So one of the things about Sonata that's different than a a traditional community bank, is we are a bank for Middle Tennessee. We're based in Williamson County, however, we are also pursuing franchise restaurant business on a national basis. So that is a niche that we're really pursuing nationally.
From the American Bankers Association, this is the A BA Banking Journal podcast. Today's episode is presented by Biz2X. Welcome back. I'm Evan Sparks, and I'm delighted to have on the show today, Wendell Bontrager, who is the newly appointed president and CEO of Sonata Bank in the Nashville, Tennessee area.
Sonata is a relatively new bank in that, in that very fast-growing geography, fast-growing local economy, and so delighted to have you on to talk a little bit more about the bank and what's going on in middle Tennessee. So Wendell, thanks for being on the show.
Well, Evan, thank you for inviting me. It's great to be here.
So I'd love it if you could give me, just kinda give our listeners a quick overview of your journey in banking where, you know, how did you get into the industry and what have you, what, what, where has your career path in this industry taken you so far?
Absolutely. So I'm a native of Indiana. Born and raised in a small town, and my banking career started with National Bank of Detroit, which is now part of the Chase franchise. I was started in the commercial credit training program spent two years there and that was in Elkhart, Indiana. After becoming a commercial banker, made the move to Fort Wayne, Indiana. And after a couple years with NBD, I got involved in my first bank startup, which was Tower Bank and Trust Company based in Fort Wayne.
That was 1999. Jump ahead 15 years. I could write a book on my experience at Tower Bank, everything you should and should not do in banking. But in any event, after that 15 year period, I was part of our, our leadership team there. We sold the the bank to Old National. After a couple years with Old National, I was recruited to become president and a board member of Equity Bank in Wichita, Kansas.
So we moved out to Wichita, my wife and I did, and then after a few years there, moved to Middle Tennessee and that was when I was introduced to the team that was forming Sonata Bank and decided to join forces with with our co-founder and founding chairman.
I definitely wanna learn more about Sonata Bank, but you intrigued me with the lessons from the Tower Bank, your experience with Tower Bank up in Fort Wayne. What are some of the highlights in terms of things you learned going through a bank startup?
You know, things that you, that worked really well, things you'd you give people advice about, about, we don't have a lot of bank de Novos these days, and so it's nice to get a little perspective from somebody who's been through, been, been, been in multiple de novo environments.
You bet. So I'll give you the highlights of Tower. First of all, we, it was the truest sense of a community bank. Timing was good and we, we did crowdfunding before crowdfunding was a thing. And I say that because when we, when we sold stock, we allowed shareholders to invest as little as $10. So we had shareholder that had a single share all the up to some major shareholders that was. Piece one, we were public from day one. Two is the importance of, of relationships.
We grew the bank you know, really at a very high level, high rate for the first number of years, but that was lesson number two. If it grows like a weed, it's a weed. And so we ended up again, to the point where in May of 2008, and I'll come back to maybe a part of my progression through the organization in May of 2008. Our, our newly appointed CEO, Mike Cahill gave me the opportunity to become Chief Lending Officer.
And so the timing was perfect in May of oh eight, where we had loan quality issues starting to rise to the surface. There followed a liquidity crisis, the great recession. Our bank at that time entered into a written agreement, formal enforcement action with the federal reserve Bank of Chicago. And so that was a very tumultuous time, as you can imagine, working through that issue.
On the back end of it we put a new plan together, we turned the bank around and we ended the bank with the three best years of profitability, and that's where we were able to successfully sell the bank to Old National. So the, the pieces along the way I had the opportunity early on in the, in the existence of the bank was to start private banking. And that was where I caught my first entrepreneurial bug, if you will. And that's what led me to Sonata ultimately group private banking.
And then progression, as I said, is stepped into my first, first C level position. Second was the importance of having a good fundamental strategic plan. That led us to, to turn the bank around. And then finally really learned the importance of focusing on shareholder return. And I can, I can speak about the importance of constituents to shareholders being an important one. As I said, the last three years turned out to be a great turnaround story. And so it ended well.
But along the way there were some sleepless nights and some times of stress.
Could tell me a little bit more about Sonata Bank and what was the vision for this? You know, obviously Nashville's a very hot market middle Tennessee's very, very fast growing. What was the vision for this bank and and the time and the environment in which you started it? In which, in which the team that, that started it began it.
The story for Sonata started with Farzin Ferdowsi. Farzin was our founding chairman and key fundraiser. It was Farzin's Vision to have a financial institution that could provide benefit to franchise restaurant operators throughout the us. To help lower turnover, which is a very major issue in that industry. He is a successful Taco Bell franchisee. He and his partner own approximately a hundred locations in multiple states, and so turnover is an acute issue for them.
So the vision was let's create a bank that can employ or bring in and integrate creative employee benefits with banking solution so that at the end of the day, we as a bank can go to the franchisee. Offer them the ability to provide benefits in a way that's very affordable and in a method that's not traditionally that affordable for them to provide. So on the side, the franchise restaurants, as you can imagine, have a lot of part-time employees, a lot of younger employees.
They need to keep their costs down so we can come in at fractional costs to provide them things like telehealth mobile phone insurance, pet insurance, believe it or not, is important in a way that is free to the employee. But is done and, and sold through the franchisee. So that was the vision of the bank. And lemme, lemme stop there. I can certainly give you more of the, more of the story, but
I love the story of banks that find unique niches in our, you know, this massive, diverse economy that we have, being able to to identify opportunities like that. What is the do you know when you, when you're providing these services to the employees of the, of these your franchisee clients are, are, do you provide that directly through the bank or do you have a subsidiary or affiliate who kind of is responsible for actually providing these benefits, benefit management services?
It is part of the bank. So right now, it's a B2B2C sale, right? So we developed a relationship with the franchisee and ultimately the franchisees are the ones that pay the monthly subscription fee to the bank to provide the service to their, to their employees. So that's kind of our approach to the marketplace. Let me add one more step to the, the vision that Farin had when we went through the initial capital raise.
We raised our monies and, and about 60% of our shareholders are franchisees, coast to coast, and we have some of the largest franchisees that are part of our universe and part of our ecosystem. So we have a captive audience of customers that we're pursuing and we're just in the rollout phase right now. We rolled out the beta test as recent as last week to get it introduced to the marketplace, but that's, that's our approach to the market is directly through the franchisee himself.
Oh, that's, that's fascinating. So I mean, so that's a, you know, seems like a pretty significant fee income play for the bank. What's the, what's your bank's ba mix of interest income versus, versus non-interest income?
Right now the interest income, because our build so far has really been on the traditional bank balance sheet. Mm-hmm. It's about 90% of the traditional interest income compared to fee income. As we envision this rolling out in the next few years with this being our SaaS model we believe that part of the franchise build and the, and the overall company's valuation is very beneficial by, by developing the SaaS revenue. And we anticipate that about 30 to 40% of our revenues. Come from this app.
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Learn more about how the platform can help banks achieve faster processing, lower overall costs, and increase loan volume@biztwox.com. And thanks again for to Biz2X for sponsoring this episode. And now back to the conversation. I'm curious, the franchise business is, you know, complex in that it's you've got lots of these part-time employees. You've got, you know, crazy operating hours. You've got, you know you're managing supply stuff.
You're managing the relationship with the, with the national brand. What is the what are some of the credit needs that these franchise owners have, and how are, and how do those differ from other business clients that banks might be familiar with?
That's a great question and, and I think there is a complementary business line that we are offering. So one of the unique value props or, or things about Sonata that's different than a i, I call it a traditional community bank, is we are a bank for Middle Tennessee. We're based in Williamson County. However, I. We are also pursuing franchise restaurant business on a national basis. Yeah. So that is a niche that we're really pursuing nationally.
So, to, to answer your question on the credit needs, it really is in the way of, of development facilities. So they're, as they're expanding to new locations, the development facilities would include real, real estate financing, equipment, financing you know, and the, and the related needs there. Then from a treasury standpoint, one of the things that I felt was important when we built the bank was to have a robust treasury platform.
And we have one in place now that we feel we can compete against really any bank in the country, and we can bank a practice regardless of where they are. In fact, one of our current clients is based in the state of Ohio, and they're, they're developing a new brand. Happens to be also one of our shareholders. They're developing a new brand, so we are banking each of their locations in Ohio being here in Williamson County.
The and what, what, and so, you know, you've got, so you've got this restaurant, the, the, this kind of unique suite of really resources for platform, solutions for the re the restaurant owners. And then how, what, and then how big compared to that line of business is the rest of your community bank business in middle Tennessee and western Kentucky.
Right now that franchise business is about 30% of our book, and, and the balance is middle Tennessee.
Since one of your founders is involved with this as a, as a franchise owner, do you, and you have so much you know, so much of your shares are owned by the, by these franchise owners, how do you bring in franchisee talent into your organization to help you you know, do the, do the lending and do the administration of these programs. How do you find the right talent to manage this kind of unique niche?
You know, believe it or not, the the needs for the franchisee is similar to what it is in a regular C&I portfolio or commercial real estate portfolio. So the talent is actually the same. We, the relationship managers that we have that handle some of our relationships in Middle Tennessee are the same ones that can handle the franchisees when the requests come in. And that's the nice part about the model is, excuse me. The, the, the systems that we have in place.
So we're, we're a Jack Henry Silverlake Bank. Once you build a system, you can bank a local customer or a customer that's based in, in Nevada, right? That doesn't matter. And then the talent is very similar as well. So even though the approach is different, there's not a need for unique talent to service that client base.
I, this is, this is really fascinating. I'd love to zoom out a little bit and to, to look at your area. What are you seeing in terms of market trends and you know, economic trends in the greater Nashville area and what, you know, how can how, how are things going in your local market?
The, the local market overall remains very strong. So having come from Northeast Indiana to Kansas and then now in Middle Tennessee, the market here is very different. It's one of the hottest markets in the US and it remains that way. for the year 2024 fiscal year we have achieved in the way of asset growth, we're number one in the state of Tennessee, and number four nationally in our asset growth rate. And so we're very proud of that metric.
And then just two weeks ago, we identified as being the number one Nashville bank in deposit growth. And that was by, we almost grew a hundred percent in deposits last year, which is a challenge for all banks. But we were very proud of that stat as well. So we, we've been able to achieve, you know some early success building our Middle Tennessee presence. Having said that, over the past few months, we've seen a slight softening in the construction business.
The housing market has, has slowed down a little bit. I wouldn't say it's it's soft yet, but it's really softening. But I would tell you that the, the metrics are still, overall, overall pretty strong. And the nice part is about our balance sheet in us being in the build phase, we don't have the same repricing risk that a lot of legacy portfolios have. So we're building our portfolio from zero up. And so because of that, that's been a, a really good you know, kind of a blessing for us.
'cause we're not seeing the same issues that some legacy banks have been experiencing.
And you know, Nashville's obviously got a, got a lot of banks present. What's your take on the Nashville market for banking talent in terms of the kind of people you can, you can attract to your bank?
Well, it, you know, it is it's been a very strong market, clearly for talent, and I would tell you that from our, our leadership team that we've been building, they've had relationships with other bankers, so they've been up able to attract local talent from a relationship standpoint. One thing that's unique about Sonata is we have a hybrid work environment. We also have some remote workers. So now have we been able to track talent when hiring a remote worker.
You expand your talent pool in a vast way, and we've been able to get some really experienced, seasoned veterans on our, on our slate and our team to play different roles, which has been really key for our success.
Yeah. What's your mix of and now what's your mix of remote to in office for people?
We've got, let's see, six. We've got about 16% of our workforce is remote and then the balance are in the middle Tennessee area.
How are you balancing those two workforces and ensuring that you kind of get a, get the best of both worlds in terms of the team cohesion and the you know, the high level of talent that you, that you want to execute the strategy? How does that balance work for Sonata Bank?
You know, that's, that's an ongoing, that's an ongoing challenge I think for many, but the way we've been able to achieve it, I think having the hybrid work workplace has been a strategic advantage for us. We're one of the only banks in Middle Tennessee that offered that. So there, that has been a key hiring plus for us as we talk to candidates to, to join forces. Then on top of that right now we're gonna be engaged in a process to hire a CFO.
And I think the attraction to come to Nashville if you're gonna relocate by chance, and it's not somebody here local, coming to Nashville, Tennessee, or Brentwood, Tennessee compared to some other markets, I think is, is very, very appealing as well. And I think overall the culture we built is really to be employee first really focused on building a very positive work, work culture.
This was, this was a really, really great conversation. I really enjoyed learning more about Sonata Bank. Thanks Wendell. Thank you so much for being on the show today.
Alright, thanks Evan. Appreciate the opportunity.
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