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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

On October 25th, five banks in Oklahoma joined together to provide education and a strong focus on fraud and cybersecurity to both local small businesses and the senior members of their communities. “Fight Cyber-Crime with your Bank” was developed by staff from all four banks in Alva and the bank in Hopeton. This extraordinary collaboration among five competing banks, demonstrates the impact that local banks can have on their customers and their towns. The events were held in two venues in Alva and Jeff Story (The Bankers Bank) and Andrew Johansen (Forward in Technology) led in two discussions. During the afternoon discussion, small business owners met to “Snack and Share” about cyber security and other concerns. Business attendees ranged from construction to grocery, accounting to quality ice sellers, and more. They covered topics like malware, multi-factor authentication, and back up. The evening event, “Dine and Discuss” focused on technology related fraud directed to the over 65 crowd of about 100 community members. The event began with videos about true fraud incidents and was followed by an hour of presenting and discussion conducted by Story and Johansen. Beginning with statistical data from the FBI Internet Crimes Complaint Center, they explored the impact and complaints about fraud and what types of fraud have been reported. Good security practices and password safety instigated questions from the crowd about password managers and social media scams. An AARP representative and bank employees followed up with additional expertise pertinent to those in attendance. These community banks exemplified what it means to be a leader. We exist in a time of rapid change in both finance and technology. Many changes are unknown or misunderstood by a large percentage of the population. Community institutions like schools, chambers of commerce, local banks (especially in the rural communities) and libraries are uniquely positioned to inform, educate, and promote financial and digital safety to small businesses and residents. We applaud these five banks for putting on this great event and for creating an awareness of the value of customer education, especially in fraud and cyber security which impacts banks, communities, and individuals. Andrew Johansen presenting at the event.

The Bankers Bank’s 33rd Annual Golf Classic was held Monday, June 13th at Oak Tree Golf and Country Club. Although the weather was warmer than it has been for many of our past tournaments, everyone seemed to enjoy their time on the course as well as visiting with friends and colleagues. Thank you to all the players and a special thanks to our sponsors. We could not have such a successful event without all involved. Mark your calendars to join us on June 12, 2023 for our 34th Annual Golf Classic. A Flight: 1st: Reggie Redwine, Mike Pierce, Gary Wilson, Randy Boeckman 2nd: Joe Morgan, Andrew Patterson, Zach Simpson, John Robinson 3rd: Rick Holder, Jeff Nippert, Hunter Laughlin, Dantz Hall B Flight: 1st: Bruce Benbrook, Jim Peck, Terry Cook, Jim Burkett 2nd: Don Abernathy, Greg Vandaveer, Doug Fuller, Curtis Davidson 3rd: Scott Hughes, Keegan Grooms, Lydell Williams, Tres Wright C Flight: 1st: Mike Bradley, Cliff Underwood, Jake Charnock, Justin Berderka 2nd: Bill Mitchell, Jerry, Knowles, Gary Valentine, Carol Wieland 3rd: Robert Young, Jim Pfeiffer, Justin Pfeiffer, Kade Young Longest Drive:  Bailey Jordan & Hunter Laughlin Longest Putt:  Don Abernathy & Clint Duesman Closest-to-the-Pin:  Carol Wieland & Steven Ward Thank you to our Golf Classic Sponsors!

Don’t forget to complete the Federal Reserve Security and Resiliency Assurance program for 2022. This is an annual requirement that must be completed by December 31. However, you may complete and submit your report at any time during the calendar year. Material should have been provided to your End User Authorized Contact (EUAC) in March. If you need assistance, the Federal Reserve has created a Resource Center that includes access to previous webinar recordings, Training Opportunities for 2022 as well as Frequently Asked Questions. Log on to frbservices.org and open the Resource tab. Fraud is ever present. EPCOR recently announced that they have acquired the Central Oklahoma Clearing House Association (COCHA) Fraud Alert Service. They will be offering free informational webinars on July 26 and August 4. This is a new EPCOR Member benefit, so you may want to learn more about the value to your institution. And you might want to learn about the Federal Reserve Synthetic Identity Fraud Mitigation Toolkit. The information is designed to help financial institutions, businesses and consumer identify and fight fraud. To explore the toolkit, use this link: https:/bit.ly/idfraudtoolkit.

Times have changed when it comes to marijuana. In the late 1960’s more than 80% of Americans believed that marijuana should be illegal. Fast forward to 2021 and the Pew Research Center found that “an overwhelming share of U.S. adults (91%) say either that marijuana should be legal for medical and recreational use (60%) or that it should be legal for medical use only (31%). Fewer than one-in-ten (8%) say marijuana should not be legal for use by adults.” For some context, Cannabis has a long history in this country dating back to European settlement when the plant was used mainly for industrial purposes (colonists used hemp to produce rope, sails, and clothing). In 1970, Congress passed the Controlled Substances Act that identified tetrahydrocannabinols – the principal psychoactive element of cannabis – as a Schedule I narcotic. Schedule I narcotics are defined as those that have: i) a high potential for abuse; ii) no currently accepted medical use in treatment in the United States; and iii) a lack of accepted safety for use of the drug or other substance under medical supervision. While federal law has not changed much over the subsequent fifty years, state laws have more closely followed public opinion. In 1996, California passed Proposition 215 legalizing the use of medical marijuana and in 2012 Colorado and Washington legalized recreational use for marijuana. Things have only gained steam. As of this writing, all but four states authorize some form of medical cannabis and 19 states and Washington D.C. have legalized marijuana for adults over the age of 21.  Regarding the territory TBB currently serves, New Mexico recently passed the New Mexico Cannabis Regulation Act legalizing the recreational use of cannabis by persons 21 years of age or older. Oklahoma allows for the use of “medical” marijuana, but there are no qualifying conditions and physician recommendations are easily obtained. Texas is the most restrictive permitting licensed organizations to prescribe low-THC products to patients with intractable epilepsy.   For employers, the relaxing of cannabis prohibitions has caused some difficult decisions as several of the laws provide for worker protections who use marijuana products. For example, in New Mexico it is unlawful for an employer to take an adverse action against an applicant or employee who legally uses marijuana products unless: i) not doing so would cause the employer harm (e.g. loss of license); or ii) an employee works in a safety-sensitive position. With that said, the New Mexico laws do not prevent an employer from prohibiting or taking adverse employment actions for impairment or possession or use of marijuana products at work or during work hours. A sense of complacency may have set in over the past few years as federal authorities have not targeted state sanctioned cannabis industries. There are at least three reasons for this hands-off approach. First, state approved industries are popular and generate a lot of money for the states in which they operate. For example, by May 2020 Oklahoma’s marijuana program – passed in 2018 – generated $110 million for the state and another $138 million in state and local sales taxes.  Second, since 2014, Congress has been attaching the Rohrabacher–Farr Amendment to funding bills preventing DOJ from using funds to stop certain “States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana”. While not an absolute ban on prosecutorial action, courts have concluded that the federal government “may not spend funds to bring prosecutions if doing so prevents a state from giving practical effect to its medical marijuana laws.” It should be noted that while the Rohrabacher–Farr Amendment has been included with spending bills for several years, it is not a forgone conclusion that Congress will continue to include it.  Third is directives set within the Department of Justice itself. In response to changes in several state laws over the years, DOJ has issued memoranda instructing it to comply with state laws in certain circumstances. These memoranda can change depending upon the occupant of the Attorney General’s Office, for example Jeff Sessions revoked these memoranda during his tenure.  Bankers are well aware of the conundrum created by the conflict of state and federal laws. Most banks were initially reluctant to get involved with cannabis related businesses, however, a growing number are choosing to service those customers (usually with certain restrictions and only for certain products). Other signs of industry acceptance include vendors offering services to help manage marijuana banking programs, and we have yet to see major enforcement actions from banking regulators.  The banking industry has been lobbying Congress for more certainty. There have been many proposals, but the most notable is the SAFE Banking Act. The bill would essentially increase access to banking and financial services for cannabis-related businesses without removing THC as a Schedule I narcotic. It has passed the House of Representatives several times but has yet to make it through the Senate.  Many observers believe that Congress will codify a clearer cannabis framework in the near future. The Safe Banking Act has again passed the House as part of this year’s defense spending bill. Additionally, Senate Majority Leader Schumer has introduced the Cannabis Administration And Opportunity Act which would essentially make cannabis a state issue. As we have seen in the past, these types of developments do not guarantee action, but if public opinion holds, we should see action at some point.