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What Cybersecurity Framework Is Right for You?

Sponsored content by Wipfli LLP, a WBA Silver Associate Member.

By Pedro J. Pinto, CISA, Manager

Cybersecurity is vital to any organization that deals with sensitive data, especially financial institutions. Cyberattacks cause significant losses, reputational damage, regulatory fines and legal liabilities for financial institutions.

Therefore, it is essential to have a robust and comprehensive cybersecurity strategy that aligns with the organization’s business objectives, risk appetite and regulatory requirements.

One way to achieve this is to adopt a cybersecurity framework that provides a structured and consistent approach to managing cybersecurity risks, implementing best practices and measuring performance. Common benefits of implementing these frameworks include:

  • Enhancing the security and resilience of information systems and assets.
  • Reducing the likelihood and impact of cyber incidents.
  • Establishing a common language and understanding of cybersecurity risks and controls.
  • Improving the communication and collaboration among stakeholders, including regulators, auditors, partners and even customers.
  • Facilitating the continuous improvement and adaptation of cybersecurity practices.

Common cybersecurity frameworks

Several cybersecurity frameworks are available today, each with its own scope, objectives and methodology. This table lists some details about the most common frameworks used by financial institutions:

Organization  Framework  Benefits  Features 
National Institute of Standards and Technology (NIST)  Cybersecurity Framework (CSF)  Provides a common language for understanding, managing and expressing cybersecurity risk.  Consists of five core functions: identify, protect, detect, respond and recover. 
Federal Financial Institutions Examination Council (FFIEC)  Cybersecurity Assessment Tool (CAT) 

  

 Helps banks assess their cybersecurity preparedness.  Consists of a series of assessment statements to determine an institution’s inherent risk and cybersecurity maturity. 
National Credit Union Administration (NCUA)  Automated Cybersecurity Evaluation Toolbox (ACET)  Helps credit unions assess their cybersecurity preparedness. 
Center for Internet Security (CIS)  Critical Security Controls (CSC)  Provides a prioritized set of actions for improving cybersecurity posture.  Consists of 20 critical security controls for effective cyberdefense. 
Financial Services Sector Coordinating Council (FSSCC)  Cybersecurity Profile  Provides a scalable and efficient approach for financial institutions to assess and manage cybersecurity risk.  Consists of diagnostic statements to determine an institution’s cybersecurity risk and maturity level. 

Which cybersecurity framework works best for your institution?

Any of these frameworks would do the job, but the question remains: Which one is best for your institution? Here are some considerations to help you choose:

1. Regulators

As regulators are the ones who ultimately have the final say on the adequacy of your institution’s cybersecurity preparedness, it is important to understand their expectations. The FFIEC CAT has been the standard used by banks and credit unions. In 2019 the NCUA published an updated assessment tool (ACET) specific to credit unions, though CAT and ACET are very similar.

In 2019, the FFIEC published a press release encouraging institutions to use a standardized approach to assess and improve cybersecurity preparedness and listed several frameworks that could be used for that purpose, signaling that the adoption of other standards, including industry-agnostic ones, was acceptable. In addition to the CAT/ACET, the list included the FSSCC Cybersecurity Profile, the NIST Cybersecurity Framework and the Center for Internet Security (CIS) Controls.

In 2023 the OCC published Bulletin 2023-22: Cybersecurity Supervision Work Program (CSW). They made it clear that institutions could use any framework they chose, but that the new program would more closely align with the NIST CSF.

2. Third-party providers

Another consideration is your third-party providers, especially if they play a more hands-on role in your institution’s cybersecurity. In some cases, the provider will help you complete the cybersecurity assessment, so it’s worth considering what frameworks they are familiar with so they can better help you or better understand requests you may have for improving certain controls.

3. Leadership

One consideration that sometimes gets overlooked is how the results from assessments can be reported. Depending on the level of comfort your board of directors and leadership team have with more technical information, it might be beneficial to choose a framework that provides the information in a more easily understandable format.

4. Internal teams

Lastly, it is important to consider who in your organization will be responsible for performing information security and cybersecurity assessments. This individual or team needs to be comfortable with the framework and understand its components to make it truly useful to the institution and not just a “checkbox” report to provide to regulators and auditors once a year.

Consider using one of the many risk management platforms available today. These platforms allow you to choose one or more frameworks as the basis for your information security and cybersecurity risk assessments and are automatically updated if the frameworks themselves are updated.

How Wipfli can help

Choosing and implementing a cybersecurity platform is essential to the long-term health and well-being of your financial institution, and our team of dedicated cybersecurity professionals can help put you on the path to long-term peace of mind. From selecting and refining a strategy to measuring performance, we’re with you every step of the way to help keep your data secure and your workflow safe. Learn more about our cybersecurity offerings.

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Six Steps to Strengthen Your Financial Institution’s Call Report Preparation Process

Sponsored content by Wipfli LLP, a WBA Silver Associate Member.

By Danielle M. Damon, CIA, Manager

How much time does your financial institution spend on its call report each quarter? If yours is like most, the answer is probably a considerable amount.

Based on to data collected by the Treasury, Federal Reserve and FDIC, banks typically invest anywhere from 39 to 44 hours to complete and file a call report.

When it comes to preparing a call report, process matters. Inefficient, poorly documented or overly complex processes can hinder your work and, worse, make it difficult for regulators or auditors to understand how the reported figures were derived.

Meanwhile, a structured, transparent and well-documented approach can significantly improve both your accuracy and efficiency. Keep reading to learn how to strengthen your call report process to deliver better results.

Why structure matters

A standardized structure forms the foundation of a repeatable and reliable process. If you have a clear process to follow, you can do so again and again while usually getting a consistent outcome.

Using a standardized structure can also be a significant time-saver. Not needing to reinvent the wheel each quarter will often cut down on the amount of time you need to invest in your call report, making the underlying work less grueling for your team.

One effective approach is to integrate core-generated reports into a spreadsheet workbook that maps general ledger and other data points using basic formulas. This allows the underlying data to change each quarter while maintaining a transparent and consistent framework.

The value of transparency

Call report instructions require institutions to retain supporting workpapers for three years. Including references to core or vendor reports in your mapping enables reviewers to quickly trace data points to their sources. Retaining your calculation workbook alongside referenced reports and documents strengthens support for internal and external reviews and also serves as a valuable training tool for new staff.

Improving your call report process doesn’t have to be overwhelming. Here are several practical steps to enhance accuracy, efficiency, and transparency:

1. Assess current processes

Conduct a thorough review of your current preparation process. Identify steps that are overly complex or require multiple data sources. Look for items where manual adjustments to core reports are required.

Then ask why these complexities exist. Do you really need such an intricate approach, or are you doing things a certain way because that’s how it’s always been done?

If it’s the latter, explore alternatives. For example, if multiple reports are used to gather the same data, consider whether a consolidated report could be built to reduce manual effort.

2. Standardize templates and mapping

Develop standardized call report templates that include mapping and report references. This will require an investment upfront, but it will improve accuracy and reduce the preparation time for future call reports.

3. Balance technology with transparency

While automation tools can streamline reporting, many automation tools create a “black box” effect, where manual or other adjustments are masked by the automation. As a result, auditors or examiners may struggle to verify your call report data.

Here, you should strive to strike a balance between leveraging technology and maintaining visibility into the process. When considering automation, think about who needs to understand your call report and whether automation might hinder their ability to do so.

4. Invest in training and development

Provide regular training for staff involved in call report preparation. Stay current with changes in reporting instructions, regulatory requirements and accounting standards.

You should also be sure to incorporate any updates into your current process.

5. Commit to continuous improvement

Strengthening your call report process is not a one-and-done task. The tools you have available to work with are constantly changing, so allow your workflows to change with them.

As technology and data availability evolve, regularly evaluate your tools and processes to identify opportunities for improvement.

6. Enhance documentation practices

Create a checklist to track required documents to make sure you have everything you need to start.   Your checklist will also help ensure all referenced materials are retained with the calculation workbook.

As a result, you will be more prepared for audits and exams and more be able to effectively transfer knowledge.

How Wipfli can help

Making the investment to update your call report process will not only make it more efficient and easier on your team, it will also enhance accuracy, improve audit readiness and support knowledge transfer for new hires or successors. By investing in structure, transparency and continuous improvement, your financial institution can turn a burdensome task into one that’s more streamlined and reliable.

Wipfli helps financial institutions to improve processes, strengthen performance and stay audit-ready. Ask our team of advisors and former industry professionals how you can do more with your existing resources in order to boost your results. Learn more here.

Read more:

Back to basics: Fiduciary account reviews

The rise of the fractional COO: A strategic solution for financial institutions

4 challenges financial institutions have that can be solved with finance dashboards and financial reporting software

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Be Ready for the Fedwire Funds Service Migration to ISO 20022

Sponsored content by Wipfli LLP, a WBA Silver Associate Member

By Michelle Bader, Internal Auditor

Big changes are coming to financial messaging, and preparation is key. On July 14, 2025, the Fedwire Funds Service will officially transition to the ISO 20022 format, replacing the legacy Fedwire Application Interface Manual (FAIM). This update will put the U.S. in line with more than 70 countries that have already adopted the ISO 20022 messaging standard. To help ensure a smooth transition, financial institutions must take steps now to prepare their systems, train their teams and minimize disruptions. 

Why ISO 20022 matters 

Switching to ISO 20022 isn’t just about keeping up with global standards; it comes with distinct benefits for financial institutions, including: 

Better data quality: More structured and detailed data reduces errors and improves transparency. 

Increased efficiency: Standardized messaging simplifies payments and reconciliation. 

Improved compliance: Granular data makes it easier to meet regulatory requirements like AML and OFAC screening. 

Seamless global transactions: Aligning with international standards helps facilitate cross-border payments. 

Steps to prepare 

All financial institutions must be ready to send and receive ISO 20022 messages starting July 14, 2025. Here’s how to help ensure a successful transition: 

Staff training and education 

Your team will need to understand the new message formats, including: 

  • pacs.008 (customer credit transfers) 
  • pacs.009 (financial institution credit transfers) 

The Federal Reserve offers training sessions, quick reference guides and hands-on practice opportunities to help institutions master the updated system. Training is available through June 25, 2025, on the Federal Reserve’s website. 

System testing and validation 

Testing is essential to help ensure a smooth rollout. 

Financial institutions should use the depository institution test environment (DIT2) to: 

  • Simulate real transactions with other institutions. 
  • Verify message formats and template accuracy ahead of the deadline. 

Additionally, the MyStandards readiness portal offers sample messages and test cases to help institutions confirm compliance before the transition. 

Contingency planning 

Even with proper preparation, unexpected challenges can arise. Financial institutions should develop backup strategies, such as: 

  • Alternative transaction methods through correspondent banking arrangements. 
  • Manual wire processing as a fallback option. 

Attestation and compliance 

To keep operations running smoothly, the Federal Reserve requires institutions to submit attestations verifying their migration readiness via the FedPayments Manager – Funds application. 

Resources for a successful migration 

For updates, live drop-in sessions, FAQ, and preparation checklists, visit the Federal Reserve’s ISO 20022 Implementation Center. 

How Wipfli can help 

The transition to FedFunds Service ISO 20022 can feel overwhelming. Wipfli specialists are ready to help. Our team has extensive background and knowledge in financial system upgrades and can guide institutions through the migration with tailored solutions. These include strategic planning, training and operational support, testing and validation assistance, compliance and risk management, and contingency planning and troubleshooting. 

With Wipfli in your corner, your institution can transition to ISO 20022 smoothly and confidently, reducing risks and helping to ensure operational stability. Contact our risk advisory services team to discuss how we can help. 

Read on for more content on compliance risk and financial institutions: 

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New FASB Updates: How Purchased Financial Assets Accounting Is Changing

Sponsored content by Wipfli LLP, a WBA Silver Associate Member

By Brett D. Schwantes, CPA, Director

The Financial Accounting Standards Board (FASB) is pressing ahead with the purchased financial assets project, aiming to simplify and enhance the transparency of acquired financial assets accounting. 

As of April 30, 2025,  the FASB continued deliberating on proposed updates and made key decisions. It’s expected that a final standard will be released later in 2025. 

Here’s the information your financial institution should know ahead of potential changes: 

Changes to purchased financial assets accounting   

The proposed changes to acquired financial assets accounting include: 

  • In general, loan discounts on performing loans related to credit conditions will now be recognized as allowance for credit losses (ACL) under business combination accounting. 
  • Other loan discounts or premiums that are attributable to fair value adjustments and unrelated to expected credit losses will continue to be accreted/ amortized to interest income over the remaining life of the acquired loans. 
  • The requirement to establish the ACL through a provision at the time of a merger or acquisition will generally be eliminated. 

The accounting treatment for purchased credit deteriorated (PCD) loans will not be changed under the update. Additionally, certain loans — such as those acquired outside of business combinations, credit card receivables and securities — are excluded from the scope of the update. 

Purchased financial assets project scope 

The amendments will apply to qualifying loans, which are loan receivables excluding credit cards. 

However, held-to-maturity debt securities are excluded if they meet the seasoning criteria: 

  • They were acquired as part of a business combination. 
  • They were acquired more than 90 days after the loan origination date, with no involvement by the acquirer with the origination of the loan. 

Determining whether an acquirer was involved in the origination of a loan requires a careful evaluation of all relevant facts and circumstances. Key considerations include: 

  • The acquirer’s direct or indirect exposure to the economic risks and rewards of ownership prior to obtaining control of the financial asset. 
  • The nature of the relationship between the transacting entities, including arrangements made in contemplation of recurring transfers of similar financial assets and the acquirer’s ability to influence the originator’s underwriting standards. 
  • The nature of the transacting entities’ relationship, including any arrangements made contemplating recurring transfers of similar assets or the acquirer’s ability to influence the underwriting standards of the originator. 
  • The transaction’s contractual terms, such as call options written for the acquirer by the originator or forward purchase commitments written by the acquirer to the originator. 
  • Whether funding arrangements between the originator and acquirer or conveyance put options or a similar contract from the acquirer to the originator exists. 
  • Whether a loss-sharing arrangement obligating the acquirer to reimburse the originator for an amount of principal loss incurred by the originator prior to the transfer exists. 
  • Whether a make-whole arrangement obligating the acquirer to reimburse the originator if the acquirer terminates the purchase transaction exists. 

For qualifying loans, the initial amortized cost basis is calculated as the purchase price plus the initial ACL. Accordingly, the acquirer will measure and recognize the ACL at acquisition using an appropriate CECL methodology, with a corresponding entry to a loan’s premium or discount. 

This approach means the acquirer will not need to recognize a post-acquisition provision for credit losses to set up the ACL, as is required under current CECL accounting standards. 

What these changes could mean for your institution   

The revised project objective focuses on improving accounting treatment for the acquisition of purchased financial assets, excluding those classified as PCD. 

Under the current accounting standards, acquired loans are measured and recognized at fair value or the consideration transferred, which typically results in a loan discount or premium reflecting valuation adjustments for market, credit, interest rate and other factors. 

For PCD loans, the ACL is established by reclassifying an amount of the loan discount or premium. Other performing loans recognize ACL through a subsequent charge to provision for credit losses, which can decrease both net income and capital. 

Additionally, the entire loan discount is accreted into interest income over the life of the loan pool. 

The proposed standards seek to align the accounting for qualifying loans — performing loans, excluding credit cards — that meet specific criteria with the existing approach for accounting for PCD loans. 

Qualifying loans would still need to be measured and recognized at the consideration transferred or fair value. And the amount of goodwill recognized in a business combination would not change. 

However, an acquirer would recognize the qualifying loan’s initial ACL as part of the business combination or loan acquisition by reclassifying it — measured with an appropriate CECL methodology — from the loan premium or discount. A provision for credit losses would not be necessary to recognize the initial ACL for qualifying loans. 

This approach under the proposed ASU is expected to result in lower discounts or higher premiums and lower effective interest margins for any qualifying loans acquired. 

Your next steps 

Once finalized, the amendments will be applied prospectively to annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual periods. The disclosure requirements under ASC 326 will remain unchanged. 

Based on previous FASB decisions, institutions can early adopt the ASU once finalized. However, your institution will not be permitted to restate prior-period financial statements for loan acquisitions occurring in those periods. 

If the final standard is issued in 2025, a calendar year entity may apply the proposed ASU to loan acquisitions that occurred earlier in the year. A fiscal year entity (e.g., the year ended June 30, 2025) may apply the proposed ASU to loan acquisitions that occurred within the fiscal year — provided the financial statements have not yet been issued, even if the ASU is finalized after the fiscal year-end. 

How Wipfli can help 

If your institution is planning or has recently completed a business combination or loan acquisition, Wipfli is ready to help. We combine decades of accounting experience and knowledge of the financial services industry’s unique challenges to deliver guidance on how you can navigate accounting changes effectively. 

Connect with our  assurance for financial services  team today to explore how the proposed accounting standards could impact your institution. 

See our additional resources more financial institution insights: 

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Safe Internet Browsing Tips to Keep Your Bank Secure Online

By Alex Hinsch, Technical Account Manager, Locknet Managed IT, A WBA Associate Member

Community banks in the Midwest are increasingly targeted by cybercriminals due to their limited IT resources, making them vulnerable to phishing attacks, malware, and data breaches. Implementing secure web browsing practices across the workforce can be one effective tool to help protect your organization. Below are essential tips to safeguard your organization from cyber threats.

Understanding Secure Web Browsing

Secure web browsing involves practices that protect corporate information, privacy, and data from cyber threats like phishing scams, malware, and data breaches. By adopting these strategies, community banks can mitigate risks and ensure a safer online environment for their operations.

Top Ten Safe Internet Browsing Tips for Community Banks

1.  Implement a secure web gateway: Secure web gateways filter malicious websites, prevent access to dangerous content, and block malware, serving as the first line of defense against online threats.
2.  Educate employees on phishing and social engineering: Regular cybersecurity awareness training can help employees identify suspicious emails, avoid clicking on unknown links, and verify website authenticity before entering credentials.
3.  Enforce strong password policies and Multi-Factor Authentication (MFA): Use strong, unique passwords for each online account and enable multi-factor authentication (MFA) for all business accounts to add an extra layer of security.
4.  Use secure and updated browsers: Ensure that all company devices use the most secure internet browsers with automatic updates enabled. Opt for browsers with built-in security features and options to block suspicious websites.
5.  Restrict access to risky websites: Implement content filtering policies that restrict employee access to high-risk websites, including those associated with gambling, adult content, and pirated software.
6.  Deploy endpoint security and antivirus software: Equip all company devices with reputable antivirus software that includes real-time scanning, web protection, and automatic updates to detect and block cyber threats.
7.  Encourage the use of Virtual Private Networks (VPNs): For remote employees or those working from public Wi-Fi networks, use a company-approved VPN to encrypt internet traffic and prevent hackers from intercepting sensitive data.
8.  Limit administrative privileges: Grant administrative access only to essential personnel to minimize the risk of malware installation and unauthorized changes to security settings.
9.  Monitor and log web activity: Regularly monitoring employee web activity can help identify potential security risks. Use web filtering solutions and endpoint security platforms to track internet usage and detect suspicious behavior.
10.  Establish a clear internet usage policy: A well-defined internet usage policy sets expectations for employees regarding safe web browsing habits, outlining guidelines on acceptable website usage, prohibited activities, and consequences of violating security protocols.

Final Thoughts on Secure Web Browsing

Implementing these safe internet browsing tips can significantly reduce the risk of cyberattacks. Prioritizing secure web browsing protocols, employee education, and proactive security measures can go a long way in protecting your bank. Foster a culture of cybersecurity awareness to create a safer digital environment for employees and customers alike.

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Navigating an Uncertain Rate Environment

Sponsored content by BOK Financial Capital Markets, a WBA Gold Associate Member

By Kent Musbach, senior vice president, and Marc Gall, senior vice president and asset/liability strategist, BOK Financial Capital Markets

Originally predicted to be a year of falling rates, rate-cut expectations have since come down considerably and some analysts are even anticipating that the Federal Reserve could hike rates at some point in 2025. Meanwhile, most financial institutions have outsized risk exposure one way or another—but this can and should change. We believe that beginning to fix the institution’s balance sheet mismatch now makes sense versus waiting for the Fed.

Rather than asking which way certain rates will move and by how much—a question that’s impossible to answer at this point—decision-makers at your financial institution instead should be asking: What can we do now that will be most impactful regardless of what the rate environment brings? The answers lie in your institution’s loan portfolio and deposit strategies.

Have an ‘all-weather’ strategy for 2025

Given that many institutions have outsized exposure to interest rate changes, it’s crucial to address these risks early in the year. The first step is determining whether your institution is adequately positioned for the current rate environment. Many community banks have faced challenges due to the rapid rise in interest rates over the past few years and are still not fully prepared for this environment. As rates are not expected to fall dramatically in the near term, unless there is a severe economic slowdown, institutions in this position should reassess their deposit pricing strategies to ensure they are competitive yet profitable.

If your institution is well-positioned for the current rate environment, there is still work to be done. It’s time to reassess your institution’s balance sheet in light of the ongoing uncertainty, preparing for both upward and downward rate movements to mitigate risk and maximize returns. Remember that decisions made now can set the tone for the entire year, making early action essential.

Fortunately, your institution doesn’t have to recreate the wheel when approaching this “all-weather” strategy; rather it’s just a matter of optimizing what your institution is already doing. This includes:

  • Maximizing loan yields: Institutions should focus on obtaining the highest possible yields on loan renewals without losing business. This involves securing better rates and terms and not giving away revenue unnecessarily.
  • Determining the most optimal deposit pricing: Getting deposit pricing right early in the year is crucial for driving revenue and improving margins.
  • Making strategic investments: Given the significant changes to the yield curve over the past few months, institutions must evaluate their options for deploying cash and reinvesting. Investing in securities with favorable yields and durations can help institutions manage their interest rate risk and improve overall returns.
  • Staying informed of economic changes: The Fed’s focus on inflation and employment will play a crucial role in determining future rate movements. Decision-makers at your financial institution should stay informed about these trends and adjust their strategies accordingly. Similarly, it’s important to understand what drives consumer spending and government spending, as these factors can significantly impact the country’s economic outlook and influence the strategies that financial institutions should adopt.

Finally, although the uncertainty surrounding changes in presidential policies and resulting economic impacts may seem more pronounced this year, it’s important to keep in mind that your institution has handled uncertainty before. By focusing on balance sheet management, optimizing loan and deposit strategies, and staying adaptable to economic changes, institutions can position themselves for success in the coming year. This includes taking a proactive approach and leveraging the current rate environment to your advantage rather than merely reacting to the changes as they occur.

Kent Musbach is a senior vice president and Marc Gall is a senior vice president and asset/liability strategist for BOK Financial Capital Markets.

Contact BOK Financial Capital Markets at 866-440-6514 to discuss the latest economic outlook and tailored solutions. We can help guide a unique, well-conceived strategy that considers many variables and potential outcomes.

The opinions expressed herein reflect the judgment of the author(s) at this date, and are subject to change without notice. The information provided has been obtained from sources believed to be reliable, but not guaranteed. Forward‐looking statements contained herein are based on current expectations and the economy in general, and are not guarantees of future performance. Likewise, past performance is not a guarantee of future results.

BOK Financial® is a trademark of BOKF, NA. Member FDIC. Bank dealer services offered through BOK Financial Capital Markets, which operates as a separately identifiable department of BOKF, NA. BOKF, NA is the bank subsidiary of BOK Financial Corporation. Investment products are:  NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

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Navigating an Uncertain Rate Environment

Sponsored content by BOK Financial Capital Markets, a WBA Gold Associate Member

By Kent Musbach, senior vice president, and Marc Gall, senior vice president and asset/liability strategist, BOK Financial Capital Markets

Originally predicted to be a year of falling rates, rate-cut expectations have since come down considerably and some analysts are even anticipating that the Federal Reserve could hike rates at some point in 2025. Meanwhile, most financial institutions have outsized risk exposure one way or another—but this can and should change. We believe that beginning to fix the institution’s balance sheet mismatch now makes sense versus waiting for the Fed.

Rather than asking which way certain rates will move and by how much—a question that’s impossible to answer at this point—decision-makers at your financial institution instead should be asking: What can we do now that will be most impactful regardless of what the rate environment brings? The answers lie in your institution’s loan portfolio and deposit strategies.

Have an ‘all-weather’ strategy for 2025

Given that many institutions have outsized exposure to interest rate changes, it’s crucial to address these risks early in the year. The first step is determining whether your institution is adequately positioned for the current rate environment. Many community banks have faced challenges due to the rapid rise in interest rates over the past few years and are still not fully prepared for this environment. As rates are not expected to fall dramatically in the near term, unless there is a severe economic slowdown, institutions in this position should reassess their deposit pricing strategies to ensure they are competitive yet profitable.

If your institution is well-positioned for the current rate environment, there is still work to be done. It’s time to reassess your institution’s balance sheet in light of the ongoing uncertainty, preparing for both upward and downward rate movements to mitigate risk and maximize returns. Remember that decisions made now can set the tone for the entire year, making early action essential.

Fortunately, your institution doesn’t have to recreate the wheel when approaching this “all-weather” strategy; rather it’s just a matter of optimizing what your institution is already doing. This includes:

Maximizing loan yields: Institutions should focus on obtaining the highest possible yields on loan renewals without losing business. This involves securing better rates and terms and not giving away revenue unnecessarily.

Determining the most optimal deposit pricing: Getting deposit pricing right early in the year is crucial for driving revenue and improving margins.

Making strategic investments: Given the significant changes to the yield curve over the past few months, institutions must evaluate their options for deploying cash and reinvesting. Investing in securities with favorable yields and durations can help institutions manage their interest rate risk and improve overall returns.

Staying informed of economic changes: The Fed’s focus on inflation and employment will play a crucial role in determining future rate movements. Decision-makers at your financial institution should stay informed about these trends and adjust their strategies accordingly. Similarly, it’s important to understand what drives consumer spending and government spending, as these factors can significantly impact the country’s economic outlook and influence the strategies that financial institutions should adopt.

Finally, although the uncertainty surrounding changes in presidential policies and resulting economic impacts may seem more pronounced this year, it’s important to keep in mind that your institution has handled uncertainty before. By focusing on balance sheet management, optimizing loan and deposit strategies, and staying adaptable to economic changes, institutions can position themselves for success in the coming year. This includes taking a proactive approach and leveraging the current rate environment to your advantage rather than merely reacting to the changes as they occur.

Contact Information

Contact BOK Financial Capital Markets at 866-440-6514 to discuss the latest economic outlook and timely considerations. We can help guide a unique, well-conceived strategy that considers many variables and potential outcomes.

bokfinancial.com/institutions

Disclosure

The opinions expressed herein reflect the judgment of the author(s) at this date, and are subject to change without notice. The information provided has been obtained from sources believed to be reliable, but not guaranteed. Forward‐looking statements contained herein are based on current expectations and the economy in general, and are not guarantees of future performance. Likewise, past performance is not a guarantee of future results.

BOK Financial® is a trademark of BOKF, NA. Member FDIC. Bank dealer services offered through BOK Financial Capital Markets, which operates as a separately identifiable department of BOKF, NA. BOKF, NA is the bank subsidiary of BOK Financial Corporation. Investment products are: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

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Putting Your Institution’s Best Foot Forward for a Lower-Rate Environment

Sponsored content by BOK Financial Capital Markets, a WBA Gold Associate Member

By Kent Musbach, senior vice president, and Marc Gall, senior vice president and asset/liability strategist, BOK Financial Capital Markets

After four years of hiking rates and then keeping them high, the Federal Reserve has now started lowering rates, hitting the ground running with a large cut of 50 basis points (0.50%) in September. As rates continue to fall, it’s important for management teams to understand how lower rates will impact their institutions’ income statements and to take steps to better position themselves for the even lower-rate environment likely to come.

Past, present and future conditions

First, let’s consider where we are now and how we’ve gotten here. Over the past few years, federal and consumer spending have been driving economic growth, despite higher interest rates. However, with many consumers now having used up all their excess savings from COVID—and then some—and also having record credit card debt, it’s questionable whether consumer spending can last at these levels. Meanwhile, unemployment has risen, which has raised concerns about weakening in the job market, even though unemployment is still relatively low on a historical basis. Given all these factors, the market is now forecasting a large number of Fed rate cuts, and some investors are wondering if the Fed can still pull off a soft landing or if a recession is in the making.

Preparing for 2025

Against this backdrop, each decision your management team makes in the last quarter of 2024 will be impactful for 2025. For instance, one important question to consider is when to begin cutting deposit rates. As financial institutions assess their ability and willingness to do so, margin and liquidity position will be important considerations. The news cycle also may aid decision-making this time around, as the Fed cuts likely will be well covered by the media. Consider reviewing rates against wholesale funding rates regularly and be prepared to adjust deposit rates frequently. Conversely, intermediate Treasury and wholesale funding rates have already fallen. To the fullest extent possible, attempt to hold loan rates higher for longer until the cost of funds begins to recede. Frequently, we see a race to the bottom on loan rates, so be prepared to fight for every basis point! This strategy may allow your institution to manage net interest margin from both sides of the balance sheet.

Understanding your interest rate risk position

With a significant inversion in the yield curve between Fed Funds and intermediate Treasuries, a non-parallel yield curve shift may be a more likely outcome. This may be led by the front end coming down more significantly than any changes in term Treasury rates that have already accounted for expected future rate cuts. If your institution has substantial risk around falling rates, you may be wondering if it is too late to manage your position given the inversion in the curve. What if you will benefit at some point from a steeper lower yield curve? Can you wait it out? With these questions in mind, you may want to take some proactive steps to hedge the risk of the market being wrong.

Investment portfolio conundrum

The current yield curve challenges investors to diversify risks. Although keeping large amounts of cash or short securities can generate the highest yield today, doing so could result in significant yield erosion if or when the short end comes down. Equally, the decision to lock into investments further out on the curve may give up immediate earnings for possible future benefit.

Instead, a balanced investment strategy could allow your institution to add a mix of securities that average a yield close to the Fed Funds rate with an allocation to call-protected assets. We urge management teams to consider the trade-off of investing in only the highest yield options compared to the potential benefits of adding assets with call protection that could result in an unrealized gain when the Fed lowers rates further.

Finally, it’s important to keep in mind that repeating the past is unlikely, but it’s still essential to learn from it. Understanding the choices that your institution made and then making informed decisions for the future is how your institution can and will put its best foot forward.

Contact Information

Contact BOK Financial Capital Markets at 866-440-6514 to discuss the latest economic outlook and timely considerations. We can help guide a unique, well-conceived strategy that considers many variables and potential outcomes.

bokfinancial.com/institutions

Disclosure

The opinions expressed herein reflect the judgment of the author(s) at this date, and are subject to change without notice. The information provided has been obtained from sources believed to be reliable, but not guaranteed. Forward‐looking statements contained herein are based on current expectations and the economy in general, and are not guarantees of future performance. Likewise, past performance is not a guarantee of future results.

BOK Financial® is a trademark of BOKF, NA. Member FDIC. Bank dealer services offered through BOK Financial Capital Markets, which operates as a separately identifiable department of BOKF, NA. BOKF, NA is the bank subsidiary of BOK Financial Corporation. Investment products are: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

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The Continued Importance of Succession Planning in Community Banking

Sponsored content by Wipfli, a WBA Silver Associate Member

By Robert H. Zondag 

Successful banking teams, as well as regulators, recognize proactive succession planning as a key governance tool. The right planning can promote a bank’s resilience, especially during challenging times, and positively impact shareholder value. 

What are specific ways that succession planning positively impacts a community bank? 

  • Risk mitigation: Effective succession planning minimizes disruptions caused by leadership changes. By reducing uncertainty for all stakeholders, succession planning promotes continuity, a key disruptor to achieving an institution’s long-term strategies 
  • Talent development: Succession planning demonstrates a commitment to employee development, attracting and retaining top talent in key functional areas. 
  • Business continuity: A well-prepared succession plan helps ensure smooth operations even when key leaders transition. Institutions are facing the need to document institutional knowledge or various procedures that have been the dominion of long-tenured employees. 

What are some challenges institutions face in succession planning? 

Community banks often face unique challenges, such as: 

  • Pipeline of qualified candidates: Without a pool of qualified candidates, it can be difficult to identify, recruit and nurture potential leaders. Rural or geographic concerns often create challenges in identifying candidates. 
  • Providing competitive salaries: Tight margins and budget strains impact the ability to offer competitive compensation to retain talent. 
  • Cultural fit: Balancing succession with maintaining the bank’s cultural characteristics is becoming more common. 
  • Widening range of skill sets: The complexity of managing a banking operation has increased the range and depth of skills needed for leadership. This large range of skills can also force an institution to consider outsourcing as an alternative to recruitment. 

It starts with a timeline and the need to document. So, what are the steps for effective succession planning? 

  1. Assess and map talent needs: Understand short- and long-term talent requirements for the institution. Each institution is unique, so the talent map will vary based on need. 
  1. Identify potential leaders: Look within the organization and consider external candidates. Often, a third party can provide an unbiased assessment of individuals. 
  1. Develop leadership skills: Using your talent map, understand what training and mentorship needs to be provided. 
  1. Develop a succession pipeline: Determine what steps can be taken to ensure a pool of qualified successors. 
  1. Regularly review and update: Review your documented plan consistently. What needs to be adapted to changing circumstances? 
  1. Involve the board: From both an operational and regulatory perspective, the engagement of the board in succession discussions is critical. (Note: Board succession is a separate matter from internal succession planning.) 
  1. Communicate the plan: Transparency is crucial for buy-in and alignment for all stakeholders. 

Community banks must prioritize succession planning to navigate leadership transitions effectively and maintain stability. By doing so, they safeguard their future success and the stakeholders they serve. 

How Wipfli can help 

If your community bank is dealing with succession planning challenges, our financial professionals are ready to help. We can assist in drafting a road map to a more secure outlook for your organization. Talk to one of our advisors today to get started on a plan for the future. 

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Outsourcing:  Getting to Go/No-Go

Key Considerations for Choosing a Strategic Growth Partner

Sponsored content by Ascensus, WBA Associate Member

If retirement plan administration isn’t a core capability or key business objective, it can still be a positive lever for your business. Large and small institutions are finding a flexible partnership model enables them to reduce or eliminate the cost and risk of functioning on outdated systems, while freeing revenue and capacity to focus on higher value relationship management and cross solutioning. Wherever you’re at in your decision tree, and whatever administration pain points you’re encountering, the most recent white paper from Ascensus reviews key questions to ask and capabilities to look for in a strategic growth partner.

Read White Paper

 

 

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Wisconsin Bankers Association logo

questions@wisbank.com

608-441-1200

4721 S Biltmore Ln.
Madison, WI 53718

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