Our panelists

Q: As accounting and capital reporting standards become more complex, how has your interaction with the CEO and other executive officers changed?

Melissa Casey: My role has evolved from reporting financial results to serving as a strategic advisor. I collaborate more closely with our CEO and executive team to evaluate the accounting, capital and regulatory impact of key decisions before they are made, helping balance growth with long-term financial goals.

Lee Pedigo: We talk a little bit every day about one thing or the other, so anything that comes up, we’re always talking to each other. We were starting preparations to cross the $1 billion [asset] threshold when the rules changed, and so that took something off our plate that we no longer had to prepare for. 

Stanley Naeger: For me, communication with our CEO has definitely increased significantly. One of the main reasons is our recent merger with M1 Bank and changes in accounting standards as part of that merger. We are closely monitoring capital standards on a monthly and quarterly basis and reporting that to the board. 

Ethan Johnson: It hasn’t changed a ton for us. New regulations raised the asset threshold size for an independent audit, so we are exempt from some of the requirements other banks are held accountable for.

Q: How has your use of outside experts evolved as financial reporting has become more complex?

Richard Lyon: One thing that makes us a little bit different is that we’re a mutual bank. As a mutual bank, we avoid some of the complexities that other banks have to contend with. So that’s helpful, but we do lean on our experts that we’ve come to know in the banking industry when we determine it’s warranted or when we feel that an independent voice can provide value to our process.

Casey: As reporting requirements have become more complex, we’ve increasingly relied on outside experts to validate our approach, interpret new guidance and provide specialized expertise. Their insights complement our internal knowledge and help ensure accurate reporting and regulatory compliance.

Q: How have overall industry cost pressures affected your community bank’s ability to effectively use outside vendors for due diligence and other regulatory matters?

Wanda Wiggins: Every time rules change, there are new expenses, but you can’t go with the cheapest options, because you get what you pay for. I would say our Bank Secrecy Act (BSA) software is one of our biggest expenses, but it’s also one of our biggest regulations, so there’s a higher cost associated with it. We are very cost-conscious, but there are just some things you’ve got to spend money on.

Pedigo: Everything has gotten more expensive, and sometimes, especially for regulatory reasons, you have to eat the cost. If we’re going to reach out to someone for assistance, it’s something we think is necessary.

Naeger: We’re no different from anyone else in that we are feeling the industry’s cost pressures, but we feel these are areas that are too important to not get right. We compare third-party vendors and try to alleviate some of the cost, but we do go ahead and get outside help if we feel it’s necessary.

Q: How has the introduction of Current Expected Credit Loss (CECL) and other high-profile accounting standards changed communications between the finance hub of your bank and key business lines, like lending officers and risk management professionals?

Lyon: At the beginning of the implementation process for CECL, we identified them as stakeholders in the accounting process. By collaborating to implement CECL, which was a big undertaking, and having each of those professionals engaged in understanding the CECL concepts and, more importantly, the regulatory perspectives, it has made communicating in this area effectively seamless. 

Wiggins: CECL has made things more complex. Number one, the learning curve, because CECL is still relatively new. Also, you have to work with different people, like the chief lending officer and chief credit officer. And then, of course, if there are any problem loans, you’ve got to make sure you understand what risk is there and what, if any, specific reserves will be needed. It requires constant interaction with those other lines of business.

Pedigo: Since I do the CECL calculation, I am more in contact with the loan and credit department of the bank, at least at the end of every month and especially at quarter ends when I do our CECL calculation. This wasn’t the case as much in the past as it is today.

Casey: CECL and other accounting standards have strengthened collaboration across the bank. Finance and lending now communicate more frequently, ensuring assumptions, portfolio trends, and credit risk insights are aligned to support accurate reporting and informed business decisions.

Q: What impact has the current rate environment had on your ability to manage the financial outlook for your organization?

Johnson: Long story short, when rates went up 500 basis points, that hurt; we weren’t ready for that. But now that we have had a little time to adjust and make some balance sheet moves, we’re in a really good spot. If interest rates hold steady, we will be just fine. If they go up, I’m not overly concerned. We can adjust. 

Wiggins: One of the things that is unique about our bank is we are an agriculture bank, which means about 22% of our portfolio reprices annually. That helps us ride the curve, whether it’s up or down. Also, some of our longer-term bonds and commercial real estate holdings are getting repriced. So, our margin has been better.

Q: How has your community bank’s ability to attract deposits shifted over the past year?

Lyon: For us, like many banks, deposit growth continues to be a challenge. Bank deposit products have re-emerged as a viable financial option for consumers and businesses. But there’s significant competition from other banks, as well as fintechs.

Naeger: Even after some of the rate cuts last year, it seems like banks have been very reluctant to lower their rates. It only solidifies our belief that deposits are going to be harder to attract in the future. You have to stay on the upper end to attract new deposits, even as there are new avenues for deposits outside of traditional banking. 

Wiggins: We’ve been incentivizing our people for deposit growth and constantly watching the market to see what’s out there competition‑wise. We’ve also rolled out a new money market account to be competitive in our local market. We’ve seen some nice growth there. You just have to pay attention to what’s going on in your markets.

Pedigo: We have a strong commercial or business focus, and so where we’ve seen increases in deposits, it’s primarily been through our treasury management department attracting commercial business that way. 

Johnson: Every bank has a CD special right now. And as those mature and roll off, you’ve got to make sure it’s not going into anything higher yielding, but you also want to retain those deposits, too. So, it’s a big game of cat and mouse.

Q: Has your bank’s funding mix shifted enough over the past 10 years to bring about new challenges for your role, or changes to it?

Wiggins: I’ve been here 28 years, and May was the first time I’ve not had to borrow short-term advances to help fund the agricultural season. So, I’m very pleased with the deposits that we have been able to raise. It’s taking some pressure off of us. I think we’ve entered a couple of new markets, and so there are more deposits there, and we’ve been active in making sure we are competitive.

Casey: Changes in customer behavior, competition for deposits and alternative funding sources have made balance sheet management more dynamic. My role increasingly focuses on liquidity planning, interest rate risk and ensuring funding strategies align with the bank’s long-term financial objectives.

Q: What is your expectation for financial reporting over the next 10 years as it relates to discussion and disclosures on lending activities?

Lyon: I think it will continue to grow and expand. I think investors want to see more information on the composition of that loan portfolio to better understand where their investment risk may be or where the risk of that portfolio is, and what’s involved in decision-making. So, instead of banks just saying they’re involved in commercial lending, they’ll have to offer more details on what type of commercial lending they do. 

Naeger: We expect financial reporting will likely become more complex over the next 10 years. Even though there have been attempts to simplify the last couple of years, it seems like it’s only resulted in more headaches. 

Pedigo: I also think it will increase over the next 10 years.

Casey: I expect financial reporting to become more transparent, data-driven and forward-looking. Disclosures around lending activities will likely expand to provide greater insight into credit quality, portfolio trends, risk management and the assumptions behind key estimates.

Q: How has your engagement with bank examiners and the examiner-in-charge during and between examinations changed since your last two safety and soundness exams?

Lyon: I’ve found them more willing to be conversational in the exam and understanding how we do something or positions that we take in running our bank that can, at times, differ greatly from the other banks they examine. I think there’s an understanding you can’t run the exam off a checklist anymore. Understanding the bank’s perspective helps them achieve their safety and soundness objectives. 

Pedigo: One thing I don’t like is that probably 50% of the exam was done offsite. I like the personal interaction with the examiners, and I wish they would spend most of the time in our office, because I like the face-to-face interaction. 

Naeger: I also feel that email is used a lot more for engaging with examiners instead of in-person.

Q: What best describes the primary function of your bank’s investment portfolio?

Wiggins: We use the portfolio for liquidity, asset/liability management and to provide collateral for our public funds.

Lyon: We’re different than some other banks in that we not only maintain a fixed-income portion of our securities portfolio but also hold equity positions, and they can comprise a third or more of our overall investment portfolio. From the investment portfolio as a whole, the primary function is an income generator, and it supports margin, but close behind that is supporting liquidity for the institution. 

Naeger: I would say since COVID, and with our recent merger, the primary function of our investment portfolio has changed to more of a liquidity source to support our lending and collateral for pledging instead of being a contributor to earnings and net interest margin. It’s definitely become a smaller percentage of the balance sheet. And I expect that to continue.