The Power of Your People: UBank’s CEO Talks Relationship Banking

Nancy Ozawa (00:06): Hello, and welcome to Banking Out Loud, a podcast where we have candid conversations and deliver insights on banking topics that you care about the most. I'm your host, Nancy Ozawa, and today we're gonna talk about relationship banking and maybe even how to become a disrupter in this industry. Many of our listeners already have that corporate culture of valuing the customer relationship and delivering exceptional customer service, and in banking, we actually probably know our customers better than most. (00:34): Relationship banking, just as a pure definition, is a way of delivering significantly better customer loyalty and customer satisfaction. And it's much different than what's at the other spectrum, which is transactional banking, just focusing on the transaction. And many of you are probably wondering, "How do we do this better? How do we radically change this?" And that is why we've invited in one of our customers, Justin Armstrong, who is the co-CEO of UBank, and one of my coworkers, Mike Foreman, to discuss this topic. (01:04): So, Justin, just a little bit about what I know about you so far besides being the co-CEO of UBank, uh, you've been in this banking space for about 20 years. Justin Armstrong (01:13): Yes, ma'am. (laughs) Nancy Ozawa (01:14): (laughs) Justin Armstrong (01:14): Time flies when you're having fun, supposedly. So- Nancy Ozawa (01:16): Yes. And one of the statements that, uh, was shared with me is that one of your philosophies is, people bank with people, not banks. Justin Armstrong (01:25): That's correct. Nancy Ozawa (01:26): I love that. That really kind of epitomizes what we're talking about with relationship banking. Justin Armstrong (01:30): Yeah, I mean, 100%. I, it was funny, I was fortunate enough to get outta college... I, I guess a little bit about myself, Nancy. Nancy Ozawa (01:36): Yeah, please. Justin Armstrong (01:37): Let's, let, let me act- actually start by saying, PCBB's been fantastic. Mike's been a great contact. You know, the funny is, is we're talking about relationships, but you and, and us, UBank and PCBB have a wonderful relationship, and a growing relationship. So you guys could probably talk about this on the podcast on your own, so I'm honored to, to be asked to do this. So thank you for inviting me. But- Nancy Ozawa (01:56): Absolutely. Justin Armstrong (01:57): ... uh, going to, "People bank with people, not a bank," um- Nancy Ozawa (01:59): Yeah. Justin Armstrong (01:59): ... started a long time ago, um, with me. It, it was interesting, my, my grandfather was entrepreneur. I'm the first actually in the family to graduate from college, so I'm really kinda not supposed to be here. And it was interesting enough, being on the flip side of working in a bank, he was going in and always asking for money. And, you know, back in the day, it was embarrassing, quite frankly, to walk into the bank and ask for money. And he was, you know, a growing entrepreneur. And, you know, I remember, it was kinda fun, uh, he, unique side story, he, he ended up... There's a, there's a bus company out of the town that he has his company at, and all of the buses that were not sold, he would buy and lease those out to people like Guns N' Roses, and Shania Twain, and Hooty & the Blowfish, and als- always had a unique perspective on how to make something work. Nancy Ozawa (02:43): Yeah. Justin Armstrong (02:43): So I think I inherently got a little bit of that from him. But at the same time, I always remember him walking in and saying, "You know, Justin, if you don't have your team of people," which was your banker, and your attorney, and your accountant, and that kinda stuff, "... you can't get anywhere, because everything is based off of relationships." (02:57): And I'm fortunate and, and honored to, like, just kinda fast-forward, and, you know, one, gives you lessons, but, two, uh, you really start to realize what that meant. When you 10 years old and you hear that, it's completely different when you're, quite frankly, 30, 35, and you, you meet somebody who understands where your thoughts are. And so I'm, I'm honored and blessed to be co-CEO with Shana de Paoli. Um, and it's, it's kinda funny, we, we're a little bit of a yin and yang. Uh, I do not wanna do what she does, which is really more the CPA route, the dot the Is, cross Ts, and make sure that we do things the right way. And I, I just, I love talking to people. My job's easy, I talk to people. Nancy Ozawa (03:28): (laughs) Justin Armstrong (03:28): So, (laughs) so- Nancy Ozawa (03:30): And some people would think that's the hard part, but it's good that you're matched well for that. Justin Armstrong (03:33): Yeah, absolutely. Nancy Ozawa (03:34): And it sounds like UBank has accomplished a lot. I mean, I was reading some of your statistics, you guys have decreased your efficiency from 90% down to 60% and still been able to increase relationship banking. So you've radically have been changing a lotta things at UBank. Justin Armstrong (03:49): You know, I thi- I think we have a unique approach to banking and management as a whole. And again, it starts with management, um, at, at first to really set the tone and really the expectations. And, and I'll tell you, six years ago, Shana and I got together and the bank at that point in time had about $130 million in loans, was assets around 200 million, and spending the same amount of money on marketing, and loans were going down 1% a year, an efficiency ratio at 90%, uh, we had 128 employees at the time. So we, we were completely out of whack. And, you know, what we found really fast was you had to change the culture of the bank. As opposed to letting somebody walk into the bank, um, and say, "Hey, thanks, we're gonna open an account today," go out and, and quite frankly earn the business. And some of that's not printing out a report and filing in a filing cabinet, that's really understanding how banking works. And I mean I think a lot of banks these days do not explain to their employees, what does a teller do and why is that so important? And, "Teller, do you understand quite frankly the why behind what you're doing and how it affects the bottom line of the bank?" Nancy Ozawa (04:53): Right. Justin Armstrong (04:53): You know, everybody talks about the, the teller's the most important employee because they're the forward facing customer. Can you imagine if you're the most important employee and you don't understand why you do what you do? Does that fulfill you? Nancy Ozawa (05:03): Right. Justin Armstrong (05:04): No. And so, you know, that's some of the culture that I think we really set out. And Shana and I, we, (laughs) we ended up, we thought it was gonna be really easy, Nancy. Nancy Ozawa (05:11): (laughs) Justin Armstrong (05:12): I mean, I, gonna be honest with you. I had no gray hair- Nancy Ozawa (05:12): You said the [inaudible 00:05:13]. (laughs) Justin Armstrong (05:14): ... and I have all gray hair now at 41 years old. To be honest with you s- I, the joke is, 41 going on 60. But, uh, we started visiting with all of our employees twice a year, and, and that was, that was a really concerted, hard effort. We did that for, for many years, for four or five years at that point. And, funny story, so the first employee that we sat down and talked to, uh, was at our largest deposit market- Nancy Ozawa (05:37): And this is in East Texas? Justin Armstrong (05:38): This is in East Texas, yes. Nancy Ozawa (05:39): Okay. Justin Armstrong (05:39): And she was a teller, had been with us at that point two or three years. And they had the most deposits, and we come and we sit down, and we're like, "Well, have you been busy?" And, "Oh, yeah, we've, we have more transactions than the new market we just entered", right? So, like, and I, I ask her, "Well, do you understand the size of the transaction was just as important as the number of transactions?" Nancy Ozawa (06:01): Right. Justin Armstrong (06:01): She didn't understand that. And that when you start really, again, going back to the why, what are you doing, and what are your goals? Shana and I sit down, and we make goals for the year, it's not just budgets, right? It's like, "Hey, this is where we wanna be." Personally, last week of the year, um, my family, my wife and kiddo, we set goals of where we want retirement, and to do this, or to do that, and what we're gonna have savings up to our... And people don't do that anymore, Nancy. Nancy Ozawa (06:24): Yeah. Justin Armstrong (06:25): And so, like, to get your employees to do that- Nancy Ozawa (06:27): Right. Justin Armstrong (06:27): ... is really a goal that we've been... 'Cause it helps them personally and professionally. Nancy Ozawa (06:30): Yeah, it does. Justin Armstrong (06:31): If you focus on that relationship, the customer part's easy. Nancy Ozawa (06:34): Well, and I imagine not only moving on from number of transactions to size of transactions, then you gotta transfer it to how many transactions per customer, so you start to realize who's the most important customer. Justin Armstrong (06:45): Yeah, exactly. And then also at the same time, even a bigger macro view of, does your employee understand, you know, the dirty word in banking is cross-sell? You know, right? I mean we don't, we don't wanna call it that, but at the same time, do they understand the difference between a non-interest-bearing account and and interest-bearing account? One of the questions (laughs) I ask, and a mentor of mine, I'm not gonna mention his name, but if he heard this, he would absolutely know he told me this, but- Nancy Ozawa (07:06): (laughs) Justin Armstrong (07:07): ... "Do you know the most profitable product of a bank?" And when you ask this to your employees, everybody assumes its loans or its overdraft fees or whatever. That not the answer. It's actually non-interest-bearing accounts. Because you can't grow the bank without the non-interest-bearing accounts. So, anyway, you start explaining how that works, and all of a sudden it l- clicks a little bit. Nancy Ozawa (07:26): Yeah. Justin Armstrong (07:26): And, and to answer your, it's taken six years for us to get where we are, and we could not do it if we didn't have the relationships internally and externally. I mean, we had an overhaul of, of employees, um, but we, we have a core group of people that have been with us for a long time. And quite frankly there's not a lot of people who wanna build something. A lotta people wanna paycheck, and wanna get paid well. Nancy Ozawa (07:46): Sure. Justin Armstrong (07:47): We, we're fortunate we have a team that wants to, you know, grow something special and different. When Shana and I got together, we wanted to change community banking 'cause we personally believed that if community banking's not changing and, and starting to do some things different, they will die or they will consolidate. And so we're trying to be on the proactive front of that. Nancy Ozawa (08:05): You're ma- you didn't wanna be irrelevant, basically. Justin Armstrong (08:07): Well, you can't just do loans and deposits only these days- Nancy Ozawa (08:10): Yeah. Justin Armstrong (08:10): ... um, with the regulations that are coming down and the increased expenses. And there's a lot of people that... We were just talking before this started, the management side of things from boards, you know, your average CEO's 68 years old, you know, typically a gentleman who's done it the same way for the last 40 years of his career. There's a lotta things that are changing that they're not willing to jump into or look at because that's just not what they've done before. Nancy Ozawa (08:32): Yeah. Justin Armstrong (08:32): Well that's forcing consolidation in the industry. And I'm sure PCBB, you guys have seen that as well. Nancy Ozawa (08:36): Yeah, absolutely. Justin Armstrong (08:37): And so we, we wanna be on the proactive side of that, right? We're not in acquisition mode, but we're, we completely believe in our organic growth and what we're doing that needs to be different. Michael Foreman (08:45): How have the customers received this? Is it hard getting a buy-in from the customers? Justin Armstrong (08:49): You know, it's, it's interesting. We, um, when we started six years ago, we, we flipped the book of business, which is something that a lotta people don't look at any more. We were right at 70, almost 80% consumer, and we've really kinda flipped that to a 70/30 split between commercial and consumer. Because we didn't have, to be honest with you [inaudible 00:09:07] Mike, we didn't have a lotta of the commercial products that we really needed to get some of the, the higher end customers that had multiple products at a bank, right? So you're wanting to take care of your existing customer base, but at the same time, not just look for employees, you wanted to get to the management and the owner so that you could do a whole 360 view of their business. And so that's been a really focus of ours. So we're finally, we're finally there. We're hitting those metrics. And I think that goes back to the efficiency ratios. Nancy Ozawa (09:32): Right. Justin Armstrong (09:32): Because we didn't have a lot of fee income. It's not that we didn't want it, we didn't have the products to offer. And so the relationships with our core, um... This is not a promotion and, and, you know, Fiserv hasn't signed off on it. But I, I gotta be honest with you, you know, banks complain about their core all the time, but what we found is that Fiserv was been fantastic to deal with. We were fortunate enough to find the right people in Fiserv that understood where we were and where we're going, just like you guys at PCBB. (09:57): So for us, we probably flipped the dynamic. And we're not a, we're not a huge, multi-billion dollar bank yet, but they also know that we're willing to work and build something the right way that's long-lasting, and quite frankly have the control to do so at the bank and the board level that supports us. Nancy Ozawa (10:12): Now, it sounds like you're, you're changing a a lot, you're educating the customers, you're th- educating the employees, you're changing culture. But let me ask you just at the highest level, what is the vision that you want at UBank? What are you educating your customers towards? What does that future vision look like that you're working towards? Justin Armstrong (10:29): We never wanna give all the secret sauce away. (laughs) Nancy Ozawa (10:31): No, no, no. Justin Armstrong (10:31): But I- Nancy Ozawa (10:31): But just so we know kind of where, why you're changing these things. Justin Armstrong (10:34): But, but in our humble opinion, you have to have a diversified source of revenue. And so for us, you know, six years ago, we did not have a mortgage department, we did not have a credit department, so you know, you start- you start at the bear basics of loans and deposits, and you kinda grow it into what's really kinda become really a community bank with eight physical locations, but with business in 49 states. But you know, we're, we're blessed to deal with one of the largest privately held affordable housing developers, one of the largest independent insurance brokers that's in- again, independent, uh, that, interestingly enough, Nancy, they all started with nothing. Nancy Ozawa (11:06): Mm. Justin Armstrong (11:07): And, and like so, so we have the same culture. I mean, you know, the history of our, our bank was started by an amazing family, and there, there was two big banks in the, in the market. One was for the, they owned the Fortune 500 company, built it, and you're gonna go do deals and do a handshake deals out the farm, and you come back and you get funded on Monday. Well the, this bank, which was formerly Huntington State Bank, is now called UBank, we rebranded in '19, but that was built for everybody else who didn't have the ability to be, you know, that person. Nancy Ozawa (11:32): Right. Justin Armstrong (11:33): So all of a su... You look that, and interesting enough, from our board to, you, you mentioned Hall of Fame athletes and all that kinda stuff, and I know we'll get into that, but e- that to these successful business individuals that support us, and quite frankly became our mentors. Started with nothing and worked hard to build it. And that's blessed, you know, Shana and I. We're not supposed to be where we are, we're, we're, we're extremely happy and, and tired sometimes, but- Michael Foreman (11:55): (laughs) Justin Armstrong (11:56): ... you stand back and it's exciting and reinvigorating to see what you're doing and with the people you're doing it with. Nancy Ozawa (12:01): Absolutely. Michael Foreman (12:01): And speak a little bit more about how you expanded out of East Texas and how your markets changed- Justin Armstrong (12:07): Yeah. Michael Foreman (12:07): ... and you start to bring in these athletes, and music stars, and- Justin Armstrong (12:10): (laughs) Michael Foreman (12:11): ... things like that to start be part of UBank and, and grow that way. Justin Armstrong (12:14): Yeah, Mike, it's funny, I say all the time, it's, it's God's winding road a little bit. Because we, we had zero intentions of doing what we ended up doing. But really what happened is, I had banked an individual for many years, and he had got diagnosed with cancer. He's still alive today. But his son was negotiating a management contract in Nashville and, you know, he said, "Hey, listen, can you just talk to him about money? He's, he's good at the music side, can you talk to him about money?" You also learn that some people don't necessarily always listen to some of that advice, so you really want some of that face-to-face time (laughs) with him. Michael Foreman (12:43): Yeah. Justin Armstrong (12:44): And so it, it really kinda propelled from that moment to having a music video filmed, and you see UBank stuff all in it, and, you know, because there's a relationship with that artist. And all of a sudden they're doing songwriting sessions with a superstar. Um, and then you turn around and, you know, at that point in time, Covid was beginning. And our brand manager suggested, you know, "Hey, what we if we did a, an online stream of a concert to raise money for the food bank?" And so we're, we're very much about financial literacy and, and really giving back. We think that's super important, and honestly, I think that's why God put us in the positions we're in. (13:16): And so, you know, we, we, surprisingly, that concert did extremely well. And then we got the bright idea, "Well, let's just, you know, throw a concert in the middle of Covid in our..." We- at that time we were rebranding, so instead of on billboards and doing it the same old way, "Let's throw a concert." And then every year, it just kinda actually grew from there, because you also had the relationships in Nashville that these artists that you, you hear names, and you see big numbers, but you don't realize what's all taken out of what gets paid to them. Nancy Ozawa (13:41): Yeah. Justin Armstrong (13:41): And so with our relationships, we're able to negotiate really good deals, and a- that was good for them, uh, because we didn't go through all the booking agents 'cause of our relationships. (13:50): Well then at the same time, you know, very much so the community we have is, you know, we're about two and a half, three hours north of Houston, about, let's call it three hours east of, of Dallas, and you don't get a lot of acts, big acts out there. And so, well, "What if we brought really big acts to town? Let's keep the tickets affordable. Let's have our relationships from our corporate standpoint, as well as our local companies, and, and supporters, and customers, and friends." And so all of a sudden, you look up and... You know, I think last year, you know, we're honored to have PCBB sponsor and support us and, and come, but it was Dylan Scott and The Oak Ridge Boys. And, you know, funny things is, is one of the last concerts that Oak Ridge Boys really ever had was, you know, that, due to some health complications. (14:32): And so, you know, you kinda look back and it's, it's fun, and it's a great ex- event. But you look around and, and... And honestly, Mike, I don't know if you really stood back and looked, but normally I think, I, I think our tickets was $15 at the door, and a Dylan Scott ticket's gonna be 100 plus to come in, much less The Oak Ridge Boys, the whole city came out to support it, because they don't get that all the time. And so for us, we're in a position to give back. So it's, one, the relationships is great, you have relationships with these artists when they come into town, typically they come in early, and get to spend a little time with them, either at the woods or, you know, in town- Nancy Ozawa (15:01): Yeah. Justin Armstrong (15:01): ... or whatever. And you, you end up having a personal relationship with 'em, so- Nancy Ozawa (15:04): And it wasn't just- Justin Armstrong (15:05): ... your Rolodex grows. Michael Foreman (15:06): Yeah. Justin Armstrong (15:06): I mean, it's that simple. Michael Foreman (15:07): You just talk to people. (laughs) Nancy Ozawa (15:09): And just to be clear, this wasn't just giving back to your artists, you were actually donating this to the food bank. Justin Armstrong (15:13): Yeah. Nancy Ozawa (15:13): So there was another non-profit that was also benefiting from this concert. Justin Armstrong (15:17): Yeah. That's 100% correct. So, one, giving back to your community. It was, it's really kind of a win-win-win- Nancy Ozawa (15:20): Exactly. Justin Armstrong (15:21): ... because, because the artists get to play, you're going through Covid, you know, that kinda fun stuff, but ch- the community comes in and gets to experience that. But also too, last year we donated over $60,000 to the East Texas Food Bank, um, which, you know, they're, they're a great partner, they serve a lot of people. It's interesting, the statistics, and you don't realize who really is affected by starvation. But, and then at the same time, you end up having a really fun group of people that come in. And, and honestly, la- last year, we had 17 states represented that flew in the day before and really came into support. But either they're, you know, shareholders or vested customers. You end up having an event with, again, Hall of Fame people walking around, and they're there because, you know, (laughs) honestly, they, they trust us, we're honest with 'em. I've told some of those guys, um, no more than I've told them yes, but they also th- know the why behind the no- Nancy Ozawa (16:11): Yeah. Justin Armstrong (16:12): ... to educate them a little bit. I mean, we have a board member that's on a Hall of Fame now that is not from Texas, but he come in and, and he wanted to learn about financial literacy and how a bank worked. And so that was, like, our first connection, the first breakfast Shana (laughs) I had with him was, it wasn't at all about the bank, it was like, "How can we help other people with financial literacy?" Bankers, in a lot of cases, they never tell the full story in some cases. And this is, sounds really weird, but I always feel like, why do we always have to be, like, hide the magic tricks behind the show? (laughs) Nancy Ozawa (16:43): Right. Justin Armstrong (16:44): What if we just showed how it all worked? What if, for instance, we put everybody in this room and- Nancy Ozawa (16:48): Mm-hmm. Justin Armstrong (16:48): ... open up the door to truly help them grow? Nancy Ozawa (16:51): Right. Justin Armstrong (16:51): As opposed to saying, "Here's the box you fit in, and this is the deal you can do." And so all of a sudden, you start seeing pure honesty from some of these people that are coming in. And, like, your, all of a sudden your insurance guy is, you know, knows of a big acquisition and he can structure that better. But because you're putting a couple of people in a room, now it's kinda fun to see what's happening, and they've created a relationship. So- Nancy Ozawa (17:11): Exactly. Justin Armstrong (17:12): And UBank gets the benefit of that, surprisingly. So it's a- it acts like we know everybody, we really don't. We just know the right ones, and we're honestly just transparent with them, and say, "Hey, this might be a good fit for you. Do- have you thought of this?" Or in a lotta cases, borrowers, or lenders, or customers walk in and say, "Hey, I need this." Well, if you listen to 'em, and ask 'em questions, and understand how to ask them questions- Nancy Ozawa (17:32): Right. Justin Armstrong (17:33): ... there's four different options. And, and you can't tell 'em which way or what to do, but if you give 'em the options, not all banks are doing that, so you look like a superstar by doing what you shoulda been doing in the first place. Nancy Ozawa (17:43): Exactly. Justin Armstrong (17:44): (laughs) So- Nancy Ozawa (17:44): You gotta get to the ultimate- Justin Armstrong (17:45): Exactly. Nancy Ozawa (17:45): ... challenge or issue that they're trying to- Justin Armstrong (17:47): Exactly. Nancy Ozawa (17:47): ... address. Justin Armstrong (17:48): That's right. Nancy Ozawa (17:48): They've tried to figure it out all buy themselves. Justin Armstrong (17:51): We know what policies are, and we know what policies and regulatory guidelines are. And, you know, in some cases, it's kinda funny, you know, they wanna buy this property, and they wanna put down, you know, 25, or 30% of whatever that is, but you might wanna leverage against this to put that down to retain your ca... I mean, there's, there's ways to structure that, and if our- Nancy Ozawa (18:10): Yeah. Justin Armstrong (18:10): ... lenders don't know that, we dang sure try to help them facilitate and figure that out. I'll tell you that we found that it's important to have our lenders and our market presidents... We, we don't tell them can't do, uh, investments and stuff. Uh, obviously you gotta a disclose on all the regulatory compliance- Nancy Ozawa (18:26): Right. Justin Armstrong (18:26): ... but we found that if they actually invest in the rental property, they understand that business getter than what they would if they woulda read our policy and know how to structure it. Nancy Ozawa (18:34): Yeah. Justin Armstrong (18:34): So it's a little bit of putting your money where your mouth is, and we found that it really does help them understand the business a whole lot more. Nancy Ozawa (18:40): That great. That's great. And I think there's something else that you personally do, I'm sure other employees do. You don't sit there and wait for them to walk in to your office, you're out on the road meeting them. I, I think I've heard the edict from Mike is, "If we're gonna talk, we're gonna talk in person." Justin Armstrong (18:54): (laughs) Yeah. Nancy Ozawa (18:55): And I think that probably goes a long way to showing that you're into the relationship and doing things differently. Justin Armstrong (18:59): Yeah. I mean, it's, it's finny, we, you gotta remember, Nancy, we started really hitting the road pretty hard at the beginning of Covid. And so it was really great back in the day when you're the only person on the plane, uh- Nancy Ozawa (19:10): (laughs) Justin Armstrong (19:10): ... (laughs) but I, I will tell you that it's important for us to know our people. I know we have Zooms, and we have all that after we know you and get to meet you in person. You know, I think, Mike, when we first met, it was like, "Listen, I'd love to talk to you, but come to our boardroom, see where we are, and like, let- y- let's, like, get to know each other." And, you know, from there, like, "Okay, Mike's our guy." And, you know, and, and it's, it's really, that has worked with us, not just from customers. Um, because I, I, I did reference earlier that we had business in 49 states, and it's not that we go and travel to 49 states, but a lot of those relationships start in a couple of states, and they kinda s- feed into others, and referrals, and you meet 'em when they come in, and concerts, and all this kinda fun stuff. But it, it's also, uh, it's also very important to talk about knowing, knowing those people that you're doing business with- Nancy Ozawa (19:55): Mm-hmm. Justin Armstrong (19:56): ... is not just the business side, but also from a shareholder perspective, you know? We're, we're fortunate we have a very supportive, uh, shareholder group. Um, but, you know the funny thing is, Nancy, we've done a couple of course raisers, and we've turned away probably more money than we've taken. Nancy Ozawa (20:09): Wow. Justin Armstrong (20:09): Because honestly, we want the right partners to be a part of this. We're... Again, I referenced earlier diversified source of revenue. It's not just the loans and deposits, it's, you know, for us it's, um, embedded finance, it's some white glove, and you kinda look at those three pillars that kinda make up what, what UBank is, really. Nancy Ozawa (20:25): Yeah. Justin Armstrong (20:25): Now, embedded finance kinda goes into multiple different directions, but, you know, we've announced a couple of partnerships that I think are expanding what community banks traditionally used to do. We feel like we need to do it the right way, and sometimes that costs more money on the frontend, to build it. But at the same time, we talked about, "People bank with people and not a bank," it's also common sense, consistency, and efficiency, are our three pillars. Because we, when we did those meetings when a one-on-one, I repeat myself all the time, the bank was important but so are those three pillars. So for us, if we're gonna get into embedded finance, if there's a way to do it, pair that up where you have a little bit of revenue as you're building that- Nancy Ozawa (21:00): Mm-hmm. Justin Armstrong (21:00): ... with the right partner- Nancy Ozawa (21:01): Right. Justin Armstrong (21:02): ... 'cause you went out and saw 'em in person, and you worked with 'em. Nancy Ozawa (21:04): Yeah. Justin Armstrong (21:04): Well, in a lotta cases, what happens is banks go in and they wanna go and invest, you know, throw out a number, $5 million, and you have no corresponding revenue, the regulator's gonna say, "Okay, you've got the capital, but you're gonna be bleeding for how long? You don't have the staff to do that." Well, if you do it little by little- Nancy Ozawa (21:20): Mm. Justin Armstrong (21:20): ... just basically pair that up, that's, that's basically what we've done. (21:23): And so you start looking at, you know, our employees went from... You know, six years ago, we were a third the size we are, and we have 98 employees versus 128, and our efficiency was 91. We're down to 56%, um, and at the same time really focused on the non-interest revenue, uh, side of things. That's not just loan fees and treasury management fees, that's some payment stuff as well that community banks aren't doing. (21:46): And another thing in a lot of cases, community banks trying to compete with the, the big boys of the world, it's really hard for community banks to do that, especially in some of the markets that are not growing. And so for us, Shana and I really wanted to focus on, how can we help other community banks? It's not just financial literacy to the employees or, and our customers, but how can we help other community banks? Because, you know, you put us all together, we're one of the big ones, right? And so we ended up, have really wanted to focus on trying to facilitate a lotta deals. So we ended up really kinda creating a little consortium of banks that might not, might've wanted loans growth, but didn't have some of the demand. You know, you can look at UBPRs and find out, or the concentration reports of these banks, but all of a sudden you're, you're talking to that, that board or that CEO, and they have a relationship with you and vice-versa. Nancy Ozawa (22:34): Right. Justin Armstrong (22:34): You can say, "Okay, hey, listen, if you need a $10 million deal," it creates non-interest income for us, because we keep a piece of that, right? It's gotta be good for that bank, and at the same time we get to keep the deposit. So it's kind of a win-win. You're facilitating growth in another community bank and strengthen the relationship with not just a competitor but our partner. Nancy Ozawa (22:50): That's fabulous. That's fabulous. So if I'm listening, and I think I do relationship banking, but I'm listening to you and realizing you're at a whole 'nother level- Justin Armstrong (22:58): (laughs) [inaudible 00:22:59] Nancy Ozawa (22:59): ... of where, then where I'm at, what are, like, three tips or three pieces of advice for me to get started? What should I be doing at this stage to up my game to getting close to that level of relationship that you're talking about? Justin Armstrong (23:12): Yeah, that's a, it's a, it's a loaded question and a great question, Nancy. Nancy Ozawa (23:15): (laughs) Justin Armstrong (23:15): So, um, I, I, I'll start by the most simplistic one- Nancy Ozawa (23:20): Sure. Justin Armstrong (23:20): ... um, that my, my son, Zane he- (laughs) him and my wife hears all the time. You need to question and you need to be proactive. So, there's a lotta times that we, you know, visit with employees and they, if they don't ask questions, that bothers us. We, we might not know the answer. Michael Foreman (23:34): (laughs) Justin Armstrong (23:34): Full disclosure, you know, believe it or not, CEOs do not know everything about a bank, right? So, (laughs) so it's okay to say that you don't know, but ask the question and figure out the why behind what you're doing. (23:44): And at the same time, again, proactive and anticipate. So for instance, I'd like to think we're doing even a better job here lately on educating on products. You know, we, we've got a, a great product with Merchant, for instance, and the people that referred those inside the branches, they typically don't know what Merchant is. So it's getting them to ask the questions, and what are the expectations. Nancy Ozawa (24:05): Fabulous. Justin Armstrong (24:05): So we need... It's not just what is the product, it's also, why don't you explain the economics behind it? Nancy Ozawa (24:11): Mm. Justin Armstrong (24:12): And so, so I'd say questions and proactiveness, one. Knowing the why behind what you do is obviously the theme it seems like today. And then probably the third one is focus on relationships that are just not professional only. Shana and I were talking last night, and the culture is that you need to work off balance. Nancy Ozawa (24:30): Mm. Justin Armstrong (24:30): But, you know, for us, we firmly believe in our bank and our growth, and, and quite frankly our customers and our employees. And so I wanna know Mike. And I know the man loves to do certain things that, that I do. (24:42): I had a mentor going a long time ago. My mentor said, "You know, Justin, you need to find one thing that you can connect with somebody on." And so it doesn't matter what ethnic race you are, what political affiliation you are. We're, first off, we're all... You know, you always have something in common with somebody. If it's a favorite color, if it's a, probably not a favorite Cowboy fan, but you might like hunting, or basketball, or whatever. You need to find that commonality. Nancy Ozawa (25:04): Mm-hmm. Justin Armstrong (25:04): And quite frankly, try to do what's right and honest. You can ask anyone of my lenders, there is not one day I've asked, "Where's your goal? What are you trying to produce? What are your expectations?" If I've gotta give you a number to work towards, you're probably not gonna be on the UBank team. Nancy Ozawa (25:18): Okay. Justin Armstrong (25:19): And that's how we operate. You know, I can talk about going into meetings, and you spend 40 minutes talking about your kids, and sports, and- Michael Foreman (25:25): Yeah. Justin Armstrong (25:26): ... then they gotta go. But then, you know, the next time, they open up a little more, and you start to- Michael Foreman (25:31): Yeah. Justin Armstrong (25:31): ... look into what will fit best for them. And again, a lotta, a lotta that happens because of face to face. I mean, Mike, you're, you've a fantastic job of quite frankly getting out of office and, and wanting to have that personal relationship. I mean, face to fay... To me, Zoom is a business call. (laughs) Michael Foreman (25:44): Yeah. Justin Armstrong (25:45): Uh, sitting here in a room with you talking is personal. And that, you know, that our time is so limited, I wanna deal with the people that I wanna be in my life. Michael Foreman (25:52): Yeah. Justin Armstrong (25:52): And there's not all the bankers look at that, they're just trying to meet a quota. That's the wrong way to approach it in, in my humble opinion. Michael Foreman (25:57): Yeah, and we're happy to do it. The person who brought us together, Sandie Schultz- Justin Armstrong (26:00): Yeah. Michael Foreman (26:00): ... the CFO of Ubank, was in Pennsylvania, um, and she said, "I'd like to bring you in. I'd like to start working with you as I did at my previous bank." She said, "There's one issue. Justin wants to meet you in person- Justin Armstrong (26:11): (laughs) Michael Foreman (26:12): ... in the boardroom. And that's the only way that they'll consider witching to PCBB." Justin Armstrong (26:15): (laughs) Michael Foreman (26:16): So I think a matter of a month, we were on a plane, and- Justin Armstrong (26:18): Yeah. Michael Foreman (26:19): ... and down there to, to Texas, and then became a great part of their Good For Country Concert, and- Justin Armstrong (26:23): Yeah, that's right. Start looking at the culture and wanting to build something, and I say all the time, we want the people on our team that have done all the work but never got the grace or the glory. If you've been in banking for long, you probably understand that. You know, you, you typically have people that, that point and direct. Shana and, and I, and our executive team, as well as our market presidents, they're in the trenches, not just pointing and telling people what to do. We've went around the world to get to the point where we know who we want on our team, the, the personality and expectations- Nancy Ozawa (26:50): Yeah. Justin Armstrong (26:51): ... and they're not normal. And I can't tell you why they're not normal, it's just we've found what works for us. Nancy Ozawa (26:56): You found the right skills and the right personality for what you needed. I mean, it sounds like you've- Justin Armstrong (26:59): Exactly. Nancy Ozawa (27:00): ... really kind of hand-picked people, and also educated them on what you want from them. So it sounds like they're very much integrated and motivated- Justin Armstrong (27:09): Yeah. Nancy Ozawa (27:09): ... to deliver on your vision. Justin Armstrong (27:11): So, you know, we've talked about Nashville, and rappers, and the Hall of Fame athletes, and all that stuff. But businessmen, and honestly, the employee and the worker, they're at the local grocery store, we have relationships with all those people. We also haven't talked about the relationship with the regulators, which are very unique. They've been very supportive and... I say "supportive," they understand the story and the why behind what we're doing. Everything from banks are public knowledge on the UBPR reports and so you, you start going to them and telling them the story and what you're working on and, and, "Hey, what do you see?" And they can't guide you on anything, but they can also understand a little bit more than seeing something on a piece of paper. And, and I'll tell you, Nancy, it's gone a long way from our relationship with them. Nancy Ozawa (27:50): That's fabulous, fabulous. Well this has been a great discussion, so thank you so much for sharing. Justin Armstrong (27:55): Absolutely. Nancy Ozawa (27:55): And you at UBank have got a very inspiring vision and you're doing things in radically different ways, but it sounds like it's actually working for you, which is wonderful. Justin Armstrong (28:04): It's a blessing. Yep, absolutely. Thank you. Nancy Ozawa (28:06): So thank you. Thank you for joining us. (28:09): And thank you for our listeners for tuning in for another provocative discussion today. If you haven't already, make sure to check out our other episodes, and subscribe to know when a new episode drops. (28:19): We're always looking for feedback on what you'd like us to discuss next, so if you have something in mind, or maybe you wanna be a guest, let us know by emailing us at bankingoutloud@pcbb.com. Thank you.