Innovation Station 2026 • Issue 3 LEVELING UP FRAUD MITIGATION
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6 ©2026 Nebraska Independent Community Bankers (NICB) | MBR Connect™, formerly The newsLINK Group LLC. All rights reserved. The Nebraska Independent Banker is published six times per year 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 NICB, 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. The Nebraska Independent Banker is a collective work, and as such, some articles are submitted by authors who are independent of NICB. 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 (801) 676-9722. Nebraska Independent Community Bankers 1201 Lincoln Mall, Ste. 103 Lincoln, NE 68508 (402) 474-4662 nicbonline.com The Nebraska Independent Banker is a publication of The Nebraska Independent Community Bankers Association. 2026 • Issue 3 Take a Look INSIDE 10 18 NICB Executive Committee CHAIRMAN Jim Niemeier Citizens State Bank Friend PRESIDENT/CEO Dexter Schrodt SECRETARY Kelly Lenners First State Bank Nebraska Pickrell TREASURER Arnold Lowell CerescoBank Ceresco IMMEDIATE PAST CHAIRMAN Rick Heckenlively Points West Community Bank Sidney FLOURISH 4 Battling Check Fraud Together By Rebeca Romero Rainey, President and CEO, ICBA PORTFOLIO MANAGEMENT 6 In With the New Introducing The Baker Group, ICBA Securities’ New Endorsed Broker-Dealer By Jim Reber, CPA, CFA, Managing Director, and Ryan W. Hayhurst, President, The Baker Group INNOVATION STATION 8 Leveling up Fraud Mitigation By Wayne Miller, Executive Vice President and Chief Innovation Officer, ICBA 10 Building the Foundation for Effective AI Closing the Data Readiness Gap By Ajay John, VP of Data Science and AI, CSI 12 Community Bank Bond Portfolios Are Finally Turning the Corner By Ryan W. Hayhurst, Managing Partner and President, The Baker Group 14 Risk Assessment Is the BSA Key By William J. Showalter, CRCM, CRP, Senior Consultant, Young & Associates Inc. 16 Home Mortgage Disclosure Act (HMDA) Requirements and Recommended Practices By Frank P. Antiga, CPA, CBAP, Risk Advisory Principal, S.R. Snodgrass PC 18 Why Community Bank Managers Need Better Conversations By Connie West, Gallup Certified Strengths Coach, High Performance Coach, Regional Vice President, The James Paul Group 19 NICB Endorsed Partners 19 Associate Members 2026 NEBRASKA INDEPENDENT BANKER 3
FLOURISH It’s becoming a frequent and unfortunate occurrence to hear community bankers recounting stories of fraud, and the attacks range from sophisticated digital scams to paper-based fraud rings. On one hand, we’re dealing with AI-induced deep fakes and advanced phishing scams. On the other, we’re having a real “Back to the Future” moment as old-school check washing makes a comeback, supported by digital image-altering technology that makes it simpler than ever before. But with all we’re fighting, check fraud remains one of the largest single contributors to our fraud problem. Industry data puts check fraud losses over the course of a year at $21 billion, and organized crime continues to ratchet up the intensity of the attacks. Despite these constant issues, checks remain a payment instrument of choice for our customers. In fact, the latest survey from the Association for Financial Professionals (AFP) found that while 63% of businesses experienced attempted or actual check fraud in 2024, 91% reported using checks, and more than 75% said they had no immediate plans to stop using them. Thus, we still see a steady volume of checks flowing through our organizations, a rate that our customers demand. To continue offering checks safely, we all must seek out advanced risk mitigation efforts. Fortunately, that’s where ICBA can help. For one, we offer our Check Fraud Resource Center, which provides guides and online courses to help community banks better prepare for emerging fraud scenarios. We also have delivered a way to connect with technology providers via our Solutions Directory, which aggregates community bank-supportive service providers that can help to address fraud. In addition, to aid customer awareness and education, we developed a customizable news release and check fraud prevention flyer that can be shared within your communities. Perhaps one of the most powerful tools at our disposal, ICBA Community has a members-only fraud subgroup, which allows this community of community bankers to share information on the latest scams and offer heads-up alerts on emerging threats. This important information sharing helps community banks to be on the lookout for fraud that might affect them. Fraud is ever-present, and locking arms as a community will empower us to address all that is coming this way today and all that is on the horizon for tomorrow. While we can always count on new threats, together with the right knowledge and tools, we can mitigate and lessen losses, supporting a safer, more secure environment for our customers and the communities we serve. BATTLING CHECK FRAUD Together By REBECA ROMERO RAINEY President and CEO, ICBA 4 NEBRASKA INDEPENDENT BANKER
Established in 1980, Bankers’ Bank of the West has been serving community banks for over 45 years as a trusted, non-competing partner, grounded in strong relationships, industry expertise, and a long-term perspective. As the financial landscape continues to evolve, we remain focused on helping our partners stay relevant and competitive through purposeful innovation, operational efficiency, and responsive, experienced support, while staying true to the core values that have guided us since the beginning. EXPERT LOAN REVIEW SERVICES • Independent loan reviews. • Strategic, compliance, and growth consulting. • Helping banks strengthen credit quality, manage risk, and plan confidently for expansion and succession. • Community banks deserve a partner as dependable and resilient as the communities they serve. • Assessing wire transfer risks • Delivering compliant backup solutions. • Trusted support, expert guidance, and service every step of the way. BUSINESS CONTINUITY OPTIONS We have BRIDGE! A secure online portal for ACH, wires, reporting, OFAC screening, anomaly detection, SFTP, file transfers, and seven-year archiving. Bill Mitchell BBWest, CEO & Vice Chair Jim Swanson President, Bank Strategies, LLC. Anne Benigsen President, CivITas Bank Solutions, LLC. EST 1980 OVER 45 YEARS OF EXPERTISE We Champion Community Banking! 800-873-4722 | NE: 888-467-5544 | www.bbwest.com • Vulnerability scans. • Penetration testing. • Phishing simulations and IT consulting. • Plus, monitoring and training. • Policy reviews. • Board advisory support to strengthen your bank’s security posture. COMPREHENSIVE CYBERSECURITY SERVICES
PORTFOLIO MANAGEMENT IN WITH THE NEW Introducing The Baker Group, ICBA Securities’ New Endorsed Broker-Dealer Jim Reber: Ryan, what a difference a couple of months makes. Last fall, ICBA Securities’ board of directors asked management to study the depository fixed-income broker market and make a proposal for a relationship that would carry ICBA and its members into the future. From that, we identified The Baker Group as the first, best option. The board agreed, and after a couple of months of negotiations, we sealed the deal in early March. Tell us about The Baker Group and your multi-decade career with one firm. Ryan W. Hayhurst: The Baker Group was founded in 1979 by a community banker who saw a need for a firm that could help community banks JIM REBER, CPA, CFA Managing Director of ICBA Relations, The Baker Group RYAN W. HAYHURST President, The Baker Group 6 NEBRASKA INDEPENDENT BANKER
manage their interest rate risk through investment portfolio management. Today, we have grown to one of the largest, independently owned, full-service broker-dealers serving community banks nationwide with a focus on education, asset-liability management and investment portfolio management. Much like how our clients are community banks, I like to think of us as a “community broker-dealer” focused on the needs of the customers we serve rather than an out-of-state owner that only cares about the bottom line. As for me, I joined The Baker Group in 1991 as a wet-behind-the-ears college intern, and I immediately fell in love with the people and culture that make up the Baker family. Thirty-five years later, I couldn’t imagine ever working for another company. Jim: Next, what can you tell us about Baker’s interest in and response to ICBA’s invitation to submit a proposal last year? Ryan: We were thrilled when ICBA reached out and asked us to submit a proposal to become the newly endorsed broker-dealer for ICBA Securities. As you know, The Baker Group was a finalist back in 1988 when ICBA selected its first endorsed broker, and unfortunately, we came in second place. But we didn’t give up. We developed new and better tools, we expanded our education platform, doing 50 to 70 events a year, and we focused on what community banks needed. Thirty-seven years later, the opportunity came around again, and we jumped on the chance to submit a proposal. Community banks are the lifeblood of America, and this endorsement will allow us to take our shared mission of serving and supporting community banks to an even bigger audience. Jim: Many of our readers know there has been another twist to this ICBA Securities-Baker Group arrangement, which is that I joined the Baker team effective April 1. I, too, have had a terrific run with one broker. I started as an ICBA Securities sales rep in 1992 and succeeded the legendary C.J. Pickering as president and CEO in 2005. ICBA was a fantastic employer, and I got the best of both worlds in my view: a position in the bond business where I’ve got some history (notoriety?) and continued collaboration with some of the best in the business among all three ICBA pillars: advocacy, innovation and education. So, there’s a lot to be said for continuity. (And I’m working on the “we” and “they” pronouns as I transition, so be patient.) Ryan: I can’t tell you how excited we are to have you join the Baker team. Your experience, reputation and integrity are unparalleled in this industry. In fact, once the announcement was made that we would become the new endorsed broker for ICBA Securities, the very first question every banker and state association asked me was, “Is Jim Reber coming to Baker?” I am proud to say, “Yes!” Jim: We should also tell our readers they’ll be seeing some changes to this Portfolio Management column. One of the many reasons Baker was invited to contract with ICBA is its deep bench of strategists and speakers. What are your plans for this column and what can you tell us about Baker’s commitment to community bank bond education? Ryan: Education is one of our pillars, along with investment portfolio and asset-liability management. We remain committed to continuing our long history of providing in-person and virtual education programs designed specifically for community banks. As for this column, we plan to continue your legacy of providing valuable (and entertaining!) investment insight, but through a range of contributors. You’ll be hearing from not only me but also several other members of our Financial Strategies Group. Jim: Let’s not forget about Baker’s capacity to partner with ICBA’s state affiliates, which was a matter of high rank in the selection process. Ryan: That’s right. We understand just how important state banking associations are to community banks. We are bringing endorsements from ICBA state affiliates in Illinois, Texas, Indiana and Alabama into the mix, so we know what it takes to work with these associations as they fight for community banks in their state. We have partnered with state banking associations for more than four decades to provide industry-leading education and financial support, and we look forward to working with all 34 state associations that endorse ICBA Securities. Jim: Very good. I am honored that The Baker Group offered me this position, and I intend to remain visible to ICBA members and attend conventions whenever practicable. In the near term, my objective is to get Baker integrated into the ICBA extended family as efficiently as possible. I’m beyond excited about this new chapter for ICBA Securities and The Baker Group. Ryan: I couldn’t agree more, Jim. Welcome aboard! Jim Reber, CPA, CFA, is managing director of ICBA relations at The Baker Group. Ryan W. Hayhurst is president of The Baker Group, ICBA Securities’ endorsed broker-dealer. NEBRASKA INDEPENDENT BANKER 7
INNOVATION STATION When asked why he robbed banks, notorious 1930s-era bank robber Willie Sutton famously replied, “Because that’s where the money is.” While his response was purposely tongue-in-cheek, stopping criminals is a reality that community banks face daily. For as long as banks have existed, fraudsters have been targeting them. Today, a complicated mix of attacks that range from old-school check washing to AI-based deepfake scams and everything in between plagues our defenses. It’s not just whack-amole defense; it’s manning multiple fronts. Community banks must address analog fraud while defending against new digital threats — a tall order no matter how you look at it. Fortunately, community banks are in a state of constant vigilance, so fraud mitigation has become second nature. From historical safeguards like Positive Pay to new solutions like advanced anomaly detection, community banks execute fraud mitigation strategies using all the tools in their toolboxes. From Reactive to Proactive These resources now include solutions that help community banks move from a reactive to a proactive stance in addressing fraud. For instance, ICBA ThinkTECH Accelerator alum Socratix AI enables community banks to build secure, enterprise-grade AI agents that help fraud and risk teams investigate alerts in real time and deliver structured insights. Meanwhile, Sardine, another ThinkTECH Accelerator participant, monitors thousands of signals to predict the likelihood of a scam in progress, resulting in more robust fraud detection protocols. Another ThinkTECH Accelerator graduate, Overwatch Data, offers dark web monitoring to alert community banks to compromised card and check numbers, helping to prevent fraud campaigns, data breaches and cyberattacks before they affect customers or staff. And because so much of what takes place today is LEVELING UP FRAUD MITIGATION By WAYNE MILLER Executive Vice President and Chief Innovation Officer, ICBA 8 NEBRASKA INDEPENDENT BANKER
on cell phones, we can use tools that identify behavior that seems out of sync with normal activities. ICBA Support I share these solutions with you not to push certain products, but to raise awareness of the growing number of resources available to your bank. As fast as the fraud landscape evolves, so, too, do the solutions to stop it in its tracks. ICBA Innovation is here to support your fraud mitigation efforts. In every cycle, the ThinkTECH Accelerator selection and advisory committee seeks out the latest technologies that support fraud prevention and mitigation, because fraud is a constant consideration for all bankers. We encourage you to engage with us as we launch future cohorts. Join other bankers at the Accelerator to hear from the companies that will be part of the next generation of fraud solutions. While we can’t eliminate fraud completely, we can minimize its impact. And with new technologies at our disposal, we’re poised to be stronger than ever. 800.228.2581 MHM.INC Now more than ever people want self-service options. With our core integrated ITMs we can make this a reality both in the lobby and in the drive-up of your branch. SELF-SERVICE BANKING NEBRASKA INDEPENDENT BANKER 9
BUILDING THE FOUNDATION FOR EFFECTIVE AI Closing the Data Readiness Gap By AJAY JOHN VP of Data Science and AI, CSI Artificial intelligence is quickly transforming financial services. For community banks, this shift brings both opportunity and challenge. It can strengthen fraud prevention, improve efficiency and deliver deeper customer insight. At the same time, it is accelerating AI-driven fraud and social engineering threats. Adopting AI isn’t just about adding new tools. To truly benefit and stay protected, banks need to address underlying data readiness gaps. Understanding the Data Readiness Gap Despite having access to vast amounts of data, many institutions struggle to generate timely, reliable insights. Fragmented systems, inconsistent data quality and legacy infrastructure limit their ability to use data effectively. As a result, AI initiatives frequently stall before delivering meaningful results. This challenge is especially pronounced for community and regional financial institutions, which often operate with leaner teams and fewer data resources while facing growing competition from fintechs and larger banks investing heavily in AI. At the core is the growing volume of data. While it should enable better decisions, many organizations lack the foundation to make it usable. Without unified, well-governed data, even strong strategies fail to translate into actionable insight. Several common obstacles contribute to this gap: • Siloed Systems Across Departments: Disconnected platforms prevent a unified view of customers and transactions, limiting visibility across the organization. • Inconsistent or Poor-Quality Data: Inconsistent formats, duplicate records and incomplete fields reduce reliability and undermine confidence in analytics. • Legacy Core Infrastructure: Older systems limit integration and data sharing, making it harder to support modern applications and real-time access. • Lack of Clear Data Ownership and Governance: Lack of ownership leads to inconsistent standards, reducing trust in data and complicating compliance. These challenges collectively create the data readiness gap, and without the infrastructure needed to connect and structure this data, institutions will struggle to unlock its full value. A Strategic Framework for Building AI-Ready Data To compete in a data-driven landscape, institutions must close the data readiness gap. This starts with understanding how data flows across the organization and identifying where visibility is limited. 1. Start With Visibility: Understand Where Insight Breaks Down Before ramping up AI initiatives, identify where the data is being roadblocked. Mapping data flows across systems and departments helps uncover integration gaps
and bottlenecks, allowing organizations to prioritize high-impact improvements. Putting this into practice starts with a few essential actions: • Integrate Siloed Systems: Disconnected systems fragment the customer view. Integrating them through APIs or modern platforms helps unify data into a consistent, usable view. • Modernize Data Pipelines: Outdated pipelines slow data movement, which limits responsiveness, while modern tools streamline data flow between systems to improve speed and reliability. • Align Analytics with Business Workflows: Tie insights to clear actions and owners so they drive daily processes, not just sit in dashboards. Understanding these friction points helps prioritize improvements that will deliver measurable business value while creating a clearer path toward unified, decision-ready data. 2. Establish Strong Data Governance Once visibility into data flows is established, the next step is implementing strong data governance. However, many institutions are still working to mature these capabilities. According to CSI’s 2026 Banking Priorities Executive Report, only 11% of community banking leaders rate their data strategy as highly effective, highlighting the need for stronger governance and data management practices. To strengthen governance, institutions should focus on several key areas: • Establish Operational Data Governance: Effective governance means each critical data element has a business owner, a technical owner, a clear definition, a defined lineage path, a quality expectation and an access policy. • Implement Data Quality Monitoring and Controls: Regular validation catches errors early. As banks adopt AI through partners, this also requires strong vendor governance, data-sharing controls and ongoing monitoring. • Embed Compliance and Security from the Start: Strong governance ensures data meets regulatory and cybersecurity requirements. Strong governance improves data quality but also builds the trust necessary to confidently adopt AI-driven insights. 3. Establish Semantic Context for AI Beyond governance and consolidation, institutions must also ensure that their data carries meaningful context. AI systems interpret data based on the information they are given. If data elements lack clear definitions or relationships, AI models may struggle to understand how different data points connect to real-world outcomes. Establishing semantic context helps solve this problem. Semantic context becomes critical when AI must interpret business meaning rather than just process raw data. For instance, in lending, statuses such as “past due,” “deferred” and “restructured” may appear similar across systems but reflect very different levels of risk. Without clear semantic definitions, AI may misclassify borrowers and trigger the wrong actions. By defining what these terms mean, how they relate and where they apply, institutions enable AI to generate more accurate risk insights and support more effective decision-making. With clear semantic context in place, institutions are better positioned to translate data into insights that drive more confident, consistent decisions. Where to Start: Practical First Steps for Growing Teams For community banks with limited staff and tight budgets, closing the data readiness gap doesn’t require a large-scale transformation. The key is to start focused and intentional. A successful AI-readiness effort begins with a clear use case, defined ownership, measurable outcomes, and strong controls for data quality and access. Rather than trying to modernize everything at once, banks can prioritize a high-impact use case, connect only the systems that support it and standardize a small set of critical data. This targeted approach allows institutions to demonstrate value quickly while building a foundation to scale over time. Unlock AI’s Potential Through Data Readiness Artificial intelligence offers financial institutions significant opportunities to improve decision-making, efficiency and customer experience. However, capturing this value requires data that is unified and ready for action. For deeper insights into the technology priorities shaping the industry, scan the QR code to explore the 2026 Banking Priorities Executive Report. https://www.csiweb.com/docs/banking-priorities-2026/ Ajay John is VP of data science and AI, leading teams that build data and AI solutions for financial institutions. He provides over 15 years of experience across banking, insurance and technology. NEBRASKA INDEPENDENT BANKER 11
COMMUNITY BANK BOND PORTFOLIOS ARE FINALLY TURNING THE CORNER For more than a decade, community bank bond portfolios languished under the weight of the Fed’s zero interest rate policy (ZIRP). Portfolios filled with higher-yielding bonds that matured or got called saw their yield slowly erode as the average bank portfolio yield fell from more than 5% in 2007 to less than 2% in 2021. In fact, bank holdings of low-yielding bonds (I’ll define that as less than 2%) have exceeded their holdings of high-yielding bonds (greater than 4%) for the last 13 years. But the Fed’s aggressive tightening cycle of 2022-2023 and the subsequent surge in bond yields have helped banks turn the page on the era of low-yielding bonds. For the first time since 2012, the percentage of bonds yielding 4% or more has surpassed the percentage yielding less than 2% (see chart). It’s a crossover that most bankers didn’t dare imagine just a few years ago. And it represents both a milestone worth celebrating and a call-to-action portfolio managers can’t afford to ignore. How We Got Here To understand where bond portfolios stand today, it helps to rewind to the era before the financial crisis. In 2007, nearly 90% of the bonds held by community banks carried yields above 4%. Rates were high, yield was plentiful and the idea that the Federal Reserve could actually cut rates to zero was considered crazy. Then came 2008. The Federal Reserve slashed rates to zero in response to the financial crisis and kept them there for years. As higher-yielding bonds matured, got called or prepaid ahead of schedule, banks reinvested the proceeds into a market offering historically low yields. By 2012, the percentage of sub-2% bonds owned by banks had surpassed the share of bonds yielding more than 4% — and it stayed that way for more than a decade. The pain was compounded further when rates finally did rise sharply in 2022-2023. Banks sitting on portfolios stuffed with 1-2% bonds watched their unrealized losses balloon, constraining capital, complicating balance sheets and limiting strategic flexibility. It was, for many institutions, the worst of both worlds. The Crossover Moment But along with unrealized losses came significantly higher reinvestment opportunities and the same forces that once worked against banks are now working in their favor. Low-yielding bonds have continued to mature while the 2021-2023 surge in bond By RYAN W. HAYHURST Managing Partner and President, The Baker Group 12 NEBRASKA INDEPENDENT BANKER
yields opened a window — one that many proactive banks took advantage of aggressively — to purchase bonds at yields that hadn’t been available since before the financial crisis. Data from more than 600 community banks on The Baker Group’s Baker Bond Accounting (BBA) system now shows that high-yielding bonds have finally reclaimed the lead, exceeding holdings of low-yielding bonds for the first time in over 13 years. The banks that moved decisively during that window are the ones seeing the strongest improvement in their yields today. The message is clear: Activity matters. The more bonds a bank has purchased over the last three years, the better their portfolio composition looks right now. The Corner Isn’t the Finish Line Turning the corner is meaningful — but it’s not the moment to ease off. The Federal Reserve has already cut rates by 175bp and ultimately wants to lower rates to around 3% once the threat of higher inflation subsides. Any further rate cuts and subsequent slide in bond yields may give way to reinvestment opportunities that look more like the post-2008 era than the post-2022 era. We’ve seen this movie before, and banks that hesitated last time spent years wishing they hadn’t. The good news is that most institutions still have meaningful options today. The question is whether they’ll act on them and act quickly enough to matter. Keep the Momentum Going If your portfolio still carries a heavy concentration of sub-2% bonds, or if you simply want to press the advantage while the rate environment still allows it, there are some concrete steps you can take today: • Deploy Cash: Many banks are still holding excess liquidity at the Federal Reserve or in overnight instruments. This may have seemed like the best option when the yield curve was inverted and cash yielded more than bonds, but that has changed. The yield curve is positively sloped once again and banks can earn 50-150bps more yield by deploying cash into the bond portfolio. Every dollar sitting in cash is a dollar that could be working harder in the investment portfolio for years to come. Extending even a portion of that liquidity into intermediate-term, higher-yielding securities locks in today’s rates before the market moves away from you. It’s the lowest friction move available and a natural place to start. • Consider Bond Restructurings (Swaps): Selling low-yielding securities at a loss and immediately reinvesting into higher-yielding alternatives, often called a bond swap, is one of the most effective tools available for accelerating the improvement in your portfolio’s yield profile. Yes, it means realizing a loss today. But if the math works, you recoup that loss through higher earnings in a relatively short period and emerge with a meaningfully better portfolio. With today’s rate environment still offering yields well above historical averages, the spread between what you’re selling and what you’re buying can make the numbers very compelling. • Build a Systematic Reinvestment Discipline: Rather than waiting for the “perfect” moment to buy, consider a disciplined reinvestment program that consistently deploys cash flows from maturing bonds, calls and prepayments into new purchases at current yields. Consistency compounds over time, and staying active keeps your portfolio moving in the right direction even when markets feel uncertain. • Update Your Investment Policy and ALCO Process: Perhaps the most durable thing you can do is embed this momentum into your institution’s governance. Make sure your investment policy explicitly allows tax-loss swaps when the earn-back math is favorable and the new securities improve your overall risk metrics. Many policies are silent on this, which creates unnecessary hesitation at exactly the wrong moment. Portfolio managers can also add a quarterly “portfolio refresh” item to every ALCO agenda: Review the investment portfolio and ensure performance is meeting or exceeding your expectations. If it isn’t, set a realistic target for the next 12 months and take action. What gets measured gets managed, and making this process a standing agenda item ensures the progress you’ve made doesn’t quietly erode between cycles. The Bottom Line The improvement you’re seeing in community bank yields isn’t just a chart; it’s a roadmap. It shows that the banks willing to act during a challenging rate environment are building portfolios that will serve them well for years. Turning the corner is a real achievement. Staying on course after you’ve turned the corner is the harder discipline, and the more important one. The window is still open. Make the most of it while the opportunity remains. Ryan W. Hayhurst serves as a managing partner and president of The Baker Group. Since joining the firm in 1991, he has led the design and implementation of investment and asset/liability strategies for financial institutions. He also plays a central role in the ongoing development of the firm’s proprietary software, which helps clients manage both their investment portfolios and overall interest rate risk. NEBRASKA INDEPENDENT BANKER 13
RISK ASSESSMENT IS THE BSA KEY By WILLIAM J. SHOWALTER, CRCM, CRP Senior Consultant, Young & Associates Inc. Your bank has an opportunity to frame your next Bank Secrecy Act/ Anti-Money Laundering/ Countering the Financing of Terrorism (BSA/AML/CFT) examination, much as you do your Community Reinvestment Act (CRA) exam, by preparing a summary of the “performance context” within which you operate. The agencies state that a well-developed BSA/AML/CFT risk assessment assists the bank in identifying money laundering, terrorist financing and other illicit financial activity risks and in developing appropriate internal controls — policies, procedures and processes. Understanding its risk profile enables the bank to better apply appropriate risk management processes to the BSA/AML/CFT compliance program to mitigate and manage risk and comply with BSA regulatory requirements. The BSA/ AML/CFT risk assessment process also enables the bank to better identify and mitigate any gaps in controls. Risk-Focused Exam Process The interagency examination procedures provide that the extent of BSA/AML/CFT examination activities necessary to assess the bank generally depends on the bank’s risk profile and the quality of risk management processes to identify, measure, monitor and control risks, as well as to report potential money laundering, terrorist financing and other illicit financial activity. Given that banks vary in size, complexity and organizational structure, the agencies acknowledge that each bank has a unique risk profile, and the scope of a BSA/AML/ CFT examination varies by bank. The first step in a BSA/AML/CFT examination is a scoping and planning process. At this preliminary stage of the activity, examiners analyze existing information about the bank — off-site monitoring information, previous examination reports and workpapers, BSA-reporting databases, other communications with the bank, and independent reviews or audits. Examiners also scrutinize request letter items completed by bank management and, perhaps most important in some ways, the bank’s BSA/AML/CFT risk assessment. BSA examiners are charged with determining the BSA/AML/CFT risk profile of the bank as a part of the scoping and planning process. The preferred method for accomplishing this goal centers on a review of the bank’s risk assessment. While banks are not required to perform such an assessment, it is central to ensuring that a BSA/AML/CFT program is appropriate for the bank, given its product and customer mix, as well as location risk factors. The agencies consider that an effective risk assessment should be a composite of multiple factors, and depending on 14 NEBRASKA INDEPENDENT BANKER
the circumstances, certain factors may be weighed more heavily than others. The information contained in the BSA/AML/CFT risk assessment assists examiners in developing an understanding of the bank’s risk profile, risk-focusing the examination scope, and assessing the adequacy of the bank’s overall BSA/AML/CFT compliance program and its compliance with BSA regulatory requirements. Examiners are directed to focus, when evaluating the bank’s BSA/AML/CFT risk assessment, on whether the bank has effective processes resulting in a well-developed risk assessment. They are not to take any single indicator as determinative of the existence of a lower- or higher-risk profile for the bank. Any assessment of risk factors is bank-specific, and a conclusion regarding the bank’s risk profile is to be based on a consideration of all pertinent information. Examiners are to assess whether the bank has developed a BSA/AML/CFT risk assessment that identifies its money laundering, terrorist financing and other illicit financial activity risks. Examiners are also to assess whether the bank has considered all its products, services, customers and geographic locations in its assessment, and whether the bank analyzed the information relative to those risk categories. If a bank has not prepared a BSA/AML/CFT risk assessment, or if its assessment is deemed inadequate, the examiner is directed to discuss this fact with management, as well as prepare their own risk assessment. The reason for this emphasis on a bank-prepared risk assessment is that the bank’s BSA/AML/CFT program should be tailored to the risks it faces, and the agencies see an assessment as an important tool to assist the bank in effectively managing BSA risks and critical in developing appropriate internal controls. Using Your Risk Assessment An appropriate BSA risk assessment provides the bank with a foundation on which to build a successful compliance program addressing this area. This risk assessment is not a static document. You will have to monitor changes in the bank’s product offerings (e.g., virtual currency-related services), business environment, regulatory changes, bank personnel and so forth — and make appropriate changes to policy and procedure — to ensure that the foundation remains strong under the bank’s BSA/AML/CFT compliance program. The agencies expect that the bank will structure its BSA/ AML/CFT compliance program to address its risk profile, based on the bank’s assessment of risks, as well as to comply with BSA regulatory requirements. Specifically, the bank should develop appropriate policies, procedures and processes to monitor and control its money laundering, terrorist financing and other illicit financial activity risks. For example, the bank’s monitoring system to identify, research and report suspicious activity should be risk-based to incorporate any necessary additional screening for higher-risk products, services, customers and geographic locations as identified by the bank’s BSA/AML/ CFT risk assessment. Also, independent testing (audit) should review the bank’s BSA/AML/CFT risk assessment, including how it is used to develop the BSA/AML compliance program. Banks that choose to implement a consolidated or partially consolidated BSA/AML/CFT compliance program should assess risk within business lines and across activities and legal entities. Consolidating money laundering, terrorist financing and other illicit financial activity risks for larger or more complex banking organizations may assist senior management and the board of directors in identifying, understanding, and appropriately mitigating risks within and across the banking organization. To understand money laundering, terrorist financing and other illicit financial activity risk exposures, the banking organization should communicate across all business lines, activities and legal entities. Identifying a vulnerability in one aspect of the banking organization may indicate vulnerabilities elsewhere. Conclusion The importance of a BSA/AML/CFT risk assessment cannot be overstated. A bank-prepared assessment can establish the direction a bank’s BSA/AML/CFT program will take, as well as guide BSA exams and other reviews/audits. Just as with a CRA performance context, preparing your own BSA/ AML/CFT risk assessment can provide the roadmap to guide your compliance and examiners’ evaluation of your program. And the agencies have given you a roadmap to guide your risk assessment — the BSA/AML/CFT examination procedures. Use it, if you have not already, before the examiners come for their next visit. William J. Showalter, CRCM, CRP, is a senior consultant with Young & Associates Inc. (younginc.com), with over 40 years’ experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He has also developed and conducted compliance training programs for individual banks and their trade associations, and has authored or co-authored numerous compliance publications and articles. Bill can be reached at wshowalter@younginc.com. NEBRASKA INDEPENDENT BANKER 15
HOME MORTGAGE DISCLOSURE ACT (HMDA) REQUIREMENTS AND RECOMMENDED PRACTICES By FRANK P. ANTIGA, CPA, CBAP Risk Advisory Principal, S.R. Snodgrass PC The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, was enacted by Congress in 1975. Its primary goals are to promote transparency, determine whether financial institutions (“institution”) are meeting the housing credit needs of their communities and assist in identifying potential discriminatory lending patterns. Regulation C sets out specific requirements for the collection, recording, reporting and disclosure of mortgage lending information. The reporting requirements are incredibly detailed, and examinations allow very few errors before an institution may be required to correct and resubmit past data. HMDA violations can also lead to civil money penalties and/or consent orders from examining agencies. Coverage and Data Reporting Requirements Coverage is based on the prior year’s origination volumes, asset size and location of the institution’s home and retail offices. If the rule is applicable to the institution, it must collect, report and disclose detailed data about home lending activity via a Loan Application Registration (LAR). The institution must submit its HMDA data to its appropriate federal agency by March 1 following the calendar year for which it collected the data and requires electronic submission of the data. The regulation generally applies to consumer-purpose, closed-end loans and open-ended lines of credit that are secured by a dwelling. There are exclusions from coverage if the dwelling type is exempted. There are extremely specific rules on whether business/agricultural transactions are reportable, and there are also certain other transaction types that are specifically excluded under the regulation. At application, HMDA requires lenders to collect certain data related to general loan information, property information, applicant information and institutional 16 NEBRASKA INDEPENDENT BANKER
identifiers. There are numerous data points to report for each transaction. Partial Reporting Exemption For institutions eligible for partial reporting, reporting still may be required, but the burden of reporting all data points may be reduced via a partial exemption. The exemption is based on loan volume and a satisfactory examination history under the Community Reinvestment Act. Partial exemption applies to an eligible institution’s applications for, originations of and purchases of closed-end mortgage loans, if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years. Also, a partial exemption applies to an eligible institution’s applications for, originations of and purchases of open-ended lines of credit, if the institution originated fewer than 500 open-ended lines of credit in each of the two preceding calendar years. The partial exemption for closed-end mortgage loans and the partial exemption for open-end lines of credit operate independently of one another. Thus, in a given calendar year, an eligible institution may be able to rely on one partial exemption but not the other. If a covered loan or application is covered by a partial exemption, the institution is required to collect, record and report fewer data points than those of non-eligible institutions, which lessens the burden and decreases the risk of reporting errors. Data Disclosure When HMDA data is submitted and released publicly each year, some information is modified to protect applicant privacy. HMDA data is primarily located on the FFIEC’s HMDA Platform which provides annual LAR data and can be accessed by scanning the QR code. The HMDA data can be used by regulators or others that may have an interest in your lending activity. Since this information becomes publicly available and the data is used as a screening tool for other regulations, such as the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act, accurate reporting is of utmost importance. https://ffiec.cfpb.gov/data-publication/modified-lar Implications and Recommended Practices HMDA compliance requires strong internal controls and specialized knowledge, which may or may not be available at all institutions. Lack of these can result in data inaccuracies or inconsistencies, missing data and discrepancies between the HMDA data and the underlying records. Violations can also lead to a complete review of past data and resubmission of past LARs, which can be quite time-consuming and costly. HMDA continues to be a critical regulation, and we see no end in sight. Here are some recommended practices to ensure your HMDA process to minimize your HMDA risks and ensure compliance: • Board and Senior Management Responsibilities: Ensure adequate oversight and the necessary internal resources to ensure compliance. Ensure all applicable employees understand the importance of accurate reporting. • Policy/Procedures: Create a HMDA policy and detailed procedures to ensure responsible employees can easily access the HMDA requirements. • Training: Provide necessary training to everyone associated with the data collection and reporting process. • Expertise and Staffing: Ensure there is a knowledgeable person(s) to confirm HMDA compliance. Establish adequate staffing for HMDA reporting. • Internal Controls: Ensure application data collection is well documented and have a thorough review process to confirm data was entered to the LAR correctly. • Internal Audit/HMDA Date Point Scrub: Perform a review of your current processes/procedures, internal controls and a detailed review of your data points by a third party. At Snodgrass, we specialize in the HMDA regulatory and data point/control requirements. We can provide simple tips to help quickly detect potential errors. We provide both internal audits and can perform a complete scrub of your HMDA data points. If you feel you are at risk for noncompliance with HMDA requirements, please contact us if you would like to see how we can help you maintain compliance with this regulation. With more than 20 years of banking and audit experience, including leadership roles at PNC Bank and Sovereign Bank, Frank P. Antiga, CPA, CPAB, brings depth, perspective and steady guidance to financial institutions navigating complex regulatory challenges. His highly valued expertise strengthens internal controls, protects institutions and helps clients move forward with confidence. Founded in 1946, S.R. Snodgrass is a privately held, multi-faceted public accounting and consulting firm, known for innovative tax, assurance, technology and financial advisory services for financial institutions, nonprofits and businesses of all kinds. The firm has worked with more than 175 financial institutions in 16 states and employs more than 90 professionals. The firm is ranked among the country’s top 300 public accounting firms according to INSIDE Public Accounting’s 2025 list at insidepublicaccounting.com/ipa-top-500-firms. NEBRASKA INDEPENDENT BANKER 17
WHY COMMUNITY BANK MANAGERS NEED BETTER CONVERSATIONS Community banking continues to evolve rapidly. Customer expectations are changing. Employee expectations are changing. Leadership expectations are changing. Yet many organizations continue trying to solve leadership challenges through additional meetings, more oversight or increased operational pressure. The stronger solution is often much simpler: better leadership conversations. Managers influence nearly every aspect of the employee experience: engagement, morale, accountability, development, confidence, retention and customer relationships. The challenge is that many managers were promoted because they were technically strong performers — not because they were trained to coach and develop people. As a result, leadership conversations often become reactive, rushed, transactional and corrective instead of developmental. Over time, this creates disengagement and inconsistency. Employees begin feeling overlooked. Coaching only happens when mistakes occur. Development conversations disappear. Burnout quietly increases. The strongest community banks are shifting toward coaching-based leadership cultures. Managers are learning how to recognize employee strengths, improve accountability conversations, support employee resilience, develop future leaders, strengthen customer conversations and build business development confidence. These leadership conversations do not need to be complicated. In fact, small, consistent conversations often create the greatest impact. Even a three-minute substantive conversation counts! A branch manager who consistently recognizes employee strengths improves engagement. A supervisor who coaches instead of simply By CONNIE WEST Gallup Certified Strengths Coach, High Performance Coach Regional Vice President, The James Paul Group correcting builds confidence and ownership. A leader who discusses career growth improves retention. A manager who proactively supports resilience reduces burnout. The cumulative effect of this type of engagement shapes workplace culture. Community banks that intentionally develop managers as coaches gain significant advantages such as stronger engagement, improved retention, better customer relationships and stronger workplace cultures. As workforce expectations continue changing, coaching-based leadership is becoming less of a competitive advantage and more of a necessity. The future of community banking leadership will belong to organizations that develop managers capable of leading intentional, consistent, people-focused conversations. Your best talent and your customers will thank you! Connie West can be reached by email at cwest@jamespaulgroup.com or toll-free at (877) 584-6468. Follow her on LinkedIn for tips on developing coaching leaders and keeping awesome employees. 18 NEBRASKA INDEPENDENT BANKER
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