In this episode
Back in 2006, Trey Maust and Jeff Sumpter started Lewis & Clark Bank–a traditional commercial bank that has embraced banking innovation and evolved to work with third parties to explore new frontiers in banking. In this chat, Trey explains the concept of bankerpreuner: a neologism they coined. He then goes over his own professional history before highlighting how Lewis & Clark has formed strategic partnerships to provide unique banking solutions. The bank focuses on serving clients who value input from experts and are open to soliciting advice from their bankers, attorneys, and CPAs. Trey also shares his view on the future of banking: a critical infrastructure that supplies banking functions and ensures secure and compliant financial services.
Key takeaways
- Since 2006, Lewis & Clark Bancorp has evolved from a traditional commercial bank to embrace strategic partnerships.
- The bank focuses on serving clients who value input from experts and are open to soliciting advice from their bankers, attorneys, and CPAs.
- Regulatory challenges are a significant obstacle for the bank, but they prioritize compliance and recognize the value of maintaining trust and confidence in the banking system.
- Trey believes that working with established banks that have successfully navigated the fintech space can provide valuable insights and guidance for newcomers.
- For Trey, banking is a critical infrastructure that supplies banking functions and ensures secure and compliant financial services.
Transcript
Rory Holland
Well, Trey, good to see you. Welcome to Austin.
Trey Maust
Thank you. Yeah, it’s nice and sunny here. It was a great drive down.
Rory Holland
Yeah, right?
Trey Maust
Yeah.
Rory Holland
Good. And so where is home for you?
Trey Maust
Home is North Texas.
Rory Holland
What part?
Trey Maust
Denton County.
Rory Holland
Oh, you’re in Denton.
Trey Maust
Far Amount is the actual city.
Rory Holland
Got it. Yeah. Got it. Yeah, our son is with friends now southeast in Freestone County.
Trey Maust
Oh, yeah.
Rory Holland
The Spring National Championship for Motocross is going on.
Trey Maust
Oh, nice. OK.
Rory Holland
Yes. Yes. Beautiful day. Yes. So nice to be here. Good. You’re with Lewis and Clark, Bancorp.
Trey Maust
Yes.
Rory Holland
And tell us a little bit about Lewis and Clark.
Trey Maust
Lewis and Clark Bank was a bank that Jeff and I formed back in 2006. It’s been around for a while. Very traditional commercial bank in the Portland metropolitan area. And now covers the entire state of Oregon and southwest Washington. And about seven years ago, we got our first taste of working with a third party trust company and really looking at how you take the bank charter and maybe deploy it in a way that’s a little bit adjunct or in addition to what we do in our local geographic market. So kind of an interesting experience. One of the first I wouldn’t call a BasS play but more of a strategic partner play.
Rory Holland
Yeah. OK. And you guys, so 2006, when you formed it?
Trey Maust
Yeah.
Rory Holland
She’s been around a bit. Interesting.
Trey Maust
And I have to do the great recession that was.
Rory Holland
You survived. Yes.
Trey Maust
Yeah. Yeah, no well, the northwest was not a fun place to be when is that.
Rory Holland
So, that’s where you began, you started it was up in the northwest. Okay, and then you’ve been in Denton. How long? Texas.
Trey Maust
Almost two years.
Rory Holland
Two years. We moved from San Francisco eight years ago. So yeah, so we spent 13 years out there same thing lived through.
Trey Maust
We like the heat, there’s a, we’re one of the few people that actually everyone runs away during the July and August time frame, and we like to hang out.
Rory Holland
That’s good. You got to like the heat if you live in Texas.
Trey Maust
You do.
Rory Holland
But also the winter is great too. So, got to ask this question. Bank, “bankpreneur”, where did that come from? It sounds like it’s.
Trey Maust
Oh wow. Well, Jeff was a history major and so was the founder of the marketing firm that we were working with at the time. And he was, both of them were obsessed with Lewis and Clark and the Expedition and David, the founder of the marketing firm, just came up with that name. We were going through a brand exercise, really trying to differentiate what is it you’re looking for in a client base? What’s that common theme? And a lot of times it’s around product or it’s around, you know, a specific niche or vertical. And for us, it was all over the board in terms of, you know, industries or verticals or people. But one common theme was around the characteristics of the, either borrower or depositor and it was around somebody who really wanted to think through where they were going in life and with their business and most of those were entrepreneurial but they also really valued those around them that provided them input. So they would value their banker, they’d value their attorney, their CPA and they recognized that’s not something they were expert in and they solicited that input. And so we really wanted to, having started our own bank, we wanted to resonate with that, really that personality type. And for us, it really gave us a chance to say, hey, we’ve got a unique perspective. We know what it’s like to start a company. I remember a month before we finalized our capital raise, we ran out of money. And well, we still had to make payroll just like any business, but that was on us. And all that capital was stuck. It couldn’t be released until we got our charter. And so we had to borrow money in order to make payroll just like any other business. I think it gives you a unique perspective.
Rory Holland
It does. When you go through that. That’s the first I hadn’t seen that until I read about Lewis and Clark. And then how did you get started in banking and well in this case Fintech we’re here with that today.
Trey Maust
In banking?
Rory Holland
Yeah.
Trey Maust
Well, I would say both of them were a bit serendipitous. The big end of my career was at Deloitte, so I was actually in financial audit and then merger and acquisition work. And my dad, unfortunately, got terminal cancer. And so we wanted to move back. I was working in New York. We wanted to move back to the West Coast to be with him before he passed away. And a CFO position was available at a community bank. And so I convinced them that I’d be a good candidate for that and was hired to fill that role. And that’s where I met Jeff. So, I was in banking, but I had always wanted to build something from scratch in the world of business. And when he was frustrated one day, he said we ought to just start our own bank and he wasn’t serious about it. But I was. And I knew I had revenue figured out with him and so you know you can build a business around revenue and Said hold that thought I’m gonna go through the financial analysis and determine whether it’s worth our time at that time it was. And so we went about the process. Now, he stayed at that bank. I left the bank to focus on spearheading the formation, and then he came on later on in the process. Fast forward. So we were a very traditional bank. Fast forward when we talk about Fintech, I referenced that trust company relationship that we had. And that was an interesting one because it, like I said earlier, and I had been involved in a lot of policy work for the industry and, so I had been looking around at how are different ways that the bank charter itself is used in various elements of the economy. Is it always used where we go direct to market with lenders and deposit gatherers and just have that face to face through branches or through digital channels, which is just a digital version of the bank. It still requires the individual to interface with the bank and get their money from the bank. And having worked with a trust company it opened my eyes to the fact that we can take that charter and whether it’s lending powers in every state, whether it’s money transmission, whether it’s deposit gathering, balance sheet power, direct access to payment rails, kind of all these things, if you put them together in unique ways, you can integrate them into the economy. So the actual point of economic activity, which is where a lot of these partnerships now focus. And so it’s taking those little pieces of either lending or money movement or holding money or just as basic as card transactions and really putting them more to that either point of sale or point of economic activity. And so the trust company was the first version of that. We actually were processing, receiving ACH payments and files from the largest e-commerce platform in the United States. And then remitting those to the third party vendors that were selling on that platform. And then a few years later started what you’d look at today and say, that’s BasS. I wouldn’t call it Bank as a Service, I’d call that more strategic partnerships, but it uses a lot of the same methods to get it done. So we’ve got about 15 of those now.
Rory Holland
Wow, so you guys have evolved a ton over the last 20-some odd years. Yeah, not quite 20 years. 2006, right?
Trey Maust
We were very traditional though for about 12 to 15 of those.
Rory Holland
And what does the customer base look like? Who do you guys service?
Trey Maust
The partner base?
Rory Holland
Yeah, the partner.
Trey Maust
So, we say strategic partnerships. And the reason I say that is because it’s a unique structure in banking in that the relationships are not bank provides a service to a client like we’re used to thinking. It is bank engages a company to act as a service provider for the bank and delivers it through that channel, the banking products or service. Now, in practice, what’s happening is yes, we have to oversee that activity all the way to the end user, but it is in a white label or a private label fashion. And so I’ll give you an example of one that’s kind of interesting. This is in the, what I love about these is they’re, it provides additional functionality to somebody who’s the end user and they don’t even think about how it works in the background. But when we look at it, it’s we meaning if anyone from the industry were to look at it, they’d say, oh, well, you’re just using a loan, a card issuing, the ability to actually utilize your balance sheet power and a few other powers that the charter provides in order to get this done, but to the customer, it’s got a pretty cool value proposition. And so that example is a fleet management company that enables the vehicle instead of the individual’s drivers carrying around those cards. And every time they have to do something for the vehicle, like get fuel or service or tolls and so on, they have to use that card and then assign it to that vehicle. And then they go to the next vehicle and they got assigned, it’s just kind of a counting mess. The vehicle itself is the payment mechanism. And so as it drives around, it accumulates payments through, whether it’s all those examples that I gave earlier, and then at the end of the day, the company settles up with us, and anyone who’s driving it doesn’t know how it works in the background. What’s neat about it is that fleet management is the focus right now with commercial fleets. So that could be tractor trailers or commercial passenger vehicles, there’s a OEM installations now for it with Navistar. They’re also working on passenger vehicles. So if you think about your your vehicle, it could just be in an, I won’t say which which manufacturer could be in, for example, General Motors cars that’s not the one, but it could be in one of those, and as you’re driving around tolls, etc. I mean everything let’s go to the fuel the gas station or wherever you go.
Rory Holland
Yeah.
Trey Maust
Accumulates.
Rory Holland
Interesting, yeah. When you think about how you guys are you guys arrived at this place where you have these super interesting like fleet relationships through the technology that you’re deploying and supporting. Are there different verticals that you have intentionally gone after or some of these through relationships or just opportunities of open?
Trey Maust
The most common thread among them and going back to the common thread among our relationship with traditional borrowers or clients is if somebody’s there to consume or use something that’s been commoditized, it’s not for us. So it needs to be something that we’re solving for. And that focus allows us to, one, it’s very interesting. But it also allows us to generate economic value that’s more than when you get at least per item or transaction that you would have and if it’s more commoditized. And so there’s a little more margin to be had when there’s something that requires a creative solution or to get from point A to point B. Or that really requires a bank only. As opposed to payments as an example of one where it’s such a saturated market with players that aren’t just banks. It’s very tough unless you’re able to do it at high volume to make much money on.
Rory Holland
Yeah, what would you say there’s like what are the bigger challenges you guys are facing right now when you think about?
Trey Maust
Without question, and I’d say it eclipses every other challenge we encounter is regulatory right now. And I don’t blame the tenor on the supervisory agencies. I don’t like it, but I understand and recognize that if I were pulled up in front of Congress after various failures or weaknesses in supervising institutions, I would want to de-risk as much as I can. And I’m not saying it’s a direct correlation that they’re focusing in this area, but I think it is permeating anything that’s looked at as either novel or would potentially generate the areas that caused in their minds the downfall. So whether that’s concentration, from risk, or it’s high growth or it’s, you know, not just novel activities in general. That it’s it ticks all of those, which means, you’re in the limelight right now if you’re in this business.
Rory Holland
Well, how do you overcome that?
Trey Maust
Patience. So that’s, and I didn’t say that necessarily in jest.
Rory Holland
No, I hear you.
Trey Maust
So patience is one of those, which means maybe you don’t onboard as many programs as you would like to. The other is we do go overboard on establishing the risk management, governance, and operational practices that are necessary to prove that we have everything under control. You know, good example of that just in practice is reconciling the subsidiary ledgers to the core. You’d be surprised at how many banks don’t do that to the extent they should. And so I think that’s gotten a few in just in trouble in the eyes of regulators. And it should. That’s a basic accounting practice. But these are new activities. And so sometimes you don’t think about the processes that need to be in place in order to ensure that they’re under control.
Rory Holland
Yeah. Totally separate question. What do you love about what you do?
Trey Maust
I love exploring frontiers. So it’s a combination of two. It’s the exploring frontiers, but it’s really thinking about where is everything going in the long run. So, if we were to look out 20 or 30 years from now, the momentum that is occurring today, where is it converging? And for me, in the banking space, I firmly believe that there will be a day when we don’t even think about where our; we have visibility into it, but we don’t think about where the money is that we have access to. It’s all automated from a treasury management perspective, whether it’s borrowed, whether it’s using stored funds, or whether removing it from one place to another happens behind the scenes based on parameters that we’ve set up. And we don’t necessarily think about the fact that, and this is not going to be popular with banks, but we don’t think about the fact that we have most of our money stored at one institution, or we use that as a primary operating account. I don’t think that’s gonna exist 20 or 30 years from now. So it’s very important for us to support this business model because I think it will be the driver for that in that time frame and the movement of money between institutions, so deposit dollars and loans on the other side, we do both, those will be, the beneficiaries of those will be banks that embrace this business model into a well.
Rory Holland
Yeah, yeah. Who knows what the future’s gonna hold, but yeah, it’s that pioneering kind of approach and model that lines up good with your guys’ name of your bank, right?
Trey Maust
Yeah, it’s surprising though how, you know, just, and it’s a good thing, banking in general doesn’t have a lot of experimentation and a whipsawing of just ideas and things that go well and things that also fail because that wouldn’t. The stability element of banking is really important. It can’t break when it’s under stress. Otherwise you have what we saw last year, actually at this time.
Rory Holland
I’m glad we’re not talking about that this year.
Trey Maust
Yes, I know. Banking tends to be filled with people who would rather have that stability. As much as we have a pioneering spirit it we also revert back to the bastion of safety of banking. So that’s very common among even people within a bank.
Rory Holland
Isn’t it an interesting paradigm though where you have fintechs that are nimble agile have more room for mistakes and failure and actually learning that way. Whereas you’ve got the traditional financial system that does need to be stable and consistent and secure and reliable. It’s an interesting combination.
Trey Maust
It is. Actually, I think it’s healthy if each party understands where it is ideally. What its role is ideally within the supply chain. And so historically banks have had the full vertical integration all the way to the end user. Like we talked about earlier with branches or even digital versions of themselves. I think there’s a breakpoint somewhere where the bank becomes the critical infrastructure that supplies those banking functions and then also has to oversee the delivery of those. So, an example that might be electricity. As I look around all the things that things that are powered by electricity, they’re very different in how you experience them, but they’re all powered by one thing. So I think the same thing eventually when we go back to that concept of what’s banking going to look like 20 or 30 years from now, where those fintechs, those need to play on the periphery where they’re either enabling that connection between the bank and the corporate enterprise, or brand or actually are going direct to market like the, for example, the fleet management company is a good example of a combination of tech, so Fintech and corporate. And in those cases, the bank’s role really needs to be focused on what it does best, which is the critical infrastructure of the money and then making sure it gets delivered in the right way, legally and in a compliant manner. And that, if we control that, there’s a tremendous amount of value there. There was a concern that it would be, well, it would just be utility. Maybe, but this is a very valuable utility.
Rory Holland
A very valuable utility.
Trey Maust
I would embrace that.
Rory Holland
Yeah, that’s great. And when you think about Lewis and Clark and what people know about you guys, is there anything that you wish the market knew, or folks knew about Lewis and Clark they don’t?
Trey Maust
We tend to prefer to fly under the radar. And the primary reason for that is that we’re very careful about how we’re positioned from a regulatory standpoint. And so you won’t tend to see us talk about this in public. So the fact that we’re doing it today is an unusual thing. But I think the story is really important. And I would look at us more as an example of what other banks should be thinking about. And more from the standpoint of, again, what’s the role of a bank in the future? And every bank out there can embrace that. Now, there may be rural institutions that really, that’s their role and always will be, but I think there are a lot of banks that need to become the supply chain for this type of business.
Rory Holland
Yeah, following on that and thinking about the society that we’re in and the economy we’re in and just the last several decades the world’s changed a lot and it’s going to continue whether it’s technology or society at whole. And you mentioned some of the challenges with some of the bank failures. The trust that people have in society these days I think I don’t remember a time in my life it was ever lower like in systems and institutions. And trust in the financial system is critical for the health, the wellbeing of the planet and how we operate here in the states. How do you see the work that we’re all doing together in this space building trust in establishing renewed faith, if you will, in consumers and businesses and finance?
Trey Maust
If I think about consumers, trust erodes when something doesn’t go right. Especially if it has something to do with their money, but it could just be you know if let’s say we start having outages I mean so it could be power it could be technology outages with internet I was trying to get on LinkedIn the other day and it was down like.
Rory Holland
It was 18 days down.
Trey Maust
I know, so yeah, that started happening one time not a big deal. You start to see repeat Instances then that starts a road trust or confidence, either one in some either industry or institution. I’d say the same would apply to banks, although you’re talking about money now, and that can create a tremendous amount of anxiety. I can live without my phone for a little bit, but if money starts disappearing, that’s a problem, or it doesn’t get to where it’s supposed to go. And so I’m bringing that up as examples because I think the most important thing we can do to maintain trust and confidence in the banking system is to take regulatory consumer protection compliance laws and regs seriously and recognize that it can be turned around instead of saying, this is a real pain, we hate this stuff, it’s getting in the way, and saying, no, there’s something of value here. And that value is trust and confidence. Yes, it goes way overboard when it comes to, I can tell you, as a bank, when you go through a compliance exam, there’s no de minimis, meaning if it’s two cents, it doesn’t matter. It still is consumer harm. So, understanding that there is a reason why that’s the case, and there’s value to it. One of the things I was always trying to figure out when we first started getting into this business a few years ago was why in the world, because I could hear from financial technology companies, banks are so difficult to work with. And I’m thinking, well, I know that’s the case, but there’s got to be some value there. And the value is you can put banks under tremendous amounts of stress and they don’t break. And there were some, yes, last year there were exceptions, but we’ve got a lot of banks in this country, and they undergo a lot of stress. We certainly did when rates rose 500 basis points and not a lot of failures. And not because there was government assistance, because banks are built a certain way and that unfortunately can look like they’re just difficult to deal with, but there’s a real benefit from having that. So they don’t break. And the same, then I go back to the conversation around consumer protection and laws and regulations, taking those really seriously, I think does answer your question as to how you can.
Rory Holland
Yeah, we often, I think, can complain depending on what side of the industry or what angle you’re looking at it, but it is so critical to have those regulatory and those disciplines and that rigor around to protect. Sometimes, ourselves from ourselves, but also things just happen like the rates rising rapidly. Last question.
Trey Maust
Sure.
Rory Holland
What advice might you give someone based on all your experience that was thinking about coming into the fintech space or financial space?
Trey Maust
The number one, just off the top of my head, the number one piece of advice I would give somebody is spend some time with a bank that’s done this before and it’s done it right. We spent a fair amount of time with a bank that has been able to stay out of trouble and learned a lot from that institution. Banks tend to be very helpful with one another, and so take advantage of that because it will pay dividends.
Rory Holland
Yeah, good. Okay. Well, thanks so much, Trey. It’s been great. Lewis and Clark, so fun to connect and catch up.
Trey Maust
My pleasure.
Rory Holland
Now that I know you’re just up the street, so to speak. You drive 10 hours in Texas. Same state.
Trey Maust
Yeah, I’m still in the same state. Took me three hours to get here.
Rory Holland
Yeah, but not that far. Good to see you. Thanks for the time.
Trey Maust
Alright.
Rory Holland
Bye, brother.
Trey Maust
Same. Thanks.
Rory Holland
Thanks, man.
