Trust and Optimization During Volatile Times

0:02 You're listening to Leaders and Lending from Upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week, here, decision makers in the finance industry offer insights into the future of the lending industry, best practices around digital transformation, and more. Let's get into the show. Welcome to Leaders in Lending. I'm your host, Jeff Keltner. This week's episode features my conversation with Dave Sayers, the CFO at Main Savings Federal Credit Union. Dave and I discuss how he thinks about balancing the balance sheet between liabilities and assets. Pretty important topic and today's day and age with recent developments. We talk about the opportunity for credit unions to be pick up deposits and this time of uncertainty. We also talked a lot about how to manage liquidity and also while you're managing liquidity, make sure you're available to meet the lending needs of your members, and also the opportunity for relationships in serving your members, putting their needs front and center to really help you strengthen brand, loyalty and stickiness of customer relationships and hopefully deposits over time. I think it was a fascinating conversation. I really enjoyed it, and I hope you will also enjoy this conversation with Dave Sayers. Dave, welcome to the podcast, and thanks for making the time to join us day. I really appreciate it.

1:19 Thanks Jeff, glad to be here. I appreciate the invite. I start many of my podcasts by asking my guests this question, and so I'd love to get your answers, like, how did you wind up in the banking credit union space? I don't feel like this was the childhood ambition of many of my guests, and yet yet here we say so taught me a little bit about your journey to where you're at. Yeah. Sure. Came over to the United States from England in nineteen eighty one and finished my college career here in Maine in nineteen eighty seven, And after my freshman year in college, I started actually in the banking industry. I had a job working in an ice cream parlor in high school, and my mother said, no more of that, we need you to work in a nice business office.

2:00 So I applied and got fortunate enough to get a tell a job as at a bank and I continued to work at that institution through the next several years as it went through a number of mergers, ended up being Fleet Bank before it became Bank of New England, so I Bank of America, and then I progressed from there. I moved for two or three different banking institutions. Had an opportunity to go in my first senior position working up in northern Maine in nineteen ninety seven, and that was kind of far from home, and an opportunity in a credit union world came up actually for a president CEO, and my father sent me the ad from the paper, which he never would usually do, and because you need to apply to this and come home.

2:47 So I was fortunate enough to That's when I stepped over in two thousand into the credit union movement, and I've worked I worked at that credit union for seven years before I came here to Main Saving sixty years ago. So it's kind of I enjoy being in the credit union space. It's kind of what banking was when I get into it back in the early to mid eighties, when it was more community focused and community oriented, and so I really enjoy being being My background on educational background is business management, and it was just I really enjoyed being in an industry where I could help people meet their financial goals and needs. And it's been just a great ride, and I've been fortunate to have a lot of success passed my way and had an opportunity to progress in the industry and really love what I do every day because for me, it's all about making a difference in people's lives, whether that's your co workers or your members in our case, and try to leave everything in a better position tomorrow than it was when you found it today. That's a great story. The ad from the paper is great. I didn't I don't know if that was still work. Would that be a LinkedIn post now or something, you know, a glass store, I don't know where you would they people it would be. But a little slip of paper he cut it down, was like a two by two ad, and he cut it out and he put a sticky on it and said apply for this, and then he just mailed it to him. He didn't tell me he was sending it.

4:09 And then I'm like, okay, then I'll do what you say. And it worked out great. Yeah, it worked out great. No, no ration, I just like we want we want you back home. We're expanding our family at the time, and it was five hours away and he's like, it's too fun to drive on the weekend. So see the brand, kids, you need to come home. So I worked out well. So I'm curious how you think about right now managing you know, we're experiencing it like maybe one of the most volatile periods in banking, you know, the most of us have experienced. Right there's I feel like I've got a whiplash from a couple of years ago. I was getting called from going to Jeff, we got too much cash, help us out with that, and then I, you know, that's not the call I get anymore. If Jeff we don't have a lot of cash, we got to stop all of the stuff we're doing it it's a cash So how do you think about how credit unions can optimize portfolios? Like, how do you manage through that cycle and prepare yourself to be ready for what seems to be a more turbulent set of times and most of us experience of the last number of decades where there was I would say a little bit more stability than what we've seen that the rapidity of chain seems to have really increased. Yeah, I mean, it's it's a great question. And as I as I think about that, UM, it's been as you mentioned, it's been a number of years since we find ourselves in a situation like we do today. UM. And in many cases, perhaps folks that haven't been in the industry more than fifteen or twenty years have never experienced first time around. Yeah. So yeah, and that makes it even hotter because you don't have that experience, you know, to draw

5:40 on. UM. One of the things that that that we try to do UM is trying to create symmetry throughout our balance sheet. Obviously, we know that you're going to have to be mismatched somewhere along the way. You're either going to be asset a liability sensitive. You need the opportunity to, you know, to leverage that and make money. Certainly, you know, two years ago, I think we would have been hard pressed to find anyone in the CFO roll across the industry that would have predicted that rates would have gone up close to five hundred basis points inside of fifteen months. And so being able to anticipate that and prepare for that is kind of difficult, but what we've tried to do. What we've tried to do is balance across the assets and liabilities as best we can. Our philosophy has always been to try to match assets and liabilities to the extent that we can. There was going to be a little bit mismatched, but take those liabilities and put them into somewhat like assets or something that would be amnicant when it comes to risk, right, we don't speculate on what could happen tomorrow. We try to make decisions today they're in the best interests of the institution and our members based on what the circumstances are today. And I think, you know, when we look at some of the issues that have gone on here recently, and obviously SPB is on top of everyone's mind when you look at what the issues were there, and there's obviously a lot more to the story than what I'm privy too

7:11 or what most people have privy two. But the bottom line was they took low cost short term assets or no cost short term I'm sorry liabilities, and they tried to um, you know, leverage the spread and buy long term, high yielding assets. And then when the markets turned to a degree that another of us could have predicted. Now they're in a situation where in order to meet that demand, they can't afford to race the deposit rates. So they're going to meet that demand for deposit outflows because they're borrowers are looking for higher returns. You've got to liquidate your assets, and now you're doing them at substantial loss. So we try to be obviously you give up a little, you don't. You don't want to chase yield. We don't. We want to obviously earn as much as we can on our excess funds and our investments, but we feel it's appropriate to maintain a balance there that makes sense so that you don't run into that situation. You might in the short run, you're gonna make it a little bit less money, but you're going to take the whole bunch of risk off the table as well. How do you think about you talk about buying like assets to the liability matching durations and things like that, and one of the questions I have is is how you think about the duration of deposits of various types shifting. Because one of the big surprises to me, I think for everyone in the SVB was just how fast deposits, like how correlated the outflow of deposits could be and based all like twenty five percent of deposits outflow in a day, and I don't think many of us are prepared for that, And I think we thought of them as stickier, And so I'm curious how you think about the shifting nature of like what what is the nature of the duration of a deposit? How sticky is

8:43 that? Is that shifting in your mind? And how do you adjust that? Because it feels like there was a bit of poor risk management there, for sure, in terms of you know, buying long term treasuries at one seven or whatever, like it was not a good play. Interest rates were certainly not going down and you were giving yourself big interest rate risk. But there was also a degree of like traditional run on the bank, and just the speed of which it could happen was kind of unprecedented and left them really in a way that given you know, six months, they probably could have handled this in some better way, but given twenty four hours, there was nothing that could be done for them. And I think that changes the way we have to think about what what what what a deposit looks like and what it means and how long term it might be when we're trying to match it to an asset. No, that's a that's absolutely right, and it's a it's an excellent question. And certainly nobody could have predicted that they would have the run that they had in such a short period of time. Um, you know, and we run obviously, as I would assume most people do with up to our ALM modeling. We run all kinds of what if scenarios, and honestly, for a number of years, myself and others have asked the question, you know, how realistic is it that we're going to see rates change three or four hundred basis points overnight and we're going to have a run, and we're going to lose ten and twenty percent amount of deposits in you know, thirty sixty ninety days. And it's easy, like I mentioned previously, when people haven't gone through these cycles before, it's easy to say, Hi, that's not going to happen. But if we look back now over the history of the last fifteen months, it did happen. And then so and one of the things I am always cautioning our alcoholon is the fact

10:16 that hey, we do a three or four hundred basis point shock test. Well, when I do that today, it's the equivalent of doing an eight hundred basis point shock test fifteen months ago, because races move five hundred and now you're shunk in an additional three and you know, how how are you going to look there? So we obviously do what most people do. We do to decay studies, you know, on our deposits, and we try to look at how they've performed, not only over time, but during various economic cycles and those kinds of things. And hopefully what's happened in this kind of a situation before has been somewhat predictive of what might might happen in the future. But I think a lot of it boils down to the trust that you build with the with the members that you have, and I actually think that this could provide. Of course, time's going to tell whether this theory proves true or not, but I honestly think that we might have a little bit of a you know, we might have a little bit of a flight to safety here. And I think that credit unions in general may be picking up deposits as we move forward over the next several months just because now, I mean, all all financial institutions are stained by what's going on with the recent losses, right, because we're all painted with the same brush. But I honestly believe as well that just like when the stock market ebbs and flows, is there can be a flight to safety when the stock markets going down across the financial industry. I think this could be something that pushes members or

11:46 consumers and pushes deposits towards credit unions. So that could be something that alleviates what is currently a liquidity situation going on for most But it's hard. It's hard to figure out. You know. It's easy to have have the glass ball now and say, well, we know what's going to happen, right, I mean, and I've said to other members of our staff and to our board that you know, had I known in January of last year what would happen with rates, I probably would have gone out and borrowed a whole bunch of money and locked in those one percent rates for four or five years, and we'd be looking us Treasury right, We'll be looking fantastic. But the problem over that at the time was if I go out and I buy these investments, or borrow this money and I'm paying one or two percent, I'm earning zero overnight. That's a huge risk. You know, I'm going to pay that. I'm going to pay for that, and then if rates don't change, now I'm a little bit of a chump. So that goes back to you know, my comment before that we really feel we need to make the right decisions every day based on what's going on in the economy today.

12:50 Not necessarily. We certainly want to look ahead and predict, try to predict as much as we can what we think could happen in the future. But I don't think we can bet our future on the fact that that is going to happen, because it may not. How do you think about You talked about the possibility of cs picking up deposits in this kind of flight to safety. What's your advice for a credit union a community bang? I mean, I want I want limited to credit unity of people who listen to both. But like if you want to look like in some ways, I feel like the safety feels like the Big Four, right, you go, Well, these guys are almost for sure going to pick up a government guarantee of deposits, maybe even uninsured. In the case that they're systemically important, they kind of almost an implicit unlimited FDIC insurance against those guys, and so that feels like the natural form of safe But I think you could be honest, something that smaller institutions can feel like a safe bet as well for a lot of businesses and consumers. What's your advice on how to how to feel like that safe place in a storm if you're not one of the big four with this kind of you know, sifty indication that the government's really going to make sure that nobody working with you gets hurt in the end. That's a great question. I think you know, we we over in our market have worked very diligently to develop a strong brand and become seen as a trustworthy institution.

14:03 I think transparency is important. Whenever we have the opportunity, whether it be through social media or print media, you know, annual meetings, whatever it may be, newsletters, we try to be as transparent as we can and put the message out to the member, always trying to educate them on what's going on in the industry, how that impacts us, how we've positioned, what our philosophy might be in terms of how we handle you know, certain situations, and obviously in this case with liquidity being on everybody's mind right now, you know, we tend to be as proactive as we can and get the message out that in a positive way, not just promoting ourselves by promoting the industry in general. Here's questions that you need to be able to ask.

14:46 Here is things that you can do to protect yourself and kind of be an educational front, if you will, for those folks that have questions, and certainly we've had members over the last several weeks that of with questions we have you know, a good portion probably not a substantial amount, but probably ten percent of our memo deposits eight to ten percent of our memo deposits would be considered uninsured deposits. And so a few folks have had some concerns. We have looked at how we can add access share insurance, and in some cases for certain programs we've done that. We also educate the members whenever we have the opportunity on how you can structure your accounts so that you can get more out of the FDIC or NCUA insurance, which possible to get substantially more than the you know, the base two hundred and fifty thousand, the AFU struct your accounts in the right way. Yeah, so it's really it's really about education and we just try to Like I say, we've got a really good reputation. We've been in the market since nineteen sixty one and we've always remained profitable, We've remained strong, and I think that the members know that they can trust us when they have questions, We're willing to answer those questions completely. I'm a full transparency so you know, I think that that helps.

16:07 Like I say, there's always whenever there's whenever there's bad news, it kind of it kind of impacts everyone, right, if there's positive news in the industry, it kind of falls on deafe as most of the time. Well, it's a bit like the like the intelligence agencies, right, like when you're managing it, well, nobody, nobody's paying attention until something goes wrong. And I thought this is one of the most ludicrous lines of reasoning after SVB was like that the line of defense was supposed to be the CFOs of the businesses that we're banking with. These guys looking at the balance sheet to make sure they were putting their deposits at a bank that wasn't taking risky bets, and I want, I don't think when things are normal, the CFO of very many businesses is looking at the balance sheet allocation and that you know, is there interest rate risk at the you know, in the investments that my bank is making, and should I move my deposits because of that?

16:55 I thought that was kind of silly because your point like people aren't really paying attention, but maybe at this moment being a bit more of a dull and traditional I mean dulls maybe the wrong word, but you talked about the credit union space being the kind of back to basics version of banking. The community banking was that it might be a strength when times get turbulent that you're sticking to, you know, not trying to make an excess yield and you're doing the basic banking stuff that is a little more stable through thick and then, Yeah, I honestly believe that That's why I talk about, you know, the flight to safety. The unfortunate reality that I think we all know is that there's whatever something bad happens in the world, no matter what it is, is always a massive overreaction right, and so the concern that we have is from a regulatory standpoint that and rightfully so the regulators should be focusing on these things. But what will typically happen now is there'll be a massive overreaction. They'll want to see even more what if analysis and stress testing through the ALM model bank I don't want to see obviously, you know, less risk and it's just going to be on and on and on. So even though you have a long an institution may have a long track record of performing in an extremely safe and sound manner with great controls and practices, and is doing everything the way that they should to continue to be successful, there's really no leeway going to be given. There still going to be we get treated with the same brush as everyone else. You know, this went wrong over here, so we assume that it's going to go wrong with you, and

18:26 so therefore we're going to be even more We're going to put even more of a regulatory burden on you. And that's that's difficult because with everything that we're dealing with, I mean, it's appropriate that they should have the right controls in place and we should operate within that framework. But I think a real concern for us and others, is that now we're going to go away, you know, the other way. Should this have happened at SPB, probably not, And the fact that they had, you know, there's a certain amount of blame that can not only be placed on the management there, but also the regulators to a large degree. They're in the shop on a regular basis and they see what's going on, and it's easier to be a Monday morning quarterback, right look back. Hopefully that was a bad decision. We shouldn't have done that. Everybody makes mistakes, so that's a little bit of a concern for us. We you know, we have a great relationship with our regulator. We've always been We've always been considered strong and safe and sound, and that will continue to be the case. But I know that there's going to be even more reverted in those areas and that kind of takes away from what we can do for our membership in terms of it takes time, it takes money, it takes effort, and that takes money and time away from what we can do to assist on members with the programs that they want to have. So let me ask you a related question, which is into something you said earlier, which is kind of just like liquidity crunch that people are experiencing. And you know, when you talk about the back to basics, it's really about I find so much of credit and is one of the things I enjoy is it's really about serving the members. I mean, there's

19:56 not this kind of asset purchase yield seeking the little bit more like how do we use our deposits to serve the products that are that our members needs are truly kind of like balancing the two. But obviously the needs of the of the of your member base can be shifting in a different way than your deposit base may be. So how do you think about managing you know that serving the needs of the members in terms of products and lending things, you know of services they may need with the liquidity situation, is it is it is a little bit more volatile because it feels like those two things can get can get out of balance and you're trying to really serve both. Yeah, that's absolutely right. I think you know, the last few years, so you say three three and a half years now pre COVID to today, um our industry has been through really an unprecedented time. UM what we found doing COVID was that we had this massive influx of cash and liquidity. And I think that's probably true from those institutions. Um you had the PPP going on and all of the government assistance programs that were out there, and people were receiving all this funding. Businesses, we're receiving large amounts of funding, and obviously that that's stopping you know, at the at their local institution. So we saw liquidity. We saw a record high liquidity during during the front part of COVID, and the assumption was that that's going to be temporary. This money is going to be spent down and it's going to go away, So we wanted to make sure that we continue to keep those funds available so that it could it could flow out as easy as it came in. It turned out

21:27 that that really wasn't the case for the most part. I'm sure some of that money flowed out, but because of the growth that we're going through and attracting and acquiring new members, we really didn't see our balances roll off. We ended twenty twenty one with you know, an excess of five an excess of one hundred million dollars in cash and at the time, we were under five hundred million in assets, so that was, you know, fly substantial and we're earning zero on that money. So we put together a plan. We said, you know, we know members are going to need there's going to be we moved through this COVID, we know there's going to be a demand, and members are going to want to get out, they want to spend money, they want to buy cars that they may want to do with interest rates being as low as they are, and we're in zero on that money. So let's get aggressive on loan growth and we put together some really aggressive loan growth programs. For twenty twenty two, I think we budgeted to grow loans about eighty million dollars. We actually end up growing loans about one hundred and ten million. Wow. And we were still bringing in cash, so obviously our cash bondances were going down. And then the ALM model suggesting, hey, you know, you can't continue to grow loans at this pace obviously for you, and we weren't bringing in deposits at that pace. We only bring into posits maybe at half of that speed, which was by design.

22:41 But then rates start to go up right so throughout the year we're getting this money out there, but then we're getting to a pointless like, we don't want to be too aggressive on pricing now because you can actually hear an equal two or more than what you were pricing some of these loans at, and so you leave it in cash, and you don't, you know, you don't want to take the risk by going towards the fourth quarter of last year. I looked into this situation and said, you know, we want to prepare ourselves for continuing to grow in twenty twenty three, and we need to replenish some cash. So we actually got really aggressive and we went out there with some very attractive certificate special offers. At the time, we were up in a fifty year five percent CD which was I was told it was the highest rate in the nation at the time. Whether that's true or not, we're not sure, but it was certainly very attractive in the marketplace.

23:26 We knew we would bring in a substantial amount of cash. We knew that we would cannibalize some of our own deposits that have been sitting on the sideline in low cost deposits, waiting for rates to go up. But we were willing to do that because a couple of things, I knew that I could go out and buy institutional investments at or above that rate four terms twelve to eighteen months, and we were happy to do that. And then it worst case scenario, we're earning somewhere around four point six at the time overnight, so we're only given up maybe forty basis points on the spread. And the flip side to that was we said, this gives us an opportunity to bring in new members, and it gives us fifty months to cross sell these new members and make us that primary financial institution. So part of our strategic plan to grow and you can continue to grow in twenty three was exactly that we backed off of our loan growth goals. We focus on deposit acquisition, and we said we're going to put together a plan that now allows us to deepen the relationship with these members. Our history has shown that typically we're very successful doing that. When we run certificate specials, we always bring in hot money.

24:29 Certainly some of that leaves when the certificates mature, but we've never seen our balances go backwards, so we've always been able to place that hot money as we bring in these members and deep in the relationship. So that kind was our strategy. I was obviously concerned as a person that's responsible for running the ALM model and making sure we have adequate liquidity and knowing what was going on in the industry, and I said, let's just get out ahead of this as quickly as we can. Let's try to bring in a bunch of money in our market. I think we did really well. I mean, we brought in you know, forty or fifty million dollars in new money in three or four month periods, So that was that was huge for us. And now we're well positioned again. We've got a ton of money in our overnight account, we've got strong loan growth continuing way over budgets to find the first quarter. But it positions us well to operate from a you know, we position to operate from a strong a strong foundation and continue to be able to offer what we need to to our members. We may make a little bit less money because we've taken on that extra expense, and certainly with the we did have more money transition over from the non low interest accounts into the c That's okay because now that money is sticky and with loan rates continue to increase, we can we can still make a positive spread there and leverage the volume to still generate some money on the bottom line. Obviously, we've got to continues a fourth the capital ratio as we do that. Hine, I'm Margie Clerk, President and CEO of Agriculture Federal Credit Union in Washington, DC.

26:00 When we wanted to acquire more members of personal loans, we knew we needed a partner that allowed us to scale quickly and easily. With Upstart, we were able to go live in fifty four days without adding hoodcom, and we were able to learn previously under serve our hours with Upstart's model. If you'd like to learn more about our partnership with Upstart, you can read more at upstart dot com. Forward slash Lenders, Thank you, and back to the show. You know, in times of volatility were times, you know, I feel like so often in times of difficulty, there's like hidden opportunity, right. It's kind of a moment where what's the old buffet saying, and everybody else is nervous, get greedy, whenverybody else is greedy, get nervous. So a lot of people are nervous and I'm not trying to say you want to be greedy, but what do you think the hidden opportunities are?

26:48 Like, what are the things you're saying, Hey, this is a real moment that we can take advantage of in certain ways while we're obviously being cautious and conservative in others. What are the kind of hidden opportunities in the current environment. Well, I totally agree with that, and I think over certainly over the last ten or twelve years, that's kind of been our m O, if you will, is we look at, you know, what's going to be coming down the road over the next twelve to eighteen months, and how can we take advantage of that, and there's going to be Our history would show that there's times when long growth is there to be taken and we've gotten aggressive in that way. Other times when it's like, Okay, we need to back off on that. Loans are going to be relatively flatten out for the next whatever twelve months, and we're going to focus on the deposit acquisition. So the opportunity I think goes back to as those as rates have ebbed and flowed and liquidity ebbs and flows. We try to tie our strategy to what's going on and what opportunities does that create. So when we flush with cash and overnight rates are relatively low, we came out with a very aggressive We had a fifty percent off promotion where we've basically said, anything that's non real estate related that you hold elsewhere for debt, you come see us and we will cut your rate in half. And certainly that led to us writing some loans at rates that were slightly below um where our traditional rates would have been. But now, you know, to folks out there that are consuming financial products, they say, wait a minute, I can cut my rate in half. That was very attractive and very successful, and we

28:21 we ran that promotion for you know, three or four years. It's a little harder to do it now. We're still kind of trying to figure out. And obviously credit cards is a perfect scenario. You know, I operate on a credit card is ten percent basically nine point nine nine percent, which is already fifty percent off of what more than fifty percent off of what folks are probably paying if there's some of the large YEA with the typical rates here twenty we've tried to lage that a little bit, and then obviously as things as things EMPs and flow. We will come out with some deposit specials that make sense. But in both cases, whether we're attracting loans, we say, okay, we want to bring your loans in and then we're going to work on you. While we've got your loans in here, we're going to work on explain it to you and selling to you why our other financial products and services make sense. Right, and I think like most credit unions, we don't charge any fees. You've got full service. Everything that you need to consume, you can consume here and you're not going to pay the fee.

29:17 So if we're bringing in new loans members through new loans, and we're going to focus on how would we now become your PFI on the deposit sign and provide on these other services. And then now while we're bringing in the folks on with higher deposit rates, Now that gives us a period of time to say, let's let us we want to sell ourselves to you and explain why we should be your primary financial institution, and this is what we believe in, this is what we care about. We want we really care about your financial well being. And then the other piece of that which I think is really important and I think most small financial institutions would take this tact is we don't want to sell you anything that you don't need. It's not about, you know, how many widgets did we sell today, It's about how many members did we ass how many members lives did we make better tomorrow?

30:03 Did they go today as a results of what we're able to do for them. So it kind of amps and flows based on what's going on in the economy and what our most important initiatives are. But that's kind of we're always looking about how do we deepen the relationship? How do you think about I want to dig in on that because I think it's such a such an important point, this difference between how many products did we sell? How many you know, and did we find the right products and serve the members needs? And how do you think about creating a culture and measuring that because it's so often what the old managers saying, whatever is measured is what matters, And what's measured is typically like unit sales, you know, like it's the thing it's easy to do, and like was that the right thing for the customer?

30:45 It's harder to measure like did we really serve the customers needs? So I'm curious how you think about both either putting measurements on that or at least instilling that understanding and culture into your team members, especially as out there maybe with complants that are against sales targets or other things. You go, how do we really get people to focus on serving the members needs above hitting some target or growth, because that feels like the right thing to do, but also a hard thing to get the organization centered around doing. Just from an incentives point of view, Yeah, absolutely, it's it's extremely difficult one of the things, and we're moving, you know, we're moving down that road all the time to say, how can we do that better? We've had we've kind of moved away from incentives over the last few years. There's a couple of products that we will still incent you know, our loan offices and MSIs to sell to the members, and still we attach products and those kinds of things. But when it comes to goals and objectives, we've tried to steer away from giving somebody a hog goal. You know, we know what the expectations are. We explain to all of the stuff their introduction roles.

31:55 This is what we would hope for this position, that we can can generate for volume, but we don't focus on really we give feedback. Obviously, we let everybody know what the production, how we do them for production, and what the numbers are, but we don't focus on, hey, you know, how come he didn't sell this many loans last week or he didn't bring in to that many deposits. Now we're transitioning. We've actually gone to we're actually going to a key performance indicator type system if you will, or mentality that we're introducing across the company now, and we're saying, these are the things that are most important to us, and this is going to determine you know, potential bonus payouts or number of different things on the incentive site.

32:37 So rather than saying we're going to give you five dollars for every checking account that you open or whatever it might be, we're saying two things that the two we came up with only two KPIs this year. One was the most important. One is we want the member feedback. So after a member of transaction occurs, could be a new member, it could be an existing member. After certain transactions, the member would receive a survey from us, It says, tell us, how we did you know? How well did you feel that you were served? And they were able to rate us on that. So that's one. The other component, because we want to tie this in across the entire company, is we have an internal component for that.

33:19 How well were you served by a coworker? How well was the folks on the front line served by the backshop department when they needed to be in those kinds of things. And so we're using those right now as measures, and we honestly believe that that kind of feedback will make us better. We want to enhance the member experience internally and externally. And if we do that and we become known. We have a strong presence now and I think our members rate us highly in terms of the service. But we're trying to say, how can we be better, How can we better tomorrow than we were today, and how can we make that a positive experience for you? So with that feedback, we're able to address maybe we have issues where our process is not as member friendly as we think it might be, and we'll be able to assess what's the difference between what we feel is important to the member and what is really important to remember, and then we can adjust our processes accordingly, so we still have the appropriate controls in place, but we're able to now push it back to the member and give you the experience. So you leave and you say, wow, that was fantastic, And not only do you want to bring all the rest of your business to us because we treat you so well, but now you're going to go out and tell all your friends how you really need to go and see main savings because this is what they're going to do for you. So we're trying to get away from the whole stigma. If you will, you need to sell x amount of whatever it might be. From a pricing standpoint and a product standpoint, I think we structure ourselves in such a way that those things are easy to sell

34:52 and they're attractive to buy. And like I say, we don't challenge fees. You know, use and abuse fees is really all we have for fee income, the biggest one being overdroffed obviously, which is really the only punitive fee that we have on members. All of our account services are free. And then obviously on the use side, we're generating a fair amount of interchange income which is important. It doesn't it's free to the member obviously, but it's obviously makes a big difference on our bottom line. And we're working on how can we enhance other revenue sources so that we can potentially, we see the writing on the wall, reduce and eliminate what revenues coming in for overdrafts. So we're trying to look at options for how we can potentially provide some additional services that members may even be willing to pay for if we're not regrowing them to pay. But there's some additional psychic subscription service that you can just like the TV stations and everyone are doing now pay for nine nine a month.

35:47 You can have all of these benefits. If they're important to you and they have value to you, maybe you'll subscribe to those type of things. So that's kind of the approach we're taking. And we have established, you know, what we call Main Savings Academy, so we all of the folks. We want to create career paths for everybody, regardless of what level in the company the rest so they feel this opportunity to grow and expand. So there's a required academy classes for people to continue to progress in that career. There's optional classes that go along with that. It's all about educating them so that they understand all of the intricacies of our business as best they can. The better that they understand how everything fits together and how a vital they are to our success, the better job they can do. So it's more about empowering them and educating them and supporting them and providing them with the tools that they need to be successful, and then having a system to say, this is the feedback we're going to get. Your members are the ones that are going to tell us how well we're doing, and that's going to determine what we may have available for incentive, for example, so getting away, because we know that if we do those things right, then the business will come.

36:57 All of the business that people want to consume will come to us. And it's not about just selling something that they don't need, because eventually they learn, they learn to dislike you for that. That becomes a dis instant for them want to come into do any of any business with you, because like every time I go in there, they knock me over the head and they're trying to give me this stuff that I just don't need. So really understanding what their needs are and trying to find a way to delivery thing to them. It's kind of the way we go about there. Love it. That's great advice because it's such an important thing to be able to do such a get the organization to really execute on David, I got three questions I ask everybody at the end of this podcast. I'd love to ask them to you now because I think we're about that out of time. And they go like this, Number one, what's the best piece of career advice you've ever gotten? Well, certainly I think the best. The best advice that I try to give to the folks that I work with is to be honest always, to let people know what your expectations are, what is acceptable for behavior and effort and one is not acceptable for behavior and effort, And to lead off see by example, not to be a hypocrite. If you say this is the standard of excellence and commitment that I expect from you, then you should you should demonstrate that and everything that you do. And I always tell folks that you only ever get one chance to make a first impression, so make it a good impression. And it could be we have a situation a life situation here recently where one of our tened employees has been promoted into a

38:28 mental position and she's in the same location where she has been for a period of time. So she's now leading the team of which she was a co worker just last week, and I said, it's still you still have a first chance to make a first impression as the leader. They've come to work with you and they know how you how you do what you do. But now you've got an opportunity to, you know, to make that distinction. So and then I think you do that, and then you you say what you expect, You do what you say. You have to always try to lead from the front and let people know that you have their back. I always say, as a leader, when there is praise to be had, you share it with the team. You deflect it to the team. I should say, when there's criticism to be had, you accept that and you take that on your shoulders. You don't publicly be rate anybody that you work with who may have been responsible for that negative feedback. Maybe you have a conversation with them in private, but from the team's perspective, they get to know, here's somebody that I can trust, I'm going to walk through a wall for them because you know, they give me the credit that I deserve and they protect me when they need to protect me. So that's the best piece of advice that I can give to somebody that's, you know, working into a leadership a leadership role. And what I've tried to do over my career is everybody's a little different, everybody works a little bit different, and there's no right way or wrong way necessarily to get to the other objective.

40:00 But what I've always said to people is whether you're working side by side with someone or if you're working with somebody that's under you or above, you take what you like and expand on that. And if there's things that you don't like, don't focus on that. Just let it go and don't recreate it, and you become better. And then always strive, as I've said before, always strive to be better tomorrow than we are today. We can always do things better, and always the last thing I would say on that is just because I might like to do something a certain way, he doesn't mean to say has to be that way. We always want to become more effective or more efficient, but It doesn't necessarily matter to me how my teammates get to the end result, as long as they're operating ethically and efficiently and it's not creating issues. Why should I sty me their creativity and I encourage their creativity. It doesn't have to be the way that I wouldn't necessarily do it.

40:57 And so those are things that I try to tell folks, Hey be your own individual self and be the best version of yourself that you can be. Love it. It's a lot of wisdompact there. In a minute or two. The second question I typically is what's the best piece of advice you've gotten NERD that you give about the consumer banking space in general? Like, what have you what are the kind of key things you've learned or advice you've gotten about just operating in that space. Certainly, the message that I would want to deliver is that it's a people business, right, and I think the struggle that you have as you get larger on certainly some of these larger institutions, it's just impossible to have personal relationships. You know, even when I worked for some of the some of the national institutions, you could still have because of the way that processes were established and the control that you have a branch level, you can still establish some of those personal relationships. I don't think you can do that. It's been a long time now since I worked in one of the what I consider a large organization, But my guess is that there is very little personalization. There's not much that can be done at the local level and the local branch. It's all structed, it's all centralized, there is no control. You're basically a glorified order taker and then you just you know, the member may get what they want, but they don't get a relationship. And so I think in the community banking space, in the credit union space, a huge differentiator for us is the fact that we can in fact engage with our members and establish relationships. We have a

42:30 leadership forum every week where we have our senior staff and middle managers and retail managers on a call to discuss what's going on across the company and best practices and what's working well or issues that we may have. And you know, one of the things that one of the managers mentioned this morning was it's great to be able to sit with a member in my office and I establish a relationship with them, and it's not about selling them a particular product to service. It's about understanding what this situation is, what their needs are, and how we can help them meet those needs. And sometimes the member doesn't always know exactly what they need. They might have an idea of what they need, but we need to spend time listening to what they have to say and understanding their story and then explaining to them how we can make things better for them tomorrow. Then what today excellent? And my last question is what's one bold prediction for the future. It's a scary time to make bold predictions.

43:32 I feel like, yeah, but there it is. A bold prediction for the future might be that our credit union will become the largest credit union state of Maine or not. Currently we're up there in the number two or three position as a couple of us buying. Yeah, you know, several years ago, a long term CEO that retired at the end of the last year, at a company training day made a bold prediction and said he us a b hag and he said, we want to be a billion dollar credit union in a certain period of time. And back at the time we were business is probably five years ago. So we were maybe three hundred and fifty million, and it's in like forever a way to be able to reach that kind of an objective and to do it organically right, not through any mergers or acquisitions or apointing there. And now we see it here, you know, five or six seven years later and we're six hundred and fifty million. Good chance we could seven hundred million, you know, this year, and it's like, well, that's not so far away now, and it's not We've always preached that it's not a matter of size, doesn't really matter. I mean, we know in our industry in order to be continually successful, you have to grow. But it's not growth for the sake of growth, and it's and you need to approach it, you know, approach it the right way, do what do the right thing, and things will you know, things will work out as you as you move forward. So I went steady, as they say, wins a race, right. So I don't know that that answers to your question necessarily, but I think it's great. I

45:07 think the last thing I would do is I'm going to put in I'm going to put in the plot here because you know, somebody asked me what can we do, What might we do differently and what opportunities are lying out there that can assist us to get where we want to go. You know, the financial services pie is a certain size, and so the only thing that you can do is try to get a bigger piece of the pie. Right it's not really I mean yet in general terms, it's growing a little bit. But let's assume you're one big pie there and everybody's buying, you know, buying for a piece of it. How do we get a little bit more and how do we maybe overcome some of the challenges we have with increasing costs on the deposit side and narrowing mogins for example. So for us, we said, you know, we want to get a larger share of insecured lending. We know that as higher yields there, if we do it the right way, we can mitigate the risk that goes along with that. So we chose to partner with with Upstarts as a fintech to say, look, these are a whole bunch of loans here that we're going to be able to get and members that are going to be able to come to us that they're going to be good loans that are going to have a high yield and help us, help us with those that margin compression, and ultimately, these are members. One of the points that I made to our leadership team was these are loans to folks that we would not be seeing if we weren't in that space, because these are folks that are going to achieve what they want for

46:39 financing without walking into a location anywhere. They're just going to go online and they're going to find out the best deal and then they're going to get an offer and it's going to be you know, through Upstart with main savings, and everybody's going to be happy. So and we honestly feel that after doing our due diligence, we think we're pretty good in the lending arena and have been for a long time. We think there's a huge, huge opportunity in unseecuted lending. And there's no doubt about the fact that, you know, working with Upstart and your unsecured loan program, we can get not only access to members that we wouldn't have access to, but in most cases, if not all cases, because of the intelligence that you use to underwrite, you don't make way better credit decisions than what we make and we don't have the fixed overhead now that we would have attached to lending staff to say we bring into your loan officers that may find some loans by pondering with the fintech.

47:28 And there's other companies out there that do offer additional services. We all need to have additional revenue, and the struggle that we will look at is how can we replace some of the revenues that are going to go away and the challenges that we have with those going away, which is substantial. How do we offer additional products and services that can help us replace that revenue that will eventually go away, And certainly the program we have with you guys will help us do that. So we appreciate that well they I appreciate the plug, and hopefully we can help you become the largest credit union made. I think that was the ball prediction. Saw. I like that. Thank you so much for joining me today and sharing I think a lot of insightful perspectives. I really appreciate your making the time. Yeah, it's been my pleasure, and we appreciate the opportunity to spend some time with you guys. I'm looking forward to continue to work with you. As we're moving forward, Upstart partners with banks and credit unions to help grow their consumer loan portfolios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Upstarts AI lending platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models. With fraud rates near zero, upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lending programs or you're just getting started, Upstart can help. Upstart offers an end to end solution that can help you find more credit worthy barrow within your risk profile. With

49:01 all digital underwriting, onboarding, loan closing, and servicing, It's all possible with Upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process, and growing your business by visiting upstart dot com Slash four dash Banks. That's upstart dot com Slash four dash banks. You've been listening to leaders and lending from upstart. Make sure you never missed an episode. Subscribe to Leaders in Lending in your favorite podcast player using Apple Podcasts. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening, until next time.