Pub. 3 2022 Issue 1


TIRED OF BORROWING MONEY BEING MORE COMPLICATED AND DIFFICULT THAN IT NEEDS TO BE? Bank Stock and Bank Holding Company Stock Loans done the simple way Bank mergers, acquisition loans and refinances up to $50 million  Approval typically within 2 to 3 days and sometimes immediately  In many cases the loan can be started, closed and funded in less than 2 weeks  No Correspondent Bank Account relationship required  If the Federal Reserve approves it we can likely get the deal done for you  Standard Commercial Loan Documentation used in most cases  We won’t restrict you to unnecessary covenants  Limited or no reporting requirements  Limited or no origination costs  Low interest rates  Principal payments often determined with the borrower’s input on a year by year basis  In many circumstances we accept bank capital growth instead of loan principal reduction  We will come to you! Most loans initiated and closed at the borrowers home or office. Deal directly with a lender/owner who is a CPA who understands the banking industry. Although we cannot give direct advice, we have 35 years of industry experience and can make your job far less stressful and time consuming. We will understand your transaction. You do not need to educate the lender. Our belief is to make the loan and then stay out of the banker’s way and let you do your job. You will only see us when you choose to. Call Ryan Gerber or Rick Gerber at 1.866.282.3501 or email or

5 FLOURISH By Rebeca Romero, ICBA 6 COMMUNITY BANKERS ASSOCIATION OF KANSAS OFFER ACCESS TO BANKERS HELPING BANKERS FOR ITS MEMBER BANKS IN KANSAS 8 THE THREAT OF RANSOMWARE FOR FINANCIAL INSTITUTIONS: FINCEN ISSUES RED FLAGS By Terri Lutrell, Abrigo 12 THE UDAAP HAMMER DROPS By William J. Showalter, CRCM, CRP 15 ICBA LIVE 16 THE 2022 COMMUNITY BANKERS FOR COMPLIANCE PROGRAM 18 INDEPENDENT BANKER PORTFOLIO MANAGEMENT By Jim Reber, President and CEO of ICBA Securities 22 ANNOUNCEMENTS 23 NEW ASSOCIATE MEMBERS CONTENTS Issue 1 | © 2022 Community Bankers Association of Kansas | The newsLINK Group, LLC. All rights reserved. In Touch is published six times each year by The newsLINK Group, LLC for the Community Bankers Association of Kansas and is the of f icial 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 the Community Bankers Association of Kansas, 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 Community Bankers Association of Kansas is a collective work, and as such, some articles are submitted by authors who are independent of the Community Bankers Association of Kansas. While In Touch encourages a first-print policy, 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. Michele C. Lundy Chairman Tampa State Bank Irv Mitchell Chairman-Elect Wilson State Bank Joe Rottinghaus Secretary/Treasurer Conway Bank Jon W. Pope Immediate Past Chairman Peoples State Bank DIRECTORS Josh Bailey Security State Bank Kent Culbertson First National Bank & Trust Tim Mattack FNB Washington Margaret Nightengale Grant County Bank Tom Pruitt Peoples Bank & Trust Co. Jack Rowden Citizens State Bank Melisa Sorenson Legacy Bank Jim Wayman ESB Financial STATE ICBA DIRECTORS Tanner Johnson Swedish-American Bank Shawn Mitchell President and CEO Nikki Dohrman Senior Vice President/ Executive Director Yvonna Hansen Vice President of Member Services Stuart Little Little Government Relations, LLC CBA STAFF 2022 CBA OFFICERS AND DIRECTORS IN EVERY ISSUE: 24 ANNIVERSARIES 25 UPCOMING WEBINARS 26 PRODUCTS AND SERVICES REFERENCE LIST

5 ISSUE 1 | 2022 Connect with Rebeca @romerorainey. “While our decisions over the past year have been driven even more by our mission than by our bottom lines, we’ve also achieved good results.” FLOURISH BY REBECA ROMERO, ICBA Winter is upon us. Dec. 21 marked the solstice, the official start of winter and the shortest, darkest day of the year. But as I see it, that milestone also signals a transition to light, as days grow longer from there. It’s a fitting analogy for community banking in 2021. With all that has happened — from continued uncertainty to the politicization of our world to increased competition — we could have been tempted to look around and see only darkness. But we haven’t. Despite the intense environment, we’ve chosen to not only focus on the light; we’ve helped bring it, too. In fact, as I look back on this year, I’m struck by how much we were able to make a difference in the lives of our customers. We didn’t allow ourselves to be pulled down. Instead, we rose to the challenge of supporting those who needed us in three critical ways: 1. We prioritized our communities. When times looked difficult over the past year, community banks upped their game. For example, community bank engagement in programs like the Paycheck Protection Program (PPP) helped small businesses navigate the continued ripple effects of COVID-19. Businesses and consumers were able to rely on the stability of their local community bank to support them in uncertain times. 2. We strove to support our work families, our teams. With uncertainty about branch openings and in-person staffing, we came up with new and creative ways to think about bank work environments. We also explored new ways to recruit and retain with benefits we had never previously thought possible, including flexible and remote work opportunities. We focused our efforts on ensuring employees felt safe, connected and supported. 3. W e outperformed as businesses. While our decisions over the past year have been driven even more by our mission than by our bottom lines, we’ve also achieved good results. For community banks, earnings have been strong and balance sheets solid. We’ve been in a place of continued growth and development. As it turns out, doing good is just good all around. Now we’re heading into the new year positioned well amid continued change. By staying focused on who we are as community bankers, we have flourished. I’m certain that our collective mission of putting community first has helped us weather this year’s storms and will be our guiding light in 2022. I wish you and yours a very happy, healthy and prosperous New Year! 6 In Touch Community Bankers Association of Kansas Offer Access to Bankers Helping Bankers for Its Member Banks in Kansas Community Bankers Association of Kansas (CBAK) is pleased to announce its participation with the FedFis and state community banking associations nationwide to offer access to Bankers Helping Bankers to its member banks in Kansas. Bankers Helping Bankers is a bankers only platform for collaboration and education. Through data tools and dynamic user groups, Bankers Helping Bankers provides community bankers with a knowledge base focused on bank technology and emerging Fintech companies, as well as hot topics such as cryptocurrencies, banking as a service, and direct digital banking. “Bankers Helping Bankers is about community banks coming together to address their shared challenges, operate more efficiently and discover new sources of income,” said Dave Mayo, Chief Executive Officer of FedFis, the developer of the platform. FedFis partnered with the Independent Bankers Association of Texas (IBAT) to bring the idea for Bankers Helping Bankers

7 ISSUE 1 | 2022 to life. “The future of community banking depends on their collaboration. For decades, banking associations have offered the means of collaboration for bankers, mostly using face-to-face gatherings. But those means are no longer enough because the industry is changing too quickly. Bankers Helping Bankers is the next iteration of the traditional value proposition of associations – the promise that together we can accomplish more than we ever could alone,” said IBAT President and CEO Christopher Williston. “The community banking industry is moving at break-neck speed, and our bankers need a platform like this to help them navigate the emerging ‘fintech’ products and services available to them, while at the same time being able to communicate and learn from bankers looking at, or already utilizing, these products on their same core,” said Shawn Mitchell, President and CEO of CBAK. “We are really excited to be able to offer this to our members.” For more information and to register on Bankers Helping Bankers, visit For more information on Independent Bankers Association of Texas, visit For more information on FedFis, visit For more information on CBAK, visit Please contact Shawn Mitchell at CBAK, 785-271-1404, with questions. About CBAK Founded in 1978, CBA represents Kansas community banks located in small rural and urban areas across Kansas. Collectively creating value for Kansas community banks through advocacy, education, and services for the benefit of their customers and the communities they serve. About FedFis FedFis provides financial institutions fintech data analytics and a strategy system that tracks Financial, M&A, and Vendor data (including technology vendors) on every bank and credit union in the United States. FedFis is committed to “truth in banking” by helping community bankers understand which products and services will best pair with their existing technology to drive the strategic outcomes for which they strive. They are, first and foremost, a family business of precisionists; fifth-generation bankers and technology experts with incredible depth and passion for the banking industry. About IBAT In 1974, the Independent Bankers Association of Texas (IBAT) represented Texas community banks. The Austin-based group is the largest state community banking organization in the nation, with membership comprised of more than 2,000 banks and branches in 700 Texas communities. Providing safe and responsible financial services to all Texas, IBAT member bank assets range in size from $27 million to $39 billion with combined assets statewide of nearly $256 billion. IBAT member banks are committed to supporting and investing in their local communities.  Founded in 1978, CBA represents Kansas community banks located in small rural and urban areas across Kansas. Collectively creating value for Kansas community banks through advocacy, education, and services for the benefit of their customers and the communities they serve. 8 In Touch THE THREAT OF RANSOMWARE FOR FINANCIAL INSTITUTIONS: FinCEN Issues Red Flags Cyberattacks — specifically ransomware — are the most significant threats to U.S. financial institutions. The June 2021 release of the Financial Crimes Enforcement Network (FinCEN) Priorities makes this clear in naming cybercrime as one of the eight national anti-money launderings and countering the financing of terrorism (AML/CTF) priorities. On Nov. 8, 2021, FinCEN issued a revised advisory on Ransomware and the Use of the Financial System to Facilitate Ransom Payments ( sites/default/files/advisory/2021-11-08/ FinCEN%20Ransomware%20Advisory_ FINAL_508_.pdf). Ransomware is a form of malicious software (malware) designed to block access to a computer system or data. It often encrypts data and prevents or limits users from accessing their system, either by locking the system’s screen or locking the users’ files until a ransom is paid. Usually, the ransom is a substantial amount of money or cryptocurrency. In some cases, the perpetrators threaten to publish sensitive information, with significant consequences to those being held ransom for losing sensitive, proprietary, or critical information. In response to an increase in ransomware attacks, this updated FinCEN advisory rescinds the agency’s previous advisory dated October 2020, showing the dynamic nature and criticality of ransomware threats. According to FinCEN, “Detecting and reporting ransomware payments are vital to holding ransomware attackers.” Recent ransomware disruptions to critical U.S. infrastructure industries include attacks on manufacturing, legal services, insurance, financial services, health care, energy, and food production sectors. The advisory is full of important information for financial institutions, focusing on disrupting criminal ransomware actors. Processing ransomware payments includes at least one depository institution used in facilitating payments. Most transactions are requested in convertible virtual currency (CVC). After a ransom payment is made, the funds typically flow through a financial institution as a wire transfer, ACH transaction, or credit card payment. Monitoring this type of activity is where the keen eye of AML and fraud investigations professionals is crucial BY TERRI LUTRELL, ABRIGO

9 ISSUE 1 | 2022 and where AML software can provide significant support. Trends and Typologies FinCEN lists the following trends and typologies for which financial institutions need to be aware. While much of the cybercrime detected comes from simple techniques such as phishing, others are becoming more sophisticated and complex. Summarized examples of these typologies are as follows: Double Extortion Schemes: Double extortion schemes involve removing sensitive data from the targeted networks, encrypting the system files, and demanding ransom. The cybercriminals then threaten to publish or sell the stolen data if the victim does not pay the ransom. Use of Anonymity-Enhanced Cryptocurrencies (AECs): Cybercriminals increasingly require or incentivize victims to pay in AECs that reduce the transparency of CVC financial flows (rather than legitimized Bitcoin) through anonymizing features, such as mixing and cryptographic enhancements. One such AEC increasingly demanded by ransomware criminals is Monero. Unregistered CVC Mixing Services: Cybercriminals often use mixers to conceal their illegal activities to protect illicit gains. Mixers are used to “break” the connection between the sender and the receiver of the CVC transaction by commingling CVC belonging to other mixer users and splitting the value into many small pieces that pass through different accounts. This is a classic layering method using innovative technology. Cashing Out Through Foreign CVC Exchanges: To launder and cash out their illicit proceeds, cybercriminals often use CVC exchanges with lax compliance controls or operate in jurisdictions with little regulatory oversight. Financial institutions should be particular attention to cryptocurrency payments through jurisdictions of concern. Cybercriminals may use these exchanges to convert “dirty” CVC to their preferred legal tender or fiat currency to integrate back into the financial system (integration). Ransomware Criminals Forming Partnerships and Sharing Resources: Many cybercriminals engage in profit sharing through ransomware-as-a-service (RaaS), a business model in which ransomware developers sell or otherwise deliver ransomware software. RaaS allows cybercriminals of varying skill levels to monetize their illicit access. As part of the profit-sharing arrangement, the RaaS developer often receives a percentage of any ransom paid by the victim. Use of “Fileless” Ransomware: Fileless ransomware is a sophisticated tool that can be challenging to detect because the malicious code is written to a computer’s memory rather than into a file on a hard drive, allowing cybercriminals to circumvent off-the-shelf antivirus and malware defenses. “Big Game Hunting” Schemes: Cybercriminals are increasingly engaging in selective targeting of larger enterprises to demand bigger payouts, a practice commonly referred to as “big game hunting.” Cybercriminals may target organizations with weaker security controls and a higher propensity to pay the ransom due to the criticality of their services. This may include community financial institutions and credit unions. Financial Red Flag Indicators of Ransomware When FinCEN issues advisories, financial institutions need to know what this means regarding their suspicious activity monitoring and reporting programs. FinCEN has identified the following financial red flag indicators of ransomware-related illicit activity that can be used in training front line staff as well as AML and fraud investigators: • A financial institution or customer detects IT activity connected to ransomware cyber indicators or known cyber threat actors. Malicious cyber activity may be evident in system log files, network traffic, or file information. • When opening a new account or during other interactions with the financial institution, the customer provides information that payment responds to a ransomware incident. • A customer’s CVC address, or an address with which a customer conducts transactions, is connected to ransomware variants, payments, or related activity. These connections may appear in open sources searches. • An irregular transaction occurs between an organization, especially a sector at high risk for targeting ransomware (e.g., government, financial, educational, healthcare) and a customer, especially one known to facilitate ransomware payments. Cybercriminals may target organizations with weaker security controls and a higher propensity to pay the ransom due to the criticality of their services. This may include community financial institutions and credit unions. Continued on page 10 10 In Touch • A customer receives funds from a counterparty, and shortly after receipt of funds, sends equivalent amounts to a CVC exchange. • A customer shows limited knowledge of CVC during onboarding or via other interactions with the financial institution, yet inquires about or purchases CVC (particularly if in a large amount or rush requests), which may indicate the customer is a victim of ransomware. • A customer with no – or a limited – history of CVC transactions sends a large CVC transaction, particularly when outside a company’s standard business practices. • A customer that has not identified itself to the CVC exchanger or registered with FinCEN as a money transmitter appears to be using the liquidity provided by the exchange to execute large numbers of offsetting transactions between various CVCs, which may indicate that the customer is acting as an unregistered MSB. • A customer uses a foreign-located CVC exchanger in a high-risk jurisdiction lacking or known to have inadequate AML/CFT regulations for CVC entities. • A customer receives CVC from an external wallet and immediately initiates multiple, rapid trades among multiple CVCs, especially AECs, followed by a transaction off the platform with no apparent related purpose. This activity may indicate attempts to break the chain of custody on the respective blockchains or further obfuscate the transaction. • A customer initiates a transfer of funds involving a mixing service. • A customer uses an encrypted network (e.g., the onion router) or an unidentified web portal to communicate with the recipient of the CVC transaction. How to File a SAR for Ransomware These criminals must be held accountable for their crimes and prevent the laundering of ransomware proceeds. Financial institutions can use the 314(B) information sharing statute to assist law enforcement. This often-underutilized method of information exchange with safe harbor is critical to following the criminal activity in these complex schemes. In addition to using 314(B) authority, FinCEN has asked that specific language be used when filing a suspicious activity report (SAR) for cyber events: • In SAR field 2 (Filing institution Note to FinCEN) and the narrative indicate that the activity could be indicative of a ransomware-related activity. • Select SAR field 42 (Cyber Event) as the suspicious activity type. • Also, select SAR field 42z (Cyber Event-Other) as an additional suspicious activity type while using the keyword “ransomware” in this field. • Include relevant technical cyber indicators related to the activity or transactions in SAR fields 44(a)-(j), (z). • Include the critical term “CYBER FIN2021-A004” in the SAR narrative. As a FinCrime professional, it is incumbent upon you to stay in touch with the spectrum of criminal activity in your surrounding areas. Staying current with these FinCEN Priorities is a good foundation but should not be the only knowledge gathering you do. Thankfully, the AML and fraud industries have extensive opportunities for professionals to learn about these schemes. It is highly recommended that your financial institution takes advantage of those occasions.  These criminals must be held accountable for their crimes and prevent the laundering of ransomware proceeds. Financial institutions can use the 314(B) information sharing statute to assist law enforcement. Continued from page 9 Terri Lutrell is a compliance and engagement director at Abrigo. She provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and a board member of the Central Texas chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS).

11 ISSUE 1 | 2022 CBA’S 44TH ANNUAL CONVENTION AND TRADE SHOW Save the Date Hyatt Regency in Wichita Kansas JULY 13 - 15, 2022 To make your hotel reservations call (800)233-1234and remember to mention you are with the CBA room block. The room block consists of single/double hotel guest rooms starting at $151/night. The CBA room block ends June 28, 2022. 12 In Touch In the summer of 2019, we discussed UDAAP and setting up a program in your bank to avoid trouble in this important area. Our title admonished you, “Don’t Let UDAAP Spook You, Take Control.” If you have not yet taken control of UDAAP compliance, you may have been spooked by developments over the past 12 months or so. There have been three big UDAAP enforcement actions involving three financial service providers of all sizes during that time. Background Section 5 of the Federal Trade Commission (FTC) Act has been around for over 70 years and prohibits “unfair or deceptive acts or practices” (UDAP), the predecessor to UDAAP. Banking regulators have had the responsibility to enforce bank and thrift compliance with UDAP rules, while the FTC had the authority to interpret the statute and write any rules. The Federal Reserve Board (FRB) was given interpretive and rulewriting authority when this part of the FTC Act was amended in 1975 but continued largely to defer to the FTC. Title X of the Dodd-Frank Act (DFA) codified UDAP law specifically for financial institutions, eliminated the FRB’s rule-writing authority, added an “abusive” standard and moved rule-writing authority to the CFPB. The acronym became UDAAP – unfair, deceptive, or abusive acts or practices. What are we dealing with? All of these standards or characteristics are quite subjective. The elements of unfairness and deception have been established by statute and interpretation over the years by the FTC in various enforcement actions and interpretive documents. The element of being abusive was established, in general terms, in statute by the DFA. To be unfair, an act or practice must cause or be likely to cause substantial injury to consumers that the consumers cannot reasonably avoid or that is not outweighed by countervailing benefits. Substantial harm usually involves monetary harm, including small monetary harm to each of a large number of consumers. A three-part test is used to determine whether a representation, omission, act, or practice is deceptive. First, the representation, omission, act, or practice must mislead or be likely to mislead the consumer. Second, the consumer’s The UDAAP Hammer Drops BY WILLIAM J. SHOWALTER, CRCM, CRP SENIOR CONSULTANT; YOUNG & ASSOCIATES, INC.; KENT, OHIO

13 ISSUE 1 | 2022 interpretation of the deception must be reasonable under the circumstances. And, lastly, the misleading representation, omission, act, or practice must be material. “Material” means that it is likely to affect a consumer’s decision regarding a product or service. An abusive act or practice materially interferes with the ability of the consumer to understand a term or condition of a consumer financial product or service. Such an act or practice also includes one that takes unreasonable advantage of: • the consumer’s lack of understanding of material risks, costs, or conditions of a product or service; • the consumer’s inability to protect his interests in selecting or using a financial product or service; • the consumer’s reasonable reliance on the “covered person” (including a banker) to act in the interests of the consumer. Recent UDAAP enforcement actions In about the year 2000, banks first saw significant enforcement of UDAP (now UDAAP) from the banking agencies when the Office of the Comptroller of the Currency (OCC) took the lead. The OCC concluded that it had authority to address a violation of the FTC Act even regarding a challenged practice that was not specifically prohibited by regulation. The three bank-related UDAAP enforcement actions to which we referred above are: • The Consumer Financial Protection Bureau (CFPB) has issued a Consent Order to Discover Bank (Greenwood, DE) and two subsidiaries ordering Discover to pay at least $10 million in consumer redress and a civil money penalty (CMP) of $25 million for violating a 2015 CFPB Order, the Electronic Fund Transfer Act, and the Consumer Financial Protection Act of 2010. The 2015 Order was based on the CFPB’s finding that Discover misstated the minimum amounts due on billing statements as well as tax information consumers needed to get federal income tax benefits. The agency also found that Discover engaged in illegal debt collection practices. The 2015 Order required Discover to refund $16 million to consumers, pay the penalty, and fix its unlawful practices servicing and collection practices. However, recently the CFPB found that Discover violated the 2015 Order’s requirements in several ways – misrepresenting minimum loan payments owed, amount of interest paid, and other material information. Discover also did not provide all consumer redress the 2015 Order required. In addition, the CFPB found that Discover engaged in unfair acts and practices by withdrawing payments from more than 17,000 consumers’ accounts without valid authorization and by canceling or not withdrawing payments for more than 14,000 consumers without notifying them. The agency also found that Discover engaged in deceptive acts and practices in violation of the CFPA by misrepresenting the minimum payment owed to more than 100,000 consumers and the amount of interest paid to more than 8,000 consumers. Some consumers ended up paying more than they owed, others became late or delinquent because they could not pay the overstated amount, while others may have filed inaccurate tax returns. • The Federal Deposit Insurance Corporation (FDIC) issued an order to Umpqua Bank (Roseburg, OR) to pay a CMP of $1,800,000 following the FDIC’s determination that the bank engaged in violations. Those violations were from Section 5 of the Federal Trade Commission Act in the commercial finance and leasing products issued by its wholly-owned subsidiary, Financial Pacific Leasing, Inc. According to the FDIC, these violations included engaging in deceptive and/or unfair practices related to certain collection fees and collection practices involving excessive or sequential calling, disclosure of debt information to nonborrowers, and failure to abide by requests to cease and desist continued collection calls. • The FDIC has issued an order to pay a CMP of $129,800 to Bank of England (England, AR). The bank consented to the order without admitting or denying the violations of law or regulation. The FDIC determined that the bank violated Section 5 of the Federal Trade Commission Act because bank loan officers located in the Bloomfield, MI loan production As we advised in our previous article, banks and thrifts should be proactive in addressing areas prone to UDAAP issues. You can anticipate potential problems by, in part, tracking enforcement actions as indicators of where regulators are looking for issues (and finding them). Continued on page 14 14 In Touch office (LPO) misrepresented that certain Veterans Administration (VA) refinance loan terms were available. However, the loans were not available, and the bank’s misrepresentations at the Bloomfield LPO regarding terms for VA refinancing loans were deceptive, in violation of Section 5. How to deal with these issues? As we advised in our previous article, banks and thrifts should be proactive in addressing areas prone to UDAAP issues. You can anticipate potential problems by, in part, tracking enforcement actions as indicators of where regulators are looking for issues (and finding them). The steps we spelled out to help in this proactive approach are: • Establish a specific compliance culture using positive words, actions, and attitudes from the top down. • Enforce compliance performance coupled with the overt support from the top, making it clear to all at the FMSI 913.955.3355 FMSI is a small business founded and located in Kansas, specializing in assisting community banks to succeed, a mission consistent with core CBA values. We have partnered with community banks for nearly 25-years providing core advisory services including asset/ liability, investment, and liquidity management. FMSI advisors actively assess market conditions and bank balance sheets of different size, mix, and capital levels. Market conditions are constantly changing presenting opportunities and challenges for CBA member banks. Interest rates are increasing for the first time in nearly a decade and now is a perfect time to partner with a trusted, industry leader. Establishing an FMSI relationship provides confidence your bank is optimizing the balance sheet, deploying necessary strategies, maximizing profitability, and managing balance sheet risks. FMSI is a Kansas CBA Endorsed Provider Continued from page 13 bank that this is a crucial element in the success of the bank and any related rewards (bonuses, raises, promotions, etc.). • Involve compliance early in product design, marketing planning, and so forth. • Focus on vulnerable customers — including the young, less educated, immigrants, elderly, etc. — within your community, paying particular attention to how your marketing, product recommendations, and disclosures are directed to such populations. It is much easier — and less expensive — to plan and lay the appropriate groundwork to avoid problems than to repair damages after inappropriate and illegal actions blow up. The reactive approach can cause the bank immeasurable reputation harm, which is much more costly than monetary penalties and from which it is much more difficult to recover.  William J. Showalter, CRCM, CRP, is a Senior Consultant with Young & Associates, Inc. (, with over 35 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He can be reached at Establish a specific compliance culture using positive words, actions, and attitudes from the top down.

15 ISSUE 1 | 2022

Sponsored by THE 2022 COMMUNITY BANKERS FOR COMPLIANCE PROGRAM Already a CBA of Kansas member? You’ll save nearly 60% off the cost of your enrollment in Community Bankers for Compliance! Instead of paying the full price of $3,974.25, you’ll receive a subsidy set aside only for CBA of Kansas members. This means you’ll pay only $998.00 for one designated banker and a second registrant. There’s Never Been a Better Time to Solve Compliance Challenges. Your Solution for Compliance Challenges is Here. Are you a Member of ICBA, and hold the Community Banker University Compliance Certification? Receive CPE credits for your participation in live events. SAVE 60% Presented by Webinars-Regulatory Update: March 4, 2022 June 3, 2022 September 9, 2022 December 2, 2022 Live Regulatory Seminars: April 12, 2022 Salina, KS October 18, 2022 Salina, KS

“As a CBC Member, I use the 800-number Compliance Hotline and the team is professional while providing quick answers. This is a very practical and useful feature of the CBC program.” Margaret Nightengale, Senior Vice President, Grant County Bank, Ulysses, Kan. “Most of us expect regulation measures to be tighter in the future, and we have to be ready. Using the CBC program helps our bank handle and control our compliance processes efficiently and more cost effectively.” Tim Matlack, President, FNB Washington, Washington, Kan. For additional information, please contact: Yvonna Hansen Vice President of Member Services Phone: (785) 271-1404 E-mail: 2 Live Seminars The live seminar topics are selected based on the most recent industry and regulatory developments, which may have an impact on community banks. Each person attending the program will receive a detailed manual, written in full narrative, that they can take back to the bank as a reference and training tool. Quarterly Regulatory Update Webinars Each webinar will discuss current news and regulatory changes that may have an impact on community banks. Monthly Newsletter The Compliance Update newsletter is sent to program members each month. It provides an update of compliance issues in easy to understand articles. Each issue includes a compliance calendar looking out several months at what is looming ahead that community banks need to be preparing for. Compliance Hotline Members of the program may call the Young & Associates’ toll-free number or visit their Web site with compliance questions that arise on a daily basis. Young & Associates has many qualified compliance professionals available to answer your questions. This service ensures that your bank is just a phone call or email away from the information you need in order to answer your compliance questions. CBC Members-Only Web Page This web page is reserved for banks that are registered members of the CBC Program. In it, you will find timely information and tools provided by Young & Associates, Inc., that can be used to enhance the regulatory compliance function at your bank. CBC Program Membership includes the following: CBA of Kansas members receive 60% off the enrollment fee! CBA Member Rate: $3,974.25 Annual Program Fee ($2,976.25) Less CBA Member Subsidy $998.00 Total CBC Program Fee 18 In Touch Independent Banker Portfolio Management Shoptalk 2021 Here’s another conversation with our consummate community banker. “This is Jim Reber.” “Hi Jim, this is Charlie Brown with Community Trust Bank. Do you have a minute?” “I sure do, Charlie. I don’t think I’ve heard from you since the summer of 2020. How are things at the community bank?” “I think things are going pretty well. But you know what, as we’re getting pretty close to year-end, I believe we need to take a good look at our investment portfolio, and that’s why I’m calling. As you may have guessed, we need a refresher about the dos and don’ts for year-end strategies.” “Charlie, this conversation is taking place right now between hundreds of community bankers and their brokers, so your timing is pretty good, but we should get on this project immediately. Liquidity, in the sense of how efficiently your bonds can be sold, starts to dwindle as we get to mid-December, even for generic bonds like mortgage-backed securities (MBS). And municipal bonds are a wholly different story.” “Well, Jim, let me start by asking about taking gains versus taking losses. I know most tax accountants preach that we should sell bonds at a loss instead of gains because that speeds up the income tax liability. Am I saying that right?” “Yes, and I hasten to add that if you sell bonds you own at a gain, you’re almost certainly going to see your overall portfolio yield go down again. And if there’s a theme that I’ve heard this year from your peers, it’s that the returns on their bonds are dreadful. So, you’ll be aggravating that situation.” “Most community bankers I know don’t like to admit defeat. Are you suggesting I’m supposed to like selling my dogs and taking losses?” “Charlie, since you brought up the metaphor, let me remind you that the bond portfolio is just a complement to the rest of the balance sheet. It is the proverbial tail of the dog. And I’d guess that your annual earnings number is looking pretty good, right?” “Yes, but that’s because of some events aren’t likely to repeat themselves next year. I mean, we booked a lot of fee income from the Paycheck Protection Program (PPP), and our mortgage department has been ahead of budget all year too. I don’t see how we’re going to do better next year than we’ve done in 2021.” BY JIM REBER, PRESIDENT AND CEO OF ICBA SECURITIES

19 ISSUE 1 | 2022 “Which is all the more reason to push your earnings out to future periods. And that means taking losses in 2021, buying some replacement bonds that have higher yields, and liking your newand-improved bond portfolio.” “But Jim, why would I do that if interest rates are going to be going up next year? Doesn’t that mean my bonds will lose more value by extending their maturities than if I stay put?” “Let me answer your question by asking one: is Community Trust Bank asset sensitive from an interest rate risk standpoint?” “The answer is, ‘I think so.’ That big wave of deposits that showed up last year just won’t go away. And even though we’re paying next to nothing for them, it’s had the effect of making our balance sheet positioned for rising rates.” “If that’s the case, then I wouldn’t worry about some selective extensions of your investments. Your overall earnings will be better if rates rise, which isn’t a given. And that brings up another point I’ve been making to community bankers this fall: Don’t be so proud of your unrealized gains. What that means by definition is that interest rates have fallen since you bought your collection of bonds. And since you’ve told me you’re asset sensitive, that means margin compression, so I would embrace a modest loss in my bond portfolio.” “Jim, at the moment, our portfolio is a little underwater since rates have risen in the past few months. What do I do next?” “Your brokers can identify those which are the best candidates for sale. Economically the most efficient are often those that are shorter, or maybe you have some MBS pools that have smaller block sizes. And circling back to municipals, those with maturities of less than 10 years often have market prices propped Webinar series for 2022 ICBA Securities and its exclusive broker Vining Sparks have concluded a successful Community Banking Matters webinar series. These events have proven very popular among community bankers, and we are planning the 2022 series. If you have topics that you would like to see covered, please contact Jim or your Vining Sparks sales rep. Jim Reber ( is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. up by retail investors. But be careful: Tax-free munis are the last ones you want to sell at gains.” “Jim, this helps a lot. I’m getting on this project right now. And you’ve made me feel better about taking losses and extension swaps. It turns out that 2021 has been a better year than anyone would have thought at the start.” “Charlie, it’s always a pleasure. And don’t think for a minute that taking losses is ‘admitting defeat.’ I think it’s responsible, proactive portfolio management. And congratulations for piecing together another successful year at Community Trust Bank.”  Your brokers can identify those which are the best candidates for sale. Economically the most efficient are often those that are shorter, or maybe you have some MBS pools that have smaller block sizes. 20 In Touch Ease into innovative payment products at Ease into modern payments with the comfort of ICBA Bancard. High quality, innovative payment products, including mobile card apps. Backup support for your community bank in negotiating with payments providers. Letting your customers sit back and use payment solutions from anywhere. A strong foundation in thought leadership in payments and ongoing personalized support.

21 ISSUE 1 | 2022 Visit Us Online. 22 In Touch Citizens Bank of Kansas is pleased to introduce their new Branch Managers to the CBK Team in Medicine Lodge, East Wichita, Derby Buckner and Derby Rock Road. The most recent addition to the CBK Team is Steve Roberts, the new Branch Manager in Medicine Lodge. Melissa Rodriguez is the new Branch Manager in East Wichita. Madison Cassube has joined the Derby Buckner branch. At the Derby Rock Road branch, Brody Burns is the new Branch Manager.  ANNOUNCEMENTS Brody Burns Madison Cassube Steve Roberts Melissa Rodriguez BRUCE GOETSCH National Sales Manager 651-497-4734 We provide financial institutions and borrowers the support they need to reach their financial goals. Re-envisionyour mortgage strategy. Correspondent Retail Wholesale Delegated Conventional FHA, VA, USDA Jumbo/Non-Conforming Quality control Contract processing Contract closing Servicing Appraisal review Servion Mortgage is a DBA of Servion, Inc. NMLS #1037 Equal Housing Lender partnership channels mortgage products additional services

23 ISSUE 1 | 2022 Senso is transforming the borrower experience from reactive to proactive. Built with the homebuyer in mind, Senso is a mortgage intelligence and engagement platform designed to help lenders build long-lasting relationships by proactively engaging borrowers leading up to their next home purchase. With $1.29 trillion in monitored mortgage balance to date, Senso enables banks to proactively provide retail clients with highly relevant insights about their home finance journey six months before their next home finance transaction. To learn more, visit  NEW ASSOCIATE MEMBERS 24 In Touch ANNIVERSARIES January 151 Years First National Bank Fredonia 146 Years Bank of the Flint Hills Wamego 138 Years Citizens State Bank Cheney 135 Years The Bank of Holyrood Holyrood 118 Years Bendena State Bank Bendena 117 Years Gorham State Bank Gorham 114 Years Citizens State Bank of Marysville Marysville 108 Years Cottonwood Valley Bank Cedar Point 102 Years Farmers State Bank Dwight 99 Years First Option Bank Osawatomie 37 Years Heartland Tri-State Bank Elkhart February 136 Years Legacy Bank Wichita 121 Years Denison State Bank Holton 121 Years Tampa State Bank Tampa 109 Years Citizens State Bank Hugoton

25 ISSUE 1 | 2022 x 1 - F E B 2 - F E B 3 - F E B 8 - F E B 8 - F E B 9 - F E B 1 5 - F E B 1 6 - F E B 1 7 - F E B 1 7 - F E B 2 2 - F E B 2 3 - F E B 2 4 - F E B 1 - M A R 2 - M A R 3 - M A R 8 - M A R 9 - M A R 9 - M A R 1 5 - M A R 1 6 - M A R 1 7 - M A R 2 2 - M A R 2 3 - M A R 2 4 - M A R 2 4 - M A R 2 9 - M A R N e w R e s o u r c e s f o r F i g h t i n g S y n t h e t i c I d e n t i t y F r a u d C o n v e r t i n g a 1 0 4 0 P e r s o n a l R e t u r n t o C a s h F l o w P a r t 1 : S c h e d u l e s B & C T h e I m p a c t o f E v o l v i n g M a r i j u a n a L a w s o n Y o u r I n s t i t u t i o n T h e G r e e n B o o k & G o v e r n m e n t P a y m e n t s E x p l a i n e d B S A O f f i c e r R e p o r t s t o t h e B o a r d O n b o a r d i n g : T h e N e w N o r m a l L e n d i n g o n L o w I n c o m e H o u s i n g T a x C r e d i t P r o j e c t s W r i t i n g N e w A c c o u n t P r o c e d u r e s D e e p D i v e i n t o F o r c e - P l a c e d F l o o d I n s u r a n c e H i g h - R i s k C a s h - I n t e n s i v e B u s i n e s s e s : M a n a g i n g & M o n i t o r i n g L e n d i n g t o T e n a n t s - i n - C o m m o n P r o j e c t s C o n v e r t i n g a 1 0 4 0 P e r s o n a l R e t u r n t o C a s h F l o w P a r t 2 : S c h e d u l e s D , E & F A d v e r t i s i n g C o m p l i a n c e 2 0 2 2 S u p e r v i s o r y P r i o r i t i e s E x p l a i n e d B S A E x a m M a n u a l U p d a t e : I d e n t i f y i n g & M i t i g a t i n g B S A R i s k s A p p r a i s a l R e q u i r e m e n t s : A C o m p r e h e n s i v e R e g u l a t o r y S u m m a r y B o a r d - A p p r o v e d P o l i c i e s : T o o l s t o S t r e a m l i n e Y o u r P r o c e s s 2 0 2 2 A C H R u l e s U p d a t e , I n c l u d i n g F a s t e r P a y m e n t s O p e n i n g A c c o u n t s O n l i n e : C I P , C D D , D o c u m e n t a t i o n & M o r e R e a l E s t a t e E s c r o w A c c o u n t s & F l o o d I n s u r a n c e W r i t i n g T e l l e r P r o c e d u r e s A C H f o r P 2 P T r a n s f e r s : P e r i l s & P r o t e c t i o n s B r e a k i n g D o w n t h e A n t i - M o n e y L a u n d e r i n g A c t & P r e p a r i n g f o r I m p a c t A n I n - D e p t h L o o k a t R e g u l a t i o n Z ' s A m e n d e d Q u a l i f i e d M o r t g a g e ( Q M ) R u l e F a i r L e n d i n g C o r n e r s t o n e s : B e s t P r a c t i c e s & C u r r e n t A g e n c y G u i d a n c e 2 0 C o m m o n M i s t a k e s i n C o n s u m e r C o l l e c t i o n s T o p 2 5 S a f e D e p o s i t C o m p l i a n c e I s s u e s U P C O M I N G W E B I N A R S Visit for all 2022 Bank Webinars 26 In Touch Products and Services Reference List Each asterisk (*) represents an agreement for a specific endorsed product with that company. Not all products that these companies offer are endorsed by CBA. To see a detailed list and explanation of endorsements, visit CBA online at Keep in mind that the services provided by each company on this list may only be a sampling of the many services they offer. By their CBA Associate Membership, these companies have shown their commitment to serving community banks. Please look to these companies first, whenever possible, to meet your banking needs. The following CBA Associate Members are ready to serve you when you need them. Please keep this list handy, and the next time you’re looking for a specific service, you’ll know where to look first! Remember, this is just a sampling of what each company provides. ACCOUNTING/TAX RETURNS Allen, Gibbs & Houlik, L.C. Wichita, KS.......................... 316-267-7231 The Fullinwider Firm, LLC Liberty, MO........................ 800-461-4702 Varney & Associates, CPAs, LLC Manhattan, KS.....................785-537-2202 ACH *SHAZAM Johnston, IA.........................515-288-2828 ADVERTISING SPECIALTIES *Works24 Edmond, OK......................800-460-4653 ALARMS & SECURITY PRODUCTS Federal Protection Springfield, MO.................800-299-5400 Oppliger Banking Systems, Inc. Lenexa, KS.......................... 800-487-7875 ASSET LIABILITY MANAGEMENT QwickRate Marietta, GA...................... 800-285-8626 ATM/DEBIT CARD SERVICES *ICBA Bancard/TCM Bank Arlington, VA......................800-242-4770 *SHAZAM Matt M., Johnston, IA..........515-480-5767 ATM EQUIPMENT (NEW/USED) Federal Protection Springfield, MO.................800-299-5400 Oppliger Banking Systems, Inc. Lenexa, KS.......................... 800-487-7875 AUCTION Purple Wave Manhattan, KS.....................785-537-7653 BACK ROOM SERVICE Data Center Inc. (DCI) Hutchinson, KS..................620-694-6800 BALANCE SHEET CONSULTING *Financial Management Services Inc. (FMSI) Overland Park, KS...............913-955-3355 BANK OPERATIONS The Baker Group Oklahoma City, OK............800-937-2257 *Financial Management Services Inc. (FMSI) Overland Park, KS.............. 913-955-3355 QwickRate Marietta, GA......................800-285-8626 BANKRUPTCY Hinkle Law Firm Wichita, KS.........................316-267-2000 BANK STOCK LOANS & LOAN OVERLINES Commerce Bank Kansas City, MO.................800-821-2182 *S&P Global Charlottesville, VA..............434-951-4419 BOND ACCOUNTING First Bankers Banc Securities Overland Park, KS.............913-469-5400 *ICBA Securities Corporation Memphis, TN....................800-422-6442 COMPLIANCE ASSISTANCE/REVIEWS *Advanced Business Solutions (ABS) Olathe, KS...........................913-731-6007 Allen, Gibbs & Houlik, L.C. Wichita, KS..........................316-267-7231 *MPA Systems Sanger, TX...........................888-233-1584 Purple Wave Manhattan, KS.................... 785-313-2094 RESULTS Technology Lenexa, KS..........................877-435-8877 Varney & Associates, CPAs, LLC Manhattan, KS.....................785-537-2202 Young & Associates, Inc. Kent, OH............................800-525-9775 CONSULTING Abrigo Raleigh, NC......................... 919-851-7474 *Bank Compensation Consulting (BCC) Plano, TX............................ 303-482-1844 Young & Associates, Inc. Kent, OH............................800-525-9775 CORRESPONDENT SERVICES Commerce Bank Kansas City, MO.................800-821-2182 First National Bank of Hutchinson Hutchinson, KS..................800-293-0683 CORE SERVICES *SHAZAM Bill M., Johnston, IA............515-306-8012 CREDIT AND PORTFOLIO RISK MANAGEMENT Abrigo Raleigh, NC..........................919-851-7474 CREDIT SUPPORT *Advanced Business Solutions (ABS) Olathe, KS...........................913-731-6007 CREDIT CARD PROGRAM *ICBA Bancard/TCM Bank Arlington, VA......................800-242-4770 DATA PROCESSING Data Center Inc. (DCI) Hutchinson, KS................. 620-694-6800 Modern Banking Systems Ralston, NE......................... 402-592-5500 DEBT COLLECTION Hinkle Law Firm Wichita, KS.........................316-267-2000 DIRECTORS AND OFFICERS INS. *Travelers Overland Park, KS............. 800-255-5072 *UNICO Group, Inc. Kansas City, KS..................800-755-0048 DIRECTORS EXAMS Allen, Gibbs & Houlik, LC Wichita, KS.......................... 316-267-7231 The Fullinwider Firm, LLC Liberty, MO........................800-461-4702 Varney & Associates, CPAs, LLC Manhattan, KS................. ...785-537-2202 DISASTER RECOVERY PLANNING *MPA Systems Sanger, TX...........................888-233-1584 ELECTRONIC SERVICES *Fitech Payments Fort Worth, TX.................... 682-201-5551 EMERGENCY FACILITIES/MODULAR BANK BUILDINGS *MPA Systems Sanger, TX...........................888-233-1584