Can I Sign Nebraska Banking Presentation

Industry sign banking nebraska presentation easy

good morning thank you for joining us for today's webinar as we take a look at the 2020 results and look ahead to 2021 uh my name's sean o'brien i'm the president of quick rate and i am pleased today to be joined uh on the phone with uh david ruffin david joined us in 2019 as we developed and built out a new division here at quick rate and quick analytics called in telecredit and so david will take you through the second half of today's presentation just a couple of reminders before we get started uh we will send you a copy of today's slide deck and a link to the audio recording uh uh probably on monday and then certainly uh we are in presentation mode which means we you can hear us but uh we can't hear you so if you have any questions certainly submit those and we'll take those at the end of uh the call today uh we'd like to thank uh nebraska independent community bankers for allowing us to present today and hope you uh enjoy the discussion we're going to touch on mention the 2020 economic recap economic indicators are improving we'll look at the fourth quarter numbers as we uh aggregate them through quick analytics and use our quick analytics community bank index uh dave will touch on the true state of credit quality and then we'll just share a few things that we've been working on here at quicken quick analytics and in telecredit excuse me so um as we did these webinars throughout 2020 we uh kind of start and ended them each with this slide uh you know quoting the after the fed where you know all throughout 2020 they just said hey the course of the economy the path of the economy is really going to depend on the progress made with with the virus um i think here in 2021 um you know i think that still still remains true last year we certainly saw a huge shock to the economy because of cobit you can see the impact of gdp in the second quarter and then the really strong bounce back in quarter three as the fiscal and uh support from the fed uh was immediate this time versus last time in 2009 where it took almost 15 months to get uh any fiscal support into the economy this time we did it in less than three months and you could see the results were pretty immediate but as we ended the year uh economic activity was starting to fall off particularly in terms of job creation and so i think it's safe to say more you know support is needed for the economy if we look at the gdp numbers you can see again the the big drop in quarter two the spike back in quarter three but all told the economy still shrunk by three and a half percent in 2020 um debt to gdp last year exceeded the size of the economy for the full fiscal year the first time that's happened in more than 70 years and i think we just have to get comfortable with the fact that for the foreseeable future there is going to be an increase in debt and there's going to be worry about inflation down the road but you know i think first and foremost we need to you know revive the patient if you will and that's i think what the the necessary support is going to do here starting in 2021 uh and i think again we'll just we'll we'll follow the uh path of the economy it's gonna depend on the course of the virus which we seem to be making or hope to make some progress uh with in 2021 um just you know kind of as a perspective point um you can see the really the five you know peacetime fiscal expansions you know what the increase to the budget deficit was um you can see uh last year was by far the largest we've we've ever experienced as a percentage of gdp um and i suspect we'll see a similar number for 2021. um the support though is worldwide this just shows other countries in the amount of fiscal stimulus as the percentage of gp certainly the united states is you know well out in front of what everybody else is going to do but the bottom line is that this is going to be a worldwide effort to revitalize and hopefully stimulate stimulate economies worldwide which will hopefully have a really positive and lasting effect as we go out go throughout 2021. um these uh bullet points come from us from a a report uh charles schwab liz sanders their chief economist put out um this week just highlighting some of the things that are happening within the economy um and i think you know primarily the the points that we take from it are just reiterations of the fact that you know our credits as david's going to talk about live on main street and not in wall street and we've experienced this dichotomy in the economy all throughout 2020 where you have the stock market doing really well but local economy is you know certainly struggling and you know that kind of makes sense right because every time a small business closes um there's usually a larger business that's also usually a national business that might be a publicly traded business that's still there that's going to win as these small businesses uh go away um the community banks have clearly been the you know the lifeline for these small businesses but the fact of the matter in many of our communities you know businesses that require people to gather such as restaurants traveling hotels you know any kind of social interaction you know those are the businesses that are struggling the most and continue um to to need assistance the housing market has remained strong uh the supply of housing is very low so that you know different from 2008 nine this has really been a source of strength for uh for individuals um ceo confidence is that you know record highs yet consumer confidence is just starting to turn the corner and begin to improve um the money supply almost correlates with the rise in the stock market and that's you know brings about the concerns around inflation but typically inflation occurs when you have not only the money supply growing but the velocity of that money really picking up and when you see a lot of you know we don't see slack in the labor markets and so right now two of those three things are not occurring there's not been much velocity with the money people are saving it and then secondly there's still tremendous slack in the labor markets and i believe that's why the fed at this point is not terribly concerned about inflation in addition their ability to pay interest on bank reserves can cool the velocity as well and that's what they did during the last recession coming out of it so i you know i think they believe they'll deal with inflation when it comes but they're not concerned that it's going to get out of control most importantly again if you think about the fed's mandate it is around employment and inflation and payrolls and employment have certainly stalled and i believe that's why they continue to be as accommodative as they can be we are still 10 million people shy of pre-pandemic employment levels and as we went through 2020 you could see how the the numbers of employment increases really dropped off so by the end of the year the final the fourth quarter we really as the economy didn't create any you know very few uh new jobs and that's why the the fiscal support um you know is is important we just need to uh to get people back back to work uh and they're still as i said about 10 million people uh who are you know still unemployed from pre-pandemic levels the other concerning thing around employment is the number of long-term unemployed uh continues to stay high and in some cases rising the employment gains have been you know spotty and certainly by industry and david will talk about later in the presentation we think that's an important thing for us as we think about our our loan portfolios is subsetting our our portfolio in terms of industries because this time around it's not a blanket problem of credit it's very specific and a little bit more targeted to specific industries that are experiencing difficulties uh while not not while others are in some ways you know in flourishing um nothing happens overnight we have to recognize that so you know we want to get the jobs back so that there's not further long-term scarring to the economy and the math around this is really um uh you know pretty straightforward right if you think about there's about nine and a half million jobs that they're trying to you know get back if the economy is creating 200 000 jobs a month it's gonna take almost four years to get back to those levels if it's 300 000 jobs a month we're down to a little over two and a half years so again the fed the fiscal support is all designed to try to get people back to work uh as quickly as we can and we learned from the last recession um there's more danger in doing less than than doing more so you know again i think this time we are airing on the side of uh doing probably too you know as much it remains some people's eyes too much so where does that leave us uh our estimation right we think the outlook for credits still expected the worst a little bit over the first half of this year but certainly much improved from where we thought it would be uh in the previous quarters if we look nationally provisions are lower at most banks most of the money centers and regionals took you know significantly smaller provisions in the fourth quarter with some even you know pulling back on their reserves i believe there's a number of reasons to be and continue to be positive you know i think we've got a new round of ppp loans the industry certainly comes at this with a you know a ton of capital and liquidity um housing prices remain strong and then i even think bank valuations since november bank stock valuations have risen uh over 30 percent and so i think it will lead to you know more acquisitive uh activity uh m a activity in 2021 but uh you know certainly uh there's been a huge rebound in bank valuations from where they were last year um as i mentioned uh throughout presentations last year we when we saw the larger banks really increasing their reserves if you look at this chart and this comes you know from our quick analytics uh platform um you know jp morgan you know last year made a huge uh increase in their provisions and at the time were uh you know we're noting that this was not just related to cecil that's 75 over 75 of the provision was attributable to losses they saw coming from uh from covet 19. um they ended the year you can see they took down the provision from where they were in the third quarter but still from 12 31 29 to 12 31 2020 they more than doubled uh their reserve um and so again it was just a way that we could see of a proxy of what the you know the larger banks were seeing in terms of potential uh credit tails that kova 19 might present all of us as i mentioned a consumer confidence uh hasn't matched the ceo confidence that uh we've seen um you can see we're you know we really plummeted last year in april and have slowly been working our way back uh you know the hope here right and this gets back to the velocity the money on the majority of people have been saving their money and not spending it um you know to get the economy going where or two thirds of our economy is around consumer spending uh you know this number needs to increase and get the consumer more confident to start spending money you know for us before i think you'll really see an uptick in inflation um just because that will you know start to increase the velocity of all this money that's gone into uh into the economy um so what do we know so you know again i'm i'm always a believer i you know i don't i i don't think you can ever uh you know try to be specific and forecast when and where things are going to change i always try to be or think about it in terms of being directionally correct and so you know as i look out into 2021 you know there's a lot of uh factors that are you know pointing positively there's still some that remain a question mark but you know again i think the things we can see is you know the outlook for kovitz better vaccinations are you know there's clearly vaccinations occurring every day so we're getting closer to returning to something more approximating normal interest rates on the short end i believe are going to continue to stay low the long end is obviously starting to run away a little bit but they're that you know with the new round of fiscal support and new rounds of ppp loans there's a lot of things that we're throwing at this um you know to revitalize uh the economy which which should be again all positive uh as we go throughout the year um but you know the question marks really remain right there's still uh higher unemployment than we'd like the long-term unemployment numbers are too high and then main street is really wounded and for us as community bankers that's really the the concern um we're gonna probably see as the year goes on what the true state of a lot of our borrowers are are gonna be and we've gotta you know uh you know uh do as best we can to continue to resuscitate you know a lot of our of uh our small businesses and our borrowers um this translates into the gdp forecast by the fed and the investment banks you know are all improving and increasing by the day you can see the range of forecasts um but the bottom line again these are all positive indications that uh hopefully the you know the worst is behind us while recognizing there's still a lot of work to do and that you know kind of borne out in this mckinsey slide just showing the amount of doses and you know people that it's going to take to get the united states vaccinated right it's a really big effort and it's going to take some time so it's not going to move as fast as any of us would like but as we work throughout the year hopefully again as we approach the third or fourth quarter we're starting to recognize things as being a little bit more closer to normal um so just a few things i want to pass along from quick analytics before i turn it over to david so quick analytics for those of you who don't know this is a uh you know a service we have uh built at quick rate we take call report information uh and and and template it and format it for every bank but we also look at things nationally and at the state level and um we developed an index we call the qcbi which is the community bank index and it just really looks at community bank data as a subset of just the overall bank data so you can see there's a 159 banks in nebraska we exclude one because it doesn't really meet the definition of the fdic uses for a community bank you can see the dispersion of those banks in nebraska you know again a tremendously strong community bank state you know with 84 percent of the institutions under 500 million dollars um if we look at the last 12 months and the asset growth right i'm not as strong the red line represents the national trend um really strong numbers not as strong as others you know as the national trend but you can see you know three out of five banks in nebraska experienced asset growth uh greater than ten percent last year um from loan growth um this was surprisingly a little bit lower um than most states i probably would attribute to the fact that there's probably just not as much ppp activity given um you know you're the more heavily bent agricultural focus in nebraska than other states and you can see almost 40 percent 40 of the community banks didn't see any loan growth in uh 2020. deposit growth though uh much like the rest of the country saw a tremendous influx of of deposits so you know two out of three banks in nebraska saw greater than 10 deposit growth we certainly saw that at quick rate right everybody uh you know really feels like they're pretty flush with cash um and you know not even needing uh you know to look at wholesale money but i wouldn't tell you if you are paying up in your local markets there is tremendously cheap wholesale money in the quick rate marketplace uh today um just some performance numbers you can see the yield on loans rollover not surprisingly so we saw a 33 basis point drop there cost of funds improved by 27 basis points still slightly above the national trend though and again so i would encourage you if you're overpaying in your local market there's certainly affordable wholesale monies to to consider and you can extend maturities if that's something you're looking to do nim is going to be and remains a you know continue source of pressure for the banks we saw a 24 basis point uh decrease in in 2020 uh for banks in nebraska um and uh also then just the non-interest income numbers and the efficiency ratio continues to come down in a nice way for the banks um looking at 2020 versus 2019 performance two out of three banks saw their roas decrease last year um you know almost every bank saw an increase in asset growth and then you know four out of five banks saw their nim decrease and we are almost at decade decade lows multi-decade lows for loans of deposit and four out of five banks saw their loan to deposit shares uh decrease um just some final numbers free tax roa you can see better than the national trend um you know remain strong remain strong across banks of all sizes and the same way with median roa and roe so um you know all told uh you know a much better year than what people might have thought as we entered uh march of of last year so at this point i'm gonna pass the presentation over to david and he will take you through the second half of today's call david great uh sean hope you can see my screen and um delighted to be with the nebraska bankers today um certainly enjoy working with eric hallman and his staff and so we appreciate the opportunity to share with you today uh sean has certainly alluded to credit uh uncertainties and i think that's the operative word uh i'm a credit guy about training and and career and there are some of you on the call may say oh uh wait for doom and gloom because that's a prototypical presumption from credit people but i'm not here to talk in those terms i'm really here to talk more vigilance because i think we are looking at uh really unprecedented levels of credit uncertainties um you know 2020 as as sean alluded to has clearly been a high performance banking year virtually every bank outperformed financial expectations certainly what was being uh of say mid spring of 2020. the armageddon has feared at the advent of coba just has not materialized from a financial standpoint credit metrics at a 10 000 foot level certainly imply nothing onerous has yet occurred and there are temptations clearly to claim victory in the in our industry as a whole uh you know we could be haughty and say we're we're just that good at managing our institutions through this national disaster and by the way making money uh doing so uh we're certainly the beneficiaries of years of building more capital in our industry and certainly vaccines and therapeutics are coming and improving and we all uh trust and hope the worst of this is soon over but you know and the other huge advantage is that unlike a decade ago there's absolutely no blame that could be ascribed to our industry whatsoever in fact quite the reverse is true and particularly at the community bank level where there's been tremendous indicators of big uh plaudits being afforded justifiably to you community bankers for being so active uh in the ppp program um as the late uh announcer famous announcer paul harvey used to do when he'd pivot to the other side of the story we have experienced unprecedented regulatory relief in 2020 as a result of the magnitude of the covet effect on banking we've as certainly shown quantified we've been the beneficiaries of massive federal economic stimulus in the early months of the pandemic obviously liquidity and non-organic loan growth have been substantial that continue even into the next uh the second round of ppp as we speak in 2021 but you know when i talk to bankers particularly the credit uh savvy people and those that are have been around lending for some time they know intuitively that credit so-called credit tales tend to outlive the economic shocks that bring about a changing credit cycle and we all know of course that the federal government lifelines eventually will have to cease but as again sean alluded to and i wrote an article in december entitled uh you know our credits our borrowing credits reside on main street not wall street and we have to remember that main street indeed is in a recession you know many of our borrowers at the credit transactional level are frankly focused more on their own survival than for any kind of growth uh strategies and of course that in and of itself tends to be a credit red flag in a more normalized environment so there are 20 20 uh credit uh realities i think that you know despite the fact that we avoided an economic calamity i would argue that all of these initiatives from the government regulatory and fiscal stimulus have basically created perhaps the greatest masking effect of underlying credit risk in modern banking history and again as sean alluded to we're it's not just a one industry issue now it's not just wonderful family housing and all things related to that that that really took us in the great recession uh covet is left what i consider to be maybe the most vexing uh aspect of its of its event on the banking landscape in that there's so much divergent industry performance that's going to be impacted by covid thus requiring us as bankers to subset and understand and segment our portfolios like never before um you know 2021 and credit uncertainties have have different aspects from different stakeholders certainly boards and management never like to be in a position to not look like they're in charge of or at least on top of their own credit trends and what's going on within their portfolios risk managers either credit officers per se or or broader credit uh risk management uh team that's the core of their your responsibility right is to understand emerging credit risk certainly investors and investment bankers have expressed personally to me that they've never in their careers since such a degree of uncertainty embedded in bank portfolios because of all the things we've talked about in terms of the masking and of course the regulators are a stakeholder in our industry and i've talked to regulators directly and i've heard indirectly through banking clients who've had recent examinations that largely the regulatory community believes that they're going to be back in a more normalized uh examination process in 2021 with a very strong expectation that banks individually explain their situations within credit and what what the real effect has been the idiosyncratic effect to your institution has been from from the code uh experience and we all know that uncertainty by its very nature is announcement to managing credit risk we can't fully eliminate it we're in a risk-taking business but we certainly don't want uh high levels of it to to determine our our perception at least as to how we're managing and i do think reducing these uncertainties to the degree we possibly can will be priority one on the credit uh arena for 2021. uh other challenges remain we are seeing some indications that some bankers are having to be caught up in some degree of paperwork relative to some ppp fraud investigations though some wanted cecil to be arguably the first victim of covet it's not going to happen it's been extended a little bit for the smaller banks but it's still there and needs to be you know dealt with and and on the road to adoption for those banks that are involved in any form of libor remember this is a year of transition on that and the interagency guidance recently uh reminded us to be sure that all the documentation and all the proper representations and disclosures uh so indicate and of course ubiquitous in our industry is any money laundering a bsa and cyber risk and again i think in all due respect the inextricable question remains is how long the tie to government to both abate our risk and enhance our growth because i think to be intellectually honest about it we as a banking industry truly have been the beneficiaries of much of this government initiative that came as a result of the the covet in an attempt to create a prevent a you know economic calamity so let's take a look uh at some metrics um on the nebraska level the national and regional level again this is from our sister division quick analytics again reiterating the uh qcbi standard we're we're operating with today which is basically those banks under 10 billion dollars in assets we think they are more relevant uh to you as community bankers certainly on this call today i tend to look at the in in very elementary terms uh when i talk about generalized loan quality at a given bank or even projected to an industry or nationally uh or region or nationally but i think of first of all where's your inventory of problems and then basically the the middle and the right chart or what are you going to do about your problems well in all these indices nebraska is performing better than any any regional state compare or nationally so in other words your inventory of problems is down at 79 basis points again again every indication is that or would have been uh in april of 2020 that those numbers would have been certainly spiked by by the end of the year but therein may be exactly the proof that i was talking about in terms of the masking effect i have a good friend in banking who i had a conversation with a few weeks back and he was bragging to me about closing the year with less non-performing loans than he had at the beginning and he said isn't that something and surprising and i said okay knowing him very well knowing it wouldn't insult him i said how many of those loans were the beneficiary of extended modifications or or extensions and he he laughed and he said you caught me and i said yeah well that's what i'm suspecting at some level is that's again evidence that there may be some masking effect or in other words we've taken advantage of the regulatory uh relief in those areas to to potentially artificially uh show some some better quality than than maybe underlying but again the the compare there across the board is nebraska is exemplary uh uh in in that in terms of your uh you know you've got a aggregate uh a triple l at uh 162 basis points another way we look at it is the inverse of that and you basically you and the plains region states have basically are ahead of the national average in other words you're a little above two and a half times covering your inventory problem loans again as we speak not many uh have significant uh inventory of problem credits at this point we certainly understand that uh quickly pivoting back to the loan growth trends that sean alluded to um it is it is largely the banks that are you know over 500 million in nebraska that have really shown the larger loan growth but if you look over to the chart to the right and this is only as of the third quarter of 2020 because fdic hasn't published year-end numbers yet but as you can see the the the real falloff of of so-called loan growth uh after the big ppp explosion in the second quarter is is very uh significant in fact it was negative uh so i think there there's going to be uh you know again this age-old issue of where is organic loan growth coming from in our industry and we'll talk a little bit more about that in a moment concentrations is going to be i think critically important for us to think about and it's not just in the real estate area which i know most people in the community bank space tend to think about because of the specific guidance issued by the regulators in that regard but again uh nebraska is in great shape uh you know from the broader 100 or 300 percent got on the broader cre to risk based capital uh only seven banks in nebraska exceed that and in the subset of that construction and development loans only three banks under 10 billion in nebraska exceed the 100 percent guidance on that again that's guidance it's not a regulation but the closer you get to the suggested level of tolerance it becomes uh more of an issue we have a client by the way in nebraska that uh as sean alluded to a moment ago about the preponderance of ag lending in in nebraska that he may have what an outsider or a regulator would look at as a significant concentration of ag loans relative to his capital position but uh he he's able to effectively which we'll talk a little bit about in a moment to disabuse any negative concerns about the uh his position relative to capital because he quickly can uh just point to a very pristinely performing ag portfolio so i think that's again the issue of where we're going to be a lot in banking the next couple of years is is if you will disabusing a potential negative trends that at a very high level may suggest a problem but you know only you as your own banker know well where the real story is in terms of the detail um other concentrations that tend to come to mind nationally are multi-family uh cni of course is really not really uh again that's no more ppp activity not really loan or organic loan growth and of course ag naturally has in that in nebraska has a more exposure uh from an uh concentration standpoint than even the other plane states and certainly the national average concentrations however is again one of the things that we need to think in terms of that in terms of the subsetting is as sean alluded to earlier of the need to and what i strongly believe is code's most incredible legacy to us bankers the need to to you know subset our portfolios the fdic sponsored an excellent article in july of 2020 that frankly had no surprises because we all knew it intuitively but it was basically a postmortem all the banks that failed in the last crisis and uh 70 of those banks were cre lending focused they had high concentrations of late cycle growth of what we call vintages proving the the known tie to the to loans made late in a benign credit cycle often uh become the most stressed when credit stress does effectively hit of course these also had high correlation to collateral dependence which those bank we bankers know that 100 percent that when you have to pivot to collateral to get out of a law oftentimes the market is devalued already and therefore it's the worst of both worlds of course there were state and regional market forces that proved to be critical covariance but again when i'm i look at another chart out of the fed that as of 2019 uh commercial real estate lending at commercial banks had actually come to par with residential lending and i would argue that the community banks i don't have data for this and by 2020 um certainly about 20 at 19 or 20 if that chart that line would probably far exceed residential ending given the uh predominance of a lot of cre lending at community banks so this this also brings up an issue that uh i've spoken about for some time now and that is the structural challenges that community banks have when having to face a wave of credit stress if and i emphasize that if and when that may come in the next year or two in in terms of this so-called credit tale of the post code and impact on our portfolios what i mean by that is three key points and that is uh one uh it's just a matter of capital and and the capability to flush quickly problems that you have uh emanating in your loan portfolio community banks don't have as much capital the second is quite impactful which is the subjective nature of the fact that in many cases you know the borrowers that are under stress it just is a human characteristic that makes it more difficult to pull the plug and to become um you know having to deal with a problem borrower where you know this person or company uh individually and personally and the third perhaps most impactful is the fact that we are as an industry community banks tied so heavily to real estate lending and we all know that a problem real estate loan is undoubtedly the most illiquid of problem loan assets to deal with now nebraska actually is the counter a bit to that theory i i speak with to other states from time to time of course and in most cases i'm able to say and and here's the proof in the pudding that the smaller the bank the higher their current problem assets but in in nebraska it's the counter it's basically the those banks over 500 million that are or at least in today's environment carrying a little more inventory of acknowledged problems i hasten to say none of these uh inventory levels of problems today are alarming or con any concern it's just the point that if we get other another wave of this whe e we have to reckon with the net effect of covid in the next a couple of years uh it is in in my opinion at least it would probably that these inventory levels would increase um so they're going to be some there are some changes of foot and lending that we'll briefly speak on i'll differentiate them from more the lending or production standpoint and then take a moment to talk about it from a credit risk uh oversight standpoint uh if there is no question that the whole paradigm of what is constitutes now a prospective borrower for your bank has had a radical transformation uh the the so-called pool of prospective borrowers of 2019 really doesn't even have a relevance to what we think about in 2021 because it has shrunk largely everything we've talked about in the presentation around the main street uh characteristics of what covett has done but therein lies i think the opportunity particularly for those banks that have been very active in ppp lending i think there's a huge opportunity to convert a lot of that to more stable organic loan growth and effectively capitalizing on the good will associated with that and again just being seen again as as as sean said you are the lifeblood in many ways of your capabilities of trying to resuscitate and keep going some of these uh local entities and uh therefore get the credit for it um and and i think that almost inevitably means that embracing even more government guaranteed uh loan programs uh to cover you know uh weaker borrowers to cover weaker debt service coverages to cover uh weaker ltvs is just an inevitability and i think looking at uh sba lending for an example as just a subset or something we may have some see some attractiveness to it but it has a lot of bureaucracy to it it has its own it has its own structure that we just don't choose to work with i'm not so sure that you shouldn't rethink that because i do think it certainly helps you from a risk avoidance standpoint it gives you greater organic loan growth it certainly provides the goodwill we've talked about as profitability from the fees and secondary market sales that that you can benefit from and of course that presumes the efficacy of the guarantee uh is is the is indeed in place and that does of course have an administrative responsibility that has to be worn by by the banks that participate in these programs excuse me on the risk side of focus of lending i think we're already in many cases pivoting away from the covet related modifications now we acknowledge we're in many some banks they're they're actively involved in phase two of the ppp uh but just trying to deal with uh ascertaining on a long loan borrow by borrow level who is capable of making it or not if we have prolonged credit stress or increased credit stress it may behoove people to start looking for some type of workout talent and unfortunately that talent doesn't exist very much in banking today because uh we didn't haven't needed it it's been years since we really had significant amounts of problem loans to to manage having to stay close to the borrower virtually of course is is standard uh but i also think it's important to tweak your policies and procedures even if you're doing so temporarily remember regulators hold bankers rightfully so accountable for practices that should be adhering to your policies and if you've got policies that haven't been tweaked in maybe two or three years and in no way reflect the current environment we're living with in with covid and even in a post-covered world i think it would behoove you to take a look at that because i want to inadvertently give regulators frankly a trap for you to fall into on not adhering to your lending policies i do think there's going to be a lot more focus on what i call conservatism without overreaction and particularly with the point of of more focuses on reserves because of the adequacy of of of uh capital in our industry now compared to the last financial crisis i do think that's going to be a way to avoid having to do kind of knee-jerk charge-offs if again if we get a wave of credit problems uh as was the case last time and i do think that even has uh some implication for m a to speak to in a moment and also i think renewing the focus of loan review is an absolutely critical uh point for 2021 and 22. loan review was in some cases backed up on an aggregate basis a lot of scopes were not met understandably logistically because of covid and i know from the fact that the regulators are looking to make sure that uh there's a catch-up is being done in that regard to make i mean this is not the time to be uh you know reducing or or not uh increasing the quality or standards of your loan review as i said with m a i think has been more indication of a more robust but you know as we said also investment bankers are complaining about the unprecedented levels of uncertainty it's going to be up to bankers i think to dissuade them of some of those um uncertainties and again that's a lot of what we do at intel credit is we work on techniques and tools and processes that would allow you to do all of that i do think again there'll be more focus on a lot of cultural synergies at this point than just the the credit mark which dominated the uh m a space in in the last financial crisis um and and and even the expansion if you will of the of of what defines the star draw for instance i think is is morphing into a much more generalized definition i have in the last few months begun to recommend five key strategies to our clients to reduce these uh 2021 credit uncertainties and first is to recognize the trap of focusing only on your portfolio at large in other words the aggregate performance of your credit portfolio may be doing very well or maybe doing acceptable and you feel comfortable with kind of hanging your hat on that but that's also like losing you know you're basically fixated on on the forest well where you may have subsets of acres of certain trees that are under disease and and you do need to be kind of looking at that because again i've said it i think three or four times creating portfolio subsets identifying hot spots that's going to be the unique covered um challenge that we have now compared to what we did a decade or so ago when we had credit challenges and of course whatever tools and processes you have should allow you to instantaneously identify an inventory what trouble or stress borrowers make up these troubling trends or hot spots we've talked about adopting alternative servicing protocols again including enhanced loan review make absolutely sure your loan review is is adequate um i'm i'm going to editorialize a bit here i know uh the accounting industry does a a very good job in many ways on doing loan review but in some cases uh we are t we are talking in terms of making absolutely sure who the reviewers are out there doing loan review ought to be credit savvy credit experience people because the when when credit becomes stressed you're going to need a loan review function that has the ability to persuade frankly uh in an intellectually honest way an internal discussion about credit issues uh that may be emerging and i do think i'm recommending for all bankers to ask for bios of who uh whatever third-party vendor is you're engaging that is doing loan review ask for bios to be specific in terms of the skill level of those uh those reviewers and again i think all of this leads to perhaps one of the most important uh outcomes of these strategies which is your capability of writing your own script before others do it for you particularly particularly a regulator and i'd like to take a little bit of an excuse me a pivot over here to kind of give you that sense of what intelli credit does uh intellectually in terms of everything we've designed it in telecredit works upon this kind of logic of course the public data at quick analytics well beyond just call reported so it's a bevy of industry and investment data uh but that's that's the public data uh intel credits energy source comes from the non-public data which is your idiosyncratic loan portfolio data and again the concept is you start at the top look at look at maybe red flags or aggregate portfolio high level trends macro trends and then be able to drill down to immediately identify what loans or borrowers may be causing that the revolutionary thing that we've done at intellicrite is to bring loan review out of a kind of a process of just thinking of it as a one-off engagement to try to make it more relevant to an interactive and much more real-time adjunct if you will to the diagnostic approach remember that the external stakeholders in your in the banking industry see you through the lens of your public data largely only you are the privy uh for the non-public idiosyncratic loan data and i believe in 2021 and 2022 in particular there's going to be a lot of need for bankers to spend time on this so-called non-public data in some cases to disabuse presumptions that may not be accurate that come out of a public perspective about what's going on with the bank i gave you the example of the nebraska banker uh just a moment ago in terms of his exposure to risk-based capital uh in agreement so what is the in in conclusion what are the benefits of implementing these five key strategies again i think it confirms you as captain of your own ship a former regulator told me years ago that they often go into a bank on the front end and the back end and fill out a basic uh foursquare matrix the y axis is relative to the bank's cooperation the x-axis is relative to the bank's competence nobody would want to be deemed in the red zone here but i do think what that how that relates to credit is there's probably no more toxic force in banking in the credit world than to have too many credit surprises emerge it's a it's really a very difficult thing between boards and management uh for obvious reasons it either conjures up an issue of uh somebody was asleep switch or somehow it's being kind of suppressed or we're just hoping that it's not as bad a problem as it is and again i think you want to avoid that at all cost if we start getting into more credit issues it also supports the proven correlation between early detection of emerging credit risk i've said this before we sometimes have to get out of this mode of thinking all loans are good loans until they're bad loans because the real benefit of early detection mean which is an early detection comes from those those that non-public data and the migration of risk in the in the in the uh in the past categories uh it gives you the ability to reduce your levels of loss uh and non-performance that's been proven empirically and it also gives you a greater flexibility of managing an early problem out of the bank before it's so weak that you really are stuck with it so to speak we know that the magnitude in conclusion we know the magnitude of all these uncertainties are pretty challenging but we absolutely believe they can be overcome and that's really what intellicredit frankly is designed to do for you we greatly appreciate the opportunity to speak with you today um with the nebraska bankers and us uh i will turn it back over to sean thanks david uh yes so just uh you know kind of continuing on heading heading for home here just a few reminders just as david kind of alluded to and what we do at quick analytics and then telecredit and david's slide was you know really captures it you know quick analytics we're looking to you know provide you with multiple data sources that are publicly available but we're aggregating those so you don't have to and we just feel like um you know every industry is getting more competitive and you know certainly nebraska you can see as your efficiency ratio continues to come down right a lot of our a lot of the gains are being made is by deploying technology uh into into our institutions and it's important to not only deploy technology but deploy technology that you can readily and easily use and that's what we think we're we've done and and hope you see with with both quick analytics and telecredit where we you'll put all this information on your desktop to give you and your team as much information about the bank and other banks in the country either within telecredit you know better visualization and understanding of any potential emerging risk that might be occurring in your portfolio so we will continue to enhance both of these services some of the ones that we're going to work on in 2021 we do have a cecil solver as part of our subscription at quick analytics we're going to be building a camel's page we'll highlight some of the call report items that go into affecting your camel ratings if necessary we've got an investor relations page and we also have an excel add-in tool that just allows you to pull in any piece of call report data for your bank or any other bank in the country and in addition this year we've added credit union data so if you have any credit unions in your backyard and you want to see what they're up to you'll be able to pull that information into your own spreadsheet we've developed here and introduced in the last month an industry credit research function again just it allows you to bring to life any call report piece of industry or excuse me any credit piece credit information from the call report you can overlay not only your state information but other peer groups as well and then we've added the uh final piece where you can overlay uh fred economic data so just to see if there's any correlations that might be you know supportive of q factors or just uh you know a better understanding of where reserves might be mentioned we do have an investor relations page if any of you are looking to add something like that we do provide you with a portfolio level credit stress test no need to build one of these or pay a consultant to do it we've already run one on every bank in the country you can customize the inputs uh we'll you know welcome to take you through your numbers but we've already run when once you log into quick analytics uh you can see the level of of cushion that you have before you breach any level of uh capitalization we we've added functionality to allow you to customize that so again just taking a a very good tool and making it uh better and then as i mentioned we've added credit union data so you can pull uh that information into any spreadsheet of your of your own um as i mentioned you know quick rate for 35 years and now quick analytics and telecredit we believe we've you know developed affordable easy solutions for you to use um you know we not only want them to be affordable but then easy to deploy because it doesn't do you any good to buy software or buy solutions that looks shiny and nice but you can't get them to work or you need to hire somebody to run them for you um so we we've really taken that to heart as we've developed all of these solutions as david mentioned uh you know we've developed some interesting solutions that in telecredit we'd love for you if you'd allow us to quote you on your next loan review uh we'd certainly welcome the opportunity to do that and show you what we've uh built in telecredit for those of you who don't know um is a cloud-based solution that is comprised of two tools a portfolio analyzer and a smart loan review function and then as david mentioned we can provide external loan review services uh for you uh as well uh just a reminder quick analytics you know we do a number of things we can you know provide you with bank and peer performance numbers we give you interactive bank pages on every bank in the country and then we also have uh some regulatory tools including the cecil solver and the credit stress test so um again uh we'd like to thank you for taking some time out of your busy friday uh and and listening to us and uh you know certainly invite you if we can ever help with anything uh to give us a call schedule a demo learn a little bit more about quick analytics and telecredit and i'll check to see if there's any additional questions um if there are not which does not appear there is um well thank you very much again for your time we hope you are safe and have a great weekend and please let us know if we can be of assistance to you in the future thank you so much i'll leave this screen up for a little bit longer have a nice day you