2025 ISSUE 2 COMMUNI TY BANKI NG MONTH • COMMUNI TY BANKI NG MONTH • COMMUNI TY BANKI NG MONTH • APRIL IS Community Banking MONTH PRESIDENT’S MESSAGE Celebrating Community Banking FLOURISH Amplifying the Community Bank Difference
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INSIDE THIS ISSUE PO Box 1765 Jefferson City, MO 65102 (573) 636-2751 | miba.net Editor: MATTHEW S. RUGE Executive Director ©2025 The Missouri Independent Bankers Association (MIBA) | The newsLINK Group LLC. All rights reserved. The Show-Me Banker is published six times per year by The newsLINK Group LLC for MIBA 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 MIBA, 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 Show-Me Banker is a collective work, and as such, some articles are submitted by authors who are independent of MIBA. While a first-print policy is encouraged, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. Published for the Missouri Independent Bankers Association 4 PRESIDENT’S MESSAGE Celebrating Community Banking 5 Community Banking Month 6 FLOURISH Amplifying the Community Bank Difference 7 FROM THE TOP Translating Advocacy Into Action 8 A Background On Casey Hopkins President of Bank of Old Monroe 10 Fraud Task Force 11 LEGAL EAGLE SPOTLIGHT Clearing the Hurdles to Financing an Acquisition Tips for Successfully Financing Acquisitions 14 MIBA/ICBA Executive Leadership Pre‑Conference 2025 Louisville, Kentucky 16 ICBA LIVE 2025 Nashville, Tennessee 17 MIBA Lobbying Report 18 Leadership Division at the Blues Enterprise Center, St. Louis February 6, 2025 20 MEET YOUR MISSOURI BANKER Amy Stark Jr. Loan Officer/Branch Deposit Supervisor, Preferred Bank 22 Concepts and Facts ChatGPT Gets it Mostly Right on Yield Curve Shapes 24 MU Agricultural Lenders School Equips Early Career Lenders 25 News From You 26 2024-25 MIBA PAC Honor Roll March 1, 2025 27 2025 Upcoming Events 27 MIBA Endorsed Vendors 28 MIBA Associate Members 30 Upcoming Webinar Schedule 18 7 20 24 The Show-Me Banker Magazine | 3
Celebrating Community Banking By the time this edition of The Show-Me Banker magazine hits your desk, we will be celebrating Community Banking Month. It’s an opportunity to share the true importance of the community banking system with our communities, our customers and ourselves. As we share our stories of community banking with our communities, the opportunity to include financial education and literacy as part of the message is front and center. What better way to demonstrate the value we bring to the communities we serve than to give them the knowledge to control their financial world? Community banks are the vital link between Main Street, local economies and the financial system. Because we are on the ground, living and working in our communities — be it urban, suburban or rural — we understand the challenges and opportunities that exist as they are the same challenges and opportunities we face. We are an important part of the economic engine in the communities we serve, providing personalized services and financial products tailored to our customers’ needs. Besides the products and services community banks provide, we also give personally of ourselves through hours of community service in more ways than I can mention: serving on boards of all shapes and sizes, providing our financial knowledge, expertise and, yes, our money — both the banks and our personal money that supports vital and deserving community projects. It takes a community bank to support a village that not only survives but thrives. Because if the village doesn’t survive, how will we? Vital to that survival is financial education and literacy. In a world that is constantly changing with a wide variety of diverse financial products, volatile markets and evolving regulatory environmental concerns, financial knowledge is a must to succeed. The knowledge necessary to compete in the world today doesn’t end after high school, trade school, college, etc. Learning is ongoing and knowledge must be as diverse as the ever-changing financial world we live in. Something as simple as fraud that we all deal with, unfortunately sometimes daily, is constantly changing. The knowledge that our communities and customers need regarding PRESIDENT’S MESSAGE Doug Fish MIBA President BTC Bank, Bethany, MO fraud has become a full-time job on our part. We must constantly and continually educate ourselves and our customers about the most recent scams. Financial education for our communities and customers is an avenue we can successfully navigate. Whether through the schools, 4-H clubs, community outreach programs or our own social media rails, it’s all part of helping to build strong customers and solid communities. I’ve only scratched the surface of the incredible work we do as community banks! I encourage each of you to celebrate and recognize your community bank and its positive influence on the community it serves. 4 | The Show-Me Banker Magazine
FLOURISH Amplifying the Community Bank Difference Rebeca Romero Rainey President and CEO, ICBA ICBA’s 2025 Community Bank CEO Outlook Survey revealed that 77% of community bank executives believe their greatest business opportunity this year will be differentiating their community bank from other financial services firms. Demonstrating our unique value proposition is a growing priority for two key reasons. The first reason is today’s competitive landscape. We are living in an environment where everyone wants to be a bank, but they aren’t operating by the same rules, which is driving a need to differentiate what we do and who we are as community bankers. It’s our job to help our customers recognize the community bank difference, both to strengthen our relationships with them and protect them from potential pitfalls with other providers. The second reason is the growing demand for community connection. There’s a rising awareness of “bank local” and what that means, but we must continue emphasizing the message that we are different from the nonbank providers that are calling themselves banks, credit unions that are tax-advantaged, and megabanks that treat their customers like numbers. We need to reiterate the positive impact we have on our customers and communities. We must acknowledge both competitive headwinds and know that we have tailwinds to drive us forward when it comes to what we do at a local level. The good we do for our communities can’t be overstated. But it’s not just our customers and potential customers we need to reach with this messaging. Rulemakers and regulation writers must understand our uniqueness. They need to know that we offer a completely different risk paradigm, keep capital in our communities (their districts) and drive the local economy — and that requires our voices to tell those stories. Storytelling, marketing, differentiation: Conceptually, they all make sense, but with each comes a question of, “Now what?” The answer falls in how we apply our stories to cut through the noise of today’s financial services landscape and resonate with our audiences. That’s why ICBA has launched our ICBA Marketing Resource Center (icba.org/mrc). From search engine optimization tips and ready-to-go segments to produced materials that can be customized for your institution, the resources we’ve provided not only offer information on marketing concepts but deliver the tools to highlight what’s unique about our industry and your bank. And the work continues: We are committed to making this center evergreen, providing new resources as opportunities arise. Our unique value proposition makes us second to none, and with our collective efforts, we will drive home that message and the community bank difference. 6 | The Show-Me Banker Magazine
Translating Advocacy Into Action FROM THE TOP While advocacy has always been a core ICBA pillar, the massive number of new regulations we have faced over the past year serves as a stark reminder of the importance of community bankers taking part in advocacy efforts. This community has really stepped up. For instance, we had a record number of first-time attendees at the 2024 ICBA Capital Summit, and we were able to successfully advocate for the Congressional Review Act resolution on the 1071 rule last year — with both the House and Senate voting to overturn the CFPB’s regulation. Despite its presidential veto, this was a huge victory, in large part because it has set the stage for the current Congress. It has never been clearer to me that we, the community bankers across the nation, need to use our voices. While ICBA does a stellar job of advocating on our behalf, the simple fact remains that when we tell our stories on Capitol Hill and in our state legislatures, it is more effective. Lawmakers prefer to hear from us, their constituents. They want to understand how community banks make an impact in the districts they serve, and they need to know that when regulations tie our hands, it’s their community that suffers. In short, we need them to be aware of the community bank difference. Although we are the economic engine of the country, most lawmakers don’t truly understand all we do to power their districts. We need legislators to know who we are and what we represent to protect our banks, communities and customers. Engaging them has to be a part of our day-to-day jobs. Throughout my tenure as ICBA chairman, I have made it my mission to rally community bankers to come to D.C. In fact, the proudest moment I experienced over the past year was when a few bankers told me that they came to the Capital Summit for the first time because of my speech at ICBA LIVE. It meant a lot that the message resonated. Because more than ever, we need to continue to act, advocate and ensure our legislators understand who we are. We My Top 3 Experiences as ICBA chairman: 1. Traveling around the country and meeting community bankers. 2. Testifying before Congress on Section 1071. 3. Representing community banks at the World Savings Bank Institute Conference in Rome. need new, younger generations of bankers stepping up to show that what we do is in line with modern financial services’ needs. We need an amplification of our voices to demonstrate our commitment to our customers and communities. So, as I end my term as chairman, I do so with a full heart and a dedication to community banking that will continue to fuel my advocacy work and hopefully inspire yours. I look forward to seeing you on Capitol Hill. Lucas White ICBA Chairman President of The Fountain Trust Company The Show-Me Banker Magazine | 7
A Background On Casey Hopkins President of Bank of Old Monroe He continued working at Edward Jones after graduation, moving into sales training. Although there was a huge upside to financial advising, he realized his heart was rooted in developing partnerships with customers in an environment where there was more control over the market and the future of their investments. In 2005, he transitioned to Enterprise Bank and Trust and worked in both the wealth management and banking sides of the business. While there, he met invaluable mentors who took the time to explain banking operations. Casey had found his niche. Serving customers and being part of helping them own their own home, start a new business or grow an existing one created a passion that led to him finding true purpose. In 2005, Casey and his wife, Holly, made the decision to establish roots of their own and build a home in Troy, where he was raised. Although Casey wasn’t working in Troy at that time, he and his family made the move. Ironically, a position opened at the Bank of Old Monroe shortly after they moved back, and Casey wasted no time applying for the job. Casey was hired to work as a lender at the Bank of Old Monroe Moscow Mills branch. “I finally felt like I was helping people with some of the most imperative financial decisions they would make in life. It was so rewarding to help a customer buy their first home or start their first business,” Casey said. Little did he know that the real estate crash of 2008 was looming. “I figured out what a true banker’s role should be when working alongside customers through the real estate crash of 2008.” Casey continued, “For the first five years of my career, I learned how to work with customers, meet their loan obligations and still be able to put food on the table for their families. I had to have some really tough conversations with customers, and it was a humbling season of my professional career.” Casey Hopkins was born in St. Charles, Missouri, and raised in Troy, a small town about 30 miles north of St. Charles. Growing up in a rural town where everyone knows one another fostered a strong sense of commitment and community. Both of his parents were lifelong educators — his mother was a kindergarten teacher, and his father taught high school and coached basketball. They instilled in him a strong work ethic, a commitment to family and community, and a love of sports and learning. Upon graduating from high school, Casey attended Maryville University, where he played golf. Maryville offered excellent internship opportunities for students, and Casey took full advantage. In his junior year, he was selected to interview for a position with Edward Jones and was hired. “That’s where my financial career started,” Casey said. “I worked there part-time my junior year on the front lines in the call center where I learned about customer service, developing relationships and many financial products.” During his senior year of college, Casey was offered a full-time position with Edward Jones, which he accepted while taking a full course load. “It was a great experience, and I met a lot of talented people there. That experience laid a strong financial foundation for me,” Casey said. 8 | The Show-Me Banker Magazine
Throughout that period, Dale McDonald, who is now CEO of Bank of Old Monroe, became a mentor to Casey. “I saw him work with people through tough times, and Dale truly cared,” Casey said. Dale taught him that if there’s a way through tough times with somebody, work with them. It’s better than trying to get through it without that person. To this day, the Bank of Old Monroe prides itself on a partnership approach and walks alongside their borrowers. While working as a loan officer, Casey became branch manager at the Troy branch and, a year and a half later, was promoted to assistant vice president. “We had an unforeseen opportunity in our Mortgage Department at the bank, and Dale called me and said, ‘Do you think you’d be interested in working with mortgages?’ Early in life, my parents taught me to never say no to an opportunity, to take the chance and with hard work, everything else would work out. So, I agreed to manage the mortgage department,” Casey said. He knew from working on the loan side there were opportunities to level up in the department. At the time, the bank was only handing Freddie Mac mortgages in-house. All other loans were outsourced to another financial entity for processing. Casey collaborated with the third party on almost a daily basis, and he was impressed with their efficiency and knowledge of the mortgage industry. In his first year managing the department, he and his team grew the mortgage revenue to an all-time high. Casey opened a new branch in Troy in 2016 and became the branch manager while maintaining his loan portfolio. “Building a team for the Troy branch was one of the most rewarding parts of my career,” Casey reflected. “I went back to my roots — where I grew up, where my parents taught — to the community I loved.” In June 2019, then-president and CEO Darrell Harke decided he was going to retire in the fall of 2021. Casey was slated to become the next president, so a replacement was hired to take over the Troy branch and market. Casey transitioned into more of an executive role, learning and preparing for what was to come. Today, Casey serves as the president of the Bank of Old Monroe. His desire to help people is the driving force in his life. “I didn’t choose this career path for a title. I chose it because I wanted to help and take care of people, whether they be coworkers or customers,” Casey said. “I’m at a point in my career where other people’s successes and other people’s opportunities mean more to me than mine.” Casey is not just a title holder, he’s a coach. He expects nothing more from anybody than he does from himself. He challenges others, the same way he challenges himself, and he supports the people who work for him, just as he would his own personal family. When it comes to nurturing young talent and growing people, Casey appreciates the educational opportunities that MIBA provides: “They give us a space to educate our younger bankers and provide a ton of opportunity that, quite frankly, wouldn’t be there if it weren’t for the association. MIBA also gives a platform and a voice to community banks, ensuring that community banks will be around for years to come.” It is important to Casey to give back to the community in other ways as well. He serves on multiple boards, including the Mercy Health Foundation and Community Opportunities. He also serves in an advisory capacity to The Child Advocacy Center of Northeast Missouri and the Dream Center. Casey has coached the Special Olympics basketball team in the past and has helped with the Special Olympics golf team. Casey is the president of the Incarnate Word Academy Sports Association. He has also coached youth basketball for years and often speaks in schools. “I take every opportunity I can to make an impact and share what I learned from my parents. My mom told me that kids are the same at ages 5, 25 and 55 — the kids who didn’t have support at home and were making bad decisions in kindergarten are still the ones making those decisions later in life. They didn’t have mentors or the guidance and perimeters. But it doesn’t have to be like that. For me, spending time with and giving somebody an opportunity to do better for themselves is what life is all about,” Casey said. Casey’s most prized role is that of husband and father. He loves spending time with his wife and three daughters — Landry, Reese and Bella — and makes sure they are his foremost priority. “Beyond all the success at the bank and what I’ve accomplished, it does not happen without the full support of my wife and daughters. There are a lot of sacrifices that go into professional success, and without the unconditional love and support of my family, it would never have been possible. They are my greatest accomplishments and what I’m most proud of. They understand hard work, respect, having good manners and that everything you get in this life is earned and only by the grace of God,” Casey said. For over 118 years, the Bank of Old Monroe has been serving the local community one customer at a time. “In every decision we make, we strive to adhere to the bank’s four pillars: trust, humility, integrity and servanthood. That mindset has cultivated a culture of feeling and caring that has resulted in longevity for both our customers and our employees,” Casey said. To learn more about the Bank of Old Monroe and what makes it so special, scan the QR code. https://vimeo.com/1049841286 The Show-Me Banker Magazine | 9
Fraud Task Force By Quentin McConkey, Security Officer, BTC Bank $123,405,404. That was the number reported to the Internet Crime Complaint Center (IC3) for total dollar losses to fraud in the state of Missouri in 2023. According to the FBI, they believe only 1 in 44 incidents are reported. If we multiply the reported number by 44, the actual losses exceed $5 billion. That is an astronomical figure to consider! As bankers, what can we do to help combat this? There are several steps we can take, such as educating our staff and customers on the dangers of fraud. Additionally, we can communicate and work together to share information about the fraud we encounter. When it comes to fraud, we’re all in this together, regardless of size, location or assets. I recently met with a member of the MIBA team and proposed creating a Fraud Task Force across the state. The principles of the task force would be to meet quarterly (virtually), discuss current fraud-related events and bring in guest speakers to educate us so we can better combat fraud. This task force would also provide a valuable networking opportunity for bankers. For example, if you join this task force and encounter a fraudulent incident, you will have direct contact with another banker across the state who works with fraud at their bank. I hope you all consider joining this team because there is no end in sight when it comes to fraud. It truly will take a team effort! Please feel free to reach out to me with any questions or if you would like to help with the task force. You can contact me at (660) 425-7285 or quentin.mcconkey@btcbank.bank. Discover the 75 Cybersecurity Commandments trusted by top executives. JMARK.COM | 844-44-JMARK 2 844-44-JMARK | JMARK.COM People First. Technology Second.® Do you adhere to the NIST Digital Guidelines? Do only authorized personnel have password access to computer devices? Do you require users adopt secure password standards (NIST) and then enforce them? Are passwords updated every three months? Do administrators have separate accounts for network management? Do you use MFA everywhere you can? Do you enforce MFA on remote access email and sensitive documents? Do you use secure methods (VPN) for remote systems access? Do you maintain a “zero-trust” security culture? Is your data stored in a secure offsite facility? Is all data at rest and in transit encrypted? Do you have procedures in place to identify and secure the location of confidential information – whether as digital or hard copies? Do you have procedures in place to identify and secure the location of personal private information? Do you continually create retrievable backup and archival copies of critical information? Do you have procedures in place for shredding and securely disposing of paper documents? Do you lock your shredding and recycling bins? Do you have policies in place for secure disposal of electronic/computer equipment? Do you have policies in place for secure disposal of electronic media such as thumb drives, tapes, CDs and DVDs, etc.? Do you have procedures in place to regularly assess IT compliance with required regulations (HIPAA, PCI, FINRA, GDPR, CCPA, etc.)? Do you conduct regular reviews of users with physical access to protected facilities or electronic access to information technology systems? Do you deploy systems in a hardened/secure state? Do you have a vulnerability management system that detects and fixes vulnerabilities on all devices (workstations, network equipment, server equipment, etc.)? Do you have a third-party company that runs an annual penetration test? Do you enforce a “Clear Desk and Screen” policy to keep all confidential information hidden? ACCESS CONTROL POLICIES DATA PRIVACY POLICIES YES YES NO NO 2 844-44-JMARK | JMARK.COM People First. Technology Second.® Do you adhere to the NIST Digital Guidelines? Do only authorized personnel have password access to computer devices? Do you require users adopt secure password standards (NIST) and then enforce them? Are passwords updated every three months? Do administrators have separate accounts for network management? Do you use MFA everywhere you can? Do you enforce MFA on remote access email and sensitive documents? Do you use secure methods (VPN) for remote systems access? Do you maintain a “zero-trust” security culture? Is your data stored in a secure offsite facility? Is all data at rest and in transit encrypted? Do you have procedures in place to identify and secure the location of confidential information – whether as digital or hard copies? Do you have procedures in place to identify and secure the location of personal private information? Do you continually create retrievable backup and archival copies of critical information? Do you have procedures in place for shredding and securely disposing of paper documents? Do you lock your shredding and recycling bins? Do you have policies in place for secure disposal of electronic/computer equipment? Do you have policies in place for secure disposal of electronic media such as thumb drives, tapes, CDs and DVDs, etc.? Do you have procedures in place to regularly assess IT compliance with required regulations (HIPAA, PCI, FINRA, GDPR, CCPA, etc.)? Do you conduct regular reviews of users with physical access to protected facilities or electronic access to information technology systems? Do you deploy systems in a hardened/secure state? Do you have a vulnerability management system that detects and fixes vulnerabilities on all devices (workstations, network equipment, server equipment, etc.)? Do you have a third-party company that runs an annual penetration test? Do you enforce a “Clear Desk and Screen” policy to keep all confidential information hidden? ACCESS CONTROL POLICIES DATA PRIVACY POLICIES YES YES NO NO 1 844-44-JMARK | JMARK.COM People First. Technology Second.® Do you have procedures in place to prevent unauthorized physical access to computers and other electronic information systems? Do you have solutions in place to prevent physical access to your secure areas, such as door locks, access control systems, security offices, or video surveillance monitoring? Do you have security desks, and sign-in/sign-out logs for users accessing these areas? Do you physically escort visitors out of secure areas? Can you ensure users always log out of their computers when leaving them? Are all computers set to lock automatically after 10 minutes if left idle? Can you remotely wipe computers, laptops, and mobile devices that are lost or stolen? Is there a policy in place to protect data during equipment repairs? Do you have security policies in place for all of your computers, laptops, tablets, and smartphones? Do you have a “Bring Your Own Device” policy in place for employee mobile devices? Do you have emergency evacuation plans in place for employees? Do all employees have emergency shelter-in-place kits for emergencies where they can’t leave your facility? (canned food and a can opener, bottled water, a blanket, prescription medicines, sanitary wipes, a garbage bag with ties and toilet paper for personal sanitation) Do key employees know how to seal off designated areas in your facility if necessary? PERSONAL & PHYSICAL SECURITY YES NO Technology has transformed the way we all do business for the better. However, to keep your data and business from being at risk, you must ensure your tech is secure and continuously monitored. We’re providing this detailed checklist as a reference tool to help you verify that comprehensive cybersecurity and physical security policies are in place throughout your organization. CYBERSECURITY COMMANDMENTS Be Ready Take Action Plan Ahead Follow Up 75 Real strategies. From the experts. Keep hackers out of your bank and grab your free copy at JMARK.com/75 today. 10 | The Show-Me Banker Magazine
LEGAL EAGLE SPOTLIGHT There are good reasons to expect that mergers and acquisitions activity for privately held businesses will increase in 2025 and the following years. Private equity firms are adjusting to the new normal of higher rates for longer. They need to deploy capital to achieve sufficient returns for their investors. Further, business owners belonging to the baby boomer generation will continue to retire. If the next generation in the family doesn’t want to take over the business, the retiring owners look to sell the company. All of this means banks who finance businesses are more likely to be involved in the purchases and sales of those businesses. For the most part, the due diligence and loan documentation for financing a business being acquired is the same as financing a business with continuous ownership. The purchase and sale component, however, adds additional parties and complexity to the overall transaction. The aim of this article is to point out some of the extra layers and items to watch for when financing an acquisition. Types of Transactions An owner looking to sell their company has two basic options: sell the equity or sell the assets. Buying equity means buying both the assets and the liabilities. Because a buyer doesn’t usually want to assume liabilities, asset purchases are more common. With an asset purchase, the buyer can take a more surgical approach in an attempt to acquire only the “good” assets, leave any risky and unnecessary assets behind, and avoid assuming existing liabilities. There are different types of buyers too. Some buyers are existing operating businesses acquiring another company as a means of growth. If you are already lending to the acquiring company, you will be concerned with how folding in the newly acquired business will affect the cashflow and profitability of your client. Will the increased size of the business require a larger credit facility? Private equity firms make it their business to acquire other businesses. If you are financing an acquisition by a private equity firm, ask them about their plans for the business. Is it a strategic Clearing the Hurdles to Financing an Acquisition Tips for Successfully Financing Acquisitions By Brian Devling, Spencer Fane The Show-Me Banker Magazine | 11
acquisition to complement other companies in the firm’s portfolio? What is the plan to exit the investment? How long do they plan to hold the investment? You may want to match the term of the credit facility to their planned holding period. Another common buyer is someone already working with the company. The current owner may be ready to retire and one or more of the management team is ready to move into an ownership role. In these situations, dig in to see how active the retiring owner is in the business. Is the remaining management team ready to take on the roles that the retiring owner was still serving? In other words, are you comfortable the new owners can successfully run the business without the retiring owner’s presence? Similar to a management buyout is creating an employee stock ownership plan (ESOP). An ESOP transaction is essentially a sale of the company’s stock to a trust for the benefit of the employees, which enables the owner to sell without finding a third-party buyer. There can be tax advantages as well with an ESOP. Properly establishing an ESOP requires compliance with numerous complicated laws. Working with advisors and counsel experienced with ESOP transactions is critical. Dive into the Details During the transaction, you, as the lender, are looking over the buyer’s shoulder as they conduct due diligence and negotiate with the seller. The buyer’s legal team will share drafts of the purchase agreement with you and your counsel. The goal is to learn as much as possible about the business being acquired, aka your new borrower. Remember, the seller is more familiar with the business. The seller knows what skeletons are in the closet. Watching how the seller negotiates the representations and warranties in the purchase agreement can give you clues as to where to dig deeper to ensure those skeletons don’t cause any problems. Similarly, review the seller’s disclosure schedules to the purchase agreement and ask questions about anything that looks unusual or potentially problematic. Despite thorough due diligence and solid representations and warranties in the purchase agreement, buyers (and their lenders) are still fearful the seller knows something negative about the business or its prospects that hasn’t been disclosed. To help allay this fear, deals are often structured so that a portion of the purchase price is held back and only paid out if no breaches of the representations and warranties arise after closing. Doing so motivates the seller to be as transparent as possible before the closing. One way to handle the holdback is to deposit part of the purchase price in an escrow account. If no claims are made by the buyer within a specified timeframe, usually six to 18 months, then the escrowed money is released to the seller. Another way to hold back part of the purchase price is through a seller carry-back note. The buyer signs a promissory note payable to the seller. As long as the business keeps performing, the seller receives payments on the note and eventually receives the full consideration for the sale. Seller carry-back financing keeps the seller invested in the business. Seller notes are typically unsecured and should be subordinated to the lender financing the acquisition. The purchase agreement may contain a mechanism for post-closing adjustments to the purchase price. A common adjustment is to account for any difference between the company’s actual working capital at closing and the working capital expected by the purchase agreement. A working capital adjustment discourages the seller from manipulating the company’s cash by accelerating the collection of receivables and delaying payments to vendors. For the seller’s benefit, the adjustment prevents the buyer from receiving a windfall if there is an unexpected increase in working capital prior to closing. 12 | The Show-Me Banker Magazine
Note that these approaches are not exclusive. Many deals use a combination of the approaches to structure a deal acceptable to both sides. Understanding the mechanisms in your deal will enable you to set expectations for potential cash outflows from your borrower after closing. Considerations for Loan Documentation A closing checklist for acquisition financing should include extra items beyond the usual loan document package. The buyer/borrower is entering into a purchase agreement and related agreements. As just discussed, those agreements may contain representations and warranties, indemnification rights, rights to escrow monies and other benefits in favor of the buyer. Although the lender is not a party to the purchase agreement, a collateral assignment of the purchase agreement and related documents gives you an interest in those benefits. Ensure the seller consents to the collateral assignment so you can enforce the rights directly against the seller. If the deal includes a seller note, the lender will require a subordination agreement. This agreement creates a direct contractual relationship between the lender and the seller, establishing the priority of their respective claims against the buyer, the conditions under which the seller can receive payments, and what actions, if any, the seller can take to enforce its note prior to the lender being paid in full. Subordination agreements for seller notes are often heavily in the lender’s favor. When a private equity firm is involved, it will often include subordinated debt as part of the capital it provides for the acquisition. Unlike a seller note, the private equity firm usually takes a second lien and is more likely to negotiate the subordination agreement’s restrictions on payments, enforcement actions and bankruptcy implications. Experienced counsel plays an important role in protecting the lender’s position without driving away the investor. Loan agreements typically include a default for a change of control. This provision protects against unwanted changes in the ownership of the borrower. In an acquisition, the lender should tailor the change of control provision based on the post-closing capital structure. For example, the buyer may plan to issue a small amount of equity to key members of the management team for retention purposes. The change of control provision should include a carveout for that equity to avoid an unintended default. While lenders are used to conducting Uniform Commercial Code (UCC), lien and litigation searches on their borrowers, acquisition finance requires searches on the seller as well. For any liens discovered, satisfactory payoff letters or releases should be provided by the seller’s lenders to confirm you, as the new lender, will have a first-priority lien on the acquired assets. After the Closing Negotiating and closing an acquisition can be a long and stressful process. Once the closing occurs, the parties are ready to move on. Before moving on, however, schedule some key dates for follow-up. If the purchase agreement includes a working capital adjustment, calendar that date to check on the final calculation and ensure there is no dispute with the seller. Around a month after closing, conduct post-closing UCC searches to confirm the liens on the seller were properly released and that your filing is in the expected priority position. Finally, if part of the purchase price was put in an escrow, set a calendar reminder to confirm the escrow was closed and disbursed without issue. While acquisitions bring additional parties and complexity to a financing transaction, understanding the additional diligence to review and documentation to include can make for a smooth and successful transaction. Brian Devling represents lenders in the origination and workout of middle-market commercial finance transactions. Applying a resourceful and pragmatic approach to collaborative planning, he constructs strong foundations for consistently risk-averse and cost-efficient outcomes. Brian’s primary focus is representing asset-based lenders in structuring, negotiating, documenting and maintaining credit facilities. He can be reached at (816) 292-8122 or bdevling@spencerfane.com. An owner looking to sell their company has two basic options: sell the equity or sell the assets. The Show-Me Banker Magazine | 13
MIBA/ICBA Executive Leadership Pre‑Conference 2025 Louisville, Kentucky 14 | The Show-Me Banker Magazine
The Show-Me Banker Magazine | 15
ICBA LIVE 2025 Nashville, Tennessee 16 | The Show-Me Banker Magazine
It always amazes me how many legislators really don’t understand banking. Sure, many have checking and savings accounts, direct deposit, a car loan and a mortgage, but most have no idea how many laws and regulatory hoops banks have to jump through. That’s why every year, we have to look at and update the Missouri banking code. Over the last couple of years, we worked on legislation to increase penalties for ATM smash-and-grabs, killed legislation that would have allowed credit unions to operate as banks without the regulatory burdens that banks have to operate under, and passed laws that allowed less regulatory duplicity. As we have knocked these and other issues out, fraud has crept into the picture in new and contemptuous ways. New scams aimed at older adults run the gamut and can put banks in a precarious and potentially litigious situation. For instance, an elderly customer makes several large withdrawals or transfers of funds. Should this transaction be flagged by the bank? Should someone, a family member or close family friend, be notified? Under current law, talking to someone other than the account holder about such a transaction would violate the depositors agreement with the bank and the bank could be liable for the disclosure. That’s why SB 99, sponsored by Sen. Sandy Crawford, and HB 1049, sponsored by Rep. Bill Owen, were filed. The bills allows a depositor the option to name a trusted contact that can be contacted in cases of account irregularity and suspected fraud. The designation by the depositor and use by the bank is totally voluntary and is not required by the financial institution. As of this writing, both bills have been heard in their respective House/Senate committees and have been given committee approval. This legislation is supported by both banks and credit unions alike. MIBA Lobbying Report Andy Arnold Arnold & Associates SPACE AVAILABLE Advertise in this magazine and reach your customers anywhere in the cosmos. CONTACT US TO GET STARTED! (801) 676-9722 • (855) 747-4003 sales@thenewslinkgroup.com QR Code: website /ad-space The Show-Me Banker Magazine | 17
Leadership Division at the Blues Enterprise Center, St. Louis February 6, 2025 18 | The Show-Me Banker Magazine
Thank You to Our Leadership Division Sponsors The Show-Me Banker Magazine | 19
Amy Stark MEET YOUR MISSOURI BANKER Jr. Loan Officer/Branch Deposit Supervisor, Preferred Bank
Where are your main bank and branches located? What is the market like? Our main branch is located in Rothville, Missouri, with branches located in Brookfield, Marceline, Lee’s Summit and Napoleon, Missouri. I live and work in Brookfield. We are a small community, so our market is competitive with four other banks in town. What is something unique about your bank? Something unique about our bank is we opened in 1904 and just celebrated 120 years of service. We are family-owned, and we take pride in serving our customers. Our motto is “Big Enough to Help, Small Enough to Care.” We may be small, but our team of employees works very hard to make each transaction a smooth process and create relationships with our customers. How did you get started in the banking business? I am a fifth-generation banker. My family charted the Sumner Exchange Bank in Sumner, Missouri. In 1891, when the railroad station left the town, the bank closed. Since then, we’ve had several family members involved in the banking industry. What prompted you to continue the family tradition and join the bank? I pride myself on customer service and helping others. I am a people person, and although it’s difficult at times, I like to work with the public. What is the most important thing you have learned from this career so far? Something important I’ve learned from this career is to always take pride in what you do. Always treat people fairly and remain calm, you never know someone’s situation. The banking industry is an ever-changing world, there is always something new to learn. CHANGE IS OKAY! Tell us about the bank’s community investment efforts. We take pride in our community by sponsoring agriculture and athletic programs, school clubs, community activities and numerous youth programs. What is the bank’s biggest challenge in the area of internet banking/ mobile banking? Our biggest challenge currently with internet banking/mobile banking is fraud. There is so much debit card fraud; it is unreal. It’s hard to prevent. Hackers are very good at tricking people. What’s your favorite thing about your bank/banking in general? My favorite thing about the bank is we are family-owned and we are a small bank. We still have that “hometown” feel. If you didn’t have a career in banking, what other career would you choose? I used to work at a title company. I would probably go back to that. I love to do paperwork, and I love the title industry. The Show-Me Banker Magazine | 21
Concepts and Facts ChatGPT Gets it Mostly Right on Yield Curve Shapes By Jim Reber, President and CEO, ICBA Securities, MIBA Endorsed Vendor Note: In this column, for the first time, I relied on ChatGPT, the generative artificial intelligence (AI) platform. For the record, I submitted this inquiry: “Write a 700-word essay on how the shape of the Treasury yield curve affects community banks.” The following was generated in, I guess, three seconds, and most of it appears to be correct. I’ve taken the liberty of adding some commentary in bold, and there really aren’t many changes. In the future, I will only use AI if I fully disclose its assistance. And you’ll be able to tell because there’s no snark in AI-generated documents. The Impact of the Treasury Yield Curve on Community Banks The Treasury yield curve is a critical financial indicator that depicts the relationship between interest rates and the maturity dates of U.S. government debt. Typically, the yield curve slopes upward, reflecting higher yields for long-term securities compared to short-term ones. This essay explores how the shape of the Treasury yield curve affects community banks, focusing on their lending practices, interest rate risk management, and overall financial health. Understanding the Yield Curve The yield curve can take on various shapes, primarily categorized as normal, inverted, or flat. A normal yield curve indicates that longer-term bonds have higher yields, suggesting economic growth; an inverted yield curve occurs when short-term yields exceed long-term yields, often seen as a predictor of recession; and a flat yield curve signifies uncertainty in the economy, where there is little difference between short-term and long-term rates. Each of these shapes presents unique challenges and opportunities for community banks. Lending Practices Community banks primarily generate revenue through lending, and the yield curve significantly influences their lending practices. In a normal yield curve environment, community banks can borrow at lower short-term interest rates and lend at higher long-term rates, which supports their profitability. For example, if a bank can secure funding at a 1% interest rate for a one-year loan and lend it out at 4% for a 30-year mortgage, the spread — essentially the bank’s profit — is 3%. This difference allows community banks to support local economies, providing loans for homes, businesses, and other community projects. Conversely, when the yield curve flattens or inverts, the profitability of these lending activities diminishes. In an inverted yield curve scenario, community banks may find themselves in a position where they borrow at higher short-term rates than the rates at which they can lend long-term. This situation compresses margins, potentially leading to a reduction in loan origination and, consequently, a slowdown in economic activity within the communities they serve. Interest Rate Risk Management Community banks must also navigate interest rate risk, which is the risk of financial loss due to changes in interest rates. The shape of the yield curve plays a crucial role in how banks manage this risk. In a normal yield curve scenario, banks can match the duration of their assets (loans) with their liabilities (deposits) effectively. For instance, if a community bank has long-term fixed-rate mortgages, it can rely on stable, lower-cost funding from short-term deposits. Wrong! This is the very recipe for exposure to rising rates. This alignment helps mitigate the risk of rising interest rates. However, during periods of an inverted or flat yield curve, community banks face increased interest rate risk. Not necessarily. The duration mismatch can lead to a situation where liabilities reprice before assets, exposing banks to potential losses. To manage this risk, community banks may engage in interest rate swaps or other hedging strategies, but these can be costly and complex, particularly for smaller institutions with limited resources. Asset Quality and Loan Demand The shape of the yield curve also affects asset quality and loan demand, which are critical for community banks’ stability. In a normal yield curve environment, economic growth typically leads to increased demand for loans as businesses and consumers have greater confidence in their financial prospects. Community banks can capitalize on this demand, extending credit while maintaining healthy asset quality. However, when the yield curve inverts, it often signals an impending economic 22 | The Show-Me Banker Magazine
BANCMAC COMMUNITY BANC MORTGAGE CORP. YOUR COMMUNITY BANK MORTGAGE PARTNER bancmac.com mortgages@bancmac.com 888.821.7729 | NMLS# 571147 BancMac provides correspondent and wholesale lending and is your Community Bank Mortgage Partner to help your financial institution originate fixed-rate secondary market loans including: PROGRAMS • Conventional Loans • USDA Rural Development Loans • Rural Living (Hobby Farm) Loans • VA Loans • Jumbo Loans • FHA Loans OUR PARTNERS RECEIVE: • Superior Service & Competitive Pricing • No Minimum Volumes • Significant, Non-Interest Fee Income • Non-Solicit Protections & More slowdown. As businesses and consumers become more cautious, loan demand may decline, and existing borrowers may struggle to meet their obligations, leading to increased default rates. This deterioration in asset quality can significantly impact community banks, which often have concentrated loan portfolios tied to local economies. It’s a bit of a non-sequitur to claim inverted curves cause a decline in credit quality. It’s more like the curve is reacting to that expectation. A rise in non-performing loans can strain capital reserves and lead to regulatory scrutiny. Conclusion The shape of the Treasury yield curve is a pivotal factor influencing the operations and financial health of community banks. A normal upward-sloping curve supports profitable lending practices and encourages economic growth, while an inverted or flat curve presents challenges related to interest rate risk, profitability, and asset quality. Community banks must remain vigilant and adaptable to changes in the yield curve, employing sound risk management strategies and maintaining strong relationships with their local communities. Understanding these dynamics is essential for community banks as they strive to navigate the complexities of the financial landscape and continue to support their local economies. Jim Reber (jreber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. Fenimore Kay Harrison LLP Elects Mathew A. Petersen to Partner Fenimore Kay Harrison LLP is proud to announce that Mathew A. Petersen has been elected to Partner. Mat has been an integral part of our team and its Kansas City office, providing exceptional legal counsel to our banking and financial services clients. Mat is a graduate of the University of Kansas School of Law and University of Kansas School of Business, where he obtained a J.D./M.B.A. While in law school, he served as editor-in-chief of the Kansas Law Review and on the Moot Court Council. Mat and his wife, Amanda, live in Lawrence, Kansas, with their 11-month-old son, Owen. When he is not serving the legal needs of our clients, Mat enjoys cooking, spending time with his family and attending KU sporting events. Fenimore Kay Harrison focuses on representing banks and other financial institutions in a wide range of corporate, securities, governance, and regulatory matters. With Mat’s continued contributions, we look forward to further strengthening our ability to serve our clients with the highest level of specialized legal counsel. Please join us in congratulating Mat on this well-deserved achievement! Fenimore Kay Harrison LLP Elects Mathew A. Petersen To Partner Fenimore Kay Harrison is proud to announce that Mathew A. Petersen has been elected to partner. Mat has been an integral part of our team and the Kansas City o ce, providing exceptional legal counsel to our banking and nancial services clients. Mat is a graduate of the University of Kansas School of Law and the University of Kansas School of Business, where he obtained a J.D./M.B.A. While in law school, he served as editor-in-chief of the Kansas Law Review and was on the Moot Court Council. Mat and his wife, Amanda, live in Lawrence, Kansas, with their 11-month-old son, Owen. When he is not serving the legal needs of our clients, Mat enjoys cooking, spending time with his family and attending KU sporting events. Fenimore Kay Harrison focuses on representing banks and other nancial institutions in a wide range of corporate, securities, governance and regulatory matters. With Mat’s continued contributions, we look forward to further strengthening our ability to serve our clients with the highest level of specialized legal counsel. Please join us in congratulating Mat on this well-deserved achievement! The Show-Me Banker Magazine | 23
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