Budget Your Business

Find Your Right Bank with Scott Geller

• Scott Geller • Season 1 • Episode 42

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E#42: In this solo episode, Scott kicks off a new mini-series focused on one relationship every business owner has — their bank. Drawing on his background as a Federal Reserve Bank Examiner and years as a fractional CFO, Scott breaks down the different types of banks, how they’re regulated, and what business owners should know when evaluating their banking partners. He also previews upcoming episodes featuring bankers from institutions of all sizes to help you find the right fit for your business.

Book Recommendation: Secret Trades Craft of Elite Advisors by David C. Baker

Find out more about Scott Geller: https://www.linkedin.com/in/scott-geller-cfo/ 

Find more episodes on Apple podcast, Spotify, Amazon Music and here: https://budgetyourbusinesspodcast.buzzsprout.com/

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So, why is this important? I do believe that banks have a place for small businesses. A business can benefit from a bank, from the right bank. More importantly, they can benefit from the right banker, the person that is your representative at the bank. And a bank can really be a partner with your business. That banker can be a resource. And I want to stress how a banker can and should be helping your small business. And that's what I'm going to pull out from these individuals that we'll have on the shows. Hello, and welcome to Budget Your Business, the podcast for small business owners who want to learn how to financially plan for every aspect of their business. I'm your host, Scott Geller. Today I'm running solo for a very specific reason. I'm always trying to think of topics or areas that I can address in this podcast that are relevant for most, if not all, small business owners. And what does every business owner have in common? They have a banking relationship. In some way or manner, it might only be a check-in account or an operational account. It might be a full-fledged debt, savings, investments, multiple bankers, commercial banker relationship. But in one way or another, everyone has a relationship with a bank. I'm running a series of episodes where guests will help a business owner make the best possible decision on what type of bank or what type of banking relationship to have. The guests will primarily be bankers from different sizes and types of banks. However, I'm also lining up a few banking experts that will come in and share their stories as well as varying backgrounds to try to provide a little bit different perspective. Again, with the goal of helping you, the business owner, find the perfect bank. Speaking of perspectives, I wanted to start this series with my own perspective and description of the banking industry. So I started my career as a bank examiner. I work for the Federal Reserve Bank of Richmond, which provides so the Federal Reserve doesn't just do interest rates, they also regulate a significant number or portion of banks in the United States. I was part of the group that regulated those banks in the 5th district. So the Federal Reserve is broken into 12 districts. In the 5th district, we focused and looked at banks in Maryland, DC, North and South Carolina, and Virginia. Sorry, and Virginia. So that's what the 5th district is. And I spent four years traveling around the 5th district examining banks for their safety and soundness to make sure that depositors and those that take out loans are safe operating with that bank. So when traveling in these community banks, just a real quick background on how banking regulatory works, examinations are based, the regulators go in and they provide it's called a CAMELS rating, and that is C A acronym for C A M E L S. The Camel's rating provides a breakdown for regulators to provide the bank and compare banks across different districts within the district, across districts with ratings to make sure that they're operating what they call a safe and sound method. So the the acronyms, the C is capital. And that is really based on examining the strength of the capital on the balance sheet. An example why this is important, if you go back to Signature Bank in 2023, they have poor assets and a poor capital structure. Didn't go well for them. The A is asset quality. And this is where examiners evaluate the loans on the books. Another example why this is important is IndyMac Bank in 2008, when housing collapse hit, they had very poor mortgage loans on their on their books and they ended up shutting down. The M is for management, where it assesses how the team, how the leadership team is managing and running the organization. Let's see, so E. E is for earnings, and that is assessing is the bank making enough to support the bank and in the right ways. An example is Pulaski Savings Bank back in 2024, they ended up failing because they had poor net interest margins, which is equivalent of you could think about as a gross margin, but their net interest margin couldn't cover its operating expenses. The L is for liquidity. Liquidity is do you have enough cash to run your organization? And for an example of where that's well, that's important. If you I'm sure everyone remembers the S SVB bank, well, they had a bank run. They didn't have sufficient liquidity to pay out their depositors, so they had to close the doors. And then the S is for sensitivity to interest rate risk. And this is a relatively newer, this is one of the latest uh letters or rating areas that examiners added. And it's basically to assess are the are the interest rates that are the assets that are on and the liabilities on the books, are the does the interest rate risk between those is it sufficient, is it too high or too low for the organization? Silvergate Bank was a bank in California that failed due to a concentration in long duration investments that are were not matched their deposits. So examiners come in, they apply ratings to these camels, and the whole point of this is to make again is to make sure that these banks are safe for the general public. A little more as I geek out on the regulation side of so there's a Federal Reserve Bank, there's the OCC, and there's also the state regulatory chartered banks. So those are the three organizations that perform examinations. The Federal Reserve has about 4,500 banks that they look at. The OCC looks at around 1,100 banks, and then the state charter looks at about 4,000. And just to be clear, all banks are regulatory regulated. And regulators, while can be a pain, while can cause some uh issues on the the client side as as far as making things make it difficult for banks to perform certain tasks, regulators are important. So that's one perspective of mine. Another perspective is from the other side of the table, where the last five plus years I've been a fractional CFO working with small businesses, multiple small businesses. And from that perspective, I'm coming to banks from the client side with what is the bank doing for me? And we'll talk about that a little bit more as well. But first, I want to start with throwing out a couple, breaking down what types of bank institutions there are. And we're gonna follow the the guidelines that the Federal Reserve has put out there and the way they look at it. And the largest that they start with are called G Sibs, and those are global systemic systemically important banks. These are the big guys, these are the ones that probably I think there's less than 10. And they're over $100 billion in assets. Yes, that's with a B billion in assets, and they're usually over $500 billion in assets. These are the JP Morgan Chase, the Bank of America's. These are the banks that are everywhere. They're on TV, they're on my Carolina Panthers Stadium, Bank of America Stadium. They're the massive organizations. The second group are the LBO, and that's not leverage buyout, but the LBO and the banking sense are large banking organizations. These are over 100 billion assets, but not globally systemic. There's about 32 banks in this category, and that includes the GCBs. Some examples are those are PC Bank. They have about 550 billion in assets. Truest Bank, who used to be Sun Trust and BBT, then they combined to become truest, and they're about 525 billion in assets. You have US Bank, Capital One, State Street Bank. So these are banks, at least in the US, that are pretty much everywhere. You see the commercials, you see them all over the place, but they're not quite as large, they're not global. The next category are regional banking organizations. And these are 10 billion to $100 billion in assets, and they include about 90 banks. Some examples are Regions Financial Court. They primarily operate in the South and Midwest. Another is Fifth, Third Bank Court. They're mainly in the Midwest and the Southeast. T Bank is another one. They're in the mid-Atlantic and Northeast. Zion's Bank Corporation is out in the west, western part of the U.S. And these are organizations that are definitely spread across states. And not always, not usually as many on as many NFL stadiums as like the Bank of America's, but they're still good size. And then you have your community banking organizations. And these are less than 10 billion in assets, and there's about a little over 4,000, about 400, 4,300 banks. Personally, I think of community banks into two different categories, and that is either locally or regionally. I consider local community banks as those banks have a presence within one state. Sometimes it's one specific area, maybe a town, maybe a county, but it's one smaller zone. And then the regional are those that are spread out across multiple states. Now it may only be two states, maybe it's three states, but they are spread out across more than just one small area or one state. To put in perspective, um 78% of community banks have a presence within one state. So 78% of that 44,300 banks only have a presence within one state. Now, these aren't the only banks, those are just the banks primarily that the Federal Reserve and those other organizations regulate. And but they are the primary types of org banks that you see, and I think most business owners are familiar with. But there are others. Some of those other types are what's called a CDFI, and that's a community development financial institution. These are typically private, they're government certified, and they're also nonprofits. They typically operate in the underserved and low-income areas. They provide loans and usually financial support or guidance too. Another is a credit union. This is actually a member-owned cooperative that services members but not profit. They are membership-based, they provide deposits, loans, lower fee, they usually have lower fees, and those typically fall into the local or the regional group as well. Another one is the SNL or savings and loans, and these are mutual or stockholder-owned. So they promote thrift or home loans. Their customer-based are usually individuals or families, and they provide mortgages and then savings accounts. For a little perspective on the size of these, there are about 200 CDFIs. There are about 4,700 credit unions. To put that in perspective, there were 21,000 credit unions back in the 80s and back in 1980. And then for the savings alone, while there's about 400 to 500 today, which is actually more than I thought there were. They provide checking, savings, some loans, usually no physical branches. You have your Islamic banks, which are corporation or co-op or with a sharia board. These are interest-free, mainly because interest is not allowed within the Islam faith. So they provide cost plus financing arrangements as well as some profit-sharing partnership contracts. And then you have specialized banks. These are corporation or sector focused, target specific industries, such as agriculture, maybe. And they usually provide equipment leasing, agri loans, maybe escrow. Those are very typically limited and very regional. All right, so a lot has happened over the last 30 and even 10 years in the banking industry or market. Specifically, there's been a lot of consolidation over the years, and especially recently. So just in perspective, in night in the 90s, there were over 12,000 FDI insured commercial banks, 21,000 credit unions, and thousands of SNLs. In 2025, there are fewer than 4,000 commercial banks, 4,700 credit unions, and about 500 SNLs. Today, the larger banks are more predominant. There are fewer and fewer community banks and niche banks. And what we're going to do, we're going to try to talk to, we're going to talk to some of these so that you get a feeling of what each of these banks do. We're going to talk about what they provide, you know, deposits, through checking, savings, CDs, they do payments, ATMs, debit, credit cards, wire transfer, bill pay. These banks provide lending. So personal, auto, mortgages, business, commercial. They will provide money management. So the lines of online banking and apps, account management and statements, direct deposits. A lot of them might provide wealth and investment services. So those are investment accounts, financial planning, advisors, IRAs. They provide safety and securities as through their safe deposit boxes and fraud protection. They can also, while they may not be global, they can provide international services, and that is foreign currency and international wires. They have special services, cashier's checks, money orders, notary services. You still have to get things notarized these days. And admittedly, a lot of these lines are being blurred across who does what and what they do, and others, some specialize, but those are generally the services that we're going to touch on when we talk to some of these different bankers. So, what are these interviews going to look like? Well, I want to bring, like as I mentioned, bring in bankers from some of these different size of banks, and I'm going to ask them what makes your type of bank important and useful? What types of businesses make sense for your bank specifically, but really your size of banks? What are some of the advantages and disadvantages of your bank? Who is the perfect business for your bank? And then get a few tips and trends from the banker's perspective. I will say, bankers see a lot of clients. They see a lot of companies. So I'm sure they can share some tips and uh trends with our with our listeners. So why is this important? I do believe that banks have a place for small businesses. A business can benefit from a bank, from the right bank. More importantly, they can benefit from the right banker, the person that is your representative at the bank. And a bank can really be a partner with your business. That banker can be a resource. And I want to stress how a banker can and should be helping your small business. And that's what I'm going to pull out from these individuals that we'll have on the shows. Now, just be clear, not every episode is going to be with a banker. I'll break it in probably other every other for the next few months. But at the end, and at the end, we'll probably wrap up the series with my own learnings and maybe a summary of what we've what we've heard from all these bankers and from different sides of banks. All right. I've rambled on enough about banking. Just want to give you a little prep on what you'll see over the next several episodes. Um, and as always, we wrap up our show with three budgeting tips. Today it's gonna be finding a banker. First tip is to ask around and ask more than one business owner or friend or trusted advisor for connections or who they think would be a good fit. And my number two is talk to more than one bank. Find the right person, find the right bank. And then my third is make them work for you. Ask what you get, ask how they help you, and compare, see how they compare to others. We also like to wrap up this show with a favorite book or podcast. And I'm gonna share one that I recently read, slash, technically listened to, but and that is the Secret Trades Craft of Elite Advisors by David C. Baker. It's a very practical guide for expertise businesses, where he helped David helps you break down, think about your work week, how to thrive as an advisor, what consultants can provide, dealing with prospects, delivering. Really a nice framework and relatively easy to get through. So I I uh recommend checking that out. That's it for today. Thank you for letting me uh take a solo episode today. And I ask you to go out, rate the show if you like it, or pass it on to others so we can spread the budget your business podcast. Thank you for listening, and I hope to see you next time on Budget Your Business.