40 Under 40: 2020’s Emerging Community Bank Leaders

Innovation

By Judith Sears

When challenges call, innovators answer

The banking landscape shifts daily. Key to meeting customer demands are innovative people who think in terms of years, not months. Here are four of them.

These under-40 innovators clearly see the challenges of the disruption remaking the financial services landscape. “Our competition is not U.S. Bank. It’s Amazon, Instagram and the big players in technology that have frictionless, seamless platforms,” says Sara Fosse, digital innovation manager for $1.9 billion-asset Banterra Bank in Marion, Ill.

That creates an imperative to innovate. “We’ve got to be more agile,” says Blake Swafford, senior innovation officer for $361 million-asset SimplyBank in Dayton, Tenn.

For these leaders, embracing change increasingly means partnering with the disruptors. SB One Bank, a $2 billion-asset community bank in Paramus, N.J., recently partnered with Built, a commercial construction platform in Nashville, Tenn., that aims to simplify the draw management process. The community bank continues to look for more fintech partnerships.

“It’s been like night and day for us,” says Ali Mattera, SB One Bank’s senior vice president, technology and digital bank officer. “We weren’t going to be able to build it internally, and it was a no brainer when we found another company to help.”

These under-40 innovators agree that a reliance on core providers can be an obstacle to change. “We were beholden to our core,” says Patrick Sells, chief innovation officer of $500 million-asset Quontic Bank in New York City. “[This reliance] limited our ability to access our data and have best-in-class technology.”

Realizing this, Sells and his team recently built out the community bank’s application programming interface (API) capabilities. The team mapped data into Microsoft Azure, a cloud-based environment. Working around the core has had multiple payoffs for Quontic Bank.

“The platform allows us to automate a lot of reporting and manual tasks,” Sells says. “It’s saved us 500 man-hours a month. And, as an API-first bank, we don’t have to connect to our core if we want to partner with a fintech. We can do it ourselves. That’s taken costs and time out of projects.”

These young executives are also using technology to drive savings. Mattera and the SB One Bank team reviewed the potential of their Microsoft Office 365 suite and tapped into the capabilities of Microsoft Flow to automate and streamline processes. “We were already paying for this,” Mattera says. “Using Flow, things that would take three days to turn around, such as the approval process for remote deposit customers, are now taking two hours.”

SimplyBank had a similar success when a product review revealed time-saving capabilities for the credit department. “Continually auditing current products and technologies is key to maximizing return on investment.”

Using tech to connect

Far from discarding relationship-based banking, these innovators use technology to reinforce customer relationships. SB One Bank’s digital experience team accompanies relationship managers on visits to commercial customers.

“Going on those calls allows us to have that one-on-one experience with the customers,” Mattera says. “We can create opportunities to discuss their questions about the technology. That reinforces the emotional connection with our customers.”

Fosse adds that relationships are key to optimizing technology. “Anybody can implement technology, but it’s training the staff and community on how to use it that is critical,” she says. “That’s where community banks have a leg up. Our customers are our friends and families. We have an opportunity that the bigger banks don’t have to teach customers firsthand.”

Innovation, these community bankers agree, requires a culture shift. To integrate new approaches with established practices, Sells paired a seasoned vice president of operations with a new marketing hire from a tech startup background.

“We had to create a shared language between the two and a process for how we will try new things,” he says. The pair ultimately created a plan that has brought in more than $200 million in new deposits digitally.

Swafford recommends engaging staff in product development, using all-staff meetings and other corporate communications to provide regular updates on new technology or other innovations that are in the pipeline.

“We tell our people, ‘Here’s some crazy idea we’re working on,’” Swafford says. “When it comes, it’s not something that someone just sent out an email about. They’ve been hearing about it for nine months. It helps the staff take an ownership in new ideas.”

Over the long haul, these four innovators say that a paradigm shift is needed to meet today’s demands on the industry. “There tends to be an attitude of, ‘This is the way it’s always been done,’” Fosse says. “Instead, we should be thinking, ‘How should it be done in today’s world?’”

Marketing

By Abbi Kiesau

Regulatory Compliance

By Rebecca Lubecki

Lending

By Beth Mattson-Teig

A Q&A with up-and-coming lenders

Before the COVID-19 crisis hit, we talked with three of the 11 lenders who made our 40 Under 40 list. What did they see as the challenges and opportunities ahead for community bank lending?

Q: What do you see as the biggest challenges in community bank lending today?
Randy Vicknair: We have been in the current credit cycle for quite some time. At what point does the current credit cycle start to decline, and have banks made sure they are positioned well, as far as margins and collateral, to protect themselves against it? The industry as a whole is much better positioned than we were for the last recession. A second piece of this question is the experience gap. A lot of banks our size have experienced bankers into middle or upper management, but when you get into junior management, there tends to be a bit of an experience gap; they haven’t been through a major financial crisis before.

Harry Hayes: Community banks still face a significant regulatory burden. Although we have experienced modest relief in this area with the passage of S.2155, community banks still are experiencing significant costs to generate loans to ensure compliance. Specifically, HMDA and TRID requirements make it challenging for community banks to expand mortgage lending activity.

Carrie Fraser: There is competition on every front. Whether it is buying a home, a car, appliances, farm equipment or even crop inputs, they all have financing options to offer. Much of this is done without a level playing field with credit unions and the Farm Credit System. In rural areas, population decline and consolidation is another challenge. What used to be 50 small businesses is now one large business, or what used to be 20 ag producers is a couple of farms. The number of potential customers is dropping, and, as the operations get bigger, the loan requests get bigger and legal lending limits become more challenging.

Joel Smith: The biggest challenge will remain achieving scale to offset increasing demands on overhead. We do a lot of larger transactions because of our niche market working with Native American tribes. Like any other bank, we have to have certain personnel on hand related to compliance and other essential functions. We don’t have the luxury of being able to staff up with someone who does one particular thing or focuses on one industry full time. Our people take on multiple jobs or wear multiple hats.

Q: Where do you see the biggest opportunities for growing lending at your bank?
Vicknair: One of the biggest opportunities we have is our USDA and SBA lending segment. Historically, we originated a mix of loans, and we will continue to do so. But those small business loans are the bread and butter of banking, and we want to get more heavily involved in them.

Hayes: Commercial lending, specifically to small businesses. The markets in which we operate are rural and made up mostly of small businesses. This provides the bank with a tremendous opportunity to expand our lending opportunities to small businesses. Recently, we introduced a Small Business Express Loan that streamlines the underwriting and decision-making process. This program will allow small businesses to access capital more quickly and at the same time provide efficiencies that will allow the bank to increase this type of lending.

Fraser: Continue building personal relationships. Unlike big banks and other lending options, we are still involved in the community. We build personal relationships by visiting at the ball games, attending church together and socializing at community events. These personal relationships allow us to better understand our customer’s needs.

Smith: Our bank is positioned to leverage government guarantees to expand lending in our unique target market, which is Indian Country. (Ninety-five percent of the customer base is made up of tribes and native business customers.) In addition to the SBA and USDA guarantees that a lot of banks are familiar with, there are guarantees provided by the Bureau of Indian Affairs, as well as HUD for tribal housing that we utilize to enhance the credit of our loans. By being able to leverage guarantees and have only the unguaranteed portion fall to be tested against our legal lending limit, we can provide a larger loan, which is a big reason why we can grow a lot faster.

Q: How is your bank using technology to improve the lending experience or create efficiencies?
Vicknair: A huge focus of our bank is to not only expand our online presence but provide deeper online options. We’re doing this through a number of measures. We entered into an agreement last year with nCino. Their platform provides us with the technological framework necessary to not only expand our lending options, but also our online presence and improve our customer service. Another area we are looking into is AI, artificial intelligence. It gives us the opportunity to automate a lot more positions, especially for mundane tasks, which helps to improve our margins by reducing overhead costs.

Hayes: We are constantly looking for new technology solutions that will provide a more efficient process and a better experience for our customers. Identifying technology that introduces automation to our processes accomplishes both of those things. Last year we introduced HelloHome, which allows borrowers the ability to easily apply for a mortgage loan on any device within minutes. This year we are going to implement electronic mortgage closings. We are really excited about this project, because it will provide a better closing experience for our customers.

Fraser: We have several projects that we have recently completed or are working on that will affect loan operations, including changing our electronic scanning to a product that directly links to our core, barcoding on loan documents, implementing an interface between the document prep software to our core and revamping our centralized loan processing.

Smith: We are in the middle of a project to implement technology-enabled workflow tracking to streamline our life of loan process. Being a bank with a small head count, we’re pulled in a lot of different directions. It can be challenging to have to bounce between deals that come to different stopping points in their process. So, we hope it will be something that can help us manage our loans from beginning to end to help us with efficiencies.

Presidents & CEOs

By Roshan McArthur

Leaders who are pushing the envelope

Being the youngest person in the room has its challenges, but these young leaders bring a fresh perspective to their community banks.

At age 38, Sarah Getzlaff has already been CEO of Security First Bank of North Dakota in Bismark, N.D., for two years. The third-generation banker laughs when she recalls how she got her start. “One day when I was 14, they needed help, so my dad literally woke me up one morning and said, ‘Put a dress on, we need you at the bank.’” Looking back, Getzlaff attributes much of her success to her father’s influence.

“Working my way from the very bottom to the top has really allowed me to gain credibility within my own organization,” Getzlaff says, though she admits that there have been a few instances where her age and gender have been called into question.

“I know when I’ve considered joining committees or been at other meetings, I’ve had some comments like, ‘Oh, you’d be really good on this committee, but how old are your kids?’”

Peter Stenehjem, president of First International Bank & Trust in Watford City, N.D., is a fourth-generation banker, getting his start 20 years ago at 15. Like Getzlaff, he credits his father.

“My dad has been very forward-thinking throughout his career and is still our chairman and CEO,” Stenehjem says. “His quote is always, ‘I’ll give you enough rope to hang yourself.’ So, basically, he’s allowed my brother [Erik] and me to make decisions and push for the boundaries of what we’ve traditionally done as a community bank.

“I’m getting pretty used to being the youngest person in the room,” laughs the 35-year-old. “When I was in high school and college, my dad brought myself and my brother along for challenging conversations, either with an employee or a customer.”

Brent Smith of LINKBANK in Camp Hill, Pa., entered the community banking world in a very different way and credits a great team for his success. His small team of key investors with backgrounds in banking and finance purchased a charter that was “really small and had some credit issues,” he says. They turned it into a highly successful community bank of which he is now president at the age of 37.

Asked what challenges have come with early success, Smith says, “I’ve gone through a transition personally of accepting that I don’t have the tenure that other people do. For a while, I tried to prove that I could compensate for that, but I’ve had to own in a humble way that I don’t know some things.”

Making connections

Andrew Pyles, 39, took a more circuitous route to his current role as president and CEO of Eclipse Bank in Louisville, Ky. He previously worked in a large community bank, where he took a leadership position in a smaller rural market, before returning to Louisville and being promoted from within Eclipse Bank.

Pyles has noticed certain advantages to his age. “I joke sometimes that I’m on the cusp between the millennials and Gen X,” he says. “I can relate to the millennials because I’m almost one of them, but I can also say, ‘Those darn millennials. I know, they’re challenging!’”

Getzlaff has found that her age helps make connections. “I think it gives me an advantage in the workforce with our own employees,” she says, “because I feel like I’m in the same position that a lot of them are in. When I was first having babies 10 years ago, it was, ‘Oh, you have to stay home today?’ Now what I hear the most within our own office is, ‘Thank you for being understanding. It’s so awesome to work with someone who gets what it’s like to have a sick kid.’”

Encouraging advancement among employees is critically important to all four. “My heart is there,” Smith says, “because Andrew Samuel, our CEO, took a shot on me at 26 or 27 with no real qualifications, but hired me as a person, giving me opportunities to learn. Not many college graduates have come out in the last 10 years and said, ‘I want to be a community banker.’ So, there’s not a breadth of talent there to go after. So, we’ve said, if it’s not there, then let’s create it.”

All four agree that a broad, team-focused approach to leadership succession is vital.

“Being a $3.5 billion bank, we are required to have certain levels of succession planning in writing,” Stenehjem says of First International Bank & Trust. “For all of the key positions, we take a stoplight approach. We have an emergency successor identified, then we have somebody that’s maybe three to five years away, and then some individuals that we could groom for that position down the road.

“For those individuals we identify for certain positions,” he continues, “we will make sure that we have a career conversation to make sure it’s what they want to do. Then … an active planning process begins, identifying the tools and training the individual needs to be successful.”

Stenehjem’s vision for his family’s community bank is a bold one, which has included expansion into the hospitality industry and the recent purchase of a fintech company. “If you look at the banks that are innovating right now,” he says, “they’re probably some of the ones that have younger decision-makers in there that are pushing the envelope.”

Banking & Branches

By Jenna Jean Grundtner

Operations

By Rebecca Lubecki

Finance

By Courtney Welu

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Judith Sears is a writer in Colorado. Rebecca Lubecki is associate editor of Independent Banker. Beth Mattson-Teig is a writer in Minnesota. Roshan McArthur is a writer in California.  Abbi Kiesau, Jenna Jean Grundtner and Courtney Welu are editorial assistants with Independent Banker .