2023 ANNUAL Convention & Expo 2023 ISSUE 4
800-347-4MIB mibanc.com MEMBER FDIC Ever since I met Chris Bryan, I have been impressed with how professional & knowledgeable he is in his work for MIB. Chris knows what MIB can do for Banks and he knows what he can do for your Bank. He brings energy and enthusiasm to everything he is associated with. Chris has the “IT” factor and he makes everyone around him better. He is who you would want on your team and he makes the MIB team better. Chris Bryan with customer Brock Nuckolls of Rock Port, Missouri WHY ? Lending Services Operational Services Audit Services* MEMBER FDIC Audit Services are offered thru MIB Banc Services, LLC, a subsidiary of our holding company. * We are very fortunate to have Andrew Lee with MIB as a trusted partner in these ever-changing times. MIB has the technology and experience to lead us into the future. The electronic banking site is easy to navigate; and the friendly, knowledgeable staff are always there to assist at any time. It is important to feel secure with the people you do business with and MIB has proven that over the numerous years we have done business together. Curt Brumley, President/CEO Community Point Bank Russellville, MO 800-347-4MIB mibanc.com Andrew Lee with customer Curt Brumley of Russellville, Missouri MEMBER FDIC Brock Nuckolls, President/CEO Citizens Bank and Trust of Rock Port
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INSIDE THIS ISSUE 16 24 28 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 Successful Management and Operation 8. Flourish 9. From the Top 10. A View From the Capitol 12. MIBA Lobbying Report 13. Meet Your Missouri Banker Jennifer Marantz, SVP, Director of Corporate Communications Bank of Springfield (BOS) 14. Legal Eagle Spotlight Know Your Alternatives: Common Non-Bankruptcy Alternatives in Troubled Loans 16. A Background On John Denkler President & CEO, First State Bancshares and CoVice Chairman, First State Community Bank 18. The Cove 46th Annual Golf Tournament 19. 2023 Annual Convention & Expo MADE IN THE USA 21. Thank You To Our Early Convention Sponsors 22. Value Added High Baseline Yields Accompany Surprisingly Wide Spreads 24. Multi-Factor Authentication How Having a Layered Defense for Your Bank Can Help to Combat Cyber Threats 27. 2023 MIBA PAC Honor Roll 27. New Associate Members 28. Adopting a Holistic FRAML Approach To Fight Financial Crime 29. MIBA 33rd Annual Scholarship Auction 30. 3 Stages To Unlock a People-First Work Culture 32. News From You 36. 2023 MIBA Financial Directories Are Available 37. MIBA Upcoming Events 37. 14th Annual Security Conference 38. Upcoming Webinar Schedule 4 | The Show-Me Banker Magazine
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PRESIDENT’S MESSAGE @tmbender Tyler Bender MIBA President Midwest Regional Bank Clayton, MO “In today’s rapidly evolving financial landscape, the success of a bank hinges on the effective management and seamless operations it employs.” In today’s rapidly evolving financial landscape, the success of a bank hinges on the effective management and seamless operations it employs. The senior leadership of any financial institution plays a crucial role in driving growth, innovation and customer satisfaction. Visionary Leadership At the helm of every successful bank is a team of visionary leaders who inspire and guide their organizations toward a shared purpose. Senior leaders possess the ability to set strategic goals, navigate challenges and adapt to changing market dynamics. By fostering a culture of collaboration, accountability and innovation, these leaders empower their teams to deliver exceptional results. Robust Risk Management Bank management involves navigating an ever-increasing array of risks, from credit and market risks to cybersecurity threats and regulatory compliance. Effective senior leadership establishes a robust risk management framework that safeguards the bank’s interests and ensures the protection of its stakeholders. By implementing proactive risk identification, assessment and mitigation strategies, leaders create a resilient institution that can weather storms and thrive in challenging times. Customer-Centric Focus Successful banks place the needs of their customers at the core of their operations. Senior leadership plays a pivotal role in driving a customer-centric culture, where employees are empowered to exceed expectations and deliver personalized solutions. By leveraging data analytics and technology, banks can gain valuable insights into customer preferences, enabling them to tailor products and services to meet evolving demands. This customercentric approach builds trust, fosters loyalty and fuels sustainable growth. Embracing Technological Advancements In today’s digital age, banks must embrace technological advancements to stay competitive. Senior leadership should champion the adoption of cutting-edge technologies such as artificial intelligence, machine learning and automation. These technologies streamline operations, enhance efficiency and enable banks to provide seamless digital experiences to their customers. By leveraging technology, banks can also unlock vast amounts of data, leading to more informed decision-making and improved risk management. Talent Development and Empowerment Senior leaders must prioritize talent development and empowerment to build highperforming teams. By investing in training and development programs, leaders equip employees with the necessary skills and knowledge to excel in their roles. Furthermore, fostering a culture of trust, open communication, and inclusivity empowers employees to contribute their unique perspectives and ideas. When employees feel valued and supported, they become brand ambassadors, driving customer satisfaction and organizational success. Successful Management and Operation 6 | The Show-Me Banker Magazine
Strong Governance and Ethical Standards Maintaining strong governance and upholding ethical standards are non-negotiables for effective bank management. Senior leaders must ensure adherence to regulatory requirements, promote transparency and implement rigorous controls to mitigate risks associated with financial crimes, corruption and conflicts of interest. By setting the tone at the top and leading by example, leaders foster a culture of integrity, safeguarding the reputation and trust of the bank. Effective bank management and operations are fundamental to achieving long-term success in the financial industry. Strong senior leadership provides the vision, guidance and support necessary to navigate complexities, drive innovation and deliver exceptional customer experiences. By embracing a customer-centric approach, leveraging technology and nurturing talent, banks can position themselves as trusted partners in their customers’ financial journeys. The relentless pursuit of excellence in bank management and operations ensures that financial institutions remain agile, resilient, and prepared to thrive in an ever-changing landscape. Opportunity for Growth If learning about the latest in effective management and having seamless operations is your thing, then join us at the Annual MIBA Convention, running September 11-13 at the Lodge of Four Seasons in Lake Ozark, Missouri. It is the must-attend event for any community banker. Sign up yourself or someone from your team today. Also, don’t forget the next generation of bankers on your staff. There is plenty of enlightening material that everyone will benefit from! ■ Connect with Tyler on Twitter at @tmbender. The Show-Me Banker Magazine | 7
FLOURISH “Community banks … commit for the long haul as a true partner, helping customers withstand market turbulence and come out successfully on the other side.” Rebeca Romero Rainey ICBA President and CEO @romerorainey A s we recently celebrated Independence Day, I can’t help but reflect on the vital role community banks serve throughout this country. We represent Main Street America, creating a firm financial foundation for our nation’s consumers, small businesses, municipalities, local governments and more. It’s a position community banks take seriously, and one we are honored to hold on behalf of the communities we serve. When we think about the current economic environment, without a doubt, we can say that we’ve weathered this storm before. That’s what makes us unique: we are there for our customers regardless of the economic situation. Megabanks and credit unions nationwide are cutting back on balance sheet areas to tighten their bottom lines, while community banks stand ready to support local businesses and neighbors who are feeling the heightened effects of the ebbs and flows of the economy. Just look at how community banks responded to the global pandemic: by introducing tools and solutions to support small businesses in the Paycheck Protection Program (PPP). Or consider the consistent, forward-looking care community banks apply to their unique community base. From seasonal businesses and service-based and manufacturing organizations to a wide array of other models, community banks tailor their offerings to the needs of individual customers. That’s because community banks don’t just look to today’s returns; they commit for the long haul as a true partner, helping customers withstand market turbulence and come out successfully on the other side. It’s precisely in an environment like the one we have today that community banks flourish because they double down on relationship banking. That connectionbased approach to finance becomes even more important in difficult economic times, because, above all, a community bank’s goal is to make a difference in the financial lives of those they serve. So, as you read this issue, notice that our top lenders share one key attribute: a commitment to the customer relationship. They are helping their customers prepare for a wide variety of economic scenarios in ways that are best suited to that business or person. It’s about helping their customers make the right decisions for their financial lives and supporting them as they go. I’m proud to say that for nearly 250 years, community banks have served at the center of our nation’s finances. That’s because, to put a spin on the well-known John F. Kennedy Jr. quote, community banks ask not what their community can do for them, but what they can do for their community. And that’s a business model that will stand the test of time. ■ Where I’ll Be This Month I’ll be attending our summer board meeting, looking forward to planning for the future of this independent industry we represent. 8 | The Show-Me Banker Magazine
Community bankers are so much more than financial providers; we are leaders who strive to use our strengths to do what’s right for our customers and communities. To them, we are advisors, partners and friends, and sometimes that means our actions need to be as much about what we don’t do as what we do. Take lending. While we certainly always consider the underwriting principles that have been proven over the years, we are committed to providing our customers with the best chance of success. In some cases, that means helping them consider alternatives, sharing financial education and offering more options. For instance, I’ve had to turn down customers for loans they thought they wanted, only to have them come back later and thank me for saying no. They realized that they would have struggled with that burden, and they appreciated that I had their best interests at heart. It isn’t always a perfect science, but I do my best to give my customers the help they need when they need it. I’m not alone in this. As community bankers, we share these common values. We don’t want to see a business or a customer fail, not only because of our relationship with them but also because we want the best for our communities. I’m sure we can all share stories about those borrowers we’ve supported who came to us seeking refinancing for an online loan that wasn’t right for them at all. Yet, that’s why we do what we do: shore up the best chance for success for those we serve and help them realize their dreams, not get buried under the weight of them. We do this because, for community banks, lending is so much more than a profit center. By helping our customers grow and thrive, we help our communities do the same. These are the same communities in which we live, work, worship, play and raise our families. By supporting the people and businesses we know and understand, we are supporting our employees and our shareholders, and making our communities better places to live. As you read this month’s issue, I hope you’ll think about the times you’ve made a difference in your customers’ lives, both when you’ve made loans and when you’ve encouraged other approaches. It speaks to the heart of what we do as bankers: We provide the counsel that helps our customers continue to thrive. And that’s the hallmark of a true leader. ■ FROM THE TOP Derek Williams ICBA Chairman President and CEO of Century Bank & Trust Quote of the Month “A good leader is a person who takes a little more than his share of the blame and a little less than his share of the credit.” Arnold Glasow, Humorist and Businessman “By supporting the people and businesses we know and understand, we are supporting our employees and our shareholders, and making our communities better places to live.” The Show-Me Banker Magazine | 9
Congressman Blaine Luetkemeyer Missouri’s 3rd Congressional District A VIEW FROM THE CAPITOL Environmental, social, and governance (ESG) policies remain very present in corporate America, with companies giving in to pressure from progressive investors and policymakers to get on board with things like climate initiatives and other social policies that have nothing to do with the company or its practices. Corporate boardrooms have become political platforms for extreme ideology. As I’ve said several times in the past, advancing political agendas at the expense of American investors paying into their retirement or savings is unacceptable. Considering all the issues there are with ESG, combatting these radical proposals and policies has been high on our priority list at the House Financial Services Committee this summer. Recently, we had a full committee hearing on the ramifications of ESG on American investors and financial regulation. One of our hearing witnesses, Lawrence Cunningham, has built his reputation on being a trusted industry voice on corporate governance, culture and law. In response to my questions, Mr. Cunningham replied, “It’s commonly said that following ESG practices is good for the long-term economic interests of a company or of a fund, but the empirical evidence doesn’t support that assertion …” I couldn’t agree more, and it seems that some of ESG’s earliest disciples are being forced to acknowledge that truth. BlackRock CEO Larry Fink commented in June that he was “ashamed” to be part of the ESG political debate and is no longer using the term. Vanguard has pulled out of its net zero climate effort for more “independence” in helping its customers find returns. While it’s clear that I have serious issues with the many shortcomings of ESG investing, there is another issue at hand. The hypocrisy of many in corporate America who preach social and environmental responsibility while continuing to do business with the Chinese Communist Party is staggering. China has the largest carbon footprint on Earth and openly utilizes forced labor to manufacture the products these “socially conscious” companies sell around the world. This is another problem that I’m working on in my capacity as the Chairman of the Subcommittee on National Security, Illicit Finance, International Financial Institutions and a member of the Select Committee on the CCP. I, unfortunately, have no doubt that ESG will continue to be an issue the financial services industry must grapple with for the foreseeable future, and we are working to combat these misguided policies in various ways here in Congress. Together with my colleague Congressman Bill Huizenga (MI-02), we introduced the House version of the Investor Democracy is Expected (INDEX) Act. This bill will empower American investors who are currently at the mercy of investment advisers. The INDEX Act requires investment advisors of passively-managed funds to vote proxies in accordance with the instructions of fund investors — not at the discretion of the adviser. Senator Dan Sullivan (R-AK) introduced the Senate version, and we are working in a bicameral fashion to advance this bill soon. While combatting ESG is going to certainly take more than one piece of legislation, this bill is a good start and allows investors who want a voice to have one. While we certainly have our work cut out for us with the prevalence of ESG policies, my House Financial Services Committee colleagues and I will continue working to find ways to put an end to the unethical ESG practices and pressures that are turning corporate America into political campaigns. ■ “As I’ve said several times in the past, advancing political agendas at the expense of American investors paying into their retirement or savings is unacceptable.” 10 | The Show-Me Banker Magazine
11 hours of Economics and Finance CPE credits will be earned for your attendance. Member: FINRA and SIPC www.GoBaker.com | 800.937.2257 Oklahoma City, OK | Austin, TX | Dallas, TX Long Island, NY | Salt Lake City, UT | Springfield, IL Interest Rate Risk and Investment Strategies Seminar October 18-20 2023 | Oklahoma City, OK The Skirvin Hotel AGENDA Wednesday, October 18 Twin Hills Golf 1:00 pm Thursday, October 19 Breakfast 7:30 am Seminar 8:30 am Lunch 12:00 pm Adjourn 4:00 pm Cocktails/Dinner 6:00 pm (come and go) Friday, October 20 Breakfast 7:30 am Seminar 8:30 am Conclusion 12:00 pm WHO SHOULD ATTEND Financial institutions’ CEOs, CFOs, investment officers, board members, and those who are directly or indirectly responsible for financial management functions will benefit from this seminar. There is no cost for this seminar. ACCOMMODATIONS A block of rooms is available at The Skirvin Hotel. Identify yourself as a Baker Seminar attendee (or group code TBG3) when calling +1 (800) HILTONS. The special room rate will be available until September 16, 2023 or until the room block is sold out. Hotel price: $159 + fees/tax. For your convenience, register for the seminar online at GoBaker.com/oklahoma-seminar. Call Skoshi Heron at 888.990.0010 for more information. The Skirvin Hotel One Park Avenue Oklahoma City, OK 73102 405.272.3040 OCT The Baker Advantage In 2020, the global COVID pandemic set into motion a series of historically unprecedented economic policies that upended markets and financial institutions, as well as the global economy itself. Massive amounts of liquidity and stimulus by policymakers enabled a fast recovery, but financial institutions found themselves awash in excess liquidity needing to be put to work at historic lows in yield. With time, the explosion of reserves also triggered an inflationary impulse unlike anything seen in decades. The Fed has been scrambling to get back in front of events and regain control of inflation ever since. The resulting rate hikes and monetary policy tightening have been unprecedented in both speed and magnitude. Portfolio managers now find themselves with scarce liquidity and deep unrealized losses, not because of poor management or asset quality, but simply because of the enormous swing in liquidity. This seminar will examine the challenges now faced by CEOs, CFOs, and investment officers who must navigate the next phase of these uncharted waters. Join us for an in-depth discussion of the following topics: • Economic and Market Update — Review of current economic conditions and the outlook for growth, inflation, and interest rates • The Fed’s Next Moves — Update on the rate outlook and likely next steps for Federal Reserve monetary policy • Interest Rate Risk — How to ensure you are prepared for uncertain balance sheet challenges and a constantly changing regulatory focus • Liquidity Risk Management — Tools and best practices for managing liquidity risk • Investment Portfolio Strategies — Adapting your strategy and finding the best relative value for the rate environment • MBS/CMO Market — Balancing prepayment and extension risk in a changing environment for mortgage securities • Municipal Market Update — Thoughts and strategies on managing municipal credit risk and finding the best relative value
MIBA LOBBYING Report Andy Arnold Arnold & Associates With summer in full swing and the 2023 Missouri Legislative Session in the books, we turn our attention to 2024 statewide and legislative races. All of the Missouri House seats are up, and 17 of the 34 Senate seats are up in 2024. In the House, 21 of the 163 seats up in 2023 will be open seats due to term limits in 2024. In the Senate, six of the 17 seats up in 2024 will be open due to term limits. At least one other Senate seat will be up in 2024 as Senator Holly Rehder-Thompson, who is eligible to run for re-election has announced her intentions to run for Lt. Governor. So, we are beginning to vet announced candidates for the state Senate and House, a process that seems to never end. As for the state-wide races in 2024, the Governor, Lt. Governor, Secretary of State, Treasurer and Attorney General are up, and we expect primaries on both the Democrat and Republican sides in each race. ■ 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? BOS was founded in Springfield, IL, in 1965 and has 14 branches in Illinois and Missouri. In 2014, we opened our first Missouri office in Brentwood, MO, which moved to Clayton, MO, in the spring of 2020. This location serves as our first Missouri full-service banking center. We added our second Missouri full-service branch in O’Fallon, MO, in 2021 and a loan production office in Liberty, MO, in 2022. Our Missouri branches are all in urban areas while still being in close proximity to our ag customers. What is something unique about your bank? BOS is excited by and embraces change. Whether it’s listening and learning from our customers, investing in new technology or growing our products and services, our employees and management team are always open to discussion and exchanging ideas. How did you get started in the banking business? I was born into it! I started interning at the bank when I was 16. My first job was entering data into Microsoft Access and cutting out bank advertisements from our local newspapers. What prompted you to continue the family tradition and join the bank? I have two distinct memories that brought me back to banking. The first was during an internship I had in Washington, D.C., while I was an undergrad. While interning for the Education and Labor Committee, I realized there was only one business I cared enough about to spend my career supporting. Then when I graduated as an undergrad, I worked for a family business for a short time — just long enough to realize that if I was going to work with any family, it was going to be my family. What is the most important thing you’ve learned from this career so far? The people I work with would probably answer patience. I think I have to answer it with perspective. Perspective is one of those things that you can only get by actively searching it out and acknowledging your differences. Our communities are vibrant and welcoming but also face many challenges. Perspective allows for more empathy which helps me better lead and serve our employees and customers. It’s something I work on every day and make a conscious effort to keep. Tell us about the bank’s community investment efforts. Community investment has always been a cornerstone of BOS’s mission. Our main focuses are supporting education, teaching financial literacy and encouraging employee volunteerism. What is the bank’s biggest challenge in the area of internet banking/mobile banking? Keeping our customers and their money safe online is becoming increasingly difficult. We’ve spent the last year focusing on fraud education through customer emails, social media, podcast episodes, radio remotes and educating our staff on steps they can take to help protect our customers. What’s your favorite thing about your bank or banking in general? I never have the same day twice. Whether it’s my interactions with customers or a new problem to be solved, community banking keeps me on my toes. If you didn’t have a career in banking, what other career would you choose? I’ve always wanted to own an activity shack on the beach. Banana boat rides for everyone! ■ Jennifer Marantz, SVP, Director of Corporate Communications Bank of Springfield (BOS) The Show-Me Banker Magazine | 13
While many lenders are familiar with dealing with troubled loans once they are in bankruptcy, there are a variety of non-bankruptcy alternatives that a lender should be aware of as part of its loan enforcement toolbox. Depending upon the circumstances, bankruptcy alternatives can provide a lower-cost alternative to formal bankruptcy proceedings with greater control, flexibility and speed. This article highlights three common types of bankruptcy alternatives. Forbearance and Composition Agreements When faced with a loan default, one of the first options a lender should consider is a forbearance agreement. A forbearance agreement is an agreement between a lender and the borrower that delays loan enforcement, subject to certain conditions being satisfied. Common terms in forbearance agreements include ratification of the debt, release of claims, a collateral liquidation plan, payment schedules, performance benchmarks and tolling provisions. A well-drafted forbearance agreement establishes the new rules of the road for the relationship and provides both the borrower and lender some sense of certainty as they attempt to navigate a troubled loan. Forbearance agreements are going to be most common between borrowers and secured lenders, especially where the borrower needs the lender’s collateral to operate its business. A composition agreement is similar to a forbearance agreement but generally involves an agreement between several of the borrower’s unsecured creditors. The borrower will make a proposal to its creditor body asking that, in exchange for accepting a one-time payment or a series of payments, the creditor will accept less than the total amount due to it. Such a proposal should be accompanied by financial disclosures such that the creditor can evaluate whether the proposal makes economic sense versus a more aggressive debt enforcement strategy such as receivership or involuntary bankruptcy. Composition agreements generally involve a borrower’s unsecured creditors and treat such creditors in a similar fashion. Composition agreements work best when the borrower has a small and known creditor pool. The benefit of a composition agreement is that it may ultimately maximize the amount a creditor receives because the distribution pool will not be burdened with the same administrative overhead of a more formal insolvency proceeding. At the same time, the creditor will also not incur the same loan enforcement costs in terms of both money and time. Receivership A receivership is either a state or federal proceeding where a thirdparty neutral, i.e. a “receiver,” is appointed by a court to oversee the preservation, operation and/or liquidation of specific assets or an entire going concern operation. In 2016, Missouri enacted the Missouri Commercial Receivership Act (MCRA), which is a comprehensive statute related to commercial receiverships. MCRA covers a wide range of receivership topics including the qualifications of the receiver, the liquidation of property and the handling of claims. The complexity of a receivership can vary in degree as can the specific powers and duties of a receiver. While most states, like Missouri, and the federal rules have some provision for receivership, the controlling document will generally be the receivership order. In a lender-sponsored receivership, the lender will want to make sure certain provisions are contained within the receivership order including consent and notice rights, reporting obligations, debt repayment and how the receiver and its professionals will be compensated. A receivership can be an effective way for a lender to gain a measure of control over its collateral, especially when dealing with a troubled or fraudulent borrower. This is especially true for those lenders who cannot invoke the involuntary provisions of the Bankruptcy Code. As a caveat, however, the lender should recognize that a receiver acts as an arm of the appointing court and not as an agent of the lender. Thus, while in many cases, their interests will be aligned, a lender should recognize the receiver’s independence. Further, while in many cases the costs of the receivership can be paid for from receivership assets, the sponsoring lender should be prepared to back-stop any operating deficiencies, including fees and expenses, of the receivership. LEGAL EAGLE SPOTLIGHT KNOW YOUR ALTERNATIVES Common Non-Bankruptcy Alternatives in Troubled Loans By Eric L. Johnson, Spencer Fane, LLP 14 | The Show-Me Banker Magazine
“A lender, however, should not rule out a bankruptcy alternative as it may provide a speedier and less costly solution to a troubled situation.” Assignment for the Benefit of Creditors An Assignment for the Benefit of Creditors (ABC) is a process where the borrower’s assets are transferred to a third-party neutral known as an “assignee.” The assignee then carries out the liquidation of the assets and administers a claims process. It is very similar to a Chapter 7 bankruptcy but without the same formal structure and oversight. An ABC is a creature of state law and the amount of court oversight and regulation varies from state to state. Missouri has both statutory and common law ABCs. Common law ABCs have little to no court oversight. Whether statutory or common law, the operative document in an ABC is the assignment agreement. The assignment will often times specify the various duties of the assignee. Additionally, an ABC does not necessarily prevent litigation going forward against the assigning entity and can serve as a basis for an involuntary bankruptcy. To the extent collateral is involved, the assignee will often work with the lender, including getting the use of cash collateral. One of the primary benefits of an ABC is that it allows for a more flexible liquidation of assets that may not be possible in a bankruptcy or receivership liquidation. Conclusion While not all of the bankruptcy alternatives will be a good fit for a particular situation, the lender should consider its options and balance the various benefits and risks of each for a particular situation. Indeed, bankruptcy proceedings may still remain the best option. A lender, however, should not rule out a bankruptcy alternative as it may provide a speedier and less costly solution to a troubled situation. ■ Spencer Fane attorney Eric Johnson is the co-practice group leader for the Banking and Financial Services Group and practice group leader for the Bankruptcy, Restructuring, and Creditors’ Rights Group. He can be reached at ejohnson@spencerfane.com. CAUGHT YOU LOOKIN’! CONTACT US TODAY! 801.676.9722 sales@thenewslinkgroup.com Your Customers Are Too. Advertising Space Available. QR Code: website /#ad-space The Show-Me Banker Magazine | 15
A BACKGROUND ON John Denkler President & CEO, First State Bancshares and Co-Vice Chairman, First State Community Bank By The Missouri Independent Bankers Association MIBA recently sat down with John Denkler and got to know more about him, his career and his thoughts on the industry. We would like to thank John for his time and hope you enjoy getting to know him as much as we did. The following are excerpts from our conversation. J ohn has been in the banking industry for 40 years. John and his wife, Kris, have four children and six rambunctious grandchildren. When he isn’t working, he enjoys being outdoors. Every year, he looks forward to hunting during deer and turkey season and has recently started to get back into fishing. He was born in Hannibal, Missouri, where many of his relatives and grandparents lived. At the age of five, he moved just a few hours south to Jefferson City, Missouri. John spent much time during his youth going back to Hannibal to help his grandfather on his dairy farm. John fondly remembers a few of the lessons he learned from his grandfather, “He taught me how to milk a cow, and I also learned what it means to be kicked by a cow and thrown up against the side of the barn.” His father also farmed part-time, and John mused, “Farming is in my blood.” When deciding what career would be best for him, he had a real desire to be involved with and help the ag/farming community. John always had a knack for numbers and was good at managing money. Having spent time with his grandfather and seeing the different challenges that farmers faced, he knew that the best way he could help his family was to get a degree that helped farmers from the financing side. John attended college at Missouri State University, formerly Southwest Missouri State University, located in Springfield, Missouri. He received an ag business degree with a minor in Banking and Finance. That led him to his first job, working for Farm Credit in the Springfield, MO, area. He learned a lot there because, at the time, A recent successful St. Francois County deer hunt. Grand Giveaway Program: We awarded a $50,000 prize to one of our long term customers. She has been a customer for over 30 years starting as a Junior saver. 16 | The Show-Me Banker Magazine
the country was right in the middle of the 1980s farm crisis. “It was a real baptism by fire, as they say,” John recalled, “learning and understanding what was going on, why it happened and doing my best to help farmers.” After that experience, John wanted to shift focus. “I was looking for a potential career change with what was happening at that point, and I knew that I liked lending and banking aspect and thought a great way to get experience would be to be a bank examiner,” he said. John went to work for the state of Missouri, Division of Finance as a bank examiner. It was a great experience, and after five years, he jumped at the opportunity to work for First State Community Bank, at that time known as First State Bank of Farmington. At the time, the bank was growing and had just made a couple of acquisitions and were looking to augment its team. They brought John in to help with loan reviews and loan administration. He went from that position to being the Chief Lending Officer and was in that role for 22 years. He then migrated to the Chief Operations Officer and then up to the President and CEO of First State Bancshares. John attributes his leadership style to his mentor Bill Cooper, who was the Chairman of the bank when he first started. One of the most important lessons that Bill taught him was that everyone is important. Bill would often say, “Every one of us is no less important than I am to this organization. The janitor is no less important because they’re the person that creates the first impression of our organization; the teller makes an impression on our customers day in and day out. Egos need to get checked at the door if you’re going to keep your company moving forward.” When asked about the challenges facing the community banking industry right now, John said that “Our biggest challenge right now is making sure that we continue to be the entity that is handling the payments for our customers.” He continued, “When I look at it from the banking standpoint, financial institutions of this country have been the ones in control of the payments. We help facilitate those payments for a business, for people, for everything back and forth, and that is under fire right now.” John knows that banks have got to stay on top of what’s happening with payments and keep pushing the industry to protect the bank’s position because it plays to the fundamentals of how the industry has been built. “We can do our lending, but if we don’t have payments, we need to figure out a whole different way to fund that lending and how we’re going to make money doing that lending. Another aspect John is focused on for financial institutions and particularly community banks, is to remain relevant to existing and future customers. He believes that customer relationships are important going forward, but it must be married with technology. Helping the community is important to John. Each year, the bank sets funds aside and picks out different local organizations to help with their Impact Project. “We’ve done everything from buying backpacks of supplies for school children to providing lunches for the needy,” John said. This is one of his favorite work experiences. Outside of work, John and his family support many charities, including the Red Cross, Knights of Columbus, St. Vincent de Paul Food Pantry and the Southeast Missouri Food Bank. Additionally, each year they helped provide Christmas presents for the underprivileged through St Francois County Community Partnership. In addition to making a donation, John gets his grandchildren involved in shopping and picking out gifts to be donated. It has become a special family tradition. Membership with MIBA and ICBA is important to John. Personally, John has been involved with MIBA for almost 20 years and the bank for even longer. When asked about the benefits of membership, John said that there are many. The relationships made with other bankers who have similar mindsets are invaluable, and shared insights into the industry are helpful. “I have not come from a meeting yet where I have not gained some insight that has helped my bank grow,” John said. When John mentors others, he offers this advice: 1. Do an assessment of yourself. Know and understand the why behind what you do. What is that that drives you to get up and go every day? Knowing why you’re doing your work serves two fundamentally important purposes: it motivates you, and it orients you 2. Always remain open and eager to learn and grow. Remain inquisitive about life, wanting to find out how things work and what makes it work. If you’re not growing, you’re going backward, and the world will pass you by. 3. Don’t let yourself get consumed by any one aspect. You’ve got to have a balance in your personal life and career for you to have the best, most fulfilled life. In closing, John expressed the need to change perceptions about the banking industry, particularly with younger individuals who have this vision of banking being stodgy and outdated. “We’ve had an intern program that started about five years ago at our bank for college-age students. A number of them have mentioned that they never thought about banking as a career,” John said. After interning, the students realized that there are a lot of cool things happening and many challenges as well, but banking is an extremely rewarding career path. “Recruiting new talent is vital for the survival of our communities in rural and non-metro areas of our country. How well would your community be doing if the community banks were not located there? What would it be like? That is a pretty sobering thought,” he said. ■ First State Community Bank team during my first year with the bank Farmington Country Days Community Celebration Farmington High School Homecoming Parade The Show-Me Banker Magazine | 17
On Monday, September 11th, MIBA will hold it's 46th Annual Convention Golf Tournament at THE COVE, A Robert Trent Jones Sr. Signature Golf Course. The Tournament tees off at 10:00 am. Entry fee per person is $160- Includes 2 mulligans, breakfast with Bloody Mary & Mimosa Bar, lunch, refreshments, cart and green fees. You must be a fully registered convention attendee or exhibitor to participate in the tournament. The Cove
2023 Annual Convention & Expo September 11-13, 2023 The Lodge of Four Seasons, Lake Ozark, MO Monday Golf Tournament, Opening Expo Reception & Rooftop Rendezvous Tuesday General Session, Expo, Scholarship Auction & President’s Dinner Wednesday Closing Session Join Us For An Exciting Line-up of Speakers and Events This Year! The Show-Me Banker Magazine | 19
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. September 11-13, 2023 - There are still a few booth spaces available but they are going fast! 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!
CONVENTION SPONSORS Thank You to Our Early The Show-Me Banker Magazine | 21
If your responsibilities include your community bank’s bond portfolio, you’ve been confounded by several elements of its performance in the last 18 months. To the extent your portfolio has mortgage-backed securities (MBS) and government agency bonds, and the clear majority of all bonds owned by banks are in these two categories, they’ve certainly lost value since 2022. It is easy enough to put the “blame” on the Fed’s Federal Open Market Committee (FOMC), which as of this writing has taken overnight rates up fully 500 basis points (5%) since March of last year. However, something else has occurred in period that’s contributed to the decline in bond prices: Yield spreads have actually widened during this time frame, which is highly unusual for a rising rate scenario. It has aggravated the market losses in community bank portfolios, which stood at around 8% as of June 30. About one-fifth of the market losses can be attributed to spread widening. What’s going on here? Maybe it’s time to review why spreads widen and tighten, and why the various bond market sectors behave differently. If we can conclude with the notion that there are some opportunities for long-term benefit for your bank, all the better. Spread Basics First, a refresher on “spreads” in this context. It is the incremental yield for a collection of bonds, over and above the benchmarks. The benchmarks are comparable maturity Treasuries, which are presumed to be riskfree. (We don’t have time here to revisit the recent elaborate game of chicken over the debt ceiling. Notice I said “elaborate” and not “elegant.”) Incremental spreads on bonds will tend to widen as rates fall, as lower yields accompany an economy that is losing momentum. This slowdown brings with it a higher likelihood of debt service problems, so lenders, including bond investors, ask for additional yield protection. In 2023, there’s no slowdown, yet, and so the FOMC has now hiked overnight rates to their highest levels in 15 years in its quest to get inflation under control. And still, spreads are wider in virtually all bond sectors, so something different is in play. One factor is the Fed’s posturing related to its own balance sheet. Currently, the Fed is removing $95 billion per month from its own Treasury inventory. It has reserved the right to actually shed some of its $2.5 trillion MBS portfolio, but hasn’t yet. Another difference this time around is the well-documented decline in excess liquidity on bank balance sheets, which I hasten to add is not the same thing as deposit runoff. Globally, the banking sector has gone from too much uninvested cash, to probably about right. Again, this has removed some demand from the fixed-income markets as the banking sector has purchased very few bonds in 2023. Some Sectors Are Not Like Others The callable agency market gives us a good example of how spreads are historically wide. Way back in 2021 (hyperbole), a bond that matured in three years and could be called in a year (“3/1 callable” in bond-speak) would have had a stated rate of interest of around 0.50%, which was about 10 measly basis points (0.10%) over the curve. Today, the “coupon” for the same bond would be around 5.50%, which has a full 1% spread over the three-year Treasury. Similarly, popular mortgage securities have improved yields and spreads today over just a few months ago. A staple of community bank portfolios is a 15-year MBS issued by Fannie Mae or Freddie Mac. A “current coupon” pool has right at a 5% yield to maturity, again around 1% over the Treasury curve. A year ago? A current coupon would have been about 3.5%, and its spread around half of today’s. Act Now; Thank You It’s time to speak into the microphone and state that things can get worse before they get better. Which is to say, Treasury yields, and spreads, can continue to gap higher and wider before coming back in line. The Fed sure doesn’t sound like it’s finished with tightening, and even though banks are making use of wholesale funding sources to maintain liquidity levels, banks aren’t likely to become deluged with excess cash in the near future. Nonetheless, we have a baseline of yields (Treasury curve) that is at a 15-year high, coupled with spreads that are nearly unprecedented for this stage of the rate cycle. This causes me to suggest that your portfolio will thank you later for bonds you purchase in mid-2023. If more yield is considered good, then it’s summertime, and the livin’ is easy. ■ Jim Reber is president and CEO of ICBA Securities, ICBA’s institutional, fixedincome broker-dealer for community banks. He can be reached at jreber@icbasecurities.com. VALUE ADDED High Baseline Yields Accompany Surprisingly Wide Spreads By Jim Reber, President and CEO, ICBA Securities 22 | The Show-Me Banker Magazine
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MULTI-FACTOR AUTHENTICATION How Having a Layered Defense for Your Bank Can Help to Combat Cyber Threats By Mike Gilmore, Chief Compliance Officer, RESULTS Technology As a leader and decision-maker at your bank, you know that technology is a double-edged sword. It helps you work effectively, learn more about your customers, and make better decisions. But the online world also has the potential to destroy a business you’ve worked so hard to build. We live in a digital world — there’s no way to run a business without technology. So, the only option is to protect yourself as best as you can. One of the most effective ways to do this is with multi-factor authentication (MFA). You’ve probably heard about it before, and if you’re tired of hearing about it, don’t leave just yet! We’re going to debunk the common complaints about MFA and explain why it’s the single most important thing you could do for your bank’s security today. “But It Adds an Extra Step to All My Applications.” The biggest complaint with multi-factor authentication is that it bogs people down. You open up your email; you have to put in a code. If you want to access a document in Google Drive; you have to open an app and request a “token” (a number) to key in. While it may add a few seconds to your day, not implementing MFA could get you in legal trouble. The Federal Trade Commission recently updated the Safeguards Rule, which “requires financial institutions under FTC jurisdiction to have measures in place to keep customer information secure.” MFA is one of those measures. In addition, the Federal Deposit Insurance Corporation (FDIC) strongly recommends MFA as well as a Managed Service Provider (MSP) that is experienced with banks and the special security needs that they require. And if that wasn’t enough to convince you, most cyber insurance requires the use of MFA. Luckily, a good MSP knows how to properly implement MFA to make it fast, easy, and secure. To get the security benefits of MFA without excessive inconvenience, there are strategies you can use. At RESULTS Technology, we recommend using push notifications. This way, you won’t have to wait or search for a code; it simply pops up on your screen with the option of remembering your device for 90-180 days. This takes away the constant code inputting and time drag. Is It Really That Effective? Yes, But Nothing Is Foolproof! When MFA was first gaining steam, Microsoft claimed it could stop 99.99% of data breaches. But like most things, especially when it’s concerning cybersecurity for banks, cybercriminals quickly got to work finding ways around it. So while you can’t have a near-perfect guarantee, MFA is still highly effective. Many bank employees may think that the biggest cybersecurity risk comes from a customer’s account being hacked or from someone accessing the bank’s main data frame. But hackers aren’t interested in those hard-toreach targets. Instead, they might find an employee’s email login information and, without MFA, make it into their account. But that’s not their target — your employee’s compromised account is just the Trojan horse. With the credibility of an employee’s account, they’ll send emails to coworkers and customers. Once they have an email address and password, the attacker can eavesdrop on your email accounts. With the credibility of your employee’s account, they can quietly collect private data from your customers or internal staff for months without detection. Through this process, they can request private information, rewire payments to go into their own account or infect thousands of more computers with a phishing email. The possibilities are endless when it comes to social engineering. If they’re successful, your bank will risk everything from lost income due to reputational damage — in the age 24 | The Show-Me Banker Magazine
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