held several positions at UBB from 2000 to 2016, including roles overseeing compliance services, trust services, HR consulting services and the stock valuation services of BankValue

About United Bankers’ Bank Headquartered in Bloomington, MN, United Bankers’ Bank is the nation’s first bankers’ bank, and a full service provider of correspondent banking services to community banks in: Minnesota, North Dakota, South Dakota, Montana, Nebraska, Indiana, Iowa, Wyoming, Idaho, Ohio, Oregon, Washington, Michigan and Illinois. 32 The Bottom bottom Line line

For more information please visit

Advisory Services. Under Larsen’s direction, BankValue

member of the Curriculum Advisory Committee and a former

expanded its bank stock valuations, market analysis, and

faculty representative to the Board of Trustees.

merger and acquisition consulting service to customers throughout UBB’s 15-state market area. Dwight was also the chair of UBB’s Asset Liability Management and Enterprise Risk Management committees. From 1986 to 2000, and again for the past two years, Larsen

Larsen will dedicate his first 30 days on the job, which officially starts on Monday, Aug. 26, to “listening, listening and listening again,” he said, “including a series of meetings with staff and executive leadership at UBB, our Board of Directors, our customers and community bank leadership.

has served as a national bank examiner with the Office of the

“I’m following a tremendous legacy in Bill Rosacker,” Larsen

Comptroller of the Currency (OCC). There he built extensive

added. “He and an exceptional group of talented and

knowledge in risk management and effective corporate

dedicated people have made UBB what it is today. The bank is

governance working with banks of every size and with every

in excellent financial condition, offers a wide range of products

level of management and operations.

and services, and serves customers across a broad swath of the U.S., stretching from the West Coast to the Great Lakes.

Students and faculty of the Graduate School of Banking at

I look forward to being part of the next great chapter in the

the University of Wisconsin – Madison also know Larsen as a

success story of UBB and the community banks we serve,” he

faculty member since 1998. In addition to teaching, Larsen is a


ICBSD 2019 33


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André G. Herrera Hypur, Inc. Considerations in Providing Financial Services to Hemp and Cannabis Related Businesses SEED COMPANY

Darren & Brian Hefty

André is Chief Compliance Officer at Hypur, Inc. where he leads Hypur’s collaboration with financial institutions on compliance and regulatory issues. Previously, he served as Senior Vice President and CIO of a bank in California, where he was responsible for the implementation and administration of all banking technologies and proprietary systems necessary to run the financial institution. Andre’s broad experience in payment systems, compliance, and banking technology management spans over 27 years and includes the management of complex, large-scale conversions, migrations and new product implementations. He has expertise in implementing merchant credit card processing programs and ACH, debit, credit and stored value initiatives. He is considered a subject matter expert in banking challenging industries and has assisted numerous financial institutions in implementing programs such as cannabis and MSB banking.

Ag PhD TV and Hefty Seed Feature Presenters

34 The bottom line

Darren and Brian Hefty are the hosts of Ag PhD TV, which has been bringing agronomic information to farmers for more than 21 years. Ag PhD is the number one agronomy show in the U.S. today, and is seen in several foreign countries, as well. In July 2013, Brian and Darren also launched Ag PhD Radio, a live hour-long call-in show airing weekdays at 2 p.m. CDT on Rural Radio SiriusXM Channel 147. Darren and Brian 19 are both farmers, agronomists, and fathers and are focused on how 0 2 to help you increase yields, make more money on the farm, 13, D r and leave the land and environment in better condition be lls, S m a e for future generations. v xF

No Siou

A representative from Raven Industries will present on technology Tom Peterson Midwest Dairy Current Ag Issues Panelist

Glenn Muller South Dakota Pork Producers Council Current Ag Issues Panelist Glenn Muller has been the Executive Director of the South Dakota Pork Producers since August, 2010. Glenn and his wife Joan live on and are involved in their family farming operation near Davis, South Dakota. He is a graduate of SDSU with a degree in Ag Education and a minor in Animal Science and has always been employed in the Ag Industry as an Ag Teacher, Adult Farm & Ranch Management Instructor, Ag Loan Officer, and the risk management division of John Morrell in the Hog Procurement Department. Glenn is a past president of the South Dakota Pork Producers. Muller was a 4-H leader for 23 years in Turner County. He also was on the Turner County Fair Board for 18 years serving as livestock chairman and was instrumental in starting the open class beef show. Glenn has also served as the FFA Livestock superintendent at the SD State Fair.

Tom Peterson serves as Farmer Relations Program Manager for Midwest Dairy and the Executive Director for South Dakota Dairy Producers. In this dual role, he is responsible for consistent communication with dairy producers and industry related professionals on work being done on behalf of dairy producers to increase demand for dairy products utilizing checkoff funds provided by farmer funders and administered by Midwest Dairy. As Executive Director for South Dakota Dairy Producers, he serves in a staff administration role for a 9-member board with chief responsibilities of member recruitment and being a conduit of member priorities to policy makers and industry representatives in alignment with SDDP pillars of policy, growth, education, and consumer confidence.

Glenn has been recognized as the 2013 Honorary Master Pork Producer, 2014 SDSU Honored Alumni of Gamma Sigma Delta, 2015 Sioux Falls Area Chamber of Commerce Agribusiness Citizen of the Year and the 2017 SDSU Animal Science Friend of the Department.

Todd Wilkinson South Dakota Cattlemen’s Foundation Current Ag Issues Panelist

er t s gi ay! / e R d o T .ICBS rence w fe ww l-con fal

Todd D. Wilkinson, a DeSmet South Dakota native, a graduate of Augustana College in SIoux Falls and the University of South Dakota School of Law. Todd’s primary emphasis in his practice are agricultural law, business transactions, estate planning and real estate matters. Todd is admitted to practice before all South Dakota courts both State and Federal. Todd is a member of the Agricultural Law Committee and the Real Property Committee. As a livestock owner Todd is actively involved in cattle feeding and finishing, farming and ranching and brings a wealth of agricultural background to his practice. With his involvement in agriculture Todd has seen his practice grow with extensive involvement in agricultural related issues including zoning, animal feeding, land use, business structure and tax issues. Todd is currently serving on the National Cattlemen’s Beef Association officer team as Policy Vice Chairman. ICBSD 2019 35

Sarah R. Larson Davenport Evans Law Firm Estate Planning

Mike Sonne Swenson Investments and Commodities Why it is Important for Bankers to Understand Risk Management Mike Sonne holds a finance degree from Dakota State University (’04) and a Graduate School of Banking Degree from the University of Wisconsin-Madison (’11). From 2005 until 2016 Mike was an ag lender for a SD community bank. He worked with a diversified portfolio of grain, livestock and dairy farmers. In 2016 he joined Swenson Investments and Commodities as a branch manager and risk management specialist. In 2017 Mike developed a risk management training program to train ag lenders on all types of risk management options, the advantages/disadvantages of each strategy and how to read commodity statements. Mike grew up on a farm and has a passion for helping farmers and bankers navigate through the ups and downs of the ag markets.

Sarah Richardson Larson is a partner in the law firm of Davenport, Evans, Hurwitz & Smith, L.L.P., in Sioux Falls, South Dakota, where she has been primarily involved with estate planning and retirement planning. She graduated from the University of South Dakota School of Law in 1979. She is a Fellow and past State Chair of the American College of Trust and Estate Counsel; a past President of the Sioux Falls Estate Planning Council; a past Chairman of the Probate and Trust Committee of the South Dakota Real Property, Probate and Trust Law Section of the State Bar of South Dakota; and a Fellow of the American Bar Foundation. She has served on the board of directors for numerous charities, including the Sioux Falls Area Community Foundation, South Dakota Parks and Wildlife Foundation, the South Dakota Hall of Fame, University of Sioux Falls Foundation, and Lutheran Social Services Foundation.

Ryan Wieman Wieman Land & Auction Co. Land and Equipment Values

Steve Dick

Ryan J. Wieman is a 3rd Generation Auctioneer & Land Broker at Wieman Land & Auction Co., Inc. in Marion, SD. Wieman Land & Auction Co., Inc. brokers approximately $50 million of farm machinery and $35 million of South Dakota Ag Real Estate annually. Ryan graduated from SDSU in 2002 with a degree in Ag Economics. He currently lives near Parker, SD with his wife Kirsten and their 2 sons – Landon (12) & Caleb (10). In his free time, Ryan is actively involved in his boy’s youth sports including junior football, basketball, and baseball.

Ag United Steve has served as the Executive Director of Ag United for South Dakota since January 2005. Ag United is a coalition of leading South Dakota farm organizations that have membership totaling more than 16,000 South Dakota farm and ranch families. The coalition includes the South Dakota Farm Bureau, South Dakota Cattlemen, South Dakota Pork Producers, South Dakota Soybeans, South Dakota Corn Growers, South Dakota Dairy Producers and the South Dakota Poultry Industries Association. Before joining Ag United, he served on Senator Tom Daschle’s staff for a total of ten years in South Dakota and Washington, DC. In his last position with Senator Daschle he served as the Agriculture Outreach Coordinator. In addition, he has worked in public affairs, marketing and political campaigns in a number of midwestern states as well as Oregon. A native of southeastern South Dakota, Steve is involved with his family’s farm near Canistota in McCook County. He previously served ten years on the West Central School Board. He is a graduate of the University of South Dakota. Steve and his wife, Jeanne, reside in Hartford and are parents to two children, Truman and Eleanor. 36 The bottom line

g n i m upco

S R A N I WEB October


10.22.19 Medallion & Signature Guarantee Risks, Rules & Best Practices

12.3.19 IRS Reporting Requirements: 1098s, 1099s, TINs & Backup Withholding

10.24.19 Commercial Loan Annual Credit Review

12.4.19 ACH Error Resolution: Returns, Authorizations, WSUDs, Stop Payments & More

10.29.19 12 Key Elements of an Effective Digital Marketing Strategy 10.30.19 Personal Accounts: Ownership, Authorization, Titling & Documentation

12.5.19 Consumer Privacy: New Online & Mobile App Issues, GDPR, Reg P & Compliance

10.31.19 1099 Reporting: Foreclosures, Repossessions & Debt Settlements

12.6.19 Updated Flood Insurance Exam Procedures, Including Recent Private Flood Insurance Rules


12.9.19 Revisiting Reg CC Policies, Disclosures & Notices for Rule Changes Effective July 1, 2020

11.6.19 Closing or Changing Accounts for Consumers & Businesses 11.7.19 Top 10 Compliance Mistakes in Advertising 11.12.19 Mortgage Lending Hot Spots Series: Critical Timing Requirements in the Mortgage Lending Lifecycle

12.10.19 Business Accounts: Who is Authorized to Open, Close, Transact? 12.11.19 The Changing Face of BSA Administration: What BSA Officers & Management Must Know

11.13.19 Year-End Compliance Checklist

12.12.19 Safe Deposit Issues: Delinquency, Death & Abandonment

11.14.19 Regulation E Series: Provisional Credit Under Reg E: Rules, Best Practices & FAQs

12.17.19 Securing Collateral: How to Complete & File UCC-1 Financing Statements

11.19.19 Robbery Preparedness: Meeting Your Annual Compliance Requirement

12.18.19 Marijuana HR Policy & Best Practices: Handling Employee Medical & Recreational Use

11.20.19 BSA Special Risks: Policy, Law Enforcement & Regulator Issues 11.21.19 When a Borrower Dies: Rules, Procedures & Liabilities 11.26.19 Understanding & Navigating ACH Rules for ODFIs

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The Bottom Line October 2019  

The Bottom Line October 2019  

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