There are many community banks around this country that have been a stalwart of their community for decades or even more than a century. Some are threatened by the rapid shift to digital, others are taking it in stride.
Our next guest on the Lend Academy Podcast is Jill Castilla, the CEO of Citizens Bank of Edmond. While her bank is more than a century old she demonstrates that community banks can be nimble, digital enabled and serve their community well. She continues to show why many consider her a national leader in community banking today.
We recorded this podcast on Zoom so you can watch this interview on YouTube or view it below.
In this podcast you will learn:
- Her background before she arrived at Citizens Bank of Edmond.
- The state of the bank when Jill started there in 2009.
- How she was able to turn the bank around.
- Why they decided to sell off their branch locations.
- The size of the bank today.
- The competitive advantage of Citizens Bank today.
- How they were able to create their Paycheck Protection Program so quickly.
- The types of small business borrowers they helped with the PPP.
- Why the PPP has shown the strength of community banks.
- How she engaged with Mark Cuban through Twitter.
- Details of the program she launched in conjunction with Mark Cuban.
- Jill’s views on the growth of digital banking.
- What the next six to twelve months hold for Citizens Bank of Edmond.
This episode of the Lend Academy Podcast is sponsored by LendIt Fintech Digital, the new online community for financial services innovators.Click to Read Podcast Transcription (Full Text Version) Below
PODCAST TRANSCRIPTION SESSION NO. 247-JILL CASTILLA
Welcome to the Lend Academy Podcast, Episode No. 247, this is your host, Peter Renton, Founder of Lend Academy and Co-Founder of the LendIt Fintech Conference.
Today’s episode is sponsored by LendIt Fintech Digital, the new online community for financial services innovators. Today’s challenges are extraordinary with the upheaval affecting all areas of finance. More than ever before, we need to come together as an industry to learn from each other and make sense of this new world. Join LendIt Fintech Digital to connect and learn all year long from your peers and from the fintech experts. Sign up today at digital.lendit.com.
Peter Renton: Today on the show, I am delighted to welcome Jill Castilla, she is the CEO/President and Vice-Chairman of Citizens Bank of Edmond, based on Edmond, Oklahoma, they are a community bank. Jill is not your typical community bank CEO though, she’s an award-winning CEO, she’s been named Community Banker of the Year by American Banker, she was on the Women to Watch list just last year, she’s also been awarded Most Innovative CEO in Banking. And, she has really been at the helm of this bank now for 11 years and taken it as a distressed bank right through now to really an example of what a successful community bank looks like.
She’s very engaged in fintech, she’s spoken at LendIt before, she’s spoken in many events and she really has a fascinating story. We get into that in some depth, we talk about the PPP Program and how they’re able to react so quickly to that, we talk about this partnership with Mark Cuban which was super interesting, and we go into some depth about that, we talk about how she views digital banks and what’s next for Citizens Bank. It was a fascinating interview, we hope you enjoy the show.
Welcome to the podcast, Jill.
Jill Castilla: Hi, great to be here.
Peter: Okay. So, I’d like to get this thing started by giving the listeners a little bit of background. You have a pretty high profile in the fintech space, or in the banking space, but why don’t you tell the listeners what you’ve done in your career, particularly before you got to Citizens Bank.
Jill: Well, I grew up in Oklahoma and I enlisted in the Army after my sophomore year in college and I’d gotten away from paper school and my family wasn’t really supportive going to college and the Army was my gateway to being able to build that dream. So, I enlisted and served as an engineer in the Army and then in the Oklahoma Army National Guard after that. I ended up getting my undergraduate degree from Hawaii Pacific University while we were stationed in Hawaii, that’s a nice place.
Peter: It is a nice place to go to school. (laughs)
Jill: When we came back to Oklahoma, I got my dream job to work at the Federal Reserve Bank. My undergraduate degree was in Finance so, I got to work at the Fed for ten years at their Management Development Program, everything from Cash to HR, Public Affairs, Financial Management, and also ended up managing the Check 21 infrastructure for the Federal Reserve System and all the check processing sites at that time. There were about 20 (garbled), managed those consolidations and was second level to add support from an IT standpoint, so I kind of cut my teeth from a fintech high payment standpoint at the Federal Reserve.
And then, the Fed paid for me to get my Masters in Economics, they also sent me to the Graduate School of Banking at the University of Wisconsin. The reason I went to college in the first place was that the local community banker in town, I would carry groceries for her in high school and that really encouraged me to go to college. She would give me money to take the ACT so, I really revered her, not just a leader in our community, but someone who’s changed my life and kind of kicked me to do more.
And when I was in banking school, I just fell in love with not only the concept of banking, but the responsibility of a community banker and what they mean to the citizens in their community. So, when my classmates were prodding me up to this bank in northern Minnesota, to be in the CFO type of role, so I was there for two years and during this time my mother married into the family that owned Citizens Bank, became a part of Citizens and the bank got into trouble and my step father called and asked if I would be willing to come down and help turn around the bank. In the meantime, I got married, had three children, that’s kind of the story of Jill.
Peter: Okay. So, then you come back to Edmond and what was the state of play? Was this during the financial crisis that this all happened?
Jill: Yes, it was 2009, July 1st 2009 was when I came back. I thought they had just a Federal Reserve re-examination and the financial crisis really didn’t hit Oklahoma like it did the rest of the nation and we ended up being the only troubled bank in the Oklahoma City metropolitan area so, I can’t walk in, I thought I was coming into a bit of a turnaround. There was rampant fraud, we really had done everything to ourselves that was in the economic condition that caused the bank to be troubled.
We were not conducting inspections for draws, we had a million dollars fully drawn out on a construction loan for a house and then you drive by where the house was supposed to be…it was just a lot so, like an empty piece of dirt. We ended up having $12 Million in loan losses that first year and for a bank at that time was $350 Million which is $30 Million in capital losing over a third of your capital in a 12-month period and really our bank, our largest shareholders, our employees stock ownership programs….so, there wasn’t capital accessibility, we’re also a Sub-S bank so our stockholders pay our taxes and we kind of distribute that to cover that.
You know, it was really a time where the bank was searching for it’s identity and was trying to fight to recover. I had come back to the bank, I had taken 50% cut in pay from where I was and the management did not want me here. I didn’t really realize that till I came, I did not have responsiveness, no one was giving correct information, the fraud resulted and we had over $2M of expensive use within the first six months in that 2009, we were paying for weddings and medical bills for kids and all kinds of crazy things and I uncovered that.
It resulted in the turnover of our whole senior management team and so, I really kind of took the helm of the bank without having the positional authority to be in that role and we ended up orchestrating the fastest turnaround in the nation without adding capital. So, it took about 18 months for us to get things kind of ….the ship rided and we did that by shrinking and we couldn’t add capital so we focused on the asset size of the bank, from $350 Million to $250 Million and maintain our capital ratios the whole time so we were never not well capitalized and then ran off high interest rate depositors.
So, I really am seeing what sustained this bank for a 100-year period that the bank might have been in existence and what has sustained it was the social capital the bank had built for a century. So, the depositors would come to us and they weren’t demanding their money back, they were demanding to know whether the bank was going to survive because of how important Citizens Bank was to Edmond. The bank started in 1901 before statehood, the next oldest bank came in 1976 so, for three quarters of a century we were the community bank of our town of 100,000.
Peter: Wow! So, you were a real important part of that community then. I’d be curious about how you got through that difficult period because, obviously I imagine, it wasn’t always a done deal, it wasn’t obvious you were going to succeed, I imagine, so how did you take the bank through such a difficult period as a newcomer really.
Jill: So, the employees are kind of shareholders of our bank, owns more than a third of our bank, and so if this bank fell, it was going to be detrimental to the people that were working here, and also, they knew what a gap it would be to our community. So, my motto during that time was that failure was not an option, I would not allow it to be discussed and I would fight until the end to manage every single ratio I possibly could and just being obsessive with doing only the right thing, being above reproach in everything that we did and not tolerating anything beyond that.
There was time where I was a very authoritative leader, it’s not my natural state, but, you know, I had a situation where I didn’t really trust the people I worked with to make good decisions because they were consistently either providing me false information, and I didn’t have the authority to be able to remove them. So, as a result, I had to be this super controlled really all the decisions going through one individual time period which is…again, it’s not sustainable, it’s terrible for our culture, but at that time, it was really the necessary thing that had to happen.
So, we went from being from being where failure is not an option, you know, not an innovative way of managing a company at all so, now, we’re trying to facilitate that failure is an option, that we would want to be able to sell to a customer and in that period of time, it was to me a reflection. So, again, not a sustainable model and not the type of leader that I wanted to be known to be, but it was a necessary thing to get done in order to save this bank.
Peter: Right. So then, okay, fast forward 11 years, or thereabouts, how do you describe your bank today. Maybe give us a sense of the size, what your customer base is like and what type of loans you hold in your books, that sort of thing.
Jill: Yeah. So, back then, we had 125 employees, six locations and were at $350 Million in asset size and like I mentioned, as I mentioned, we shrunk. We ended up selling our branch locations in 2013 and had only one location, downtown Edmond, which is a low moderate income type in the middle of a fluent city and made that decision so, now, we’re down to one and we’ve gone from 125 employees to 55 and all through attrition, we didn’t do any layoffs during that period of time. We just tried to move as we had turned over the people to different roles and developed a team that was really strong.
Right now, our asset size is $320 Million, that’s what it was this morning, but we also have a $25 Million Paycheck Protection Loans as part of that asset size. We have been using the PPP lending facility so, our real asset size from a capital ratio standpoint is around $295-ish. We are looking at this…..seems pretty small so the way that the bank…really the competitive advantage for this bank is that our funding source are just thousands, tens of thousands of non-interest bearing deposits and checking accounts for small businesses and individuals who basically had pooled their money together like they did 119 years ago and they’re still doing it today and that’s what grew. Our deposit base continues to grow and that nice spurring categories. On the deposit side, we look very so much on what a credit union will look like as small accounts.
On the lending side, we’re more of a traditional community bank, we are a mixture of just about every type of loan that you can imagine from small business loans, SBA loans, consumer loans, mortgages, larger sized commercial real estate loans. We have a really established, well-rounded and it really can handle any kind of request from a borrower in our community and we also have secondary market loans. So, it’s a kind of real traditional community, we don’t have any kind of niche, quite the opposite, we just try to be a good community partner for everyone. We’re Citizens Bank of Edmond and we want to reflect the citizens we cater to.
Peter: Right, right, okay. So, let’s talk about the PPP. I’m on Twitter a lot and I noticed you are very active on Twitter around the PPP, I saw you give out your cell phone number several times, I think, on Twitter to try and, obviously, help your small business customers. So, maybe just talk a little bit about what your customers maybe were asking you and how you reacted to the PPP because, obviously, this was put together, we all know, very, very quickly and it wasn’t easy. Many big banks struggled mightily to get their act together so, how were you able to respond so quickly to it?
Jill: Well, from a communication standpoint, we’re committed to being transparent and accessible, especially in times of crisis, you have to do that on steroids. So, I always provide my cellphone number out to the public so that they can text me anytime, but we were feeling the anxiety, the heaviness of the anxiety and fear. This was occurring at the time that the PPP was being developed, we were really engaged in the development of the CARES Act and that communication had nothing to do with marketing, or PR, it was only to try to be some conduit of information, two-way communication with our community and what ended up being more of the smallest business community around the nation to just provide information, to know that someone….that they know that someone’s listening and will relay their concerns. It was impacting the development, or the execution of these programs and so that was part of it.
Then it turned into, once the program was being more defined, we became very aware early on, before PPP launched that we were going to have access to this and we thought other banks would have the same access issue. We are an SBA lender, but if you don’t enter anything into E-Tran for 30 days, your authorization is turned off. And so, we tested before PPP-deployed, we ran into that issue so, we started sounding the alarm bells and you can do that through formal means, but in a time of crisis, there’s not been a better source at getting the right people to hear your message than social media. There just absolutely is not unless you go to the highest levels of agencies, delegations, associations, associations that may be aligned from a value standpoint and so, we started using our voice for that as well.
We were committed just as much internally that when we launched the PPP Program, that we were going to provide status updates to our customers, those applicants, on a regular basis so that they knew where they were in the queue. There was so much anxiety, it’s hard to put yourself even in that place, the need of the small business customers to get some type of funding, or assurance of funding and knowing that there was this…basically, this pot of gold, or I thought it worst than to plug the Hunger Games when they come out of the ground (Peter laughs), right. For some people that were already clipped with….their applications were ready to go because they had a great relationship with the SBA, or someone else who is assisting them, they can get, you know, an advantage at getting to that pot of gold.
So, we knew how important it was to be able to communicate to alleviate fears and then to also talk, as quickly as we could, to the SBA and to the Treasury to let them know that this need is there and that we need to make sure that the accessibility is there for small businesses too. The PPP went live on Friday morning and we didn’t get the guidelines until the night before, we didn’t get access until late Saturday night and our first file that I saw saved was at 3:00 in the morning that Sunday and like I said, we only have 55 team members. Some of the fintechs were saying, well, that’s a lot of people, I only have 11. Well, these 55 team members were also tellers, staff, this is not like a team that is focused exclusively on this particular situation and so, we were really trying to mobilize.
We only had one access point that was working and so, we were just trying to drive all the applications through that lane. It was excruciating, taking forever and that first phase, we were able to get through quite a few applications, but knew that there such a gap, especially in those gig workers, independent contractors that couldn’t apply until that following Friday when Phase One started so, we knew that there was even more work to do.
We were really fortunate at the very beginning…..Teslar Software, I put out a call knowing that we wanted to stay engaged with customers, I did a call on social media just asking for fintech partnership opportunities for PPP, and offered a free tool for community banks to be able to manage applications through the process and also communication with customers that was perfect for us and they provide to others community banks free as well. That was great and from that point we were able to get a partnership with MX who then helped us get where we only had one access point, we could try pooling our applications through their access points, those applications only.
Again, we used social media to communicate the status of where we were with customers and we saw a lot of anxiety from small business customers not thinking that they were qualified, or they were sophisticated enough to be able to apply. So, our team spent hours, and even days with some business owners trying to make sure that their applications were complete so that they could get this much needed funding. So, the communication was mainly for those that have the least amount of resources available to them, to know that the program was accessible to them.
Jill: You know, at the same time, I was working to try to match make small businesses that may be in New York, or Florida, or California, or Texas where the community banks in those areas could serve them well because we were having to limit resources, limited to just Oklahoma and applicants.
Peter: Right, right. So, did you focus…..obviously, your existing small business customers, I imagine, would have been your primary focus, but did you help many small businesses that were not Citizens Bank customers?
Jill: Yeah. So the first round, we did prioritize our customers and we actually triaged. We were trying to help those that were in the most critical need first, sometimes those were borrowers and sometime they were not, and then we really focused more on our customer base, only because that’s only what we could handle from a volume standpoint. Phase Two, we opened that up to all of Oklahoma, I don’t think I have percentages, but it will be a good wager to say that at least 50% of those that we served were not already……they weren’t legacy customers of Citizens Bank Edmond.
Peter: Okay. I’m curious because with our story which I’ve shared, we have banked with a top four bank since the founding of LendIt and we weren’t getting anywhere and, obviously, I know a lot of people in the fintech space and the small business space, but we ended up going with a small community bank here in Denver which we are now moving to be our primary bank. I’m just wondering, it seems like there’s many community banks that have come out of this really in a positive light and it sounds like….obviously, your bank is one of them so, do you think that this has been like a real net positive for your bank and for community banks, in general?
Jill: I think it shows that you want to have some local accountability and I heard from anyone somewhere where you know that you can go meet with the CEO, or get them on the phone so, if there’s a big bank that their CEO is accessible to you, then that’s great and you want to be sure that you can talk to the person that’s ultimately making decisions and is accountable, what’s their direction and where their bank is going.
Peter: Okay, that makes sense. You certainly can’t get that with a large bank. I want to switch gears a little bit and talk about Mark Cuban. I was on Twitter when he put out a call to say, hey, I need a bank that will come work with me to create a program for consumers, and I saw you actually responded really quickly and then next think I know, I’m reading about you in American Banker that you got this program in place. So, tell us a little bit about that process and what actually you’ve created with Mark Cuban.
Jill: Yeah, my phone started blowing up and a friend who knew Mark Cuban saw the post. I had many of them that responded and tagged me on it and then I had a lot of text messages from them as well. Primarily from the fintech community and they started advising other people in the fintech community, I responded, even my cell phone number responded a couple of times. I didn’t hear anything, but another fintech friend sent me an e-mail and said, hey, I have Mark’s e-mail address and he does publicize it, you might try this because it certainly does monitor that account.
So, I e-mailed him and he said that he will call me back, he wanted to call and talk about it, he did call me. It was in the middle of my board meeting, actually, and so we had about a 7-minute conversation it was really…just like it was Shark Tank pitch (Peter laughs). I had my pitch and then he destroyed that pitch and then had his, kind of what I really want to see happen and respond. So, I gave him some feedback about some concerns I had about it, but then some things I’ve to talk and really get about his perspective on it and it was mainly talking about a line of credit. He called back about an hour, or two later and said, hey, I think I have another idea, why don’t we…let’s not mess with the loan, let’s look at an overdraft program because then you don’t have to do as much, you don’t have to do underwriting.
I was concerned about the bank’s exposure to an unsecured loan program, floats the funds until someone gets a stimulus check. I mean, it was an exposure of multi million dollars and a bank that has $30 Million of capital so, I was really concerned about our exposure, but both us had this focus on helping so, the overdraft I thought…. talking to him, I could outline pretty quickly, how I thought we could accomplish something and he agreed with some of the criteria and then asked me to come up with a plan. So, I came up with a plan and after telling our staff, I grabbed the team both times and said, okay, first of all, this is what I’ve done, do we want to move forward with how many discussions with Mark Cuban about this and it was a resounding yes.
When he came back, we kind of formulated a plan and brought the team back together and they’re like, this sounds great but, yeah, this is exposing us to a significant financial risk, significant financial risk and then we have a significant regulatory risk with my compliance standpoints because overdrafts are such a sensitive area and we want to make sure we’re doing the right thing. Everybody was just a resounding yes and some risk that we were able to identify, we were able to mitigate.
So, I e-mailed Mark Cuban back and said, hey…..he wanted me to send him what I was going to tweet out and I said something like we’ll be posting soon our new program on this and he, basically, just gave me the (garbled). Yeah, that’s pretty basic and I can get that….. any bank to say something is coming soon, we need something now and so, I said, okay, how about if I get it done by Tuesday. This e-mail, I think, was on Saturday, and he was like, okay, that’ll work, tell me when you will send it out on Monday.
So, we were able to hussle and get it done by Monday, rather than by Tuesday, and he continues to be a leader and at least, giving us a thing differently about this crisis. We have this tool kit…… because we have a financial crisis and we took so much effort to make sure the financial crisis won’t happen again and if the Fed had all the tools and Treasury had all the tools that they needed to address the financial crisis and that crisis last time, he was in that, mid-market….you know, were at a much larger bank, much larger companies that were affected by it.
We still have this tool kit and we’re deploying it now because we’re having it now and we’re entered another crisis, but this crisis is so at the small business level at main street. This is happening at store by store by store….the systemic spread and the economic impact and it’s not this massive attack at the top. And so, he’s done a great job in really trying to break away from convention and identifying that this tool box is inadequate. He provides the ability to get to the highest level of government. Also, the whole thing with this partnership with us wasn’t about Citizens Bank of Edmond, Mark was wanting to use a bank that could plant a seed and then spread and that’s exactly what happened.
We ended up having over 400 interactions with different banks around the United States, ended up in national publications, on all kinds of chats, on social media and with large groups that we were able to then really get everyone thinking about, could we help from an overdraft standpoint. That’s what we saw, lots of banks shift to not be charging overdraft fees, applying more liberal overdraft management and so, that’s really what his focus was…..kind of the same way that this crisis was occurring like one storefront at a time, having the challenge making the change from one bank at a time.
Peter: Okay. So then, what the specific product, you said it was it an overdraft product, was it tied to the stimulus check? You put it in place and, obviously, stimulus checks have been arriving, are people paying it back like you expected?
Jill: Yeah. So, it was a little bit different. The criteria included that you had a……your stimulus money had your previous tax payment, or tax refund have to come out of your Citizens’ account so, we knew then the tax and the stimulus check would come into this account So, that was one of the criteria so all those funds have come in. We have seen our overdrafts triple what they normally are and we’ve been such a liberal in how we’ve been processing overdraft payments, making sure that we’re not keeping food off someone’s table because we won’t process the checks. So, we are maintaining higher overdraft balances and, again, trying to really help our community weather the storm.
Peter: Okay. We’re almost out of time, but a couple of things I want to get to. You know, there’s obviously been a lot of talk about digital banks and in fact, many of the digital banks have been adding customers by the thousands every day in this crisis. So, I’d be curious to get your take, do you see digital banks as a competitor to you, as a complement, I mean, how do you view this kind of digital banking movement?
Jill: Yeah. I think digital banking is in some ways a complement, in some ways it’s competitive. You know, there’s a rapid evolution at the community banks where it can be both a digital bank as well as your traditional community bank on the corner for us. You can open all your accounts online and you can manage it through our mobile app system. We’re about to upgrade our mobile banking so that we can open APIs, so we can plug in lots of things to make it sexier.
So, you know, I think what’s happened with digital banking is it’s really pushed conventional banking to be more and to be relevant. You know, I don’t spend a lot of time concerned about the digital banks, but I do spend time being inspired by them and so, I do think they’re elevating the game of all of banking and you know, it’s been great to see the way that they built some of their business models. They allow you to be very thoughtful about the income regarding your customers and not be asked, dependent upon that, but be able to have a sustainable revenue source, or business plan so you can stay around for another hundred years which is our goal.
Peter: Right, right. Last question then, we’re in the middle of this real….what’s going to be a financial crisis, I’m curious about what do you see the next six to 12 months holding for Citizens Bank?
Jill: Well, for us, we’re planning for the worst, but we’re hoping for the best so we know that there’s going to be some small businesses, especially in some consumers in our community, that…..this temporary crisis is going to have a longer term impact on them so, we’re focusing a lot more on portfolio management, but then we’re also looking at this crisis as it plays. How do we look at things we implemented in the short term as convenience offerings to our customer and be able to develop them into longer-term solutions to increase the accessibility our customers have to their finances.
And so, for something….by curbside thinking, we were running things out to customers outside, trying to keep safe distances, now we’ve formalized that so that we have curbside banking that customers can now go online, or use their mobile to schedule a time and to do non-cash related transactions at the curbside and then be able to use restaurant style buzzers if there’s a wait inside the bank to be able to go on and take advantage of all the great fun in downtown Edmond and then come back to the bank whenever their point in time is back. So, it’s really about how you take these things to be kind of “MacGyver-ed” up during the crisis and perfect them and make them something that makes banking a better post crisis than it was before.
Peter: Right, okay. We’ll have to leave it there, it’s really been fascinating to watch you and your company sort of operate through what is a very challenging time for everybody. So, thank you for coming on the show today, Jill, appreciate it.
Jill: Take care.
Peter: See you.
You know, one of the things I really appreciate about Jill and the Citizens Bank of Edmond story is that she really shows what’s great about community banking. She talks about how she’s close to the customers, but what I see most is how she’s been able to react quickly. I mean, she talked about the PPP story and how to react to that, doing this program with Mark Cuban, doing the curbside banking.
I mean, this is why, I think, Jill has become such a high profile person in community banking is that she’s innovative, she’s not scared to try new things, not scared to take a risk and she implements these things quickly and that has really a lot of the recipe for success there. She’s been able to continue to do it year after year and I see, you know, one of the community banks really as coming into their own, I think, in this financial crisis. I think what we’ll find at the end of all these is that many of the community banks are going to come out of this crisis much stronger than when they went in.
Anyway, on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.
Today’s episode was sponsored by LendIt Fintech Digital, the new online community for financial services innovators. Today’s challenges are extraordinary with the upheavals affecting all areas of finance. More than ever before, we need to come together as an industry to learn from each other and make sense of this new world. Join LendIt Fintech Digital to connect and learn all year long from your peers and from the fintech experts. Sign up today at digital.lendit.com.