Street Talk | Episode 150: 12 words for community banks to live by

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Nathan Stovall

Welcome to Street Talk, S&P Global Market Intelligence podcast that offers listeners a deep dive into issues facing financial institutions and the investment community.

I'm Nathan Stovall, and in this episode, we're going to share the views of a veteran bank investor who closed our Annual Community Bankers Conference with a fireside chat that I moderated on May 7. That investor, Joe Stieven of Stieven Capital Advisors, has 40-plus years of experience in the banking space and discuss what he believes drives value in the sector, his view of margins, efficiency and credit quality, how AI could impact bank performance and how community banks will remain relevant over the next decade. Here's the conversation.

Joe is a veteran investor in the space. I think I've known him my entire career covering the bank space and have learned from him. And now I get to try to pull some of that out, some of his knowledge for all of you to hear. We're going to look to the audience. Please feel free to jump in. Joe has assured me he wants this to be interactive as well.

 

Joe Steivens

You did not give me the questions.

Nathan Stovall

No, no. No. And he told me, don't worry about it. Don't worry about it. I think you know that you can do this in your sleep. So one of the things that we've talked about in the past, and I think it's a good place to start is the idea that community banks really have 3 different stakeholders that they're serving, customers, employees and shareholders. And maybe 4, if you think about regulators. Two, how do you see the best management teams balance serving all of those stakeholders and being successful in doing so.

Joe Steivens

Okay. Well, before I answer that, I want to thank both Maureen and Nathan for asking me to come on down. There is a great group of banks here. And when I was watching the awards last night, you don't know how many of those banks we either own in our -- that we own already shares of or we have in the past. So you got a great group of banks, and so I compliment everybody here on that. And I also just thank S&P for doing this because there are no new problems in banking. They're typically small changes to delivery channels, small changes to the cycle. But you've got the best people to talk to. And for example, the people from Bridgewater Bank, okay, I met you last night. And if you've got a question about tech and First Financial out of Abilene, if they got a great tech stack, it's unbelievable how happy people are to share information when they're not competitors. So you've got the best consulting groups sitting in this group. So back to your question, there is a balance that has to happen. Your 3 legal constituents are your employees, your customers and your shareholders. Whether you're private or public, it doesn't matter because if any one of those constituents is getting too big a piece of the pie or I'm Italian, so I say too big a piece of the pizza, it's not fair. And it all has to be done under the watchful regulatory approved lens. So if you're giving too much away to your employees, it's not right. You're giving too much away to customers and you're making loans at let's say if you're making credit card loans at 10% like Liz Warren wanted to do, you're going to go bankrupt, okay? You have to balance everything. And shareholders can't take too much, but they deserve to be compensated because they're the only ones with the risk capital. The best companies that I've watched for -- this is my 44th year. My first 3 years was a bank examiner, my next 20 was at Stifel Nicholas, where I ran their entire financial institutions research group and the last 20 on my own is Stephen Capital, which is a private investment adviser specializing in banks. The best companies I find, they understand this balance. But there's a lot of other trades, but I won't get into that yet.

Nathan Stovall

While we're pursuing that I've talked about this in many people, too. I think that you should also strive to be about as profitable as you can while maintaining that balance. I don't know if you agree with that, and I've made the case many times that it gives you optionality for each one of those stakeholders that if you're more profitable, people want to work for a winner, you're more likely to attract customers because you can invest in technology and your shareholders are going to be happier. Do you agree with that?

Joe Steivens

I totally agree with that. I'll take it out of banking for a second. So I'm from St. Louis. So to use a baseball term, do you want to play for the Cardinals who've won the second most number of world championships besides the Yankees? Do you want to play for the Cardinals or do you want to play for the Cubs? It's just like, come on. Just tell the truth, you want to play for the team that wins more. Well, that's the same way with banking. You want your employees want to be with a winning team, okay? And a winning team has -- your scorecard is profitability. And there's so many different metrics to look at on profitability. But let's just say strong profitability. I don't want to try to define it too importantly. But strong profitability allows you to invest more in technology and it allows you to look at other businesses. It allows you to try to stay at least be a very fast copier of technology. I don't think you want to be on the leading edge of technology as a community or regional bank. You just want to be a very, very fast adopter.

Nathan Stovall

We saw -- speaking of profitability, we saw good results Q1 mid-market volatility. I felt like the group was just chugging along, 70% or so beat estimates, estimates are going up. And one of the drivers we saw was deposit costs continue to decline, supporting NIMs. We talked yesterday about the challenge of what how long will that NIM tailwind remain. And really over the longer term, could a lot of our spreads get competed away from nonbanks. What do you think about that? And several people made the case that community banks who make most of the money on spread, some made the case about fee income, but more and more folks came back to you need to think about net overhead. You really need to think about growing with what you have on the expense side on the headcount side. Do you agree with that? Do you think that's critical?

Joe Steivens

You put 5 questions in there. So he's got every topic under the sun covered with this. So let's just make it simple. The average community bank, about 80% of revenues is net interest income. Maybe sometimes even a little bit higher. Maybe it's 85%. But the vast majority is net interest income. So understand where your bread gets buttered. The other comment that I will make is that I'm going to weave an overhead and pricing all in one. But it's like when you go to your doctor and your doctor says, Mr. or Mrs., your weight is good. But they don't want you if you're supposed to weigh I'm going to use a make-up number, 175 pounds. If they want you to weigh 175, they don't want you going to 250, then 100 and vacillating back and forth, they want you to stay at 175. That's how you have to look at your overhead. We do not want companies who let their overhead get really fat, then they cram it down and cut and then they come back and forth. Overhead has to be a discipline you live by. And if you don't live by that, you won't earn your right, and this is I think it's a concept that we talk about. You have to earn your right to be independent, whether you're public or private. If you're private, you've got one investor still or a number of investors. They want to earn a return. And the reason you have to be efficient, and I didn't say the most efficient, but just efficient is that the money that you are lending is green and the money that the bigger banks lend is green. It's the same green. The question is, if they want to beat you on pricing, they can. So the only way you can compete is to have better service, better delivery, but you've got to keep your overhead tight. And that's the only way. So if and I say this, customers will give you local customers will give you the last bite at the apple. They'll typically love you for 25 basis points. If you're really good, they might love you for 50 basis points. But most of the time, it's down to about 25 basis points, whether it be a loan, one of the biggest banks might say, we'll lend it at 6, you might be able to get 6.25% to your customer because they love you. But you're not going to be able to get 6 in 3 quarters. You got to get your overhead down.

 

Nathan Stovall

And in that case, I mean, not only get your overhead down, but you'd rather your portfolio company walk if they lose that deal, right? I mean, don't try to meet them on price, maintain that pricing.

 

Joe Steivens

I can't give you a cart bunch answer because there are some customers you just don't want to lose period. And sometimes you have to cut certain deals. But in general, I hear bankers say this all the time, they get into a cycle, they say, well, we are not cutting our standards. And they typically mean their underwriting standards. However, if you're cutting your pricing, aren't you really cutting your risk-adjusted standards? You are cutting them. So it's a slippery slope. It's a very slippery slope.

 

Nathan Stovall

How do you balance growth? And maybe a better way to frame it, what are some of the best management teams you see out there doing when they balance growth and maintaining that overhead, keeping the idea that we see good organic growth opportunities. We see opportunities to hire lenders or whatever it is. How do you think about the best operators balancing those 2 things?

 

Joe Steivens

I'm going to throw in my own question now because if you look at the cornerstone of banking, it's not overhead. The cornerstone of banking is risk management. That is your life. And there's 2 risk inside of a bank. 90% of the risk is loan quality. and say 10% is interest rate risk. Now, unfortunately, 2022 taught us a really hard lesson on interest rate management because duration extension caused the second and third largest bank failures in history in 2023 in Silicon Valley and First Republic. But the cornerstone of any bank, your bank is risk management. Overhead is important, but those first 2 can never be sacrificed. So overhead is something you have to live, eat and breathe every day. But Risk management is the most important. And to me, the culture of an organization and the only way to learn culture is to sit out here and meet face-to-face with the CEOs, CFOs, the Chief Lending Officers, -- that's the only way to understand their culture. And when you as I said, my 44th year, maybe after the first 20, I finally figured it out, and you could figure it out pretty fast. It's no different, though. I do a lot of coaching for youth athletic teams. You could notice little kids who are 6 or 7 or 8 who just get it, who just get it faster than other people. It's just God-given. I would tell you, in culture, looking at banks, there is a very similar culture with all the top-performing banks. It's led by the CEO, they're energetic, they're disciplined. They're ethical. That's a term that, boy, your politicians don't want you to use that term. But let me tell you, remember the 4 Cs of banking, character is one of the Cs, okay? We absolutely believe in ethics and character when we're looking at banks and bank stocks don't.

 

Nathan Stovall

Ethical operators pass on bad deals, pass on bad borrowers, pass on bad customers more often, I would assume.

 

Joe Steivens

Most important word in banking has 2 letters. No. Somebody walks in and says, "Hey, I got a great hotel I want to finance. I want I just want to put down 10%. You're my buddy, Billy, Bob, whatever. And your answer is no. I could give you my thoughts how to do it, but you have to say no. And the other aspect about banking, which is so important to really good regional and community banking is that you're trying to make sure your customers never commit financial suicide. You're not being somebody's friend giving them a 90% LTV on a hotel loan. Because it's cyclical and chances are very high, it will go down. So you want to prevent that financial suicide because that's your community. Every good regional community bank, they want their communities to be healthy. And making sure loans don't go bad by making sure the equity invested is proper, the structures, the cash flows, that's what helps you prevent financial suicide for some of these customers.

 

Nathan Stovall

And we're thermometers of our economy. So if we're creating problems in our economy, it's going to come back to the roof.

 

Joe Steivens

That's the one thing people say, oh, all these nonbank lenders are going to -- this and that, they're going to -- and I go, go ask some of the commercial borrowers that have had their loans put into securitizations into CDOs and CLOs. And if they have a little nick here or there, -- as said borrower if they have any way to try to work it out. The answer is no. Once it gets put into one of these pools, it's gone.

 

Nathan Stovall

Goes a special servicer and it's blowing out...

 

Joe Steivens

That's it. That's it. And that's the value that -- that's part of the value proposition of what we call community or regional banks.

 

Nathan Stovall

One of the things you talked about, the most important word, no. I feel like something that -- one of the most important principles I've learned in this business is the best operators have money when no one else makes money, and we will have a cycle. And sort of 2-parter there. I mean, one, do you agree with that? Two, how do you feel about credit broadly and where we are in the cycle?

 

 

 

Joe Steivens

Yes. So Again, I'll answer it in a different way. There are so many metrics inside the banking industry on how do you determine long-term value. And I would say we have 12 words that we live by, which is the corner of our bible. Our banking my team calls it the banking bible according to Joe. 12 words. And when somebody comes up with an idea, you ask how does this impact our earnings and tangible book value per share. That's your question. and then shut up and make somebody take that concept and answer it in fundamental terms. Somebody says, "Hey, I think we should put Chimneys in all the fireplaces and all the executive suite. You know it's stupid. But don't say it's stupid. -- ask them the question. And that will guide the answer. So that's how we look at value. We look at people who compound tangible book value and earnings per share at the most consistent, predictable rates. They get the best multiples.

 

Nathan Stovall

5% to 7% a year. And if you do that at a decent price point, it pays off every time.

 

Joe Steivens

Actually, it's even better. So bank loans and deposits should grow at nominal GDP approximately. Money supply should grow at nominal GDP, which is core GDP plus inflation. And if you're watching your overhead, you should be growing expenses lower than you're growing your revenues. And if you have strong capital, you should probably be repurchasing 1% or 2% or 3% of your shares a year. And all of a sudden, what that math turns out is that you're probably compounding earnings per share probably somewhere between 8% to 12%, and that's quite attractive. So that's how you get there. You don't have to grow loans 12% to have earnings per share go up 12%. You might grow loans 6%, maybe 7%, something like that, 6%. You might grow overhead a little bit lower than your revenues, and you might repurchase 2% of your shares each year. And all of a sudden, you're at 10%, 11%, 12% EPS growth.

 

Nathan Stovall

On loan growth, one of the things we've heard over the last few years is it's been harder. We talked about this yesterday, more competition from nonbanks, whether spec, fintech or private credit. My flip side to that is, if true, maybe some risk has moved out of the system. Maybe some of the stricter underwriting standards post Dodd-Frank have allowed that risk to move out of the system. How do you think about that? Do you think that's the case?

 

 

 

Joe Steivens

When people complain I just so I was not a football player, but I love to use the term. It's like when a coach has to grab the kid, the kid comes off the fields like coach, it's a tough game out there. It's muddy, it's cold. They're big and Coach has to grab by the face mask, I know it's tough out there, but you got to get back out there. So I look at  it's the same thing. I watch people complain about how competitive it is. And I'm like, "Oh my God, I've heard this for 44 years. I go quit telling me how competitive it is. I go, it's nuts. So one of the when I got into the industry, 1982, one of the things that was going to go away immediately were checks. I don't know if some of you people aren't haven't been in you're not 42 years old, but I got into the business or 44 years ago. Checks were supposed to be nonexistent in like 3 years. And I was looking at a chart, did you know the volume of checks that were actually written finally peaked, I think it was last year.

Nathan Stovall

Wow.

Joe Steivens

It was we were doomed. The industry was doomed because check writing was going to stop in 1984 '05 or '06. Then we had another one. Remember in 1999, Y2K was going to kill you. You were dead. Your IT servers could not handle going from '99 to double 0. It's going to wipe you out. Bank stocks got killed. I go through all these different things. COVID hit. People said commercial real estate was going to bust every bank and it didn't happen.

 

Nathan Stovall

1,000 failures. I remember seeing that.

 

Joe Steivens

Oh my God. And...

 

Nathan Stovall

We did get one last week. I think we got 5.

 

 

 

Joe Steivens

I hear these -- the best management teams that I see, the best, they don't tell me they know where the industry is going. They tell me they listen to their customers and they make sure they get their customers what they need as fast as possible. That's what they do. And they spend money on things that they don't understand. For example, I'm 65. Do I understand the AI revolution? No. But I've got young people who are AI geeks who absolutely understand it, and I'm letting them run. And then they have to explain it to me though. I tease them. I go they take the nuclear powered vitamins and they jump in and they do all this AI stuff, I go, okay, now, get it down to Flinstone chewables and come talk to me. Explain it in terms of that. And so and I forced myself years ago to get Venmo to get Zelle and to learn these things, and it's awesome. And I'm learning more and more on AI now. And it is a phenomenal tool. So we do a lot of -- we have a lot of mergers in the banking industry, and we wrote our own merger model years ago, and we always update it. But for us to run that, it would take one of my analysts 2 hours. Now I had my AI geek, which is a compliment. But I have him, he rewrote our model, and it takes 2 minutes to run any merger now. It's awesome. So it's there are technologies, the people with gray here in this room, you've got to get these young kids and let them and learn from them, force yourself to learn from them.

 

Nathan Stovall

Different take on models, something you and I spoke about that going back to credit a bit that I thought was a really interesting point that I want this group to hear that I keep hearing, and I've said, we haven't been through a cycle since '13 or something like that. You immediately jumped on me on that and said, -- the industry has been stress tested a bunch of times since then. Please, please, please.

 

Joe Steivens

Oh my God. So I wrote about this in my letter. Since this decade began, 2020, we had COVID, okay, March. And March has just been like March Madness. We have the NCAA tournament for March Madness. No. We have the banking March Madness every March. So 2020, we had COVID. 2022 was the beginning of the Federal Reserve rate hiking cycle, along with the Russian invasion of Ukraine. And the Fed ended up raising rates 500 basis points. 2023 in March, Silicon Valley and First Republic hit the wall, okay? 2025, we have the largest announcement in history of United States tariffs ever. 2026, -- we have the joint Israeli, United States fighting war, whatever in Iran. And I I'm not trying to say you I'm not trying to be political and say what I support or don't support. I'm just saying, give me a blurring year without one of these once-in-a-lifetime events happening. And these banks are going to kill it. You guys and guys will make so much money. But the best companies I know, they don't tell me where the future is. They say, listen, we're navigating. We are navigating it. And it's so important to navigate and have a little excess capital. We are not an ROE shop. We look at EPS growth, ROE is nice, but it's just leverage. That's all it is. Any good CFO can give me any ROE he or she wants just by leveraging. EPS growth is something that is much more important to us.

 

Nathan Stovall

Equalizer.

 

Joe Steivens

We want companies to have a little excess capital because your best opportunity for growth is when your competitors are hamstrung.

 

Nathan Stovall

How do you feel about M&A? I mean that's obviously a way to grow quickly seen as a catalyst for the group. We talked some about that yesterday about pent-up demand coming through '25. Volatility in the market never really helps it. We had that begin in March. But the pipelines -- I continue to hear the pipelines are building. When you talk with teams, you talk with plenty of acquirers out there. Do you feel like they're more excited about it? -- more active? What do you think we're going to see this year and the next?

 

Joe Steivens

Okay. Well, let me say something else that's more important than M&A. The best form of growth for a bank, where is my Bridgewater lady? Yes, there she is. Okay. The best form of growth for banking is internal growth or we call shoe leather. So go look at the most successful banks, and you'll see they grow internally. Why is internal growth better than acquisitions? Because you're not giving contracts to Uncle Fred and Aunt Betty and all these other people, you're not doing this complex accounting, you're growing your business with your culture and your standards. We love internal growth for our companies, okay? So that's number one. Now can acquisitions be good? Yes. They can be good. However, the cards are stacked against you because the seller always wants more of the action. So you've got to be very disciplined in the game, okay? And I could go down the line. It's some of the acquisitions over the years have just been huge failures. Look at some of the biggest acquisitions ever and some of these companies have.

 

Nathan Stovall

BofA Countrywide, Wacova, Golden West.

 

 

Joe Steivens

Whatever. Yes. I don't there's so many to even talk about. So be very important. We look at if there is tangible book value dilution, we want to know how quickly it's going to be earned back. The other thing is everybody assumes that if a $5 billion bank buys a $2 billion bank, it's going to be $7 billion automatically. They never really talk about how much diminution there will be of that target bank. How many of their people will be targeted by competitors to take them away. And all of a sudden, it's not a $2 billion bank you bought, you bought $1.8 billion. That's 10% of assets. You've got to be honest in your estimates.

 

Nathan Stovall

Do you want to see retention packages for key lenders? Is that something we...

 

Joe Steivens

Good...

 

Nathan Stovall

If they're good...

 

Joe Steivens

You're bad fire them.

 

Nathan Stovall

So, is transparency on things like that on how they're going to execute important to you when you look at the assumptions? I mean, I know you would do your own math.

 

Joe Steivens

Absolutely. But it gets down to people you can trust or not trust. So there's a gentleman here from South State. Where is he? Is he not here? Okay. If he's not here, I'm going to be telling him. So but there are some management teams you just trust because you know -- so many CEOs I've known for 25, 30 years. And there are some management teams you can just trust. And there's other management teams. You've got to learn -- and it's funny, my son who's been with me 16 years now in my business. And my whole team most of my team has been with me 30 years. But I always say to them, I said, well, what did they tell you? And many times, they will regurgitate to me what they said. And I said, no, I don't care what they said. What did they tell you? And I go, you've got to learn to read between the lines. So I won't give names, but there is one CFO I used to have. And I'd say, "Hey, Phil, how are things going? Things are going fine. Well, if Phil said things are going fine, that really meant the quarter was crap okay? And I just watched it over 10 years. And there's other CEOs like David Kemper at Commerce Bank out of St. Louis. David is now Chairman's retired. But you asked David, David, how are you doing? Oh God, it's hard out there. And all of a sudden, he comes out with another record quarter. And so he's building up good chips and the other person is building up bad chips. And you just learn who you can trust and who you can't trust. And that affects valuation. That's why some of the best valued stocks are with management teams who don't take this as an insult, who are a little boring. I have a plaque in my office, I've had for 40 years that says boring banking is best, okay? We want remember, when you make a loan, the best you could ever do is get your interest in principal. You're not an equity investor. So what do you call a bank lender with a 990 batting average, unemployed. That's what you call it. Pardon me. Yes. It's -- you have to be -- it's a risk-taking business, you have to be great at it.

 

Nathan Stovall

FFIN.

 

Joe Steivens

FFIN. So I saw FFIN get an award. Scott Desser, I've known Scott for 20 years. He had me down to his annual meeting 2 years ago. People like that, you just they're honest, they're ethical. They're hardworking. They're in your face. They want to win they want to and their employees want to win. And it's Jerry Bock at Bridgewater. I mean just people who just I go to the people at South State, German American. It's just a bunch of the banks get the wars last night, you sit down with the top people in a sport term, these people, they just don't want to win. They want to win. They want to grind into you. They want to win big.

 

Nathan Stovall

Questions from the audience?

 

Joe Steivens

Yes.

 

John Maxfield

Hello Joe, John Maxfield here, sir. So you -- one of the advantages that you have -- so if you're a banker in this room and like one of the things you do is you come and you really try to learn from like who are the phenomenal institutions, who are the ones that I should go back and study. Like through your career, I mean, you've looked at probably thousands of banks, like what are the ones that you would point out to bankers to be like these guys were like excellent bankers in this way or that way. You know what I mean that they can go back and learn about?

 

Joe Steivens

It's hard to -- I don't want to give out too many names because it's every bank has certain things they need to do better at. In banking, it's funny, if you use the CAML rating system in banking, CAML, I tell people this all the time. As an investor in a bank, -- it's the only business I know that if you get straight Bs across the board, you can get an A at the end because the consistency gets you there, okay? So if your bank has let's say, you're running an FIS box and you're having issues with your FIS box, find a bank 2 to 3x your size who's and you could network it so fast. It's one of the things we do all the time is try to put people together in noncompetitive situations to talk about things. And tech people, especially, I've never seen more people willing to open up their black box and talk about it. They love to do it and as long as you're not competitive. So there are so many ways. If you're having ALCO problems, there's so many different people you could talk to people who do it well, people who don't do it well. And the networking process is so key here. And we try to help people do that all the time.

 

Nathan Stovall

I'm hearing management teams who don't sit still and try to learn from their peers, not their competitors. I don't know if that's a common attribute.

 

Joe Steivens

That's exactly right. And there are so many good we talked about First Financial at Abilene. I mean they've had one of the best track records in the country, period. But there's a lot of them. And you can go to every single I can point you to every single state. You go to the state of Washington, go look at Columbia  go look at HFA. I mean just go down the line. I mean there is a bank in L.A., American Business Bank. I think since their formation 20-some-odd years ago, they have never had charge-offs, cumulative charge-offs, they're a $4 billion bank. So this is not some little thing. $4 billion bank founded, I don't know, 20-some-odd years ago, they haven't had more than $1 million of cumulative charge-offs. These people are studs and you meet them and they're the most boring people, and I love them. I never want a happy loan CEO credit officer. I grouchy credit officers. There was one credit officer, we used to call them Chief Dark Cloud because there he was never happy. You won a lottery. God. I just -- I love those people. Banking is a bad news business. Make your mistakes really small. But I also will say this, AI should help you dramatically, dramatically recordkeeping, compliance, things like that, that are very difficult and time-consuming.

 

Nathan Stovall

And not necessary, but not value creating.

 

Joe Steivens

Not value creating. But it can save you a ton in expenses. Just like fraud now, fraud prevention, fraud is bigger than loan losses for most banks right now. And AI can absolutely help with fraud prevention.

 

Nathan Stovall

Got another question back here.

 

Audience Question

Back to what you were saying about M&A. I'm curious what are some traits that you think that good acquisitions share -- and also curious of your response to those who say that people worried about a bad M&A deal are not focusing on the long-term growth benefits, like 5-plus year growth benefits as opposed to the short term.

 

Joe Steivens

Okay. Let me give you a couple of examples of good M&A that I  at least from my opinion, Fifth Third bought Comerica. And they paid a price. It looks like any tangible book value dilution is going to be earned back in less than a year, and it will be nicely accretive. And I -- it looks like it's even working out better. So that is what the market would consider not only Joe Stephen, but that's what the market considers a good deal. United UMB bought Heartland Financial. And that deal is I think when it was penciled out, it was supposed to be an earn back in, I don't know, less than 2 years. I'm doing this off the top of my head. I think it's proven out that it's less than a year, and it's been wildly accretive. Those are good acquisitions. Now I'm not going to name bad acquisitions, okay? I just -- I don't want to have people shooting arrows at me when I walk out the door. But there are a lot of people overpay. I could give you a funny one. There was an acquisition about 20 years ago, a company called First Union was buying First Fidelity. And First Union was run by Ed Crutchfield, and they bought a company in New Jersey called First Fidelity. And I remember on the conference call, they were saying this expands our Eastern Seaboard presence. And what is the 12 words I told you to ask every time, how does this impact our earnings and tangible book value per share? Just ask that, okay? In this acquisition, First Union wrote off 10% of its tangible book value, 10%. And a guy that I know was an analyst at another firm, gets on the conference call. He says, Ed, congratulations. And you could hear Crutchfield go, somebody is going to ask me a nice question. And the guy says, 9 more of these, we go bankrupt.

 

Nathan Stovall

Was that before or after the money store? -- was...was a sweetheart deal too.

 

Joe Steivens

My point is -- and if you cannot underestimate the importance of the culture. It can only be one culture when it's done. And if the 2 cultures are starkly different and you think it's going to be a smooth integration, you're lying to yourself.

 

Nathan Stovall

Yes, another thing coming.

 

Joe Steivens

You're lying to yourself. But there are a lot -- there are plenty of bad acquisitions out there, too. But the good ones -- and you find that the good acquirers, they're disciplined. They're not doing one every 6 months. They're pretty boring. And boring is such a strong term in banking. And I say it's an award. It's a badge. You should -- you want people to think that you're sound. You always want to be sound. Somebody comes in with their hair on fire wanting to do something. Okay, let's settle down. Let's think about this. Let's work through this. I want to make sure you're not committing financial suicide.

 

Nathan Stovall

I always think of the term aggressively dating, selectively marrying, knowing what's out there.

 

 

Joe Steivens

I like that term. I don't know if I was ever an aggressive dater. I got turned down too much.

 

Nathan Stovall

Well, we're out of time, but one quick question in closing. It's hard to think of sort of one thing, but what do you think community banks need to do to maintain relevance over the next 5, 10 years, core principle or even 2 or 3?

 

Joe Steivens

Number one, you still got to understand what the cornerstone of your bank is, controlling risk, which is asset quality, interest rate management. But the delivery channel for your products and services has to change and evolve with your competition. And if your competition wants mobile banking, you better find great mobile banking apps. If your competition, excuse me, not your competition, your customers, if your customers want it. And you could also see what the better companies are doing. And I'm not talking about Chase. I'm talking about people that are 2 or 3 or 4x your size that you aspire to be like. You can watch them, talk to them. And it's amazing these companies will talk to you back and forth. And as I said, it's a navigation process, but you always want to do it from a position of strong capital, always. You can never sacrifice your asset quality. You can never sacrifice your interest rate risk. You can never sacrifice capital too much. I just can't do it.

 

Nathan Stovall

Well, terrific. I think it's a great place to leave it. Join me in thanking Joe. Really appreciate you joining us.

 

Joe Steivens

Yes. Thank you.