JULY/AUGUST 2025 A PUBLICATION OF THE INDEPENDENT COMMUNITY BANKERS OF COLORADO BUILDING ON THE PAST, BANKING ON THE FUTURE. Balancing AI-Driven AML With Human Control
©2025 The Independent Community Bankers of Colorado (ICBC) | The newsLINK Group LLC. All rights reserved. Independent Report is published six times per year by The newsLINK Group LLC for ICBC and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of ICBC, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Independent Report is a collective work, and as such, some articles are submitted by authors who are independent of ICBC. While a first-print policy is encouraged, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. 6732 W. Coal Mine Ave., #640 • Littleton, CO 80123 • (303) 832-2000 2024-2025 OFFICERS ICBC CHAIRMAN Tom Ogaard President & CEO Native American Bank ICBC PRESIDENT Mike Hurst President Del Norte Bank ICBC PRESIDENT-ELECT Joe Martinez President & CLO San Luis Valley Federal Bank ICBC ICBA STATE DIRECTOR PJ Wharton President & CEO Yampa Valley Bank ICBC STAFF EXECUTIVE DIRECTOR Mike Van Norstrand mvannorstrand@icbcolo.org ADMINISTRATION DIRECTOR/ TREASURER Maelynn Lewis mlewis@icbcolo.org LEGAL COUNSEL Christian Otteson Partner Otteson Shapiro LLP LOBBYIST Mary Marchun Founding Partner The Capstone Group 2024-2025 DISTRICT DIRECTORS DISTRICT A Dan Ebert, Vice President, Evergreen National Bank Mark Sheeley, President/CEO, RNB State Bank/Front Range State Bank Robert Holt, Senior Vice President, North Valley Bank Jeff Walker, Senior Vice President & CCO, Redstone Bank DISTRICT B Mark Brase, President, Points West Community Bank Tim Croissant, Market President, Bank of Colorado Travis Goeglein, Senior Vice President, First FarmBank Scott Applegate, President and CEO, Bank of Estes Park DISTRICT C Ben Johnson, President, First National Bank Colorado Sean Lening, President, GN Bank Miles McClure, CEO, Rocky Mountain Bank & Trust Kathryn Perry, Senior Vice President, Park State Bank & Trust DISTRICT D Wade Gebhardt, Corporate President, Mountain Valley Bank John Stelzriede, Market President — Colorado River Region, Alpine Bank Niki Stotler, President & CEO, High Country Bank Chad Zummach, Executive Vice President, Gunnison Bank & Trust ICBC ADVISORY BOARD MEMBERS Eric Budreau Partner Eide Bailly Jim Hall Managing Director Bond & Specialty Insurance — Financial Institutions, Travelers Bill Mitchell President & CEO Bankers’ Bank of the West Christian Otteson Partner Otteson Shapiro LLP 2 | INDEPENDENT REPORT
20 CONTENTS 10 14 CONNECT Email us mlewis@icbcolo.org Like us on Facebook ICBColo Connect with us ICBColo Follow us on X ICBColo Give us a call (303) 832-2000 Follow us on Instagram ICBColo 2025 PUB. 4 ISSUE 4 4 Support the ICBC’s Associate Members! 6 ICBC Preferred Providers FLOURISH 7 Creating Financial Freedom for Communities Nationwide By Rebeca Romero Rainey, President and CEO, ICBA FROM THE TOP 8 Community Bankers Are Leaders in Times of Crisis By Jack E. Hopkins, Chairman, ICBA 10 Belief Is the Last Backstop What Easing Bank Capital Rules Really Means for the Treasury Market By Christopher Myers, CEO, B:Side Capital and B:Side Fund, ICBC Associate Member REGISTER TODAY! 13 52nd Annual Convention 14 Whole Lotta Thinkin’ Going On Fed’s Forward Guidance Reflects Uncertainty By Jim Reber, President and CEO, ICBA Securities, ICBC Associate Member and Preferred Provider 16 Balancing AI-Driven AML With Human Control By Jessica Tirado, CSI, ICBC Associate Member 18 Choosing a Deposit Network and Maximizing Its Value for Your Bank By Steve Kinner, Senior Managing Director, IntraFi, ICBC Associate Member 20 The Real Impact of Downsizing Financial Regulators By Laura Zannucci, Audit Manager/Information Security Officer, SBS CyberSecurity, ICBC Associate Member and Preferred Provider 16 INDEPENDENT REPORT | 3
SUPPORT THE ICBC’S ASSOCIATE MEMBERS! ACCOUNTING | COMPLIANCE EideBaillyLLP. . . . . . . . . . . . . . . . . . . . . . . . . .(303)770‑5700 Fortner Bayens PC . . . . . . . . . . . . . . . ........ (303) 296‑6033 Forvis Mazars . . . . . . . . . . . . . . . . ......... (303) 861‑4545 Moss Adams LLP now Baker Tilly . . . . . . . . . . . . . . (503) 471‑1277 Plante Moran** . . . . . . . . . . . . . . . . ........ (303) 740‑9400 ADVERTISING | EQUIPMENT | PRINTING | SUPPLIES Kristopher James Company . . . . . . . . . . . . . . . . . (800) 274‑9212 Spry.. .. .. .. .. .. .. .. .. .. ............ (303) 323‑4341 CAREER ADVANCEMENT Graduate School of Banking at Colorado . . . . . . . . (800) 272‑5138 CONSULTING | HUMAN RESOURCES AND MANAGEMENT | MARKETING | STRATEGIC PLANNING BankStrategiesLLC . . . . . . . . . . . . . . . . . . . . . . (303)291‑3700 (A Bankers’ Bank of the West Bancorp Inc. Subsidiary) Expert Business Development . . . . . . . . . . ..... (610) 771‑2121 *ICBA CRA Solutions .. .. .. .. .. .. ........ (877) 232-0859 *ICI Consulting Inc. .. .. .. .. .. .. .......... (316) 201‑8590 TheJamesPaulGroup . . . . . . . . . . . . . . . . . . . . (877)584‑6468 MJCPartners . . . . . . . . . . . . . . . . . ......... (213) 278‑0429 The NaviTrust Group . . . . . . . . . . . . . . ....... (801) 438-1842 Piper Sandler & Co. . . . . . . . . . . . . . . ........ (415) 978‑5057 *S&P Global .. .. .. .. .. .. .. .. ........... (434) 951‑6948 CORRESPONDENT BANKING SERVICE *Bankers’ Bank of the West .. .. .. .. .. ....... (303) 291‑3700 BellBank. . . . . . . . . . . . . . . . . . ........... (701) 371‑3355 Citizens Bank Farmington . . . . . . . . . . . . ...... (505) 599‑0100 INTRUSTBank . . . . . . . . . . . . . . . . ......... (800) 732‑5120 PCBB.. .. .. .. .. .. .. .. .. .. ........... (888) 399‑1930 TIB — The Independent BankersBank . . . . . . . . . . . (972) 650‑6000 CYBERSECURITY | IT CONSULTING AND SERVICES | SECURITY Alogent..............................(719)583‑8004 ArcticWolf............................(888)272-8429 Botdoc.. .. .. .. .. .. .. .. .. ............ (719) 960-4475 CivITas Bank Solutions . . . . . . . . . . . . . ....... (303) 291‑3700 (A Bankers’ Bank of the West Bancorp Inc. Subsidiary) Cook Solutions Group . . . . . . . . . . . . . ....... (503) 260‑8562 Federal Protection Inc. . . . . . . . . . . . . . ....... (800) 299‑5400 FileInvite. . . . . . . . . . . . . . . . . . ........... (719) 771-3586 M.R.Solutions. . . . . . . . . . . . . . . . . . . . . . . . . .(303)296-3328 Richey May Cyber*** . . . . . . . . . . . . . . ....... (303) 721-6131 *SBS CyberSecurity .. .. .. .. .. .. .......... (785) 594‑0503 DATA PROCESSING | EFT | ATM | CARD PROCESSING | MERCHANT SERVICES *Bankers’ Bank of the West .. .. .. .. .. ....... (303) 291‑3700 *BluePoint ATM Solutions LLC .. .. .. .. ....... (540) 335‑2848 Computer Services Inc. . . . . . . . . . . . . . . . . . . . . (970) 212‑7104 DCI.................................(620)694-6800 *IBT Apps . . . . . . . . . . . . . . . . . . . . . . . . . . . . (512) 606‑1100 *ICBA Bancard / TCM Bank .. .. .. .. .. ....... (800) 242‑4770 Jack Henry & Associates . . . . . . . . . . . . ....... (417) 235‑6652 SHAZAM.. .. .. .. .. .. .. .. .. ........... (515) 288‑2828 VisaInc.. . . . . . . . . . . . . . . . . . ........... (415) 238‑3682 INSURANCE | BENEFIT SERVICES Bank Compensation Consulting . . . . . . . . . . . . . . (303) 482‑1844 First Insurance Services Inc. . . . . . . . . . . . ...... (719) 456‑2303 *ICBA Reinsurance . . . . . . . . . . . . . . . . . . . . . . (888) 790‑6615 *Travelers .. .. .. .. .. .. .. .. ............ (720) 200‑8416 INVESTMENTS | FUNDING AND LENDING PARTNERS B:SideCapital. . . . . . . . . . . . . . . . . . . . . . . . . .(303)657‑0010 TheBakerGroup. . . . . . . . . . . . . . . . . . . . . . . . (405)415‑7200 BancAlliance . . . . . . . . . . . . . . . . . ......... (301) 232‑5423 *BHG Financial Institutional Network*** .. .. .... (954) 263‑6399 Citizens Bank Farmington . . . . . . . . . . . . ...... (505) 599‑0145 Colorado Enterprise Fund . . . . . . . . . . . . ...... (303) 860‑0242 Colorado Housing and Finance Authority . . . . . . . . (303) 297‑7329 D.A.Davidson..........................(303)764‑6000 FHLBank Topeka — Denver Office . . . . . . . . ..... (720) 212‑9873 First Bankers’ Banc Securities Inc. (FBBS) . . . . . . ... (720) 709‑7613 GillCapital............................(303)296‑6260 HelloBello. . . . . . . . . . . . . . . . . . .......... (970) 946-6160 *ICBA Mortgage .. .. .. .. .. .. .. .......... (800) 253‑5356 *ICBA Securities . . . . . . . . . . . . . . . . . . . . . . . . (800) 422‑6442 IntraFi Network . . . . . . . . . . . . . . . . ......... (303) 706‑9265 Northland Securities Inc. . . . . . . . . . . . . . . . . . . . (303) 801‑3380 Olsen Palmer LLC . . . . . . . . . . . . . . . ........ (202) 803‑2620 Performance Trust Capital Partners . . . . . . . .... (312) 521-1000 Preferred Lending Partners . . . . . . . . . . . ...... (303) 861-4100 RocketPro. . . . . . . . . . . . . . . . . . .......... (704) 650-0622 Towne Mortgage Company . . . . . . . . . . ...... (303) 947-5244 USDA Rural Development . . . . . . . . . . . . ...... (720) 544-2916 West Gate Bank Mortgage . . . . . . . . . . . ...... (402) 434‑4116 LEGAL SERVICES Arnold&Porter. . . . . . . . . . . . . . . . . . . . . . . . .(303)863‑1000 Godfrey Law Group LLC . . . . . . . . . . . . ....... (303) 802‑6336 Markus Williams Young & Hunsicker LLC. . . . . . . . . (303) 830‑0800 Otteson Shapiro LLP (ICBC Counsel) . . . . . . . .... (720) 488‑0220 Spencer Fane LLP . . . . . . . . . . . . . . . ........ (303) 839‑3838 StinsonLLP . . . . . . . . . . . . . . . . . .......... (303) 376‑8400 Womble Bond Dickinson** . . . . . . . . . . . ...... (303) 623‑9000 LOAN REVIEW SERVICES EideBaillyLLP. . . . . . . . . . . . . . . . . . . . . . . . . .(303)770‑5700 Fortner Bayens PC . . . . . . . . . . . . . . . ........ (303) 296‑6033 ICBC LOBBYING AND PUBLIC RELATIONS The Capstone Group (ICBC Lobbyists) . . . . . . . . . . (303) 860‑0555 *ICBC Preferred Providers **Silver Associate Member ***Gold Associate Member 4 | INDEPENDENT REPORT
BHG Financial Institutional Network National Seminar Designed for community banks: A deep dive into BHG Financial and the loan purchasing program Scan to register Alexis Simons VP, Institutional Relationships 315.849.5658 simonsa@bhg-inc.com REGISTER NOW BHG is an endorsed vendor
ICBC PREFERRED PROVIDERS ICBC Preferred Providers are selected by bankers just like you, so give them special consideration when considering their proposals for your bank! To learn more about ICBC’s Preferred Providers, contact the ICBC at (303) 832-2000. Please note: ICBC endorses the listed companies but not all products offered by the company. Contact: Scott Wintenburg | swintenburg@bbwest.com | (303) 291-3700 or (800) 601-8630 Merchant services from Bankers’ Bank of the West help you grow customer relationships with mobile payments technology, competitive unbundled pricing, efficient approvals and startups, responsive support and training. Contact: Alexis Simons | simonsa@bhg-inc.com Creator of the largest community bank loan network in the country. ICBC members can access the BHG Loan Hub, a secure, state-of-art loan delivery platform and the number-one source for professional loans. Contact: Wade Zirkle | wade@bluepointatm.com | (720) 295-9142 Colorado-based BluePoint ATM Solutions provides cost-efficient, reliable, branch and off-site ATM equipment and managed services to community banks across the Mountain West. From equipment sales/leases to custom installations, CIT, and ongoing service and maintenance — BluePoint provides dependable, cost-efficient ATM programs tailored to meet your bank’s needs. Contact: Phil Layher | phil.layher@ibtapps.com | (512) 616-1188 IBT Apps® is an empowering core partner to community banks nationwide, offering end-to-end core and digital banking solutions that meet today’s customer demands. Their adaptable i2Suite banking system enables your bank to streamline operations, control costs and mitigate risks. Transform your bank with the power of one total solution. Contact: icba.org/solutions | (866) 843-4222 The ICBC supports and recommends the following products and services supplied by our national association, the ICBA: ICBA Bankcard and TCM Bank, N.A.; ICBA Compliance & Risk Management; ICBA Mortgage; ICBA Reinsurance; and ICBA Securities. Contact: Mike Hatch | mike.hatch@ici-consulting.com | (316) 201-8590 Since 1994, ICI Consulting has helped banks and credit unions to assess, cost justify, evaluate and convert core processing, digital banking, EFT, lending, document imaging, CRM and branch solutions. Contact: Brian Miller | brian.miller@sbscyber.com | (605) 923-8722 SBS is your cybersecurity partner. Our offerings include: TRAC™ — Cybersecurity risk management software; Cyber-RISK™ — Automated FFIEC cybersecurity risk assessment software; IT and Network Security Audits; Consulting Services; Full Service Vendor Management; Role-Based Certifications; Vulnerability Assessments; Penetration Testing and more! Contact: Joe Valdez | joseph.valdez@spglobal.com | (213) 549-2281 S&P Global combines exclusive analysis and in-depth data in real time for the banking, financial services and insurance industries. From bank branch data and government assistance programs to executive compensation and league tables, S&P is the final word in business intelligence on financial institutions. Contact: Madeline Dickman | mdickman@travelers.com | (720) 200-8293 Offering a wide range of customized insurance protection, Travelers SelectOne+® for financial institutions is designed to respond to the most recent trends in banking. 6 | INDEPENDENT REPORT
At the end of the day, our flexibility and creativity are what set us apart from other providers. FLOURISH Creating Financial Freedom for Communities Nationwide As we recently celebrated Independence Day, I can’t help but equate that sense of freedom with what we do as community bankers. We are champions of our local communities, ensuring our customers have access to financial services that afford opportunities for individual freedoms. Take lending, for example. Community bankers bring with us unique attributes — including our nimbleness, creativity and problem-solving — that help us in taking a long-term focus to our customer relationships. We listen to what customers need, factoring in our deep knowledge of our local market, and we offer solutions that address the individual opportunities and challenges of that very community. No two customers are exactly alike, and community bankers identify the right mix to help customers succeed over time. It’s in our DNA to consider the ebb and flow of our landscapes and tailor solutions accordingly. But today’s customers want it all. They seek the relationship and knowledge their community banker provides, but they also want the decision immediately. We live in an instant gratification society, and today’s lending decisions are pressured by a ticking clock. It’s a constant balancing act between ensuring thoughtful, tailored solutions and responding to today’s immediate needs. Fortunately, community banks can deliver both a holistic, thoughtful process and timely decision-making. When we look at outstanding lenders, we see a strong thread of commonality: They have a unique ability to maximize local knowledge, combine it with their personal relationships, and offer tools that support the speed and ease of customer experience. By combining technology’s efficiencies and insights with the creativity and nimbleness anchored in a community banker’s personal relationship, we achieve a near-perfect lending solution. By Rebeca Romero Rainey, President and CEO, ICBA At the end of the day, our flexibility and creativity are what set us apart from other providers. Those attributes allow us to be the relationship bankers we are, speaking directly to the financial needs of those we serve. For our customers and communities, I’d say that’s an independence worth celebrating. INDEPENDENT REPORT | 7
When faced with a crisis, community banks step up. Our communities rally around us because, as their pillars, community bank leaders take the initiative to oversee recovery efforts. In many cases, we become the disaster recovery center for those in need. For instance, think back to COVID. Community banks were the lifeblood of small businesses in that uncertain time. I know that my bank asked a lot from our employees. We had people coming in on shifts working around the clock, because sometimes the SBA systems were easier to access at 2 or 3 a.m. We were all in it together, from senior leadership to frontline staff. But the amazing thing was that none of us felt obligated to do it; we all just wanted to help our customers. And when wildfires raged in California and communities needed support, community banks answered the call, both in the moment and in the aftermath. That’s the true heart of community banking: giving back to the community. In my community, we’ve been fortunate not to have experienced that scale of crisis, but when neighboring communities in Rock Valley, Iowa, were ravaged by storms and river flooding, it was their community bankers who were FROM THE TOP MY TOP 3 Independence Day memories: 1. Camping with my family as a child. 2. Camping with my kids as an adult. 3. Watching fireworks over the top of Mount Rushmore. Community Bankers Are Leaders in Times of Crisis By Jack E. Hopkins, Chairman, ICBA instrumental in becoming the command center for recovery efforts and raising money to rebuild. This drive to help our communities extends beyond times of crisis. At our cores, community bankers are community servants. Whether it’s charitable giving to local nonprofits, engagement in community fundraisers or steps we take within our banks, we are centered on supporting those around us. Case in point: Our employees pitched me to introduce a program where they pay to wear jeans on Fridays. Staff collect money so they can wear jeans, and all donations go to a local nonprofit. A team overseeing the program decides which nonprofit benefits each month, and all I had to do was approve jeans on Fridays. It was a no-brainer, and it is an honor to call out our employees for their generosity. But that’s simply who community bankers are. If we see hardships in the community, if we see something going wrong, we immediately jump to action. Our dedication to our communities is not lip service; it’s a fundamental driver of who we are as community bankers. I, for one, am honored to call myself a community banker because of it. 8 | INDEPENDENT REPORT
| Bank Stock Loans | Loan Participations | ATM/Debit | International Services | | Cash Management | Securities Safekeeping | Merchant Services | 800-873-4722 | NE: 888-467-5544 | www.bbwest.com Where community banks bank Est. 1980 – 45 years of service to community banks “As a service provider exclusively focused on community banks, Bankers’ Bank of the West is here to help strengthen our clients and the communities they serve.” Across the western states and Great Plains, we’re the place where community banks bank. That’s because we provide the services, technology, and expertise to help you extend your resources, deliver for your customers, and stand out in your market. 5 reasons to partner with us BBW - President and CEO - Bill Mitchell 1. You can unlock efficiencies and cost savings. We can provide sophisticated solutions and economies of scale because we’re powered by hundreds of community banks across our region. 5. Our priorities are aligned with yours. 2. You can expand your capabilities. 4. We’ll never compete for your customers. 3. You can count on prompt, reliable service. • Independent loan review • Loan and credit administration consultation • Strategic planning facilitation • Management, staffing, & succession planning • Acquisition & expansion • BSA/AML compliance • Regulatory risk consultation President, Jim Swanson President, Anne Benigsen • Consulting • Phishing Tests • Vulnerability Management • Security Monitoring Cyber/information security, strategic planning, independent loan review, AND MORE. Consulting Services $ 8.45B assets under management $ 1.9B daily transaction value processed/settled Serving more than 60% of community banks across 7 states
What Easing Bank Capital Rules Really Means for the Treasury Market Belief Is the Last Backstop 10 | INDEPENDENT REPORT
When the Treasury market works, everything else has a shot at working too. When it breaks, the ripple effects are massive. Right now, it’s starting to break. When a financial system can no longer stand on its own, it leans on illusion. That’s what the June 18, 2025, quiet regulatory move was really about. Most people didn’t see it. That’s not a knock on them — it’s by design. The headlines were filled mostly with war and politics. Meanwhile, the real news came wrapped in beige. A footnote in a press release. A whisper in financial regulatory circles. But don’t let the silence fool you. What just happened was loud — deafening, if you know how to listen. Here’s the short version: On June 18, 2025, federal regulators proposed easing capital rules for banks. Specifically, they want to loosen the Supplementary Leverage Ratio (SLR), a rule that forces big banks to hold capital against their assets, including U.S. Treasurys. Translation: Banks can now load up on government debt without needing to hold extra cash in reserve. No penalty. No capital buffer. No friction. If that sounds technical and boring, stay with me because, under the hood, this is something else entirely. This is a quiet admission that the Treasury market — the bedrock of the global financial system — is starting to buckle. And we’re out of clean fixes. THE CRACKS BENEATH THE SURFACE To understand why this matters, you need to know what the U.S. Treasury market really is. It’s not just where the government borrows money. It’s the foundation of global finance. Treasurys are considered “risk-free” assets. They’re used as collateral in just about every corner of the financial system — from home mortgages to hedge fund leverage. When the Treasury market works, everything else has a shot at working too. When it breaks, the ripple effects are massive. Right now, it’s starting to break. The U.S. is issuing $1-2 trillion in new debt every quarter. That’s not a typo. Every quarter. At the same time, major foreign buyers — China, Japan and others — are stepping back. Some are outright selling. By Christopher Myers, CEO B:Side Capital and B:Side Fund, ICBC Associate Member Pension funds can’t keep up. Insurance companies are maxed out. Retail demand is inconsistent. There’s just too much debt chasing too few willing buyers. So yields rise. Volatility increases. And liquidity — the ability to buy or sell large amounts without moving the price — starts to disappear. That’s where regulators stepped in. A QUIET BACKDOOR Instead of fixing the core problem — too much debt, not enough demand — regulators did something else. They relaxed the rules that prevent banks from binging on Treasurys. It’s not quite a bailout, but it’s close. It’s a quiet version of yield curve control. The government is nudging banks to buy more of its debt, without saying that out loud. It’s not being done through the front door, like a formal Fed policy. It’s being done through the back door — in the plumbing of financial regulation. And that should make you pause because this kind of move doesn’t happen when things are fine. It happens when confidence is fading, when the people behind the curtain start to worry that the system can’t hold. NOT A POLICY SHIFT — A CONFESSION What happened on June 18, 2025, wasn’t a new policy. It was something more honest. It was a confession — a recognition that the market can’t stand on its own anymore. That real demand for Treasurys is drying up. And that someone — anyone — needs to step in and buy. But because it can’t be the Fed directly (at least not yet), it has to be the banks. And INDEPENDENT REPORT | 11
because the banks won’t do it voluntarily at this scale, the rules need to be bent. The message is clear: This market needs help. But we can’t call it help. So we’ll call it a technical adjustment. This is how belief is managed. Quietly. In the shadows. With just enough plausible deniability to keep the machine humming. BELIEF IS THE FINAL GEAR At a certain point, the last thing holding a system together isn’t logic or math. It’s belief. Not productivity. Not tax revenue. Not trade flows. Belief. Belief that the dollar will hold value. That U.S. debt is safe. That the people in charge have things under control. When that belief holds, the system works — even if it’s fragile underneath. But when it starts to fray, the game changes. And when belief starts to go, governments don’t double down on discipline. They shift to narrative. They try to control the story. They bend rules, massage data and do just enough to buy time for the next bond auction. That’s where we are now. A phase of narrative control where the truth is too dangerous to say plainly, so it has to be managed indirectly. And that should concern anyone trying to lead with clarity. WHY LEADERS SHOULD PAY ATTENTION If you run a business, lead a team or steer an institution, this isn’t just an economic footnote. It’s a warning light because when the system starts depending more on belief than performance, it means the real constraints are being ignored. And invisible ones are taking their place. When that happens, leaders start making bad bets. Risk gets mispriced. Capital gets misallocated. You think you’re operating in a free market, but you’re not. You’re navigating a fog of unseen rules and shifting incentives. And that’s the danger. Not that we’re on the edge of collapse — though that can’t be ruled out — but that we’re being asked to play a different game without being told the rules have changed. The worst place to be is stuck in old assumptions. Assuming markets are efficient. Assuming prices reflect reality. Assuming your cost of capital means what you think it means. In moments like this, clarity becomes a competitive edge. Not panic. Not cynicism. Just clarity. WHAT COMES NEXT ISN’T NEUTRAL This move to ease capital requirements won’t be the last one. There will be more: • Repo operations will get larger and quieter. • Liquidity facilities will expand under the banner of “stability.” • The Fed’s balance sheet will start to grow again — maybe slowly, maybe suddenly. • Shadow support will merge into formal policy. • And the public story will remain the same: This is technical. This is temporary. This is responsible stewardship. But none of that is true. What’s happening isn’t neutral. It’s a distortion. It means we no longer have a truly free bond market. And that has consequences. For banks. For businesses. For investors. For you. YOU CAN’T BUILD STRATEGY ON A LIE Markets depend on signals. Capital goes where it’s treated well. Risk gets priced based on information. But when those signals are manipulated, even with good intentions, the system becomes harder to navigate. You can’t build strategy on a lie. And right now, the lie is that everything is normal. That we’re just doing some “technical adjustments” to fine-tune the machine. But the machine is broken. It’s overloaded. It’s gasping for air. And instead of overhauling it, we’re repainting the dashboard. That may buy time, but it doesn’t change the direction. FINAL THOUGHT A healthy market doesn’t need this kind of help. It doesn’t need coercion dressed up as convenience. It doesn’t need the rules bent to keep the illusion alive. And it certainly doesn’t need capital requirements gutted in a whisper so that auctions can keep clearing. So where does that leave us? In a place where belief is the last backstop. Where faith in the system is the glue holding it together. And where any leader worth their salt needs to be looking beyond the headlines and asking harder questions: • Is my business exposed to mispriced risk? • Are the signals I’m using still valid? • What happens if the floor gives way? These aren’t easy questions. But they’re necessary. Because the longer we pretend everything is fine, the more fragile everything becomes. And when the truth finally forces its way in, it won’t be polite about it. 12 | INDEPENDENT REPORT
ICBC 52nd Annual Convention – Camp ICBC
Whole Lotta Thinkin’ Going On Fed’s Forward Guidance Reflects Uncertainty 14 | INDEPENDENT REPORT
I hope the readers of this column will excuse the lack of decorum in the title, but in reading and listening to the words of the Federal Reserve Board’s members over the past month, I hear a lot of hedging. And far be it from me to second-guess the respective governors and regional presidents of our central bank. If they were asked individually for their druthers, I suspect they’d prefer an economic, fiscal and geopolitical backdrop that had less drama. Not to mention an inflation track that would get back to its elusive 2% target. Alas, such doesn’t seem to be the near-term expectations of the Fed. We were shown their most recent projections for the key indicators in the quarterly Summary of Economic Projections (SEP), released on June 18. Several closely watched metrics, such as inflation and gross domestic product (GDP), had significant revisions from the previous quarter. The notorious “dot plot,” in which the 19 members are obliged to place a marker on a grid that corresponds with their guess as to where the fed funds rate will be in one, two, three years and beyond, reflects a wide dispersion of thought. QUARTERLY RESET First, let’s examine how the Fed’s outlook on inflation has changed. A year ago, the SEP was projecting the preferred inflation gauge, core personal consumption expenditures (PCE), to end 2025 at 2.3%. It is not exactly to the Fed’s liking, but it is noticeably lower than current readings. Fast forward to March 2025, and the estimate had risen to 2.8% as price increases had proven more durable than hoped (and were the major reasons for monetary policy to remain “restrictive”). The June 2025 SEP hiked the year-end 2025 estimate all the way to 3.1%, citing import taxes as the culprit. GDP is directly affected by inflation in that it’s reported as a “real” number, i.e., net of price changes. Accordingly, the current full-year 2025 GDP estimate is now 1.4%, which is down from the 1.7% projected a quarter earlier. That decline is a mirror image of the expected increase in core PCE. Another corollary of inflation is consumer confidence. Like GDP, there is an inverse relationship between expected price hikes and consumers’ expectations. Higher prices equate to lower purchasing power in the short run, which can lead to lower standards of living. Accordingly, consumer sentiment surveys in 2025 have trended lower, particularly the gauges of future expectations. STAKE YOUR POSITIONS The dot plot of the SEP revealed that the Fed board members are currently encamped in two locations, separated by 50 basis points (0.5%). Of the 19 voters, seven are projecting no rate cuts by the end of 2025, and another eight are projecting two cuts. It’s unusual for the plots to be heavily weighted at two levels that are not contiguous, and I think it reflects that the board collectively doesn’t have a feel for the upshot of trade policy for the rest of the year. In fact, Chairman Powell said as much in his testimony to Congress the week of June 23. Still, whether the number of rate cuts for the remainder of the year comes to zero or four, the target rate of fed funds will remain historically elevated. This will probably result in the shape of the yield curve remaining relatively flat. A couple of wild cards are still in the mix: 1. supply issues, as Uncle Sam continues to go ever deeper in debt, with institutional investors ready to act, and 2. geopolitics, and the dollar’s continued privileged status as a safe haven in times of turmoil. RUNNING IN PLACE Given all of this, the Fed seems able to sit and watch for a while longer before making any moves, especially with the labor market remaining solid. As stated previously, we could be in for an extended stretch of range-bound yields, and 2025 so far has seen just that, as the last rate cut was December 2024. And what type of bonds do well in stable rate environments? Ones with options, which account for about 80% of the dollars in community bank bond portfolios. The reason is that the callable bonds won’t get called en masse, and investors get to enjoy the incremental yields for periods into the future. So, where this takes us is a place where our central bank — the Federal Reserve — is doing a whole lotta thinkin’, and maybe not so much shakin’. Goodness gracious, great balls of fire. Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. By Jim Reber, President and CEO ICBA Securities, ICBC Associate Member and Preferred Provider INDEPENDENT REPORT | 15
Artificial intelligence isn’t just for big banks anymore. One compelling use case for community financial institutions is reducing the cost, effort and headache of AML compliance. An AI-powered AML solution can automatically review millions of transactions overnight, surface unusual activity and even draft a suspicious activity report (SAR) while your analysts sleep. However, greater speed and scale come with a tradeoff: As system complexity increases, transparency can decrease. To manage that risk, AI-powered AML systems still need human oversight. Some aspects of your program should never be entrusted to AI. WHAT KIND OF AI SUPPORTS AML? Although generative AI has dominated headlines over the past couple of years, AI is more than just chatbots. In AML compliance, key AI technologies include: • Machine Learning (ML): Learns and adapts from transaction history to detect anomalies and adjust risk scores. • Natural Language Processing (NLP): Extracts data from unstructured analyst notes or reports. • Graph Analysis: Maps relationships among accounts, people, devices and transactions to spot hidden connections. Balancing AI-Driven AML With Human Control By Jessica Tirado CSI, ICBC Associate Member OPPORTUNITIES FOR AI IN AML When these techniques are paired with quality data and strong governance, community banks can see powerful benefits: • False Positive Reduction: The system learns normal patterns and suppresses benign alerts, so analysts spend more time on genuine risks. • Faster Investigations: The system auto-collects KYC data, negative news and transaction history, so SARs are completed and filed faster. • Pattern Recognition: The system spots indirect or layered transactions that rules miss, increasing the detection of complex laundering typologies. • Continual Learning: The model evolves alongside criminals’ tactics. Compliance keeps pace without constantly rewriting rules. RISKS AND DOWNSIDES OF AI Opacity Rules-based systems are easy to explain: “If X, then Y.” AI models rely on thousands of parameters, making it hard to trace decisions. Without strong explainability tools, this can become a governance risk. Hybrid models, which include AI layered on rules, help balance scalability with transparency. 16 | INDEPENDENT REPORT
Bias and Blind Spots AI reflects the biases in its training data: • Under-represented groups may be missed or unfairly targeted. • Media sources or sanctions lists can encode geopolitical bias. • Analyst behavior, like clearing alerts faster for familiar customer types, can reinforce skewed patterns. These issues are harder to spot in opaque models, making governance reviews essential. Missed Red Flags AI models only know what they’ve seen before. Emerging typologies like crypto off-ramps can evade detection. Human oversight is essential for recognizing novelty and interpreting real-world context. Amplified Errors Faulty inputs or logic scale quickly in AI systems. A single mis-weighted variable could freeze hundreds of accounts or overlook major fraud before anyone notices. Regulatory Responsibility The OCC and FinCEN have made it clear: You own your AI’s outcomes. Institutions must validate, document and explain model behavior. “The algorithm did it” won’t satisfy an examiner. AML TASKS TO KEEP IN HUMAN HANDS Automation is a force multiplier for your compliance team, not a replacement plan. These critical functions should remain human-led: 1. Setting Risk Appetite: Only the board and senior leadership can define acceptable levels of residual AML risk. AI can enforce thresholds, but deciding what those thresholds should be belongs in boardroom minutes, not model settings. 2. Designing Customer Risk Scores: AI can crunch data but can’t make value judgments. For example, should cash volume or political exposure carry more weight? That’s a question of ethics, strategy and regulatory expectations. 3. Clearing Alerts: Models can cluster alerts or assign “likely benign” scores, but a human must make the final call. Auto-closing alerts removes your ability to defend decisions in hindsight. 4. Finalizing SARs: AI can draft SARs by linking accounts and summarizing activity. But only a trained analyst can verify accuracy, add context and craft a clear, defensible narrative. 5. Model Governance and Tuning: Vendors may build the models, but you’re on the hook. That means validating data inputs, sanity-checking the math and signing off on all changes. 6. High-Impact Customer Actions: Freezing accounts or filing 314(b) requests affects real lives. AI can recommend, but humans must confirm and justify each step. 7. Explaining to Regulators and the Board: No algorithm can sit across from an examiner and defend itself. Your team must translate model logic into plain English, from feature weights to tuning rationales. BEST PRACTICES FOR COMMUNITY FIS To use AI safely and effectively in AML, community institutions should: • Use Explainable Models: Choose vendors that provide reason codes or variable weights so analysts can explain every decision. • Customize for Your Risk Profile: Tune models to reflect your institution’s size, market and product mix. • Keep Humans in the Loop: Let AI prioritize alerts, but reserve final decisions for trained analysts. • Validate Regularly: Conduct independent validation pre-launch, test after any material change and audit frequently. • Invest in Analyst Training: Run workshops on model interpretation and encourage staff to challenge or override model outputs when their gut says, “Dig deeper.” BRINGING IT ALL TOGETHER AI is fast becoming a standard part of AML programs, even for smaller institutions. When deployed thoughtfully, it can cut through noise, surface risk patterns and save staff hours of clerical work. But it must remain a co-pilot, not the one flying the plane. Community banks that strike the right balance will: • Adopt explainable, customizable hybrid systems. • Embed human review at all high-risk decision points. • Validate and document continuously. • Cultivate staff who understand both compliance and AI. Follow these steps, and you can get the best of both worlds: the speed of automation and the assurance of human oversight. INDEPENDENT REPORT | 17
In a market where deposit competition is fierce and industry turmoil has placed an increased emphasis on safety, one of the best ways to proactively reassure your most-valued customers could be joining a reciprocal deposit network. Per IntraFi’s quarterly survey of bank executives, as of Q2 2024, 90% of institutions reported that deposit competition had worsened or stayed the same compared to 2023, with most expecting this trend to continue into 2025. Given this competition, access to millions of dollars of aggregate FDIC insurance across network banks in a reciprocal deposit network can be a valuable tool to any bank. WHAT DO BANK CUSTOMERS SAY ABOUT RECIPROCAL DEPOSIT NETWORKS? Reciprocal deposits (i.e., deposits a bank receives through a deposit network in return for placing a matching amount of deposits at other network banks in increments under the FDIC insurance limit of $250,000) can delight large depositors and bankers alike. Cindy Thomas, a depositor who handles millions of dollars flowing through a property management company in Silver Spring, Maryland, found significant value in the reciprocal deposit products offered by her bank. Choosing a Deposit Network and Maximizing Its Value for Your Bank By Steve Kinner, Senior Managing Director IntraFi, ICBC Associate Member 18 | INDEPENDENT REPORT
“[My bank] does all the work for me,” Thomas said. “I’m getting a good rate of return, and it is so easy for me. I can see all the details in one place. I would think that anyone who is doing my type of job would want to use these products.” Erik Burgdorf, the business manager at Immanuel Lutheran, a 175-year-old church and school in St. Charles, Missouri, also uses products available via a deposit network. “When we looked at this product, we said yes, absolutely, this is something we need to jump on. It was a no-brainer,” Burgdorf said. “With the [deposit network] product, our funds are protected, we earn a competitive rate, and it does not cost us the significant time and effort required if we were to do this ourselves.” WHAT TO LOOK FOR IN A DEPOSIT NETWORK? Not every deposit network is created equal. Consider these questions before signing up: • Does the provider compete with banks for deposits? Some networks may double-dip and pursue depositors, creating a potential conflict of interest. • Does the provider offer multiple deposit product options for placement of funds? The more options, the more flexibility your bank can offer. • Does the provider ever have possession of customer funds? Preferred networks will use highly reputable, established banks for settlement, keeping your depositor’s funds at arm’s length. • Is the bank allowed to set the interest rate? A network that lets your bank set the interest rate enables you to control your profit margin and create customized offerings to retain valued depositors. • Does the provider have relationships with many banks? Larger networks typically mean higher deposit balances can be placed, providing more flexibility for your bank. With the right reciprocal deposit network, your bank can build stronger customer relationships, fund more loans and seamlessly manage its liquidity. IntraFi® is a trusted partner chosen by more than 3,000 financial institutions nationwide. IntraFi’s network — the largest of its kind — brings scale, giving each participant access to tens of billions of dollars in funding, the highest per-depositor and per-bank capacity, and the peace of mind of being able to make large-dollar placements. Contact IntraFi at (866) 776-6426 or contactus@intrafi.com to find out how your bank can join our network of financial institutions and benefit from The Power of Many®. INDEPENDENT REPORT | 19
Financial institution regulators — including the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve — are facing significant downsizing. This trend raises critical questions about the safety and soundness of financial oversight and the decisions board members must make in response. Let’s explore the implications of a reduced regulatory workforce, the risks tied to longer intervals between examinations and the potential shifts in spending priorities. THE SHRINKING REGULATORY WORKFORCE: A CAUSE FOR CONCERN? The FDIC, NCUA, OCC and Federal Reserve have been pivotal in ensuring the stability and integrity of the banking and credit union sectors. However, recent directives from the current administration have led to substantial staff reductions across these agencies. The FDIC, for instance, has seen a workforce reduction of about 9% since January 2025, driven by deferred resignation The Real Impact of Downsizing Financial Regulators By Laura Zannucci, Audit Manager/Information Security Officer SBS CyberSecurity, ICBC Associate Member and Preferred Provider 20 | INDEPENDENT REPORT
Sustaining trust, stability and operational resilience requires a proactive, risk-informed approach, even in the face of reduced regulatory scrutiny. offers and layoffs of probationary employees. According to Banking Dive, the FDIC aims to reduce its workforce by 1,250 — nearly 20%. Notably, the Voluntary Early Retirement Authority (VERA) and the Voluntary Separation Incentive Program (VSIP) are not being offered to “mission-critical” employees such as those in risk management and information security. Similarly, the NCUA has pulled back job offers and discussed early retirement programs in closed board meetings. Regulatory Report states the NCUA is considering a 16% staff reduction, or approximately INDEPENDENT REPORT | 21
200 positions, which would likely impact its ability to perform supervisory functions. The OCC has laid off more than 75 probationary employees and shed approximately 140 staff through buyouts and deferred resignations. These reductions align with broader federal efforts to streamline operations and reduce costs. The Federal Reserve is also affected, with staffing cuts across financial regulatory agencies contributing to a larger campaign to trim $1 trillion in federal spending. While the intention behind these measures is efficiency, the resulting gaps in financial oversight could have serious consequences. UNINTENDED UNSAFE CONDITIONS One of the most pressing concerns is that fewer regulatory staff could lead to longer gaps between examinations — critical moments for identifying risks, ensuring regulatory compliance and maintaining financial stability. Consequences of reduced oversight include: 1. Delayed Detection of Issues: Problems may go undetected for longer, making them harder and more expensive to fix. 2. Increased Risk Exposure: Institutions may take greater risks when they believe scrutiny is less frequent. 3. Erosion of Regulatory Compliance: Less frequent exams can lead to diminished focus on compliance, as short-term priorities crowd out long-term risk mitigation. IMPACT ON INFORMATION TECHNOLOGY SPENDING The downsizing of regulatory staff doesn’t just affect compliance — it may influence how board members allocate resources, particularly in information technology (IT) and information security (IS). Several factors contribute to this potential shift in spending priorities: 1. Perceived Reduced Need for Compliance: Fewer exams might lead boards to deprioritize technologies that support compliance. 2. Short-Sighted Cost-Cutting: Institutions may delay or reduce IT and IS investments to save money — a move that can weaken their cybersecurity posture. 3. Shift in Strategic Focus: Funds may be reallocated to other initiatives, potentially neglecting essential tech and security infrastructure. ESSENTIAL OVERSIGHT: WHY AUDITS MATTER MORE THAN EVER With reduced regulatory presence, external IT and IS audits become essential tools for financial institutions committed to maintaining high standards of security and compliance. Benefits of regular external audits include: 1. Independent Verification: Third-party reviews help identify vulnerabilities and gaps that internal teams may miss. 2. Regulatory Compliance: Audits help institutions stay aligned with regulations — even when oversight is less frequent. 3. Proactive Risk Management: External audits uncover and address issues early, allowing institutions to mitigate risks before they escalate. 4. Stakeholder Confidence: Independent assessments reassure customers, investors and regulators alike. WHAT SETS EFFECTIVE RISK MANAGEMENT APART Cyber threats aren’t slowing down, especially as AI introduces new risks. Smart investments in technology and sound risk management practices are essential. That includes regular cyber risk assessments to guide informed, prioritized decisions about which risks to mitigate next. These assessments keep financial institutions out of breach headlines — and out of regulators’ crosshairs — while ensuring they can continue serving customers without disruption. Effective risk management isn’t just about checking boxes — it’s about protecting the institution and the people it serves. That protection becomes even more crucial as traditional oversight scales back. NAVIGATING RISK IN A TIME OF REDUCED OVERSIGHT The downsizing of key financial regulators presents serious challenges. However, institutions aren’t powerless. External IT and IS audits offer a meaningful way to uphold oversight standards, even as federal agencies reduce staff. By providing independent verification, ensuring regulatory compliance, managing risks and enhancing stakeholder confidence, external audits play a crucial role in maintaining the safety and soundness of the sector. As financial institutions navigate these changes, it’s essential to strike the right balance between cost-saving initiatives and continued investment in oversight and technology. Sustaining trust, stability and operational resilience requires a proactive, risk-informed approach, even in the face of reduced regulatory scrutiny. This article was originally published on sbscyber.com. SBS helps business leaders identify and understand cybersecurity risks to make more informed and proactive business decisions. For more information, contact Ryan Kast at (605) 270-9381 or ryan.kast@sbscyber.com. Learn more at sbscyber.com. 22 | INDEPENDENT REPORT
Is your community bank bond portfolio performing? Meet Jim. Jim meets with community bankers across the U.S. to discuss ICBA Securities’ investment products, services, and education through our exclusively endorsed broker, Stifel. Investing through Stifel is a direct investment back into the community banking industry. When Jim is on the road, he always takes time to enjoy local restaurants and share on social media. As an ICBA member, you’ve got Jim’s help investing. Learn more at icba.org/securities Member FINRA/SIPC
www.thenewslinkgroup.orgRkJQdWJsaXNoZXIy MTg3NDExNQ==