2023 ISSUE 3 Creating Compelling Content For Your Financial Institution
INVESTMENT PRODUCTS Municipal Bonds Mortgage-Backed Securities Govt. & Agency Bonds Corporate Bonds Brokered CDs Money Market Instruments Structured Products Equities Mutual Funds ETFs FINANCIAL SERVICES Public Finance Investment Portfolio Accounting Portfolio Analytics Interest Rate Risk Reporting Asset/Liability Management Reporting Municipal Credit Reviews Balance Sheet Policy Development and Review Comprehensive SOLUTIONS 888-726-2880 FBBS believes the success of your team is the future of our firm. MEMBER FINRA & SIPC. INVESTMENTS ARE NOT FDIC INSURED, NOT BANK GUARANTEED & MAY LOSE VALUE. COLORADO | ILLINOIS | IOWA | KANSAS | MISSOURI | NEBRASKA | OKLAHOMA | TEXAS | TENNESSEE | VIRGINIA Brock Nuckolls, President/CEO Citizens Bank and Trust of Rock Port COMMUNITY BANKING CONFERENCE MIBANC.COM/EVENTS KANSAS CITY, MO INTERCONTINENTAL HOTEL AUGUST 23-25 BANKER Traveling to the 800-347-4MIB The Perfect Storm - The Latest Scams you Need to Know Mike Burke, SHAZAM Managing Liquidity is More Challenging than Ever! Allen North, Federal Reserve Bank/St Louis 2023 at the MidPoint - Are We Where We Expected to Be? Chris Kuehl, Armada CI FedNow Readiness: Your Bank’s Path Forward Philip Sprague, Federal Reserve Financial Services Joni Hopkins, AAP - Federal Reserve Bank/Chicago Sheila Noll, Midwest Independent BankersBank Lyndsay York, Midwest Independent BankersBank Great Places to Work Focus Areas Donna de St Aubin, St. Aubin, Haggerty & Associates, Inc. Conference Highlights
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INSIDE THIS ISSUE 16 20 26 30 Published for the Missouri Independent Bankers Association P.O. Box 1765 Jefferson City, MO 65102 573.636.2751 | miba.net Editor: Matthew S. Ruge Executive Director ©2023 The Missouri Independent Bankers Association | The newsLINK Group, LLC. All rights reserved. The Show-Me Banker Magazine is published six times a year by The newsLINK Group, LLC for The Missouri Independent Bankers Association and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of The Missouri Independent Bankers Association, 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 Magazine is a collective work, and as such, some articles are submitted by authors who are independent of The Missouri Independent Bankers Association. While The Missouri Independent Bankers Association encourages a first-print policy; in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003. 6. President’s Message Community Banks Are Essential 8. Flourish 9. From the Top 10. A View From the Capitol 12. MIBA Lobbying Report 13. Meet Your Missouri Banker Jennifer Utter, Compliance Officer, MA Bank 14. Legal Eagle Spotlight The $2 Billion Issue in SVB Financial Group’s Bankruptcy 16. A Background On Jim Anderson President and CEO of Bank Northwest 18. Price Stability or Yield? Here’s Both Cash-Management Instruments Have Relative Value Today 20. Creating Compelling Content For Your Financial Institution 22. News From You 23. Leadership Day at the Capitol 2023 24. MIBA/ICBA Post Trip Maui 2023 26. MIBA State Reception ICBA LIVE 2023 27. MIBA Upcoming Events 28. Directors & Officers Seminar 2023 29. Bank Term Funding Program Provides Liquidity to Depository Institutions 30. Windows 11 vs. Windows 10: Should You Make the Switch? 33. 2023 MIBA PAC Honor Roll 33. Welcome MIBA’s Newest Team Member 35. 2023 Scholarship Winners 36. New Associate Members 36. New Bank Members 36. MIBA’s Social Media & Digital Marketing Seminar 38. Upcoming Webinar Schedule MADE IN THE USA 4 | The Show-Me Banker Magazine
ALM School Schedule Tuesday, August 8 7:30 a.m. Breakfast 8:30 a.m. Program 12:00 p.m. Lunch 1:00 p.m. Program 4:30 p.m. Adjourn 6:00 p.m. Dinner Wednesday, August 9 7:30 a.m. Breakfast 8:30 a.m. Program 12:00 p.m. Conclusion Accommodations A block of rooms is available at the Omni Oklahoma City Hotel. Identify yourself as a Baker ALM School attendee when calling 405.438.6500 to make online hotel reservations. The special room rate will be available until July 7, 2023. Hotel price: Deluxe $209 + tax. 10 hours of CPE credits will be earned for your attendance. August 8-9, 2023 Oklahoma City, OK Omni Oklahoma City Hotel Cost: $495 Member: FINRA and SIPC www.GoBaker.com | 800.937.2257 Oklahoma City, OK | Austin, TX | Dallas, TX | Springfield, IL Indianapolis, IN | Long Island, NY | Salt Lake City, UT AUG The Baker Group pioneered Asset/ Liability Management (ALM) more than forty years ago when we developed the first computer based ALM program designed specifically for community banks. Since then, we have spent four decades educating financial institutions how to effectively use ALM strategies to manage risk and maximize performance. The Baker Group has presented hundreds of seminars and conferences across the country and now we have brought that history of educational experience to an Asset/Liability Management School designed specifically for members of the ALCO and those needing to learn the fundamentals of ALM. The Baker ALM School will give attendees the knowledge to better understand the “who, what, why, and how” of ALM and the ALCO process. What You Will Learn • Fundamentals of asset/liability management including what it is and why we do it • Understanding the impact of the economy, monetary policy, and interest rates on the earnings and capital of the institution • Regulatory expectations to ensure you are always in compliance with the latest guidance and prepared for your next exam • Best practices for developing an effective ALCO process including appropriate policies, procedures, and risk limits • Practical methodologies and recommendations for how to develop assumptions that are institution specific and regularly reviewed, stress-tested, and back-tested • Review of the most important assumptions available in most models and which ones have the greatest impact on outcomes including: — Betas, rate sensitivities, and lags — Decay rates, NMD average lives, and maturity distributions — Discount rates and reinvestment rates — Prepayment rates — Rate scenarios including instantaneous vs. ramped and parallel vs. non-parallel • Risk mitigation strategies for managing interest rate risk • Incorporating investment portfolio management into asset/liability management • How to develop an effective liquidity risk management process including forward looking dynamic cash flow modeling, stress testing, and contingency funding plans Who Should Attend This school is designed for Presidents, CEOs, CFOs and members of the ALCO committee. Directors and anyone else involved in the asset/ liability management process will also benefit from the Baker ALM School. For your convenience, register for the seminar online at GoBaker.com/almschool-2023/. Call Skoshi Heron at 888.990.0010 for more information. Baker Asset/Liability Management School
PRESIDENT’S MESSAGE Community Banks Are Essential @tmbender Tyler Bender MIBA President Midwest Regional Bank Clayton, MO “Marketing and business development are essential to any community bank’s strategy to grow and expand its customer base.” Community banks at their core are financial institutions that serve the local population in a specific region or area. We not only provide generic financial services, such as savings accounts, loans, mortgages, and investment products, but can tailor to the customer’s unique needs. We differ from larger national or multinational banks because we tend to be smaller and more focused on the local market. Marketing and business development are essential to any community bank’s strategy to grow and expand its customer base. There are several critical marketing and business development strategies that community banks can use to strengthen their brand, attract new customers, and retain existing ones. 1. Build strong relationships with customers. Community banks differentiate themselves from larger institutions by offering personalized services and building strong customer relationships. Community banks should strive to be more than just a place where customers go to deposit or withdraw money. They should aim to become a trusted financial advisor for their customers, providing tailored financial solutions that meet their unique needs. To build strong customer relationships, community banks should offer excellent customer service, be accessible and responsive to customer needs, and provide financial products and services that meet their needs. Building strong customer relationships takes time and effort, but it is a crucial aspect of community banking. 2. Leverage digital marketing. In today’s digital age, community banks must have a solid online presence to attract and retain customers. Digital marketing is an effective way for community banks to promote their services and build their brand. Community banks should leverage social media platforms like Facebook, Twitter, and LinkedIn to engage with customers and promote their products and services. They can also use email marketing to reach customers and keep them informed about new products or services, promotions, or other relevant news. 3. Offer personalized products and services. Community banks can differentiate themselves from larger institutions by offering personalized financial products and services that meet the unique needs of their customers. For example, community banks can provide customized loan packages tailored to the specific needs of small businesses in the area. 6 | The Show-Me Banker Magazine
Community banks can build a loyal customer base by offering personalized products and services and attracting new customers looking for financial solutions that meet their needs. 4. Participate in community events. Community banks are an integral part of the local community, and they should participate in community events to build their brand and strengthen their relationships with customers. For example, community banks can sponsor local charity events, sponsor youth sports teams, or participate in community festivals or parades. Community banks can show their commitment to the local community by participating in community events and building goodwill with their customers. In conclusion, community banks are essential to the local financial ecosystem, and marketing and business development are crucial components of their growth and expansion strategy. By building solid customer relationships, leveraging digital marketing, offering personalized products and services, and participating in community events, community banks can strengthen their brand, attract new customers, and retain existing ones. ■ For more community banking insights, follow Tyler on Twitter @tmbender. Are you ready for growth? Advertise in this magazine and watch your revenue soar. A place where your company gets wings! Space is limited. Contact us today to get your spot. 801.676.9722 | 855.747.4003 sales@thenewslinkgroup.com 2023 Issue 3 | 7
FLOURISH “Community bankers know the people and needs behind [small businesses], and that personal connection creates a recipe for mutual success.” Rebeca Romero Rainey ICBA President and CEO @romerorainey I f there’s one universal truth about small businesses, it’s this: No two are the same. Whether it’s an agricultural entity, a business consultancy, a retail establishment or a host of other options, you’d be hardpressed to find a replicated set of financial needs. Fortunately, community banks operate in the same fashion. Though you share common values in relationship-first banking, your models are based on the needs of the communities you support. That’s what makes you so uniquely poised to serve small businesses: You are small businesses yourselves. Your ability to look at each organization independently allows you to underwrite not based on a one-size-fits-all approach, but on the individual needs of the business and the local community. Yet the small business relationship extends beyond any transaction. Community bankers are there for their small business customers as lenders, financial advisors and overall business supporters. For instance, I recently visited my local dry cleaner, who always greets me by name, and he apologized that services had been delayed a week because his boiler went out and he had to close. Then, without knowing what I do for a living, he went on to tell me how thankful he was for his community bank, which was able to lend him the money he needed to get back up and running. He shared that without this bank, he would have been out of operation. This is but one example of the significant impact you have on the nation’s small businesses. Think about walking down Main Street of any community and how small businesses are the embodiment of that community. Whether the business is a large employer, a local gift shop or a hotel that’s growing, community bankers know the people and needs behind the business, and that personal connection creates a recipe for mutual success. So I invite you to take a look at the resources unveiled as part of our national campaign and those in the Tell Your Story toolkit. Both provide turnkey materials to help you share your stories and the work you do in supporting small businesses in your communities. Telling this story matters, particularly as we continue to differentiate community banks from megabanks and credit unions. The impact you have on the small businesses you serve speaks volumes about where your priorities lie and what it means to be a community bank. And that’s a story worth shouting from the rooftops throughout Main Street America and beyond. ■ 8 | The Show-Me Banker Magazine
There’s no doubt about it; today’s economic environment is tumultuous. All around us, we’re fending off new storms from big bank failures to compliance hurdles and beyond. But we weather these tempests through our relationship-first focus. And we demonstrate this commitment to community every day in what we do. For example, over the course of my career, I have worked at several community banks, and when one of them was acquired by a super-regional bank, the whole environment shifted. I had a customer of more than 20 years who owned a commercial excavation group. He had signed a new contract and leased equipment to support it, and then the contract fell through. He continued to pay the lease payments, but that expense without the corresponding revenue made times difficult. He fell behind in loan payments. The super-regional that had acquired my community bank had an “up or out” policy, and the business had two quarters to fix its standing or they could no longer be a customer. I was forced to cut a relationship with a customer who didn’t fit into a box, and I vowed never to do it again. I left the bank not long after, returning to my community banking roots where the people, not the policies, matter. Big banks will outspend us on advertising and locations every day and focus on flashy products, but they are constantly buying to build a new ship. Community banks, instead, look at their communities and what they need, and then say to their teams, “Here’s what we’re trying to accomplish — get us there. Help us build what we need.” And therein lies the difference. The core success of community banks stems from how well we meet the needs of the people we serve: our customers, employees, stockholders and communities. Exceptional financial performance is the result of customers whose financial needs are being met and exceeded, employees who are engaged in a positive and inclusive culture, stockholders who support the bank’s mission and communities that recognize and appreciate the value of a local community bank. So as you read about our top-performing banks in this month’s issue, I invite you to focus not on the financial results but on the paths they took to achieve them. Find some inspiration from them to enhance what you provide to the communities you serve. Because in a sea of industry change, community banks always can find their due north in community service, and that’s a course we can bank on into the future. ■ FROM THE TOP Derek Williams ICBA Chairman President and CEO of Century Bank & Trust “The core success of community banks stems from how well we meet the needs of the people we serve: our customers, employees, stockholders and communities.” Quote of the Month “If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.” Antoine de Saint-Exupéry, French writer, poet and aristocrat 2023 Issue 3 | 9
Congressman Blaine Luetkemeyer Missouri’s 3rd Congressional District A VIEW FROM THE CAPITOL If you’re a regular reader of this column, you’ve heard me talk about reforming the Consumer Financial Protection Bureau (CFPB) a time or two. But now that Republicans have the House majority and the United States Supreme Court is going to decide whether its funding mechanism is constitutional, we’re in a position to actually make some changes. And I’ve got several bills in the works to bring reform to arguably the most unaccountable agency in Washington. The Bureau’s actions over the last couple of years have been concerning — to put it mildly. This agency and its current director operate as if they’ve been given carte blanche over the American financial system. The most glaring example of this took place in December of 2021 with Director Chopra’s attempt to usurp then-FDIC Chairwoman Jelena McWilliams’ authority, which I’ve spoken about before. Not long after this stunt, I introduced the FDIC Board Accountability Act to remove the CFPB Director from the FDIC Board and put term limits in place for the FDIC Board of Directors. This would ensure the FDIC remains independent from the extremely political CFPB and prevents career bureaucrats like Martin Gruenberg from sitting at the corporation indefinitely. But no matter my views on the director and his actions during his tenure, there is a larger issue here. The CFPB as an agency has far too much autonomy, authority, and unaccountable federal funding, which allows it to operate in the manner it does. In 2018, the then-CFPB Director Mick Mulvaney — who later went on to become acting White House Chief of Staff — said something very profound in a written testimony. He said the CFPB’s, “lack of accountability to any representative branch of government should be a warning sign that a lapse in democratic structure and republican principles has occurred.” Keep in mind, this was the person leading the Bureau at the time. He experienced firsthand the excessive, unchecked power he was given and sounded the alarms, which doesn’t often happen in Washington, D.C. Fortunately, the Bureau’s legitimacy is so legally questionable that the United States Supreme Court will hear arguments on whether the CFPB’s funding mechanism is even constitutional in October. I’m hopeful it will rule that the manner in which it’s been allowed to operate is unacceptable and confirm what CFPB critics have been saying all along. Recently, the House Financial Services Committee passed a package of oversight bills aimed directly at the Bureau. Two of my bills were in that package. The Consumer Financial Protection Commission Act that would replace the CFPB Director position with a bipartisan, five-person commission and the Bureau of Consumer Financial Protection-Inspector General Reform Act of 2023 to establish an independent Inspector General specifically for the CFPB. Most people don’t know this but the CFPB — the agency most in need of an independent Inspector General — doesn’t have one. Both of these bills would minimize politically motivated actions and drastically improve transparency at the Bureau. While getting those bills through the Senate and signed by the President would be extremely difficult, the House is making our intentions clear. And should the Supreme Court rule that the funding mechanism is unconstitutional, legislation will need to be passed to authorize any sort of funding for the Bureau. You can be sure that massive reforms will be required for the House to allow the Bureau to receive any funding at all, and these two bills are only the start. ■ “You can be sure that massive reforms will be required for the House to allow the [Consumer Financial Protection] Bureau to receive any funding at all…” 10 | The Show-Me Banker Magazine
Expo Convention www.miba.net Register NOW All exhibits questions should be directed to Jessica Rogers, MIBA Exhibits Coordinator at the MIBA Office: (573) 636-2751 or jrogers@miba.net. Registration is now open to all Member & Non-member vendors. MIBA EXHIBIT HALL TRADITIONALLY SELLS OUT BY JULY 1ST! The MIBA 46th Annual Convention & Expo will put you in front of a higher percentage of our CEOs and decision makers than many other trade shows. As an Association Member Exhibitor, remember you are also accorded one complimentary registration for the entire convention at no additional cost. If you have not received your copy, you can go online to www.miba.net, click on the Annual Convention link. The entire prospectus will be available to download and print, along with the application. Get your booth space request in ASAP as this exhibition hall always sells out!
MIBA LOBBYING Report Andy Arnold Arnold & Associates The 1st Regular Session of the 102nd Missouri General Assembly ended May 12 at 6 pm. As with past years, there was controversy in the Missouri Senate during the last week. This year’s blow-up came when House and Senate leadership pitted the passage of a controversial sports betting amendment against the passage of a bill that would have reduced personal property tax. The sports betting amendment was added to SB 92, a bill dealing with rural economic development investment and job creation, a blatant violation of Missouri’s constitutional provisions on bills containing a single subject and not being amended as to change their original purpose. So, rather than pass an unconstitutional law, SB 92 sponsor Senate Denny Hoskins decided to lay the bill over. Senate and House leadership responded by letting the personal property tax reduction legislation die, and the session ended. However, even with these shenanigans, MIBA did manage to assist in the passage of several bills. The following were Truly Agreed to And Finally Passed and await Governor Parson’s Approval: • SB 13, Senator Sandy Crawford’s bill that clarifies the responsibilities of the Division of Finance; • SB 63, Senator Steven Roberts bill that allows financial institutions to gain access to marijuana licensees applications for banking purposes; • SB 101, Senator Sandy Crawford’s bill relating to lender-placed insurance; and • SB 186, Senator Justin Brown’s bill that elevates the crime of stealing or damaging an automatic teller machine and gives financial institutions access to licensed marijuana sellers for banking purposes. As always, it is a pleasure working with MIBA to represent the interest of Missouri’s community banks with the members of the Missouri General Assembly. ■ Focus on what matters. Third-party research shows that JMARK clients enjoy 30 more discretionary hours a week than the average business leader! We solve IT problems before they start so technology distractions never keep you from making memories. People First. Technology Second. JMARK.com/Focus 12 | The Show-Me Banker Magazine
MISSOURI BANKER Meet Your Where are your main bank and branches located? What is the market like? Our headquarters is in Macon and we have a branch in Monroe City. Our market is a large mix of consumers, local businesses and farm operations. What is something unique about your bank? Our bank was started in 1893 by W.J. “Jett” Dearing and Frank Hayes. Jett rode on horseback to sell bank stock to area farmers. Those area farmers and business owners invested enough money at the bank to get its charter. We have never forgotten the local people and businesses that gave MA Bank their start. All these years later, we are still working hard for the communities we serve. Today, we have fifth-generation family members working at the bank in marketing and lending positions. We take great pride in our long local history of being a familyowned community bank. How did you get started in the banking business? My mother worked at MA Bank (formerly Macon-Atlanta State Bank) for 19 years. As graduation from graduate school was nearing, another employee told her there was a bank in St. Louis that was hiring where her son worked. Eventually, I made my way back to my hometown and now her son and I both work for MA Bank. What prompted you to continue the family tradition and join the bank? My mother had such a wonderful career working for MA Bank and made lifelong friends with both co-workers and customers that, when I decided to move back to this area, there was nowhere else that I wanted to work but here. What is the most important thing you’ve learned from this career so far? Everything comes down to relationships and being able to connect to customers in the way that best meets their needs. I feel that we do an awesome job of this with the variety of ways we interact with customers from online conversations to making home and farm visits. Tell us about the bank’s community investment efforts. MA Bank invests heavily in the communities they serve. The bank really strives to be a cornerstone of the local economy. Dollars invested in the bank are turned around and lent back out to local businesses, helping to keep our local economies strong. The bank also typically donates anywhere from $30,000 to $60,000 per year to local schools, community organizations and events. We are a very proud supporter of the communities we serve. What is the bank’s biggest challenge in the area of internet banking/mobile banking? We have partnered with Jack Henry to host our internet/mobile banking. We don’t shy away from technology and offer new banking options soon after they’re available to us. However, just like many other community banks, we struggle with cost vs. return. It’s expensive to keep up with cuttingedge technology, but something we must do to stay relevant and meet customer expectations. Many times, the cost of that technology is a true cost without the ability to get a return or pick up many new customers within a community bank footprint. What’s your favorite thing about your bank or banking in general? I really love getting to know our customers and learning about their businesses and occupations. We have a wide variety of business owners in our local communities that are integral to the success of this entire area. If you didn’t have a career in banking, what other career would you choose? I’ve wanted to own a bed and breakfast since I was in high school. I love the hospitality industry and think it would be a fun way to meet new people. ■ Jennifer Utter , Compliance Officer MA Bank 2023 Issue 3 | 13
LEGAL EAGLE SPOTLIGHT THE $2 BILLION ISSUE IN SVB FINANCIAL GROUP’S BANKRUPTCY That Could Impact the FDIC’s Special Assessment on Banks and Require a Bankruptcy Loan By Eric Van Horn, Spencer Fane, LLP The Silicon Valley Bank Financial Group (SVBFG) filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on March 17, 2023, exactly one week after the FDIC’s midday bank takeover. Tensions were high and sparks flew at the “first day” court hearings on March 21 about whether the FDIC should immediately turnover approximately $2 billion that SVBFG had on deposit with Silicon Valley Bank (SVB). Bondholders who were owed several billion dollars joined SVBFG’s demands for turnover, citing the future potential need for cash that could not be delayed. At that time, SVBFG had approximately $180 million and expected to spend about $100 million in the ordinary course. The resolution of this issue potentially impacts whether SVBFG must obtain a bankruptcy loan to operate in Chapter 11, as disclosed in a court hearing on April 26. It could also impact the amount of the special assessment fee the FDIC will be proposing to cover losses to its deposit insurance fund (DIF) after backstopping SVB and other recently failed banks (the FDIC’s proposal was expected in May 2023 and was not yet available at the time of submission). On April 26, the Bankruptcy Court directed the FDIC, as receiver for SVB (through FDIC-R), to file a statement “identifying specifically any Title 12 regulations on which the FDIC relies in exercising rights of setoff,” indicting the “authority” for its setoff right, and “any rules or regulations or authority upon which the FDIC relies in sweeping the parent’s funds...” The FDIC filed its statement on May 3, starting with a reminder that SVBFG, as a depositor, has nothing more than a “promise to pay” from SVB because its relationship with the bank is one of debtorcreditor, meaning SVB owned all of the deposits. Instead, SVBFG has a claim it may assert in the FDIC’s receivership case, a claim which SVBFG has not yet made in a claims process the FDIC states is “an exclusive process and core function of FDIC-R.” Any claim would be addressed through the receivership estate (including resolution of the amount) and to the extent deposit claims are not fully satisfied, “the FDIC will fully protect and satisfy any remaining amounts” under Title 12. Drawing an analogy to the bankruptcy code’s distribution process, the FDIC explained “[a]s in a Chapter 7 bankruptcy distribution scheme, however, claimants receive payment after the claims allowance process is completed, not before it starts.” In short, SVBFG will have to wait. The FDIC clarified that it did not “sweep” and is not “holding” any of SVBFG’s funds, stating that: “After the depositors ran on the bank, SVB lacked sufficient cash on hand to cover deposit demands. No segregated cash was allocated to SVBFG’s deposit claims among more than $100 billion other deposit claims SVB expected to be unable to fulfill on March 10, 2023. Although the FDIC approved additional funding under the systemic risk exception to protect SVB’s depositors, nothing that has transpired since March 10 altered the debtorcreditor relationship…” The FDIC claimed the receiver (FDIC-R) has a codified right to setoff under Title 12 § 1821(d) which it asserts has been recognized 14 | The Show-Me Banker Magazine
by courts as creating a federal statutory. It further argues that FDIC-R succeeds to all of SVB’s contractual rights, including setoff rights in the Deposit Agreement and Disclosure Statement-Business Accounts providing for setting off any “direct, indirect and/or acquired obligations that you owe us, regardless of the source of funds in the account, to the fullest extent permitted by law.” Importantly, the FDIC argues that § 1821(d)(2)(A) provides a common law right to setoff by providing the FDIC-R with the right to succeed to SVB’s claims or causes of action that it has against its parent, SVBFG. The claims FDIC-R may have against SVBFG would appear to include those related to the bank’s collapse, including the mismanagement alleged in the report issued by the Federal Reserve Board on April 23. Private parties have already asserted claims against SVB’s current or former directors and/or officers in seven putative securities class actions according to a motion filed on May 3 in the bankruptcy case to allow for advancement and payment of “The resolution of this issue potentially impacts whether SVBFG must obtain a bankruptcy loan to operate in Chapter 11, as disclosed in a court hearing on April 26.” defense costs as insureds under director & officer liability policies, which provide more than $200 million in coverage. This $2 billion issue does not appear to be getting resolved consensually anytime soon. The Bankruptcy Court may be asked to decide, which could lead to a dispute over whether it has jurisdiction in light of the FDIC arguing that the claims resolution process under Title 12 is exclusive. This issue will be one of many that arises in SVBFG’s bankruptcy case that is worth banks and their management to be aware of while providing a glimpse into the interplay between the FDIC’s receivership and SVBFG’s Chapter 11 case. ■ Spencer Fane partner Eric Van Horn assists clients nationwide with all aspects of bankruptcy, restructurings, reorganizations, negotiations, collection actions, multijurisdictional insolvencies, corporate liquidations, and bankruptcy litigation. He can be reached at 214.459.5895 and ericvanhorn@spencerfane.com. 2023 Issue 3 | 15
A BACKGROUND ON Jim Anderson PRESIDENT AND CEO OF BANK NORTHWEST James (Jim) Anderson was born to Tom and Virginia Anderson in Hannibal, MO, but was raised in Philadelphia, MO. He has two sisters and a brother — all registered nurses. He attended Hannibal-LaGrange University in Hannibal, MO, Truman State University (formerly Northeast Missouri State University) in Kirksville, MO, and Carl Sandburg College – Knox College in Galesburg, IL, with studies in business and finance. He has also taken courses from Dun & Bradstreet to learn more about the business world and data analytics. Jim and his wife, Kimberly, were married for 32 years before she, unfortunately, passed away two years ago. Their passion was to travel, so they visited over 100 countries over the course of their time together. They have a daughter, Renee Anderson, who lives and currently works in Hamilton, MO, at Bank Northwest as EVP, CFO, and COO. To this day, Jim still enjoys traveling in addition to working on his farm located in Caldwell County. When it comes to supporting charitable organizations, Jim is on the board of directors of the Missouri Veterans Home in Cameron, MO. At home, veterans are given excellent food and living accommodations in addition to 24-hour medical care, skilled nursing care, social services, pastoral services, and recreational, physical, and rehabilitative therapy. The Board helps provide vans that are specially equipped to transport their special guests to any appointments or outings in a safe and secure manner. The Board also helps raise money to ensure the guests have the means to live as full of life as possible because funding is limited by the State of Missouri and the federal government. By The Missouri Independent Bankers Association MIBA had the chance to sit down with Jim Anderson to discuss his journey in banking, how he became the President and CEO of Bank Northwest and the benefits of MIBA membership. We enjoyed talking with Jim and hope you enjoy learning about him as much as we did. 16 | The Show-Me Banker Magazine
Since Jim is a first-generation banker, his interest in banking is not attributed to anyone from his family but to a banker in Lewiston, MO. He was selling livestock at a young age and had gone to the bank to deposit his money. Mr. Bub Gnuse happened to be behind the teller’s line when Jim asked where they were going to keep his money. Mr. Gnuse asked Jim to come behind the counter to show him the vault where the money would be kept. “He made the mistake of telling me that I could come by at any time I wanted to check on my money — I am sure he regretted those comments later on,” Jim said. In 1975, he started his banking career with the Bank of America in Illinois. From there, he left Galesburg and went to work at the Commerce Bank in Kahoka, MO. He was with Commerce Bank for eight years before he moved to Edina, MO, to work for Citizens Bank of Edina as the President. Jim is currently the President and CEO of Bank Northwest in Hamilton, MO, and has had the privilege of working in the community for approximately 30 years. When asked about his favorite work experiences, Jim said, “One of my greatest memories is when I was asked to help build a jail to house federal prisoners.” The government was looking for a place to house both immigrants and federal prisoners; the terms they were offering were very beneficial for the county. He was able to put together a lease purchase program for the county. The jail continues to make a lot of money for the county and has provided a number of jobs for many years. Jim said the most rewarding part of his career has been “Working with our customers and community — hopefully helping both grow and prosper.” Most of all, for him, it’s about making lasting memories for customers, their families, and the community. When asked about the benefits of MIBA membership, Jim said, “I believe that the leadership of MIBA has the interest of not only our community banks at heart, but most of all, our customers.” In the end, it’s the customers that need a strong banking atmosphere that allows community banks to compete with larger institutions. MIBA provides a strong representation at both the state and federal levels. Jim continued, “In my opinion, the community bank is the heartbeat of our communities.” Jim’s mentors were Dean Phillips, Larry Kelly and Dick Kelly, the owners of Citizens Bank of Edina. He commented that “Mr. Dean Phillips was the most intelligent banker and businessman I have ever known. Mr. Phillips always believed in the importance of staying with the basics of banking.” Larry Kelly’s common sense and belief not only in the people but making sure their banks’ safety and soundness were always strong. In addition, he always wanted to make sure the banks took care of their employees. Mr. Dick Kelly wanted every customer to be treated like a King or Queen. These three had such diverse backgrounds and instilled values of the strength of community banks that I still believe in today. If Jim was to mentor someone and offered two recommendations based on his experience in the banking industry, they would be: 1. Always remember why your bank was given a charter to be a financial institution and remember the responsibility to your customers and community. 2. Stay with the basics of banking! It is easy to find shortcuts to try to find ways to make decisions. “I am thankful each day that I am allowed to do what I love. I hope that each individual that gets into banking for a career sees it more than a job, but an actual commitment to our industry,” Jim reflected. “In summary, as bankers, we have one of the greatest privileges to work in an industry that can not only support our communities but provide a better way of life for many. I have always been proud to be involved in our industry and will always be thankful for that opportunity,” Jim said. ■ “I am thankful each day that I am allowed to do what I love. I hope that each individual that gets into banking for a career sees it more than a job, but an actual commitment to our industry.” 2023 Issue 3 | 17
PRICE STABILITY OR YIELD? HERE’S BOTH Cash-Management Instruments Have Relative Value Today By Jim Reber, ICBA Securities “What if?” How many times and how many ways has a conversation like this begun with a community banker? Borrower: What if you hold the title on my 1979 Ford Pinto as additional collateral? Auditor: What if your held-to-maturity bonds go further underwater? Loan officer: What if we put a 6% cap on this floater? Stockholder: What if you bought my 25 shares at three times book? Depositor: What if you pay me an extra five basis points on my $5,000 CD? Examiner: What if the Treasury defaults on its debt? What if you could purchase a full faith and credit instrument that pays monthly principal and interest, adjusts each quarter based on prime with no caps, has little or no prepayment risk and out-yields the 10-year Treasury by 100 basis points (1.0%)? 7(a) Loans: Highly Valued All of the above qualities currently exist in a Small Business Administration (SBA) 7(a) loan pool. These have long been the choice of investors looking for additional yield on the very shortest end of the maturity spectrum. Most 7(a) pools adjust with the calendar quarter, although there are some monthly adjusters available. They also have no rate caps, either periodic or lifetime, so when we endure a year like 2022 when fed funds rose 425 basis points (4.25%), these floaters went up lockstep. All these factors make SBA securities the most rate-sensitive of any in the market. There has been a lucrative two-way market for SBA pools for at least 30 years. Community bank lenders like the ability to make loans to qualifying borrowers that don’t quite fit the standard parameters. They also like the ability to sell the guaranteed portions of the loans (usually 75%) and retain the servicing and the relationship. And they especially like selling them at big premiums. At the start of 2023, the balance on outstanding 7(a) pools was over $38 billion, which was a high water mark for the agency. Around four out of 10 loans originated are sold into the secondary market to a variety of SBA poolers. Response to Demand To a community bank investor, the rub with the pools has historically been the high purchase prices. Risk-averse portfolio managers covet all of the characteristics of a 7(a) pool, except for the premiums. While there are ways to manage those prepayment exposures, there’s no getting around the fact that an instrument that costs 110 cents on the dollar or more, that can prepay at any time, contains risk. In response, there are SBA securities being issued and available at prices very near par. As part of the pooling process, certain amounts of the loan rates can be stripped off for alternative uses, leaving just enough coupon pass-through on a given bond to result in a market price between, say, 99.50 and 100.50. Price Stability You may have heard that the yield curve is inverted. (It’s not exactly news — it’s been that way since last June.) This is a concrete example of the good news/bad news environment in which community banks invest. The positive is that short-term bonds yield out-yield longer-term bonds, so today you don’t have to extend your maturities for reasonable returns. The negative is that an inverted curve is usually followed by a secular drop in rates, especially on the short end. True floaters, like SBA 7(a)s, will be the first to see their yields fall. However, it’s totally uncertain that any rate-cutting will happen in the near future. Macro indicators like GDP, employment and inflation aren’t pointing to recessions anytime soon. And though the current level of fed funds is approaching the normal stop-out point in a rate hike cycle, maybe we’re in for a period of stable rates. “Higher for longer” is the mantra of some rate hawks in 2023. If so, then the current yields on these 7(a) pools are quite handsome. It’s not too difficult to achieve a return of around prime minus 270 basis points which, as of this writing, equates to a true yield of over 5%. Where’s the value in that? For starters, the 10-year Treasury note has averaged about 3.70% this year. For closers, these par-level bonds have virtually no prepayment risk and very little price risk, are pledgable and produce monthly cash flow. They also can be great items to sell if and when a community bank decides it needs to extend its duration. What if you committed a portion of your securities portfolio to investing in SBA 7(a) pools? ■ Jim Reber (jreber@icbasecurities.com) is President and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. 18 | The Show-Me Banker Magazine
forvis.com/financial-services ASSURANCE / TAX / ADVISORY FOR unmatched industry insight, VISion matters FORVIS is a trademark of FORVIS, LLP, registration of which is pending with the U.S. Patent and Trademark Office. FORward VISion counts We applaud that the dreams you finance begin with a vision of making a positive impact in the communities you serve. Our vision is helping make yours a reality. Whether you’re looking to stay compliant, manage risk, or grow strategically, our forward-thinking professionals can help you prepare for what’s next. FORVIS—created by the merger of equals between BKD and DHG—has the enhanced capabilities of an expanded national platform and deepened industry intelligence to help your bank better navigate the financial services landscape and capitalize on your vision with interest.
Creating Compelling Content For Your Financial Institution By forbinfi 20 | The Show-Me Banker Magazine
Content is the key to any successful marketing strategy for community banks and credit unions. But what does effective content marketing look like? Simply having pages on your bank’s website describing the products and services you offer isn’t enough. So, how can you use different content pieces to effectively market yourself to better connect with new and existing customers? Embrace a diverse content approach. Content Type What It Is When You Should Use It Blog Article A long-form piece of content focused on a specific topic designed to engage with users on a deeper level. Blogs are versatile content pieces that can be used to go in depth on a wide range of topics, including money management, highlighting new products, and general financial advice. Info Graphic A visual representation of content to simplify complex information that is designed to be easily shareable. Any time you have a lot of data that can be made easier to read by adding photos or other visuals. Info graphics can be used on anything from annual report summaries to step-by-step guides to help your customers complete online applications. Comparison Chart A table that allows a user to compare similar products and services for easy consumption. Comparison charts are a great option for doing side-by-side comparisons of deposit accounts or loan products to highlight everything from a brief description to fees and rates. Video A short clip of no longer than five minutes. Videos are ideal to demonstrating step-by-step processes, especially for online and mobile banking services to show how your users can take full advantage of those services. Direct Mail Piece A marketing or informational piece of content mailed directly to an existing or prospective customer. Direct mail pieces are a great way to highlight new products and services throughout your bank’s market. If possible, using variable data printing to customize each direct mail piece as much as possible for each recipient can drastically improve response rates. Need help creating compelling content? We can be a helping hand! Contact Bailey Ronnebaum at baileyr@forbinfi.com. ■ 2023 Issue 3 | 21
NEWS From You Hawthorn Bancshares, Inc. (NASDAQ: HWBK) and its subsidiary Hawthorn Bank announced that Brent Giles was named CEO of both entities effective May 1, 2023. Also for both entities, Gregg Bexten, currently Regional President of the bank’s Central Region, will assume the role of President while current Chairman, President and CEO David Turner will remain on as Executive Chairman. “It is my pleasure to welcome Brent Giles to the Hawthorn Bank leadership team. Brent’s extensive experience and proven leadership will be an incredible asset to shareholders, customers and employees,” said Turner. Giles brings 34 years of banking experience, most recently as President and CEO of Bank of Blue Valley, a $1.4 billion bank based in Overland Park, Kansas. Giles served as Chairman and Chief Executive Officer of Liberty Bancorp, Inc. and BankLiberty from 2003 until its sale in 2019. During that time, Giles took the company public, growing the bank through a mix of acquisitions and organic growth to become one of the nation’s top-performing community banks. “Hawthorn Bank has a long, storied history of supporting its customers and communities through true relationship banking,” said Giles. “I’m honored to step into the CEO role and very excited to work with the talented leadership team at Hawthorn Bank. Mr. Turner and his team have built a tremendous foundation and franchise that is primed for continued growth and expansion.” “We also look forward to Gregg Bexten’s expanded leadership as we continue building on our many solid relationships with local businesses and individuals in the communities we serve,” Turner added. Bexten has been with Hawthorn Bank since 1998 and brings over 30 years of commercial banking experience to his new role. Giles and Bexten will both join the Hawthorn Bancshares and Hawthorn Bank Boards of Directors. ■ New CEO and New President Announced for Hawthorn Bancshares, Inc. and Hawthorn Bank MRV Banks Promotes Heather Jokerst to Senior Compliance Officer MRV Banks has announced that Heather Jokerst has been promoted to Senior Compliance Officer. “Heather has shown an incredible work ethic and is very deserving of this promotion,” said Chief Lending Officer Rob Lawrence. “She has proven herself to be a knowledgeable team player for the bank. I know she will do a great job as Senior Compliance Officer.” Jokerst started with MRV Banks in 2019 as a Loan Processor. In July 2020, she moved to a position in Compliance. As MRV Bank’s Senior Compliance Officer, Jokerst will help ensure that the bank’s practices align with state and federal regulations. “I have witnessed the professional growth of Heather at MRV Banks and I believe she will continue to excel in her new role,” said Chief Technology Officer Dan Wyatt. “The most rewarding part of my job is doing my part in contributing to the overall success of the bank,” said Jokerst. “The bank has had exponential growth in recent years. It’s exciting to be a part of it.” Jokerst received her bachelor’s in business administration from Maryville University in 2007. She became a Certified Community Bank Compliance Officer in 2021. She has been married to her husband for seven years and they have three daughters. Jokerst said she is passionate about her family and her career. ■ 22 | The Show-Me Banker Magazine
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