[piano intro] - Hello, I'm Nido Qubein.

Welcome to "Side by Side".

Our guest today has 30 years experience in banking and technology.

He's been driving innovation and community impact in North Carolina for more than a decade.

Join me today as we speak with James Sills, President and CEO of M and F Bank.

- [Announcer] Funding for "Side by Side with Nido Qubein" is made possible by- - [Announcer] Coca-Cola Consolidated is honored to make and serve 300 brands and flavors locally thanks to our teammates.

We are Coca-Cola Consolidated, your local bottler.

- [Announcer] The Budd Group has been serving the southeast for over 60 years.

Specializing in janitorial, landscape, and facility solutions, our trusted staff delivers exceptional customer satisfaction.

Comprehensive facility support with the Budd Group.

- [Announcer] Truist, we are here to help people, communities, and businesses thrive in North Carolina and beyond.

The commitment of our teammates makes the difference every day.

Truist, leaders in banking, unwavering in care.

[upbeat music] - Mr. Sills, welcome to "Side by Side".

I'm intrigued with your career and your work today.

You're the CEO of a bank that's been in business 117 years, is the second oldest minority owned bank in the country, M and F Bank based in Durham, North Carolina.

You're the second oldest minority owned bank in the country.

Which one is the first one, which is the oldest?

- Citi, well, it's first it's great to be here with you, Nido.

The oldest African American owned bank is Citizens Bank of Nashville.

They've been in business about three years prior to our bank coming into formation.

- But to be, you know, around for 117 years is pretty impressive, to say the very least.

And you've gone through a lot of economic cycles and you've survived all those.

How long have you been CEO?

- I've been the CEO for 10 years.

I came in 2014.

- And you've been a North Carolinian all along, or?

- No, I moved down here from Wilmington, Delaware.

- Okay.

- I was recruited by the Board of Directors to come transform the bank to make it more relevant to the markets that we serve all across North Carolina.

- Yeah, what does, how does the bank become more relevant to the market that it serves?

- You have to look at how, what economic factors are occurring in the state.

Is there a lot of growth?

Is there a lot of small business opportunities?

Are there a lot of new entrants to the state?

Is the political climate correct?

Is the economic climate correct?

Is the tax climate correct?

And so you wanna make sure that your bank is relevant to those various sectors of the economy because you wanna participate in the growth, the overall growth of the economy, but also your institution, your financial institution.

- How would you rank the times we're in now?

Are we in good times?

Are we in average times economically?

You know, banks of course are a litmus test, if you will, for how the economy is doing, whether people are building, borrowing, expanding their business, investing in equipment, et cetera.

- Banks are doing well.

The economy overall is good.

It's not as good as it was a few years ago, but it's good.

North Carolina is a tremendous state for banking.

We have a number of new entrants here.

Some of the largest banks in the country are expanding here.

So that's a sign that this is a very healthy state and a great banking market.

- And Charlotte is the second capital for banking in the country, New York being the first.

- [James] Yes.

- If banks are doing so well, how come the stock of banks today is not where it should be, where it needs to be, where would like for it to be?

- It's all based on earnings.

It's all based on growth.

It also based on, you know, where your bank is physically located.

I think bank stocks will come back if we have less regulation.

I think you'll see banks- - [Nido] Interest rates.

- Interest rates come down a little bit more.

I think you'll see bank stocks continue to increase over time.

- M and F Bank is is corporate headquarters in Durham?

- [James] Yes.

- But you're in other cities as well.

You have operations, correct?

- Yeah, so we're located in the five largest markets of North Carolina.

So we're in Durham, Raleigh, Winston-Salem, Greensboro, and Charlotte.

- You only do business in North Carolina?

- We're a state charter bank.

- [Nido] Your a state charter bank.

- Yes.

- And your assets are?

- $512 million.

- Which, you know, just for those who may not be familiar with what assets mean in a bank, you define assets principally as the amount of money that you have lent to other people.

It's reversed in banking.

- [James] Right.

- You know, we think of assets as what we have and liabilities as what we owe.

But bank is kind of a little different than that.

How would you define it to a, let's say a high school seniors class who wanna learn about money and finance and banking.

How would you define assets and liabilities in a bank?

- Yeah, great question.

You know, assets on a bank's balance sheet are the loans as you just mentioned, but it's also the investments and also fixed assets.

And then on the liability side, those are the deposits.

So those are the, you know, individual savings accounts, money market accounts, CDs.

But those are liabilities to a financial institution because we owe those depositors their money.

I love the business of banking because we serve as middlemen of taking that customer's deposits and redeploying it into, in the form of loans back out into the communities that we serve.

I just think it's a great business model and I've loved every minute of my banking career.

- Is there a standard ratio or percentage of the relationship between assets and liabilities?

In other words, if you have, you know, your half a billion dollars or so in assets, so let's hypothetically say, I'm making up the number.

You have deposits of 350 or so.

Would I be correct?

- Yes.

- [Nido] In that range of 3?

- 372 for us.

- 372, okay, had a good guest there 350.

- [James] Yes.

- So is there a relationship between those two that's an acceptable relationship and is it monitored by the Feds or in your case, by state examiners?

- It's monitored by the Feds.

It's also monitored by the state banking department and the FDIC.

The way I look at it is the percent of capital to total assets.

And so a healthy bank is gonna have a capital to asset ratio of at least eight or 9%.

Our capital to asset ratio is about 15%.

So we're one of the strongest banks in North Carolina, but that's how I measure it.

- Okay and how do you raise capital?

- We are very fortunate.

We are capital rich.

We have about $130 million in capital.

We've raised the majority of that since the murder of George Floyd.

And so the bank has actually grown from about 250, 264 million in total assets to about 512 million in total assets over the last five years.

So we've experienced tremendous growth over the last five years.

- And why is that?

Besides excellent CEO and management.

- No, no, we have a great board.

We have a great management team.

Because of the mission of the bank in terms of serving low and moderate income individuals, but also providing access to capital to small and medium sized businesses, people, corporations, nonprofits, large scale banks, and others want to support the mission of the bank.

And they know that supporting a bank like ours, like M and F Bank, that's the best way because we're closest to those communities.

- Every bank, of course, has a community reinvestment program.

You obviously have your whole business is community reinvestment.

What is it that you, as CEO, or your management team, what is it you look at when somebody comes to you for a loan to invest in expanding a business, starting a business, buying equipment, whatever.

What are the fundamentals you look for?

- We look at the total person, we look at the total relationship that that business has with the institution.

So we are very cognizant of looking at do they have the management experience?

Have they been in business at least three to five years?

Do they know what they're doing?

Is this a business that we can work with?

'Cause our whole goal is to work with small and medium sized businesses to help them expand.

- You define small to medium by business as what?

That would be different for example, a large bank like Truist would define small to medium, I would think quite differently than you would.

- Yes, yes.

So for us, a small business is really gross revenues of less than $5 million per year.

- And medium would be what, 15, 20, 10?

- Yeah, 15 to $20 million and then it just goes up from there.

- So you look at those fundamentals, one of them is that there should be in business three to five years.

You want it proven - Yeah and you want them to at least be, have at least to have profitability, some history for four out of those five years.

- So how does, help me understand how does a person, let's talk about minority person.

- Sure.

- Who wants to start a business, can't get money from you.

They gotta figure out somehow without capital, they can't start their business.

I'm familiar with some programs that are focused on that, raise private money, usually philanthropic money to help small business people start a business.

But if you're speaking to college graduates, for example, who have a dream to be entrepreneurs, build a business, where would they go for capital, if they can't get it from M and F, where would they go for capital?

- It's gonna be tough, but it is possible.

You know, you go to friends and family.

- Yes.

- You leverage credit cards.

There are grant opportunities that they can apply for.

There are other programs that they can participate in.

There are programs where they can participate in various shark tanks and win prizes.

So that's how they would normally raise capital.

- What's your biggest challenge as CEO of M and F Bank?

What is it you worry about when you go to sleep at night?

You know, what is it you really worry about?

- The talent, can we get the talent.

That's our, that's my biggest concern.

You know, we have the capital to grow to a billion dollars in total assets.

We're a little over a half a billion at the moment.

- But what and why and why aren't you there, because of?

- It just takes time.

- Yeah.

- It just takes time.

- It's a relationship business.

- It's a relationship business.

You have to have the people in place.

You have to have excellent marketing, you have to have excellent technology.

It's very competitive.

The markets here are very, very competitive.

- Yeah, speaking of technology, I mean, how does an M and F Bank with $500 million in assets have a backroom operation to compete with somebody who has significant funding for technology?

How do you have, for example, online services that can compete with another bank that has the capacity to create really good resources?

- Well, we have, we utilize a third party vendor, Fiserv, and they're the core provider or technology provider for about 2200 banks across the United States.

And so that's how we're able to kind of keep pace with some of the larger banks.

We're actually one of their customers.

- [James] Yeah.

- And so we have online banking and mobile banking and all the technology and all the- - Using other systems that- - All the bells and whistles that the large banks have.

We have to continue to invest in technology if we wanna stay relevant.

It's absolutely critical that we continue to invest in technology 'cause everybody wants to do it faster.

- So I'm intrigued by the notion a few years ago we had roughly 5,000 banks in America and there was so much chatter about these banks are gonna disappear.

We're gonna end up with 50 big banks.

M and A, mergers and acquisitions, will take care of that.

You're gonna see small community banks disappear.

A half a billion dollar bank has no hope of staying in business.

And yet that hasn't happened.

You know, it's, how many banks do you think we have in America today?

- 4,500.

- So we lost 500 through mergers and acquisitions.

A couple of 'em went bankrupt.

But generally they get, you know, cooped up by somebody and there more community banks are being started.

What's that all about?

- I think that's great.

- Do you think it's good?

- Yeah, I think it's good.

- Even though it creates more competition for you.

- I still think it's good.

It really helps the end consumer and the small business owner.

You always want to have access to financial institutions and to capital.

So the more banks that you have, it makes it easier for the consumer and the small business owner to have a relationship with a bank.

We're the only country in the world that has that community bank model.

Most large countries only have a handful of banks.

Like Canada only has six banks.

So I think it's great if you- - And there's a lot of government regulation around the world.

- It's a lot, it's a lot of government regulation.

- Even though you have regulation too.

- We have the same regulation as the largest banks in the country.

- Yes.

- But one point i I wanna make sure that I communicate is that community banks normally focus on a specific area, a specific niche, and they're focused on helping small and medium sized businesses grow.

- Or professionals.

- Or professionals.

- Yes.

- Like doctors and lawyers.

But community banks provide 60% of all the small business loans under a million dollars.

Community banks provide 80% of all ag loans across the country.

- [Nido] Really?

- And community banks provide about 40% of all mortgage loans across the country.

So community banks are a critical component to the financial system that we have here in the United States.

- You think of M and F as a community bank?

- Yes and my definition of a community bank is any bank that is under $5 billion in total assets.

- I see, I see.

So we can extract from that a community bank is, one would argue, much more connected to the community and the people in the community.

- [James] Right.

- You know, the old times, we used to say a handshake with a banker can get you- - [James] Exactly.

- I remember when I first had my first mortgage, the gentleman called Fred Alexander in a community bank.

He literally, you showed up and he knew you, asked you a couple of questions, it was a handshake.

You came back in the afternoon, you signed one piece of paper and that was it.

- It's changed a little bit, but it's all about relationship banking.

- But regulations have caused you to change.

- [James] Yes, that's correct.

- Now so many pieces of paper, so many disclosures you must make and so on.

You mentioned talent as being a challenge, meaning attracting the right associates who can help you grow.

As North Carolina grows and North Carolina's become a magnet for companies of all sizes to come here.

It's a great place to live, great place to raise a family.

We have great infrastructure in North Carolina, highways, et cetera.

That's gonna put pressure on the existing companies to create and the communities to create more workforce, to supply the needed talent for these companies.

How would an M and F Bank deal with something like that?

- We have to be creative in terms of how we attract talent to the bank.

We have to do a lot of outreach.

We have to have like a management trainee program.

We've had that the past five years at our institutions.

- Taking from like colleges.

- Like straight outta college.

We normally hire two college students.

- [Nido] Train, develop, educate 'em.

- And we actually rotate them through all of our departments in our institution.

- So you grow them basically.

- We grow them, but we also try to take talent from other institutions, you know?

- Yes, everybody does that, okay.

That's a tough one though because pay scale becomes an issue there.

Compensation becomes an issue.

Although values also, I would think, very important to people.

They wanna work with you because you have specific vision, mission, and values, and wanna be a part of that.

- We sell the mission.

- Yeah.

- Most of our associates that join the bank, they wanna support the mission and that's what helps us attract talent to the bank.

- So let's talk about economics in North Carolina.

I know you're involved in the North Carolina Banking Association and you certainly are in contact with a lot of leadership in the chamber and beyond and across the state.

As we look at economic development in this state, which you seem to welcome and cheer on, we are gonna have some challenges.

I mentioned workforce as being one challenge.

Rail could be another challenge for us.

We do have good airports, we have good access in that.

We have great university system with private and public and community colleges.

What do you see as a challenge for North Carolina as it grows population, as it attracts more people here?

- Again, I think the biggest challenge is talent.

We need to attract more talent here.

- So, are are you making a distinction between talent and workforce?

Are you referring to talent as a category of workforce or you just mean human resources?

- Just human resource, human capital.

We need more human capital here.

We have great schools, we have great community colleges.

- And how, in your view do we get there?

How do we get more talent?

Part of it moves here, right?

- Part of- - [Nido] Part of it comes here.

- Part of it moves here.

We need to have better relations with the schools and the universities and the state chambers and the local chambers and the bank associations and various public private partnerships to make sure people are aware of all the talent that is here.

But how do we get to that talent in terms of talking to them and actually attracting them to your institution- - Persuading them.

- [James] Persuading them.

- To commit and then retaining them over the long haul.

When we look at the future, you seem to be optimistic about the future of North Carolina and therefore banking in North Carolina and all of that.

And talent is a niche.

How many employees do you have at M and F?

- We have 90 employees.

- 90, yeah.

So if you lose five of those, it makes a big difference for you versus an institution that might have 200,000, right?

They come and go, you know, as time allows.

When you look at your own position as a leader in the state and as someone who's trying to educate young people and others to join your group, what is it you sell them on?

What are the two or three things that you say, here's what you have to be and to become, to be a valuable partner on our team?

- I actually sell the mission and the history of the bank.

- Mission of the bank.

But in terms of personal characteristics and personal focal points.

- I would say that I strongly encourage someone to be a generalist and not a specialist.

- [Nido] Really?

- Yes, I've been a generalist and I think that's how I've been able to rise through the ranks.

I think you wanna be a continuous learner.

I think an individual wants to, should volunteer and raise their hand for opportunities.

- [Nido] In the community?

- In the community, but also in the institution.

- [Nido] I see, I see.

- Don't just think we're gonna always call on you to perform a task.

Why don't you volunteer and say, "Hey, I'm ready to step up."

So I'm looking for individuals that have leadership characteristics, good adaptability, and they take initiative.

And just because of, you know, your universal soft skills are more important now.

- [Nido] Life skills, yes.

- Life skills are more important now than ever before.

- Yeah, that's become quite apparent as the world changes.

Technology is a big part of our present and our future.

Artificial intelligence, everybody's talking about it.

I'm not sure I understand it completely, you know, but you're, we hear about it coming and going, how is that gonna affect your bank and other banks of your size?

Obviously large financial institutions are investing humongous amounts of money in that field, but the smaller ones use third party, I understand, but it also has implications for your customer.

When I go online to do business with you or call you or go to one of your branches, assume you have branches.

- [James] Yes.

- You know, the exposure to that and the experience I have is everything.

I was reading this morning about how banks in North Carolina and it enumerated three or four of 'em, have lost some points, whatever this organization that ranks the satisfaction of the customer from zero to a thousand, they seem to have lost some points in that area.

Mostly online banking, not so much one-on-one.

- Sure, sure.

I think the goal is to be high tech and high touch.

- Yes.

- For us, specifically, we will utilize AI over time.

It'll make our bank more efficient.

We'll have better interaction with our customers, our processes will be more efficient.

We'll be faster in terms of how we get capital out on the street.

- That's so in every other institution.

- But I think for us to be competitive, we have to do that.

We have to invest in those types of technologies- - [Nido] Just to survive.

- Just to survive and to be successful.

- Is AI gonna diffuse and dilute the distinction that any organization, forget banking, any organization, is it going to take away the distinction of an institution?

Because now we are standardizing everything through significant changes in technology.

- I think for our institution, we wanna make sure we're looking at the data.

We wanna make sure that there's not any biases through AI.

And so we're always gonna be checking the AI output, so to speak, because we wanna make sure that we're not making a decision that maybe is the incorrect decision based on utilizing AI.

So I think you're always gonna have a model where you're using AI, but you always want to have a human kind of checking behind the AI.

- You know, the co-founder of Apple Computers, a friend of mine called, a guy called Steve Wozniak, and I love his line.

He says, you know, "You can have all the artificial "intelligence you want, "but you'll never have artificial wisdom."

- [James] Yes, I agree with that.

- And I heard someone the other day say, you know, "knowledge is knowing that a tomato is a fruit.

"Wisdom is knowing not to put it in a fruit salad."

You know?

And that's your point about, about life skills and soft skills and communication, connecting with people, understanding people.

Well I've been around the world of banking for a long time and it is a complex system and it is regulated from the outside to great extent, which makes your life sometimes difficult, but you seem to handle it quite well.

And I honor you and congratulate you Mr. James Sills, CEO of M and F Bank.

Thank you for being with me today on "Side by Side".

- Thank you, thank you, I enjoyed it.

Thank you.

[gentle music] [gentle music continues] [gentle music continues] - [Announcer] Funding for "Side by Side with Nido Qubein" is made possible by- - [Announcer] Coca-Cola Consolidated is honored to make and serve 300 brands and flavors locally thanks to our teammates.

We are Coca-Cola Consolidated, your local bottler.

[upbeat music] - [Announcer] The Budd Group has been serving the southeast for over 60 years.

Specializing in janitorial, landscape, and facility solutions, our trusted staff delivers exceptional customer satisfaction.

Comprehensive facility support with the Budd Group.

- [Announcer] Truist, we're here to help people, communities, and businesses thrive in North Carolina and beyond.

The commitment of our teammates makes the difference every day.

Truist, leaders in banking, unwavering in care.