A Bank Credit Officer on Too Big to Fail, Community Banking, and How Loan Decisions Really Work

Rita Kuster [00:00:00] It was almost like too big to fail and too small to care.

Vance Crowe [00:00:05] This is the Van Scroll podcast. Welcome back to the podcast. I'm glad you're here. Each week on this show, I try and interview an expert to discover what it is that they know about a subject that we could learn from. And I also try and find out how did they develop the discipline to get where they at are at in their career. This week's interview was with a woman named Rita Kuster, who's the Chief Credit Officer of St. Louis Bank, where I am a member of the board of directors. But I'd never actually had a chance to sit down with Rita and hear her biography and how that informs decisions she makes at the bank. She'll talk about being a banker's banker and even working for the Federal Reserve. But later in the conversation, when we start talking about things like too big to fail, and Wall Street versus Main Street, you can hear how this experience allows her to have a perspective that you don't hear very often. We also get into what goes on behind the scenes. How does a bank make a decision as to whether or not to grant a loan to someone? And she also gets into the conversation around how do you create the tension within a boardroom to get people to have the conversations they need to have and be willing to disagree with one another? This was very interesting and an unusual interview for a banker. I was quite pleased with how it went and learned quite a bit. So I hope you will buckle in and enjoy the conversation with Rita Kuster of St. Louis Bank. Rita Kuster, welcome to the podcast.

Rita Kuster [00:01:33] Thank you, Vance.

Vance Crowe [00:01:34] So we have known each other for about a year and a half because you are the Chief Risk Officer, is that right?

Rita Kuster [00:01:42] Chief Credit Officer.

Vance Crowe [00:01:43] Chief Credit Officer. But your job is to mitigate risk at a bank.

Rita Kuster [00:01:48] That's part of it, yes. Part

Vance Crowe [00:01:49] Of it. Yeah. So what does it mean to mitigate risk?

Rita Kuster [00:01:52] You know, on the, I'm primarily on the lending side, but as a bank as a whole, there's all kinds of risk, whether it's compliance, risk, credit risk, liquidity risk, reputational risk. I primarily, like I said, is are on the credit side of it. And what that means is on the lending side. So what I'm trying to do is make sure we make right loan decisions or good loan decisions to ensure that we basically get, get our money back, and that the borrower gets what they need as far as financing, because I am in a community bank, which is smaller, you tend to get involved in different risk. And so while it's not as broad as a total risk officer, there's definitely pieces of it that all of us have to deal with because we're in a bank that's small.

Vance Crowe [00:02:46] So maybe just to put it in the simplest terms possible,

Rita Kuster [00:02:50] There's

Vance Crowe [00:02:50] A person that goes out and finds somebody that wants to borrow money, correct. The loan officer.

Rita Kuster [00:02:55] Yeah.

Vance Crowe [00:02:55] And they get excited about the loan. Yeah. And they're, they're pumped up. They found a person that really wants their help, and then they write it up in a package and they bring it to your department and they say, I think we should give this person money. And your job is to say, maybe not.

Rita Kuster [00:03:12] Sometimes. I mean, I don't, you don't wanna go into it saying, as a, on the credit side, saying, I wanna say, no, no, no. You know, there are times where maybe you structure it different to get you comfortable, or you get more collateral to get you comfortable. So I'm, I don't wanna be like a doctor. No, you wanna be make the right decisions and see if you can make the deal. But I don't think us making a deal every time helps a borrower. Sometimes no is the best answer for a borrower, because they might think, you know their idea's the best. They might think, you know, this is gonna work. And we see things that are like, oh, you know, maybe you don't wanna do that. Maybe you, maybe you want to revisit it at a different time. So, like I said, I don't, we, we try to do it, but we try to make sure it's right for the bank and right for the borrower.

Vance Crowe [00:04:13] So you have an interesting background because you're not just the No, no, no. Or finding the right, but you actually started out as a, as a regulator,

Rita Kuster [00:04:23] I didn't start out as a regulator. I worked at a bank and it was a specialty bank. And maybe that's where I, I'm so closely tied to community banking. I started at a bank in Jefferson City, Missouri that was a banker's bank. And what that meant was we were owned by other banks. It was kind of a co-op, I guess, and collectively it was all small community banks that, that, you know, worked with this bank to get some of their services. So I worked in Jefferson City for this banker's bank, and there was only, at the time, there was only like 19 of them in the nation. It was a correspondent bank. And after that, because I had done so much bank work, I actually moved to St. Louis and got a job with the Federal Reserve here and was on the regulatory side. So I was a bank examiner after that.

Vance Crowe [00:05:18] So does that mean you were the person that showed up in the black SUVs when something had gone horribly wrong?

Rita Kuster [00:05:24] You know, fortunately, or maybe unfortunately, there wasn't a lot of problem banks at the time. I was a regulator, so I would've been maybe that person, but we didn't have, you know, I wasn't an regulator during the banking crisis when all the banks were closing. I was, you know, it was a smoother time then. But we definitely, we showed up at banks on a Monday with our audit bags and, you know, took a look at all kinds of stuff. And, you know, normally because we were in smaller banks, we'd be there one to two weeks and make our assessment of the safety and sound of the bank and move on. So,

Vance Crowe [00:06:08] Okay, so let's talk a little bit about this, because I had no idea just how regulated banking was, right? Yeah. Like when you look from the outside, yeah.

Rita Kuster [00:06:16] You

Vance Crowe [00:06:16] Look at a bank and you say, there's a group of people that have money, they put it together, and then they make decisions on who are we gonna give money out to, and they're gonna pay us for the, for the value of, of, of, of borrowing money.

Rita Kuster [00:06:28] And,

Vance Crowe [00:06:28] And then we make money that way. But the federal government and state government are deeply, deeply involved in banking. And almost to the extent that, to me, I feel like, what are we allowed to do it? So, but when you showed up with your suitcases on, on Monday morning, what are you looking at for a bank? I mean, like, these are really serious moments for a bank when the examiners show up.

Rita Kuster [00:06:52] They are, but they shouldn't be, you know, we're, we show up as a regulator and we'd show up every year, year and a half, and it was just kind of a check. If, if a regulator told a banker something that they didn't know, that's when we were concerned, you know, because most of the time they're in the bank every day, they should know, or they know what's happening in their bank and you know, how their loan portfolio's looking or what their liquidity looks like. And if I was a regulator and I walked into a bank and started seeing some problem loans, and I went to the senior lender or whoever we were dealing with, and they were shocked, that's when I got concerned because it's like, I shouldn't be telling you that.

Vance Crowe [00:07:40] What do you mean a, a problem loan? And why, why wouldn't these people know about it?

Rita Kuster [00:07:44] Maybe they're not monitoring it. Maybe they're just, you know, the person keeps making their payment. And we would only look really at commercial loans. We weren't looking at mortgages that, those kind of things, for the most part, maybe they, they were just monitoring it and the borrower's making their payments, you know, we're, we're good and, and that's it. Yeah.

Vance Crowe [00:08:04] What's wrong with that?

Rita Kuster [00:08:05] Well, it's all okay until you get their financial statements, and maybe you look at it and you realize, you know, their tr their, their revenues are down, their income's down, their cash flow is strained. Or maybe, you know, there's something happening with the collateral piece. So there's all kinds of monitoring that has to happen as well. Once you make that loan, particularly on the commercial side of the business, you can't make it and forget it.

Vance Crowe [00:08:33] So the, the, that seems super interesting, right? I that the, that it's not just, can I get the, it's not just the loan officer saying, can I get the bank to make this loan? Because then the bank actually has to prove to the Federal Reserve and the state regulators, Hey, look at this financial health of this company. They're still, they're still doing okay. They could get in trouble if, if, if they're, if they have too many loans out where the retail sales are going down or what.

Rita Kuster [00:09:00] Yeah, I mean it, but it's really not, they're not proven it to the regulators. They're really just running their business and it's part of their responsibility to their shareholder and to, you know, the safety and soundness of that bank. The regulators are just there just to check because it is a highly regulated institution. There's an FDIC insurance sticker that, that makes them, you know, that gives them some protection, gives their depositors protection. And as a regulators, you're just making sure that they're doing what's right and, and doing it in a safe and sound manner. I never felt as a regulator that we were there just to, just to check up. We weren't running the bank. They were running the bank on a day-to-day basis. We were just there to make sure everything was going okay. And when, but if you went in and you found a bunch of loans, problem loans, it became real problematic for that institution because as a regulator, you can do some stuff or, you know, require them to do things differently because you're there to protect the depositors, you're there to protect the safety and soundness of that institution.

Vance Crowe [00:10:17] So what are, what are you allowed to do if you're a regulator? So let's, let's keep going with this scenario. Maybe you can imagine a time when you found out that there was, you know, trending down a series of loans. Now what does Rita say? What do you, what do you do?

Rita Kuster [00:10:32] You know, it really depends on the severity. You know, if you have just a few and you don't see a pattern of they're not paying attention or whatever, you know, you, you, at the end of the edit, at the end of the exam, you write up an exam report, you actually rate the bank on different components of their balance sheet and, you know, give them suggestions or give them items like, we want you to do this, we want you to do that. You know, and, and maybe it's improve your loan review, improve your receipt and review of financial statements. You know, those kind of things. And if it's not too bad, you check up with them in a year when you go back, or another regulatory agency goes back, if, if it's really severe. There are different things that the, that the regulators can do from the standpoint of a written agreement with them. They can put you under like a, like what they call a, a memor memorandum of understanding where the board gets involved. So you, as a board member, there's a lot of responsibility, ability for making sure that there's processes in place and everything is, is, you know, working like it's supposed to. So what a regular can do is go to the board and say, okay, board you, you need to improve the operation of this bank.

Rita Kuster [00:12:03] So, like I said, as you, as a board member, you're definitely have some liability and have some responsibility. And, and like I said, the, the regulators as it would get progressively worse, let's say,

Vance Crowe [00:12:17] Does it get progressively worse? Like, did you see times when that happened or is this all like, in theory, you know, we have the playbook and

Rita Kuster [00:12:25] Most of the time you don't, most of the time they address it and you move on. Other times where, you know, when we went through the banking crisis, you know, there was so many problems and sometimes there was nothing you could do about it. There was, the economy was so rough that, you know, you just, you, you tried and tried, but there were so many things, you know, from a economic standpoint that made it difficult, that it was hard for, for banks to turn around. And

Vance Crowe [00:12:58] Where, where were you during the banking crisis?

Rita Kuster [00:13:00] I was at a bank here in St. Louis. It's since been sold, but it was, it was a Pulaski bank who had been around for 99 years. And I was, I was on that side fighting the good fight.

Vance Crowe [00:13:16] So you were, you were like risk credit. Yeah. That, that side of things.

Rita Kuster [00:13:19] Yeah.

Vance Crowe [00:13:20] And so at what point were you like, this isn't just a recession, this is, this is bad.

Rita Kuster [00:13:28] You know, I think, I think we all knew it, you know, just from what was happening in the nation as a whole, you know, with, with different banks and all the pressure that we, that that was happening in the economy as far as past dues and foreclosures. And

Vance Crowe [00:13:48] You saw, so people could see this coming, like, I mean, maybe not in time to stop it, but you, you saw that the, that the roller coaster was headed down?

Rita Kuster [00:13:56] Yeah, yeah. I mean, our, our, and we didn't have, luckily we didn't have the severity of problems that a lot of banks had, but we, you know, I think every bank had issues to work out during that time period. But what you would typically see is your, maybe your past dues crept upwards, or maybe as you did renewals on borrowers, we were new in a, a loan and we would get a new appraisal, and suddenly that value from three, four years ago of let's say $500,000, you'd get it appraised. And now it was $300,000 and maybe your loan was four, 400,000.

Vance Crowe [00:14:39] So now they're totally underwater.

Rita Kuster [00:14:40] Yeah. So then, yeah. And, and that was stuff that, you know, as a banker, you couldn't control what the value of that real estate was, but because of the market and how many problems there were, you just had to deal with it. And, you know, so that's where a lot of the problems came for, you know, kind of working it out was, okay, well what do you, what do you do now? You know, can you shore that up? Can that borrower pledge additional collateral or pay down the loan? Do they have the liquidity? That kinda stuff. So it, it was a lot of strategy behind every loan that, that you got concerns with, you know, and sometimes it was, you know, how do you make this better? How do you get the, the credit risk to an acceptable level? But I think every bank, you know, had their share of issues during that time. Luckily, we, you know, we worked through 'em, we came out of it a k you know, there were a lot of other banks that, that had the people show up in the black SUVs and shut 'em down. So,

Vance Crowe [00:15:43] And so did you work at Pulaski after you were a regulator? So then were you calling your regulator friends

Rita Kuster [00:15:50] And,

Vance Crowe [00:15:50] And saying like, what do you see?

Rita Kuster [00:15:53] Not, not on an ongoing basis. You know, I, I would certainly, I'd keep in contact with some of 'em, but the regulators were calling all the banks, you

Vance Crowe [00:16:03] Know, that was, you didn't have to go to them, they came to you. No,

Rita Kuster [00:16:06] They definitely came to you. And, you know, they were, they were, you know, trying to get ahead of it and making sure that banks were on top of things and, and that kinda stuff, you know, I, being a former regulator, I understand kind of what their mission is, and it, it, it wasn't to shut down all these banks. It was to make sure that, that they can make it through, through this, through the recession and come out the other end. And, and like I said, we did not all of them did. So,

Vance Crowe [00:16:36] And what, what, what happens when a bank got shut down? So that, let's say the people came in and they said, look, you, you bank, you are underwater yourselves. Yeah. Then, then what happens?

Rita Kuster [00:16:47] Most of the time they have another bank kind of in the wings to, to take over the deposits and sometimes work through some of the loans for 'em. There, there was a lot of unique things that the regulatory agencies did during the recession to help work through all those problem loans. Some of it was, they called it loss share arrangements, where the bank that acquired those assets worked with, you know, with worked with the FDIC to kind of work through the loans that were on the portfolio. But most of the time, if a, if a regulars come and shut down a bank, that bank is not surprised. I mean, they know there's problems. They know they're, you know, out of capital. So it, it wasn't like a surprise. And as a banker in St. Louis or in anywhere, you knew what banks were on the bubble.

Vance Crowe [00:17:43] Oh, you did?

Rita Kuster [00:17:43] Oh, yeah. I mean, you could tell there's, there's some ratios that are public ratios that you could still get to this day. That there was one ratio called the Texas ratio that became very, very popular. And it was the amount of non-performing loans and or or other real estate owned as a, as a percentage of

Vance Crowe [00:18:09] ORE as everybody

Rita Kuster [00:18:10] Yeah, yeah, yeah. As a percentage of their equity capital. And if they had, if that number, if that ratio creeped up to like, say over a hundred, you knew that borrow that bank had a lot of problems. And so, oh, that got a lot of play, you know, like, what's the bank's Texas ratio? And it was just really a percentage of how much, how much of their capital was in, you know, how, how many bad loans they had as a percentage of the capital base. And so, you know, it was, it's a ratio that is, you can get on any bank still today. So just

Vance Crowe [00:18:47] By going and Googling it,

Rita Kuster [00:18:48] Yeah, you can find it. But it's, you know, that became, you'd see these banks with these high Texas ratios and you knew they had tremendous problems, you know, that they were likely trying to work through, but it was no secret, I guess. And banking's a small, small community. So, you know, you ended up kind of knowing what banks were, were working through problems and stuff

Vance Crowe [00:19:15] Like that. So the people that were in credit positions that had their bank go upside down, their Texas ratio goes sideways, and it's the, they, either their bank gets shut down, they move on, and they are shamed outta the industry, or they, they get positions and Hey, that was a really expensive education that you just

Rita Kuster [00:19:35] Got. No, I mean, they move on. The, the industry is the, if, if they've got some banking experience, you know, there's definitely a room for, for those types of underwriters, most of the time those folks would stay on with a bank that acquired them. And, you know, they would, they would just ultimately make a decision whether they wanted to be with that institution. But, you know, that underwriting knowledge is, is, is, is pretty marketable for a lot of people. So it wasn't like they were shunned or anything like that for the most part. So,

Vance Crowe [00:20:14] And what's the difference between what happened with community banks and what happened with like the giant banks, the, the Bank of America or Wells Fargo, those kind of things.

Rita Kuster [00:20:24] So it's unfortunate. I personally, I think, so you have these mega banks that they would call too big to fail because it was a systemic problem. If a Bank of America failed, you had so many issues in the financial market. If a bank in small town USA failed,

Vance Crowe [00:20:45] It's just gonna be relegated to that

Rita Kuster [00:20:46] Community. Yeah. It was almost like too big to fail and too small to care.

Vance Crowe [00:20:51] Oh.

Rita Kuster [00:20:52] And, and that's, to me, you know, somebody that has been in community banks and involved in that space for so long that that's a problem. You've got the, the government and, you know, the, the making sure these large institutions are, are saved, but they're not saving the smaller ones, you know? So, and I understand, I mean, those large institutions, it is a systemic risk to the, to the financial markets if they fail. But if you've got coverage of the government that you're always gonna bail you out because you're too big to fail, is that bank taking more risk? They know they're not gonna fail. You know, are they taking more risk? And I think it's, it's an ongoing issue for the industry that has to be addressed. And, and there was a lot of regulations that came out after the recession, and some of those have been peeled, peeled back since then. But some of those really,

Vance Crowe [00:21:58] Like which ones?

Rita Kuster [00:22:00] It hasn't been major. There was just a lot of consumer protection stuff, which was totally fine. Some of those regulations did require larger institutions to do some stress testing, different things like that. Those are still,

Vance Crowe [00:22:14] And stress testing is, is when you go through the loan portfolio as though something has just happened, and you say like these 10, let's say these 10 businesses, they, they suddenly start failing the land appraisal goes way down. Same thing. Yeah. How did the bank survive?

Rita Kuster [00:22:30] Well, for a community bank, it's more or less like that for a larger institution, they're really stressing the big picture, you know? Okay. So they're doing a much more rigorous stress test of, okay, well, you know, what does a span look like under different scenarios? So it's, it's much broader, it's much more complex, you know, so, so that was required for large institutions to do as part of some of this regulation, but, but they still really never address the fact that there's these, these institutions that are really too big to fail, you know? So it's still out there, there's actually a merger that's happening now between a bank, SunTrust Bank, and Atlanta, Georgia, and bb and t, which I, I think is in North Carolina, that that bank, when they're combined are, it becomes another one that's likely too big to fail. You know? So it really hasn't addressed, you know, what they're doing. I, I don't wanna say they haven't done anything, you know, certainly they've done some things to try to make that not an issue anymore. But I don't, I I still think it's, it's really lopsided, you know, with that issue. So I, I'm interested though, you know, you came into the banking world with no banking experience as far as being involved in one. Were you surprised at the level of regulation that that was there?

Vance Crowe [00:24:06] Yeah, I am. And, and I think that, so, you know, our, our close friend associate, Travis Liebig and I, we've, we've been very good friends for a long time. So I've been with him along the way as he was moving up to becoming president of a bank. And we would talk a lot about regulation and how it worked, but it wasn't until I got on the board that I realized like there are the, the parameters under which you can operate are so restrictive that in some ways you kind of look at other banks and say like, well, how are we different? Is it that we're changing our marketing strategy that's different? I mean, we can, you can offer little bit different on rates. Like how do you differentiate it? And, and that was really like, quite surprising for me because you look at, from the outside, you look at a bank and you think, well, they have all the money, they have all the power, but you have to clear so much through the regulatory bodies that it was really surprising. And, and going back to your point about these larger and larger conglomerations, this is really similar to, to what has gone on in biotech. And what I have seen is people want more protection. They say GMOs are dangerous, we, or we don't really know if they're safe or not. I don't, I disagree with that, but that's what, that's what the public perception is. So people add on more regulations, then what ends up happening is only the biggest people can afford to pay to get through all the regulations. So for example, in in biotech, they would say, let's say it takes four years of regulatory trials to determine whether or not that that genetically engineered crop is gonna be safe.

Vance Crowe [00:25:42] Well, the politician says, you know what, I'm not gonna require four. I'm gonna require 12 years of regulation. And if each one of those years of regulatory trials is $10 million, you've just stacked 8 million more dollars or eight, I'm sorry if it's 10 million, you just act 80 million more dollars of regulatory cost under that, which means there's only this many companies that can afford to do that. So you just keep forcing mergers to happen. And I'm watching that go on with banking. It appears as though

Rita Kuster [00:26:13] After

Vance Crowe [00:26:13] 2008, just let's keep putting regulations on, which means the little guys can't keep up with the regulatory costs. And so you have mergers of, you know, mergers of equals Yeah. And they just keep coming together, and then you end up having just a few very, very large banks. Yeah.

Rita Kuster [00:26:28] And I, that's totally the same. You know, it's a, it's kind of the same phenomenon in banking as you described in the biotech world. You know, you, you've got those systemic large institutions or large companies that, that get protected and then smaller ones don't. And you know, for me, coming from a community bank space, like that's a disconnect. You know, if I go back to my hometown, which is Central Missouri, Lynn, Missouri, there's only two community banks there. Bank of America is not gonna go there. Wells Fargo is not gonna go there. So how do those small towns get services? You know? And,

Vance Crowe [00:27:14] And then you have, you have farm credit systems in there,

Rita Kuster [00:27:17] But those

Vance Crowe [00:27:17] Are only for the farmers. Exactly. So then you have the people that are living in the town

Rita Kuster [00:27:20] Yeah.

Vance Crowe [00:27:21] That are trying to do grocery stores and little shops, and they just, they don't have banking.

Rita Kuster [00:27:25] Yeah. And I, you know, I I I think it's super important, you know, for those small communities, but it's, it's just as important for a town like St. Louis, you know, to have those community banks that banks, you know, where the decisions are made locally, and you know, the board is local and they know what's happening in the town.

Vance Crowe [00:27:46] You know, that, that actually, so, you know, when Travis and I were first talking about, you know, a community bank, or, or, or when, when he was bringing together the investors to get the bank, he would talk about like, the value of community banking. And I would be like, well, what does that really mean? He'd be like, well, local decisions. And I thought, who cares? Right? Like, you, you're just gonna take, you know, people that are locally good versus people that are nationally good. But it completely changes how you understand when a loan comes in. How, how strong is this construction company? How new are they? What, where are they building? Because you have people that literally are in those areas. Yeah.

Rita Kuster [00:28:24] And

Vance Crowe [00:28:24] So if you make it so only the national banks can do it, you're you're creating giant DMVs in a way. I don't know. I mean, I don't wanna be too disparaging. Yeah.

Rita Kuster [00:28:33] Because

Vance Crowe [00:28:33] I'm sure there's benefits that I don't understand for,

Rita Kuster [00:28:35] For sure. You know, and it, I think there's a, there's a place for all of 'em, but you know, there's, there's some of the stuff that is, is kind of lopsided. But,

Vance Crowe [00:28:45] You know, so speaking of that lopsided point of view, I, my very first guest on the podcast is a man named Tim Hausler. And he, during the interview, had an idea that he said he put forward to the fed, and they, they looked at him a little sideways. I don't know if you heard the interview.

Rita Kuster [00:29:01] I saw that.

Vance Crowe [00:29:02] So, so he, so his idea was, if you want to stop too big to fail, you have FDIC insurance. So what that is for anybody that's not aware is every single time you go in and open a savings account, or is it, is it just savings or checking as well? Yeah,

Rita Kuster [00:29:18] It's checking as well.

Vance Crowe [00:29:18] So up to $250,000, if the bank fails, the government will guarantee you that money. And so, so, and you can open up as many of those $250,000 checking accounts as you want, more or less, right? Yeah.

Rita Kuster [00:29:32] Yeah.

Vance Crowe [00:29:33] And so he said, well, how about instead of saying we're gonna limit that, we want people to have those protections. How about any one bank can only be FDIC insured up to a half a billion dollars, 500 million. What do you think?

Rita Kuster [00:29:48] I, I think that's, that's a way to get to what has been discussed, which is breaking these banks up into smaller chunks, you know, and, and so that, that's a means to an end. And it, it certainly may be be a great means to an end, you know? 'cause I think the goal was, and a lot of the conversation was how do we break these banks up to where, you know, it's not this massive systemic issue. If one of 'em has a problem, one or several of 'em have a problem. So that might be the, that might be a great way to facilitate that. There's other people,

Vance Crowe [00:30:33] You seem to have a hesitation on this, you know, you don't seem to be fully behind it. So what, what would you say is your, no, I

Rita Kuster [00:30:38] Think, I think that might work. I think at the end of the day, they wanna break 'em up, or maybe there's a,

Vance Crowe [00:30:44] Do you think they, do you think they really do wanna break

Rita Kuster [00:30:46] 'em up? No, I don't think they do. Okay. I think it's like main street versus Wall Street kind of stuff. There's probably some people that do, but not everybody thinks that's the best way to go. So maybe it's, you require additional capital or reserves or something like that for those large institutions that have that protection. You know, there's, there's a lot of different views on how you get there. But the problem is, I don't think is, it really has never been addressed. You know, we're still creating those two big to fail banks. And although there are more requirements, I think the risk is still there to some degree. You know, that they, that they could have that. But like I said, I, I think his idea is interesting. I, I think some of this stuff is just gonna be really hard just because of, of how, you know, the political environment and the regulatory environment and all that other kind of stuff. But, but I think as bankers, you've gotta be aware of some of this, some of these things. It's really easy to get caught up in your day to day and worry about just your bank and what it's doing. But there's a much broader issues out there for the industry as a whole that, that everybody should be paying attention to. So, well,

Vance Crowe [00:32:09] This is actually what prompted me to say that, or to, to invite you on the podcast is that, and I don't think I'm talking outta school here, we'll edit it out if I am, but during our board meetings, you come in and give updates and you actually write a newsletter essentially for the, for the board packet. Well, it's, it's a, it's an update. It's like, I don't know, maybe 20 pages long talking about the economy and like, how is the St. Louis region doing? How is that mapped nationally? And I, I've been making the case that we should turn this into a newsletter and mail, mail it out.

Rita Kuster [00:32:39] I don't know about that,

Vance Crowe [00:32:40] But, but, but, so that is an interesting component of banking that I also didn't understand, because every business has to worry about what are national trends Yeah. And what's going on in the region. But banking is like very much that way. It feels like you're trying to play baseball because you've got all these sta via statistics or something like Moneyball. Because you are really trying to look at numbers to say what is going to happen and how should we position ourselves? Yeah. 'cause if we wait too long and we are too risk averse, then we don't make any money and the other banks do. And then they can grow and push us outta the market. Or on the other hand, if we get too much risk and we make too many bad loans, then we lose our capital and we're outta the game. Correct. So what are the numbers that right now you think, hey, people should be paying attention to these things?

Rita Kuster [00:33:30] So here's the problem with some of that stuff is it's data overload. There is,

Vance Crowe [00:33:35] Yeah, no doubt.

Rita Kuster [00:33:35] There is so many statistics, so many opinions, so many indicators out there that it can be overwhelming for anyone in any industry. I personally, I think what, what we've tried to do is zero in on, you know, a, a group of ratios or, or a group of economic indicators that, that we pay attention to. Otherwise we're, you know, it's just, it's just too much. So the things that, that we include on an ongoing basis are at least monitor, are things like unemployment trends, you know, what's happening nationally with unemployment, what's happening in the St. Louis market, you know, if, and, and,

Vance Crowe [00:34:21] And right now that number is like, people can't even find Yeah,

Rita Kuster [00:34:25] Good,

Vance Crowe [00:34:25] Good enough. Good employees. Yeah. That there's like real pressure that that means wages go up and Yeah. So that looks like a pretty good number, right? Yeah,

Rita Kuster [00:34:33] Exactly. You know, and, and, and that's why it's like, you kind of have to look at several of them because it's, you know, they might give you different signals, but it, it may come down to an awareness issue that you just got. You just have to be aware of what's happening in that market because it can affect your bank, your borrowers, all that kinda stuff. But some of the other things that we look at are consumer confidence levels. You know, are they trending downward? Are they going up? We look at housing market indexes. So it's kind of a confidence index for the housing, you know, the builders and the people building homes throughout the country. We look at purchase managers index, which,

Vance Crowe [00:35:15] What is that?

Rita Kuster [00:35:16] It is basically a manufacturing, more manufacturing type of index. And it's not, it's not the CEO that you go to and say, Hey, how's your business? And he or she goes, oh, it's doing great. This is, you're going to the person that buys the inventory to make the widgets. Or that is making sure that they've got the, the things to produce their market and go, okay, well how are you feeling? You know? And if the purchasing manager is like, we're slowing down, you know, I'm, I'm gonna back off, that index will reflect that.

Vance Crowe [00:35:50] And who is going to make those calls? Who's calling up the purchasing person?

Rita Kuster [00:35:54] You know, a lot of it is just like industry people, you know? So like the housing stuff is through a national association of home builders kind of thing. The purchasing managers are through a, like an institution for manufacturers. So it's all national kind of legitimate industries or organizations that monitor this. But like I said, you know, if, if a purchasing, if all the purchasing managers that this organization surveys says, you know, I can feel it. Our business is down or our, our orders or have trended down three months in a row, you know, I, I'm, I'm a here or my confidence is here, that should tell us as a bank, okay, well, you know, do we wanna look at our manufacturers? Do we wanna reach out to those borrowers and say, Hey, how's everything going for real? You know, and get ahead of some of their issues.

Vance Crowe [00:36:50] And why would they tell you if they have problems?

Rita Kuster [00:36:52] They should.

Vance Crowe [00:36:53] But why?

Rita Kuster [00:36:54] Because if it's your, your banker is not your enemy, you know, they need to let their banker know if they have issues. And because the banker might help. You know, they may come to the bank later and ask for, okay, well, you know, can we have a little relief on the payment? Don't wait until things are bad to let your banker know that. Because the last thing anybody wants is a surprise. You know? And that's why it's important to bankers to keep in touch with their borrowers and make sure that they know it. And a borrower that's not being full disclosure with a bank, it's not gonna, it's not a relationship that as a banker, you want, you want that trust, you want that, I won't say a partnership 'cause that implies something different. But, but as a borrower, you want a banker that understands your business that's gonna be there for you, you know, through thick and thin, you know, because it might, might be tough, you know, if you've got a bank that that's gonna come down really hard and not work with you, you know, you're, you're gonna have a harder time. So, so

Vance Crowe [00:38:01] What does that mean? So if a, if a banker is there for you during the hard times, so to somebody that isn't taking out lines of credit Yeah. What, what does that mean?

Rita Kuster [00:38:11] It's, it's maybe working with them to restructure their debt or to give them a little bit of, of relief when maybe they're, they've got seasonality in their business, you know, their business dries up during the summer months or something like that. And it's just really working with that borrower rather than saying, okay, your numbers are down, get outta here. You know, and some banks, some borrowers, at that point in time, they can't go anywhere, you know, and some, sometimes that happens, you know, to where you just, you know, you, you just can't work with them any anymore. And you both go to your own separate corners. And, and that's not the scenario you necessarily want. But you know, you do want a bank if you, if you are having a hard time, that that will take the time to understand what your issues are and maybe work with you to, to see if it can be resolved. If it's just a kind of a rough patch you're going through, I think you want a banker that that'll help you through that. And, you know, hopefully you come out and everybody's fine. But,

Vance Crowe [00:39:17] So as, as the person that's, you know, head of credit, you have an a high pressure situation in that, I mean, your bank listens to you. Right. And there are people that could be in a hard spot and you actually have to make the decision, are they going to get out of this hard spot? Because if they don't and I give them more leash Yeah.

Rita Kuster [00:39:39] Then

Vance Crowe [00:39:39] The people that trusted me with their money are not going to be repaid. And it's not like everybody that's involved in a bank can afford to lose that money. Correct.

Rita Kuster [00:39:47] And

Vance Crowe [00:39:48] So how do you manage the stress of that? Is it something you think of as stressful?

Rita Kuster [00:39:53] For sure. It's just kind of the nature of the beast, you know, from a standpoint of lending in general. You know, you've, you've gotta, you've got every, everybody always says, you know, I've never made a bad loan. You know, you never make the bad loans, they just kinda happen for you. But it, it is gonna happen. It's the, it's, it's a risk game, you know? And, and what you want is enough mitigation or enough to where you can get ahead of it, and you're not always gonna be Right. And you can't sit there and, and, you know, dwell on that, but you kinda have to be right most of the time. Or you, you have to know how to maneuver stuff. So

Vance Crowe [00:40:38] When, at what point did you start realizing, I, I actually have the, like, real power here. I I don't mean that in like a, you know, hoisting a sword above your head or something like that. Yeah. But I mean, like, the power to change people's lives,

Rita Kuster [00:40:54] You know, I think you go through as a, as a whatever worker, you know, in any industry, you go through different jobs and you find out what you're really good at, you know, whether it's on the sales side, whether it's on, you know, a more audit level side or detail side. And, and I think for me, you know, that's where I gravitated to was because I ended, I I, I tend to think things through maybe overthink from time to time.

Vance Crowe [00:41:23] Yeah, yeah. For example, when I asked you to do this, you were like, sure, we'll do it in like a few weeks so I can think about what I was gonna say. And I was like, no, no, you agreed. We're doing it this week.

Rita Kuster [00:41:31] Yeah. I would've much rather overthought it. But, but I, I, you know, it, it's, it's definitely one of those, probably the, the, the one time that I remember that I was like, whoa, you know, this did make a difference, was at my first job, and I was new to kind of a credit officer role, and I was, we were working, I was at the banker's bank and we were working with another bank. So I was bank, my, our customers, there were other bankers, you know, that were way more experienced than I was. And I was probably late twenties at the time. And they had approached us about, about doing a particular deal, and I just couldn't get there, you know, I just, the numbers didn't work for me. I didn't feel good about the deal. And it was like, okay, I am gonna tell this banker with way more experience that I can't get comfortable with their deal. And that banker, he, he, we ended up saying, you know, we, we can't help you with it. And he was like, totally get it. He sent me a note, it was probably five, six months later, and it, he was like, thanks for the no, because it ended up that they didn't do the deal and it was, it was a deal that they shouldn't have done, you know? So, and that's why I kind of ended up with saying no to a borrower is not always a bad thing, you know, it's really us taking a look at it and going, you know, this, this may be too much leverage for you.

Rita Kuster [00:43:08] And some borrowers appreciate that and others, you know, take it personal. And it's really, it's, it's really not that, you know, we just look at it from the standpoint of, you know, what, what things are, you know, we think are gonna work and, you know, decide there. So,

Vance Crowe [00:43:26] So one of the things that sticks out to me about you, in fact, some of the very first times we met was your willingness to, to say no. Right? And, and I've, I've talked several times with various people on the podcast about this trait called agreeableness. And so this is, you know, how likely are you to decide that? I would rather the group get along. Yeah. And I don't really care if we get to the correct answer versus I need to resolve this conflict. And I don't care how much disturbance it makes.

Rita Kuster [00:43:57] Are

Vance Crowe [00:43:57] You, I mean, are you, where do you fall on that scale? 100 being the most agreeable, zero being completely disagreeable?

Rita Kuster [00:44:07] You know, I would hope I'm kind of in the middle. I, but you've gotta have an opinion. You know, I don't, and and, and my opinion might be totally different than another person's, but I am not, I would never encourage a credit, an underwriter not to say anything. You know, and I've, I've talked to people that have worked with me over the years, you know, and if I, I charge them with underwriting a deal, and if they don't like it, raise your hand. You know, don't sit there and, and take orders from somebody and just, you know, not think through it, you know, have an opinion, voice it. I think there's, you know, you can do it in a way that certainly is, is better received than, than other times. But I think, you know, inherently from a banking perspective, there's always that, that push and pull from the sales side and the credit side. And I think I've always worked in institutions what, what that valued that separation, that valued that push and pull from the standpoint of, yeah, some, you know, you wanna make the deal, but you've gotta have that control. So if I was, like I said, I've been fortunate to been, to be in institutions that understood that balance. You know, if it gets outta balance and it's more about sales than it is about credit, that's when your decision, you know, maybe is, is gonna be just do the deal.

Rita Kuster [00:45:43] You know? Do

Vance Crowe [00:45:44] You, do you think people can learn to be more disagreeable or to raise their hand like that? Yeah. Or is it something you either got it or you don't?

Rita Kuster [00:45:52] I think they can either be encouraged to do it or not. Some people maybe never get comfortable with it. Those aren't the underwriters that I want.

Vance Crowe [00:46:06] Okay.

Rita Kuster [00:46:06] Yeah. And, but if there, there's been times where, you know, I've gotta say, Hey, it's okay. You know, like, if you don't like something, I wanna, I want you to raise your hand. I want you to say something.

Vance Crowe [00:46:23] So are you disagreeable in other parts of your life? I mean, would, would your family say no? No,

Rita Kuster [00:46:29] I don't think so. But

Vance Crowe [00:46:31] Would your family would, I mean, if, if they were listening to this, they would say, no, Rita, she's always bringing up the problems and making sure we confront it. And I

Rita Kuster [00:46:38] Think most people would just say that I've got an opinion

Vance Crowe [00:46:42] On

Rita Kuster [00:46:42] Stuff. Okay. And I'm not afraid to voice it, you know? And if it's, if it's, I, if it's something that, that is, that I feel needs to be brought forward, that's part of my job. I'm not gonna apologize for it. And so, and, and, and like I said, that's from an underwriter standpoint, I want underwriters that bring to the forefront issues and, and not just sit there and do their job and not ask questions. And I think, you know, you've gotta be in an environment that appreciates that, that encourages it, or else you do end up with people that are afraid to speak up, you know, or afraid to say anything. And, and I, I, you know, I, there's a lot of differences in an organization from a diversity standpoint that, that becomes pretty important to me personally. So, yeah.

Vance Crowe [00:47:47] Would you say that people feel like they can disagree with you?

Rita Kuster [00:47:53] I would think so.

Vance Crowe [00:47:54] I mean, the reason I ask, so, so I had a chemist on named Dr. Doug Salmons, and, and he's one of the most disagreeable people on the face of the earth. Like no joke, he's chemist that has figured out, discovered all sorts of interesting things. And it took him the better part of four or five decades to figure out that the reason that people didn't disagree with him was because he was so disagreeable that he didn't, he didn't know. And I, I just think like you were an extraordinarily confident person, or at least that's the way that it comes off. And so, I, I'm just curious because I think you're, you're in a, you're in an interesting dichotomy, right? You are saying, I want people to disagree more. I believe they can be taught that you are already pretty disagreeable. So it would be hard to cultivate that. I don't know. I, this is, I'm just thinking here.

Rita Kuster [00:48:43] Yeah. I, I just, I just don't would, would be real hesitant on kind of a group think kind of thing. It's okay for people to disagree. It, it's totally okay. If I don't like a deal, I'm not gonna, you know, if, if it's, if we're voting on a, making a loan, if I can't get comfortable, I'm not gonna vote on it just because the five other people at the, at the

Vance Crowe [00:49:09] Table

Rita Kuster [00:49:09] Says it's a good deal. You know, like, like

Vance Crowe [00:49:12] As, as a member of the board of directors, I can say that is awesome. The, the

Rita Kuster [00:49:15] Deal might still get done, but I don't wanna vote just because everybody else says yes. You know, there may be times where, you know, you talk through a deal and, and maybe somebody brings up a point that says, well, you know, what about this? I can be swayed for sure. Oh, really?

Vance Crowe [00:49:34] Okay.

Rita Kuster [00:49:34] For sure. You know, that's

Vance Crowe [00:49:37] Probably the key Yeah.

Rita Kuster [00:49:38] Thing,

Vance Crowe [00:49:39] Right? Yeah. If you're super disagreeable, but that's because you're already convinced you're right. Yeah.

Rita Kuster [00:49:42] Yeah. I think

Vance Crowe [00:49:43] Then no one will.

Rita Kuster [00:49:44] Yeah. I think you just have to listen. And I might go into some of the meetings with, okay, I, I'm not comfortable with this or I want this. And then, you know, you talk through it and, and I, I will get to the point where it was like, okay, I can, I can get there on this deal. So, and I think it just takes open communication and respect for all the people at the table and all their opinions to get to that, that point. But I, I, I don't have, you know, a real issue with somebody, with somebody disagreeing with something. Everybody should have their opinion. And like I said, I as an underwriter, I'd rather have an underwriter voice it than keep it inside and never say anything about it.

Vance Crowe [00:50:38] You know, the, I you were asking earlier about me being surprised about regulation, I would say the bigger surprise that I have is how much of banking is relationships? And, and you have this really interesting kind of tension, a dichotomy there of you wanna be able to have people that can, IM, that, that can account for, I know this person, I, they're just going through a rough time. They're just, you know, this is their situation. They've got a lot of potential versus these are cold, hard fact numbers and bringing together inside of a bank, the people that can balance those two forces Yeah. Is really, really difficult.

Rita Kuster [00:51:21] Yeah. Yeah. But it's essential in, in working, you know, in, in being successful because it all really does come down to relationships amongst people at the bank or any business, you know, your relationships with the customers and then your relationships internally, you know, so it's, it's definitely not a transactional kind of business.

Vance Crowe [00:51:46] Do you do anything to keep yourself objective there? I mean, I would imagine that the, that in your role, you know, you go to enough client mixers and meet enough clients that would start Yeah. Changing your opinion.

Rita Kuster [00:51:56] It can, and sometimes it's helpful sometimes meeting that borrower. For me it, it makes more sense, but, but definitely I don't, I don't want to, to make a loan because, oh man, I, I liked, I met them and I really liked them. It still has to support, you know, the numbers have to be there. And I think when you are in that sales role, you definitely have more of a personal relationship. I, I, I don't think in my role that, that I do have to separate that and really look at it a more kind of factual basis. But, you know, it's, it is a balance. And, you know, if, if we all had a crystal ball, it'd be fantastic. But you don't, you know, and, and it always, everybody always says like, you know, whenever, whenever you get in a situation where you're sitting there going, okay, should I really make this loan? You know, and, and I've done this, it's like, okay, if it was my own money, would I make this loan? And sometimes when you ask people that they, does

Vance Crowe [00:53:11] It always make them more conservative?

Rita Kuster [00:53:14] A lot of times,

Vance Crowe [00:53:14] Yeah.

Rita Kuster [00:53:15] Yeah. Because it's like, you are, I, I'm not, I'm loaning the bank's money out. I'm not loaning my,

Vance Crowe [00:53:22] It's not gonna come outta your paycheck.

Rita Kuster [00:53:23] Exactly. But it's like, it's a question that you have to ask yourself, you know, would I give this borrower money? And if I sit there and go, no, then my vote at the table needs to be no. Or I need to, you know, make sure that deal doesn't happen

Vance Crowe [00:53:41] In that regard, how do you incentivize a credit officer? Because your job is not, I mean, it's not have that pipeline

Rita Kuster [00:53:49] No.

Vance Crowe [00:53:50] Be as big and full as possible. So how do you, how, how are, how are you incentivized or how are other people incentivized to, to do, to do right by the bank?

Rita Kuster [00:54:00] So if you're gonna measure a credit officer, it comes down to some asset quality metrics within your portfolio. Maybe it's a past dues level loans. There's, every bank has rating systems, you know, to where you rate the risk of your loan portfolio. And it, and the regulators use a rating system as well. So they'll come in, you know, whenever they come in for their exam, and they'll rate your loans. And so if you get too many rated in the bad categories, you know, you're in trouble. And I think as a credit officer, I should be held accountable to those types of metrics. You know, if, if, if I'm making decisions and those, those metrics are indicating that our portfolio quality is getting worse and worse and worse, we gotta figure out what's going on.

Vance Crowe [00:55:00] Wow. So

Rita Kuster [00:55:00] Anyway, so I can't, yeah, I can't, I'm not measured on how much business I bring in because it's none, but there's still accountability that, that I've gotta, I've gotta make sure that the loan portfolio is graded properly, that we're recognizing the risk in it and that we're addressing it. And so there's a lot of ways to, to do that, but it's primarily through, you know, kind of credit quality metrics.

Vance Crowe [00:55:26] So let's make it real for the listeners in terms of if they were starting a new business, we'll just imagine that they've figured out how to make a new hot sauce and it's really good and they want some money to be able to take it from their, their kitchen production to factory style. What are you looking for as a credit officer to determine, yeah, this is a good choice, we should, we should make this decision?

Rita Kuster [00:55:51] So there's a lot of things that a borrower would wanna do, you know, get the financials in order and

Vance Crowe [00:55:58] What does that mean?

Rita Kuster [00:56:00] Just make sure that the, like if it's a startup that they've got, you know, their personal financial statement, accurate, encompassing all their assets that they filed all their tax returns, and those are all up to date, that they've got a business plan where they un, where it, it can evidence to a banker that they understand their business, they understand the risk, they understand how to produce that hot sauce from ingredients to the day that it put goes on the shelves for sale. So a lot of thought needs to be put into that. And that's what a banker will expect. I think it's helpful. And I've had conversations with different people that knew I was in banking and had their own business friends of mine that, you know, they would ask me different things about, well how does that, you know, how does it work on your side? And I think that's important to understand from the standpoint of a borrower, you know, like what are they, you know, what are we really looking at? And you know, they call it like the five Cs of credit and it comes down to character capacity.

Vance Crowe [00:57:10] What does that mean? Capacity?

Rita Kuster [00:57:12] That's basically their, their ability to make the loan payments, you know, and the capacity for them to carry the debt.

Vance Crowe [00:57:22] Okay.

Rita Kuster [00:57:23] The other ones are capital, collateral and conditions, which is kind of what the industry is doing. And so, you know, you can debate, maybe there's a couple other Cs out there, but even if you go to an institution that does like artificial intelligence and does credit scoring and all that kinda stuff, some of those components of those five Cs will be built into their models. You know, the character part of it is largely me measured by a, a individual's credit score. You know, how they pay their bills, you know, do they pay on time? Have they applied for a bunch of credit recently? Are they maxed out on all their credit cards? Do they have a bunch of installment debt out there, you know, in relation to their income? You know, so a lot of the models that are built in large institutions and some small institutions take those factors into account. So there's, there's part of me that from a credit perspective, is you can have all these tools, which are fantastic for the industry, but it does come down to some pretty, pretty basic stuff on, on how you as a banker go through your underwriting process and what you measure and, and what you really spend some time on. And, and like I said, you know, when I talk to people about, well, you know, what is the bank gonna look at? I end up always coming back to like, those five Cs and what, you know, kind of how we would look at it from an underwriting

Vance Crowe [00:59:01] Standpoint. So let's talk about that, that first c the character one. Yeah. And this actually is a question. It comes from my brother who is very attuned financially and, and really despises debt. So pays for everything as much as he can in cash. Great. Well it's great up until he goes to get a mortgage,

Rita Kuster [00:59:20] Right?

Vance Crowe [00:59:20] Because if he, if he hasn't been putting money on credit cards and he doesn't have that score, what do you as a banker say to somebody like him that says, like, you know, I go to get a, I I have a multimillion dollar business I'm running, I've, I've, I, I own everything I use and yet I go to get a mortgage and the banks say, Hmm, your credit score isn't very good 'cause you don't have any credit. What do you think of that?

Rita Kuster [00:59:44] I've seen it before. Actually, my mother had the same problem. Okay. And, you know, and it was, it was funny because she was probably, I don't know, 80 at the time and had never had credit And all she wanted was a credit card and could not get one. You know? So it happens, I guess if I would see, see that there's other ways that, that we could do, okay, well then give me a personal financial statement. Show me your credit or your checking account history. Maybe we, we would get some statements from how they handled, you know, just their basic day-to-day checking account. So there's other ways to do it. It's very rare though that you wouldn't have a credit score, you know? So, and sometimes it doesn't tell the whole story, but it's certainly a basis or a, a factor that can be used because it is available for everybody and it, you know, it does give an indication of, you know, how they pay their bills. So there's, there's ways to get around it. You just kind of have to think through kind of what your options are. So,

Vance Crowe [01:00:54] So we've kind of talked on the, on the surface and about how loans get made and the, the Fed. But one of the things that I don't know very much about, 'cause I've only seen it in the abstract, is what happens when somebody doesn't pay their loan and can't pay their loan?

Rita Kuster [01:01:14] Well, I mean, if they cannot pay or they won't pay, you know, there's, there's really no choice from a banker perspective. We have to get our money back, you know, and we will, a lot of times if that happens, you know, there, there, there is a, an element of, you know, is it a borrower that's gonna work with you? You know, is it a borrower that's trying to get out of it and you wanna give them a little bit of leash to, to, or him or her a little bit of leash to kind of turn their business around, you know, if it got, gets to the point where it's like it's never gonna happen or that they're not willing to do that, you know, we've gotta kind of assess where we're at, you know, is, you know, will our collateral cover the debt outstanding? If it will, then we're, if the borrower's not willing to sell it, then we're gonna have to take legal action foreclose on that collateral

Vance Crowe [01:02:12] Sell. So you're saying, so when you're talking about collateral, you're saying if they have, let's say like the, the hot sauce example, if they have a, a, a warehouse that they store all that in and they own the warehouse and the land, they've put that up that if they can't pay their loan, then the bank would get possession of that. Correct. And then be able to sell it, or,

Rita Kuster [01:02:31] Yeah. If, if, if we had that as collateral, now if we just have the hot sauce collateral, we might be a little bit trouble. But yeah, it just depends. But that's part of that underwriting process, you know, if I'm gonna take on that risk, do I need more collateral to get me over the risk that we're taking on that new venture? Or, you know, do we feel good about this borrower's ability to get outside income or whatever, to, to work out of their issues. So

Vance Crowe [01:03:05] Have you had to take possession of somebody's property?

Rita Kuster [01:03:07] For sure. Oh, for sure. It, it definitely, and it's not a good, you know, you don't wanna do it, but I, we still work for a business that's owned by shareholders and our job is to get our money back. And so definitely, I mean, we've, we've foreclosed on over the years, I've, we've foreclosed on all kinds of property. We've, we've taken back.

Vance Crowe [01:03:36] What's the most unusual thing you've, you've gotten back or gotten his

Rita Kuster [01:03:39] Caught? So, probably we got back a motorcycle shop. So that one was a little tough because we had motorcycles and then accessories and clothing. So that one was a little bit different

Vance Crowe [01:04:01] In kind of a niche market and probably one that you're not an expert

Rita Kuster [01:04:04] In. Yeah, yeah, exactly. So that one was a little tougher. You know, sometimes you'd get back properties that were in terrible shape, you know, so that presents challenges, you know, because you've gotta figure out, okay, who's your buyer for this stuff? You know, we we're, we we're not in the real estate business. We take it back and then we wanna get it out. So, and, and the, the good thing about banking is, you know, you work with so many different businesses and so many different customers that there's always, you know, all kinds of stuff. It's not always gonna be real estate. It may be a piece of equipment, it may be a vehicle, who knows. It could be, you know, a, a unique kind of vase or whatever. I've heard of that happening as well, you know, you, you land on a, on a collectible item, it's nothing you want to do, but sometimes it happens. We never took back a vase, but it, it, you know, it it, it was just different things. So,

Vance Crowe [01:05:11] So what is one of the funny things about banking right now is that people don't really go to banks anymore, correct? I mean, like, regular people, you know, their, their check gets direct deposited. Yep. They very rarely need cash. Maybe you need, you know, 20 bucks throughout the week. What do you see as the future of, of banking in a world where people don't physically go to banks?

Rita Kuster [01:05:38] That's a challenge. You know, for, for banks, they've just gotta make sure from a technology standpoint that we can accommodate that borrower and give them the services they need. It still comes down to a lot of, lot times that relationship standpoint, particularly on commercial borrowers, because you're not gonna do all that and, and never talk to your bank, or you, you shouldn't want to, I have a checking account at the bank though, that I work with, but my main checking account is still at my hometown bank. I never, I haven't been inside that bank, I bet in 15 years, but that's my primary checking account.

Vance Crowe [01:06:25] I mean, it's just such a pain to go through and change that stuff. Like

Rita Kuster [01:06:28] Yeah. But, but it's like they've got the products that, you know, from an online perspective and those kind of things that, that take care of me. And I think for banks, you know, we're not gonna go backwards, you know, ba people are not gonna start coming into banks. It's, it's just a, making sure that your products and your security levels and all that kinda stuff can facilitate that sort of banking, those banking needs.

Vance Crowe [01:07:00] One of the interesting effects of having the FDIC saying, Hey, if, if there's the little sticker as you walk in all, all the way up to $250,000, then as far as the, the individual with the checking and savings account, which bank they're at, doesn't matter so much. Right?

Rita Kuster [01:07:19] It, it doesn't, I mean, and that's the part that's what's tough about banking is it's a commodity. Your checking account at x, y, Z bank, there's probably a similar checking account at another bank, you know, and I think it comes down to, you know, convenience, who you wanna bank with, maybe relationships, those kind of things. So it's, it's tough as a banker to sometimes differentiate yourself from all the other banks out there. And, but I

Vance Crowe [01:07:52] Think, but you did differentiate earlier. You were saying there is a difference between big banks and community banks, and what would you say that is?

Rita Kuster [01:07:59] I think it's, and that's, that's where you've gotta make sure your story gets out. I think that, that from a community bank standpoint, it is about, you know, you're there in the community, your boards in the community decisions are made locally. And it, it really is about a bank helping a community and helping small businesses, large businesses thrive in that market and understanding that market. And I think, you know, I I, I don't wanna disparage large institutions Oh, go

Vance Crowe [01:08:31] Ahead.

Rita Kuster [01:08:32] 'cause there's, maybe I will, but there's a lot of stuff that that, that they do equally as well. But from my standpoint, you know, I want a bank with a bank in my community. And if you look at the St. Louis market, and you've probably heard Travis say, say this many times. There's, over the years, there's been a lot of locally owned banks that have been acquired. And there's, there's a lot of great banks in St. Louis, but over the years, a lot of that have has left St. Louis, you know, so it, so it's like, you know, I wanna see local institutions thrive because I think, I think it's great for that community if, you know, it's, it's great for the industry as a whole that everybody's doing okay, but I, you know, maybe I, maybe it's the underdog, you know, root for the little guy kind of thing. But I still wanna see that local community bank do great things in their community and, and really, really get out. And for a borrower, you know, all the decision makers are right there. You know, they're not going to another state or another country, you know, that, that owns that bank that are, that is, you know, making their decisions from a strategic standpoint, the strategic decisions for our community bank are made in that community for sure.

Vance Crowe [01:10:07] Well, that was, you know, I had a, a dairy farmer on, and we talked a little bit about this. I spent the better part of my late teens, twenties, all the way up until my thirties thinking I want to go change the world. And the way that I do that is I go as far away from wherever I am right now because the world is out there. And the thing that woke me up was Travis actually showing me, Hey, if you have the ability to gather up people's money within a community and then responsibly distribute that out to various businesses, you get to play a major role in seeing whether or not that community can thrive. And it, it was really like he was offering me a chance to make a way bigger difference than I was gonna make digging wells in Africa or playing some political game at the World Bank, like, which is not really a bank. I mean, it is, but we won't go into that. But that's, so when we talk about the, the difference between the large bank and the small bank, you know, they're, they're just a business. I don't if you have any ill will towards Bank of America or Wells Fargo, but they are playing a very different game. One is, I'm gonna go harvest a commodity in this community. If I can extract money, I will. And if I can't, I won't. Which is the same thing that a community bank is doing except for literally every single person there lives in that community.

Rita Kuster [01:11:31] Correct. Correct. And you know, I i, I don't wanna like bash large,

Vance Crowe [01:11:36] We'll just make that assumption. Yes. Rita does not want to bash the large banks. Yeah.

Rita Kuster [01:11:40] But it, yeah, it's true. You know, and, and like I said, I've, I have an affinity for community banks and what they do locally and what kind of impact they can make on people's lives, because I've seen it so many times, you know, and

Vance Crowe [01:11:54] Like what,

Rita Kuster [01:11:55] Just if, if I go back to my hometown, you know, those people that wanna buy homes that, that wanna have a business in that small town are not going, you know, they're, they don't have many options. They're not gonna go to Bank of America. They're not, and, and Bank of America doesn't want 'em, you know, so, so they've been able to be served by a community bank where they see the people every day out and about in their community. They probably know the kids, they know the parents and, and that kind of stuff. And it, it, it does, you know, it, it impacts people's lives and it makes them, you know, it gives them businesses that thrive and homes to live in and, and you know, those kind of things.

Vance Crowe [01:12:42] I was in a, in a meeting one time where somebody pointed out that the automation that's going on in banking has an impact that is somewhat unexpected in that it used to be that the, the way you brought up a banker was they started out handing out cash at the teller and then they move their way up. But the more automation you have, you start with all those easier jobs and then you just keep moving up the, the executive ladder and automate as much as possible. Yeah. Do you think that's true?

Rita Kuster [01:13:13] Yeah. You know, it's definitely changed over the years and if, if you're a banker that doesn't embrace automation, efficiencies, technology, it's gonna become more and more difficult for you. What

Vance Crowe [01:13:30] Do you mean by embrace? How can somebody embrace that automation?

Rita Kuster [01:13:34] You know, not fight it? You know, it's, it's just the way the business is, is heading, you know, if, if you, you can't keep pace at the level of every other bank. If you've got inefficient processes, if you've got systems that are so dated because there's, there's banks out there that are way far ahead of you, and sometimes for a borrower or for a customer, it comes down to speed. You know, how fast can I get this? And if

Vance Crowe [01:14:05] So, what's automated? Like the collection of the credit reports, or

Rita Kuster [01:14:08] It could be anything, you know, I think there's, there's banks out there, you know, you look to automate, you look for efficiencies in anything. You know, I, is there a way to make that a little bit more efficient? Is there a way to credit score people or to automate some of your underwriting to where you can get decisions to customers really quick? You know? So it's those kind of things that, that I think every bank, you know, they've gotta determine where they're going with it and if it's, you know, a kind of a short term goal for 'em or long term where they go. But certainly, you know, the, the technology from the standpoint of even as a, a bank customer has changed. You know, the amount of the times that I write a personal check is nothing

Vance Crowe [01:14:57] Compared to

Rita Kuster [01:14:58] Where it was. Oh yeah.

Vance Crowe [01:14:58] And that was always the reason that they gave us that we had to learn cursive was that we had to be, we wouldn't be able to write a check if you couldn't write cursive, which one wasn't true. 'cause you can write one in print. And second of all, like that's all gone to the, the, the side. So if somebody is thinking about different careers, do you learn banking in college? What do you, what do you think is the right path to be, to be a, a great banker?

Rita Kuster [01:15:23] Certainly a business background helps, you know, from, just from the standpoint of there's, there's a lot of accounting and there's a lot of financials and, and that kinda stuff, whether you're on the lending side or, or some of the other depository side. But, but I would say any more, you know, banks, you know, from a technology standpoint and different areas, there's a lot more diverse opportunities for people. What I would say is, is, you know, particularly on the lending side, the, the it, you do get exposed to a lot of different businesses and a lot of different things. So, you know, you if, if somebody wants kind of a routine, this is what I do all the time, probably there's some positions in banks that, that really won't accommodate that. But really,

Vance Crowe [01:16:13] I didn't expect you to say that

Rita Kuster [01:16:15] Really. I mean there's, I mean,

Vance Crowe [01:16:17] There's

Rita Kuster [01:16:17] Some, there's some jobs that, that maybe are a little bit more structured, but, you know, certainly on the lending side, it's, it's not because you don't know whether you're gonna have a manufacturer come in and ask you for a loan, a home builder come in and ask you for a loan or, you know, some business that you never even knew was out there. So it's, it's a lot about learning how businesses operate and, you know, learning how borrowers make money, you know, that that's essential, at least on the lending side, you know, so, so

Vance Crowe [01:16:52] Could somebody leave their current job being, you know, head of accounts receivable at a, at a plastics factory and then jump over to banking?

Rita Kuster [01:17:02] Sure. You know, there's always a learning curve, but if they've got an interest, you know, they probably couldn't come over at certain levels. You know, there's always that learning curve of just how the bank works and, and how to underwrite and how to talk to customers and those kind of things. But there's a lot of different backgrounds that I think could help. But certainly if, if you've got a business background or an accounting background, it's, it's great business. So.

Vance Crowe [01:17:35] And if, if you were giving advice to a young person in college about getting into banking regarding how they use social media, what do you, what do you think, what do you think of the social media and banking?

Rita Kuster [01:17:48] I would just tell 'em to be careful, just like with any, anything, you know, from the standpoint of, you know, just don't post anything out there that you, that you don't want, want everybody to read, you know, so no different advice from there that, that I think you wouldn't have in any other industry. I, I do think it's important for young people to maybe get a couple mentors that can help them, you know, kind of who

Vance Crowe [01:18:18] Are your mentors?

Rita Kuster [01:18:20] You know, there's been different ones over the years, you know, some of them have been bosses that I've worked with at all. I'll, there was a guy by the name of Bill Donius who I think you met Bill, and he was president of Pulaski and he probably didn't know he was as much of a mentor to me as what he was. Not only did he know banking, but he had a style about him and a rapport with people that you were just like, wow. You know, and it's that kinda stuff that, you know, you wanna pick up from, from people that, that you're exposed to. Like, you know, how did you handle that? You know, at the time I was coming up in banking, it wasn't something that was really talked about. You know, I think it would've been great to have somebody that, that you can go to and go, okay, well how did you get here? You know, it would've helped tremendously. So I would encourage, you know, anybody thinking about getting into really any industry and definitely banking to, you know, reach out to somebody that's in the industry and talk to 'em about it. You know, what did they do to get to where they are, you know, and, and what, what tools did they use? What training did they do? You know, that kind of stuff.

Rita Kuster [01:19:51] So I think it, I think it is important for any young person to, to have that relationship with somebody that they can go to and just ask for advice. And, and maybe it's that their, maybe it's their parents, maybe it's somebody within the industry, but I, I think, you know, having somebody to talk through those things would be helpful. So,

Vance Crowe [01:20:12] So if people wanted to get ahold of you, where would they find you?

Rita Kuster [01:20:15] I am at St. Louis Bank. Our office is in town and Country, Missouri. And again, which

Vance Crowe [01:20:21] Is just outside of St. Louis, right. For people that, dunno, it's like this suburb That's

Rita Kuster [01:20:24] Right, right on Highway 40. So Farty, I think. So. Anyway, it's small community bank. I am there every day and if you wanna apply for a loan Vance or a deposit count, you just let me know. I, you can reach me. I'm on LinkedIn. My email address is r I'll

Vance Crowe [01:20:44] Put it in the show notes. Yeah. Yes,

Rita Kuster [01:20:45] Yes. Okay. So, so definitely we, we'd definitely like to help anybody that, that is looking to expand their business, so.

Vance Crowe [01:20:52] Well great. Thank you so much for stopping by. I know you were very nervous about this, but you did excellent and I appreciate you being so open. So thank you very much. Thank you. Well, that's it for this week's interview with Rita Kuster of St. Louis Bank. If you enjoyed this, I hope you will hit the subscribe button or consider giving us a review. Those five star reviews have really opened up the number of people that are finding us on places like iTunes. The other way that people encounter this podcast is on social media. And one place that I am often in is Twitter. There's two people I wanted to mention this week that are particularly interesting and caught my eye. I've been speaking with both of them for several years. The first one is a man named Carl Lippert. Carl is an ag tech kind of wonky guy, and he, he's always got his finger on the pulse of what's new and he's not afraid to say things that are a little bit counter-cultural. So he'll be talking about everything from blockchain to smart barns and everything in between. And the thing that I like about Carl is that he sometimes will agree with you and, and support your point of view, and then sometimes he'll have a counterpoint and he'll wanna start a discussion with you. He's always great. And he is Carl Lippert, L-I-P-P-E-R-T on Twitter. And the other person is a breeder slash geneticist from out in California. She and I have known each other because we work together in the past, but now stay in touch on Twitter. Her name is Kate Crosby. And Kate and I have developed a friendship and it's gone much deeper over the last few months because each week I send her photos of the small tomato seeds that I've been growing all the way up into being tomatoes.

Vance Crowe [01:22:29] Kate has a very interesting perspective and has just moved into a new job where I think she's been using Twitter quite a bit more. So if you'd like to find somebody that knows a lot, and I mean a lot about breeding plants and interesting facts on, on genetics, then I recommend you talk with Kate Crosby. She can be found, and this is kind of an unusual Twitter feed at underscore Kate, KATE, underscore Crosby, C-R-O-S-B-Y. So I'll leave that in the description and I hope you'll go check them out. They are people that are fun and interesting, and it's a good way to get into an entirely new network on Twitter. I hope you'll come back next week because we are going to have a fantastic interview. I sat down with Tony Sansone ii, who started a cannabis company out in Las Vegas and was able to sell it just last year for $22 million. We get into the cannabis industry, what he thinks are jobs on the horizon, and even what he thinks will be the impacts on the country as we move more and more towards federal decriminalization. I, he's a great conversation and I really hope you will be around for it. So we'll see you next week.