Katie Wahlquist—CEO of Star Bank on Running Family Owned Bank, and the Future of Community Banking

INTRO: Helping community bankers grow themselves, their team and their profits. This is the Community Bank Podcast.

CALEB: Well, hey everybody, and welcome back to the Community Bank Podcast. Thank you for joining today’s conversation. I’m Caleb Stevens with SouthState Bank’s Capital Markets and Correspondent Banking division. And if you were with us a few weeks ago, we discussed the importance of succession planning with the folks from Travillian Group. And today, we’re going to be zooming in on one particular banker and one particular banking family who is a shining example of effective succession planning. My guest today is Katie Wahlquist. She is the CEO of Star Bank, based in Eden Prairie, MN. It’s a family-owned bank, and she talks about her journey to becoming CEO, taking over the helm after her father’s recent passing, and she offers her perspective on the future of community banking and what community banks need to be focused on to remain competitive in the coming years.

CALEB, continued: And speaking of the coming years, I want to remind everybody about our brand new e-book: “The Top 12 Winning Strategies for Community Banks in 2025.” We want to help you make 2025 the strongest year yet at your bank, and we’ve created this e-book to help you accomplish your bank’s goal. Not only does this e-book unpack the top 12 strategies you’ll need to know, it’s jam packed with resources, playbooks, and analyses to help you actually implement these strategies at your bank. To get it, all you’ve got to do is click the link in the show notes of this episode. Fill out the form on the web page and we’ll send it right to you. Don’t let the uncertainty of 2025 stop you and your bank from achieving its goals and growing deposits, fee income, and loans. Get our e-book today. Click the link in the show notes of this episode. And now here’s my conversation with Katie Wahlquist.

CALEB, continued: Well, Katie, it’s great to have you on the Community Bank Podcast. How are things up your way in Minnesota?

KATIE: Hi. Caleb. Thank you for having me. I’m just so appreciative. It’s starting to feel like the holiday season here. It’s cold. We had a little snow this morning and so, it’s the holiday season and the Christmas feels for me today. Yep. So, winter is coming.

CALEB: Yeah, well, man, we’re recording this before Thanksgiving, and so, I mean down here in Georgia, if you told somebody there were snow coming before Thanksgiving, all the grocery stores would be empty. No milk, no bread. We can’t handle it like you guys can.

KATIE: Yes, yes. Well, yes to the season. We’re looking forward to Thanksgiving and Christmas coming up and the weather starting to show the season. So here we are.

CALEB: Yeah. Well, tell us a little bit about Star Bank. You and I have followed each other on LinkedIn from a distance for a while, and we’re always looking to feature other community bank leaders like yourself. We love to see what other banks are doing and hopefully share, you know, a little bit about what you guys are doing with the other community bank executives that listen to the show. So, tell us about you and Star Bank and a little bit about your history.

KATIE: Oh, thank you. I would love to do that. So, like you said, I’m with Star Bank. Star Bank is a true, family-owned independent community bank with 11 offices now in central and west central Minnesota. We have just under 500 million in assets under management today. The founder of Star Bank was my father. His name is Harry Wahlquist, and he bought a struggling rural bank in 1989 with some financial assistance from a dear family friend of ours. And that first bank purchased, Bertha, Minnesota, was followed by several other acquisitions in the creation of a few de Novo offices. And so, today we are still primarily rural. Eight of our 11 offices are in rural Minnesota towns. Agriculture is a significant area of focus within our loan portfolio. And back to my father, our founder. Very sadly for us, my dad passed away just about four months ago after a 16-month battle against pancreatic cancer. And so, the bank remains family-owned and managed today.

KATIE, continued: We have a succession plan in place, and so we are following and staying true to that. I have an active family council for our bank, which includes myself and three older brothers, and I have the real honor and privilege of serving as my dad’s successor. I am now the chairwoman of our bank board, and Star Bank’s president and CEO. I’ve been employed with Star Bank for, gosh, 14 years now, and it’s been quite a beautiful journey. It’s been incredibly rewarding to work alongside my dad. Learn from him all these years as we’ve been growing our bank in a strategic way from, like I said, one office to now 11 brick and mortar locations in Minnesota. So, thanks for the question. I appreciate the chance to talk about Star Bank and also my dad. I appreciate that.

CALEB: Yeah. Well, what an honor to get to continue the family legacy and to take on the mantle and his role. Growing up in a banking family myself, my dad’s a banker and several other family members are bankers. It really does run in the family in many ways. I’m curious, growing up, did you sort just assume you’d be working in banking? Did you want to work in banking or was it sort of like, “Nah, that’s what my dad does, I kind of want to do something different.” How did you sort of fall into it?

KATIE: That’s a great question. Caleb, my real honest answer is no. My dad did not groom me to work in financial services. We didn’t have those conversations. I certainly respected his career. I asked a lot of questions about it. When I was starting my professional career after college, our family held bank offices were all rural and remote work just was not an option in the early 90s. I’m dating myself there a little bit, so I was really limited in terms of what I could do and also where. And the location was really important to me back in the day. He worked out of town. Sunday to Thursday or sometimes Monday to Thursday in a rural dairy community starting in 1989, and I didn’t envision that life for myself. After college, I worked in marketing-communications for years.

KATIE, continued: I eventually found a marketing role within the financial services industry and that offered me good experience and the building blocks of knowledge about the banking sector. So, that was wonderful. I worked for two financial services companies before I joined our family-owned bank. And that was when a position became available for me in our first ever metropolitan branch location of Eden Prairie, MN. And so, it’s bittersweet. I believe that everything happened for a reason. I’m glad that I was employed outside of our bank before joining the Star Bank team because, A) I just I had more to offer our bank in terms of my skills and qualifications and then B) nepotism just wasn’t a reason for or an excuse for my hire at the time. It was an earned opportunity and here we are now, and I’m thrilled to be here and like you said, carry on that legacy.

CALEB: Yeah, well, down here in Atlanta, Chick-fil-A is obviously very popular, and they’re a family-owned business. And they actually require any of their children, if they want to work in the business, I think they’re required for five years to work outside the business somewhere else. One to gain experience and bring new ideas to Chick-fil-A. But two, it’s kind of what you said. They want to see some grit and some grind and the ability to earn their keep. It’s not just sort of assumed that because they’re in the family, they’re going to take on a major role. So, it’s neat to hear your story, you know, in that in that regard, for sure.

KATIE: Thank you for that. And we do have that as well in our in our bank, for the for the next gen. So, for my nieces and nephews coming up. Also, like that outside work history in financial services. So, they are bringing something to the table, and I think that’s wise. So, thank you for sharing that.

CALEB: Yeah, no doubt. And I would say too, banking was probably the last thing I thought I’d be doing when I was coming up in college. It’s funny how you tend to not think you will like banking because you don’t understand it. But once you really learn about how it works, why it’s important, why it matters, it kind of opens your eyes to how important it is to communities and to the economy and to small business. And so, I think you tend to grow a passion for it over time the more you learn about it. And that kind of leads me to my next question, which is, I’d love to just get your thoughts on just the general future of community banking. Know we had 18,000 banks back in the 80s and here we are a little over 4,000, I think. And more and more, community banks it seems like every day are disappearing, sadly. It sounds like you all being a family-owned bank are committed to Star Bank and you want to continue to serve your communities and your clients. So, I’d love to just get your thoughts on for the banks out there that would like to remain independent, but also relevant and competitive in the coming. What do you think they should be focused on?

KATIE: Oh, that is just a wonderful question. And I would have a laundry list of answers but let me just start by saying: Yes, the number of bank charters is on the decline and consolidation continues, as we hear. But, community banks are still—and I underscore that—they are still the heartbeat of America. And incredibly important to consumers, to businesses and families, and even in some cases, an entire township. Community banks are growing. And I think with strategic planning and smart hiring, the sky is the limit for us. I am very optimistic about community banks in general, and I truly love being a part of this industry. Incredibly rewarding and there are so many career opportunities in banking from the frontline, from the teller and universal banker position, to marketing, IT, operations. finance. There are so many great back-office career opportunities, and it is a very rewarding career that I love to speak about with the next gen coming up.

KATIE, continued: You asked, I think, about how community banks can remain relevant. And I think the first thing that comes to mind for me really is being relevant in our digital capabilities. Community banks need to invest in digital to serve a wider and a newer audience. The online deposit opening, online lending, lead gen websites. Those are really a mandatory right now. And yes, fraud and security measures have to be in place, but with constant monitoring of the tools from behind the scenes to ensure the safety and reliability of those tools, it is possible. And so, I would just encourage community banks to keep going with their digital journey and transformation, whatever that looks like for them. Another thing that I think comes to mind for me is processes and procedures and just the mere idea of being easy to do business with in comparison to the competition, whoever that is. Whether it’s a mega bank in town or a credit union or farm credits, we need to be easy to do business with. And so, doing things like when I speak about processes and procedures, I mean evaluate customer wait time. Take a look at what your phone hold times are and how that’s working. Look at things from the eyes of a current customer or potential new customer and evaluate that.

KATIE, continued: Even how long does it take to open a new account? What kind of hoops or hurdles or red tape are we putting people through that we might not even realize because those processes and procedures haven’t been reviewed for a while? And then obviously a fee structure, comparing that to local competition, what does that look like? And just really take a step back to determine if there’s any roadblocks that customers might face and try to knock those out. So, processes and procedures are very important, and I think those to be evaluated. And then I think another way to remain relevant is also that spirit of innovation. And we talk about digital capability but embracing innovation and technology to stay relevant and competitive, whether it’s AI or something else. People have a choice of where to do their banking today. I’m in sitting in an office with three banks across the street from us, and we have to continue innovating, whether it’s whether it’s digital, whether it’s the look and feel of our branch, whether it’s innovating through exciting community events. Having that spirit of innovation. Being easy to do business with. And tech, those are really important to the next gen of community bank customers. And so those things are what are top of mind for me.

CALEB: Yeah, well, that’s a great list and quite a comprehensive list. Lot of different things that we ought to be thinking about. Not to jump on the bandwagon of AI, but I’m just sort of curious from where you all sit. How are you guys thinking about that? I mean, I talk to so many community bankers, and it’s kind of overwhelming, and you don’t really know what the implications are, the security risks are, how it can be used effectively but also safely? Have you all had those discussions? And then what’s your kind of temperature on that?

KATIE: Yeah, you know. It’s so interesting that you asked that and said that right now because our Chief Credit Officer just returned last week from the American Bankers Association Ag Conference that was held in Milwaukee, WI this year. And one of the sessions at the event had to do with AI and lending in specific. And when I was reviewing the session breakdowns with him, I highlighted that one and I said, “Please be sure, if you’re going to anything at this event, please be sure to attend this seminar, and then let’s debrief on it when you get home.” And then since then, he has found two other learning opportunities about AI and how to apply it in the community bank. And so, the long or short of it is that right now we’re in a learning phase. We are being students of the industry and observing what the trends are, and we haven’t jumped into anything. But we’re not opposed to doing that. Just kind of taking it all in and doing our own learning and due diligence. And then we will plan our strategy and our tactics after that learning phase and that research is complete.

CALEB: Yeah, that makes that makes. Well, as we wrap up, I’d love to just hear as you sort of look back over the past few years, what are some initiatives that you all have undertaken that you’re proud of, and it kind of relates back again to, you know things you’re doing in digital. Things you’re doing to improve your customer experience and process. Any things that stand out that you all feel like has really moved the needle for you as a bank?

KATIE: I love that question because there’s something that I’d like to share, which maybe, I don’t know if it is on the radar, but it certainly is on the radar for me. And a key initiative that we have undertaken that I’m really proud of is improvements in the area of human resources at our bank. Our improvements have helped us with employee retention. It has helped us improve employee satisfaction. And the how for that is we have drastically improved our benefit offerings over the last six years. Our model of PTO has evolved and changed in the employee’s favor. The bank contributes a lot more generously to medical care and other benefits like our 401K contribution than ever before. Even in the face of rising costs from our benefits providers, we’re still being very aggressive. And then training and development too for employees has become a greater priority. And I love to hear that our managers are having conversations with their employees about ongoing learning and career growth within the bank. We see, like many community banks, we still see frontline turnover, but our average years of service is now 12—just over 12-and-a-half years. So, 12-and-a-half years average years of service. The average age of our employees at the bank is about 45.5 and women represent 75% of our workforce. We employ 61 women now, so that 75% of our workforce. And with the exception of our credit area and our financial accounting area, women lead every back-office department of our bank, and they are serving as both branch and people leaders. And that is really huge for me. I am super passionate about our reputation for offering women a long career in this industry. I think we can all admit and realize that financial services used to be pretty male-dominated, especially in those lending and more managerial roles. Branch managers, people managers, and that’s just not the case anymore. I think women have a valuable seat at the table, in our boardroom, certainly, and in every committee, every department, and every branch of our bank. So, those key initiatives rev me up and make me excited to get to work and you know, speaking of talent, we have a strong group of really young, energetic minds here at Star Bank who want to grow their career in the industry, which is wonderful. And watching them emerge and take part in training courses, going to association meetings, joining us are groups. I just really hypes me up and makes me feel great about the longevity of our bank, and our succession plan is becoming even more deep for that reason. It’s because we have such strong talent. That depth chart, if you want to have a football analogy, that depth chart is really exciting for us and our future is bright.

CALEB: Well, you mentioned 12 years average tenure. That’s quite staggering. I must say, it’s funny. I was talking to a group of a couple guys on a podcast just recently, and I mentioned that one of my friends, he likes to say that the corporate ladder is now the corporate lily pad because people jump, hop jobs, you know, every 2-3 years. So, to hear that you all are running an average of 12 years is staggering. And I think it speaks to your culture, your commitment to, you know, the wonderful benefits you provide, but I think the training and development. Giving, you know, both men and women, great career opportunities long term. I think so many young people today don’t feel like they’re getting developed in their careers, and so it’s easy to just jump to the next thing if you don’t feel like you’re getting challenged and developed. Just bravo to you on all fronts for everything you’re doing there.

KATIE: Thank you. The fact of the matter is that, I don’t know about you, but I spend more time in the office at work and doing work related things than I do at home. And I want our bank to be a great place to work. And, previously, when we talked about community banks staying relevant, I mentioned that phrase of being easy to do business with. I want our bank to be an employer of choice. People have a choice of where to bank, and they also have a choice of where to work. And so, behind the scenes from an HR training and development perspective, we’re working really hard to make sure that we are offering a great employment opportunity. And the proof is in the pudding, like you said, in terms of our average tenure years of service. So, thank you for that.

CALEB: Well, any final words of encouragement to the community bankers listening? I mean, we’ve been through COVID, we’ve been through rates, you know , skyrocketing through the roof, now rates are coming down. We’ve been through inflation, we’ve been through the great resignation, the war for talent. It seems like it’s harder than ever to operate in today’s environment as a community bank. So, just any final words of encouragement to the listeners out there?

KATIE: I would say, you know, it’s fun, my brother. I have an older brother who serves on our family council, and his key phrase with me is always, “Bank on, banker.” We got to keep going. One foot in front of the other. Focus on your mission. Work on finding great talent. Leverage their skills. Train them up. Be a great mentor to employees. And really, the sky is the limit for what we can do. Community banks are strong and what an opportunity we still have to serve our local communities and help them grow and become even more vital. So, let’s keep on going. Bank on, banker.

CALEB: That’s a great place to end it, it’s a great word. Thank you for your time. Really appreciate it. I know our listeners always enjoy hearing from fellow leaders like you to not only encourage them, but just to hear what other banks are focused on, so they can continue to survive and thrive in the future. Thanks again for coming on.

KATIE: Thank you. I am a huge fan of the podcast and really enjoy it. You are doing a great job, and I appreciate you.