ISSUE 1 2024 Official Publication of the Community Bankers Association of Kansas 14INNOVATION STATION THE POWERFUL ROLE OF DATA IN COMMUNITY BANK INNOVATION 4 FLOURISH CONTINUING THE CLIMB FOR OUR COMMUNITIES
CONTENTS Issue 1 www.cbak.com © 2024 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 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 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. 4 FLOURISH CONTINUING THE CLIMB FOR OUR COMMUNITIES By Rebeca Romero Rainey, President and CEO, ICBA 5 NEW ASSOCIATE MEMBER: KLARIVIS ® 6 SPREAD THE WEALTH Some Bond Sectors Performed Better Than Others in 2023 By Jim Reber, President and CEO, ICBA Securities 8 THE 2024 COMMUNITY BANKERS FOR COMPLIANCE PROGRAM 9 ICBA LIVE ORLANDO 10 HMDA & CRA ADJUSTMENTS ARE HERE By William J. Showalter, CRCM, CRP, Senior Consultant, Young & Associates, Inc. 12 ANNOUNCEMENTS 13 ANNIVERSARIES 13 SAVE THE DATE! CBA 46th Annual Convention & Trade Show 14 INNOVATION STATION THE POWERFUL ROLE OF DATA IN COMMUNITY BANK INNOVATION By Charles E. Potts, Executive Vice President and Chief Innovation Officer, ICBA 16 IRS ISSUES PROPOSED LONG-TERM, PART-TIME REGULATIONS By Ascensus IN EVERY ISSUE: 19 OFFICERS AND DIRECTORS 19 PRODUCTS AND SERVICES REFERENCE LIST 22 BANK TRAINING WEBINARS 4 10 16 3 In Touch
FLOURISH I recently came across a quote from the Pulitzer Prize-winning poet Theodore Roethke: “Over every mountain, there is a path, although it may not be seen from the valley.” As an avid hiker myself, it resonated because as you look up toward the climb ahead, you may not see the route, but you know it’s there — not unlike the situation we face in community banking today. As we enter 2024, we see a steep climb amid so many headwinds, including volatile interest rate and supervisory environments, emerging regulatory reforms, constant pressure on margins and more. Yet, with every step on the journey, we just get stronger. As we look back on 2023, we felt the impact of numerous challenges — failures of large, risky banks, fluctuating interest rates, increased competition and more — and we not only survived but thrived. We championed new solutions like FedNow. We successfully advocated for the vast majority of community banks to be exempted from the FDIC’s proposed special assessment. We expanded our innovation programs, creating a center for community bank innovation. These previous experiences have positioned our strength, and today, as we climb toward that next peak, we’re honing new skills. Each step is an investment in the future to further fuel the community banking model. Our national campaign goes hand in hand with this work. By telling the compelling stories of the ways in which you make a difference, we’ll continue to bolster the work you do. In advocacy, education and innovation, we are working alongside you to power your potential and help you surmount the trials you face along the journey. And while this climb may be difficult, it will lead to new opportunities. As I reflect on my career, I realize some of the greatest learning moments were in the most challenging situations. That’s how I know community banks will find a way as an industry, as a network of community bankers, to find the right next step to provide for our communities. Hikers will stand at the bottom of the peak and realize it looks a lot higher than it did when they were farther away, but they made the climb. As we take our first steps into 2024, it’s that same “bring it on” mentality that will continue to bring us strength and guide us. We’re ready to see what lies ahead, embrace the challenge and create forward momentum. Because while the path from the valley to the summit may be circuitous, community bankers will always continue the climb for the good of their customers and communities. BY REBECA ROMERO RAINEY, PRESIDENT AND CEO, ICBA Where I’ll Be This Month I’ll first meet with the ICBA Nominating Committee to continue our leadership journey, and then I’ll head to Atlanta for a showcase from ICBA’s sixth ThinkTECH Accelerator program. Continuing the Climb for Our Communities In advocacy, education and innovation, we are working alongside you to power your potential and help you surmount the trials you face along the journey. 4 In Touch
NEW ASSOCIATE MEMBER KlariVis® KlariVis is the only cloud-based, core-agnostic enterprise dashboard and analytics solution built for bankers by bankers. The KlariVis platform compiles and aggregates high-value, actionable data across disparate systems into an intuitive, interactive dashboard that provides financial institutions of all sizes with timely insights that empower teams, drive profitability and improve productivity at every level of the organization. For more information, visit them online at klarivis.com. 5 In Touch
SPREAD THE WEALTH Some Bond Sectors Performed Better Than Others in 2023 Most of the mortgage sector, for example, saw their spreads widen. The genesis of the wider-spreads/ higher treasuries dynamic was, of course, the demise of several large banks beginning in March. Silicon Valley Bank, in particular, with its $200 billionplus of mortgage-backed securities (MBS), caused that sector to have some indigestion through the summer as the FDIC’s bridge bank gradually disposed of the assets. Still, yield spreads were wider at the end of the year, partly the result of depositories in general not purchasing many bonds of any color or flavor. The MBS sector, in this column, includes traditional fixed-rate pass-throughs, collateralized mortgage obligations (CMOs) and even adjustable rate pools (ARMs). In the counter-intuitive world of bond investing, mortgage pools’ underperformance in 2023 would seem to indicate a pocket of value heading into 2024. Munis for the Bid? You may ask, “If MBS are cheap, what’s expensive?” On the other side of the past-performance spectrum are municipal securities. The muni market has other machinations going on that resulted in relatively low yields and spreads by the end of last year. Demand for munis is determined not so much by institutional investors but by the retail sector. Well over 60% of existing muni bonds are owned by individuals either directly or through municipal bond funds. Appetite for retail munis has generally grown over time as baby boomers retire, and except for temporary “headline” sell-offs such as those related defaults by Detroit or Puerto Rico some years ago, demand has been steady and growing. Recent credit-quality performance in the sector has been solid. The supply side of the municipal market is another story. According to the Federal Reserve, the entire muni market grew by only $50 billion between 2010 and 2022, or barely more than 1%. More recently, in 2023, there were a number of issues Endorsed Partner As we have navigated the holiday season and hopefully had some time to wrap up some gifts as well as a successful 2023, let’s now spend a few minutes looking into pockets of relative value in the bond market. To get there, we should remind ourselves of the vagaries and ironies of fixed-income investing. In my 35 years of portfolio management participation, I’ve noticed some recurring themes and doctrines, which have both positives and less-than-positives: • Higher rates = lower prices. • Selling bonds at a loss, versus a gain, has positive cash flow implications. • Community banks buy more securities in lower rate periods. • Higher coupons have less price volatility than lower coupons. • Yield spreads usually widen when rates fall. Let’s stay with this last bullet point for a minute. In practice, this means the value of a “risk” asset, which we’re defining here as anything other than a treasury note, will improve less than a similar duration treasury, given a drop in rates. There are several reasons for this reaction. One is that rates fall when investors expect the economy to slow down, so presumably, credit quality will become sketchier. Another is that the lower market rates translate into greater call risk since the likelihood of a bond ending up “in the money” to be redeemed increases. Usually, Not Always The corollary to the preceding paragraph is that spreads narrow as rates rise. In the year just completed, in which Treasury yields fell thanks to a fourth-quarter rally, we saw an amazingly diverse set of returns for the various bond sectors that community banks like. BY JIM REBER, PRESIDENT AND CEO, ICBA SECURITIES 6 In Touch
postponed into the future, presumably to chase lower interest rates. The amount of new paper issued in 2023 was over 20% less than in 2021. While some of that was due to fewer calls being exercised, the continued supply shortage has pulled down tax-equivalent yields for institutional buyers, including community banks, into “through the curve” levels. For maturities out to 10 years, investment-grade munis could yield up to 50 basis points (.50%) less than benchmark treasuries. Cogito, Ergo I Swap? The previous two sections would seem to suggest a tidy bond swap strategy. The first step in any simultaneous purchase and sale is to find the most efficient securities to sell. Those would be the ones with the lowest return to the buyer, otherwise known as a “takeout yield.” Bonds that have lower returns than treasuries are hard to come by, but that’s exactly where shorter municipals were trading at the end of 2023. Securities to replace them? I’d start with some kind of MBS. Recently, strategists from Stifel have been suggesting “hybrid ARMs,” which have reasonable yields today and the possibility of maintaining them in the future even if rates fall. Most of them come with offering prices below par, which is another rarity. Ultimately, the theme of this column is that opportunities abound for your bond portfolio at the start of the year. Some sectors look historically expensive, while others seem to offer uncommon value. Acting early in the year can get the momentum started for a prosperous 2024. Upcoming Webinars ICBA Securities and its exclusive broker Stifel will present 16 webinars throughout 2024. There will be several tracks, including balance sheet management, enterprise risk and economic outlooks. We will again offer CPE credits for these events. Be on the lookout for announcements starting early in the year. Acting early in the year can get the momentum started for a prosperous 2024. Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income brokerdealer for community banks. 7 In Touch
THE 2024 COMMUNITY BANKERS FOR COMPLIANCE PROGRAM Your solution for compliance challenges is here! Offering flexibility across employee departments, CBA recognizes that job responsibilities change frequently within some banks and for this reason, membership is granted to banks, not individuals. This enables you to send bank representatives as the topics relate directly to their positions. These employees typically come from the customer service, lending or operations departments in the bank. The CBC program is priced to enable your bank to send additional employees with substantial savings. We offer three levels of service: CBC Basic Program, CBC Extended Program and the CBC Enhanced Program to ensure that your employees receive the level of training they need. CBA OF KANSAS MEMBERS RECEIVE 60% OFF THE ENROLLMENT FEE! Presented by Are you a Member of ICBA, and hold the Community Banker University Compliance Certification? Receive CPE credits for your participation in live events. To learn more and register today, scan the QR code. https://www.cbak.com/about-us/compliance-tool/ 8 In Touch
ICBA LIVE 2024 ICBA LIVE is the annual destination for thousands of community bankers, solution providers, and experts to exchange strategies and resources. Join us for three days of inspiration, learning, growing, and connecting. Share and gain ideas from your peers to power your potential as leaders in your bank and community. Learn more and register icba.org/LIVE2024. HELPING COMMUNITY BANKS FLOURISH
HMDA & CRA ADJUSTMENTS ARE HERE There are changes that arrived with the new year of 2024 to Home Mortgage Disclosure Act (HMDA) compliance for banks and thrifts in many areas. No, the Consumer Financial Protection Bureau (CFPB) is not repealing Regulation C or adding more detail to the required data we collect and report. The existing rule is still in place. The changes we will look at here are driven by the decennial (every 10 years) adjustments by the Office of Management and Budget (OMB) to geographic units used by the federal government, including the Census Bureau, for statistical purposes. The particular geographic units that impact bank and thrift HMDA compliance are Metropolitan Statistical Areas (MSAs) since they are a qualifying location factor for lenders in determining HMDA coverage. The OMB’s changes will also have possible effects on bank and thrift compliance with the Community Reinvestment Act (CRA) in the drawing of institutional CRA “assessment areas.” These latest changes were effective when issued by OMB — July 21, 2023 — so they can impact 2024 HMDA coverage. OMB Action The OMB completed a process of delineating Core Based Statistical Areas (CBSAs) based on 2020 Census data and the American Community Survey and Census Population Estimates Program for 2020 and 2021. A CBSA is a geographic entity associated with at least one core of 10,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties. The standards designate and delineate two categories of CBSAs: Metropolitan Statistical Areas and Micropolitan Statistical Areas. The general concept of a metropolitan statistical area is that of an area containing a large population nucleus and adjacent communities that have a high degree of integration with that nucleus. The concept of a micropolitan statistical area closely parallels that of the metropolitan statistical area, but a micropolitan statistical area features a smaller nucleus. The purpose of these statistical areas is unchanged from when metropolitan areas were first delineated: The classification provides a nationally consistent set of delineations for collecting, tabulating and publishing federal statistics for geographic areas. The new delineations are found in OMB Bulletin 23-01 by scanning the QR code. https://www.whitehouse.gov/wp-content/ uploads/2023/07/OMB-Bulletin-23-01.pdf Associate Member BY WILLIAM J. SHOWALTER, CRCM, CRP, SENIOR CONSULTANT, YOUNG & ASSOCIATES, INC. 10 In Touch
HMDA Coverage Regulation C covers any “financial institution,” as defined by the regulation and its underlying HMDA statute. “Financial institution” means, in part, a bank, savings association or credit union that: • On the preceding Dec. 31, had assets in excess of the asset threshold established and published annually by the CFPB for coverage by HMDA, based on the year-to-year change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, for each 12-month period ending in November, rounded to the nearest million — $56 million for 2024 HMDA coverage. • On the preceding Dec. 31, had a home or branch office in a Metropolitan Statistical Area (MSA). [Micropolitan Statistical Areas have no HMDA impact.] • In the preceding calendar year, originated at least one home purchase loan (excluding temporary financing such as a construction loan) or refinancing of a home purchase loan, secured by a first lien on a one- to four-family dwelling. • Meets one or more of the following two criteria: is federally insured or regulated; or the mortgage loan referred to in the previous bullet was insured, guaranteed or supplemented by a federal agency or was intended for sale to Fannie Mae or Freddie Mac. • Meets at least one of the following criteria in each of the two preceding calendar years: originated at least 25 closedend mortgage loans that are not excluded by §1003.3(c)(1) through (10) or (c)(13), or originated at least 200 open-end lines of credit that are not excluded by the cited section of Regulation C. There are also similar qualification criteria for for-profit mortgage lenders that are not banks, thrifts or credit unions, which we will not detail here. The qualification criterion impacted by OMB’s action is the geographic one, the second bullet above. If a financial institution that otherwise meets HMDA coverage criteria has an office in an MSA on Dec. 31, then it is covered by HMDA for the following year. For many lenders, determining HMDA coverage is a one-time exercise (other than those who are right around the asset-size threshold). Kansas MSA Changes OMB made some significant MSA changes that impact banks and thrifts in Kansas and their compliance with HMDA requirements. Four existing MSAs were unchanged — Kansas City, Lawrence, St. Joseph and Topeka MSA. Changes were made to the other two existing MSAs and one out-of-state MSA had a Kansas county added, as follows: • Joplin MSA — Cherokee County (Kansas) added. • Manhattan MSA — Geary County added. • Wichita MSA — Kingman County added. All the details of the new Kansas geographic delineations can be found in the OMB Bulletin mentioned previously. The list of MSAs and micropolitan statistical areas by state is in List 6 (with Kansas on pages 157-158) of the OMB Bulletin, while five additional lists in the bulletin give other breakdowns of the geographic delineations, including the counties included in each. HMDA Impact In 2023, there was no impact on HMDA reporting because the new MSA delineations were not in effect on Dec. 31, 2022. However, they were in effect Dec. 31, 2023, which has the following impacts: • Banks and thrifts with offices in the newly included counties — Cherokee, Geary, and Kingman — and in no other MSA counties now have had to begin collecting HMDA data by Jan. 1, 2024, and must make their first reports of that data by March 1, 2025. • Unlike 10 years ago, there are no banks and thrifts whose offices in Kansas counties have made them subject to HMDA reporting (i.e., no offices in other MSA counties) that will no longer have to collect HMDA data beginning in 2024. (Note that such banks would still be obligated to report their 2023 HMDA data by March 1, 2024.) If your institution has an office in any of the counties affected by the MSA changes, be sure to review how this action affects your HMDA compliance beginning in 2024. There are changes that arrived with the new year of 2024 to Home Mortgage Disclosure Act (HMDA) compliance for banks and thrifts in many areas. 11 In Touch
CRA Impact MSAs affect the CRA compliance efforts of banks and thrifts, too. They come into play in drawing up an institution’s CRA assessment area (AA), as well as in the small business and small farm lending disclosure statements prepared by regulators annually for institutions reporting their data (all except for “small” retail banks and thrifts). The CRA rules require that an institution’s CRA AA generally consist of one or more MSAs or metropolitan divisions — using the MSA or metropolitan divisions boundaries that were in effect as of Jan. 1 of the calendar year in which the delineation is made — or one or more contiguous political subdivisions (e.g., counties, cities or towns). A CRA AA may not extend substantially beyond an MSA boundary or beyond a state boundary unless the assessment area is located in a multistate MSA. If a bank or thrift serves a geographic area that extends substantially beyond a state boundary, the bank must delineate separate AAs for the areas in each state. If a bank or thrift serves a geographic area that extends substantially beyond an MSA boundary, it must delineate separate AAs for the areas inside and outside the MSA. The regulators prepare annually, for each MSA and the nonmetropolitan portion of each state, an aggregate disclosure statement of small business and small farm lending by all institutions subject to reporting of that data (all except “small” retail banks and thrifts). William J. Showalter, CRCM, is a senior consultant with Young & Associates, Inc. (www.younginc.com), with over 35 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He authors and edits compliance publications and articles for Young & Associates. He can be reached at wshowalter@younginc.com. Therefore, the redrawn MSA boundaries might have an impact on your institution’s CRA compliance. Each bank and thrift with the affected counties in its CRA AA should review its delineation to make sure that the changes do not require an adjustment to those delineations. If any adjustments are needed, they should be made by April 1 — when any updating of CRA public files must be accomplished (including the map of your CRA AA). The OMB Bulletin provides the six lists of statistical areas that are available electronically at the link stated above or from the OMB website at www.whitehouse.gov/omb/information-for-agencies/ bulletins. The update, historical delineations and other information about population statistics are available on the Census Bureau’s website at www.census.gov/programs-surveys/metro-micro.html. ANNOUNCEMENTS FHLBank Topeka is pleased to announce that Jeffrey B. Kuzbel has been selected as its next president and CEO. Kuzbel has served as FHLBank’s chief financial officer since April 2021. He transitioned to his new role at FHLBank on Jan. 1, 2024. Jeffrey B. Kuzbel Joan M. Bowen Jeri Rowe The Trust Company of Kansas (TCK) is proud to announce the addition of two experienced wealth management professionals to its team. Joan M. Bowen has joined the Lawrence team as vice president and trust officer, while Jeri Rowe has joined the Wichita team as vice president and trust officer. 12 In Touch
January 153 years First National Bank — Fredonia 148 years Bank of the Flint Hills — Wamego 140 years Citizens State Bank — Cheney 137 years The Bank of Holyrood — Holyrood 120 years Bendena State Bank — Bendena 116 years Citizens State Bank of Marysville — Marysville 110 years Cottonwood Valley Bank — Cedar Point 104 years Farmers State Bank — Dwight 101 years First Option Bank — Osawatomie 138 years Legacy Bank — Wichita 123 years Denison State Bank — Holton 123 years Tampa State Bank — Tampa 111 years Citizens State Bank — Hugoton February SAVE THE DATE! CBA 46th Annual Convention & Trade Show JULY 18-20, 2024 Margaritaville Lake Resort Lake of the Ozarks ANNIVERSARIES Congratulations to the banks celebrating January and February anniversaries as chartered institutions! 13 In Touch
Data is king. Everyone — from Big Tech to retailers to systems providers — prioritizes data for its ability to deliver on revenue expectations. Looking to improve the customer experience? Data tells a story. Want to strengthen fraud prevention? Data provides protections. Striving to prioritize the projects on your to-do list? Data leads the way. For these reasons and more, the overarching narrative for community banks in 2024 will center on all things data: how to uncover, understand, mine and activate the data you have for the benefit of the customers you serve. From our experiences with the PPP, we’ve learned the importance of identifying a need and reporting on the outsized role community banks play in servicing small businesses in their hour of need. But now the charge is to make sure we’re retaining those valued customers, attracting new ones and expanding our services to meet their evolving needs. The strategic approach to small business banking is predicated on better data analysis. Community banks have to ask, “Where are my small business customers moving money? Where am I losing deposits? What products and services are they getting from somebody else that I don’t have, or I do and they’re not using?” The answers to those questions come from existing data points, including payments. Community banks can investigate transactions, and the account they give may define product development’s next steps. Yet this data quarrying doesn’t have to be a manual process. Fintechs can help banks automate the review, pull out the central narrative and prioritize actions around it. Finding the right partner can be as simple as checking out our current ThinkTECH Accelerator cohort, which is focused on small business needs and data analytics (see sidebar). We heard from bankers that these are two key areas where they need solutions, and the companies in this cohort directly reflect that input. So, as the new year gets started and priorities are abound, I come back to an oft-repeated phrase: It’s about working smarter, not harder. Data analytics offers a tool to do just that, helping community banks excel in new ways by identifying the right opportunities. Data may be king, but ultimately, community banks will reign supreme if they can harness it to benefit their customers and communities. Charles E. Potts is ICBA’s Executive Vice President and Chief Innovation Officer. Potts drives ICBA’s innovation initiatives and financial technology strategies. Innovation Station THE POWERFUL ROLE OF DATA IN COMMUNITY BANK INNOVATION BY CHARLES E. POTTS, EXECUTIVE VICE PRESIDENT AND CHIEF INNOVATION OFFICER, ICBA 14 In Touch
Accelerator Introduces Small Business and Data-Centric Fintechs Join ICBA for their sixth ThinkTECH Accelerator, featuring fintechs that can help community banks with small business banking and data analytics. Banks are welcome to sign up for one-on-one or group sessions with the cohort. To schedule a time, visit icba.org/thinktech. QwickRate,® a Data Analytics CBA Endorsed Partner QwickAnalytics® delivers time-saving bank research, performance analysis and regulatory tools. 15 In Touch
The Internal Revenue Service (IRS) has released a proposed regulation reflecting statutory changes related to longterm, part-time (LTPT) employees made by the SECURE Act of 2019 (SECURE Act) and the SECURE 2.0 Act of 2022 (SECURE 2.0). This proposed regulation would amend Treasury Regulation (Treas. Reg.) 1.401(k)-5 to reflect the rules for LTPT employees, including specific eligibility and vesting requirements. The proposed regulation also provides guidance regarding employer contributions with respect to LTPT employees and the impact that LTPT employees will have on nondiscrimination, coverage testing and top-heavy benefits. Background Historically, employers could design their 401(k) plans to prevent part-time workers from entering a plan by requiring employees to be credited with at least 1,000 hours during a plan year in order to become eligible to participate. In 2019, the SECURE Act changed the eligibility requirements so that LTPT employees who are credited with at least 500 hours in three consecutive years must be allowed to participate under a 401(k) plan’s salary deferral provision. In 2022, SECURE 2.0 reduced the wait from three years to two, effective for plan years that begin after Dec. 31, 2024, and expanded applicability to ERISA-covered 403(b) plans. This proposed regulation provides answers to some of the open questions regarding the administration of LTPT employees and paves the way for new plan design concepts. The highlights of the proposed regulation are described below. Definitions The proposed regulation provides clarity on the criteria that need to be met in order for an employee to be considered a LTPT employee and also defines a new classification identified as former LTPT employees. • LTPT Employee: Under this proposed regulation, a LTPT employee is defined as an employee who is eligible to participate in a plan solely by reason of o being credited with at least 500 hours of service during each of two consecutive 12-month periods (three consecutive 12-month periods for plan years beginning before 2025); and o attaining age 21 by the close of the last of the consecutive 12-month periods. IRS ISSUES PROPOSED LONG-TERM, PART-TIME REGULATIONS BY ASCENSUS 16 In Touch
LTPT employees do not include employees described in Internal Revenue Code Section (IRC Sec.) 410(b)(3), including union employees and employees who are nonresident aliens with no United States source income. If an employee becomes eligible to participate in the plan under any other service condition (or lack thereof), the employee is not a LTPT employee. For example, if a newly hired employee is immediately eligible to participate in the plan for deferral purposes, she will not be considered to meet the definition of a LTPT employee. Similarly, an employee who becomes eligible to participate using the elapsed time method would not be considered a LTPT employee because the individual would not have met the service requirement solely by completing the applicable number of consecutive 12-month periods during which the employee is credited with at least 500 hours of service. • Former LTPT Employees: This proposed regulation also defines a former LTPT employee. A LTPT employee will become a former LTPT employee as of the first day of the plan year beginning after the earlier of o the plan year in which the employee is credited with at least 1,000 hours during a 12-month period; or o the plan year in which the employee becomes an ineligible employee (due to an eligibility requirement other than age or service). Eligibility and Participation Criteria • Determining Eligibility Service: The proposed regulations generally leverage existing rules for determining LTPT employees, including the methods for counting hours and determining the 12-month periods during which hours must be counted. o Equivalency Method: In addition to counting actual hours, the proposed regulation will permit employers to use an otherwise permissible equivalency method to determine if an employee is credited with at least 500 hours of service during the applicable number of consecutive 12-month periods. The hours of service credited will not be affected by an employer classifying an employee as part-time. For purposes of LTPT eligibility, the IRS did not choose to reduce the number of hours that normally would be credited to an employee under the applicable equivalency method. o Eligibility Computation Periods: All computation periods beginning on or after Jan. 1, 2021, must be considered when determining if an employee has completed the LTPT service requirements. The initial eligibility computation period begins on the employee’s date of hire and ends on the anniversary date of the date of hire. Subsequent eligibility computation periods may continue as the anniversary date of hire or may switch to the plan year depending on the terms of the plan, which may result in overlapping eligibility computation periods. • Class Exclusions: The proposed regulation confirms that certain classes of employees may continue to be excluded from participation in the plan, notwithstanding the LTPT requirements, so long as the class exclusions are not a proxy for imposing an age or service requirement that forces an employee to complete a period of service that extends beyond the earlier of o age 21 and one year of service; or o the applicable number of consecutive 12-month periods during each of which the employee is credited with at least 500 hours of service. • LTPT Entry Dates: A LTPT employee must be permitted to enter the plan under the same entry date rules that apply to all other eligible employees. This means a LTPT employee must be permitted to enter the plan the earlier of o the first day of the first plan year beginning after the date the employee satisfies the eligibility requirements; or o six months after the date the employee satisfies the eligibility requirements. • Break in Service Rules: The proposed regulation does not include any provision similar to existing eligibility break in service rules. Therefore, once an employee becomes eligible under the LTPT provisions, the completion of any 12-month period where she is credited with fewer than 500 hours does not affect her LTPT eligibility. In addition, if a LTPT employee terminates service and is rehired by the employer maintaining the plan, then the employer must take into account the previous 12-month periods during which she was credited with at least 500 hours for purposes of whether they are eligible to participate. • Deferral Restrictions for Non-HCEs: In order to give effect to the statute, the proposed regulation limits the ability to impose restrictions on the right to make deferral contributions by a LTPT employee who is an eligible non-highly compensated employee (non-HCE). The right to make deferral contributions cannot be restricted in any manner that would not be permitted for a non-HCE under a safe harbor plan. Therefore, the permissible restrictions are limited to o restrictions on election periods; o the amount of deferral contributions; o the types of compensation that may be deferred; and o limitations under the IRC (e.g., 402(g) and 415 annual additions limits). Vesting Service Regulations The proposed regulation would require employers to credit LTPT and former LTPT employees with one year of vesting service for each year that an individual is credited with at least 500 hours during a 12-month vesting computation period. Therefore, former LTPT employees will continue to be credited with vesting service under the LTPT vesting provisions, necessitating separate tracking of such participants for vesting purposes. Employer Contributions for LTPT Employees The proposed regulation stipulates that — except in the case of a SIMPLE 401(k) plan — employers are not required to provide nonelective and matching contributions to LTPT employees. This applies even if the employer makes contributions on behalf of other eligible employees. An employer that wishes to 17 In Touch
forego making matching or nonelective contributions on behalf of LTPT employees in a safe harbor plan must make an election — described below — to exclude LTPT employees for purposes of determining whether the plan satisfies the nondiscrimination and minimum coverage requirements. Impact on Nondiscrimination and Coverage Testing The proposed regulation permits an employer to exclude LTPT employees from several compliance tests, including the nondiscrimination requirements under IRC Sec. 401(a)(4), the actual deferral percentage (ADP) and actual contribution percentage (ACP) tests, ADP and ACP safe harbor provisions, and the 410(b) minimum coverage test. If the employer does not elect to exclude LTPT employees, those employees generally will be otherwise excludable employees for purposes of IRC Sec. 410(b)(4)(B). • Former LTPT Employees: Unlike LTPT employees, the proposed regulation does not permit former LTPT employees to be excluded from testing or be considered otherwise excludable because these employees have satisfied the minimum age and service requirements of IRC Sec. 410(a)(1). • All-Inclusive Testing Election: An employer’s election to exclude LTPT employees from nondiscrimination and coverage testing must apply to every nondiscrimination and coverage testing provision (as applicable). This election must also apply to all LTPT employees who are eligible to participate in the plan. • Testing Election Documentation: If a plan is an ADP or ACP safe harbor plan, the employer’s election must be included in the plan document and satisfy the safe harbor plan year requirements. If a plan is a non-safe harbor plan, the employer’s election does not have to be included in the plan document, but the plan’s terms must provide language that enables the employer to make an election to exclude LTPT employees from the nondiscrimination and minimum coverage requirements. • SIMPLE 401(k) Plan: An employer may not exclude LTPT employees for purposes of determining whether the plan satisfies the SIMPLE 401(k) requirements of IRC Sec. 401(k)(11) and (m)(10). Impact on Top-Heavy Benefits The proposed regulation permits an employer to exclude LTPT employees from the application of the vesting and minimum benefit requirements of the top-heavy test. For such an election to apply, the plan’s terms must provide that LTPT employees are excluded from the vesting and benefit requirements of IRC Sec. 416(b) and (c). The election would not apply for the purpose of determining whether a plan is a top-heavy plan and would not apply to former LTPT employees. With respect to safe harbor plans, a plan will not fail to be excluded from the definition of a top-heavy plan if the employer makes an election to exclude LTPT employees from the nondiscrimination and coverage tests and they do not make safe harbor contributions on behalf of LTPT employees (or they make nonelective or matching contributions in an amount that does not satisfy the requirements for safe harbor contributions). Employer elections regarding the nondiscrimination and coverage testing and the top-heavy benefits are considered separate elections. Next Steps Employers may rely on the proposed regulations prior to the date final regulations are published. If applicable, employers should consider the pros and cons of amending their plan’s eligibility requirements to avoid the application of the LTPT employee rules. For example, employers should consider how other variables — including the possibility of increased employer contributions and the loss of testing exemptions will affect their operation. To assist employers that choose to change their eligibility requirements, the proposed regulations provide that employers may change their eligibility requirements in operation and generally need not formally amend their plans for such changes until the end of the 2025 plan year, when other amendments for SECURE 2.0 are required. The IRS accepted written or electronic comments on the proposed LTPT regulations until Jan. 26, 2024. A public hearing is scheduled for March 15, 2024. Ascensus will continue to follow any new guidance as it is released. Visit ascensus.com for the latest developments. ERISA Operations at Ascensus consists of multiple retirement experts who work collaboratively to research and analyze new guidance as it is released. 18 In Touch
ABSTRACTING Security 1st Title Wichita, KS . . . . . . . . 316-267-8371 ACCOUNTING/TAX RETURNS Allen, Gibbs & Houlik, L.C. Wichita, KS . . . . . . . . 316-267-7231 Varney & Associates, CPAs, LLC Manhattan, KS . . . . . . . 785-537-2202 ACH *SHAZAM Johnston, IA . . . . . . . . 515-288-2828 ADVERTISING SPECIALTIES *Works24 Brian, Edmond, OK . . . . . 800-460-4653 ALARMS & SECURITY PRODUCTS Federal Protection Springfield, MO . . . . . . .800-299-5400 Oppliger Banking Systems, Inc. Lenexa, KS . . . . . . . . .800-487-7875 ARTIFICIAL INTELLIGENCE *Agent IQ Drew, Austin, TX . . . . . . 830-708-9370 ASSET LIABILITY MANAGEMENT *Financial Management Services, Inc. (FMSI) Chuck, Overland Park, KS. . . ..913-955-3355 *QwickRate Dan, Marietta, GA . . . . . . 800-285-8626 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 Modern Banking Systems Ralston, NE . . . . . . . . . 800-592-7500 BALANCE SHEET CONSULTING *Financial Management Services, Inc. (FMSI) Chuck, Overland Park, KS . . . 913-955-3355 BANK OPERATIONS The Baker Group Oklahoma City, OK . . . . . 800-937-2257 *QwickRate Dan, Marietta, GA . . . . . . 800-285-8626 BANK/PEER PERFORMANCE *QwickRate Dan, Marietta, GA . . . . . . 800-285-8626 BANKRUPTCY Spencer Fane, LLP Overland Park, KS . . . . . .800-526-6529 BANK STOCK LOANS & LOAN OVERLINES Commerce Bank Kansas City, MO . . . . . . . 800-821-2182 *S&P Global Stacy, Charlottesville, VA . . . 434-951-4419 BOND ACCOUNTING First Bankers Banc Securities Overland Park, KS . . . . . . 913-469-5400 *ICBA Securities Corporation Jim, Memphis, TN . . . . . . . . . . . .800-422-6442 COMPLIANCE ASSISTANCE/REVIEWS *Advanced Business Solutions (ABS) Sandy, Olathe, KS . . . . . . 913-340-7041 Allen, Gibbs & Houlik, L.C. Wichita, KS . . . . . . . . 316-267-7231 *BHG Bank Group Tom, Syracuse, NY . . . . . . 315-372-4510 *MPA Systems David, Fort Worth, TX . . . . 888-233-1584 Purple Wave Manhattan, KS . . . . . . . 785-313-2094 Varney & Associates, CPAs, LLC Manhattan, KS . . . . . . . 785-537-2202 Young & Associates, Inc. Kent, OH . . . . . . . . . 800-525-9775 Products and Services Reference List Joe Rottinghaus Chairman Conway Bank Tanner Johnson Chairman-Elect Swedish-American Bank Tom Pruitt Secretary/Treasurer Peoples Bank & Trust Company Irv Mitchell Immediate Past Chairman Wilson State Bank DIRECTORS Josh Bailey Security State Bank Kent Culbertson First National Bank and Trust Cheri Fahrbach First National Bank of Hutchinson Brandon Lee Union State Bank Margaret Nightengale Grant County Bank Steven Suellentrop Legacy Bank Jim Wayman ESB Financial Michele C. (Mickey) Lundy Past Chairman Tampa State Bank STATE ICBA DIRECTOR Blake Heid First Option Bank CBA STAFF Shawn Mitchell President and CEO shawn@cbak.com Nikki Dohrman Senior Vice President/ Executive Director nikki@cbak.com Yvonna Hansen Vice President of Member Services yvonna@cbak.com Stuart Little Little Government Relations, LLC 2024 CBA OFFICERS AND DIRECTORS Officers and Directors 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. The “*” 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 at www.cbak.com. Keep in mind that the services listed by each company on this page 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. 19 In Touch
CONSULTING *Bank Compensation Consulting (BCC) Rich, Plano, TX . . . . . . . 303-482-1844 *CRA Partners | SHCP Foundation Kristine . . . . . . . . . . 914-656-8643 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 Data Center Inc. (DCI) Hutchinson, KS . . . . . . . 620-694-6800 Modern Banking Systems Ralston, NE . . . . . . . . . 800-592-7500 *SHAZAM Bill M. Johnston, IA . . . . . . . . . . . 515-306-8012 CRA/COMPLIANCE *CRA Partners | SHCP Foundation Kristine . . . . . . . . . . 914-656-8643 CREDIT AND PORTFOLIO RISK MANAGEMENT Young & Associates, Inc. Kent, OH . . . . . . . . . 800-525-9775 CREDIT CARD PROGRAM *ICBA Bancard & TCM Bank Heather, Washington, DC . . . 800-242-4770 CREDIT SUPPORT *Advanced Business Solutions (ABS) Sandy, Olathe, KS . . . . . . 913-340-7041 DATA ANALYTICS KlariVis Roanoke, VA . . . . . . . . 540-357-0011 *QwickRate Dan, Marietta, GA . . . . . . 800-285-8626 DATA PROCESSING Data Center, Inc. (DCI) Hutchinson, KS . . . . . . . 620-694-6800 Modern Banking Systems Ralston, NE . . . . . . . . . 800-592-7500 DEBIT/ATM CARD SERVICES *ICBA Bancard/TCM Bank Heather, Washington, DC . . . 800-242-4770 *SHAZAM Matt M. Johnston, IA . . . . . 515-480-5767 DIGITAL LENDING *BHG Bank Group Tom, Syracuse, NY . . . . . . 315-372-4510 DIGITAL RELATIONSHIP BANKING *Agent IQ Drew, Austin, TX . . . . . . 830-708-9370 DIRECTORS AND OFFICERS INS. *Travelers Danielle, St. Louis, MO . . . . 800-255-5072 *UNICO Group, Inc. Diana, Lenexa, KS . . . . . .800-755-0048 DIRECTORS EXAMS Allen, Gibbs & Houlik, L.C. Wichita, KS . . . . . . . . 316-267-7231 Varney & Associates, CPAs, LLC Manhattan, KS . . . . . . . 785-537-2202 DISASTER RECOVERY FACILITY PROGRAM *MPA Systems David, Fort Worth, TX . . . . 888-233-1584 DOCUMENT MANAGEMENT *Trust Exchange Leo, Austin, TX . . . . . . . 888-777-8434 EDUCATION *CRA Partners | SHCP Foundation Kristine . . . . . . . . . . 914-656-8643 EMERGENCY FACILITIES/MODULAR BANK BUILDINGS FOR LEASE *MPA Systems David, Fort Worth, TX . . . . 888-233-1584 EMPLOYEE AND EXEC. BENEFITS *Bank Compensation Consulting (BCC) Rich, Plano, TX . . . . . . . 303-482-1844 Woner, Reeder & Girard, P.A. Topeka, KS . . . . . . . . . 785-235-5330 ESCROWS Security 1st Title Wichita, KS . . . . . . . . 316-267-8371 FINANCIAL INST. BOND *Travelers Danielle, St. Louis, MO . . . . 800-255-5072 *UNICO Group, Inc. Diana, Lenexa, KS . . . . . .800-755-0048 HUMAN RESOURCES *UNICO Group, Inc. Kansas City, KS . . . . . . . 800-755-0048 INFORMATION TECHNOLOGY CalTech Olathe, KS . . . . . . . . . 325-947-5550 Kansas Bankers Technologies Salina, KS . . . . . . . . . 888-752-8435 RESULTS Technology Overland Park, KS . . . . . . 877-435-8877 Varney & Associates, CPAs, LLC Manhattan, KS . . . . . . . 785-537-2202 INSURANCE — BANK *Bank Compensation Consulting (BCC) Rich, Plano, TX . . . . . . . 303-482-1844 *Travelers Danielle, St. Louis, MO . . . . 800-255-5072 *UNICO Group, Inc. Diana, Lenexa, KS . . . . . .800-755-0048 INTEREST RATE RISK SERVICE *Financial Management Services, Inc. (FMSI) Chuck, Overland Park, KS . . . 913-955-3355 *ICBA Securities Corporation Jim, Memphis, TN . . . . . . . . . . . .800-422-6442 INTERNAL AUDIT *Advanced Business Solutions (ABS) Sandy, Olathe, KS . . . . . . 913-340-7041 INTERNET BANKING Data Center Inc. (DCI) Hutchinson, KS . . . . . . . 620-694-6800 *ICBA Bancard/TCM Bank Heather, Arlington, VA . . . . 800-242-4770 INTERNET WORLD WIDE W.E.B. Oppliger Banking Systems, Inc. Lenexa, KS . . . . . . . . . 800-487-7875 INVESTMENTS Central States Capital Markets Kansas City, MO . . . . . . .800-851-6459 Commerce Bank Kansas City, MO . . . . . . . 800-821-2182 *Financial Management Services, Inc. (FMSI) Chuck, Overland Park, KS. . . . 913-955-3355 First Bankers Banc Securities Overland Park, KS . . . . . . 913-469-5400 *ICBA Securities Corporation Jim, Memphis, TN . . . . . . . . . . . .800-422-6442 IT SECURITY CalTech Olathe, KS . . . . . . . . ..325-947-5550 Kansas Bankers Technologies Salina, KS . . . . . . . . . 888-752-8435 *RESULTS Technology Darla, Overland Park, KS . . . 877-435-8877 LEGAL SERVICES Spencer Fane, LLP Overland Park, KS . . . . . .800-526-6529 Woner, Reeder & Girard, P.A. Topeka, KS . . . . . . . . . 785-235-5333 LENDING *BHG Bank Group Tom, Syracuse, NY . . . . . . 315-372-4510 LOAN COLLECTIONS AND WORKOUTS Spencer Fane, LLP Overland Park, KS . . . . . .800-526-6529 Woner, Reeder & Girard, P.A. Topeka, KS . . . . . . . . . 785-235-5330 LONG RANGE PLANNING The Capital Corporation, LLC Overland Park, KS . . . . . . 913-498-8188 Varney & Associates, CPAs, LLC Manhattan, KS . . . . . . . 785-537-2202 MARKETING Harland Clarke Newton, KS . . . . . . . . 800-322-0818 *SHAZAM Johnston, IA . . . . . . . . 515-288-2828 *Works24 Brian, Edmond, OK . . . . . 800-460-4653 MERCHANT PROCESSING *SHAZAM Johnston, IA . . . . . . . . 515-288-2828 Products and Services Reference List
MERGERS/ACQUISITIONS The Capital Corporation, LLC Overland Park, KS . . . . . . 913-498-8188 Olsen Palmer Kansas City, MO . . . . . . . 816-379-4029 Spencer Fane, LLP Overland Park, KS . . . . . .800-526-6529 MOBIL CUSTOMER ENGAGEMENT *Agent IQ Drew, Austin, TX . . . . . . 830-708-9370 NETWORK SECURITY Kansas Bankers Technologies Salina, KS . . . . . . . . . 888-752-8435 PAYMENTS *ICBA Bancard Heather, Washington, DC . . . 800-242-4770 PORTFOLIO MANAGEMENT Central States Capital Markets Kansas City, MO . . . . . . .800-851-6459 *Financial Management Services, Inc. (FMSI) Chuck, Overland Park, KS . . . 913-955-3355 PROMOTIONAL PRODUCTS Harland Clarke Newton, KS . . . . . . . . 800-322-0818 RETIREMENT PLANNING Central States Capital Markets Kansas City, MO . . . . . . .800-851-6459 First Bankers Banc Securities Overland Park, KS . . . . . . 913-469-5400 SECONDARY MORTGAGE MARKET LENDING FHLBank Topeka Topeka, KS . . . . . . . . . 800-933-2988 SECURITY MONITORING Federal Protection Springfield, MO . . . . . . .800-299-5400 SUPPLEMENTAL HEALTH INSURANCE *UNICO Group, Inc. Diana, Lenexa, KS . . . . . .800-755-0048 TECHNOLOGY SERVICES CalTech Olathe, KS . . . . . . . . . 325-947-5530 Kansas Bankers Technologies Salina, KS . . . . . . . . . 888-752-8435 *RESULTS Technology Darla, Overland Park, KS . . . 877-435-8877 *QwickRate Dan, Marietta, GA . . . . . . 800-285-8626 *S&P Global Stacy, Charlottesville, VA . . . 434-951-4419 TELECOMMUNICATIONS CONSULTING Verge Network Solutions, Inc. Oklahoma City, OK . . . . . 405-782-8400 TELECOMMUNICATIONS SERVICES Verge Network Solutions, Inc. Oklahoma City, OK . . . . . 405-782-8400 TELECOMMUNICATIONS SYSTEMS Verge Network Solutions, Inc. Oklahoma City, OK . . . . . 405-782-8400 THIRD PARTY COMPLIANCE MANAGEMENT *Trust Exchange Leo, Austin, TX . . . . . . . 888-777-8434 THIRD PARTY RISK MANAGEMENT & CONSULTING *Trust Exchange Leo, Austin, TX . . . . . . . 888-777-8434 TITLE INSURANCE Security 1st Title Wichita, KS . . . . . . . . 316-267-8371 WEBSITE DEVELOPMENT *S&P Global Stacy, Charlottesville, VA . . . 434-951-4419 WHOLESALE LENDING FHLBank Topeka Topeka, KS . . . . . . . . . 800-933-2988 Visit CBA online at www.cbak.com. Last Update: Jan. 23, 2024 Mortgage Investment Services Corporation 22316 Midland Drive • Shawnee, KS • 66226 • 913-390-1010 NMLS# 194708 • A Kansas licensed mortgage company #MC 0001182 Missouri Residential Mortgage Loan Broker Licence # 10-1912 Oklahome Mortgage Broker #MB001953 Colorado License #100044344 Nebraska Licensed Mortgage Company NMLS#194708 Arkansas Licensed Mortgage Company License #124530 20+ Years! Depend On Us! For 20+ years, community banks in the Midwest have depended on MISC’s expert mortgage services for their customers. • Free Loan Officer Training & Webinars •Offer all secondary market loan programs: VA, FHA, USDA/RD, Conventional & Jumbo •Earn more fee income with less risk Call or email today. Let’s discuss how MISC can help you! Andrew Holtgraves, Senior Vice President Cell: 913-558-2555 Email: Andrew@MISCHomeLoans.com 21 In Touch
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