Former examiner leverages experience at North American Banking Company

Longtime state banking examiner Max Zappia is using his expertise to help North American Banking Company expand its cannabis operations and broader payments system..Zappia was named chief risk officer of the Roseville, Minn., bank in February. He had worked for the state of Minnesota for the previous 17 years, joining in 2009 as an assistant examiner after graduating from college. “That was the first job offered to me,” he said. “It just so happened to be a job that was a really good fit for me, that I really enjoyed.”Zappia’s appreciation for community banks sharpened as he grasped the significant role of smaller financial institutions in local economies. He was also drawn to the relatively fast-paced nature of the job. “It was topical to what the economy was doing and the struggles we were going through,” he said of being a bank examiner during the Great Recession. “It is super-engaging work. You get to meet all kinds of different operations, see how everyone runs their banks.”Zappia was chief examiner of banking at the Commerce Department for the past 11 years, and Deputy Commissioner from 2017-23. Following the federal 2018 Farm Bill, the Minnesota Commerce Department laid the groundwork for cannabis banking, explaining to state chartered banks the pathway to compliance for hemp-related products.He was attracted to the challenges banks overcame to keep a successful cannabis banking program in the fragmented federal regulatory landscape. The SAFE Banking Act, which would establish a federal regulatory landscape for cannabis companies, has not passed despite being introduced more than a half-dozen times. Once Zappia joined Minnesota’s Office of CannabisManagement in 2023, he focused on communicating new cannabis standards to bankers. “My educational background is in economics, so the idea of designing and launching a market fascinated me,” Zappia said. “My expectations were completely untethered from the reality of day-to-day work. “I made a point of being a resource to any bank looking for it,” Zappia said. “There were a few speaking engagements, but we were so much busier than I expected that we did not get out to the banks as much as I would have hoped.”As a regulator, Zappia was aware of the strong relationships North American Banking Company had with regulators, which raised his comfort in joining the bank. “One of the things I like about this bank is that it always has had a culture of compliance,” he added. “So getting things right is important to it, so the way we approach risk is very healthy.”Zappia’s work in his first couple months at the bank has been focused on getting up to speed on the payments side of the business. His background on the regulatory and cannabis sides of banking were ideal for North American Banking Company, said CEO and Chair Michael Bilski. “Max is a perfect fit for us,” Bilski added.The $1.5 billion bank was expanding its compliance department, and wanted to separate compliance and internal auditing. North American Banking Company entered cannabis banking in 2014, becoming one of the first financial institutions in the state to do so. Since then, the bank expanded its cannabis services to offer payment processing.While North American Banking Company currently serves cannabis customers in Minnesota, it is open to expanding the program. Doing so is challenging as Minnesota is surrounded by an international border and other states without legalized cannabis.Another complication is the initial business cycle of cannabis in states where it has been legalized. States with recently legalized cannabis programs have seen high prices per pound as, initially, there are few sellers. The price of the product tends to fall as a greater number of operators hit the market, leading to oversaturation and more business failures due to a loss of market share. The price of the product then stabilizes at the end of the three-year cycle.Even the Trump administration’s relatively laid-back regulatory stance creates challenges. Deregulation by administrative discretion can be challenging because if rules are unwritten, they can change at any time, Zappia added.“You have to meet the regulator because if they do not like what you are doing, they will find a way to stop you,” he said. “Going in a direction that your regulators do not like in banking is not a recipe for success.”‘Coaching is my favorite form of leadership’Zappia believes in “situational leadership,” where each situation requires a different approach. “In some situations, especially early in my career, leadership looked like giving really bad news and having to hold on to it,” he said. “Sometimes leadership looks like great coaching. Sometimes leadership looks like getting out of someone’s way. My philosophy is figuring out what is needed and then trying to provide that as much as possible.”Zappia especially enjoys helping those he oversees improve. “Coaching is my favorite form of leadership,” he said. “When you are coaching someone, you start giving them the skills and all of a sudden they get better than you, or they have a different way of approaching it. That is a pretty cool moment.”He said the switch to the bank side of the compliance sector has required humility and a shift in focus. “The bank does not need another regulator,” Zappia added. “It already has many regulators. It does not need someone who is looking around for things to tell people to stop doing. I am approaching this role making sure we understand all the risks so we can manage it right.”