S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Hello, and welcome to today's webinar highlighting our rankings of the top banks and credit unions. I'm Nathan Stovall, principal analyst at S&P Global Market Intelligence, and I'm delighted to moderate the session. Before we get started, I want to cover a few housekeeping items. [Operator Instructions] Also I want to point out the related content widget, where you'll find more information on this year's rankings. We also have a survey widget, and we certainly value your feedback and would appreciate completing a short evaluation at the end of the webinar. Lastly, we'll have a recorded version of the webcast available shortly after we end and would encourage you to share it with your colleagues. I also wanted to remind you of our upcoming Community Bankers Conference from May 16 to 18 at the Four Seasons Dallas, Las Colinas. Community Bankers Conference is our flagship banking event that we hosted for 10 years. At the event, we'll discuss the most pressing strategic issues facing Community banks and recognize the institutions that made our annual rankings. It is a great one and offers a great opportunity to interact top-performing banks around the country, and we hope to see many of you there. Lastly, before I begin, please note that the activities of S&P Global Market Intelligence are independent and separate from S&P Global Ratings. S&P Global Ratings maintains a separation of analytical and commercial activities. Now on to the rankings. We'll begin hearing from my colleague, Zain Tariq, Manager of our FIG Data Journalism team, who will walk us through the results and the methodology used to rank the banks and credit unions in each of their categories. Then we're going to talk with 4 executives whose institutions made the rankings and discuss what drove their outperformance. Now I'm going to hand over to Zain. Take it away.

Thanks, Nathan, and hi, everyone. Like Nathan said my name is Zain Tariq, and I lead the U.S. Financial Institutions Group and Real Estate Data Journalism teams at S&P. And today, I'll be going over our 2021 ranking methodology and the winners of this year's rankings. So last couple of years have been very eventful with big impacts on the banking industry. At the end of 2020, we've analyzed financial trends in the banking industry and saw the need to tweak our methodology and the ranking metrics we use for our rankings. And we did the same for 2021, although this year, it's not as different compared to 2020. So starting with the Community Bank rankings. As you can see, we have largely kept -- just hold on a second -- we largely kept the same metrics used for the ranking except for the replacement of net interest margin by net charge-offs to average loans. We removed net charge-offs to average loans in 2020 rankings because the stimulus relief and deferrals received in conjunction with the pandemic had little to no impact on charge-offs or asset quality as a whole. This year, asset quality is still not that big of an issue at this point. However, we wanted to put some more weight on it as some of the relief provided started to wipe out, margins have been very thin for a while, and a lot of impacts of net interest margin are already covered or accounted for another profitability metric. Removal of NIM allowed us to put some additional waiting on asset quality. And we also took 5% weighting from operating revenue growth and applied it to safety and soundness in the form of leverage ratio at 20%, which stood at 15% in 2020. A lot of other underlying criteria remain pretty much the same, some of which includes gross loans to assets ratio of greater than 25%. credit card portfolio and revenue from nonbanking activities must not be greater than 50% and the removal of industrial banks and banks with yield on loans and leases exceeding 3x of the industrial median during 2021, which stood at 5.05%, and this was done for a more apples-to-apples comparison of the business models. We continue to adjust for PPP loans in some of the criteria and metrics used in the analysis. Moving on to the slides. There has been some confusion here. All right. With that, I'll move on to announcing the winners in our first category of community banks with total assets between $3 billion and $10 billion. With the above criteria applied, 191 banks were eligible for the ranking and 188-year old Missouri-based Hingham Institution for Savings topped our 50 best-performing banks in this category. The bank moved to the large community bank category during the third quarter of last year, crossing the $3 billion mark in total assets and recorded an efficiency ratio of 20.82%, which was the best among the top 50 in this bucket. At number two, we had Fargo, North Dakota-based State Bankshares, Inc. closing on the $10 billion asset mark, the bank reported an outstanding return on average tangible common equity and operating revenue growth during the year. Cross River Bank with the help of PPP loans, a very familiar name over the last couple of years, checked the #3 spot, posting an operating revenue growth of 144.6%. Next is the banks under $3 billion in total assets, 4,015 banks were eligible for the ranking and Alabama-based Samson Banking Company took the crown in this bucket. The bank recorded 87.4% growth in operating revenue and 38.5% jump in net interest income while maintaining an efficiency ratio of only 42.65% during the year. Dallas-based State Bank of Texas took the #2 spot. Almost all of its loan portfolio is tied to real estate lending. The bank recorded the second best efficiency ratio of only 22.25% among the top 100 in this bucket. And lastly, closing in on $1 billion in assets, Doraville, Georgia-based, First IC Bank ranked at #3, the bank performed better than the top 100 median and all 6 metrics analyzed. Moving on to our Credit Union rankings. We made slight changes in this ranking as well. We continue to use 5 equally weighted metrics in this ranking. The only change made this year was replacing loan balances to members ratio with a number of loans to members, as we thought that adds more value for Credit Unions. Qualifying criteria remain the same with more than $100 million in total assets and at least 7% net worth ratio. With over $7.5 billion in total assets, Philadelphia-based Police and Fire Credit Union took the crown for the second year in a row with almost 20% loan growth from the prior year and outperforming the industry median in all 5 metrics. Springfield, Missouri-based Multipli Credit Union was ranked at #2, while Dothan Alabama-based Five Star Credit Union ranked at #3. And now moving on to the new ranking we have this year, public U.S. banks trading on major exchanges over $10 billion in total assets. We've have had different versions of regional bank rankings in the past. Last year, we ranked largest 50 banks in the U.S. And this year, we expanded the universe and included the rankings here. For this ranking, we used 2 growth metrics, 2 profitability metrics and 2 metrics for safety and soundness. And you can see the different ways applied to each of these metrics on the screen. Announcing the winners, a familiar name from our Community Bank rankings from 2019 and 2020 in Indiana-based Merchants Bancorp took the #1 spot. The bank was ranked among the top 3 in each of the last 2 Community Bank rankings and crossed the $10 billion asset mark in 2021 and sits at $11.28 billion as of December 31. The banks return on average tangible common equity was nearly twice compared to the median of 101 banks eligible in this analysis and reported the lowest efficiency of 26.68% among the group, which is also pretty much the focus of the bank. Almost 60 billion Phoenix, Arizona-based Western Alliance took the second spot, followed by Pennsylvania-based 19 billion customers Bancorp, both banks reported strong growth in pre-provision EPS and outstanding written on average tangible common equity. With that, congratulations to all the winners in each of these rankings, and I will hand it over back to Nathan.

Great. Thank you, Zain. I want to follow up a little bit about some of the changes. We actually have one question come in pre submitted on that on how we have adjusted these over the years. And the question was, are we fine-tuning or are we trying to change to really sort of accommodate for what operating environment we see in a given year.

Yes, sure. That's a great question. And it's a little bit of mix of both. We obviously want to evolve our rankings. We want to make sure that we provide a more apples-to-apples comparison. So some of the changes related to those and some of the changes are because of the changing environment, like we also -- what happened in 2020. Asset quality impact was nonexistent, a lot of stimulus. So -- and I believe this is something that we are going to continue to do at least in the coming years, and I'm glad that we started making these changes because things are moving so fast and every year, different things are impacting the financial trends in the banking industry. So what we're going to do in next year, I believe a lot of factors will impact our 2022 results. We have interest rates going up this year. Let's see how many more we get this year with the inflationary pressures. PPP and other stimulus have almost completely dried out. That means banks involved or benefiting from the those programs will no longer be able to take advantage of that to boost their operating revenue growth. They'll still have other indirect benefits like the relationships they have built with their customers or the improvements that have made in the technology, but a lot of focus will have to be shifted back to traditional lending and other ways to boost your income. You can see some regulatory pressures on overdraft fees, especially for larger banks and then the additional scrutiny on large M&A. So I definitely -- I'd say, definitely a lot to counter or tackle for the banks this year and will impact our decision of next year's -- of 2022 rankings as well. And then we see delayed impacts on asset quality as we discussed earlier, the release packages over the last couple of years kind of shadowed the underlying credit quality issues. Net charge-offs were almost nonexistent. Loan growth has been good. In fact, one of our analysis showed at the end of -- during the fourth quarter, loan growth exceeded the deposit growth for the first time since the second quarter of 2019, and the demand is expected to stay strong according to the January Senior Loan Officer Opinion Survey. Although the survey does show that there is expected improvement in credit quality of commercial lending, but a significant net fraction of banks expect credit quality to deteriorate for loans to households, which includes auto loans, credit cards or mortgages. And it's not just limited to nonprime, its also for the prime borrowers. So essentially, if your portfolio is largely consumer or residential, you may face challenges in the later part of 2022 or over the next year. And then lastly, another thing to consider going forward for us would be consumers obviously have become more used to online banking and the foot traffic, although it has recovered a little better, I believe it's still low compared to pre pandemic level. So if you have made tech investments over the last couple of years, you would definitely benefit from that. So I think coming back to your original question, it's a mix of both, and we want to continue to adapt to the fast-changing environment in the banking industry. And I think that, that has really helped us really drill down and provide a more apples-to-apples comparison when we rank banks.

Sure. Makes sense. Makes sense. We'll continue to adjust. Zain, thank you for walking through all of that with us. I want to transition to some of our winners who are here with us and beginning with Dan Schrider , who's the President and CEO of Sandy Spring Bancorp, who was on our publically traded group above $10 billion. Dan, can you just start off talk a little bit about the bank, who you guys are, so the audience has a better understanding of Sandy Spring?

Sure. Thanks, Nathan, and thanks for having us on and congrats to the other folks that are joining us today who have been recognized. We are a 154-year old Community Bank that has been covering the greater Washington, D.C. market for a number of years. So we think of that as a suburban Maryland, Northern Virginia and D.C., focused on blocking and tackling of retail client relationships, small, midsized companies and then with a specialty and focus on driving wealth-related fee-based revenue. I've come from a long line of leaders here at Sandy Spring and that's really focused on our people and on the communities that we serve and through that, drive a nice financial result and return to shareholders. So that's kind of who we are, and how we're -- we are new to this group. We just crossed over $10 billion a couple of years ago with an acquisition. So certainly pleased to be recognized as a newbie.

Well, that's terrific. And I want to pull on one of the things, you said because if you look at your performance, which was quite strong, not unlike many institutions -- Sandy Spring had a little bit of margin pressure in the second half of '21, but was able to counter that with strong fee income and wealth management, particular as you alluded to. The bank has highlighted that you've got a niche focus on medical professionals in that business. What are the benefits of focusing on that nature? How do you really develop that?

Yes. So you've obviously hit on the trend in '21. And I think that was from a margin perspective, just to comment briefly. As we moved through the year, we had less and less PPP-related revenue because our forgiveness was largely behind us. So you saw that affected in the margins. The benefit of having PPP largely behind us was our folks hit the ground, heavy in the third and fourth quarter, and we saw it really outpace loan production in that time. But on the wealth side, we got into the wealth business initially through our fiduciary shop in [Indiscernible] Trust, which is a division of the company, and then augmented that with 2 acquisitions of registered investment advisory firms over the course of 2005 and again in 2020. And those are kind of the 3 legs of our well stool, now we're about $6 million, $6.1 billion in assets under management. The firm we acquired in 2005 had developed a focus on the medical professional. If you think about the DC market, heavy in terms of health care innovation and institutions related to health care. And so they had focused -- built a brand around the unique needs of the medical professional in terms of financial planning and investing and have really parlayed that into a specialty for us. And it also allows us to develop deeper banking relationships with the medical professional through our wealth business. So important niche for us, one that we've been really successful.

And I heard something in that it makes all the sense in the world. I mean it's your market, that's what you supposed to do was bank your market. So if it's outside exposure there, then it makes perfect sense for you to be there. I want to turn a little bit. One of the things that Sandy Spring has talked about that we're hearing more of in the banking world is a focus on ESG. And you highlighted fact recently expanding recruitment efforts, focused on minority recruiting to really promote greater diversity, equity inclusion. Sort of 2 part of there, how do you roll out approach like that? And what has that done -- how has it helped your recruiting efforts?

Yes. We issued our first corporate responsibility report publicly in 2021. And in fact, we are issuing our second about a week from now. And so it is a little broader than specific question you asked because it's about having a culture of strong governance and ethics and integrity while at the same time being a good corporate citizen, it relates to climate and the world we live in and also developing a more diverse workforce. And I think for us, it's kind of a natural outgrowth of the soul of the company. And that is, let's look at our marketplace and make sure that folks across the board in our company and every level of leadership or every position that we represent in the marketplace that we serve. And so that's become a really important movement for us. And so what we've identified as a desire to do more recruiting to create a more diverse workforce is less about kind of a specific initiative that has the beginning of end and more of a journey for what we want the company to continue to be and become better at, quite frankly. And we have a very diverse workforce, but we want to become more diverse as we look through the different layers of management. So what does that include? it includes recruiting that you mentioned, but also includes significant emphasis on development, being very intentional about identifying folks that we want to invest in, whether that's through mentoring through access we will see at the table on a project or an initiative. And so it's a combination of different facets of that movement and recruiting is one of them. So to answer your question, we've things like this recognition and being considered a top workplace by local publications here in the market, those all help in attracting quality candidates with diverse backgrounds and experiences to Sandy Spring. So we're starting to see the benefit of that. We want to continue to get better and better at.

And lastly, one of the other things you mentioned coming out of last quarter was talking about continued investing in tech and digital and a couple of different legs that you guys have really pointed to. We spent a ton of time during the pandemic talking about everybody's effort to modernize. How do you do that? And really sort of maintain your current earnings trajectory?

Yes. Great question and not really an easy task. If there's one thing I need to get out here because my comment is going to be about technology. Our success is rooted in our people, always has and always will be. But it doesn't mean that our clients desire a person-to-person contact all the time. Zain referenced it in his comments. And so our goal from a technology investment is to build a foundation that allows us to remain agile and nimble and continue to evolve our products and services in the channels in a way that meets the client where they want bank, when they want a bank and how they want to bank. And so that's an evolution that we're going to invest a lot here in the next 2, 3 years, but it's probably never going to end. And the pandemic only accelerated that in terms of how folks want to do business. And we believe that the same way that we create an emotional connection with clients member within face-to-face then we can build technology tools that allow us to build and maintain that emotional connection if they choose to use a digital tool for instance, to augment their face-to-face relationship. So how do we do it and maintain financial performance? Continuing to grow and build scale. We did an acquisition in 2018, another in 2020 with an eye not towards just getting bigger, but being able to invest in the future, while at the same time providing a return for our shareholders that we keep them satisfied and keep us being Sandy Spring. So it's a combination. But there are probably many companies that are struggling with coming up with the resources to do it. But we feel like if we don't, then we become irrelevant over time. And so those are key decisions and choices for us to invest. So.

Sure. Sure. Well, great, great insight, Dan. Thank you, thank you for joining us. I want to shift to Bridge Water Bancshares. And with us today is the COO, Mary Jayne Crocker. Mary Jayne, if you could start off talking a little bit about who Bridgewater is, that would be great.

Well, thank you, Nathan, and honored to be here and part of this list once again. Bridgewater Bank is located in St Louis Park in Minnesota, so we do serve the broader twin cities area. We're $3.5 billion publicly traded bank, and we find ourselves on being entrepreneurial bank, but we have a more commercial focus, primarily real estate and small businesses that we focus on. We were founded in 2005, so we're about 17 years old now. We have 7 branches and about 250 employees.

Great, great. One of the things that I've noticed at Bridgewater counts quite a bit is its culture. And I asked Dan a little bit about ESG and Bridge Water definitely talk about its commitment with ESG too. But one of the things that really rang true with me when looking through everything I find on you was the entrepreneurial spirit that you guys try to create that you say it's key to your performance. How do you do that? And what results do you think come from creating a entrepreneurial spirits?

Great question. Well, culture was defined the day we opened the bank back in 2005. And having an entrepreneurial spirit is really driven by the founders of the bank, Jerry Baack. It's really an attitude, our leaders walked the walk, they talked the talk, and they really do set the tone for the entire organization. We discourage any kind of politics or bureaucracy . And as soon as we see any of that kind of creeping in, especially as we got a little larger, we put an end to that. We have a really positive and optimistic culture. People don't see obstacles instead they're very future oriented and see opportunities. And that all goes back to how Jerry has kind of set the tone at the bank. We maintain a really flat organization to start. We don't have a lot of hierarchy. We do really value and invite people to be contributors. People are all encouraged to innovate. Every 3 months, they're asked to bring forward new ideas. And they all have a voice, everybody independent of where you participate in the bank. Everyone does own a true piece of the growth of the bank and we continuously reward that kind of activity. We do have 5 core values, and we definitely take them to heart. We hire, fire, reward and recognize based on those values. And we understand not everyone is going to be fit. So people who really get it, they want to be here. And if they don't get it, that's okay, too, then we're fine with that. We do have a core value that's responsive and that again permeates with the whole organization, and that was really important, especially during the last couple of years when responsiveness was really, really important through the PPP process and as people were struggling with different things on the pandemic. And then we do have above market salaries, we pay really significant bonuses and we do the profiting plans. So all those things, as people feel part of the organization, they feel part of the growth, and there's a lack of hierarchy, I think all of those things kind of play together to allow people to go really truly a part of the team. So I think that's a lot about what our entrepreneurial spirit is about. Because we have entrepreneurial founders, we started the bank, we are entrepreneurs ourselves, and so we kind of get that. And I think everyone has a little piece of feeling like they're part of the entrepreneurial attitude as well.

Sure. Sure. Well, it's work -- you're right #5 on our list. I should have mentioned earlier Sandy Spring is also 5 in the group, so strong results there. What are some of the initiatives? You talked a lot about how you started off with that culture, which makes a lot of sense, creating that from the dead set beginning. But what are some of the this initiatives that the bank has rolled out the last few years that you think have been really key to maintaining that culture of driving performance.

Well, I think we focused -- I mean, we've always focused on the employee and that was never more key than it has been over the last couple of years. We focused on team health, which was a big initiative throughout the course of the last couple of years. We do health and wellness community, so it has always been part of what we talked about here, but we certainly ramped that up during the last couple years as well. And our organizational alignment, ensuring that people were align on what the organization was trying to do, was really also really important to know the last couple of years. We kind of had a head start on that because we use the entrepreneurial operating system to drive, as our operating system and how we run the bank. We started that in 2010, and that really is a program that creates a lot of clarity on who we are, where we're going and how we operate. It's a model that promotes a lot of transparency, a lot of internal communications and also everybody has a scorecard so there's true accountability. So as managers were struggling to try to figure out how to manage remote employees all of a sudden, we already have those 3 kind of pillars in place. They were really, really helpful as they transition out of the office. Along the alignment piece as well, we did we did launch an employee Internet just prior to the pandemic. So that was really helpful in reinforcing our internal communications and also creating an opportunity for people to collaborate across departments with things like planner and all the different tools that are on the share point site. So that was really, really helpful and certainly accelerated technology like Dan spoke as well. And then we also ensured -- we also made sure everybody independent of what meeting they were attending, they're always on camera. So we never had anyone off camera. Everyone had to show up with their face on the camera, so that they felt connected. So with regards to the team health weeks, we kept all of our quarterly ALT meetings focused on schedule, the way that we've always done them. We made sure that we were really, really transparent in what we were doing. And we also tried to add an element of employing engagement and fun, even though we were working remotely, we tried to have some things that added a little bit of fun to the all team meetings so that people were a little bit more engaged. And people put on some skits and some kind of silly things to make people now that work is still fun, even though you're sitting in your bedroom, your office at home, that you can still have fun. We did host over 12 annual play events throughout the pandemic. We have our third Thursday happy hours, which we set up on our deck here at our new corporate office and invited people to come, if they were comfortable to come in and make some mingle with a social distancing, but we still brought people together. And then we did have enhanced focus on diversity, equity and inclusion program with a lot of training, a lot of communication and a lot of development on that front as well, just to give people the opportunity to think outside of the work environment about how they can make a difference in the community as well. As far as our focus on the employees, we did a couple of things. We did introduce a hybrid work model in the last couple of years, we did not have any remote workers prior to that. Now we do. So now we have people working in the office 3 days a week and out of the office 2 days a week. We increased our minimum wage to $20. We are the first bank in Minnesota to do that. So everyone makes at least $20 an hour now, changed our entire policy. So we don't have suits an jackets anymore. People are free to come and they were when they were at home. I've seen too many jogging pants, but I'm sure those are coming, increase our leadership development program, so we didn't want to lose the sight of the fact that people still want to learn even when you're remote so put an enhanced effort on our development programs and training. We changed our [Indiscernible] during that time. And then as I talked to , we do have health and wellness committee, and we have an mentorship program. So we made sure those stayed intact, even people were working remote. And when people did come to the office, we do have healthy snacks next to our beer taps at the bank as well.

So just a few things there. But really, the main takeaway I heard is just adjust, adjust, adjust, move with the market, which is great, great stuff. I want to transition to Steve Miller of Communities First. Thank you so much, Mary Jayne. Steve is President and CEO there and the bank Fresno First, #10 on our list in their category . Steve can you give us sort of a quick overview of who you guys are.

Yes. Thank you for having me today. So Fresno First is a single branch located middle of California. Fresno is the bread basket of the U.S., we grow over 200 different crops here. But I explained the bank in 3 ways. One, we're a TrueBlue community bank that focuses on the central valley and customers -- business customers up and down the state. The second thing we are is a regional and soon to be nationwide lender. We have 2 LPOs in L.A. and San Diego that focus on multifamily lending on our SBA business and we started to do business out of state over the last couple of years. And then the third thing that makes us unique is that we are an acquiring bank, there's only about 60 acquiring banks in the country out of 5,000 banks, and we're one of them. Most of them are big OCC banks. And we have a nationwide payments business that either we're going directly to our merchants here in our market across the country or we're supporting our ISO partners or processors to do the same.

So not your normal bank of that size, I would say, though, as you talked about, you've got some of those levers in there. I want to build on one of the first things you said, first on first is one of the lowest efficiency ratios that you would see anybody pure-size bank, but your -- as you said, your one-branch shop with 2 LPOs. Is that a huge -- is that a big driver of the efficiency ratio being where it is? Sort of part 1. Part 2, that question is how do you get comfort with having one branch where you are and then 2 LPOs in very different parts of the state?

Yes. It was joke -- I've been with the bank about 6.5 years. But when they founded the bank, the regional Chairman, whether it was dumb luck or great strategy, they knew that being a business-focused bank in branches on every corner, and back then, that technology was the remote posit capture machine was getting popular in mid-early 2000s. That machine still is workhorse of banking. There's more checks written today than it was 20 years ago. So that machine is technically the best part of fintech for a bank and honestly you've outsourced a very cumbersome process to your customers. So we did a pretty good job with that. I think with efficiency, we have almost a paranoia about what it's going to take to survive going forward. And I think that any small bank, meaning on your less $3 billion or less that's not in the low 40s for efficiency, I think it's going to be in trouble. We think we need to be a 40 or less just to be effective to give a good return to our shareholders. So that's just kind of a mantra for us. Obviously, having one branch helps, every new customer that we push into this one branch really drives down our unit cost and really changes the dynamic of how we see as a customer who's profitable. 5 years ago, maybe a small business with $10,000 in balances, a good work or a whole prop didn't seem that profitable, but if you can put them in the right channel and service them in the right way, now that customer is actually quite profitable for us because unless they live 5 minutes away, they're never going to come to our branch. I mean they can still get that high top service, we can still talk to them, engage them in the way they want to engaged, but I think the bigger thing that really got us comfortable, they are similar to I think the previous presentation about, we were not a big remote bank before this, the old adage of, hey, you have to be there for our customers and be close. And I still think it's the same as just slightly different. So COVID did really help to confirm a few things for us. One-- it's not like that we don't like branches. I just don't think I need another one in Presto. Maybe if I have a big presence down south and [Indiscernible] branch, but technology allows you to go into new markets and test that market out. And then instead of build it and they will come, you go get the business and then maybe you can put a franchise in there later. So we have customers in 30 different states right now because of our payment franchise. And so COVID helped us get really comfortable with remote work. It helped us get really comfortable with remote hiring. The talent pool in Fresno for certain parts of our business is not that deep. But now my talent pools is United States of America for a small bank, that's a nice talent pool. And we just hired our sixth person in Texas, for instance, I've people in Atlanta, I've people in Minnesota that do different parts of our business for us. And I love California, I'm a California kid, but it's a horrible place to run a business in terms of cost. So if you can move people around and have different positions in the right place, there's a cost savings element as well for the bank. And I think the last thing that COVID helped us prove was that you can get what customers are also everywhere and then as a payments play everyone had to go online. If you were not comfortable making purchases online or using a contactless method and those things, you got real comfortable real quick, and that's been a big benefit to growing payment franchise.

Sure. Sure. [Indiscernible] get met nimble. I want to touch on one of the couple of new initiatives that Bank mentioned and recently coming out of earnings. And that was rolling out an API bridge and launching a new origination system. Can you talk a little bit about those initiatives? I mean, it sound like it's sort of along the same lines of allowing you to grow without necessarily putting a lot of extra fixed costs on top of it.

Yes. No, no, no, you're right. I think it was mentioned earlier, fintech has turned in like this nasty 4-letter word, and I think it gets I think you overlook a couple of really important things. I mean, most banks do 2 things a lot, which is open up new accounts and do loans. For us, the third thing we do is payments. So if we can look at technology that helps make those 3 processes really smooth for 2 customers, the external customer and then the internal customer, I think that's what we are focusing on using technology for. I love Banking as a Service. I love all that actually talk about crypto and that's coming, but we have 2 or 3 main priorities here to fix that experience for account openingloans. So on a loan origination system, very few banks even large banks have a straight-through process where the customer can start online, finish online and it stays online once it gets into the bank. So on our new system, you can apply online, upload all your documents, it goes for a workflow. That data gets pushed into the loan document system, which connects with the API to the core. So the documents get boarded automatically when someone hits approved, and no one has to touch anything. There is no scanning of files, there's no paper. And that allows you to scale. And hopefully, for us, that means to do loan internationally with different product types. But you can't scale like that unless you have bigger system. And you can fly this same concept to the payments or account opening. It's not that complicated. I mean I always joke that I think all cores are equally useless, but you still need to maximize the core that you have. And then I think the stuff that a lot of folks are going on, new to this. But when it comes to API, a lot of times, you can sign up with a best-in-class third party and they take their API hooks and connect it to your core API. Well, that's a single project that both of those guys are going to charge you a lot of money for. And then if you want to bring in another partner, you've got to start up another ticket with your core. So what we're doing is we're creating our own bridge that we own. And think of it as a search protector. So you plug into the wall, that's the connection to the core. You asked your core one time for all the data that you want. And then the surge protector where there's 6 different ports on it, that's the bridge that we now want to own, and then we can go talk to different partners to plug in there. So if my core starts acting up, I can take a bridge and go somewhere else, and I don't mess all the third parties on the other side. So that can get very complicated. There's a lot of people smarter than me that understand the details of it, but those are the types of things that we're trying to do. And that's going to help us, be able to scale and maintain that efficiency ratio. So -- but similar to everyone else, the biggest thing that's going on right now in the market is it's still a war for talent. If you want to go to technology and then you're competing against some pretty fierce competitors outside of banking to get that technology experience, but we like our chances. We are set up as an ESOP, our culture is very unique. Everyone from the teller to me is a shareholder in this company. So whenever we're doing anything, whether it's the high touch of a relationship to the high-tech side of things that say, what would you do, this is your money. And it is their money, they're shareholders. So it helps frame everyone's decision-making to focus on the customers.

Great. Great. Well, thank you, Steve. And I want to transition to our last panelist. Todd here, CEO of Technology Credit Union, not to too far away from you. We've got folks from all over the country here. But talking tell us a little bit about TXU before we ask you follow-up questions.

Yes, sure. Thank you, Nathan. We are a $4 billion Credit Union, headquartered in mostly primarily operating in the heart of Silicon Valley. We have 2 branches, 155,000 members, have been in business for over 60 years. And I think a fun fact about us that people always get interested in is our founding say or our founding company, was actually Fairchild Semiconductor. And anybody who works or lives in Silicon Valley kind of knows the [Indiscernible] Fairchild, as they were the company that created the first viable computer chip and kind of gave rise to what we now call Silicon Valley and all the other technology hubs around the country.

Nice. I like that back story for sure. TXU generated really strong loan growth. I think that's one of the reasons why you guys showed up on the left, not #26 the group. What really drove loan growth for you last year -- almost every institution I talked to would like to have the loan growth you guys had, I believe 20-plus percent.

Well, surprisingly, the loan growth was fairly broad-based for us in terms of our commercial business. If you net out PPP, we had great growth there, particularly in our asset-based lending product. If you look at the second half of the year, we had quite a surge in mortgage growth. And of course, we had consistently strong growth as we have the last couple of years in our solar lending portfolio. So those 3 were kind of the primary drivers of our growth. And we did struggle a bit in auto. We had to work really hard just to maintain those balances and pretty much the same story in HELOC, just kind of maintaining it. So we have the growth really in commercial mortgage and solar, and then we kind of held the line, so to speak, in HELOC as well as auto.

I want to pull on that solar because I think that's definitely a differentiator. I don't see that in tons of banks portfolios or [Indiscernible] portfolio for that matter. How do you launch that business? And how do you get comfortable with entering that kind of product line?

Well, part of our culture is experimenting, trying new things. We've had a number of experiments that we've done in terms of getting into different asset classes that didn't turn out too well. Solar, unfortunately, was one of those ones that didn't turn out well. We got into that about 6 years ago. We partnered with a third-party finance solution provider to the solar industry. They had a different network of installers and things like that, but they had a great technology, but they didn't have a whole lot of funds. And so we were introduced to them at one point about 6 years ago, and it really took us about 2 years to work out the kinks to come up with a credit structure that we were comfortable with and the credit structure that was appealing into the public. And so really starting about 4 years ago, the growth in that portfolio through that partnership with them and some others that we've added for the years has really taken off and growth. So when you're going to be -- I don't think -- I don't claim that we are the first to do it, but we were one of the first, it takes time to kind of work out those things and figure it out. So we invested about a good 2 years of not really getting anything out of it and in the last 4 years, we've had some pretty good growth. I will tell you that as the market advances, the solar market has matured considerably over those last 6 years even. And what we're seeing is the credit structures are getting a lot more aggressive. I still think it's a great line of business for someone to get into an experiment, but if you're going to get into it, I think you need to be very careful to make sure that you understand the credit structure and understand the credit philosophy of [Indiscernible] buying assets from.

Sure, sure. That makes sense. You mentioned [Indiscernible] through a partnership. One of the questions I want to ask you is TXU highlights a lot of different partnerships that you have with employers. How do those come about? And what role does that play in sort of driving your loan member growth?

Yes. Well, again, I mentioned that 62 years ago, our founding and only company was Fairchild semiconductor. And it turns out that a lot of those employees jumped in and went to all sorts of other technology companies as the value is growing up. So we had kind of some built-in evangelist for us as those people left and founded other companies like Intel and Apple and so to speak. We have -- those were part of our charter members or people that founded those companies. So we still focus on that. Being in Silicon Valley, it's kind of hard not to. You can't throw a stone without hitting the technology company. So we still try to do that, but what we found like a lot of Credit Unions have found is just those old traditional employer partnerships aren't as effective as they used to, primarily because with the advent of digital banking and becoming more prevalent. The employer kind of plays a lesser role in setting that up for employees. And then we have a couple of special programs that I think still work well with that. But what we've had to do is focus on other community partners like food banks, things like that support the community in general and also partnering with municipalities, especially when it comes to funding like affordable housing projects, things like that. Housing is a big deal in the whole state, and it's an even bigger deal in Silicon Valley just because of cost. So looking by partnering with those other partners and supporting the local community in general, we don't necessarily drive membership directly, per se, but we do continue to get our name out there and increase that recognition, so when people do think that they need a service, they can think of us.

Sure. It makes a lot of sense, brand awareness, helping drive some of that marketing piece. Well, we're at time, a little bit over what we're setting out a polling question right now to the audience asking, if you like to be contacted about any of S&P's products, if you like to see more information about the rankings, we'd appreciate if you participate in that, as well as the evaluation received at the end here, but I want to thank all of our analysts Dan, Mary Jayne, Steve and Todd, thank you so much and congratulations for showing up on our list, but that will conclude today's webinar. Thank you very much.