The Annual Shareholder meeting was held at the Quail Creek Golf and Country Club on Friday, March 24th, where we announced the newly elected members of Bankers Bancorp Board of Directors, Chris Rector and John Robin. Get to know them below! Chris Rector CLO, Regional President Firstar Bank | Tulsa, OK Chris Rector is the Chief Lending Officer and Regional President for Firstar Bank based in Sallisaw, Oklahoma. He also sits on Firstar’s board and has been a shareholder since 2020. Rector has 23 years of lending experience. He holds a Bachelor’s Degree in Business Management from Oral Roberts University and is a graduate of both ABA’s National Commercial Lending School and OBA’s Consumer and Commercial Lending School. Outside of serving the local banking community, Rector is involved with the Teachers Retirement System of Oklahoma; he is a Chair for the Investment Committee and was nominated by Governor Kevin Stitt to serve as a Trustee. He is also an owner/partner of a small plumbing company and proud father to two daughters, Raegan and Morgan. John Robin EVP, Head of Lending Sooner State Bank | Tuttle, OK John Robin is the Executive Vice President and Head of Lending at Sooner State Bank in Tuttle, Oklahoma. Robin is a graduate of the University of Oklahoma and the Graduate School of Banking, Colorado. In addition, he has attended numerous schools through the Oklahoma Bankers Association and has over 30 years of banking experience. He is very involved with various civic and professional groups and has held many leadership rolls including both President and Treasurer of the Northwest Oklahoma City Rotary, Chairman of the OBA’s Commercial Lending School, Instructor of Junior Achievement in Oklahoma City, Board Member of the Edmond Soccer Club and Metropolitan Area Development Corporation, Member of both OBA’s Government Relations and Fraud Council, and Instructor for several OBA schools.

Malinda Rickel and I just returned from the annual NACHA conference. We have not attended for the last couple of years, so this one felt like it was bigger and better than any other. While the focus was certainly on Faster Payments, there were a variety of sessions to keep us busy! And you will be delighted to learn the ACH network is still alive and well and growing. In 2022, there were 30 billion ACH transactions totaling $76.7 trillion. Possibilities for ACH in the future include a new processing window that will align with close of business in Pacific time; Additional ACH distributions on weekends and Holidays that will include settlement and funds availability, and increased dollar limits on transactions. No time frames for any of those enhancements, just a peek into the future. One of the announcements you may have seen recently is the Federal Reserve’s move to a Seven Day Accounting structure that will be effective June 12, 2023. Banks who have subscribed to the Federal Reserve Account Management Information service (AMI) may want to do some testing, but that is not necessary for others. This change is in preparation for the launch of FedNow in July of 2023. This change will not significantly impact you until you begin participating in FedNow. If you need more information on this process, there is a Resource Center on the frbservices.org website. The Bankers Bank is continuing to prepare for the FedNow launch and we find there is still confusion about how this service will work and what steps your bank needs to take to participate, either at launch or later. One of the most important pieces of the puzzle is how your bank will receive/send transactions. Many core providers are developing a solution for their users. If you have interest in FedNow and have not discussed this with your core, you should start there. If you would like to discuss the product and the role that The Bankers Bank has in this project, please call.

Each year The Bankers Bank sends a handful of employees to the Oklahoma Bankers Association Annual Convention. The event is always chock-full of education and camaraderie, but this year was extra special for a few select staff members. Kas Stewart, Amanda Martin and Courtney McDaniel were all recognized for their hard work and success in banking and they took some fancy hardware home with them! TBB is very proud to have them on the team. We know our customers appreciate them and their dedication, friendship and knowledge. Kas Stewart SVP/Calling Officer Kas Stewart was inducted into the Oklahoma Bankers Association “50 Year Club” and honored for her years of service to the banking industry. What an accomplishment! She started her banking career with the Federal Reserve but The Bankers Bank is proud to have called her their own for 18 years. Kas is loved and respected by bankers throughout the state of Oklahoma; some might say she knows everything and everyone related to banking. She encourages the next generation to find a job they love so that they never have to work a day in their life. Kas lives in Oklahoma City, Oklahoma with her husband, Mike, and their sweet pup, Mable. She spends her days on the road as a Calling Officer, bringing her knowledge and expertise to customers from Boise City to Idabel and everywhere inbetween. Kas and Mike love cars, especially fast ones. Both have been involved in drag racing as owner, participant, pit crew or spectator since the 60’s. Their car of choice is a top fuel dragster. They also enjoy Formula 1 and Hot Rod Reunions. Amanda Martin AVP/Calling Officer Congratulations to Amanda Martin for graduating from the Oklahoma Bankers Association Emerging Leaders Academy. Amanda has been a “Road Warrior” at The Bankers Bank for three and a half years and has made her way through several OBA schools during that time including both the Operations and Intermediate Schools. Amanda has a background in marketing for financial institutions and has worked hard to understand the banking operations side of things since joining TBB. Amanda is a proud mom to nine-month-old Graham. Her husband, Cole, is also a banker and the three of them live in Oklahoma City, Oklahoma, with their two extra-large and fluffy dogs, Chloe and Kylo. Amanda serves on both her neighborhood association board and the Community Bankers Association of Oklahoma’s Horizon Bankers board. By day, Amanda loves building relationships with bankers across Oklahoma as a Calling Officer. By night, she enjoys fitness, travel near and far, hiking and family time. Courtney McDaniel Card Services Accounting Clerk Courtney McDaniel graduated from the Oklahoma Bankers Association Emerging Leaders Academy – way to go, Courtney! She is a rockstar employee at The Bankers Bank who always goes above and beyond. She dedicates time and energy to her job as well as many extra-curricular activities at the bank including social committees, volunteer groups, party planning and more. Courtney has worked at TBB for six and a half years and has spent time in both the lending department and the credit card department. With all that experience, her future with TBB is bright. Courtney lives in Yukon, Oklahoma, with her husband, Jake, their daughter, Madison, and a herd of dogs and cats! She is a board member for her local fire department (of which her husband is a volunteer fire fighter) and enjoys spending time with family and going to concerts when she is out of the office.

FedNow moves closer to implementation every day and The Bankers Bank continues to participate in testing and preparation. Here are some things we know: FedNow is a new and innovative product that could provide a competitive advantage and create a new revenue source for your financial institution. Your financial institution can participate directly with the Federal Reserve or through your existing correspondent relationship with The Bankers Bank. FedNow is a good funds model with immediate settlement and immediate funds availability. FedNow is credit only, domestic only, final, and irrevocable payment. Your financial institution has options for participation. You may receive only, send and receive, or you may choose not to participate. FedNow uses ISO20022, a global standard messaging format. This is not ACH, not wire transfer and not a card rail. FedNow is a 24/7/365 product but that does not mean you need staff available for monitoring. All payment types will be supported: A2A; P2P; B2B; C2B; B2C. Rules and Regulations are available; Regulation E; Regulation J (amended); Federal Reserve Operating Circulars 1, 5 and 8; UCC4A. Resources for training and education are available on the Federal Reserve site. What could/should you be doing to prepare? Do you have a payment strategy? Are Instant Payments a part of that strategy? The Fed has announced pricing, have you considered what you will charge? The Federal Reserve has established a value limit for their service. Have you determined the maximum value your financial institution will allow to be sent in one transaction? Are you or your customers still writing checks? Could the bill paying process be improved with FedNow? Can you identify use cases or customers who would take advantage of a new and faster payment system? How would Instant Payments affect your cash flow? Has your core provider reached out to you? Still feel like you lack some key information? Check out the FedNow Service Readiness Guide. It is very comprehensive and while it reviews much of what you already know, you will find a section dedicated to Technology Planning; Treasury Operations Planning; Liquidity Management; Information Security and even a Sample of the Activity Report the Fed will provide. OR Call The Bankers Bank!

As we welcome 2023, I am first happy to report that 2022 was another incredible year for TBB and our subsidiaries, BPSI and FIT. At the Bank, our net income was over $3,000,000 and our ROA was 1.46% (compared to less than 1.0% by our peer group). It was one of the best years in the bank’s history. As a quasi co-op, we are excited to be able to turn these profits into dividends to our shareholders as well as use towards research and development to give our customer banks the tools to keep up with the “Too Big To Fail” banks. The credit goes to our customers and our staff. We have dedicated employees and subject matter experts who work hard to support our community banks. We know that we succeed when our customers succeed. So, what does that mean for 2023? As my old football coach would say, “We’re going back to the basics and focus on blocking and tackling.” Instead of trying to do everything, we are going to emphasize our core offerings that really impact our community banks. Those items include: 1. Managing your excess liquidity. 2. Helping your bank take care of your best customers with loans and other products. 3. Aggregating our customers to help drive better terms from vendors. 4. Being subject matter experts on issues you care about like payments, technology, etc. We will be improving our current products, like iWeb and offering new services like FedNow and SBA loan packaging. Our affiliates, Forward in Technology and Bankers Professional Services are taking the same approach as well. I encourage you to talk to us about your needs. We can’t help you unless you tell us what you need. Helping community banks is our mission. Sincerely, Troy Appling, President & CEO

Much has been written about the staggering level of unrealized losses in community bank securities portfolios triggered by the rapid rise in interest rates in 2022. Tangible capital ratios fell to low single digits or even negative due to these losses being recorded in the banks’ capital accounts as “other comprehensive income” (bypassing the income statement). At the end of the third quarter 2022, the average loss, as a percentage of the investment portfolio book value, was 13.6% for all US community banks (assets less than $1.5 billion) and 10.6% and 12.4% for Oklahoma and Texas banks, respectively, based on banks’ call report filings. Oklahoma banks have about 25% of their assets in the securities portfolio (same as the US bank average) while Texas banks have about 29% of their assets in bonds. The first glaring issue caused by the losses relates to capital adequacy concerns. The losses are excluded from the calculation of Tier 1 regulatory capital, but there could be peripheral issues or examiner concerns relating to liquidity risk, interest rate/market risk, or even the management component of the CAMELS rating. A number of bankers have expressed concern about examiners requiring approval of dividends or distributions due to the low equity ratios. These banks’ concerns are not unfounded. Banks with large unrealized losses should re-assess their enterprise risk management assessments, their capital plans, their liquidity and funding strategies, and their balance sheet cash flows. They should share these with their boards and their primary regulators to demonstrate a thorough understanding of these issues and how they intend to manage these risks over the next two to three years. The losses in the bond portfolio will persist until interest rates decline heading into 2024. Interest rates could decline by 200 to 300 basis points before unrealized losses on legacy holdings have been erased. This, in essence, means you have used or consumed that much of your capital to support your bank’s market and liquidity risk, resulting in less remaining capital for credit risk in the loan portfolio. This compels bankers to be very good at identifying, quantifying, reporting, and managing credit risk in loans. At this time, we just don’t have the capital capacity to take big loan losses! With interest rates having risen by 4 percent and a slowing economy, this is a real risk. The greatest concern I have in 2023, relating to the high level of portfolio losses, is liquidity risk. Even without regard to these bond losses, liquidity risk has increased significantly for banks due largely to retail, public and corporate depositors moving funds into money market funds outside of banks as they seek higher returns. Additionally, strong loan demand in the first half of 2022, and throughout the year, has put further pressure on liquidity. Managing liquidity risk must be based on thorough cash flow analysis of the entire balance sheet including building a foundation of rock-solid cash flow from the securities portfolio. It has been reported that the levels of FHLB advances and Fed Funds purchased are at multi year highs. Quantitative tightening by the Federal Reserve has slowly drained liquidity from the banking system affecting the biggest banks first but eventually impacting community banks. Banks having large investment portfolios should in theory have an easier time meeting their liquidity needs. If, however, those banks have the majority of their bonds in long duration instruments they now have sizeable losses in virtually all of their holdings. Remember, to be liquid you must have cash on hand, have the ability to access cash or convert an asset to cash without excessive cost or loss. It can’t be prohibitively expensive. As of this writing, the Fed Funds target rate is 200 basis points higher than at any point in the past 15 years. The average yield on Fed funds was 82 basis points (upper bound). And for 10 of those 15 years, the range for the Federal Reserve’s Fed Funds target rate was 0 to 25 basis points. For the same 15-year period (2008 through 2023), the average yield on the 10-year US Treasury note was below 2.50%. During the same 15-year period, the yield spreads for some Treasury alternatives (MBS, CMO’s and corporates) were exceptionally narrow and began to widen in 2022, putting further pressure on prices. Why do I offer this perspective? It is important to recognize that very few, if any, of our securities holdings today have gains. Almost every bond I own, I own at a loss. Nonetheless, I suggest you run a filter in your bond accounting or portfolio analytic platform to sort all your securities holdings overall and by sector by loss – smallest to biggest loss. I would identify which securities, if any, I could sell without realizing an inordinate loss that could disrupt my earnings and Tier 1 capital growth. I would confirm my borrowing facilities with counterparties – fed funds lines, FHLB advances, brokered CD lines and other sources. It has been widely discussed that the FHLB’s regulator, the Federal Housing Finance Agency, will not allow the eleven FHLB’s to lend to banks with negative tangible capital (the unrealized bond losses exceed equity). I’m afraid that liquidity and funding challenges will be more serious than many banks realize. Please remember that the first and most important goal of a securities portfolio is to be a tool to help manage liquidity risk. The second goal is to assist in managing interest rate risk, and thirdly earnings. Yield is third! Never forget that. Determine how much latitude you have for taking bond losses or using wholesale borrowings based on your 2023 budget and business plan without creating excessive earnings disruption. And when it comes to understanding risk in your portfolio please don’t forget about optionality, measured by negative convexity. Many fixed income analysts focus primarily on duration risk. Duration IS an important (maybe the most important) tool to manage market risk in a bond portfolio. But securities with embedded options (MBS, CMO’s) and explicit options (callable agencies) can trigger an increase in duration and acceleration in the level of losses as rates rise. This is measured in part by a metric referred to as “stressed duration.” Please understand this concept and use convexity! So, to reiterate: • Take liquidity risk seriously • Review your liquidity, funding policies and strategies, and update as necessary • Update your investment portfolio strategy • Update your ERM report for integrated assessment of all financial and operating risks • Update your capital plan • Communicate with your board and primary examiner(s) • Test your borrowing facilities • Communicate to your customer personnel, contact your deposit pricing and customer retention goals and latitude on rates paid for each market you serve • Stratify your bond holdings by size of loss by sector • If you decide to sell bonds always get a minimum of two and preferably three bids • Ensure bond swaps proposed by brokers benefit the bank more than the broker Lastly, three thoughts to remember: Patience, Discipline and Simplicity. Today’s economic uncertainty and market volatility demand that we reduce risk not exacerbate it – that we sharpen our focus on our bank’s liquidity. A bank’s bond portfolio is not to be managed like a hedge fund. The theme you hear today in business media is “Risk Off.” Remain Tactical and strategic when evaluating proposed swaps increasing duration. There will be a time for extending duration and adding optionality or credit risk to your portfolio. While that time may be nearing, for most institutions, I don’t believe today is that time. This is a time for risk off and preserving liquidity. I wish everyone God’s peace and richest blessings throughout 2023.

We are fresh off the TBB Road Shows and I was so glad to see so many friends. We hosted almost 200 people in five cities and discussed new iWeb features, faster payments, cyber security, cryptocurrency, and capital lending alternatives. Importantly we learned what we do well and what we can improve upon. If we missed you, please let us know what we can do better and what services you would like to see from your correspondent bank. For 2022, the good news is that things are shaping up for another excellent year. TBB continues to provide exceptional products and services with efficiency. The bad news is we are looking at a lot of the same things you are like margin compression, increased costs and competition, inflation, and a possible recession. First, we can use your help. If you have a loan you need to participate, or have capital needs, come see us first. We will never be your competition! Second, we need to invest more in our products, services and people. As a result, we will continue to evaluate our pricing, but do not worry. As a quasi-cooperative we will always look to balance a sustainable business model with tremendous customer value. Most of our customers are also our shareholders so we will always make your bottom line a priority. Thank you for all that you do with us! Sincerely, Troy Appling, President & CEO

Bankers Bancorp Annual Shareholder Meeting  Friday, March 24, 2023 The Bankers Bank Golf Classic Monday, June 12, 2023

According to research firms, subordinated debt offerings by bank holding companies (BHCs) have grown significantly in the past few years. There appear to be two main drivers of this trend. First, low interest rates made high dollar issuances with longer terms more appealing. Second, in 2018, the asset threshold to qualify for the Small Bank Holding Company Policy Statement was raised from $1 billion in consolidated assets to $3 billion. When BHCs meet the criteria for the Policy, certain incentives are created, such as the ability to finance up to 75% of the purchase price of an acquisition. It is interesting, and perhaps counterintuitive, that regulators appear favorable of subordinated debt. In fact, since the mid- 1980s there have been at least 14 proposals to require large banking organizations to regularly issue subordinated debt on the open market. The main reason for this is that subordinated debt poses less of a risk to the insurance deposit fund. Subordinated debt is inferior to all other creditors, including depositors. As such, in the event of a failure, the subordinated debt is eliminated along with the shareholders, but there is more capital in the institution from said debt. Thus, regulators do not need to worry about the claims made by subordinated debt holders in a liquidation. Compared to issuing new shares, issuing subordinated debt can be an attractive tool to raise capital. For example, issuing subordinated debt will not dilute current shareholders’ interest, and interest payments on subordinated debt are tax deductible. With that said, subordinated debt may not be available to BHCs struggling financially, as there will be less demand for their debt. Compared to a bank stock loan, there can be a benefit to either depending upon your needs. Some benefits of a bank stock loan are that they are more negotiable, fees are typically much lower, interest payments are also tax deductible, and there is no prepayment penalty. Subordinated debt may also look more favorable at the outset; however, as noted by the FDIC, “subordinated debt is often issued at a fixed rate for the first five years before converting to a variable coupon rate. Therefore, if interest rates rise over the instrument’s life, servicing costs may increase.” In order to qualify as subordinated debt, the transaction must contain certain features such as: Be subordinated to depositors and general creditors; Not be covered by a guarantee or subject condition that improves the seniority of the instrument; Have a minimum original maturity of at least five years; and, Must not have any terms or features that create significant incentives for the banking organization to redeem the issuance prior to maturity. So, if an organization is looking to carry debt for a long period of time and assume risks with long-term interest rates, then subordinated debt can be an attractive option to finance growth or an acquisition. If the organization wants to prioritize the ability to pay down debt quickly and take less risk on long-term rates and upfront fees, then a bank stock loan might be the better option. I would be remiss if I did not conclude by mentioning that TBB can accommodate both bank stock loans and subordinated debt offerings. Bank stock loans have been a primary product for TBB to help institutions and individual investors for decades. We also have an ownership interest in First Bankers Bank Securities, Inc. which can help broker subordinated debt transactions. Make sure to let us know if you are interested in either product. We are happy to work through the options.

Thank you to everyone who took the time to join The Bankers Bank on our 2022 Road Show Tour! It was great to see and visit with those of you who were able to attend. If you could not be with us in person, we missed you. We shared a lot of information both on iWeb and some industry topics. If you would like to review what you heard or see what we discussed, the slide show from those events has now been  posted on our website . A white paper on Multifactor Authentication can also be found there. A good part of the meeting related to iWeb, both current applications and future enhancements. Please feel free to call if you have questions on any of the material. We will be recording an internal presentation and will make that available to you also. If you have not logged on to our website lately, we have made some changes. Each person needs to register individually and set up your own logon ID and password. Once your information has been reviewed, you will receive an email letting you know you have full access. You may have seen some information from the Fed that showed the Fedwire Funds message format would be changed on November 21, 2022. This change to ISO20022 was announced earlier in the year, but implementation was delayed. The Bankers Bank is testing and preparing for this new message format, but there will be minimal, if any, impact to your bank. This change supports cross border interoperability and is specific to field tag {8200}, Unstructured Addenda information. This change will add field tag {8200} to bank transfer and cover payment options. That field tag is already being used in customers transfers. Beginning this year, the Federal Reserve is permanently discontinuing holiday special currency ordering periods. The Reserve Banks are paying out new currency in all denominations throughout the year. If your institution needs new currency for the holiday season, Fed recommends setting aside new notes as you receive them.

Beginning the second quarter of 2023, the Security Code List for call-in wires will no longer be mailed. TBB is moving to electronic delivery. Although most use call-in wires as a contingency, keep in mind that when you need it, you need it. To facilitate this change, new documents must be completed by March of 2023. Please contact Laura Coale, lcoale@tbb.bank or call (405) 848-8877 and just ask for Laura.

We loved seeing each of you at the TBB Road Shows during August, September and October. It was great to share information and hear your suggestions. Thank you for attending! Program materials available  here . The TBB Team in Krebs