On the Balance Sheet® S1 E2 - Jonathan Baird, Peoples Bank (AR)
[Vinny, 0:00]:
Welcome to On the Balance Sheet. I'm Vinny Clevenger, Managing Director here at Darling Consulting Group. As always, joined by fellow Co-host and Managing Director Zach Zoia. And Zach, when you and I sat back and conceptualized On the Balance Sheet podcast, our aim was to give folks that we have the fortune of working with a platform to kind of talk about their business and their perspectives. And I'll tell you today, we've got one that I think fits the bill. It certainly is a unique one: Jonathan Baird.
[Zach, 0:31]:
And I'm really, really excited to be here for our second episode. And Jonathan, you know, is a client of mine. I've known him for a while now, and I think we're going to talk about a couple of things here right off the bat in terms of, you know, generally just some banking in the Razorback state. You know he's the CFO down at People's Bank in Magnolia, AR. We're going to have a little bit of fintech discussions, some disruption, and some of his thoughts on that side, and also some crypto, you know, some blockchain technology, Bitcoin, and just ideas for bankers. And I think it's one of those things where if you are a crypto enthusiast, there'll be plenty in this podcast to take away. If you're not, if you're a novice like myself, or like Vin, then there's still things that I think we could start with to kind of learn and make sure we can kind of dip our toe into the water and understand some of the concepts and technologies you know that are coming out every day.
[Vinny, 1:18]:
Absolutely, sounds great, Zach. And so, without further ado, Jonathan Baird, Chief Financial Officer, Peoples Bank, Arkansas.
[Zach, 1:27]:
We're very, very pleased to be joined here by Jonathan Baird, CFO at Peoples Bank, down in Magnolia, AR. And you know, Jonathan happens to be a client of mine. So, we're really thrilled to have him here, and really, I think, Jonathan, I can give you a bit of an intro from my standpoint. But I think the viewers here will probably want to know, just kind of some of your background, your path, how long you've been with the bank and your role when just some of the unique things I think about where you bank. You know, down in, down in southern Arkansas and then we can kind of go back and forth here. But I know from my perspective, we've known each other for what, four or five years now, I think.
[Jonathan Baird, 2:02]:
Yeah, I think that’s right.
[Zach, 2:04]:
You know, overall. And I remember the first time coming down to see you, and we got some tacos, I think it was Antigua's? Is that the name of the place down there?
[Jonathan Baird, 2:13]:
Yeah, yeah, Antigua's was the best, was the Mexican in town, that's for sure.
[Zach, 2:18]:
And I think everyone listening will be really excited about this interview because I remember talking, and we're kind of getting to know each other about families and what we do. And remember coming out of there saying Jonathan is a really interesting guy, right? He's a CFO of the bank, right? You help run a wealth management firm down there. You're very active in the community. You do host of other things, so I think that's my intro to start and maybe if you want to jump into some of your how you got to where you are, so we can kind of go from there?
[Jonathan Baird, 2:44]:
Sure, yeah. Thanks, Zach. And we're really excited to - I'm excited to be doing this with Darling. You guys are great. Been very helpful to us in our journey and trying to figure out how to kind of walk the line on liquidity sensitivity, things like that. So we really do appreciate our partnership that we have a little bit about my background. I grew up in banking, basically. I'm the 5th generation of bankers with Peoples Bank. We were founded in 19.10 over in Waldo, which is about 7 miles away from Magnolia, where we are now with our headquarters. And so it was my great-great-grandfather that started him and some other investors started the bank and then down to my great-grandfather, then my grandfather and my mom is now the CEO of the bank, and I'm the Chief Financial Officer of the bank at this point. So yeah, it's a small community-focused bank. We have three locations currently. We're going to be adding a fourth location here in the next few months - pretty rural area. We have a four-year university in town, Southern Arkansas University. You know, we've got about 12,000 people in our town in Magnolia, and the county has about 25,000, and that's the only county - Columbia County - is the only county that we serve down here in Southwest Arkansas. My background, like I said, I kind of grew up around the bank, started filing checks when I was 15. Went to college and got a degree, an accidental degree, in marketing and then went back and sat for the - or, well - went back and got the classes in finance to be able to sit for the CFP exam. And so, I sat for the CFP exam in 2003, passed that actually while I was in seminary. And from 2002 to 2005, came back home, went to work at mustard seed wealth management and Peoples Bank. And so, I'm a certified financial planner, CFO of the bank. I like to tell people that the bank is my biggest client. One of the things I think, as far as my career and what really has been maybe a challenge or something that's unique is just, and I think it has to do with our demographics, the demographics that we serve in the bank, but we just have a regular client. You know that we have a $700.00 checking account, but they may need to borrow $100,000 to buy a house. And you know, most people in banking know that you can't make that up on volume. And so if you have a bunch of people with relatively low deposits who have loan needs, you can't fund your loans with the deposits that you have. And so we have been fighting this problem for well over a decade at this point because there are so many other options for people to put their money, whether it be PayPal or Venmo or Apple Pay or just whatever, and I'm kind of jumping ahead a little bit now to the tech, you know, world that we live in, but we had trouble raising local deposits. And so we started getting into wholesale funds, and we use the FHLB, we use broker deposits, we use Cedars and all kinds of these other solutions to that wholesale fund providers. And through that, we were able to raise the money that we needed to fund our loans and but it kind of started out as an arbitrage opportunity back in 2006, 7, 8. And so we would borrow money, and then we would invest it in CD's on quick rate and make a little bit of a spread. And it kind of evolved into us buying bonds. And so we would buy in 2009 and 10. They came out with the qualified school construction bonds and the build America bonds, and we were able to borrow money, invest it in those bonds, and make a pretty decent spread on it. And we knew we weren't taking a lot of risk and we knew kind of what we had, but we couldn't prove it to examiners as far as you know, what this strategy was sound and that we weren't taking excessive risk on it. And so we kind of had to prove ourselves to the examiners over time, and we're still having to improve ourselves to examiners over time that we know what we're doing. I do think that, you know, one of the things that I've dealt with throughout my career and I started back at the bank in 2005 and so just kind of when I came back, that's when all this stuff kind of started happening. And I mean, just the world has changed so much in the 15 years that I've been here, but one thing that's kind of remained the same is our problem of not being able to raise quote core deposit. And so that's I guess the thing that's really been, I don't know if you call it a thorn in my side because I really do like the ability to use wholesale funds to fund our banking endeavors, but it has a stigma that goes along with it. And that's where I think you guys have been really helpful in helping us to kind of prove to the examiners that what we're doing makes sense.
[Vinny, 7:44]:
Jonathan, obviously, I think you're very humble because I was doing a little bit of research and I had found that a number of different things you've been recognized for, one of which was, you know, you were the CFO of the year in Arkansas. I thought that was pretty impressive. I happen to know another CFO in your state, and he's pretty impressive too. So, I would imagine you do a hell of a job, but I think it, you know, he's also been recognized as one of the 40 under 40 influential business folks in that area. Yeah, but Jonathan, most importantly, are you the father of five children?
[Jonathan Baird, 8:19]:
Yes, I am. I am. I've got five kids, two daughters and three boys. So yeah.
[Vinny, 8:26]:
Well, you know, Zach got two and I have one, and I'm sitting here going, 'Oh my gosh. One, I got one. He's got five. And look at his resume. Holy cow. What am I complaining about?' So, and obviously, you know from what you've communicated to us, it's clear that you are really in a more prototypical community bank, and it's interesting how the world has certainly evolved. I don't know how a bank, particularly if you look at a de Novo per se, could fund themselves, you know, the de Novos that maybe had the benefit over the last couple of years of COVID and all the money that's been printed and how that's kind of made its way into the banking system. Maybe you could make an argument they've had an opportunity, but you know outside of that, you know, you got a situation where, I don't know, I don't know how a bank would fund themselves. So, I'm curious because you know, you made a remark that you know you're still pretty you know engaged in that, did you folks reap the benefits of some COVID-related deposit surge? Has some money come in? Have you had a little boost to your core deposit base over the course of the past two years?
[Jonathan Baird, 9:31]:
No, we haven't. I mean, it's really amazing. I totally agree with you. I don't know how any bank gets money. I know they do because there are lots of banks that have the problem of way too many deposits, but we just never had that problem. And again, I think it's partly because of the demographic that we serve, it's more just regular people, you know. So, we just don't have very many wealthy people that do business with us, which is fine by us. I mean, we love our customers and love everything that we do. So, and I don't know, there are other banks that have the same problem. We have, in fact, I've got really good friends in the bank, in the neighboring county that has the same problem that we do. I think we've been just a little bit more aggressive as far as going after wholesale funds and you know taking that risk, taking the criticism for it. But yeah, I have no idea how people would be able to raise money. We've done everything. I wish we had three hours so I could tell you all what we've done to try to raise deposits. I mean, at one point, we were paying the highest rate, we were with Kasasa. We're still with Kasasa. We were paying the highest rate in the country. And I mean, it just barely moved the needle. You know, we're paying like 5% on our Kasasa accounts back in 2020. You know, we've done the whole paying high rates for CDs and that would bring in a little bit of money, but of course, it leaves just as soon as you lower the rate. The most successful thing I think we've done is by hiring a firm called Haverfield and Associates, and if you guys are familiar with them, but they've been very helpful to us, we really love them as far as helping bring customers into the bank, and now the volume of deposits hasn't necessarily come in, but we've got tons of new customers that are coming in. But it's just kind of the same clientele that we already have, which again is great. We love serving these people, you know, you bring in a bunch of people that have $700.00 and they're taking account need to borrow $100,000, and you get a whole bunch more of them. You know, it's still, it's not helping. So, you know, it's just a constant struggle for us. And yeah, I'm like you. I don't understand how banks raised deposits with, again, with so many different places that people can put their money. I mean, they put their money on PayPal, they put their money in Venmo, they put their money on their phone, through Apple Pay or Samsung Pay or Google Pay. You can just put your money in any number of places, and you know, I just think that's something that we as bankers need to think about how can we, how do we compete with that, and I think wholesale funding has a lot to offer for us.
[Zach, 12:12]:
That was a great, you know, kind of overview, and that was kind of where I think Vin and I were trying to go in terms of the unique challenges, and a lot of this in Community banking is local. Jonathan, I know that part of you know back in that 2017/18 timeframe when you had some higher costs, CD's, and there was some, you know, criticism about rate caps and all that fun, fun stuff we say. Well, you know what? It's more effective to go wholesale, you know, it's cheaper, we can get it in bulk, and we're not against retail deposits, but we don't want to bring them in at too high of a cost, right? So, I think you make a really good point about the challenge there. But also, you mentioned a few things about, you know, some of the Fintech to use an umbrella, you know, term with the Apple Pay and Google Pay. And I agree it's a big payments, I think challenge, you know, for lack of a better way to put it, but are you guys doing anything or are you talking to folks about, you know, solutions on that front to try to, you know, stay ahead of the game or at least if you know ahead of it, stay with, you know, kind of the herd right now?
[Jonathan Baird, 13:10]:
As far as the tech stuff, you know, we're really not doing a whole lot there just because I mean, and if really nothing else, we're almost encouraging people to use some of those tools because you know most people have PayPal and it's very useful. You know, I send my me and my friends all send each other money back and forth on PayPal. So, to me it's just almost like a separate thing. As long as we can, of course, as long as we keep our funding up and keep some core deposits, some true core deposits from customers, I think we can still make it on that, but as far as the technology side of it, we really aren't doing just a whole lot. I mean, we've got obviously all the main things that you have to have like online banking and bill pay, and we do have a P2P payment solution that's coming out here pretty soon that will work with PayPal. But again, it's just kind of, to me, it's kind of clunky how the way it works cause each person has to set it up on, you know on each end for each channel. So, like: Zach, if I want to send you money, I'd have to send it to you, you'd have to set up an account and you'd have to - you know, it's just it's so much easier to say, 'Hey, you got PayPal, you know, or Venmo.' And so, to me, it's going to be tough for us as banks to compete with some of that. I think our, you know, our opportunity in the future is going to be just in lending, I think because I think payments are going to be one of the first things to be disintermediated away from banks. So, you know, the debit card that we have, I just don't see a future for banks in using debit as a big driver of revenue because there's so many options out there, and this really gets into the tech part of it. And I see companies like Stellar, companies like Ripple, Companies just using Bitcoin with the Lightning network, Venmo, PayPal, just, there are all these different payment providers out there. And they're driving the cost of transactions down to 0. That's what they're doing. And so, I just don't see that being a revenue driver for banks going forward. So that's just payments. But then on the other side, on the other hand, also, just the deposit function, I think the deposit function will be the next thing to be disintermediated for banks. Because again, if you, you know, you can put your money in PayPal and who wants to keep $100,000 really in the bank anymore? Why would you do that? I mean, you know this, and this gets into the whole inflation question. Like, you know, why would you Park $100,000 in your checking account that's maybe making point 1% if you’re lucky you know, when the inflation rate is running at 6.8%, if you buy the CPI numbers or 7.2, whichever one you know, you look at, which again I don't really buy those numbers. I think it's way higher than that. Why would you leave your money sitting in a checking account? It's like a melting ice cube, OK? And so, so I see the next function of banks being disintermediated in the future as being the deposit function. But what's going to be left? I think it's going to be the lending for now at least, and I think even that can be disintermediated. Now, how long is this going to take? 20, 30, 40 years. You know, man, but I just think these banks need to be realistic about what we're looking at and what these technologies are trying to do, and they're trying to destroy us. And you know, we need to be thinking about not how do we, you know, we're standing on the railroad tracks, the trains coming down the tracks. The light keeps getting brighter and brighter because it's getting closer and closer. We don't need to pretend it's not there. I think we need to figure out how we can jump on board.
[Zach, 16:39]:
Jonathan, do you think there's room here, you know, to be working with some of these groups right at on the back end because a lot of these firms too, maybe not all in the payments area, but a lot of these, you know, kind of fintech lending and depositary NEO bank type of firms have banks behind them. They’re doing a lot of the, you know, kind of the guts of all the deals, at least right now. So, I mean, do you see kind of a hybrid approach here in the future where you be able to partner with a lot of these folks who do you think now it's gonna, you know - maybe for now - but over the longer term, they're gonna try to eat kind of eat our lunch too, and we're gonna have to innovate, you know, do some things to fund the balance sheet, cause the lending will might be there, but the deposit side is gonna be the area that we’re gonna need to be careful of.
[Jonathan Baird, 17:20]:
Yeah, I think so. Because the way I look at banks and the way I look at all industry, we are a network of trust. A bank is a network of trust. A lot of people bring money to us? Because they trust us. You know, it's because of FDIC insurance because of a lot of other things, but at the end of the day, they trust us. They're and trusting us with, you know, taking care of their money and leaving it with us. And that's built on a web of trust. And that's where our value is, OK, so we as banks, we are a network of trust, and we can monetize that by offering different services and products. And I think as some of these fintech companies rise and as they, you know, as they start competing more and more for this business, I think the smart banks are going to be the ones that adopt the technology. They're going to be the ones that partner with some of these fintechs to, you know, to basically sell our network of trust to some of these companies. And so yeah, I mean, I think the franchise value of a bank is in its network and how much trust you have built up among all your customers and so. That's the value of a bank. And if, if we're smart, I think we're going to partner with these people and not get eaten alive by.
[Zach, 18:28]:
Jonathan, one of the next, I think segues too. I always enjoy talking with you in the in the group down there about, you know, blockchain and some things like that, I think some of this right kind of the decentralized aspect of it, digital wallets, all those type of things is a logical next step. I mean, we could probably talk all day about it, but you get a couple of minutes, you know, type of thought process here in terms of how that might be playing an impact you know in the banking industry and if in the future you know given some of the things we've talked about and of the other things that you're reading hearing seeing out there in your travels and in your talks with your peers.
[Jonathan Baird, 19:00]:
Sure, yeah. And you know, it's really hard to know where to start on something like this because, you know, I want to talk to other banks about it because I think we all as bankers need to realize what Bitcoin is trying to be, particularly because I think to me Bitcoin is the is the most important project out there in the blockchain industry. It's not even close to - I mean, there are other projects that are interesting in doing stuff, but to me, Bitcoin is the one that can have the most impact on the on the world. For the first time ever, we have a true hard money monetary system, and that's what Bitcoin is. Bitcoin is not just a currency, it's a new monetary policy that's enforceable through code, OK? And so, with Bitcoin, you have a 21 million cap on the number of units that are available. Each unit, each Bitcoin can be broken into 100 million different pieces, called Satoshis. But there will only ever be 21 million Bitcoin created, unlike in contrast that with the US dollar, Fiat and all Fiat currencies around the world.
[Zach, 20:11]:
Jonathan not to cut you off, but Vin and I have been talking kind of about this stuff too and just the volatility right of it, but it's still a very immature asset class or whatever you want to call it, right and some people - you've been around it for a long time, right? But ten years is a very small period, even if some people were doing it back or looking into it back when you were, you know, there's still a lot of way to go here, right? I think, in terms of figuring this thing out, you know, to your point, but to me the blockchain technology and how that works is one of the key things to and to your point, I think what I'm hearing is Bitcoin is the best one to learn, right? About how a lot of that stuff works, you know, versus all the plenty of other projects out there, like you said that, you know, go up and down kind of every week, every month.
[Jonathan Baird, 20:57]:
So, Bitcoin is unique in history in that it has a credible story that it can enforce a 21 million cap in a monetary unit or in a monetary system. And so that's what makes it so much different than any other monetary policy or monetary system in the world because every other country that issues its own currency, they're all by Fiat. They're not backed by anything, except for the full faith and credit of whatever issuing government it has. There's no oil, there's no gold, there's nothing there really to back it up, other than, you know, the reputation of the country, and some are better than others, obviously the dollar is the strongest currency among all the currencies of the world right now. But that's not always necessarily going to be the case. And so, so yeah, and all the technologies that came together to create Bitcoin are all very important and very important for you to understand. And to know why what I'm saying has any credibility at all, because I may sound like a crazy person. You. Well, how do you know there's only be 21 million Bitcoin? How do you know they can't hack it? How do you know that that somebody's not going to change the monetary policy of Bitcoin at some point in the future? Well, I've been trying to figure out why all those things may not be true for about 10 years now and I can't figure it out. It looks to me like it's the real deal, so - this is not financial advice, by the way. So, I'm not saying anybody should go out and buy a whole bunch of Bitcoin. But I do think it's worth - Bankers, CFO's, especially you guys, I mean, you need to understand this thing. And so, my hope here is just to pique your interest enough to do a little bit of research on it.
[Vinny, 22:42]:
Yeah, Jonathan, this is Vinny. And I was curious because - I hope I don't prove too much of my ignorance when it comes to Bitcoin - Obviously I've watched the Netflix specials and everything that's available out there and some of the media forums. I have not done a ton of research, but I, kind of in my little brain view it as an indictment on the Fiat currency. You know, I've listened to different podcasts with different economists and so forth, and one thing was said that stuck out to me, and I just don't understand it well enough, and I'm curious if you could shed some light on it. Well, folks who are really enthusiasts with regards to Bitcoin, you know, if Bitcoin does in fact fail, if you will, if the value of Bitcoin goes to whatever, make it up. You know, now like, who is bailing out the holders of that Bitcoin?
[Jonathan Baird, 23:28]:
You know, something that is competing to be the world reserve currency or the World Reserve asset, of course it's going to be volatile until it wins. And then it won't be volatile anymore. So, I said earlier, what gives banks its value? Their value is their network of trust, OK. What gives Fiat currencies their value is their network of trust. What gives Bitcoin its value is its network of trust. What gives gold its value is its network of trust. The reason people value gold is because it's relatively scarce. People know that that nobody's going to be able to just double the gold supply, you know, willy nilly and just print more gold. You can't do that. So, it has a credible, known scarcity. And that's what gives - and it's relatively portable it's, you know, it holds up; it doesn't erode over time. It has lots of qualities of what you would want good money to be, good sound money to be, and that's why it has value. I think that Bitcoin is actually demonetizing gold. It's stealing some of that trust, expressed in value of gold and you know, taking it for itself as Bitcoin. Because Bitcoin is a digital gold, it's a digital version of gold that's more secure, more sound, has less attack vectors because, you know, you remember, FDR issued the Gold Confiscation Act - I can't remember that, that's probably not what it was named, But he confiscated gold back in the 30S, and you can't do that with Bitcoin, so Bitcoin is unique in that way. It's, yes, if you leave it on an exchange and you leave it on coin base, yes, the government can get it. But you can actually self custody Bitcoin. And keep it out of the hands of government better, at least than you can with gold. Of course, they can always come to you and, you know, threaten you. But to kind of get back to your question, what would happen if Bitcoin went to 0? Well, I don't know exactly, but we had an 85% correction of Bitcoin back in 2017. In 2017, around the end of 2017 and 18, the price of Bitcoin went from it - it peaked out at about $20,000 and it crashed back down to about $3500 or $3200. So, it had almost an 85% correction just this past year, Bitcoin went from $64,000 at an earlier peak back in May, all the way down to it got down into $28,000, $29,000 range, briefly, a couple months later, I think in July or August. And so, you had a 50% correction over a couple month period, you know? So, it basically went from about a trillion dollars to about 1/2 a trillion dollars over a couple month period. There were no bailouts. Nobody lost their head, no exchanges even, you know, I'm sure there may have been some exchanges that failed, some small ones, but none of the big exchanges failed. They had sometimes where they were down for a little while, but no major disruptions, no bailouts, no nothing. It self-healed - it's a self-healing network, and so to me, that just gives more credibility to the story that Bitcoin is telling, that it is a good monetary system. It's not just a currency. It's not just a code, it's a whole monetary policy itself. And yes, it is a major indictment on Fiat currencies because you can't manipulate it, it's just not manipulable.
[Vinny, 27:11]:
When you look at the different currencies and so forth, do you think that was your favorite project? Or you thought the most important project? Is there a reason you know it's a coin per se and not Ethereum or some of these other currencies that you see out there? I think I know why it's not Doge Coin but keep going.
[Jonathan Baird, 27:34]:
It's a great question. And I'm not. And by the way, I'm not like a Bitcoin maximalist or anything. But I just recognize it as the groundbreaking technology, and it has the first mover advantage. It has a fair distribution. You can't recreate the distribution of Bitcoin over time. I mean, it's irreproducible, okay? It's got a huge network, and the possibility of it being hacked or attacked effectively or successfully is incredibly low because of how much hash power is being used to secure the network. I mean, you have to, you can do one thing called a 51% attack where you would have to garner enough computing power to challenge the existing network, and it's just impossible for you to gather that much computing power to be able to - I mean, it's not impossible, but it's almost impossible. So much so, that you would be better off - instead of trying to attack the network - to just invest in the network, to buy the Bitcoin to use it. And so, it has very few attack vectors, and it just has a much better story than any of the other currencies out there as far as being a world reserve currency. Ethereum does awesome things and I probably should disclose a little bit too: I own multiple projects. Bitcoin is my #2, Ethereum is actually my #1 holding, but only because it has grown so much over time. Most of my investment that I'm doing into cryptocurrencies today goes directly into Bitcoin. I'm not really investing in anything else. And so, I do want to make that disclosure that I hold multiple different projects, and Bitcoin, Ethereum, are my top two. But I just think as I study more about it, as I think more about it, as I see what the world is doing, what countries are doing, what they're doing with Fiat currency, how they're eroding the trust in these different monetary systems and monetary that works. Bitcoin just has a much better story to tell, and it's much more believable, I think, to people that are fair-minded.
[Zach, 29:47]:
Very interesting. And I think, Jonathan, just to kind of bring the Bitcoin talk and the Ethereum back into maybe a people's bank in terms of, you know, is there anything on the radar for you folks? Are you talking with folks about, you know, custody and Bitcoin for customers or doing Bitcoin rewards, or is there anything like that that you? Are you thinking about, talking about, you know, what's the latest on how that might integrate into the Community banking space overall?
[Jonathan Baird, 30:18]:
I mean, I think to me, it's pretty simple at this point. I mean, the on-ramps for banks are pretty difficult right now. But there's a company called an IDIG - it's New York digital investment group, and they offer a custody solution for banks. And we are, we're working on that, our core processor is working on getting an integration with that. So that's something we're looking at. But other than that, I mean, we've put some Bitcoin derivatives on our balance sheet in our holding company. That's really about the only thing we've done right now. And then I think hopefully we just have a stance of openness to it, and we're, you know, we're spending some resources in understanding it better. That's what I'm doing anyway. But it's pretty easy because I'm just fascinated by that, but yeah, that's the baby steps right now really. Not really a whole lot, you know, we've looked at maybe even doing like a Bitcoin ATM or something like that. I'm not even sure banks can own those. So yeah, I'm very interested in integrating it. You know, to some degree, taking again, taking baby steps, you know, to me kind of like with individuals. You know, it's tough as a financial advisor. You know, you have to advise people on what to do and it's easy to say the normal stuff like yeah, you need to be invested in bonds and stocks. You know what about Bitcoin? I mean, you're talking about Bitcoin so much and you know it's kind of untested. We've only got like 10 years of history where we can really go back and do any analysis on returns. But I think I'm almost ready to, I am, to the point where I'm ready to tell people, you know, get off 0, OK? So, whether you're a bank or whether you're an individual: get off 0. You have 0 exposure, put a couple of hundred bucks in, you know. If you're a bank, put a couple of thousand bucks in, you know, put a few hundred thousand bucks into Bitcoin. Start looking at it, you know, get a little skin in the game, you know, for depending on your level of conviction about it, that will judge or that will determine how much you have. And so, you know, for people who want to be really aggressive, maybe you have a 10% allocation to Bitcoin or other cryptocurrencies in your portfolio. You know, if you really want to go all out as a bank, you know, check into getting the Bitcoin ATM, check into IDIG and be able to custody Bitcoin for your customers. You know, one helpful statistic that I've seen and that not big promotes a lot is that there are 40% of Bitcoiners willing to move banks, if you will provide a custodial solution for them, for their Bitcoin. So, I don't know how good that study is, so I don't back it up or anything, but that's what they tell me, and it makes sense as I would consider myself a Bitcoiner in that. I think it's an amazing technology, I think it has great implications for our future for a more stable future. You know, between here and there, yeah, there's going to be bumps along the road getting there. But yeah, I mean, I think it's such a revolutionary technology. I think people really underestimate what it actually is. So, we shouldn't do that as bankers, we shouldn't underestimate that and don't get caught off guard by it because it is, it's something that's coming and we need to understand it and be ready to, you know, take advantage of it.
[Zach, 33:29]:
It makes a ton of sense, and even if that stat isn't perfect, it's thought-provoking, right? At the very least, I think for folks to get more educated on it. Dip your toe in or put the whole foot in, you know, depending on how you want to, you know, kind of look at that. So, I know, I know, John, this has been really great on our side, you know, for us to learn about some of these things. And I know the listeners and just about your background and kind of the uniqueness of where you folks are, you know, in Arkansas, and how you guys bank and some of these other things on the fintech side, on the payment side, on the Bitcoin side, which aren't going away right anytime soon. It might evolve, right? They might grow and adapt, but overall, you know, we're not going back in time. We're moving, you know, forward here. So, I know we've taken a ton of your time today. We really, you know, really appreciate it overall. And I mean, was there anything else you had on your side, or you know, before we close this out?
[Vinny, 34:26]:
No, no. But Jonathan, thank you. This is a very engaging and thought-provoking conversation. And I hope the folks who listen to this do it with an open mind and I know I certainly am. And there's a lot to be learned. It sounds like a lot of folks better start doing their homework if they haven't already. Thank you for sharing some of your insights and talking about your challenges and your opportunities ahead. We really appreciate it. Thank you, Jonathan.
[Jonathan Baird, 34:55]:
Well, thank you guys. It's been an honor. I love doing this. I'll be glad to do it anytime y'all want to.
[Zach, 35:05]:
Vin, what a great interview. And I want to thank Jonathan for spending some time with us. And boy, we talked about certainly a number of topics in the interview and I'm very curious about your takes and some of the takeaways from that. I can tell you my 2 cents, which you kind of probably more than the one is that I think ultimately as a banker we don't want to have her head in the sand about some of these technologies that are out there. And while it might feel like we're in a blender sometimes in terms of everything being thrown at us and all, you know, blockchain and Bitcoin, the theory and fintech, all of those type of things, I think you've got to start somewhere right? Understanding and researching and looking into it and overall, just making sure that we have an understanding about how we may be able to utilize give some of these things too overall, and to make banking better and to make our businesses and our clients' business better. So, that was really the two things I was taking away. How about yourself? What were the key things from your side?
[Vinny, 35:53]:
Yeah, Zach, some of those points were very well taken. It was eye-opening for me to kind of hear some of his perspectives and views on what the industry may look like. And he talked a little bit about this intermediation, all very interesting things. I actually feel like a dinosaur because something to me that stuck out at the beginning was he had made mention that the bank had had no deposit surge related to COVID and so forth, and I thought that was really quite interesting cause you're talking about a square peg in a round hole to a degree – a bank in the community where they can't necessarily fund themselves. I mean, he talked about the size of the county. I think he said something to the extent that there are 25,000 people in the county they serve so clearly it becomes very difficult to fund your balance sheet and looking off the balance sheet or looking to wholesale resources to bridge the gap and provide financing to folks in their communities, really quite interesting and I enjoyed all of it. So again, I think it was kind of a marriage of some traditional banking concepts with the direction of banking and what may be out in front of us. So again, a huge thank you to Jonathan for joining us today. Hope you folks enjoyed it and thanks so much for listening to episode two of On the Balance Sheet.
[Outro, 37:11]:
On the Balance Sheet is a podcast produced by Darling Consulting Group, DCG. All views and opinions expressed by hosts and guests are solely their own and may not represent those of DCG. All third parties are independent entities and are not affiliated with DCG. This podcast is intended for informational and educational purposes only and is not considered as advice. All views and opinions expressed are based on the information available at the time, it may have changed on current market and other conditions. For more information about DCG; please visit www.darlingconsulting.com or email us at info@darlingconsulting.com. Today’s background music is provided by John Sib at Como Media and can be found on pixabay.com.
The text of this transcript was generated by an artificial intelligence (AI) model, and its organization, grammar, and presentation enhanced by AI, and as such may contain errors or inaccuracies. DCG is not liable for any damages, however caused, that may result from any use of this content.