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Trust and Optimization During Volatile Times · Leaders in Lending

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You're listening to Leaders and Lending from Upstart, a podcast dedicated to helping consumer
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lenders grow their programs and improve their product offerings. Each week, here,
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decision makers in the finance industry offer insights into the future of the lending industry,
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best practices around digital transformation, and more. Let's get into the show.
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Welcome to Leaders in Lending. I'm your host, Jeff Keltner. This
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week's episode features my conversation with Dave Sayers, the CFO at Main Savings Federal
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Credit Union. Dave and I discuss how he thinks about balancing the balance sheet
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between liabilities and assets. Pretty important topic and today's day and age with recent
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developments. We talk about the opportunity for credit unions to be pick up deposits
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and this time of uncertainty. We also talked a lot about how to manage
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liquidity and also while you're managing liquidity, make sure you're available to meet the
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lending needs of your members, and also the opportunity for relationships in serving your
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members, putting their needs front and center to really help you strengthen brand,
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loyalty and stickiness of customer relationships and hopefully deposits over time. I think it
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was a fascinating conversation. I really enjoyed it, and I hope you will
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also enjoy this conversation with Dave Sayers. Dave, welcome to the podcast,
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and thanks for making the time to join us day. I really appreciate it.
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Thanks Jeff, glad to be here. I appreciate the invite. I
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start many of my podcasts by asking my guests this question, and so I'd
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love to get your answers, like, how did you wind up in the
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banking credit union space? I don't feel like this was the childhood ambition of
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many of my guests, and yet yet here we say so taught me a
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little bit about your journey to where you're at. Yeah. Sure. Came
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over to the United States from England in nineteen eighty one and finished my college
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career here in Maine in nineteen eighty seven, And after my freshman year in
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college, I started actually in the banking industry. I had a job working
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in an ice cream parlor in high school, and my mother said, no
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more of that, we need you to work in a nice business office.
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So I applied and got fortunate enough to get a tell a job as at
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a bank and I continued to work at that institution through the next several years
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as it went through a number of mergers, ended up being Fleet Bank before
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it became Bank of New England, so I Bank of America, and then
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I progressed from there. I moved for two or three different banking institutions.
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Had an opportunity to go in my first senior position working up in northern Maine
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in nineteen ninety seven, and that was kind of far from home, and
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an opportunity in a credit union world came up actually for a president CEO,
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and my father sent me the ad from the paper, which he never would
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usually do, and because you need to apply to this and come home.
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So I was fortunate enough to That's when I stepped over in two thousand into
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the credit union movement, and I've worked I worked at that credit union for
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seven years before I came here to Main Saving sixty years ago. So it's
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kind of I enjoy being in the credit union space. It's kind of what
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banking was when I get into it back in the early to mid eighties,
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when it was more community focused and community oriented, and so I really enjoy
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being being My background on educational background is business management, and it was just
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I really enjoyed being in an industry where I could help people meet their financial
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goals and needs. And it's been just a great ride, and I've been
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fortunate to have a lot of success passed my way and had an opportunity to
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progress in the industry and really love what I do every day because for me,
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it's all about making a difference in people's lives, whether that's your co
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workers or your members in our case, and try to leave everything in a
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better position tomorrow than it was when you found it today. That's a great
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story. The ad from the paper is great. I didn't I don't know
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if that was still work. Would that be a LinkedIn post now or something,
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you know, a glass store, I don't know where you would they
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people it would be. But a little slip of paper he cut it down,
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was like a two by two ad, and he cut it out and
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he put a sticky on it and said apply for this, and then he
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just mailed it to him. He didn't tell me he was sending it.
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And then I'm like, okay, then I'll do what you say. And
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it worked out great. Yeah, it worked out great. No, no
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ration, I just like we want we want you back home. We're expanding
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our family at the time, and it was five hours away and he's like,
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it's too fun to drive on the weekend. So see the brand,
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kids, you need to come home. So I worked out well. So
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I'm curious how you think about right now managing you know, we're experiencing it
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like maybe one of the most volatile periods in banking, you know, the
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most of us have experienced. Right there's I feel like I've got a whiplash
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from a couple of years ago. I was getting called from going to Jeff,
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we got too much cash, help us out with that, and then
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I, you know, that's not the call I get anymore. If Jeff
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we don't have a lot of cash, we got to stop all of the
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stuff we're doing it it's a cash So how do you think about how credit
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unions can optimize portfolios? Like, how do you manage through that cycle and
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prepare yourself to be ready for what seems to be a more turbulent set of
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times and most of us experience of the last number of decades where there was
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I would say a little bit more stability than what we've seen that the rapidity
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of chain seems to have really increased. Yeah, I mean, it's it's
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a great question. And as I as I think about that, UM,
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it's been as you mentioned, it's been a number of years since we find
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ourselves in a situation like we do today. UM. And in many cases,
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perhaps folks that haven't been in the industry more than fifteen or twenty years
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have never experienced first time around. Yeah. So yeah, and that makes
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it even hotter because you don't have that experience, you know, to draw
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on. UM. One of the things that that that we try to do
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UM is trying to create symmetry throughout our balance sheet. Obviously, we know
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that you're going to have to be mismatched somewhere along the way. You're either
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going to be asset a liability sensitive. You need the opportunity to, you
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know, to leverage that and make money. Certainly, you know, two
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years ago, I think we would have been hard pressed to find anyone in
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the CFO roll across the industry that would have predicted that rates would have gone
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up close to five hundred basis points inside of fifteen months. And so being
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able to anticipate that and prepare for that is kind of difficult, but what
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we've tried to do. What we've tried to do is balance across the assets
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and liabilities as best we can. Our philosophy has always been to try to
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match assets and liabilities to the extent that we can. There was going to
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be a little bit mismatched, but take those liabilities and put them into somewhat
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like assets or something that would be amnicant when it comes to risk, right,
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we don't speculate on what could happen tomorrow. We try to make decisions
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today they're in the best interests of the institution and our members based on what
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the circumstances are today. And I think, you know, when we look
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at some of the issues that have gone on here recently, and obviously SPB
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is on top of everyone's mind when you look at what the issues were there,
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and there's obviously a lot more to the story than what I'm privy too
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or what most people have privy two. But the bottom line was they took
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low cost short term assets or no cost short term I'm sorry liabilities, and
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they tried to um, you know, leverage the spread and buy long term,
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high yielding assets. And then when the markets turned to a degree that
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another of us could have predicted. Now they're in a situation where in order
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to meet that demand, they can't afford to race the deposit rates. So
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they're going to meet that demand for deposit outflows because they're borrowers are looking for
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higher returns. You've got to liquidate your assets, and now you're doing them
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at substantial loss. So we try to be obviously you give up a little,
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you don't. You don't want to chase yield. We don't. We
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want to obviously earn as much as we can on our excess funds and our
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investments, but we feel it's appropriate to maintain a balance there that makes sense
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so that you don't run into that situation. You might in the short run,
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you're gonna make it a little bit less money, but you're going to
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take the whole bunch of risk off the table as well. How do you
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think about you talk about buying like assets to the liability matching durations and things
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like that, and one of the questions I have is is how you think
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about the duration of deposits of various types shifting. Because one of the big
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surprises to me, I think for everyone in the SVB was just how fast
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deposits, like how correlated the outflow of deposits could be and based all like
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twenty five percent of deposits outflow in a day, and I don't think many
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of us are prepared for that, And I think we thought of them as
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stickier, And so I'm curious how you think about the shifting nature of like
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what what is the nature of the duration of a deposit? How sticky is
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that? Is that shifting in your mind? And how do you adjust that?
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Because it feels like there was a bit of poor risk management there,
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for sure, in terms of you know, buying long term treasuries at one
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seven or whatever, like it was not a good play. Interest rates were
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certainly not going down and you were giving yourself big interest rate risk. But
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there was also a degree of like traditional run on the bank, and just
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the speed of which it could happen was kind of unprecedented and left them really
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in a way that given you know, six months, they probably could have
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handled this in some better way, but given twenty four hours, there was
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nothing that could be done for them. And I think that changes the way
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we have to think about what what what what a deposit looks like and what
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it means and how long term it might be when we're trying to match it
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to an asset. No, that's a that's absolutely right, and it's a
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it's an excellent question. And certainly nobody could have predicted that they would have
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the run that they had in such a short period of time. Um,
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you know, and we run obviously, as I would assume most people do
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with up to our ALM modeling. We run all kinds of what if scenarios,
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and honestly, for a number of years, myself and others have asked
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the question, you know, how realistic is it that we're going to see
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rates change three or four hundred basis points overnight and we're going to have a
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run, and we're going to lose ten and twenty percent amount of deposits in
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you know, thirty sixty ninety days. And it's easy, like I mentioned
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previously, when people haven't gone through these cycles before, it's easy to say,
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Hi, that's not going to happen. But if we look back now
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over the history of the last fifteen months, it did happen. And then
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so and one of the things I am always cautioning our alcoholon is the fact
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that hey, we do a three or four hundred basis point shock test.
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Well, when I do that today, it's the equivalent of doing an eight
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hundred basis point shock test fifteen months ago, because races move five hundred and
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now you're shunk in an additional three and you know, how how are you
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going to look there? So we obviously do what most people do. We
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do to decay studies, you know, on our deposits, and we try
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to look at how they've performed, not only over time, but during various
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economic cycles and those kinds of things. And hopefully what's happened in this kind
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of a situation before has been somewhat predictive of what might might happen in the
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future. But I think a lot of it boils down to the trust that
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you build with the with the members that you have, and I actually think
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that this could provide. Of course, time's going to tell whether this theory
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proves true or not, but I honestly think that we might have a little
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bit of a you know, we might have a little bit of a flight
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to safety here. And I think that credit unions in general may be picking
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up deposits as we move forward over the next several months just because now,
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I mean, all all financial institutions are stained by what's going on with the
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recent losses, right, because we're all painted with the same brush. But
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I honestly believe as well that just like when the stock market ebbs and flows,
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is there can be a flight to safety when the stock markets going down
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across the financial industry. I think this could be something that pushes members or
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consumers and pushes deposits towards credit unions. So that could be something that alleviates
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what is currently a liquidity situation going on for most But it's hard. It's
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hard to figure out. You know. It's easy to have have the glass
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ball now and say, well, we know what's going to happen, right,
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I mean, and I've said to other members of our staff and to
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our board that you know, had I known in January of last year what
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would happen with rates, I probably would have gone out and borrowed a whole
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bunch of money and locked in those one percent rates for four or five years,
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and we'd be looking us Treasury right, We'll be looking fantastic. But
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the problem over that at the time was if I go out and I buy
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these investments, or borrow this money and I'm paying one or two percent,
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I'm earning zero overnight. That's a huge risk. You know, I'm going
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to pay that. I'm going to pay for that, and then if rates
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don't change, now I'm a little bit of a chump. So that goes
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back to you know, my comment before that we really feel we need to
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make the right decisions every day based on what's going on in the economy today.
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Not necessarily. We certainly want to look ahead and predict, try to
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predict as much as we can what we think could happen in the future.
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But I don't think we can bet our future on the fact that that is
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going to happen, because it may not. How do you think about You
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talked about the possibility of cs picking up deposits in this kind of flight to
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safety. What's your advice for a credit union a community bang? I mean,
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I want I want limited to credit unity of people who listen to both.
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But like if you want to look like in some ways, I feel
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like the safety feels like the Big Four, right, you go, Well,
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these guys are almost for sure going to pick up a government guarantee of
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deposits, maybe even uninsured. In the case that they're systemically important, they
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kind of almost an implicit unlimited FDIC insurance against those guys, and so that
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feels like the natural form of safe But I think you could be honest,
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something that smaller institutions can feel like a safe bet as well for a lot
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of businesses and consumers. What's your advice on how to how to feel like
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that safe place in a storm if you're not one of the big four with
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this kind of you know, sifty indication that the government's really going to make
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sure that nobody working with you gets hurt in the end. That's a great
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question. I think you know, we we over in our market have worked
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very diligently to develop a strong brand and become seen as a trustworthy institution.
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I think transparency is important. Whenever we have the opportunity, whether it be
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through social media or print media, you know, annual meetings, whatever it
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may be, newsletters, we try to be as transparent as we can and
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put the message out to the member, always trying to educate them on what's
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going on in the industry, how that impacts us, how we've positioned,
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what our philosophy might be in terms of how we handle you know, certain
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situations, and obviously in this case with liquidity being on everybody's mind right now,
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you know, we tend to be as proactive as we can and get
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the message out that in a positive way, not just promoting ourselves by promoting
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the industry in general. Here's questions that you need to be able to ask.
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Here is things that you can do to protect yourself and kind of be
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an educational front, if you will, for those folks that have questions,
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and certainly we've had members over the last several weeks that of with questions we
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have you know, a good portion probably not a substantial amount, but probably
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ten percent of our memo deposits eight to ten percent of our memo deposits would
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be considered uninsured deposits. And so a few folks have had some concerns.
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We have looked at how we can add access share insurance, and in some
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cases for certain programs we've done that. We also educate the members whenever we
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have the opportunity on how you can structure your accounts so that you can get
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more out of the FDIC or NCUA insurance, which possible to get substantially more
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than the you know, the base two hundred and fifty thousand, the AFU
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struct your accounts in the right way. Yeah, so it's really it's really
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about education and we just try to Like I say, we've got a really
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good reputation. We've been in the market since nineteen sixty one and we've always
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remained profitable, We've remained strong, and I think that the members know that
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they can trust us when they have questions, We're willing to answer those questions
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completely. I'm a full transparency so you know, I think that that helps.
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Like I say, there's always whenever there's whenever there's bad news, it
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kind of it kind of impacts everyone, right, if there's positive news in
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the industry, it kind of falls on deafe as most of the time.
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Well, it's a bit like the like the intelligence agencies, right, like
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when you're managing it, well, nobody, nobody's paying attention until something goes
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wrong. And I thought this is one of the most ludicrous lines of reasoning
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after SVB was like that the line of defense was supposed to be the CFOs
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of the businesses that we're banking with. These guys looking at the balance sheet
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to make sure they were putting their deposits at a bank that wasn't taking risky
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bets, and I want, I don't think when things are normal, the
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CFO of very many businesses is looking at the balance sheet allocation and that you
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know, is there interest rate risk at the you know, in the investments
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that my bank is making, and should I move my deposits because of that?
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I thought that was kind of silly because your point like people aren't really
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paying attention, but maybe at this moment being a bit more of a dull
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and traditional I mean dulls maybe the wrong word, but you talked about the
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credit union space being the kind of back to basics version of banking. The
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community banking was that it might be a strength when times get turbulent that you're
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sticking to, you know, not trying to make an excess yield and you're
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doing the basic banking stuff that is a little more stable through thick and then,
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Yeah, I honestly believe that That's why I talk about, you know,
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the flight to safety. The unfortunate reality that I think we all know
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is that there's whatever something bad happens in the world, no matter what it
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is, is always a massive overreaction right, and so the concern that we
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have is from a regulatory standpoint that and rightfully so the regulators should be focusing
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on these things. But what will typically happen now is there'll be a massive
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overreaction. They'll want to see even more what if analysis and stress testing through
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the ALM model bank I don't want to see obviously, you know, less
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risk and it's just going to be on and on and on. So even
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though you have a long an institution may have a long track record of performing
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in an extremely safe and sound manner with great controls and practices, and is
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doing everything the way that they should to continue to be successful, there's really
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no leeway going to be given. There still going to be we get treated
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with the same brush as everyone else. You know, this went wrong over
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here, so we assume that it's going to go wrong with you, and
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so therefore we're going to be even more We're going to put even more of
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a regulatory burden on you. And that's that's difficult because with everything that we're
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dealing with, I mean, it's appropriate that they should have the right controls
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in place and we should operate within that framework. But I think a real
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concern for us and others, is that now we're going to go away,
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you know, the other way. Should this have happened at SPB, probably
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not, And the fact that they had, you know, there's a certain
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amount of blame that can not only be placed on the management there, but
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also the regulators to a large degree. They're in the shop on a regular
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basis and they see what's going on, and it's easier to be a Monday
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morning quarterback, right look back. Hopefully that was a bad decision. We
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shouldn't have done that. Everybody makes mistakes, so that's a little bit of
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a concern for us. We you know, we have a great relationship with
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our regulator. We've always been We've always been considered strong and safe and sound,
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and that will continue to be the case. But I know that there's
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going to be even more reverted in those areas and that kind of takes away
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from what we can do for our membership in terms of it takes time,
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it takes money, it takes effort, and that takes money and time away
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from what we can do to assist on members with the programs that they want
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to have. So let me ask you a related question, which is into
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something you said earlier, which is kind of just like liquidity crunch that people
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are experiencing. And you know, when you talk about the back to basics,
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it's really about I find so much of credit and is one of the
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things I enjoy is it's really about serving the members. I mean, there's
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not this kind of asset purchase yield seeking the little bit more like how do
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we use our deposits to serve the products that are that our members needs are
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truly kind of like balancing the two. But obviously the needs of the of
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the of your member base can be shifting in a different way than your deposit
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base may be. So how do you think about managing you know that serving
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the needs of the members in terms of products and lending things, you know
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of services they may need with the liquidity situation, is it is it is
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a little bit more volatile because it feels like those two things can get can
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get out of balance and you're trying to really serve both. Yeah, that's
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absolutely right. I think you know, the last few years, so you
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say three three and a half years now pre COVID to today, um our
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industry has been through really an unprecedented time. UM what we found doing COVID
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was that we had this massive influx of cash and liquidity. And I think
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that's probably true from those institutions. Um you had the PPP going on and
20:55
all of the government assistance programs that were out there, and people were receiving
20:59
all this funding. Businesses, we're receiving large amounts of funding, and obviously
21:02
that that's stopping you know, at the at their local institution. So we
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saw liquidity. We saw a record high liquidity during during the front part of
21:11
COVID, and the assumption was that that's going to be temporary. This money
21:15
is going to be spent down and it's going to go away, So we
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wanted to make sure that we continue to keep those funds available so that it
21:22
could it could flow out as easy as it came in. It turned out
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that that really wasn't the case for the most part. I'm sure some of
21:32
that money flowed out, but because of the growth that we're going through and
21:37
attracting and acquiring new members, we really didn't see our balances roll off.
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We ended twenty twenty one with you know, an excess of five an excess
21:45
of one hundred million dollars in cash and at the time, we were under
21:49
five hundred million in assets, so that was, you know, fly substantial
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and we're earning zero on that money. So we put together a plan.
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We said, you know, we know members are going to need there's going
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to be we moved through this COVID, we know there's going to be a
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demand, and members are going to want to get out, they want to
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spend money, they want to buy cars that they may want to do with
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interest rates being as low as they are, and we're in zero on that
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money. So let's get aggressive on loan growth and we put together some really
22:14
aggressive loan growth programs. For twenty twenty two, I think we budgeted to
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grow loans about eighty million dollars. We actually end up growing loans about one
22:22
hundred and ten million. Wow. And we were still bringing in cash,
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so obviously our cash bondances were going down. And then the ALM model suggesting,
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hey, you know, you can't continue to grow loans at this pace
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obviously for you, and we weren't bringing in deposits at that pace. We
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only bring into posits maybe at half of that speed, which was by design.
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But then rates start to go up right so throughout the year we're getting
22:45
this money out there, but then we're getting to a pointless like, we
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don't want to be too aggressive on pricing now because you can actually hear an
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equal two or more than what you were pricing some of these loans at,
22:55
and so you leave it in cash, and you don't, you know,
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you don't want to take the risk by going towards the fourth quarter of last
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year. I looked into this situation and said, you know, we want
23:03
to prepare ourselves for continuing to grow in twenty twenty three, and we need
23:07
to replenish some cash. So we actually got really aggressive and we went out
23:11
there with some very attractive certificate special offers. At the time, we were
23:15
up in a fifty year five percent CD which was I was told it was
23:19
the highest rate in the nation at the time. Whether that's true or not,
23:22
we're not sure, but it was certainly very attractive in the marketplace.
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We knew we would bring in a substantial amount of cash. We knew that
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we would cannibalize some of our own deposits that have been sitting on the sideline
23:33
in low cost deposits, waiting for rates to go up. But we were
23:37
willing to do that because a couple of things, I knew that I could
23:40
go out and buy institutional investments at or above that rate four terms twelve to
23:48
eighteen months, and we were happy to do that. And then it worst
23:51
case scenario, we're earning somewhere around four point six at the time overnight,
23:55
so we're only given up maybe forty basis points on the spread. And the
23:57
flip side to that was we said, this gives us an opportunity to bring
24:00
in new members, and it gives us fifty months to cross sell these new
24:06
members and make us that primary financial institution. So part of our strategic plan
24:10
to grow and you can continue to grow in twenty three was exactly that we
24:14
backed off of our loan growth goals. We focus on deposit acquisition, and
24:18
we said we're going to put together a plan that now allows us to deepen
24:21
the relationship with these members. Our history has shown that typically we're very successful
24:26
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
24:33
our balances go backwards, so we've always been able to place that hot money
24:37
as we bring in these members and deep in the relationship. So that kind
24:41
was our strategy. I was obviously concerned as a person that's responsible for running
24:47
the ALM model and making sure we have adequate liquidity and knowing what was going
24:51
on in the industry, and I said, let's just get out ahead of
24:52
this as quickly as we can. Let's try to bring in a bunch of
24:56
money in our market. I think we did really well. I mean,
24:59
we brought in you know, forty or fifty million dollars in new money in
25:02
three or four month periods, So that was that was huge for us.
25:04
And now we're well positioned again. We've got a ton of money in our
25:07
overnight account, we've got strong loan growth continuing way over budgets to find the
25:12
first quarter. But it positions us well to operate from a you know,
25:17
we position to operate from a strong a strong foundation and continue to be able
25:22
to offer what we need to to our members. We may make a little
25:25
bit less money because we've taken on that extra expense, and certainly with the
25:30
we did have more money transition over from the non low interest accounts into the
25:34
c That's okay because now that money is sticky and with loan rates continue to
25:40
increase, we can we can still make a positive spread there and leverage the
25:44
volume to still generate some money on the bottom line. Obviously, we've got
25:48
to continues a fourth the capital ratio as we do that. Hine, I'm
25:52
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
26:03
needed a partner that allowed us to scale quickly and easily. With Upstart,
26:08
we were able to go live in fifty four days without adding hoodcom, and
26:12
we were able to learn previously under serve our hours with Upstart's model. If
26:18
you'd like to learn more about our partnership with Upstart, you can read more
26:22
at upstart dot com. Forward slash Lenders, Thank you, and back to
26:27
the show. You know, in times of volatility were times, you know,
26:34
I feel like so often in times of difficulty, there's like hidden opportunity,
26:37
right. It's kind of a moment where what's the old buffet saying,
26:41
and everybody else is nervous, get greedy, whenverybody else is greedy, get
26:42
nervous. So a lot of people are nervous and I'm not trying to say
26:45
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
26:51
real moment that we can take advantage of in certain ways while we're obviously being
26:55
cautious and conservative in others. What are the kind of hidden opportunities in the
26:59
current environment. Well, I totally agree with that, and I think over
27:02
certainly over the last ten or twelve years, that's kind of been our m
27:06
O, if you will, is we look at, you know, what's
27:08
going to be coming down the road over the next twelve to eighteen months,
27:11
and how can we take advantage of that, and there's going to be Our
27:14
history would show that there's times when long growth is there to be taken and
27:18
we've gotten aggressive in that way. Other times when it's like, Okay,
27:22
we need to back off on that. Loans are going to be relatively flatten
27:25
out for the next whatever twelve months, and we're going to focus on the
27:29
deposit acquisition. So the opportunity I think goes back to as those as rates
27:34
have ebbed and flowed and liquidity ebbs and flows. We try to tie our
27:38
strategy to what's going on and what opportunities does that create. So when we
27:42
flush with cash and overnight rates are relatively low, we came out with a
27:47
very aggressive We had a fifty percent off promotion where we've basically said, anything
27:53
that's non real estate related that you hold elsewhere for debt, you come see
27:57
us and we will cut your rate in half. And certainly that led to
28:03
us writing some loans at rates that were slightly below um where our traditional rates
28:08
would have been. But now, you know, to folks out there that
28:12
are consuming financial products, they say, wait a minute, I can cut
28:15
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
28:25
little harder to do it now. We're still kind of trying to figure out.
28:27
And obviously credit cards is a perfect scenario. You know, I operate
28:32
on a credit card is ten percent basically nine point nine nine percent, which
28:37
is already fifty percent off of what more than fifty percent off of what folks
28:41
are probably paying if there's some of the large YEA with the typical rates here
28:45
twenty we've tried to lage that a little bit, and then obviously as things
28:52
as things EMPs and flow. We will come out with some deposit specials that
28:55
make sense. But in both cases, whether we're attracting loans, we say,
28:59
okay, we want to bring your loans in and then we're going to
29:00
work on you. While we've got your loans in here, we're going to
29:03
work on explain it to you and selling to you why our other financial products
29:07
and services make sense. Right, and I think like most credit unions,
29:11
we don't charge any fees. You've got full service. Everything that you need
29:14
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
29:21
going to focus on how would we now become your PFI on the deposit sign
29:23
and provide on these other services. And then now while we're bringing in the
29:27
folks on with higher deposit rates, Now that gives us a period of time
29:32
to say, let's let us we want to sell ourselves to you and explain
29:36
why we should be your primary financial institution, and this is what we believe
29:40
in, this is what we care about. We want we really care about
29:42
your financial well being. And then the other piece of that which I think
29:45
is really important and I think most small financial institutions would take this tact is
29:52
we don't want to sell you anything that you don't need. It's not about,
29:55
you know, how many widgets did we sell today, It's about how
29:57
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.
30:06
So it kind of amps and flows based on what's going on in the
30:08
economy and what our most important initiatives are. But that's kind of we're always
30:15
looking about how do we deepen the relationship? How do you think about I
30:18
want to dig in on that because I think it's such a such an important
30:22
point, this difference between how many products did we sell? How many you
30:26
know, and did we find the right products and serve the members needs?
30:32
And how do you think about creating a culture and measuring that because it's so
30:36
often what the old managers saying, whatever is measured is what matters, And
30:38
what's measured is typically like unit sales, you know, like it's the thing
30:42
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
30:49
I'm curious how you think about both either putting measurements on that or at least
30:53
instilling that understanding and culture into your team members, especially as out there maybe
31:00
with complants that are against sales targets or other things. You go, how
31:03
do we really get people to focus on serving the members needs above hitting some
31:07
target or growth, because that feels like the right thing to do, but
31:11
also a hard thing to get the organization centered around doing. Just from an
31:15
incentives point of view, Yeah, absolutely, it's it's extremely difficult one of
31:22
the things, and we're moving, you know, we're moving down that road
31:23
all the time to say, how can we do that better? We've had
31:26
we've kind of moved away from incentives over the last few years. There's a
31:30
couple of products that we will still incent you know, our loan offices and
31:36
MSIs to sell to the members, and still we attach products and those kinds
31:40
of things. But when it comes to goals and objectives, we've tried to
31:45
steer away from giving somebody a hog goal. You know, we know what
31:51
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
31:59
for volume, but we don't focus on really we give feedback. Obviously,
32:04
we let everybody know what the production, how we do them for production,
32:07
and what the numbers are, but we don't focus on, hey, you
32:09
know, how come he didn't sell this many loans last week or he didn't
32:13
bring in to that many deposits. Now we're transitioning. We've actually gone to
32:17
we're actually going to a key performance indicator type system if you will, or
32:24
mentality that we're introducing across the company now, and we're saying, these are
32:29
the things that are most important to us, and this is going to determine
32:32
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
32:40
account that you open or whatever it might be, we're saying two things that
32:45
the two we came up with only two KPIs this year. One was the
32:51
most important. One is we want the member feedback. So after a member
32:55
of transaction occurs, could be a new member, it could be an existing
32:59
member. After certain transactions, the member would receive a survey from us,
33:04
It says, tell us, how we did you know? How well did
33:07
you feel that you were served? And they were able to rate us on
33:12
that. So that's one. The other component, because we want to tie
33:15
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
33:23
on the front line served by the backshop department when they needed to be in
33:27
those kinds of things. And so we're using those right now as measures,
33:31
and we honestly believe that that kind of feedback will make us better. We
33:37
want to enhance the member experience internally and externally. And if we do that
33:44
and we become known. We have a strong presence now and I think our
33:47
members rate us highly in terms of the service. But we're trying to say,
33:52
how can we be better, How can we better tomorrow than we were
33:53
today, and how can we make that a positive experience for you? So
33:59
with that feedback, we're able to address maybe we have issues where our process
34:05
is not as member friendly as we think it might be, and we'll be
34:07
able to assess what's the difference between what we feel is important to the member
34:14
and what is really important to remember, and then we can adjust our processes
34:16
accordingly, so we still have the appropriate controls in place, but we're able
34:21
to now push it back to the member and give you the experience. So
34:23
you leave and you say, wow, that was fantastic, And not only
34:28
do you want to bring all the rest of your business to us because we
34:30
treat you so well, but now you're going to go out and tell all
34:31
your friends how you really need to go and see main savings because this is
34:35
what they're going to do for you. So we're trying to get away from
34:38
the whole stigma. If you will, you need to sell x amount of
34:43
whatever it might be. From a pricing standpoint and a product standpoint, I
34:46
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.
34:57
You know, use and abuse fees is really all we have for fee
35:00
income, the biggest one being overdroffed obviously, which is really the only punitive
35:04
fee that we have on members. All of our account services are free.
35:07
And then obviously on the use side, we're generating a fair amount of interchange
35:12
income which is important. It doesn't it's free to the member obviously, but
35:15
it's obviously makes a big difference on our bottom line. And we're working on
35:20
how can we enhance other revenue sources so that we can potentially, we see
35:23
the writing on the wall, reduce and eliminate what revenues coming in for overdrafts.
35:30
So we're trying to look at options for how we can potentially provide some
35:35
additional services that members may even be willing to pay for if we're not regrowing
35:37
them to pay. But there's some additional psychic subscription service that you can just
35:42
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
35:51
they have value to you, maybe you'll subscribe to those type of things.
35:52
So that's kind of the approach we're taking. And we have established, you
36:00
know, what we call Main Savings Academy, so we all of the folks.
36:05
We want to create career paths for everybody, regardless of what level in
36:07
the company the rest so they feel this opportunity to grow and expand. So
36:10
there's a required academy classes for people to continue to progress in that career.
36:15
There's optional classes that go along with that. It's all about educating them so
36:20
that they understand all of the intricacies of our business as best they can.
36:23
The better that they understand how everything fits together and how a vital they are
36:28
to our success, the better job they can do. So it's more about
36:31
empowering them and educating them and supporting them and providing them with the tools that
36:37
they need to be successful, and then having a system to say, this
36:42
is the feedback we're going to get. Your members are the ones that are
36:44
going to tell us how well we're doing, and that's going to determine what
36:49
we may have available for incentive, for example, so getting away, because
36:52
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.
37:00
And it's not about just selling something that they don't need, because eventually they
37:04
learn, they learn to dislike you for that. That becomes a dis instant
37:07
for them want to come into do any of any business with you, because
37:09
like every time I go in there, they knock me over the head and
37:12
they're trying to give me this stuff that I just don't need. So really
37:15
understanding what their needs are and trying to find a way to delivery thing to
37:17
them. It's kind of the way we go about there. Love it.
37:21
That's great advice because it's such an important thing to be able to do such
37:23
a get the organization to really execute on David, I got three questions I
37:29
ask everybody at the end of this podcast. I'd love to ask them to
37:31
you now because I think we're about that out of time. And they go
37:36
like this, Number one, what's the best piece of career advice you've ever
37:37
gotten? Well, certainly I think the best. The best advice that I
37:43
try to give to the folks that I work with is to be honest always,
37:50
to let people know what your expectations are, what is acceptable for behavior
37:55
and effort and one is not acceptable for behavior and effort, And to lead
37:59
off see by example, not to be a hypocrite. If you say this
38:02
is the standard of excellence and commitment that I expect from you, then you
38:09
should you should demonstrate that and everything that you do. And I always tell
38:15
folks that you only ever get one chance to make a first impression, so
38:19
make it a good impression. And it could be we have a situation a
38:22
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
38:32
of time. So she's now leading the team of which she was a co
38:37
worker just last week, and I said, it's still you still have a
38:40
first chance to make a first impression as the leader. They've come to work
38:45
with you and they know how you how you do what you do. But
38:49
now you've got an opportunity to, you know, to make that distinction.
38:52
So and then I think you do that, and then you you say what
38:58
you expect, You do what you say. You have to always try to
39:04
lead from the front and let people know that you have their back. I
39:09
always say, as a leader, when there is praise to be had,
39:14
you share it with the team. You deflect it to the team. I
39:16
should say, when there's criticism to be had, you accept that and you
39:21
take that on your shoulders. You don't publicly be rate anybody that you work
39:24
with who may have been responsible for that negative feedback. Maybe you have a
39:29
conversation with them in private, but from the team's perspective, they get to
39:31
know, here's somebody that I can trust, I'm going to walk through a
39:36
wall for them because you know, they give me the credit that I deserve
39:39
and they protect me when they need to protect me. So that's the best
39:44
piece of advice that I can give to somebody that's, you know, working
39:46
into a leadership a leadership role. And what I've tried to do over my
39:51
career is everybody's a little different, everybody works a little bit different, and
39:55
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
40:04
someone or if you're working with somebody that's under you or above, you take
40:08
what you like and expand on that. And if there's things that you don't
40:12
like, don't focus on that. Just let it go and don't recreate it,
40:16
and you become better. And then always strive, as I've said before,
40:22
always strive to be better tomorrow than we are today. We can always
40:24
do things better, and always the last thing I would say on that is
40:31
just because I might like to do something a certain way, he doesn't mean
40:35
to say has to be that way. We always want to become more effective
40:37
or more efficient, but It doesn't necessarily matter to me how my teammates get
40:43
to the end result, as long as they're operating ethically and efficiently and it's
40:47
not creating issues. Why should I sty me their creativity and I encourage their
40:52
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
41:00
your own individual self and be the best version of yourself that you can be.
41:02
Love it. It's a lot of wisdompact there. In a minute or
41:06
two. The second question I typically is what's the best piece of advice you've
41:13
gotten NERD that you give about the consumer banking space in general? Like,
41:15
what have you what are the kind of key things you've learned or advice you've
41:19
gotten about just operating in that space. Certainly, the message that I would
41:23
want to deliver is that it's a people business, right, and I think
41:29
the struggle that you have as you get larger on certainly some of these larger
41:32
institutions, it's just impossible to have personal relationships. You know, even when
41:38
I worked for some of the some of the national institutions, you could still
41:44
have because of the way that processes were established and the control that you have
41:47
a branch level, you can still establish some of those personal relationships. I
41:52
don't think you can do that. It's been a long time now since I
41:54
worked in one of the what I consider a large organization, But my guess
42:00
is that there is very little personalization. There's not much that can be done
42:04
at the local level and the local branch. It's all structed, it's all
42:07
centralized, there is no control. You're basically a glorified order taker and then
42:13
you just you know, the member may get what they want, but they
42:15
don't get a relationship. And so I think in the community banking space,
42:20
in the credit union space, a huge differentiator for us is the fact that
42:24
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
42:36
managers on a call to discuss what's going on across the company and best practices
42:42
and what's working well or issues that we may have. And you know,
42:47
one of the things that one of the managers mentioned this morning was it's great
42:51
to be able to sit with a member in my office and I establish a
42:54
relationship with them, and it's not about selling them a particular product to service.
43:00
It's about understanding what this situation is, what their needs are, and
43:04
how we can help them meet those needs. And sometimes the member doesn't always
43:07
know exactly what they need. They might have an idea of what they need,
43:12
but we need to spend time listening to what they have to say and
43:15
understanding their story and then explaining to them how we can make things better for
43:20
them tomorrow. Then what today excellent? And my last question is what's one
43:28
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
43:36
the future might be that our credit union will become the largest credit union state
43:40
of Maine or not. Currently we're up there in the number two or three
43:44
position as a couple of us buying. Yeah, you know, several years
43:50
ago, a long term CEO that retired at the end of the last year,
43:53
at a company training day made a bold prediction and said he us a
44:00
b hag and he said, we want to be a billion dollar credit union
44:04
in a certain period of time. And back at the time we were business
44:08
is probably five years ago. So we were maybe three hundred and fifty million,
44:13
and it's in like forever a way to be able to reach that kind
44:15
of an objective and to do it organically right, not through any mergers or
44:20
acquisitions or apointing there. And now we see it here, you know,
44:23
five or six seven years later and we're six hundred and fifty million. Good
44:28
chance we could seven hundred million, you know, this year, and it's
44:30
like, well, that's not so far away now, and it's not We've
44:35
always preached that it's not a matter of size, doesn't really matter. I
44:38
mean, we know in our industry in order to be continually successful, you
44:43
have to grow. But it's not growth for the sake of growth, and
44:46
it's and you need to approach it, you know, approach it the right
44:50
way, do what do the right thing, and things will you know,
44:53
things will work out as you as you move forward. So I went steady,
44:58
as they say, wins a race, right. So I don't know
45:02
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
45:09
to put in the plot here because you know, somebody asked me what can
45:16
we do, What might we do differently and what opportunities are lying out there
45:22
that can assist us to get where we want to go. You know,
45:25
the financial services pie is a certain size, and so the only thing that
45:30
you can do is try to get a bigger piece of the pie. Right
45:32
it's not really I mean yet in general terms, it's growing a little bit.
45:37
But let's assume you're one big pie there and everybody's buying, you know,
45:40
buying for a piece of it. How do we get a little bit
45:43
more and how do we maybe overcome some of the challenges we have with increasing
45:49
costs on the deposit side and narrowing mogins for example. So for us,
45:54
we said, you know, we want to get a larger share of insecured
45:58
lending. We know that as higher yields there, if we do it the
46:00
right way, we can mitigate the risk that goes along with that. So
46:04
we chose to partner with with Upstarts as a fintech to say, look,
46:08
these are a whole bunch of loans here that we're going to be able to
46:12
get and members that are going to be able to come to us that they're
46:14
going to be good loans that are going to have a high yield and help
46:17
us, help us with those that margin compression, and ultimately, these are
46:23
members. One of the points that I made to our leadership team was these
46:28
are loans to folks that we would not be seeing if we weren't in that
46:31
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
46:44
they're going to find out the best deal and then they're going to get an
46:45
offer and it's going to be you know, through Upstart with main savings,
46:49
and everybody's going to be happy. So and we honestly feel that after doing
46:53
our due diligence, we think we're pretty good in the lending arena and have
46:58
been for a long time. We think there's a huge, huge opportunity in
47:00
unseecuted lending. And there's no doubt about the fact that, you know,
47:04
working with Upstart and your unsecured loan program, we can get not only access
47:07
to members that we wouldn't have access to, but in most cases, if
47:12
not all cases, because of the intelligence that you use to underwrite, you
47:15
don't make way better credit decisions than what we make and we don't have the
47:19
fixed overhead now that we would have attached to lending staff to say we bring
47:23
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
47:34
to have additional revenue, and the struggle that we will look at is how
47:37
can we replace some of the revenues that are going to go away and the
47:38
challenges that we have with those going away, which is substantial. How do
47:43
we offer additional products and services that can help us replace that revenue that will
47:46
eventually go away, And certainly the program we have with you guys will help
47:51
us do that. So we appreciate that well they I appreciate the plug,
47:54
and hopefully we can help you become the largest credit union made. I think
47:58
that was the ball prediction. Saw. I like that. Thank you so
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much for joining me today and sharing I think a lot of insightful perspectives.
48:04
I really appreciate your making the time. Yeah, it's been my pleasure,
48:07
and we appreciate the opportunity to spend some time with you guys. I'm looking
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forward to continue to work with you. As we're moving forward, Upstart partners
48:14
with banks and credit unions to help grow their consumer loan portfolios and deliver a
48:19
modern, all digital lending experience. As the average consumer becomes more digitally savvy,
48:24
it only makes sense that their bank does too. Upstarts AI lending platform
48:29
uses sophisticated machine learning models to more accurately identify risk and approve more applicants than
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traditional credit models. With fraud rates near zero, upstarts all digital experience reduces
48:42
manual processing for banks and offers a simple and convenient experience for consumers. Whether
48:47
you're looking to grow and enhance your existing personal and auto lending programs or you're
48:52
just getting started, Upstart can help. Upstart offers an end to end solution
48:57
that can help you find more credit worthy barrow within your risk profile. With
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all digital underwriting, onboarding, loan closing, and servicing, It's all possible
49:07
with Upstart in your corner. Learn more about finding new borrowers, enhancing your
49:12
credit decisioning process, and growing your business by visiting upstart dot com Slash four
49:16
dash Banks. That's upstart dot com Slash four dash banks. You've been listening
49:22
to leaders and lending from upstart. Make sure you never missed an episode.
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Subscribe to Leaders in Lending in your favorite podcast player using Apple Podcasts. Leave
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us a quick rating by tapping the number of stars you think the show deserves.
49:35
Thanks for listening, until next time.