The Integration of a Digital Banking Platform with Dale Oberkfell

In the final episode of Season 3, Vin and Zach are joined by colleague Jeff Reynolds for a terrific discussion with Dale Oberkfell, former President & CFO of Midwest BankCentre in Missouri. Dale shares lessons from a 40-year career, ranging from his early days as a CPA to his time as Chairman of the FHLB of Des Moines and his experiences from 10 years as a CFO driving digital transformation at a multi-billion dollar bank. Dale discusses the importance of establishing a separate brand from the legacy bank, how to manipulate the digital funnel, and the importance of removing roadblocks from the customer experience.

For more insights and ideas, visit DCG at DarlingConsulting.com or follow us on LinkedIn.

Transcript

On the Balance Sheet: S3 E12: The Integration of a Digital Banking Platform with Dale Oberkfell

  Transcript

   [Vinny, 00:05]

Welcome to On the Balance Sheet season 3 episode 12. This would be our last episode of 2024, so an awesome year. Part of this podcast that's been terrific is meeting so many different guests with such diverse backgrounds, and today's guest is no exception. Today we're going to be joined by Dale Oberkfell and Dale is, I guess, quasi retired. He's currently doing some consulting work, but prior to his recent stepping away from the industry, he was the President and CFO at Midwest Bank Center in Missouri. And even prior to that, he was chairman of FHLB Des Moines. And and if you'll hear through the interview, that he's had his own CPA firms, he he's done a lot, he really knows the industry, he's got 40 years’ worth of experience. This is a terrific interview, highly focused on his foray into digital banking. And so, Zach, I think the listeners are gonna really like this.

[Zach, 00:56]

Vin 100% and and you nailed it. I mean, 40 plus year career in banking, some CFO spots from President and he worked with our colleague Jeff Reynolds for almost a decade. And Jeff actually is going to join us in this interview, as well, to chat with Dale and yeah, right now he has Oberkfell Financial Advisors where he he works with banks, NFI’s in the consulting space, as you said, he's semi-retired, but the meat of this interview, as you mentioned, is really focused on digital banking transformation. And I think one of the things is we're gonna talk about Rising Bank, which is one of the things that he's helped start under the umbrella of the West Bank Center, but a key theme to is just transforming all levels of the bank. Like, we're gonna focus on that side, but he makes a couple points or about making sure that that permeates kind of throughout the organization, so I think a lot of really cool takeaways in that digital banking space that our listeners are going to really like to like to hear.

[Vinny, 01:49]

Absolutely, Zach. So, without further ado, Dale Oberkfell.

[Zach, 02:05]

Welcome back to On the Balance Sheet. We're very pleased to have Dale Oberkfell joining us today. Dale is currently runs a consulting practice at Oberkfell Financial Advisors; he's a principal owner there, and he's worked with our colleague Jeff Reynolds for years before that in his previous life, but I won't tell Dale’s story. Dale, would you mind just starting off the interview, walking the listeners through your journey in the banking industry from your start to becoming the President of Midwest Bank Center and in in the stops in between?

[Dale, 02:35]

Sure, thanks. Well, I've been either a banker or working in a bank for more than 40 years. So, I started out as an internal auditor with a large Kansas City bank holding company. At that time, they had about 20 banks in their group and that was a a great learning experience, they were very internal control conscious. That allowed me to jump to one of their subsidiaries in the late 70s. They had just gone through a acquisition, they needed to convert the bank. So, in 79’ would be my first bank conversion, some of it from paper to to computer, and one particular area of the bank from computer to paper to computer. And so that's where I really kind of learned and began to my journey with acquisitions and computer conversions, and I would say I've done somewhere 20 plus computer conversions either as a bank or as or as a CPA assisting a bank. And then I went to a bank holding company that was in an acquisitive mode. They acquired 5 banks while I was there over 4 years. I was in charge of taxes, financial planning for the banks. And then moved to a three, two bank holding company initially where I became the Executive Vice President and CFO of the holding company, and an operational officer for the banks, two banks. And then we started a third bank, I became president of the bank, of one of the banks remained the CFO until we sold that group in early 93’ and I did not cross over in the acquisition and that was fine. I did have a time when a friend of mine called and said hey, they need a senior lender and he was with a bank headquartered in East Saint Louis at the time, so I went over with him, he was an ex -KPMG partner. And we said, well, if this doesn't work out, we'll just start a CPA firm that works on banks and credit unions. And as things turned out, they didn't work as we had hoped, and so we jumped off and started a CPA firm in 94’ and that concentrated on banks and credit unions. I I did most of the bank work, he did all the audit work, so I did compliance work, I did M and A work, I did operations, I did tax returns, and so so I was the banker he was the auditor - that worked out great. We grew that practice significantly because all the big CPA firms vacated the community bank space and then I jumped off into a client in 2005 back as a banker and with that bank, I was the President of the Bank, CFO of the holding company again. They were a SEC reporting entity, and so that was, I hadn't experienced that since the holding company that I worked for in the early 80s at that point. And so, from there, five years after that, I don't know if you remember that time frame that was right at the beginning of the big economic downturn and everything and this bank had gone to Florida and that was a pretty negative experience. They were in Florida when I got there. I helped work through a pile of problem assets in Florida and basically jumped off and went to Midwest Bank Center in Saint Louis in 2011 and stayed there for 10 years and retired, and that's when I met Jeff at Midwest Bank Center. I was President and CFO again of the holding company and when I left they were about 2 1/2 billion in assets, today they're about 3 billion in assets and so that's my journey. And then, I I've always been a CPA, I’ve always done tax returns, so in retirement now I'm doing bank consulting, I'm doing some bank tax returns, and just keeping busy.

[Jeff, 06:28]

Awesome, you know, thanks for that. And one of the things that I would just say in working with a number of different banks and whatnot, it's you start getting into this whole blend with what you were just talking about. There is the technology piece that taking a look at, hey, we got to be more aggressive out online, we have to leverage technology a lot better. And then finding a community bank that actually does it, it's almost like kind of searching for Bigfoot. You know, it's out there maybe or some people think it's out there, but really is it ever seen? And that was one of the things that was a lot different about Midwest Bank Center was it's a very competitive market on the banking side, in particular, for deposits. And you know, meeting the funding needs required something that was probably a little bit different. In your background with the finance and the strategy acquisitions and things of that nature, can you talk a little bit about how that might have helped bring the organization around to creating a separate digital bank in Rising Bank?

[Dale, 07:32]

Yeah, sure. It it it all does because when I started internal auditing, I remember one of the first banks I worked on was bank down in southern Missouri, and they still had their checking accounts on ledger cards. And so, you know, I learned in the banking space how to do things manually, how to do things paper, and I think that's always served me well because banking is a very mature product business. There aren't many new products that come around. There are a few that come around every once in a while, but they typically are created because of technology. And you can trace them back to, you know, the ATM was a big deal, the the new the cell phones are a big deal now, smartphones are a big deal, but it's really just doing the same kind of transactions, except with different tools. And so, I've lived through that process, I learned through that process. One of the things in my, just in my DNA, I'm happy with taking a little bit of a chance. I've been a beta tester for when the Fed started setting up their wire network in the 80's. The bank I was at then was about an $80 million bank, we were a beta tester for in the feds Saint Louis and that worked out great. I love that experience because it allowed me to, to help them shape how the product was

going to actually work from a community banker standpoint. And so, I like that interaction a lot, so learning from these things over time gave me the opportunity to actually see the value of trying to move from paper activities into more technologies. And so we started Rising Bank in 2019, but I started working on that about three years earlier, trying to figure out if technologies had advanced far enough that I could actually take one of the three big cores, which we used Jack Henry, and build this new branch, digital only branch, nationally, and allow it to ride on the rails of the existing bank, but yet maintain a separate brand and separate pricing, separate products, and and make it a pure new brand play. In other words, all the way up and downs, statements, notices, website, everything's a separate brand.

There had been some community banks who started digital banks, but they didn't have that pure brand. In other words, if you go to a bank, there was a bank in Wisconsin who's done some work successfully. They were out there, they had a separate website, a separate brand, but when you got your statements, it was a statement from the old bank from the existing bank, not from the new brand and notices are the same way. So, it was import to me to build a brand that was consistent because once you set up the brand and you have separate products you don't want to commingle, that loses the ability of keeping things separate and being able to have a different marketing plan for this brand versus that brand. And so that took me about three years to actually conclude that we could jump off and do something and that is after I met a couple of people who helped me in the know your customer area of technology, and a person at Jack Henry that helped a bank, a large bank with their entire backroom operations and they were digital only, going back 10 years prior to that time and so we found out some of the difficulties. But the answer is is that in 2018 the Board of Directors and bank agreed we could we could start this this effort. It took us about six months to do it, we had basically we, again, we're riding the rails of the basic bank. So, all we had to do is plug in the new Fintech capabilities and there was a new fintech that came out and it's well publicized. I've said this publicly, it's the the online account opening is Mantle, and that that Fintech has really been successful. We were the third bank online with Mantle. Now they have many, many, many customers much larger than Midwest Bank Center, and so they've done a great job. We only had retail accounts at the time, but they were working on business account opening, so they now have business account opening also and Midwest has employed that. But more than just opening the digital bank, it's about growing deposits when you need them, it's about transparency of and and efficiency in the digital first area. In other words, if you're going to do something, do it in an efficient way and try to do it digital first. And then, finally, it's about using the proceeds of these deposits for the benefit of the overall bank. And so people think it's just a deposit play on the Internet, but it's really a lot more than that because when you think about creating this new brand that's super-efficient, once you start working on that and it's successful, then the rest of the brick and mortar bank kind of look at that and they say, well, shoot, I'd like to do that. I'd like to be part of that. And so, the goal was to move it over to the brick and mortar side, which we did in September of 2019. So we now had separate products on both sides, the bank we're doing digit both areas and, of course, now they're doing it in both areas, business also. And now they open more than 50% of their deposits online even though they've just rolled out the business part of it just in the last 12 months. And so, when you think about that, when customers used to walk into bank branches and it'll take 30 to 45 minutes, community banks always thought they were doing a customer a great service with that. But if you can go to Rising Bank or a lot of the other digital banks, you can open those accounts in 3 minutes or less, fund them and the customer experience is just wonderful, it's what they expect today in the Amazon world. And so, in my opinion, as we go forward and I'm helping a bank in Illinois with this now, there are $300 million bank. If we can get the smaller community banks to engage in this activity at a at a price point that works for them, we can help community banks sustain themselves into the future. And that's one of my goals of doing this is to create this efficiency that allows you to take all this customer activity, throw it into a digital experience that people love, which gives those employees time to do other things in the bank and you can scale the bank up without adding more FT's you just have to move FTE's from one job to another over time slowly, you don't have to do it quickly. So that's the basic planning of it, that's what we did. The first question a lot of people ask me when I talk about this is is, well what happened during the pandemic? You know, because the whole world turned upside down. And the funny thing is is that, as far as Rising Bank is concerned, nothing happened other than we grew the deposits $100 million in six months, our goal was $100 million in 12 months. We slowed down at that point in time and started trying to understand what drove customers to Rising Bank, whether it was purely interest rate, whether it was marketing, what was actually moving the dollars, which was a great opportunity for the last six months. But we grew another 50 million the last six months, ended the 1st 12 at 150. And then the pandemic hits and the stimulus money brought in tons of cash and, Jeff, you know this, all the banks were screaming because they had all this money and they couldn't do anything with it. Well, Midwest Bank Center was no different. So, what we did on the Rising Bank side is we said, OK, we're just going to tread water, we're not going to grow anymore. Even though our plan was to grow 100 million a year, we don't have a need for the cash and we're just gonna sit back and turn that spigot partially closed and tread water, which they did for a couple of years until all of that stimulus money started to roll out. And all of a sudden, they found themselves the deposits had actually shrunk down to about 120 million at that point, and so they basically said, OK, well, now is the time where we need to open that spigot back up because we have some loans we want to generate. And so now today I talked to the people at the bank and their deposits are well over 200 million, and they're kind of back on track to that 50 to 100 million a year pace. But it's really about what is the liquidity the bank needs? If the loan volume drops off, then you don't add the liquidity. It has reduced the reliance on home loan banks, dollars, and expensive dollars like brokered deposits and things like that and it gives you the flexibility to have more core deposits. So that's a that's a long story to a basic question, but it is a it is an effort that is near and dear to me because it was interesting to do and engaged all of the employees during a pandemic and the pandemic forced us all as human beings to change. So, I think we got greater acceptance from the the greater prospects out there on on the Internet to going to an Internet based bank, because they're changing everything in their life already and they're sitting at home at the computer half the day looking for things to do. And so, they surfed the net and found Rising Bank and it was a really good success.

[Jeff, 17:29]

I think one of the things that's really impressive there when you kind of sit back and think of it, it's often the the deposit game is what leads banks to that and what you found was look there are some efficiencies here that work out in our favor, but it's also more aligned with the customer experience as well. Was it you that had the the there were like 3 things, anything that we're doing with Rising Bank it should accomplish one or all of these three things. Was it something along the lines of efficiency and improving the customer experience, etcetera?

[Dale, 18:04]

Right, it's when we started adding products you know. So, we had deposit products to start with and then we added a mortgage portal. And so, we already had a mortgage operation in the brick-and-mortar bank, but we went to improve that to add it to the Rising Bank side of the house and so so we had a portal already, which was kind of clunky. We had software that produced the loan documents for mortgages. And then we had to get it into the Jack Henry system when the loan was done and and needed to be booked. And the problem with those three pieces was, is that they didn't communicate with each other during that life process. And so, before we moved it into Rising Bank, we got a new portal which we connected into the mortgage processing product and compass we used. And so the portal talks to encompass, which helps load all of the data and not have humans in the middle, and then at the end when the loans closed and done, it can move it straight into - we had to do a an interface program from Encompass to Jack Henry and eliminate the human being who was having to input that and booked those loans. And so we went through a process that had human intervention, which that means you have errors and time to a front end to back end that's totally designed and improved. So so the goal has been digital first, put these things together, and take the human element out of it. And again, take the time it used to take 30 minutes to book a mortgage, so now when you do 1000 mortgage and you save 30 minutes for 1000 mortgages, things start to add up. And so, I think that's a big deal in this efficiency play, but it really is about transforming how the bank across all of its platforms will do business going forward. The bank also opened up an SBA operation nationally, and they do their SBA under the Rising Bank names across the country. Now that they open up commercial bank accounts, they can sell not only SBA loans in Florida, California, Texas, wherever they're doing business, but they can also open up deposit accounts, and they can do all of their banking digitally with the bank in Saint Louis. It makes no difference where that company is sitting, it makes no difference where a individual is sitting. They don't have to leave Midwest Bank Center or Rising Bank just because they had to move from Saint Louis or wherever they were sitting at the time. And so that helps retain customers because when customers like the bank that they are working with, more times than not, they're going to stay with that bank; they only leave most of the time when they have to, when they feel compelled that they're not getting something from that community bank.

[Vinny, 20:54]

Dale, Vinny Clevenger here, thanks again for joining us and, again, I think the Rising Bank stories is the one that's probably really compelling to our listeners. A couple of things that come to mind, and I had I spent some time on the website last night, terrific website. I was thinking about your comments regarding branding, and I didn't see Midwest Bank Center anywhere on the website, and I'm like ha, and I knew that there's a clear differentiation. Great website - to our listeners, there's a million calculators out there. I had a lot of fun on those, cool site. One of my questions would be, and this is sometimes what you hear from others, what is Rising Banks, sort of, success or experience been with retaining depositors maybe at a rate that's just somewhat below pure market? Have they kind of done some of that analysis to say, alright, well clearly we we have the ability to offer a higher rate because we have the overhead in theory, but as rates are starting to move lower, I know it might be early days, what's their experience been? Are you able to roll some of these folks into slightly lower rate? You know, I think of savings rates posted out there at 440 and change or whatever, are those folks staying, or is it a really, really rate sensitive group of customers that are, you know, you're involved with that with that bank?

[Dale, 22:08]

Well, that's a great question. I'll just say if you look on the on the website very closely, at the bottom you will see somewhere in the disclosures about it being a part of Midwest Bank Center in Saint Louis, which is required by the federal regulator.

[Vinny, 22:23]

That's just the details, that's details, Dale, you know what I mean?

[Dale, 22:28]

Exactly, you just said you missed - it's there. You may not have had your glasses on. Anyway, but but when I talked to you about the situation where we didn't want the money and we just started treading water, somebody might say well, did I have to continue to pay up to retain those customers? And the the answer was no. We did lose a little bit of volume, but you know, we didn't care about that, we were OK with it. But I would tell you from the very first day we had certain certain requirements. First of all, we had to be able to fund an account, open an account and fund it within 3 minutes or less if it was fully automated, and we were successful with that. The other thing is we had a retention rate of 70 to 80%. And prior to the pandemic that retention rate we started calculated over 85%, but during the pandemic it actually dropped down to 70 to 75%, which was still in our range of acceptability. But during that time frame of almost two years, the bank had shrunk the interest rate down, just as all the other interest rates across the country were shrinking down, they they were still maybe a little bit above what you might see in a local area like Saint Louis, where it's very competitive. But we could lower the rates and people if they like you, they will roll over, they're somewhat apathetic when they're happy with you. And so, if you had a one-year CD it rolled into a lower rate. If you hit, you know, and it and it did that over a two-year period. And so, I believe that technology and the experience, as long as you can maintain that 70 to 80% retention, which for some community banks is a typical range. You've got a hardcore group that might be a customer for 50 years, but if you don't take care of a newer customer that walks in a branch, you're not going to keep them because they'll get disgusted and go somewhere else pretty quickly. And so that's a very important factor, so that's where those levers came into play as to how important different pieces are. And I would tell you that the savings and overhead cost is somewhere between 75 and 125 basis points, which is pretty significant. So even if the interest rate is zero, I can still pay 100 basis points and and not have it negatively impacted from an income statement standpoint. So, people misunderstand that they just say well it's a higher rate, well it is a higher rate, but that overhead savings is significant and it varies based upon your cost structure.

[Jeff, 25:05]

Dale, one thing that you had just touched on is acquiring a customer. And I think that there's a perception that all you have to do is have something out on the Internet that has a high rate and it's going to attract customers left and right. But what is the true cost of doing that? Were there any surprises along those lines as far as digital marketing goes, what does it cost to acquire customer? And, you know, after how long do you think that you fully absorb that acquisition cost? Because I think there's an argument to be made that, you know, the cost is so much to acquire CD, you don't necessarily want to just chop the rate completely and tick that customer off and see them leave. You want to keep them around for a while, cause coming up with those customers is not a free proposition.

[Dale, 25:55]

Yeah, that's that's right. So, when you you start off a a new brand like that first of all, you have a cost, a branding cost. It has to be recognized, it has to be out there, we got some great play on that with the media. One thing that we did is is we marketed Rising Bank in 49 states, we did not market it in the state of Missouri because we didn't want cannibalization. And so, you can mark it down to the census track area if you want from a marketing standpoint. So, it's easy to market it to five states, or 20 states, or all the states except Missouri, and so that's pretty simple. But yes, there's an acquisition cost and that's why you want the retention. The the retention helps reduce your overall cost of acquisition over time, because you're going to retain 70% of those customers on average or 80% of those customers. And so, if you can move that up with efficiency, it's helpful. When you think about the marketing costs it's a marketing funnel, so you have to push people into the top of the funnel. So first of all, they have to like your name, they have, they like what they hear about you, they they go to your website, they look at it, they they see it's only a couple clicks to where they need to get to, so it's efficient, they love it. And then they jump into the top of the funnel and then as they start to the opening process, the question is how many of them actually come through and finish the application and actually fund the account. And so there can be a lot of things that happen in between. One of the things that Rising Bank did was, we did not require signatures, that's a friction item in the funnel, and we did not require a picture of the driver's license. So, we asked 6 questions, with 6 questions we could use our know our know your customer vendor and mantle and identify a person within a likelihood of 99.9% of the time. And so, for us, it's about creating this marketing effort that pushes 1,000,000 people in the top of the funnel. If you want 50,000 at the bottom of the funnel, you've got to make it less friction and efficient. And anything you add if you were to add a driver's license picture, that's like a 12% friction rate, you'd have to push another 12% people in the top of the funnel, and that cost you marketing dollars. The same thing is true with a signature. If you require a signature, you just lost 12% of the people you put in the top of the funnel. With those two items, you'd have to spend 25% more in marketing dollars in order to get enough people to the bottom of the funnel. And so that's a measurement issue that we knew up front, we also knew that there were five states that that are more friendly toward digital account activities, and those are California, Texas, Illinois, Florida and New York. And sure enough, as we tracked it overtime, those five states had the highest dollar amount of outstanding deposits after 6 months, 12 months and and I'm sure it is today. Now that I'm gone and I don't see the numbers, but it's a it's a consistent situation on the Internet, and I think those are all important factors that are pretty well known out there, but if you're a community bank and you want to just cover 5 states, that's just fine. You can cover whatever states you want and then expand it as you go forward.

[Zach, 29:34]

Dale, I think some of the stuff you're just saying, too, is things that I certainly didn't know from the marketing and and the funnel perspective; I think a lot of our listeners may not be as aware of, too. So, I think that was a tremendous answer and we're thinking maybe one more or maybe two more questions. I'm looking at Vin’s notepad, he's got at least 2 pages of scribbles on that thing, so he you might have to block your lunch off.

[Vinny, 29:54]

Yeah, the the, the, the main thing is, hey, look at the fine print on the website.

[Zach, 29:58]

Yeah, yeah, yeah, exactly. But but my, you know, my kind of final question talking with Jeff and Vin before this is, you're doing this again to a degree, right, with that bank you mentioned in Illinois. With that and, if you were to keep doing it, you know, in other engagements, what are the things you do differently? Or what are the things that maybe you've learned, or would you do a lot of the things the same? I'm just kind of curious about the prospects for the future with what you did with Rising and how it might translate.

[Dale, 30:22]

Yeah, so community banks are an interesting creature, I guess I would say, because they're important for their communities, it's important for them to have good employees and so. But sometimes good employees that have been there for 30 or 40 years, they don't like change. And sometimes they don't have the ability to change to do what you want. And so, one of the biggest challenges is how do I take and agree to spend more money now to set this up, to save money into the future and sustain ourselves for the next 20 years. And so, the board has to be a little bit forward thinking, because they're going to have to take a a little bit of a gulp to do it. And the the good thing about it is, is that second time around, you know, the technology continues to improve itself. And so, when you go out and look at online account platforms today, they're different than they were five years ago when we were looking, six years ago. When we started, the online account opening capabilities have improved, and Mantle is still probably the Cadillac of the online account opening Fintech. But the know your customer area has expanded significantly because community banks  are being just flooded with fraud issues. And a lot of community banks think if they go to the Internet it's going to increase their fraud problems, and the answer is that's not true. It does move faster, but it's not new fraud. In other words, account takeover still exists, you don't have, you know, washing the checks in the Internet side because most people are not using checks. 1 in 10 customers that opened a checking account ordered checks, but other than that, they're going to use digital only debit cards and so on. And so, you get account take over, you get people who are moving money around, bad guys who are moving money around so you've gotta be careful with that, but the speed is what happens. If you start with CD's and savings accounts, not many fraudsters open accounts for one year or longer and expect to get their money back in a day - that that doesn't work very well. And so, so you can use some products that are less volatile. And so, the fraud is a big issue, having enough bodies to do the work is a big issue, and getting the roadblocks out of the way. And so that was one of the big things that we did. We used 20 or 30 people in our planning and and execution group that was about 10% of our staffing, but that was important to me because I wanted as many people as possible to be involved in the process so they could see the change, they could see it happening. They could contribute to it so that they could tell their other employee friends how well it worked and how interesting it was to participate and that worked pretty effectively. But there were people who tried to put up roadblocks, I'm not saying there weren't. One person I had to, there was a compliance person who said, well you've got to have you got to have a signature, the regulators won't allow it any other way.

And I I said well, I already had thought about this, so I said I'll take there's one five star restaurant in town that people were well known in Saint Louis. I said if you can find me the regulation that requires a signature, I will buy a dinner for you and your husband at Tony's, which is the name. And so, she came back to me after about a week and said, you know, I don't think I can find that, I said that's because it doesn't exist. It was required in the paper world because that's all we had, but now you're in the digital world you can identify that person so successfully that a signature becomes irrelevant because people's signatures change over time and so they've really become insignificant in the identification area.

[Zach, 34:19]

Dale, thanks so much for for that. I'm gonna cap myself at no more questions. Vin or Jeff, do you guys have anything else to to add?

[Jeff, 34:26]

Just one, not necessarily on Rising Bank, but Dale in in your spare time you also served as the the chairman of FHLB Topeka, correct?

[Dale, 34:39]

Des Moines, actually.

[Jeff, 34:39]

Des Moines, I'm sorry. Des Moines, correct. Yep. So just just a a quick thing there, so you're not just a a client, but you're also the chairman. With some of the things that have come out since Silicon Valley Bank, there was a piece that was done by the FHLB's regulator called FHLB at 100, just your thoughts on the role of the FHLB moving forward as we kind of get now two years beyond what Silicon Valley Bank kind of led to.

[Dale, 35:21]

Yeah, so I'm glad you mentioned Silicon Valley Bank because I I neglected to say one thing is that one of the risks that's really important, in my opinion, to control is exactly what happened at Silicon Valley. In Rising Bank, we set a maximum for our customer to open accounts at 500,000. In other words, we did not allow someone to open an account with a million, two million, three million dollars which they would have. We had people who who asked to let them do that and we said no. I learned a long time ago over my career that if you lose a $3,000,000 deposit, it's a whole lot more painful than if you lose a $500,000 deposit. So right after Silicon Valley Bank, I know I went and double checked whether they still had, I’m I'm retired so I asked I asked the CFO if they still had that requirement in place and she said yes. I said well, that's good, I said because we just experienced why a limit to the dollars is important in the digital space, because you you just can't control everything that they're doing in a 24-hour period, so I wanted to say that. But the Federal Home Loan Bank was a great experience. I was elected to the Federal Home Loan Bank Board as a Missouri director. Every state has at least one director elected from that from their state, some states more than that, depending upon which Federal Home Loan Bank district you were in. And so, the the Federal Home Loan bank when I first joined, had five states which was Missouri, Iowa, North Dakota, South Dakota, and Minnesota. And so, the interesting thing there is that when you think of all community banks, those states have hundreds, and hundreds, if not thousands of community banks. And so, the other thing that they had was Des Moines was the bank that had the most insurance companies as members, which was pretty unique; it's a historical thing. And so, I learned this issue in the Federal Home Loan Bank, which, you know, includes politics because it's an agency just like Fannie Mae and Freddie Mac, and it's actually regulated by the same regulator, the Federal Housing Finance Agency. So, so we're talking about a major governmental regulator who's managing this process and the regulators, I mean, they're very intrusive in the business of the Federal Home Loan Banks. But from a liquidity standpoint, the one thing that I learned was that the FHLB system, in general, is what helps the community banks and the banking system  across the country survive difficult economic times. And so, when when it takes six months for the Federal Reserve to react to a downturn, the Federal Home Loan bank system is sitting there pumping out cash into the banks as they need it. And I think it's a really good entity to help with that. Now it was originally set up to help mortgage activities, which they do. Behind Fannie Mae and Freddie Mac, it's the largest mortgage originator in the country. And so, it lost its primary focus in that regard after the S&L debacle in the 80s, and they opened it up to banks at that time. And so, it has become more of a economic stimulus type of situation for community banks, while still adhering to the housing mantra that is necessary.10% of all the earnings for the home loan banks are distributed annually to support low-income housing economic situations. I was happy that we were able to grant a lot of dollars to indigenous Native Americans across the country. In 2015, the Des Moines Bank acquired, merged the Seattle Bank into Des Moines. When they did that, the area expanded another eight states, plus it included American Samoa and Guam. So now you have 13 states, a huge geographic area all the way from Minnesota to the West Coast down to Missouri, and the largest FHLB member bank in the country. And it exceeds 100 billion in assets regularly now, and so it's a really interesting machine where banks, community banks try to try to get to that 3% net interest margin, Jeff fights that battle with all of his clients and the FHLB system, if you can get 50 basis points, you're you're a superstar because the margins that you're dealing with are razor thin, but I believe it's a necessary institution. There are some politicians who would like to restrict it, I think that would be foolish. But every time there's a regime change, they tend to, the door kind of opens a little bit wider or sometimes it closes a little bit more. So, I I would say with the current, the current election process, I I would say the new director that goes in there is probably going to be less problematic than you might think the current director is.

[Zach, 40:27]

 Dale, thanks so much for all your time today. Some terrific insights, terrific answers and we really appreciate you joining us.

  [Dale, 40:33]

 I appreciate the invitation. Thanks, guys. 

[Jeff, 40:36]

Dale, great seeing you. 

[Dale, 40:38]

Yeah, thanks, Jeff.

[Zach, 40:42]

And we are back. What a great conversation with with Dale, certainly a lot to unpack - a really fun, interesting journey he's had, especially some of the recent things that we focused on. I think as we normally do, just with a takeaway or two here at the end, my biggest one, and he said this in the pre-recording. that we were all just kind of catching up on, he and he mentioned it again in the interview, which is he's really he has that passion for helping community banks, you know, play in that digital banking space and he firmly believes that banks have to evolve. The smaller you are, the more so you're going to have to do that or you're going to, you're going to die, you're not going to last. I think that's what my big key takeaway here is that in 2024, that's where we're going it appears a lot of these groups, if you want to keep thriving you're going to have to really put a stake in the ground and do some research on this space. Jeff, how about you?

[Jeff, 41:30]

One of the things that I think I discovered was I had some appreciation for it working with Dale and with Midwest Bank Center through the implementation process of getting Rising Bank up off the ground. But just some of the cultural barriers that you have with the workforce that's accustomed to doing things a certain way having to shift. But you know, also just shifting with the tide and where the customer experience is taking us is is is important, but it doesn't sound like it's something that maybe a lot of bankers think about when they begin that journey.

[Vinny, 42:07]

Yeah, Jeff well said. I think for me, my main take away was that how important it was to make the customer experience be sort of streamlined, this idea that it takes 3 minutes to open up an account. I personally have some deposits with some, you know, digital banks if you will, and it was not a 3-minute process. And just kind of going through their website, Rising Bank, it's just very simplistic and it's easy and the notion that I can put money in there in 3 minutes that's very, very compelling to all of us. So, I thought that was really probably a really important hurdle. You talk about these things, that are roadblocks that you have to get by. I thought that's really quite interesting how they got rid of some of those roadblocks and they've sorted tilted that funnel in their favor when they were trying to kind of market that site, but that was my main take away. Terrific conversation with Dale today, he's got a vast banking background. It was really focused on Rising Bank, but that's really, I thought, what our listeners would be most, you know, interested in. But that's a wrap for today's episode, thank you for joining us on On the Balance Sheet.

[Dana, 43:19]

 On the Balance Sheet is a podcast produced by Darling Consulting Group (DCG). All views       and opinions expressed by the hosts and guests are solely their own and may not represent   those at DCG. All third parties are independent entities and are not affiliated with DCG. This podcast is intended for informational and educational purposes only and is not considered as advice. All views and its opinions expressed are based on the information available at the time and may have changed based on the current market and other conditions. For more information about DCG, please visit  www.com.darlingconsulting.com or e-mail us at info@darlingconsulting.com. Today's background music is provided by John Sid, the Coma- media and can be found on pixabay.com.

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