The Bottom Line Volume III 2022

EXCLUSIVE MEMBER BENEFITS

Megan Olson, President & CEO of ICBSD

This spring ICBSD was fortunate to have the opportunity to work with ICBA and Philip Smith of The Smith Gerrish &Tuck Law Firm to create a new strategic plan to help guide us as we serve you and your bank. During this session, we revised our mission statement which is now “to empower independent community banks”!

As we look ahead to 2023 and beyond, one way the ICBSD will empower independent community banks is through the launch of a new program called “Level Up”. This program is designed to help shape young bankers in your organization by equipping them with the leadership and professional development they’ll need to serve as the future leaders of South Dakota’s independent community banks. This one-of-a-kind learning experience will have an immediate, positive impact on attendees and the banks that sponsor them. Level Up will begin in January of 2023 and will feature a series of six sessions. Each session has been designed for future bank leaders who are motivated and eager to reach their full potential.

At the conclusion of the program, participants will be poised to contribute significantly to the bank’s future, as well as contribute positively to the bank’s work environment by building and maintaining influential relationships with employees and supervisors.

The cost to enroll is $350 per participant (from an ICBSD member bank). Class size is limited to 20 participants. Level Up will only be

offered in year’s ending in an odd number. For more information and to register visit: ICBSD. COM/LEVEL-UP. Along with the six in person training sessions, participants will receive: DISC personality assessment, professional head shots, registration to ICBSD’s annual Black Hills Retreat for graduation as well as all meals, refreshments, and activities during the sessions.

SESSION INFORMATION

Session 1: JANUARY 2023

Location: Watertown GETTING PERSONAL Participants will take a deep dive into their strengths and habits, and learn how both affect teamwork. This session will also help participants understand the power of projecting a professional brand for themselves and their bank.

Session 2: FEBRUARY 2023

Location: Pierre

THE POWER OF INFLUENCE: LOBBYING 101

Understand how to become an effective lobbyist for your community bank both at a state and federal level. Participants will also get a behind the scenes look at state government and an opportunity to better understand community banking in South Dakota.

Session 3: March 2023

Location: TBD

HIGH IMPACT PRESENTATIONS

Learn and practice key elements of effective

presentations: communication, content, and delivery along with tips and tricks to make your next presentation a breeze.

Session 4: APRIL 2023

Location: TBD

THE CHALLENGE OF LEADING

This session will help participants navigate obstacles many leaders face: managing multiple generations, inspiring a team and living up to one’s full leadership potential.

Session 5: MAY 2023

Location : TBD

THE POWER OF COMMUNICATION

Get ready to become a master communicator! Learn to navigate communication barriers, understand proper communication in a professional setting and learn to effectively connect with multiple generations within your organization.

Session 6: JUNE 2023

Location: TBD

FLEXIBILITY IN LEADERSHIP

During our final session you’ll refine your skills to push you and your team to maximum potential! The culmination of your 6 months of hard work!

JULY 27-29, 2023

Location: Spearfish Canyon Lodge GRADUATION

Each participant and their family (yes, kids too!) is invited to take part in a special graduation reception as part of ICBSD’s annual Black Hills Retreat

FLOURISH

— Rebeca Romero Rainey, President & CEO of ICBA

Cyber and data security have long been areas of emphasis for community banks, but in today’s escalating digital environment, that focus has grown. In fact, our 2022 CEO Outlook Survey ranked data security as a top concern, and as the digital sphere continues to evolve, all signs point to that level of concentration increasing.

When I think about the work community banks are putting into heightening security protocols and protecting their customers, I’m struck by the fact that so much of cyber preparedness stems from navigating conceptual circumstances. Fraudsters continually evolve their techniques to find new ways to prey on consumers and small businesses, and as they do, we must remain vigilant in serving as the first line of defense. But the question remains: How do we stay on top of their tactics and safeguard against a hypothetical, moving target?

While there’s no cyber or data security silver bullet, by bringing the theoretical into a true banking environment, we can begin to establish action plans that speak to real-world attacks. For example, by participating in tabletop exercises, bankers can get a first-hand account of where their preparedness plans shine and where they fall short. By taking cyber and data security from the conceptual into the concrete, we are able to find the chinks in our armor and shore up our defenses before a hacker gains entry.

Because a good defense begins with a strong offense, ICBA has partnered with the Cybersecurity and Infrastructure Security Agency (CISA), a division of the U.S. Department of Homeland Security, to offer tabletop exercises tailored specifically to

community banks. These exercises enable you to bring all areas of your bank into the cyber and data security fold, and in the process, create a deeper understanding about what you are preparing for, how it will impact all facets of your bank, and how you can be ready to respond to what may come your way.

In addition, ICBA also has created a Cyber and Data Security Resource Center. Updated regularly with new tools and resources, this center offers insights, tips and even customer support tools for community banks. It helps you not only to prepare, but also execute your cyber plans and introduce new education, training and resources as needed.

In today’s environment, cyber and data security is about constant vigilance. This can feel like a daunting task, but by working in bite-sized pieces, you keep it top of mind on a standing basis and build a culture of cyber and data preparedness. That cyber and data security-first mentality will go a long way in helping to protect you and your customers from emerging threats.

WHERE I’LL BE THIS MONTH

I’ll be participating in our fall leadership meeting as we strategize for the coming year and consider ways to help community banks both manage risks and embrace new opportunities.

WITH REBECA @ROMERORAINEY

““While there’s no cyber or data security silver bullet, by bringing the theoretical into a true banking environment, we can begin to establish action plans that speak to real-world attacks.”"

THE PURPOSE OF COMMUNITY BANKING.

What is the purpose of community banking? This is a question that could be open to some debate. However, those of us engaged in the business of independent community banking could agree that a central theme of our purpose is to “Make A Difference.” Not one bank is the same in our great state. Each has its own history and evolvement, but I can guarantee you that each bank still standing today has had a profound impact on the communities and people it serves. This isn’t something that just happens due to a bank merely existing. It happens when you have an exceptional team of people collaborating towards a common goal of making a difference every single day. What I love most about community banking, is the fulfillment received from serving the very communities in which we work, live, volunteer and raise our families. There is not a better model than the community banking model. Our funds are raised from our local depositors and re-invested directly back into our communities. We have a vested interest in the success of our customers and communities as we cannot be successful without their success coming first.

My family and I live in Philip, SD just down the road from my folks’ ranching and farming operation between Wall and Philip. My wife is from Gettysburg, and we met at college in Brookings. We have 4 children ages 9 to 2. I am actively involved within our ag operation and my brother, Ryan, and I work together on a farming and custom spraying enterprise. My wife, Courtney,

and I own a group of independent community pharmacies. She received her Pharm D. in 2011 from SDSU.

I am honored and humbled to serve as the 2022-2023 chairman of the board. I get to work with a great group of board members and executive staff as well as represent the greatest industry. I have met so many wonderful people during my involvement in the Independent Community Bankers of South Dakota, and it has made me a better person by being around so many people better than myself. I would like to thank Brian Gilbert, immediate past chairman, for his leadership and support. I will commit to continuing this association’s good work of empowering community banking and protecting the industry responsible for making profound differences in the lives of all those it serves.

“What I love most about community banking, is the fulfillment received from serving the very communities in which we work, live, volunteer and raise our families. ”

- Dillon Kjerstad

— Dillon Kjerstad, Vice President, First National Bank in Philip, Chairman, ICBSD Board of Directors

FAST FACTS ABOUT DILLON:

Hometown: Quinn, SD

Family: Dillon and Courtney live in Philip. They have been married for 11 years and have 4 children Kaden (9), Grayson (7), Taelyn (4), and Maddie (2)

EDUCATION:

2009 Graduate of SDSU, BS in Ag Business and BA in Economics

2011 Graduate of USD, Master of Business Administration Graduate School of Banking

Goals for the Association: Empower community banking by making sure our voice is strong in the state and federal legislative process, providing educational resources for our members, and maintaining a spirit of community and family for our independent banks through our conferences, events, and retreats.

COMMUNITY INVOLVEMENT:

• Philip Charities Economic Development

• Knights of Columbus

• Badlands Eagles Youth Football Independent Community Bankers of South Dakota

FROM THE TOP

When it comes to fraud, you don’t know what you don’t know, and what you don’t know can greatly influence your bottom line. But the effects of fraud are felt far beyond budgetary impact; our reputations are at risk. Customers expect their bank to keep their money safe, and though they most often are the gateway for fraud, they are inclined to blame us if we can’t fix the problem.

So, we are in a unique position as community bankers—between a rock and a hard place— trying to thwart attacks and keep the banking experience a positive one for our customers. We have to stay on top of emerging threats through continuous staff education and technology enhancements. Solutions like dual authentication and customer card controls can help in sidestepping some of the risk, and continuous

cyber training for bank staff can help them remain vigilant against phishing emails and more.

Fortunately, this work arms us with fraud prevention expertise. While hard-earned, the knowledge we have cultivated over years of circumventing attacks means that we have a depth of understanding about cyber and data security that the general population doesn’t—and those are lessons we can share. We, as community leaders, have an opportunity to provide value-added insights to our municipalities, small businesses, schools and beyond. If we share our experiences, advise employers to train their employees and offer greater information to consumers, we are taking our work one step further in helping to protect our communities. These efforts don’t have to be new initiatives. Consider holding quarterly meetings with your small business customers: How can you incorporate some cyber and data security education into those sessions? Or think about your team’s roles on various boards and committees and how they can raise this topic as an agenda item. Or explore ways to introduce these concepts in school or public presentations. This type of education is important, and it’s something we all should be doing.

“While hard-earned, the knowledge we have cultivated over years of circumventing attacks means that we have a depth of understanding about cyber and data security that the general population doesn’t—and those are lessons we can share.”

Because with cyber and data security, as with everything else in community banking, it all comes back to relationships. If our customers are unsure about an email or text message and they decide to call us before acting on it, that’s the first step in stopping the attack and a clear sign that sharing information is paying off. That’s the power of the relationship shining through and trumping anything the dark web can throw at us. When our customers know we will help protect them against fraud, they gain a peace of mind from that relationship that only we, as community banks, can provide.

— Brad M. Bolton, Chairman, ICBA, President, CEO of Community Spirit Bank in Red Bay, Ala.

FEDERAL DELEGATE’S REPORT

I hope a fun time was had by all in the Black Hills at the ICBSD Retreat! It was great to see familiar faces and meet new people. A big thank you to Megan and Hannah for another fabulous event! Does anyone else feel like we’re on the downhill of summer after the ICBSD Retreat? It’s a fun weekend that my family and I look forward to every summer.

As bankers, we are used to government overreach. I often wonder what the bankers in generations before me would have thought about the newest hot topic in banking- climate control. I think we can all agree, this is getting out of hand. The ICBA is heavily opposing “Operation Chokepoint”- an attempt to discourage banks from doing businesses with legal carbon-intensive businesses. The Security and Exchange Commission has proposed a rule that would require publicly held banks to disclose extensive climate related information in their filings. Luckily, this does not affect community banks, but we can all see where this regulation is going. Carbon-intensive businesses are not just your petroleum refineries and factories, but food production well- also known as farming.

The ICBA is in front of Operation Chokepoint for us. They understand that we community bankers have decades of experience in managing concentration risks and natural disasters. The ICBA will oppose any climate risk regulation that adversely impacts community banks and their ability to support their communities and customers.

As South Dakotans, we are lucky to have representation in Washington D.C. that is responsive to their constituents and is pro-community banking. Please, reach out to Representative Dusty Johnson, Senator John Thune, and Senator Mike Rounds to tell them how our communities and customers will suffer from any regulation that limits how we serve our customers, especially our farm customers. Agriculture is the backbone of this state.

For more information on this, please visit www.icba. org/advocacy where you will find more resources to ensure we can keep banking our customers and our communities.

— Valerie Anderson-Boudaka, ICBA National Director, Farmers State Bank of Canton, Canton, SD

Bruce Anderson,

John Ripley

Valerie Anderson-Boudaka

Bryan Launderville

Kirk Rikansrud

David Johnson

Jan Johnson,

Hugh Bartels

Reliabank

Josh Hogue, Reliabank

Jane Swenson, Reliabank Dakota Reid Johnson, Reliabank Dakota David Ebbers, Reliabank Dakota jeremey Keizer, Reliabank Dakota Bob Smithback, Reliabank Dakota Mark Lee, Reliabank Dakota Monte Troske, Farmers State Bank, Turton Mark Troske, Farmers State Bank, Turton Rory Troske, Farmers State Bank, Turton Kevin Teigen, Farmers State Bank, Turton Wayne Board, Farmers State Bank, Turton

CENTURY

Farmers State Bank of Canton Reliabank Dakota Farmers State Bank, Turton

Terry Vogel, Farmers State Bank, Turton Boyd Hopkins, CorTrust Bank Jack Hopkins, CorTrust Bank Jeff Smith, CorTrust Bank Robert Hopkins, CorTrust Bank Roger Weber, CorTrust Bank Mark Hahler, CorTrust Bank Troy Olson, CorTrust Bank Nathan Smith, CorTrust Bank James Grotenhuis, CorTrust Bank Paul Richards, Rivers Edge Bank Cameron Becker, Rivers Edge Bank Jodi Eich, Rivers Edge Bank James Viet, Rivers Edge Bank Don Nolan, Rivers Edge Bank Dean Dreessen, Merchants State Bank, Freeman Emily Hofer, Merchants State Bank, Freeman Steve Schmeichel, Merchants State Bank, Freeman Tor Sorlien, Merchants State Bank, Freeman Robert Satter, Merchants State Bank, Freeman

ABOUT PAC

The ICBSD Political Action Committee helps provide South Dakota

banks with a strong, united voice in Pierre. Your participation in the PAC helps ensure we have a seat at the table when issues

banking are being discussed in the state capitol.

First State Bank of Roscoe CorTrust Bank Rivers Edge Bank

Merchants State Bank, Freeman

Mary Jo Grismer, First State Bank of Roscoe Patty Beyers, First State Bank of Roscoe Lori Faw, First State Bank of Roscoe Toni Bukaske, First State Bank of Roscoe Jessica Holscher, First State Bank of Roscoe Caitlyn Lehr, First State Bank of Roscoe Brittany Hoff, First State Bank of Roscoe Clay Spielman, First State Bank of Roscoe

Sandra Kirschenmann, First State Bank of Roscoe Kim Oster, First State Bank of Roscoe Joell Bieber, First State Bank of Roscoe Phillip Hetick, First State Bank of Roscoe Chad Lang, First State Bank of Roscoe Kelly Eiseman, First State Bank of Roscoe Robert Kaul, First State Bank of Roscoe Kathleen Swenson, First State Bank of Roscoe

ROUNDS INTRODUCES BILL TO REMOVE BURDENSOME REGULATIONS ON AMERICAN TRUCKING INDUSTRY

U.S. Senator Mike Rounds (R-S.D.) introduced legislation that would remove burdensome government regulations, which are impacting the agricultural industry, school districts and trucking companies in South Dakota.

In 2012, then-President Obama signed into law legislation that set in motion a new rule that created a requirement for Entry-Level Driver Training (ELDT). The final rulemaking went into effect earlier this year. All new drivers who wish to obtain their Commercial Driver’s License (CDL) must now complete ELDT, adding a burdensome requirement at a time when the American Trucking Association estimates a nationwide trucker shortage of 80,000 drivers. Additionally, this requirement is costly and time consuming. ELDT training classes range from $450 to $8,500, depending on the trainer, and can take anywhere from three days to 20 days to complete.

Rounds’ legislation, the Trucking Regulations Unduly Constricting Known Service-providers (TRUCKS) Act, would allow states to issue a new “Small Business Restricted CDL” so ELDT requirements would not affect small businesses with nine CDLs or less. This would make certain any driver obtaining a CDL without completing the ELDT process could not switch to a larger company and bring a “Small Business Restricted CDL” with them. Further, it would protect small businesses from these constricting regulations so they can fill their positions in a timely manner and remain competitive in the industry. Additionally, the TRUCKS Act would allow states to exempt employees of agriculture-related industries, school districts and local units of governments (including county,

municipal and tribal), from ELDT requirements to obtain their CDL.

“At a time when our nation is in a recession and faced with worker shortages and supply chain issues, American businesses should not have to battle the heavy hand of government,” said Rounds. “We should be working on policies to help our producers and consumers, not hurt them. This legislation eases the burden on small trucking companies, agricultural producers, school districts and local units of government. It also gives power back to the states so they can decide their own rules of the road.” This legislation is supported by the Associated School Boards of South Dakota and has been endorsed by the U.S. Custom Harvesters.

“While we understand the need for CDL standards, the new rules have a significant effect on local school districts trying to hire bus drivers,” said Wade Pogany, Executive Director of Associated School Boards of South Dakota. “In rural areas school bus drivers are hard to find. We are grateful to Senator Rounds who understands the needs of rural states. The exemptions he has proposed will be beneficial for schools.”

“We’re appreciative of Senator Rounds for recognizing the burden of duplicative regulation on our industry,” said JC Schemper, USCHI board president and co-owner of Schemper Harvesting, a multi-generation family owned and operated custom harvesting business. “The additional time and financial investment required by ELDT creates obstacles for harvesters to meet the demand of farmers. We support safety measures, however,

— Mike Rounds, United States Senator (R-S.D)

“At a time when our nation is in a recession and faced with worker shortages and supply chain issues, American businesses should not have to battle the heavy hand of government.”

- Mike Rounds, United States Senator

when each state has existing strict safety measures and regulations in place that our members comply with, ELDT is unnecessary bureaucratic red tape.”

This bill has been cosponsored by Senators John Hoeven (R-N.D.), Roger Marshall (R-Kan.) and Kevin Cramer (R-N.D.).

“At a time when we already have a shortage of drivers and continued supply chain constraints, the FMCSA’s new training requirements impose higher costs and discourage new drivers from entering the workforce,” said Hoeven. “Our legislation provides important regulatory relief and flexibility by allowing exemptions for agriculture, small businesses and state and local governments. This will help ensure farmers, ranchers and other small businesses, as well as school districts and other government entities have access to the reliable and affordable transportation services they need while ensuring safety on our roads.”

“Custom harvesters across Kansas are overregulated by federal rulemakers who have never worked on a harvest crew,” said Marshall. “The ELDT requirements for new drivers are burdensome to small trucking companies, and this legislation is a common sense reform to eliminate barriers for small businesses, farmers, and custom harvesters crews who are already hard pressed to find an adequate amount of drivers.”

“With the current supply chain issues and shortage of truck drivers nationwide at a time of tremendous demand, the last thing the transportation industry needs is more overbearing bureaucratic red tape placed on them by the Biden Administration,” said Cramer. “The TRUCKS Act allows states to exempt certain drivers from new ELDT requirements and provide regulatory relief to small trucking businesses ensuring we have drivers on the road to keep interstate commerce moving.”

BACKGROUND

In 2012, then-President Obama signed into law the Moving Ahead for Progress in the 21st Century (MAP-21) Act. The law includes a provision, which added an additional section to the federal law dealing with CDLs. The provision directs the Secretary of Transportation to issue regulations establishing minimum entry-level driver training (ELDT) requirements for an individual operating a commercial motor vehicle. A 2020 interim final rule was finalized in June 2021 with a compliance deadline of February 7, 2022. The regulation (ELDT) applies to individuals seeking to obtain a Class A or B CDL for the first time, a Passenger (P), HAZMAT (H), or School Bus (S) endorsement for the first time or if trying to upgrade from a Class B CDL to a Class A CDL or a Class C CDL to a Class B CDL. The Class A CDL allows truckers to drive vehicles that are heavier than what is allowed with only a Class B CDL. ELDT does not apply to those obtaining a Class C CDL.

Prior to the implementation of ELDT, in order to get a CDL, applicants had to do the following:

• Obtain a medical certificate (if required for your operation there are some exemptions)

• Complete the CDL application and pay state fee Provide proof of identity

• Pass knowledge test

• Use a Commercial Learner’s Permit (CLP) in a commercial vehicle with another CDL holder for a certain amount of time as determined by the state (minimum waiting time varies by state)

• Return to State Licensing Bureau for road test –pass the road test

Under this new rule, CDL applicants have to complete the following additional ELDT requirements:

• Drivers will be required to attend theory and behind-the wheel classes PRIOR to taking the CDL knowledge test for a CLP Training must be provided by an entity or individual listed on the Federal Motor Carrier Safety Administration’s Training Provider Registry (trainers self-certify)

• The State Driver Licensing Agency will be required to verify training has been completed before allowing the driver to go to the DMV to get a CDL (this is done via electronic records uploaded by the trainer)

BORDER DISORDER

— John Thune, United States Senator

There is an undeniable crisis at our southern border. So far this fiscal year, Customs and Border Protection (CBP) has encountered more than 2 million illegal immigrants, far exceeding the Biden administration’s previous record, which it set last fiscal year. This doesn’t include known “gotaways,” immigrants who evaded apprehension after crossing the border – more than 1.1 million combined in the previous two fiscal years alone.

President Biden recently claimed he’s put a process in place to manage migrants and that he is working to make it safe, orderly, and humane. Conditions at the border contradict the president’s claim, as well as his vice president and appointed border czar’s recent assertion that the border is secure. Border Patrol is overwhelmed, local police departments are stretched thin, and border facilities and private shelters are beyond capacity. One Texas sheriff worries illegal immigrants may be released into communities with minimal or no screening because Border Patrol is so strained. This is especially concerning as convicted criminals, large shipments of drugs, and individuals on the terrorist watch list are known to be crossing the border.

Deaths at the southern border have surged under the Biden administration. The Department of Homeland Security reports 748 migrants have died crossing the border in fiscal year 2022, surpassing last year’s record. The number of CBP

search and rescue missions have substantially increased as well. These conditions have resulted in the United Nations International Organization for Migration declaring the U.S.-Mexico border “the deadliest land crossing in the world.”

The situation at the border is neither safe, orderly, nor humane. It is also clear the border is not secure. An illegal immigrant recently told a reporter, “Everybody believes that the border is open.” This is the message that President Biden’s immigration policies have conveyed since he first took office more than 20 months ago. The longer this inaction continues, the more individuals will be encouraged to attempt the dangerous journey across the southern border.

For months, as this crisis raged, Democrats have downplayed and outright ignored it. Democrats recently shoved their massive spending package through the Senate, containing hundreds of billions of dollars for Green New Deal priorities, but zero resources for addressing the border crisis. Republicans offered multiple proposals to provide resources to secure the border, but Democrats unanimously rejected all of them.

It was not until recently, when border-state governors began sending some illegal immigrants to places like New York City, Chicago, and Washington, D.C., to alleviate their overstretched communities that there was a

is an undeniable crisis at our southern border. So far this fiscal year, Customs and Border Protection (CBP) has encountered more than 2 million illegal immigrants, far exceeding the Biden administration’s previous record, which it set last fiscal year.”

- John Thune, United States Senator

sudden and predictable outcry from Democrats who accused these governors of manufacturing a crisis. Washington, D.C., a city of 700,000 people, declared a state of emergency and requested federal resources when they received about 9,400 migrants over five months. New York City, with 8.4 million residents, has not received as many as the nation’s capital. Eagle Pass, Texas – population: 29,000 – sees 10,000 migrants each week. Where is the real crisis?

The situation at our southern border is appalling, but it’s preventable. If the president has any real interest in making it “safe, orderly, and humane,” he would make border security a priority. His record so far suggests it’s more likely we’ll see the scenes of chaos and human suffering continue.

Whatever Loan You Need,

FOURTH QUARTER RALLY

Some suggestions on how to wrap up 2022

— Jim Reber, ICBA Securities, an ICBSD Preferred Partner.

The word “rally” can be used for a number of purposes and in different contexts. For instance, it could mean a long-distance auto race over varying surfaces and involving stages and checkpoints. It could mean a gathering of supporters to generate enthusiasm and momentum for an individual or cause—we’ve seen plenty of these during this election cycle.

It can also refer to a comeback from some type of challenge. It may be an improvement in one’s health. It could be a spurt of energy to enable the completion of a task. Finally, it might an analogy for sports or other competition in which a participant or team overcomes a deficit to snatch victory out of the grasp of defeat.

This final example is the general theme of this column. I hasten to say that the community banking industry, by most measures, is doing quite well. I’ve consistently heard from bankers across this country this year that “earnings are good.” So if there’s any catching up to do, it’s not in banking fundamentals. It has to do with—you guessed right—rising interest rates and the attendant drop in market values for your bonds. Here are a few ideas that may be worth considering as we approach year-end.

FUNDING OPTIONS

Suddenly, shockingly in some cases, community banks are having to consider using wholesale funds to manage their liquidity. This is an exercise that was fading in relevance in 2019 as loan demand

was beginning to wane, and had been in oblivion since. Not now: FHLB’s issued more debt in the third quarter than they did in the first two quarters combined, most of which was used to finance new advances to community banks.

And with a little effort, a bank can lock down attractive (which I admit is relative) terms on longer-duration borrowings. Even with 5%-plus yields available on shorter assets, low-4% costs can be secured for FHLB floating rate advances swapped to fixed, for five or so years. If you’re not inclined to execute a rate swap, traditional 3- to 7-year advances are generally less expensive than brokered CDs. This is, in part, compliments of the inverted yield curve.

“INCOME DEFERRAL”

This subheading is shorthand for “sell assets at a loss in this fiscal year, reinvest into higher-yielding bonds, and make back the loss before your original bonds mature.” All accountants worth their salt (I think I’m one of them) understand that pushing income into the future is a wise move from a tax planning, and cash flow, standpoint. And, since all community banks own liquid assets at belowmarket rates (i.e., have unrealized losses) in a year in which they’re probably ahead of budget, the table is set for a classic holiday feast: tax swap.

What makes this strategy viable in many cases is the ability to book a net-of-tax loss, since selling bonds is considered an ordinary event for a community bank. When the proceeds

are reinvested into tax-free instruments, the net loss often recouped in short order. Your brokers are capable of modeling a number of possible transactions to determine the best course of action.

If you do go down this path, here are a couple of possible sales items that may work for you:

Short bullet bonds or out-of-the-money callables

• Short (< 5 year) municipals (which are the domain of retail investors)

• Odd lot MBS with several years of seasoning

And for all you S corps, this strategy works even better as your higher marginal tax rates allow you to avoid more income tax liability.

LOOK AROUND YOU

If you’re inclined to sell out of some losing positions, but need to limit the impact on this year’s earnings, remember there may be other pieces of your balance sheet that can be sold at a profit. Not the least of these are floating rate assets such as SBA 7(a) loans.

The guaranteed portion of a 7(a) loan will likely adjust each quarter based on prime, which is 100% correlated with fed funds. They command large premia in the secondary market; it’s not uncommon to see a bid of over 110 cents on the dollar. Plus, the lender/seller is required to retain the unguaranteed portion of the loan, and to service it as well. There are SBA lender service providers that can guide a community bank through the secondary market process.

Far from making up lost ground, use of some of these ideas can more correctly press your advantages into 2023 and beyond. In a year of positive earnings pictures and solid credit quality, the fourth quarter could be the ideal time to set the stage for robust future periods. This holiday season, community bankers may be donning their rally caps.

QUARTERLY BANK INDUSTRY UPDATE

ICBA Securities’ exclusive broker Stifel presents its quarterly Bank Advisory and Strategic Services webinar on Dec. 8 at 10 a.m. Central. Bank profitability, industry risk and the M&A environment will be discussed. One hour of CPE is offered.

Contact your Stifel rep for more information.

Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks.

FIRST NATIONAL BANK IN PHILIP

When your bank is in rural Philip, South Dakota, you may be a long way from a lot of things, but that doesn’t mean you’re not close to people.

In fact, it makes you closer than ever to the communities you serve. Vice President Dillon Kjerstad of First National Bank in Philip agrees.

“In our territories, many customers may be 90 miles away from another independent bank,” said Kjerstad. “Our team is from here, they operate ranches and businesses here, and they know the people who come from miles around to keep their livelihoods going.”

With locations in Philip and Faith, the bank has been in business for over 110 years. Originally chartered as The Bank of Midland, they eventually moved to Philip, acquired another bank and became what we now know as First National Bank in Philip.

That history matters, according to Kjerstad. Because when you’ve been around that long, you are better built for the challenges and changes of a livestock and agricultural economy.

“We’ve lasted through the thirties, the eighties and the nineties when credit was drying up and interest rates were soaring,” said Kjerstad. “Having a community bank model, we were able to weather those challenges and not be beholden to national decision makers or market trends.”

With a predominantly ag-related clientele, it’s crucial that decisions are made locally and quickly. It’s a level of service that business owners,

ranchers and producers may not readily receive otherwise. Funds on hand, efficiencies and margins matter. But people matter more.

“When you know the people, you know their circumstances and what they’re capable of,” said Kjerstad. “That not only makes for quicker decisions, it helps put money back into the community because you keep those families here, operational, successful and invested.”

Speaking of being invested, the First National Bank in Philip team doesn’t really think twice about investing their free time by sitting on school boards, economic development committees or hosting local fundraisers. “The bank is kind of a hub for all those things. We just do that naturally, because we know it’s important,” said Kjerstad.

As Kjerstad takes on his latest role as Chairman for the ICBSD Board of Directors, he follows the path of those who came before him. Ray Smith, former

ICBSD President and current President, First National Bank in Philip, set an example of protecting and advancing what community banks do for a living, and for the living of their customers.

“We need people to know that when times are tough, community banks are going to stand tall,” said Smith. “Banking options are always changing and we must always advocate for the strength of our community model and keep it moving forward.”

While Kjerstad and his team at First National Bank in Philip look ahead, he is also looking ahead to his plans for ICBSD. “We have a great team of people, perhaps the best we’ve ever had. I view our number one job as preserving and protecting community banking and all that community banks do for our customers.”

Community bankers well know the advantages of the community banking model. In addition to lending flexibility and knowing the customer, Jack Youngberg, Vice President, Lending for United Bankers’ Bank boils it down to something even simpler, “We’re here because we have to be. We have to be the answer for our communities.”

Michael Hahn, Vice President, Correspondent Banking Officer agrees.

“These banks are often what drive our communities,” said Hahn. “When a sports team needs a scoreboard, for example, it’s important for us to be involved. That’s not just for our business, it’s what helps communities thrive and succeed.”

United Bankers’ Bank offers an innovative model. Owned and managed by community banks, their main goal is to level the playing field against big lenders banks and offer a full range of lending correspondent services for their banks’ customers. They do so by leveraging their various community bank owners and constructing the best solutions.

Hahn adds that organizations like theirs - and Independent Community Banks of South Dakotaare extremely important.

“With increased regulations, it’s not getting any easier to be a community bank,” said Hahn. “So it’s important to be involved with ICBSD to not only support our industry, but to network, have an exchange of ideas and make sure that a rising tide lifts all boats and everyone succeeds.”

Commitment to that success is part of what drives Hahn and their entire sales team. Doing what’s right for the customer underlines their values of success, non-compete relationships, innovation, growth and commitment.

In many cases, some smaller town community banks have an easier time financing a new work pickup than sorting through the regulations and requirements of a mortgage for a home that may be of lesser value.

“We help keep those banks competitive and viable for their customers,” said Youngberg. “Anything we can do to help streamline and support them, we’re going to do.”

Loyalty is key to those relationships says Hahn.

“Loyalty is important because you’re going to church with these people, seeing them out at dinner and school functions. And these are the very people you’re lending to,” said Hahn. “You know their work, their families, their land.”

Hahn recognizes that same loyalty and family atmosphere in ICBSD. “ICBSD has some of the best people in the world. Yes, there are business and networking benefits, but there are friendships, too. You get to know people on a different level. Your kids play with their kids.”

And while the team at United Bankers’ Bank is committed to working for their customers, they’re having a lot of fun too.

“When there’s a challenge, we try to get everyone involved and people jump in to get it done,” said Youngberg.

Hahn agrees, “It’s not just doing deals and checking boxes. It’s not just a bottom line business, it’s a people business.”

MICHAEL HAHN, ERIC SUNDBERG, GRANT MCNULTY, JACK YOUNGBERG

— Michael Hahn, United Bankers’ Bank

— Grant McNulty, United Bankers’ Bank

— Eric Sundberg, United Bankers’ Bank

— Jack Youngberg, United Bankers’ Bank

SUSPICIOUS ACTIVITY

Will You Know it When You See it?

The Federal Bank Secrecy Act is aimed at preventing money laundering and the financing of terrorism or other criminal activity, and suspicious activity reporting is a key component of the BSA framework. A bank’s failure to file suspicious activity reports or its failure to have policies and procedures to identify, relay, and report suspicious activity may result in civil money penalties, criminal penalties, and, at worst, imprisonment.

A bank is required to file a suspicious activity report (SAR) when a transaction conducted or attempted through the bank involves at least $5,000 in the aggregate, and the bank knows, suspects, or has reason to suspect that the transaction involves funds derived from illegal activities or is intended to hide or disguise funds derived from illegal activities. A SAR is also required when a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts. The definition of “transaction” is broad and includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, CD, and purchase or redemption of any money order.

FinCEN has issued guidance explaining the five essential elements of information – “who? what? when? where? and why?” – that must be collected

in connection with completing a SAR narrative.

Recognizing the SAR filing requirements is more straightforward, however, than recognizing actual suspicious activity. While larger banks may have personnel dedicated to BSA compliance, banks of all sizes must rely on personnel throughout the bank to identify suspicious activity and relay that information per the bank’s BSA policies and procedures. BSA training can include examples of suspicious activity that will help personnel in all departments recognize suspicious activity. The FinCEN guidance includes examples of common patterns of suspicious activity, including:

• A lack of evidence of legitimate business activity, or any business operations at all, by parties to the transaction.

• Unusual financial transactions occurring among certain business types (e.g., food importer dealing with auto parts exporter).

Complex transactions indicative of layering activity involving multiple accounts, banks, parties, and jurisdictions.

Suspected shell entities.

• Beneficiaries maintaining accounts at foreign banks that have been the subject of previous SAR filings.

• Businesses that do not meet routine customer due diligence requirements (e.g., unregistered/unlicensed businesses).

— Dixie K. Hieb, Davenport, Evans, Hurwitz & Smith, L.L.P.

With the recent legalization of medical marijuana, recognizing red flags related to marijuana-related businesses (MRBs) is especially important. FinCEN guidance has identified the following MRB-related red flags:

• Use of a state-licensed MRB as a front to launder money derived from other criminal activity.

• Cash deposits or withdrawals over a short period of time that are excessive relative to local competitors or the expected activity of the business.

Rapid movement of funds, such as cash deposits followed by immediate cash withdrawals.

• Deposits by third parties with no apparent connection to the accountholder.

• Inability to produce satisfactory licensing documentation.

• Publicly available sources and databases about the business, its owners, managers, or other related parties, reveal negative information.

FinCEN Alerts provide additional, activity-specific red flags. Recent alerts highlighted red flags indicating attempts to evade export controls and OFAC-impacted sanctions in connection with Russia’s invasion of Ukraine, including:

• The nature of a customer’s underlying business (specifically military or government-related work), type of services or products offered, and geographical presence pose additional risks of unintentional involvement in the evasion of export controls.

Parties to transactions with addresses that do not appear consistent with the business or are otherwise problematic (e.g., either the physical address does not exist or it is residential).

• Use of legal entity arrangements to obscure ownership, source of funds, or countries involved, particularly sanctioned jurisdictions.

Use of third parties to shield the identity of sanctioned persons or “politically exposed persons” seeking to hide the origin or ownership of funds, for example, to hide the purchase or sale of real estate.

Enforcement actions by various regulatory agencies serve to identify other types of red flags, including check fraud schemes involving a customer’s deposit of numerous checks payable to a third party and

identify theft schemes involving multiple attempts to hack a bank’s customer database.

Notably, the federal regulations provide that a bank may file a report of any suspicious transaction that it believes is relevant to the possible violation of any law even if reporting is not required. The BSA includes a safe harbor provision protecting a SAR filer from civil liability. Failure to file required SARs can, on the other hand, subject the bank and its officers to civil penalties of up to $100,000 for willful violations, as well as possible criminal penalties and jail terms of up to 10 years.

A bank’s BSA policies and procedures, including required staff training and procedures to relay and report suspicious activity, are key to meeting the bank’s SAR filing obligations. With appropriate training, bank personnel in all areas will recognize suspicious activity when they see it.

WELCOME TO THE NEWEST ICBSD ASSOCIATE MEMBERS!

DAKOTA

FINANCE NEW VISION SECURITY

Trisha Viss 605-681-8122 trisha@dakotabusinessfinance.com

Dakota BUSINESS Finance is an SBA Certified Development Company helping businesses work with their lenders to secure long-term, SBA 504 loan financing for purchasing and renovating existing buildings, construction of new buildings, leasehold improvements, and longterm equipment. DBF’s service area includes the entire state of South Dakota and Iowa and several counties in Minnesota and Nebraska.

newvisionnd.com 701-222-8888

We're proud to be the most trusted name in financial institutions with hundreds of security system installations throughout the Dakotas. We share a common goal: keep your bank locations secure around the clock. We accomplish this by designing and installing sophisticated security and keycard access systems. Each system is tailored to the specific demands of your branch locations including audit trail, compliance, employees, and customers. Our local team provides professional installation, training, and maintenance to minimize downtime and ensure best practices.

PROAG BANKWARE TECHNOLOGIES

Josh Eggley

402-215-5329 josh@proagbank.com

Mike Hinton

703-283-4961 mike@proagbank.com

ProAG Bankware Technologies is an innovative provider of fully integrated and customizable credit facilitation solutions for financial institutions. Our flexible agricultural lending platform, AnyCore Ag, is a cloud based, software-as-a-service (SaaS) delivery model that is easy to implement and use in a range of settings and institutions. At ProAG, we are software architects specializing in farmers, bankers, process, and technology.

The company was founded by a group of veterans in agricultural lending and financial services technology whose vision was to make lending technology easier for lenders and farmers by automating the many manual steps still ingrained in the loan process. We leveraged more than four decades of ag lending, risk management, and technology expertise to build our product focused on ease of use for the farmers and a seamless lending tool for lenders. We believe technology does not have to be complicated or expensive and should help make ag and small business lending, data collection and loan analysis easy and more efficient. The company has set these bars high for itself and believes its AnyCore lending solutions are a testament to these philosophies.

These days, Fintech solutions can automate just about any lending process. But no technology has ever focused on how to make it easier for borrowers, or to finally solve the challenge of connecting farmers and their lenders seamlessly by using the same lending platform. Additionally, there has been no new development in agricultural lending software using the latest technology available. Our agricultural lending solution, AnyCore Ag, is an Ag-centric lending platform that makes the loan process simple for Ag lenders AND your borrowers. AnyCore Ag was built using the most up to date technology. It is a cloud-based software-as-a-service (SaaS) and is designed to be easy for users. Additionally, because there is no software or updates to install on your or your customers computer, we have eliminated many of the technology support challenges.

Our unique customer portal allows your customer to easily share financial data, quickly apply for initial loans, and subsequent loans, and access analytics to better understand their financials. Our lender portal provides all the tools necessary for the lender to perform a complete credit analysis and loan underwriting for an informed and documented loan decision. It is a better solution for lenders by making technology easy and credit decisioning less complicated. For more information contact Josh Eggley at 402-215-5329 or josh@proagbank. com or Mike Hinton at 703-283-4961 or mike@proagbank.com.

THE BHG FINANCIAL ADVANTAGE:

Why Banks Should Partner with a FinQuant, not FinTech

Low lending margins, paired with a surplus of cash, have driven many banks to seek new income opportunities or diversify their portfolios to increase their bottom lines. One effective way to overcome these obstacles and achieve your revenue goals for the year is to form a strategic relationship with a proven industry partner.

One well-established alternative lender, BHG Financial, has set itself apart from FinTechs by carving its niche in the industry as a financial quantitative service company or FinQuant. The company has been originating and selling loans to community banks for over two decades, strategically targeting high-earning professionals throughout the United States.

BHG has built proprietary quantitative analysis models that leverage 20 years’ worth of its historical borrower data to uncover variables that dictate the risk associated with each borrower. Utilizing some of the brightest minds in analytics, as well as 50 data vendors, BHG has gained unmatched insight into its borrower characteristics and performance.

Not only does this data help inform future decision-making regarding who BHG lends to, it is also leveraged by BHG’s full-service, in-house marketing division to execute highly targeted campaigns to millions of professionals every day. BHG’s origination strategy is extremely selective: the company targets the top 16% of the strongest credit-quality borrowers in the market. This attention to detail ensures that BHG only lends to the highest-performing borrowers, resulting in a huge industry advantage for the company and over $11 billion in loans funded to date.

FINQUANT-DRIVEN RESULTS

Today, BHG works with more than 48,000 of these highly coveted borrowers each month, with millions of dollars in high-quality loan volume sold daily through the BHG Loan Hub, the company’s state-of-the-art loan delivery platform for community banks.

This secure online system allows for the daily sale and delivery of time-tested and proven

loans, helping BHG meet the growing loan demand from community banks. The platform includes various methods for purchasing a single loan or portfolio of loans.

It has been a highly effective distribution channel where a bank can approve the loan program and purchase loans according to their underwriting standards the next day.

New loans are posted daily, and—as with all BHG loans—a consistent, complete credit file is available for review prior to purchase.

Across the country, a network of more than 1,400 community banks has access to this program, earning a solid 3.5% – 6.25% return.

Over the course of 20 years, no bank has ever taken a loss on the BHG Core Loan portfolio.

If your bank is looking for new ways to diversify its commercial loan portfolio, partnering with an established lender like BHG may be a great opportunity.

1964 Travelers becomes one of

2011 Travelers CyberRisk coverage is introduced to

2021 Travelers distributes more than $4 million to ICBA members participating in the policyholder

Throughout our long history, we’ve stayed focused on keeping community banks on the cutting edge. We do this with industry-leading specialists, expertise and offerings –all backed with local banking knowledge. Learn

MARK SHLANTA TECHNOLOGY PARK

—

In the case of SDN Communications, its data center site northwest of Sioux Falls will be named the Mark Shlanta Technology Park in honor of its late, longserving CEO.

“One of Mark’s favorite activities was dreaming and being progressive in technology and economic development,” SDN Board of Managers President Denny Law said. “In Mark’s head, he had the 66 acres of that site mapped out even before we turned the first shovel of soil for the data center.”

Shlanta left his CEO position at the end of 2021 to focus on his cancer fight. He had worked at the business-to-business broadband service provider for nearly a quarter century, most of that time as CEO. He died in February shortly after his 57th birthday.

In one of Shlanta’s last actions with the SDN Board, he persuaded members to double the size of the existing data center because the first 10,000 square feet of raised data floor space was filled and he believed there was a need for more hardened data center space in the market.

With 12-inch-thick concrete walls able to withstand an F4 tornado (200+ mph winds), SDN Communications built the data center northwest of Sioux Falls as an emergency backup facility for its 50,000-mile fiber network and the networks of

the 17 independent broadband companies of South Dakota that own SDN.

Together, those networks support critical business, including many members of the Independent Community Bankers of South Dakota, as well as government data operations.

“It is the type of facility our customers expect SDN to have to ensure the constant connectivity services. That’s UPTIME,” said SDN CEO Ryan Punt.

The construction will add a 25,000-square-foot pod to the original structure. There’s room for another two pods of the same size.

Features of the hardened building that provide security and reliability include:

• 12-inch-thick concrete walls

• No windows

• Biometric security access

• Stringent, multi-layered security control procedures

• Dual authentication access control system

• Diverse access to metro, statewide and regional fiber networks

• Diverse power provider different from much of Sioux Falls

• 2MW generator

• Temperature and humidity control

• Monitored building management system

• Specialized fire suppression and smoke detection

• Dry agent fire suppression

Construction on the project is well underway and should be completed by fall, ready for new buildto-suit clients.

SDN has also created a preliminary master design for the rest of the site, but those developments will have to wait until city infrastructure, which is about a mile away, extends to the location.

However, signage honoring Shlanta will not wait. It will be completed yet this summer, CEO Punt said. “We’re excited to honor Mark and his family in naming this technology park after him,” Punt said.

BUILDING SECURITY FEATURES

• 12-INCH-THICK CONCRETE WALLS

• NO WINDOWS

• BIOMETRIC SECURITY ACCESS

• STRINGENT, MULTI-LAYERED SECURITY CONTROL PROCEDURES

• DUAL AUTHENTICATION ACCESS CONTROL SYSTEM

• DIVERSE ACCESS TO METRO, STATEWIDE AND REGIONAL FIBER NETWORKS

• DIVERSE POWER PROVIDER DIFFERENT FROM MUCH OF SIOUX FALLS

• 2MW GENERATOR

• TEMPERATURE AND HUMIDITY CONTROL

• MONITORED BUILDING MANAGEMENT SYSTEM

• SPECIALIZED FIRE SUPPRESSION AND SMOKE DETECTION

• DRY AGENT FIRE SUPPRESSION

THE GOLDEN RULE OF EMAIL

National Cybersecurity Awareness Month was in October. Its goal is educate the Nation about cybersecurity and how everyone can be safer online. The initiative provides a great opportunity to evaluate the cybersecurity culture of your company and how you can share your knowledge and resources with your customers and community.

Phishing training has been encouraged for years, yet we still see record-breaking attacks and losses. To help fix this recurring problem, organizations should consider adding one simple reminder to their training program: The Golden Rule of Email. This modern version of the well-known principle is to treat every email as if it’s a phishing attempt.

There are three steps to implementing this concept in any organization:

1. Introduce and apply the concept.

2. Build phishing awareness skills.

3. Take accountability.

STEP ONE: INTRODUCE AND APPLY THE CONCEPT

The rule should be endorsed by leadership teams and woven into training to be mastered by every employee. It should be established as part of onboarding and general practices, similar to how employees comprehend the company mission or values.

STEP TWO: BUILD PHISHING AWARENESS SKILLS

Once the concept is adopted, it’s time to start building the skills necessary to support the rule and act against suspicious activity.

A crucial step in helping employees steer clear of phishing emails is asking the Three Ws - who, what, and why. Questions similar to the following should be considered for every email received:

Who?

• Do I know the sender? Do I usually communicate with them?

• Is the email sent to an unusual group?

• Is the email address spelled correctly? What?

• What action does the sender want me to take?

• Does it contain bad grammar, odd styling, or typos?

• Is it written in a style consistent with the sender? Is the action something you’d expect? Why?

Why do they want me to click on a link, download an attachment, or send information?

• Is it an urgent request? Is it an unusual situation?

If you’ve gone through these questions and you have doubts, verify the email. Contact the sender via phone, internal chat, or in-person conversation to verify the validity of an email. Do not reply to the suspicious email asking for verification.

It’s also important to be wary of different phishing types, including email phishing, spear phishing, whaling, smishing and vishing, and angler phishing. In addition, organizations can put technical controls in place to filter down phishing emails and implement security controls to ensure emails are coming from valid sources.

— Nick Podhradsky, Executive Vice President, SBS CyberSecurity, LLC

STEP THREE: TAKE ACCOUNTABILITY

Each employee should know what steps to take when spotting a phishing email. Also, anyone who accidentally clicks on a phishing email and realizes it should immediately report it to their IT or security department(s) for faster identification and quicker response times.

The goal is for The Golden Rule of Email to become second nature for everyone. If you habitually follow this rule, you will instinctively verify certain elements before taking any action on an email. It becomes more than just another rule to follow; it’s a habit.

H E G O L D E N R U L E O F E M A I L T R E A T

H I S H I N G A T T E M P T A S I F I T I S A E V E R Y E M A I L

ELDER ABUSE

According to the Federal Bureau of Investigation (FBI), millions of elderly citizens are targeted annually with some form of financial fraud, and many of these attempts are successful. It has been estimated that seniors lose approximately $3 billion per year as a result of these scams, which are becoming more widespread and sophisticated.

Surprisingly, much of the criminal activity is initiated by a friend or family member. A recent study by the University of Southern California revealed that 55% of respondents reporting any type of elder abuse categorized those acts as financial, and that family members were the most alleged perpetrators of elder financial abuse.

With these facts in mind, banks should maintain heightened sensitivity around transactions that involve elderly clients, particularly if these clients have historically managed their own finances and may be exhibiting signs of cognitive decline. Increased vigilance, in general, can assist in uncovering fraud.

Knowing the customer, coupled with a comprehensive employee training program, can act as a strong front-line tactic to help banks prevent and expose elder financial abuse.

Here are some best practices for recognizing “at-risk” clients:

• Be on the lookout for non-family members being added to banking or investment accounts. Monitor large money transfers and changes in spending patterns, as these could be signs that some form of abuse is occurring. A senior’s spending habits are often predictable in frequency, volume and payees. Be alert for large amounts of funds exiting accounts to payees who had not been previously paid in any manner.

• Keep detailed notes in the form of dated, journal-type entries, recording any spending or

personal behavior that seems unusual. These notes would be in addition to those kept on risk tolerance, goals, objectives, etc.

• Follow up with clients via phone or email to discuss any sudden financial decisions that seem out of character.

• In addition to making personal contact, encourage the client to engage an independent attorney to assist in their financial matters. Understand the laws that apply to the financial abuse of an elder client. Follow prescribed protocols if any illegal activity is suspected.

• Implement internal procedures to elevate circumstances which may present the need for further inquiry and analysis to the appropriate decision-makers.

“It’s important not just to have a system in place to detect elder financial abuse, but to also act on situations where potential fraud or malicious intent has been identified,” said Kristin Roger, Vice President and Head of Financial Institutions at Travelers. “We know banks want to serve as trusted advisors to their customers, and by taking simple steps, they can better protect their customers from potential financial harm.”

Elder financial fraud is on the rise and counts as one of the more heinous abuses of trust that senior citizens might endure. Along with the financial damage inflicted on customers, incidents of elder financial fraud can cause serious reputational harm. Therefore, implementing a sound method of prevention, detection, identification and reporting of this criminal behavior is paramount.

Travelers is committed to managing and mitigating risks and exposures, and does so backed by financial stability and a dedicated team – from underwriters to claim professionals – whose mission is to insure and protect a company’s assets. For more information, visit www.travelers.com.

FACES

PAYMENTS

Covid-19 has accelerated the move to electronic payments. There is less need for bricks-and-mortar banking as account holders can complete just about any transaction online. To stay competitive—and retain customers— banks need to find ways to compete effectively with non-bank fintechs, large regional banks and large credit unions. The challenge in everything is to find business partners that offer leading edge technologies and share common goals.

When you choose United Bankers’ Bank as your partner, you gain access to background systems that support your business. UBB’s operations team manages a full gambit of payment types for its community bank customers. Through our biometric fingerprint secured UNET system, we run ACH transactions as well as both domestic and international wires.

Collectively, our operations and payments teams have more than 425 years of experience in banking, payments and operations. This allows community bankers to focus resources on their customers. By offering instant payments, banks can capture deposits currently held in fintech payment system wallets.

First for your Success is the guiding principle for what we do. As the nation’s first bankers’ bank, we were founded by community bankers who pioneered the bankers’ bank model. We’re a full-service bankers’ bank offering the resources and support community banks need to compete, succeed and remain community based. Our business is built on relationships with community banks and the pledge that we will never compete against them.

US COMMUNITY BANKS POST STRONGER LOAN GROWTH, WIDER NET INTEREST MARGINS IN Q2

U.S. community banks generally reported improved loan growth and net interest margin in the second quarter compared to a year earlier, according to data collected and analyzed by S&P Global Market Intelligence.

POSITIVE TREND

Publicly traded U.S. banks with assets of less than $10 billion reported a median net interest margin of 3.37%, up from 3.23% a year earlier. The sector reported a median 8.5% loan growth, against a 0.7% decline in loans last year, when consumers and businesses had enough cash to avoid borrowing, partly due to federal pandemic aid.

Smaller community banks, or those with assets of less than $3 billion, had a median NIM of 3.45% in the most recent quarter, up from 3.28% in the year-ago period. This subgroup saw a median 8.1% loan growth in the second quarter, jumping from a 0.4% uptick in the comparable 2021 period.

Those with assets of $3 billion to $10 billion had a median NIM of 3.32% in the second quarter, bigger than the year-ago quarter’s 3.18%. They saw a median 10.0% loan growth in the past quarter, bouncing from a 1.7% compression in the same period last year.

ALL-TIME HIGHS

Englewood Cliffs, N.J.-based ConnectOne Bancorp Inc. posted the widest net interest margin among the 20 largest community banks by total assets, at 3.90%. It was followed by Wilmington, N.C.-based Live Oak Bancshares Inc. at 3.88%, and Newark, Ohio-based Park National Corp. at 3.83%.

ConnectOne Bancorp President and CEO Frank Sorrentino noted during the bank's recent earnings call that much of ConnectOne's loan growth in the past quarter came from non-commercial real estate components, notably commercial and industrial.

On Live Oak Bancshares' second-quarter earnings call, CEO James Mahan said the company's nationwide government-guaranteed lending platform has led to an all-time high pipeline.

Live Oak CFO William Losch said the company's NIM of 3.89% held up well during the quarter — at the beginning of the Federal Reserve's rateincrease cycle.

"We still expect some compression as the Fed continues to raise rates rapidly and funding costs move more quickly than loan pricing," Losch said.

TOUGH METRICS

While loan growth and NIM were favorable in the second quarter, deposit growth slowed during the period. Overall, community banks had a much lower median deposit growth of 6.6% in the second quarter than in the year-ago quarter at 11.4%.

Those with assets of $3 billion to $10 billion had deposit growth of 6.9% in the most recent quarter, down from 10.5% in the year-ago quarter. Those with assets of less than $3 billion posted deposit growth of 6.6%, less than half of the 14.2% growth rate they had a year earlier.

Return on average assets was likewise tough for community banks in the second quarter, even though profitability was positive based on loan growth and NIM.

The entire sector posted a median return on average assets of 1.11% in the second quarter, down from 1.20% a year ago. Those with assets of $3 billion to $10 billion recorded a 1.15% return on average assets, down from 1.34% in the year-ago quarter.

UNITED BANKERS’ BANK WELCOMES KURT COTTIER AS SENIOR VICE PRESIDENT, SENIOR LENDING OFFICER

BLOOMINGTON, MN – Dwight Larsen, President and CEO of United Bankers’ Bank (UBB), is pleased to announce the appointment of Kurt Cottier as Senior Vice President, Senior Lending Officer. Kurt joins UBB with over 30 years of lending experience in the community banking industry. He is actively involved as a Class Mentor of Essentials of Business Program with Women Venture as well as volunteering within other area organizations.

“Kurt is a seasoned lender and community banker that will bring a wealth of industry knowledge to the UBB Lending Team,” commented Dawn Tollefsrud, Executive Vice President, Chief Credit Officer. “His experience and community involvement illustrates his fit with the culture and mission of our organization.”

Kurt received his bachelors of business administration in Industrial Relations with minor credits in Finance and Psychology from University of Wisconsin – Milwaukee.

Kurt Cottier Senior Vice President Senior Lending Officer

UNITED BANKERS’ BANK WELCOMES ALAN MCLEAN AS

SENIOR VICE PRESIDENT, OPERATIONS DIRECTOR

BLOOMINGTON, MN – Dwight Larsen, President and CEO of United Bankers’ Bank (UBB), is pleased to announce the appointment of Alan McLean as Senior Vice President, Operations Director. Alan joins UBB with over 20 years of experience in correspondent banking and operations. He studied business at the University of Alabama and received a general banking certificate from the Alabama Banking School as well as certifications in FedLine 101 and FedLine LA.

“Alan’s dedication to community banking aligns well with UBB’s mission and core values,” stated Mary Williams, Executive Vice President, Chief Operations Officer. “His vast knowledge of bank operations will prove to be a great asset to UBB.”

Alan will be based in Birmingham, Alabama.

Alan McLean Senior Vice President Operations Director

UNITED BANKERS’ BANK ANNOUNCES STRATEGIC PARTNERSHIP WITH BLUE TEAM ALPHA

BLOOMINGTON, MN – United Bankers’ Bank (UBB), the nation’s first bankers’ bank and Blue Team Alpha, an elite cybersecurity force, announce an agreement to offer cybersecurity services to UBB's community banks. Through this partnership, UBB and Blue Team Alpha will provide community banks with access to comprehensive cybersecurity services to help shore up defenses against cybercriminals.

"Very few areas present more challenges to community bankers than cybersecurity. Data breaches in financial services make the headlines weekly and regulators are cracking down. I'm happy to announce Twin-Citiesbased Blue Team Alpha is the newest addition to UBB's suite of consulting services for our customer banks," commented UBB’s President and CEO Dwight Larsen.

"As banks adopt advanced technologies to improve customer service and operating efficiencies, they increase their attack surface and become more vulnerable to cybercriminals. Blue Team Alpha is happy to partner with UBB to help increase the security posture of community banks and the communities they serve," said Joe Kingland, CISSP, CEO of Blue Team Alpha.

The security experts at Blue Team Alpha have experience in addressing financial institutions' complex and highly regulated demands. The company has over 25 years of experience implementing stringent IT standards for banks and financial institutions.

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 over 1,000 community banks throughout 22 states. For more information, please visit www.ubb.com or follow us on LinkedIn or Facebook.

ABOUT BLUE TEAM ALPHA

Blue Team Alpha is an elite cybersecurity force with one primary focus - to keep its clients' company resources safe from attack. Established in 2018 as a subsidiary of Manage Infinity, Blue Team Alpha was designed to focus on incident response and to minimize the business impact of cyberattacks. The team has deep roots in incident response with decades of experience handling hundreds of breach investigations across 12 industries. For more information on Blue Team Alpha, visit blueteamalpha.com or follow us on LinkedIn or Facebook.

UNITED BANKERS’ BANK ANNOUNCES PLAN TO PROVIDE FEDNOW INSTANT PAYMENTS THROUGH PIDGIN NETWORK

BLOOMINGTON, MN – United Bankers’ Bank (UBB), the nation’s first bankers’ bank announced its new instant payments solution Pidgin, developed by VSoft Corporation, projected to roll out in time for the FedNow program’s anticipated late 2022/early 2023 launch.

Engineered to deliver innovation no matter how payments evolve, this new payment solution will allow banks of all sizes to participate in any new instant payments arena. Through Pidgin, UBB will provide customers the ability to receive only payments or both send and receive payments 24 hours a day, 7 days a week, 365 days a year via Peer-to-Peer (P2P), Consumer-to-Business (C2B), Business-to-Consumer (B2C), and Business-to-Business (B2B) payments.

“As a pilot bank for FedNow, we are excited to have a solution for banks of any size, large or small, to communicate with any instant payment channel when FedNow is up and running,” commented Dwight Larsen, UBB’s President and CEO. “Regardless of a bank’s participation in FedNow, we will have a solution.”

“In keeping with our mission, we want to ensure community banks have access to innovative, secure, and cost- effective products that are supported by the highest level of customer service,” said Mary Williams, UBB’s Chief Operations Officer. “VSoft’s Pidgin Network embodies all these traits.”

The Pidgin Network will provide the utmost security by combining UBB UNET’s, biometric fingerprint authentication with Pidgin’s SSL Internet date encryption. As we roll out this exciting update, UBB will keep customers informed when it is ready to be used. Institutions with questions are encouraged to contact Mary Williams, Executive Vice President and Chief Operations Officer, at mary.williams@ubb.com.

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, California, Arizona, South Carolina, Florida, Georgia, North Carolina, Kentucky, Tennessee and Illinois. For more information please visit www.ubb.com.

CORTRUST BANK NAMED A TOP BANK IN SOUTH DAKOTA

BY FORBES MAGAZINE

SIOUX FALLS, SD, JULY 12, 2022 – CorTrust Bank has been named a 2022 Best Bank in South Dakota by Forbes Magazine. This is the third time CorTrust Bank has received this recognition over the past four years. “It’s an honor to hold the distinction of being one of South Dakota’s Best Banks,” said Jack Hopkins, CorTrust Bank President and CEO. “I consider this a true testament to our outstanding employees and their commitment to CorTrust’s customers and communities.”

According to Forbes, they went directly to customers, partnering with market research firm Statista to conduct more than 26,000 in-depth interviews about banking relationships. Respondents answered questions that centered around six areas of banking including trust, branch services, digital services, terms and conditions, customer services and financial advice. Just 2.7% of banks nationwide made the cut for the best-in-state rankings.

“I’m grateful our customers trust us with their financial needs and continue to choose CorTrust as their banking partner,” said Hopkins. “We will strive to raise expectations for years to come.” For the complete Forbes Magazine article, Best-in-State Banks, click the link below. https://www.forbes.com/best-in-state-banks/#3c88c16a5873

ABOUT CORTRUST BANK

Since 1930, CorTrust Bank has been serving the needs of individuals and businesses throughout 16 South Dakota communities, and 15 Minnesota communities, with 37 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 $1.6 billion in assets, and $165 million in equity and reserves. CorTrust Bank – raise your expectations.

C yberSecurity

P.O. BOX 615 WATERTOWN, SD 57201 605.878.3040