2016 Conference

Dallas Wells: Up next is Greg Demas from Popular Community Bank. They started this process a little after Andy did at First National, but they’re on a similar road. They’re taking a little bit different approach to it. I think you guys will get some good stuff from Greg as well. It’s funny, and Greg, I’ll probably embarrass somebody here, but some of our staff, we do a lot of stuff remote for our clients so they hear these names all the time: Andy Max, Greg Demas, Kyle Koelbel. They hear those names. They were joking that as they saw everybody arriving in the lobby yesterday, it’s like celebrity shock. “Oh my God, that was Greg Demas out in the lobby.” Anyway, we have our own celebrity coming up on the stage here.

Greg and I also, we played Pinehurst number two at the advisory board meeting last year. We played that together. On number 18, we had to take a blood oath that no one would ever learn of what the scores were on that course. That was brutal and we’re taking that one to our grave, buddy. Anyway, Greg’s got a great story to tell. I’m really excited about this. We did a little dry run and I told Carl. I said, “We just need to get out of Greg’s way and let him tell this story.” It’s really powerful, of where they started, why they wanted to do what they did, and the purpose behind it and where they’ve come with it. Much like Andy was talking about with Sir Dave Brailsford, and I guess he’s on his way to Sir Andy as we work on this, incremental improvements. You don’t have to boil the whole ocean. You start with that next incremental step. I think Greg and his team are partway through that process, but you get a good view of where they are, where they’ve come from, and where they’re headed.

Greg, come on up. Everybody welcome Greg.

Greg Demas: Is this on? This on? Can you guys hear me? All right. First of all, thank you to Precision Lender to letting me fulfill my lifelong dream of walking out onto the stage in Texas to a Stevie Ray Vaughn song. Thank you very much. I’m from New York. I don’t get to do that up there very much. Thank you guys very much. Thank you also for just this whole conference. I feel like there’s been an uptick lately in business purpose discussions. I’ve seen it a lot on TED Talk recently. I’ve seen it in a couple conferences that I’ve been to, but none of them have been about banking. They’ve always been about these really coll tech companies that we heard about earlier like Apple and why they exist and what are they trying to do, and they haven’t been about banking.

Banking is so fundamental to society. I feel like the last eight years or so, it’s been a very rough ride for all of us, clearly, but I think that at least from a public perception, we’ve gotten away from that, away from the purpose of banking and how integral it is to society. It’s very exciting for me to be here today with so many passionate and smart people. Talked with a lot of you over the last couple days and thanks for having me and I’m very happy to be here. Lost my little cue thing here.

What I want to do today really is just tell the story of our bank over the last two years. Popular Community Bank, that’s our bank. I’ll tell you what we’ve done over the last two years and why we did it and what, ultimately, we were looking to accomplish and what it’s done for us. The last two years for us has been two years of tremendous, tremendous change. We basically uprooted everything in our organization. I’m going to tell you guys about it today and hopefully it’s a good story for you and everybody can walk away with something from it.

Just a little primer here to get started. Let’s get in a time machine and let’s go back literally two years ago to April 2014 and the state of the union of Popular Community Bank. You can see up there on the screen we were an $8 billion bank. The first thing you’ll notice from looking at it is wow, that’s a lot of land to spread $8 billion over. Basically from the Atlantic Ocean to the Pacific Ocean and pretty much everything in between. We had five regions that we operated in: California, Chicago, New York, Orlando, and Miami. Then we had our mothership, as I’ll call it, down in San Juan. We’re part of Popular, Incorporated, which for anybody that’s ever been to Puerto Rico, Banco Popular is JP Morgan, Citi, B of A, and Wells combined down there. There’s pretty much one on every corner.

We’re the US mainland subsidiary of that overall bank. I’m going to focus mostly today on the US. I have no interest in talking about what’s going on in Puerto Rico right now, so let’s just focus here on the mainland. This is where we were. Like many other banks, in 2014 I wouldn’t say the crisis was over. I still don’t think it’s over, but it had died down a bit and it slowed down. We still found ourselves in a crisis mindset, which really was a very defensive mindset. Risk mitigation above everything else, protecting the balance sheet above anything else. That was a major challenge for us. We also had the structural challenges that I mentioned here that we were just very spread out. It was very difficult for us to say okay, moving forward, what do we want to do and why do we want to do that?

We knew that in order to position ourselves for what we wanted to be and what the values of our bank were that we needed to make some significant change in the organization. Some difficult decisions needed to be made. In April 2014, we issued a press release, somewhat lengthy press release talking about this stuff. I actually read it the other day when I was putting this presentation together, and really this line that was made by Richard Carrion, who’s our Chairman and CEO, really jumped out at me. In my opinion, this really just captured the essence of what we were doing. I’m going to tell you guys what it was that we actually did, but I want to focus on these words because they ultimately the reason of what we were looking to do.

Focusing our efforts will ultimately enable us to better serve and grow our customer base. Pretty simple. Everybody’s reading that. They’re probably like, “Yeah, sounds good, man. Sounds good.” Those are very, very, very powerful words if you really take them at their core and really realize, wow, focusing your efforts and serving your customers. How many companies, let alone banks, can really say that they do that? It’s tough in today’s day and age when somebody in a position of power makes a statement like this. It’s tough at time to actually truly believe them, right? There’s so many statements being made out there today that you hear and you’re like, “Yeah, sounds good.” Can anybody think of anybody in a fairly powerful position today that’s making these outrageous claims they have no ability to deliver on? Anybody?

I don’t want to get all political up here. He just won New York the other day, actually my home state. I’m just happy you guys didn’t put the screen behind me because I would feel like my head was actually going to be bit off or something like that. Ultimately, it’s tough today when people make claims of stuff they may or may not be able to do. You got to just say, “Okay.” Kind of just say okay, and then you brush it off and move on with your life. That was not what we were looking to do.

We made this statement and we were serious about it. I want to just dive a bit more into the two pieces of this statement that really capture it. Focusing our efforts. How many places out there, how many companies, how many banks, whatever, can actually say that their efforts are focused? Aligned? How many departments exist at your bank? Between sales and credit and risk and audit and finance and treasury and blah blah blah blah blah. It is really hard to get all of that stuff aligned around something. Ultimately, what is it? What is the building block? What do you need to be able to focus your efforts?

I’d say the answer is purpose. I’d say the answer is the reason that your company exists. Once you have that and you have everybody actually bought into it, it’s really pretty easy to focus your efforts because everybody knows what they need to be doing and everybody knows what they want the output to be. It’s pretty Machiavellian. That’s what we want to do, so then everybody can do whatever they need to do to make that happen. Without a purpose, you’re just all over the place.

Begs the question, what is our purpose for our bank? It’s actually quite simple. Our purpose is the second part of the statement. Serving our customers. Serving our customers. We’re a community bank. We’re a community bank in New York City. That’s tough. That’s tough. It’s a pretty small community up there. Literally, we exist to serve our customers. What does that mean? It means doing whatever it takes to meet the needs of our customers. This statement was made and you may brush it off as “Yeah, we hear that kind of stuff every single day,” but this was very, very, very powerful statement. It was going to require a lot of actions to actually support it.

I showed you that map earlier of what we were in April of ’14. Basically what this press release was about was to say this is what we were going to become. This is what we were going to become. There’s a lot less red things with white stars on that map now. Basically what we announced was that we were exiting 60% of our business. Very, very, very difficult decisions. We are exiting California. We are exiting Chicago. We are exiting Orlando. Selling the commercial bank, selling the retail bank. Exiting our headquarters in Chicago. Sending about two thirds of our company down to the headquarters in San Juan of our back office, and we were going to focus our company on New York and Miami, which was the core of our business.

I don’t get lost on the bit of irony here that in order for us to focus on serving our customers we need to say goodbye to 60% of our customers, and some very, very, very valuable employees that were working at our headquarters in Chicago. This was a tremendously difficult decision that was made and, to make it even better, guys, I wasn’t even at this bank in April 2014 when the decision was made. This decision was made in April ’14. I was still at JP Morgan watching all this from the outside. Man, I was intrigued. I was very interested. Just watching this from afar and just saying, man, these guys really mean business. This is an organization that’s been around for a long time and they’re willing to take this drastic of measures to do what they need to do to deliver on what they felt their purpose was.

I was lucky enough to start interviewing and start talking to some of the people at the company. It was immediately clear that they were dead serious on doing this and how serious they were on changing their organization. I was fortunate enough to join in July of ’14, right as this was getting underway. They brought me over with the task of rebuilding finance and strategy. That’s what I’ve been doing for the last two years.

Okay, I come in and it’s July 8, 2014, I think was my first day. I’m the JP Morgan guy, the $2 trillion+ bank, and I’m going to this little now $5 billion community bank. All right, first day on the job. What is all this really cool stuff that I’m going to get to start doing? This is why I came here. I have all this opportunity to do all this really cool stuff. What’s the next M&A transaction that we’re going to be doing? Or what’s our capital planning exercise that we’re going to be doing? Long term financial planning, organizational structure, how are we going to align our talent? Whatever other Post It Note, critical thing that was on the wall.

This was literally Day 1. I come in and I sit down at my boss’s desk. He’s like, “Hey, great to have you on board, man. Really excited to see what you can do.” I was like, “Yeah, me too, I can’t wait to show you what I can do.” He’s like, “Great. We need you to roll out this loan tool.” What? I was like, “Wait, what about all this other really cool stuff I want to do? You want me to roll out a loan tool?” He’s like, “Yeah, that’s what we want you to do.” I’m like, how is that possible? I was like, my God, did I make a mistake coming over to this bank? Now I just have to roll out this pricing tool. You know what I’m talking about, Dave.

I was like, how, among all of the things that we need to do, is this what you need me to do right now? Really brought me back down to Earth. I want to go back to this. Want to go back to this. Let’s talk about a commercial bank, because most of our assets, by the way, for our bank, are commercial loans and that’s really what we use Precision Lender for, is pricing all of our commercial loans, the majority of our assets. What does this mean for a commercial bank? Let’s focus on that. Like I said, it means doing whatever we need to do to meet the needs of our clients. Money’s money. We all lend out money. It’s how you do it that differentiates you.

Like I said, we’re a small community bank operating in New York City and Miami. Miami’s rapidly growing. If anybody’s been to Brickell lately or anything like that, you can see the amount of construction that’s going on down there, it’s amazing. How are we going to operate and compete in these markets? Ultimately it’s delivering whatever we needed to do to meet the needs of our customers. Our management understood that. They understood we need to rebuild the foundation of this company. That is why, of everything that we needed to do, they told me Day 1, “This is what we need you doing.”

They’d already picked some tool called Precision Lender. I had no idea what Precision Lender was. The bank I came from, JP Morgan, had a homegrown tool. Big banks, small banks, they all build their own things. It was Excel-based. They had a team of like 9,000 analysts that supported the thing, and a dedicated building of IT people. Great. I had no idea what Precision Lender was, but the decision had already been made to go with the tool.

What did I know? I knew two things. Number one: that pricing is ultimately the end product that we give to our customers and we needed to focus around that. There needed to be an aligned focus of all of these different things. I probably captured maybe half of them up there. You guys think about your bank and all of the different things and people that interact with pricing and pricing is constantly changing and pricing impacts all of these people. All of these different departments. Yet everything I’d ever seen, pricing was, a lot of times, looked at in a vacuum. It was like, “Ah, the finance guys, whatever. They do that.”

What I did know is that we needed to build an entire framework that spanned our entire company, had very deep roots across the whole company around pricing. It was going to be this Precision Lender tool. Equally as important was what we needed to avoid. The traps that needed to be called out from Day 1 that we needed to not do. What were those? First and foremost, a one size fits all approach does not work. It does not work, particularly in competitive markets where you’re the little guy getting pushed around the block by the big guys all the time. It can’t be our way or the highway. You need to work with your customer.

Number two: lenders who aren’t empowered will kill you. You have to trust your lenders. That’s a very … Surprised I didn’t get from a few of you out there like “What? Huh?” You have to trust and empower your lenders, because ultimately that’s what’s going to allow them to really do what they need to do for their customers. Lastly, and the thing that there’s one thing that’s the essence of this whole little presentation that I’m doing here, is you break down walls between departments. Functional silos will destroy you. They will destroy you and I’ve seen it happen multiple times.

Lenders and credit, that’s the easy one. That’s what everybody knows. They hate each other. They can’t work together. It’s an us vs. them mentality. All of this at the expense of the customer. All of this as the lenders and the credit folks are bickering back and forth, saying he said, she said, whatever it may be. That’s all at the expense of the customer, and ultimately then at the expense of the bank because happy customers, as everybody is set up here already today, mean a good, profitable bank.

What I did know is that we needed to align everything around the product, which was pricing, and ultimately that was going to allow us to deliver what our customers want. What do they want? I’m going to start with the lower left quadrant there. Confidence and trust, really. Borrowers want to know that they have a relationship with a bank that’s going to do what needs to be done and that they can trust them, that that bank’s going to do what they need to do to get that customer what they need. Equally as important, particularly in competitive markets, is speed. Do it quickly. I’m sure a lot of us do a lot of commercial real estate lending. Real estate turns over very, very quickly. If you have a bank that’s sitting there with infighting at the expense of the customer and they lose a property, you’ll probably never get a deal with that customer ever again. Trust and speed.

The ability to customize solutions. Particularly for a smaller institution like us, this is absolutely paramount. Lastly, transparency. Don’t just have “Let me get back to you in a week” and whatever’s going on, it falls into a black hole and the client has no idea what’s going on. Transparency all along the way of all of the different cycles that something’s going through and all the different desks that it needs to go to and be reviewed and everything. Build something so that you know what the hell is going on, so that when your client comes to you and says “What’s going on?” You can give an immediate answer.

We knew that these were the value that we wanted to deliver. What we were building, ultimately, this was how we were going to track did it work or not? Did it work or not? One thing that’s on here that I said we weren’t going to track that I didn’t put up here is the amount of assets. How many loans did we generate? I think this point’s been made really clear, that if you do this, that problem solves itself. That’s not a problem. Borrowers talk. Everybody knows what’s going on. The word gets around these guys will do what it takes to get it done, get it done quickly, and you can trust them. That’s what we set out to build.

What I want to talk to you guys a bit about is what did we build. I think Andy, I didn’t get to see it because I was back there, but I’m sure he did an awesome job talking about the CRM integration that they did. I always say I don’t like seeing Andy because I just am just envious of everything that they’ve built. All I ever want to do, I just want to say, “Come on, can we implement it?” He is a great source of ideas for us on the CRM side.

We can look at this in the concept of an ecosystem. I’m looking at the little screen here. The definition of an ecosystem is a system where a group of interconnected elements formed by the action of a community of organisms within their environment. That’s exactly essentially what needs to happen to originate a loan. Think about it. What happens with a loan from its inception in either the pricing tool or in your CRM tool to when you actually click the big red launch button in your core system to get the thing funded? Think about all of these different parties of people that need to interact together to get something done. Nobody’s here from our bank. It’s good. I made sure that we can say that the fish is operations and the eagle’s risk management. I made sure there’s no snake on here or no whatever other bad animals you wouldn’t want to put on here. I wouldn’t want to make anyone angry.

They key here, obviously, is not doing pricing in a vacuum and having all these parties work together. Ultimately, I know this has been said a bunch up here, it’s not about squeezing an extra basis point of NIM out of a deal. NIM’s important. Of course it is. I’m sure we all stare at it every day. It’s not about increasing a line of credit so that your exposure is greater, your funding is greater. It’s literally about getting everybody to work together so you can deliver on those value points that we talked about. That’s really what we set out to do.

I’m just going to show you a bit on what we did and what we continue to do. By no means are we done. I don’t think we’ll ever be done, much to the dismay of Wade out there. This will be a constant effort, Wade, of I’ll be saying that we’re not good enough five years from now. What have we done? If you guys think about at your bank, what are all of the systems that a loan from when it’s born to when it’s funded that it needs to pass through? For us, it’s four systems. It’s four. It’s our CRM tool. It’s our pricing tool. It’s our origination system and it’s our core system. Those are the four that we knew that we needed to basically build this ecosystem and all those different animals are all plugged in to one or more of these and they all needed to work together.

Just as an aside, as I look at banks, the two things in my opinion that limit banks from being successful are not a lack of funding, the things that you would think a bank would need, like a lack of funding or a lack of talent or a lack of a product strategy. Almost every bank that I talk to, they can get deposits to fund their loans one way or the other. They have good lenders and they have smart people that work there that can put together a strategy of this is what we want to loan. The two things that I’ve seen that really limit a bank are a lack of technology and a lack of communication that happen within the bank. A lot of times, the lack of communication is actually because of the lack of technology.

How many times have you guys seen something falls through the cracks and it just delays the process for three, four days? All of a sudden, you have some guy in credit. I feel like I’m picking on credit up here, but lenders are usually the ones that get picked on, so I’ll pick on credit. “We never saw that. We never saw that.” It just brings the thing to a screeching halt. What we want to do is build this thing where you remove that entirely and information flows freely back and forth between this whole ecosystem of systems and it works. It’s been working.

What do we build, and I do want to answer questions, because the devil’s really in the details with this. This is, oh year, a nice, little, pretty slide that you integrated for systems. Great. The devil’s very much in the details here. Okay, so what did we do? We have obviously Precision Lender, and each system I’ve called out, what we’ve made sure we did is in all these systems there’s no duplicative functionality happening in any of these systems. I’ll give you the very simple example and if Andy just talked about it, sorry.

Between CRM and between Precision Lender, there can be a lot of overlap like maintaining a deal stage or maintaining an estimated close date, whatever it may be. We leverage the unique capabilities of each one of these systems and then turned off that functionality in all the other ones. There’s no opportunity for overlap to happen or confusion to happen or conflicts of data or anything like that. What are the key functionalities of each one of these that we need to use? For Precision Lender, obviously, it’s loan pricing and profitability of opportunities and also client relationship profitability. We knew that’s where we’re going to do this.

In CRM, it’s all about workflow and customer relationship management. Tracking your appointments and managing your customer touch points and that kind of stuff, but it has absolutely nothing to do with loan pricing and we would never have set out to build a loan pricing model inside of CRM. That would make no sense. What we did, with Precision Lender, these guys build it for us. We use dynamics, fortunately. I like SalesForce a lot better. What can we do? What can we do? In dynamics, we have the whole back and forth error there of data flows back and forth. The way it works is they go and create an opportunity in dynamics. That should actually be the first one on there, and then they launch Precision Lender from inside of dynamics. We don’t even let them log in to Precision Lender. They can’t even go to PrecisionLender.com and sign in. We force them. You can only get in there through dynamics.

On the dynamics opportunity page, you can’t type in loan amount. Read only. It has to come from Precision Lender. They go into Precision Lender, they fill out the loan pricing model. All of that information feeds back into dynamics. What that then allows us to do is build our entire approval workflow for pricing leveraging the workflow of CRM, which is really what CRM is built for. We don’t use Precision Lender tasks or anything like that. We use the CRM workflow. Basically we build a ton of really goof workflow and rules and whatnot that says hey, if deal size greater than this and ROE variance vs. target greater than that, then send it to this really powerful executive guy who needs to approve it.

The key here is that we are getting pricing decisions made extremely early on in the process in the sales cycle. At the beginning. At the absolutely beginning. Also, our credit department is seeing this stuff before it ever gets into their system. There’s no surprises because surprise is that whole lack of communication thing where it comes in and you get “Whoa. Whoa whoa whoa whoa. Stop the train. What’s going on?” By building that, that’s what it’s allowed us to do. Also, most CRM tools, particularly SalesForce, comes with very, very, cool dashboarding capabilities. You can take all this wealth of information between who are your customers and what’s all the pricing information and client relationship information, and this is where I get really envious of Andy because he’s shown me what he’s built and it’s really, really cool. I think I’m going to just maybe steal some of that, Andy. I don’t know where you are. He’s not in New York or Miami, so we’re not competing, so it’s fine. We’re not going to be opening up anything in Omaha.

That happens. We can do all of our dashboarding. Ultimately, the marriage of Precision Lender and our CRM tool is very, very powerful. We then took it a step further and we wrote rules where the only possible way that a deal can get into our underwriting system is to come through the CRM tool. Just like it’s impossible for somebody to go into Precision Lender and create a deal, it is impossible, the machine won’t let you, to go into our underwriting tool and create a deal. It has to come through this.

What happens is they go through the whole pricing CRM thing, go through big powerful executive approvals and all that stuff, and they say, “Okay, approved, we’ll do it, that’s good pricing.” They click the Send to Credit button in our CRM tool. It takes that big package of information and it integrates it field by field into our underwriting system and it assigns it to an underwriter. Then the underwriter takes it and goes from there and does his thing or her thing. As that’s all happening, everything that’s being done in the underwriting system is feeding back to the CRM tool. That’s that whole transparency thing. Our lenders in real time know every single thing that’s happening.

The key is, and I’m sure you guys have all experienced this, I’ll give you the example. I do a pricing model and it’s for a $5 million CRE loan. It’s only going to be 50% LTV because this property’s worth $10 million. Great. I price the thing out and it hurdle and hurdles the target and everything’s great and okay, I send it off to credit and they start doing their thing and the appraiser comes back at like $7 million. Lenders typically like to overestimate the value of property, by the way.

Now the LTV is completely different. It’s no longer a 50% LTV. It’s, what, I don’t know, I’m horrible at math. 80%? I don’t know. Something like that. The ROE obviously is going to go down because the LTV’s up, and oh my God, now it doesn’t hurdle. Has that happened to everybody? I’m sure that happens constantly or the debt service ratio comes back wrong or whatever it may be. What do you have to do? You have to go re-price it. Got to re-price it. That’s exactly what I was saying a couple slides ago. Pricing is at the core of absolutely everything. What we built is the capability, basically, for our credit team in the origination system to hit pause, kick the thing out, send it back to the CRM tool, and with the workflow shoot them an email that says “Hey buddy, your appraisal didn’t come back go re-price it.” They re-price it. If it doesn’t hurdle, it goes to the approval again and then they can send it right back in, pick up right where we left off. That pricing is constantly in everybody’s minds at all times. Okay?

Then lastly, once the loan is underwritten and documentation’s all had and all that kind of stuff, then the credit guys hit their button out of the origination system, it goes to the operations team, and the operation team forwards it into FIS, which is our core system. Then to complete the circle here, obviously the loan starts performing in our core system. The key, also, we talked a lot about this last year at the Cab, because this deal has been integrated throughout all these systems, we have the unique identifier for the deal from when it was born in the CRM tool all the way to when it was boarded in the core system. It allows us to audit people and make sure that they’re not adding phantom deposits. It really creates a very, very holistic framework for us to be able to look at this deal throughout its whole life cycle.

Then lastly, of course, as everybody knows, the core system data will actually feed back into Precision Lender and that’s how we do relationship profitability. As these loans start to perform, we start to look at that and we see, okay, here’s the relationship. Then the whole cycle starts all over again. That is the 30,000 foot view of what we’ve done.

What has it gotten us? I have this slide here with raspberries and grapes and cherries. Everybody likes fruit, right? This has been a very natural presentation, ecosystems and fruit and talk about planting roots. What it’s gotten us is those exact things, guys, that we set out to get. That we set out to get. Greater transparency and trust with our customers. This has allowed our sales people to be educated and know the entire time this is what’s going on, and they pass that along to our client. Nobody in this game likes dealing with the Wizard of Oz. hold on, I’m going to disappear behind the curtain. I’ll be back in a week. I’ll let you know what’s going on.

Improved speed of funding, of course. This has probably been the biggest metric that we’ve been able to impact with this whole thing because there’s just so many less points of failure. You have people talking at all times and you have pricing out in the open, all the hands on top of the table from Day 1 so there’s no surprises so the thing just flows. Ability to drive strategy. Very, very important. Now I’m going to transition away from over-customer value, and this is more the internal stuff, but obviously getting everything aligned and driving your strategy will benefit your customer, of course. Our ability to drive strategy by this is key because the minute we want to change something, and a lot of strategy at a bank is pricing strategy.

How many people’s strategy right now is to increase the duration of their loan portfolio? Probably nobody. How many people are looking to do more fixed rate deals right now? Probably nobody with what we think rates are going to do over the next five years or whatever it may be. Our ability to make those strategic decisions, that’s obviously very high level, and put them into practice with basically the click of a button and have that go throughout all of these systems, throughout the entire bank, and be embedded in everybody’s process, has been huge for us. Before, it was like, okay, we want to do this. We want to reduce duration of our pipeline. Great. Now how the hell do we do that? I don’t know. Let me get on the phone and set up 45 meetings and talk to people and then maybe we’ll do it. Very, very different.

Then lastly, improve communication efficiency and reducing paper costs. Reducing paper costs. How many of you guys today have to print out your pricing model sheet and give it to your credit group? Yeah. That’s what we were having to do. You’re talking pages and pages and pages of scanning and emailing and somebody losing it and somebody not initialing it. That’s all gone when you can do this. It’s all digital. There’s been a lot of benefit that we’ve gotten from this.

I have eight minutes. That’s the end of my presentation. What I will say, by the way, lastly before we open up for questions is I told you guys when we started we are an $8 billion bank. We were in California, we were in Chicago, blah blah blah, all those things. We sold 60% of the company two years ago and literally we just got back and we just crossed. We’re bigger than 8 billion now. That whole thing when I said sometimes you got to take one step back to go two forward? This hasn’t just given us these little pieces of fruit here. It has resulted in a lot of growth for us and we’re very much looking forward to the future. This whole system that we’ve built, we would not be in the situation we are right now. We wouldn’t have been able to make up all that loss ground without it. Been great for us.

Dallas Wells: Great, you act like you’ve done this before.

Greg Demas: Huh?

Dallas Wells: I said you act like you’ve done this before. That was good. Questions for Greg on their journey and road bumps, how they’ve cleared those things. Not everybody at once.

Greg Demas: My tablemate.

Speaker 3: You mentioned transparency in your presentation. How transparent have you gotten with regard to the pricing tool and the functions of pricing with your customers?

Greg Demas: Extremely transparent. Extremely transparent. I’m not going to go as far as say that our lenders are having our customers actually look at the pricing tool as they’re doing it, but they know everything. We share everything with our customers. There’s no real secrets on how we’re pricing our loans, so if they sit here and say “Why?” We can immediately answer that question for them now. I think you guys have all seen Precision Lender. It very clearly tells you this is why you can or cannot do this. Before, when we were on an Excel model or something like that, they had no idea. They would sit there and be like “I don’t know? It just doesn’t work. I can’t do it for you.” Now it’s like I can go here and see there’s these three or four factors that’s hurting it. Precision Lender 101, let’s see how we can work through this. Let’s create two or three different scenarios and do any of these work for you? That’s why they work for us. We pretty much share all of it. Why not?

Yeah? Great.

Speaker 4: Did you guys create the interfaces between the systems or were you able to get back through the …

Greg Demas: Yeah, we did. The CRM and the Precision Lender interface was built by these guys. These guys over here.

Dallas Wells: Not me.

Greg Demas: Yeah, definitely not me. That was built by Precision Lender. Now they have that ready to roll. We actually worked on it together. I think we were the ones who gave the initial requirements for building out the dynamics connector, so that was them. Yeah, the integration between dynamics and our homegrown origination system, that was us. That was us that had to build it. Then obviously the origination to core integration, that was us too. It’s a lot of work. It’s not something that just happens overnight. I won’t lie to you. It’s a lot of work, but it’s worth it. It’s very much worth it because before, there would be a deal in CRM and everybody would be like “Okay, great,” and then credit would have to start over. It wasn’t working for us and it probably added at least a week to our amount of time to fund a deal.

Dallas Wells: I think the point there, Greg, is to not be captive to those core providers that’ll tell you just it’s not going to work. There’s a way to do it. The technology’s there to make it happen, but you guys had to take that initiative to force the issue.

Greg Demas: We did. We did. It was …

Dallas Wells: It’s not cheap.

Greg Demas: It’s not cheap, and it’ll take some time, but it’s worth it. It’s 2016. I really don’t feel like you can compete, especially as time goes on and on and on and technology just becomes … Something like this will be something that everybody has. I don’t think you’ll be able to compete. I really don’t, unless you have an extremely efficient process, everything that’s going on. Right now, actually, what I’d love to do next is that whole tracking the status in our CRM tool, I would love to actually make that external facing and have a portal where our customers could actually log in and just see it. I think Quicken is doing something like that now with residential mortgages. I would love to do something like that with commercial lending. Where basically at any time, customer logs in and they get a nice view of exactly what’s going on, what’s next. That’s where I want to take this next is actually make it …

Dallas Wells: Like Domino’s Pizza.

Greg Demas: Yeah, like Domino’s Pizza. Yeah, exactly. Exactly.

Dallas Wells: Greg, one of the other things Andy talked about was, in building this seamless environment and really trying to make it so that the lenders are the quarterback of the deal and they can see where it is themselves and communicate that to the customers, that there was still some pushback from the frontline folks. Did you guys meet some of that same resistance as you were rolling all this out, and if so, how’d you overcome that?

Greg Demas: Actually, to be honest, Dallas, not as much as I thought. I said how I got in on Day 1 and “Hey, roll out this loan pricing tool, all right.” I hit the brakes and probably spent four months, at least, just talking to people and being like “This is what we need to do.” I made sure that I secured buy-in ahead of time. I didn’t just blindly go down this road. That was actually probably the hardest part was talking to all of those involved parties and being like “This is the right thing to do and do you agree?” That very much includes lenders. Once we had everybody, we see it, we get it, everybody was on board.

Dallas Wells: They saw what was coming and what the end goal was.

Greg Demas: Absolutely, absolutely.

Dallas Wells: Anybody else? Questions? One down here.

Speaker 5: Greg, I had a question for you. When you hire new lenders and they walk through the door and they see this tool, what’s the reaction? I would imagine “This is so cool. This is a great product.”

I was asking, when you hire new lenders and they walk in the door and the first day you expose them to this tool, do they look at that and go “Wow, this is really cool. This is a great tool?” Second to that, what’s your training like on it and how long does it take them to get up to speed?

Greg Demas: They love it. They absolutely love it. The first thing they love is Precision Lender. My thing with Precision Lender is that they’ve taken something that is so highly complex … Loan pricing, it’s complex. It is. They’ve boiled it down to its most basic elements. First and foremost, they love it because the simplicity of the UI and the UX inside of Precision Lender’s so easy. That goes a really long way for us. In terms of the integration, yeah, it takes some training, clearly, but my line when I train these guys all the time, they seem to like it, is we kind of want to build an iPad. Does an iPad come with a manual? No. You open the thing up, you turn it on, you’re like, oh, I have to touch that and it works. That same thing that you guys have done with the UI of Precision Lender, we’ve tried to do the same thing in our CRM tool.

I was saying yesterday in the meetings that half of the development that we do in our CRM tool is just deleting stuff. Honestly, maybe like 75%. It’s just getting out of there crap that nobody uses. Everybody always has these big grandiose ideas of what they want to do with CRM and it’s going to tell us how to cure disease and solve world hunger and all this great stuff and nobody uses it. Actually, I think if you were to see our CRM tool you would be like, “This is really, really basic.” We’ve done that on purpose. There’s really not a ton of training that needs to be done. We do it anyway. We do refresher courses. They love it. We get new lenders here.

Speaker 6:  I just wanted to check my understanding of something you said earlier regarding pricing being the first step in the process and that your senior management has to approve that as step one. Does that not include a lot of deals that don’t happen for competitive reasons or underwriting reasons, etc.?

Greg Demas: It does. It does.

Speaker 6: They’re okay with that?

Greg Demas: Yes. Yes. They are. First of all, we have so much trust in the model and we’ve stress tested it so much that if it hurdles, we’re comfortable with it most of the time unless it’s a gigantic deal. If there’s a $1 million deal that hurdles, we’re good. We’re good to go. We trust the model that much. We’ve stress tested it that much that we don’t require approvals for that. Yeah, in the case that there’s a big deal or a deal that doesn’t hurdle, they have to approve it and sometimes they approve deals that don’t close. That actually adds more accountability throughout the organization too because then they’ve seen it and they go, “Hey, what happened? Why did we lose this deal?” It actually allows us to understand, is there a trend there? If they’re constantly approving stuff that’s not closing, they understand there’s a reason behind it. That’s something we can go fix.

Speaker 7: Greg, you mentioned you might have a preference for SalesForce.

Greg Demas: I do have a preference for SalesForce.

Speaker 7: I wanted to address that question in a politically correct manner. What is it that you like about SalesForce, and more specifically, how does SalesForce fit better into this process that you’ve already built?

Greg Demas: I’ve deployed both. The answer’s agility and just easy customization. There’s no Microsoft reps in here, are there? Hopefully not. Dynamics is just you got to run so hard to do basic stuff. It’s getting better as they’re upgrading their versions, but SalesForce is just such a more agile tool and it’s so much easier to customize stuff. That’s really what was behind that comment, my preference to use it.

Speaker 7: Thank you.

Greg Demas: Yep.

Speaker 8:  Along that same theme, when you were talking about the migration through SalesForce and the dashboards and measurement, so not that any of us ever want to throw our credit colleagues under the bus, but as those folks do see that pricing get approved, that deal go through, gets dropped in through, in your case Dynamics, into the credit channel, have you started measuring throughput on that? When you talk about from birth to boarding, how do they feel about that indigestion that happens somewhere in the middle?

Greg Demas: They hate me. They all hate me. No, just kidding. Wade knows what I’m talking about. We’re actually working on this right now. I don’t want this to come off the wrong way. This has put a gigantic spotlight on our credit organization. You think about sales life cycle analysis, typically it’s on sales. At a bank, this gets into that whole everybody ecosystem thing. A deal probably spends more time in credit than it does with the lender. Yeah, this has allowed us to massively increase transparency and accountability in the world of credit. Their reaction has been great. They’re all professionals. They’re all very good and they understand that this is ultimately going to allow us to deliver that quote. That is the whole reason our company exists, which is speed to funding, it’s confidence, and ultimately they understand that they have a massive role to play in that. This integration has done nothing more than facilitate that and they’re good with it. Nobody’s out to get anybody. It’s something that they understand that this transparency benefits all parties.

Dallas Wells: Anybody else with questions for Greg? All right. I think that deserves another round applause. That was good.

Greg Demas: All right. Thanks.