Bank of Tennessee Screening Feb.

21, 2014 James Woods, Bank of Tennessee Joe Palladino, MSLGROUP Mike Ingrisano, Appian James Woods: It doesnt really match our policy, it just can take a bunch of stuff and then deal with it, but theres no customization, theres no configuration or anything like that; we cant really make it fit our policy. So what happens is, if someones not familiar with our loan policy, on what information they need to take for each different type of loan, they might miss something. And then that on the back end causes rework, which is what we try to avoid all the time. Its another [inaudible, :36] in the amount of rework that we do because it happens constantly. People forgetting something or not putting something correctly. So using a solution like this where we can actually customize it to match our policy makes it a lot easier because we dont have to; for one type of loan we might require this deal but we dont require it for other types of loans. Theres a million different specifics you can go into on those because if youve ever filled out a loan application theres quite a few things you have to put in the re, and it changes day to day depending on what our policy is and how aggressive were getting with our lending and also just by the loan type and regulations. So having something that we can actually enforce where they cant submit this loan application until its submitted correctly and it lets them know before they submit it incorrectly is great because it doesnt go in and go to someone else who has to review it, find the error, let them know that theres an error and then they have to go back and correct it and then resubmit it. Thats a huge time-waster for us. So thats the loan application quality thing, is just being able to customize our application to our policy instead of using generic stuff. Joe Palladino: Thats great. JW: Increasing underwriting accuracy Previously weve used, our loan policy is really where everything ties into. Its just this big document that spells out everything you need to know to lend. If you have that document you can basically recreate the bank. [Laughter] I mean, not recreate the bank, but you can lend exactly like we do. You know exactly what we do if you have that policy document. And the problem with that I mean, its great But its a big document that you have to read into and then you mis s a line and screw up the whole loan and underwrite something incorrectly and things can go wrong there. And weve had stuff in multiple places as well. Our old Internet was [inaudible?] and had some other limits and stuff like that, things that were updated on a daily or weekly basis where they didnt want to publish a whole new policy document and theyd refer to this grid for the limits on these loans, so that caused quite a bit of trouble. When Im reading down this process I had to learn the loan policy and its kind of tough to get my head around JP: Uh-huh.

JW: Its not complicated, its just messy. We had this big document, its just messy, and so easy to miss something. So having something like that makes our underwriting accuracy poor. I mean, it wasnt poor, but its easy to miss stuff. So with this new system we basically just have a rules system and you can go in there and you can see exactly what they are and the system will actually auto-decision loans if they meet those cookie-cutter criteria. If it meets our criteria and the system knows, it goes OK, that meets policy, youre good to go, and of course for our exceptions that we have people handling but those are people who specialize in doing. that. JP: Right. JW: So theyre very familiar and know the policy. And it lets them know the problems, with what policy they didnt follow. Whether its something like loan to value, or debt to income, or the loan amount is too high or credit is too low; theres quite a few different things that can deny a loan. And basically just getting into a more rigid structure thats well defined as opposed to a natural-language document thats easy to misinterpret. So thats how we went about fixing the underwriting accuracy is getting a better structure in place. JP: I assume that reduces the underwriting time? JW: Yes, it does as well. Obviously if you have a system doing the decision by itself it can do that in a couple of seconds, versus seeing it off to someone and having them review it by hand and turning it around and making that decision. And that was actually one of the big things too, is when we were planning this we had this big company-wide meeting and we were talking about ways to improve the bank and one of the lenders stood up and talked about how we had just changed this was a couple of years ago how we had just changed the loan policy after a merger and previously, with their old policy, he knew the guy was coming in for a loan and he would just go ahead and fill out the documents, have him sign the paperwork and cut him a check. He knew the guy, he knew the loan was good; its a pretty small bank, so we know a lot of our people, so he can pull their credit and stuff by the time he gets here. So with the new process it took him a couple of hours to do something that would have taken him 10-15 minutes. That was one of the big things, is trying to keep stuff like that from happening. And thats where the audit [?] decision comes in, everything before was email based, it was really great email, thats a really great way to notify people, people are always on Outlook. They would send the application thru email and would go through it and if you didnt include the right people on it or if it didnt go to the right group, or maybe the email got lost, things got dropped that way. So having a system that can remind people that things are out there and notify them when somethings waiting is great for fixing that underwriting time and reducing that underwriting time. Anything else on the underwriting time or do you want me to keep going? JP: Thats good, thats great stuff, yeah. JW: I feel like I ramble sometimes

JP: No its good, thats what I was hoping for actually. [Inaudible] I know, this is great. [Laughter] JW: Ok, I reduced the amount of required training for lenders Yeah so this is another thing I found with using business process management and tools like this by defining our processes and building our applications around that process that theyre literally being matched one for one. Our training is kind of inherent in the application where [laughter] Working on the training materials for this is you know The training person asked me, Well can you get the screenshots with instructions for what to do on each page? And its really just screenshots because its not like Im giving them a blank form and saying Hey, figure out how to if they have instructions .. something required to let you know because it lets you know when you make a problem , so really training is a lot simpler than walking through this huge document going OK well if youre doing this type of loan make sure you get this, that and the other And its good for that because otherwise training can be a nightmare when you have policies that are changing frequently and we need to keep our people aware of those changes. That again reduces the rework and stuff by having a __ in the whole application quality and train to tie it together to We have the application more self -explanatory, which reduces the amount of training and also improves the input of the application so it really all kind of works together in a synergy, if you will, if you want me to use a cheesy business term. [Laughter] JW: Sorry, I hate that word. Its been over-used, I think thats safe to say. [Laughter] JP: So, this is all great stuff about the solution. I wonder if you can add some context about why mobile. Because this can be used at a desktop as well I assume. JW: At a desktop as well, is that what you said? JP: Yeah, can someone --- [inaudible] JW: I forgot this is a mobile mic [laughter] JP: No, its so good, I can use all that stuff. Now lets say, someone is -- are they on an iPad in the persons home talking about their loan application or some other location? JW: Yeah, and most of these come through the desktop. The application process is pretty long; its not something that you typically want to do mobilely. There are other things like the rate calculator for instance, if you want to get a quick quote on a loan you can do that mobilely. That also enables the furthest steps in the process. The less data entry-intensive steps in the process: getting the documents, modifying the loan down the road if they want to change the loan amount, stuff like that is where mobile is a lot

more important because Its certainly possible to step through it. Most of our people do use their phones for stuff, and we do have iPads as well, so its pretty even blend. It actually probably leans more toward the iPads and tablets. On a three-inch or four-inch screen, however ibg those little iPhone screens are, filling out 100 different fields is kind of a pain. But most of the application process is done on desktops. But like I said those other steps are great for mobile, for the smaller steps. JP: And, is it iOS and Android as well? JW: Were just on iOS. It would work the same on Androids but the bank doesnt support Android phones. JP: Yeah, I noticed in a later question that you folks are not doing BYOD. Its all bank provided, which Im sure is security-related. JW: Yes, exactly. I used to be in IT and that was my decision to use some transparency on that. That was after I did the research on it and we decided not to just because for one, weve always been a bank-owned or company-owned and weve always had issues with Were in pretty rural areas and one issue that weve had is one of the other banks we brought on was on Sprint, and not to bash Sprint I used to be a customer of theirs the service is awful up here, and it caused tons of support tickets of people not getting their email. It wasnt a problem with our network, it was a problem with their cellular network. So if were going to do BYOD wed have to say that you have to have a decent carrier, you have to have a phone that were compatible with on our system, and also just managing BYOD devices is kind of a pain and expensive. Some of the solutions we looked at were in the 10-, 20-, 30-thousand dollar range and its just kind of like, OK. Its nice for that one guy who likes to bring his own Android phone. I have my own Android phone, its my personal phone, and I do whatever I want to it. Otherwise iPhones are simple and easy to use and people like them, so thats what we went with. JP: You know its a hot topic right now and certainly there are plenty of pros, but there are plenty of cons as well. Especially in regulated industries. If people are just getting email and you work at a company that maybe confidential data isnt that confidential thats one thing, but when youre passing around social security numbers and personal information like that, security is everything. JW: Yeah pretty much everything we do, every customer, we have social security numbers, how much money they make, where they make it. Were a bank. You trust us with your money and your information, thats what we do. So having that in peoples own devices is kind of scary. Ive known people who have actually left one company, a BYOD, and theyll go to another company and theyre still tied into the email server and havent disabled their account yet. So theyre actually still pulling in all their old contacts and thats exactly the situation we want to avoid. JP: Certainly, certainly.

JW: So thats I have my stance on BYOD. I definitely see the pros but at least in this industry, I dont think its worth it. Its not that expensive to pay for our own phones. JP: Well in the end its probably a lot less expensive, because one breach could be catastrophic. JW: Absolutely. I mean the management for BYOD is a huge pain, especially because we own these devices. They sign a contract saying that we own it and we can do whatever we want, so if we want to track it, wipe it, do whatever, your data can be wiped in a second is basically what we tell them Youre just borrowing this. So its really great for banks, I think. If I was a smaller business that wasnt regulated and didnt deal with this kind of stuff, Id probably be all for BYOD. But not for us. Whenever I get Security is obviously a big thing here in banking and sometimes we get frustrated. Sometimes I just put my head down on the desk and say Why cant we just sell lemonade? [Laughter] Lemonade and cookies. I dont have to take anyones social security number. JP: Thats an industry that can be improved. JW: Im just gonna open a lemonade stand Cash only. Then the whole regulatory climate is going to go out the window. I probably wouldnt have a job, because you know, I dont think it takes more than one person, but whatever Itd be so much easier. JP: [Inaudible] JP: This is one of those industries where you have to follow the rules, and theres a big book of them. You just have to be careful. [Inaudible] JW: As youve noted before, the regulations can change. There are the -JP: Absolutely. JW: Financial regulatory landscape has changed so many times even in the last 10 years. JP: In the last 10 weeks. [Laughter] JW: I cant keep up with them. Our compliance people do that. They just tell me what to change.

JP: Some of the other questions that Ive put together youve answered through our conversations. One thing you noted about better visualization and analyzing of loan prices and policies is that a pretty much self-explanatory form? Go ahead. JW: Whats the question I answered that on? JP: What are the other benefits of RLY [? Inaudible] youve realized? JW: Oh yeah, I see it. Like I was saying, I actually have the loan policy right next to me because Im talking to someone after this about changes they want to ma ke in it because like I said they always want to change loan policy. JP: Is it like a book, or like a phonebook? How thick is this thing? JW: Its only about 20 pages or so JP: But its dense JW: Oh yes its dense, very dense. If you miss a comma Its like the Constitution. You misinterpret something and you can completely screw something up. Its very dense Lots of numbers, lots of very technical terms. Well not very technical, I dont mean to sound like Im on my high horse or anything. But just lots of technical terms that Its not fun to read. Its You get lost in it. But the visualizing thing is basically it kind of ties into that thing I answered on the first question. Is getting that policy into a structure thats actually well-defined as opposed to spread out and kind of just written out in plain English. Which you know plain English sounds good. Except when youre talking about policy, I think we have about 15 products in this thing. And when policy and definitions and pricing is spread out all over the place its hard to really get a grasp on whats doing what. And a lot of our pricing actually points back to different products. And thats not the way its set in the system but on the policy it just says refer to this price and add or subtract this many points because its a different type of loan and were just going to do that. So its really hard to see if you wanted to quote something out for example if I wanted to quote out a [inaudible] loan, ones RV, like a recreation or AT V kind of loan, stuff like thatits like oh, refer to the auto policy and then add so many points. Well, you have to go out there and go quote an auto one and figure out what the price is for that and then you have to add those points. So its not bad when youre doing it one at a time but when youre trying to audit the whole policy you dont really notice they dont stick out as much than when you can pull the table that says heres the price for each product and what our spreads are and what were doing there. So you can see OH, well I see if this person got really bad credit were only adding 50 points when we should be adding 100 points or something like that. So its that kind of stuff, its just getting stuff out in the open and more well-defined, and maybe the people didnt have this problem, their banks didnt have this problem because the policy just kind of grew on top of itself and was due for a print update. [Laughter] and just became a big monster. Whatever our senior risk management guy was, he was looking at these numbers and he was like, Wow these are, Ive never really noticed some of these numbers; we should be adding

more for this situation or that situation because it was hidden behind all this other junk and it wasnt out there where I could see it. So its good for stuff like that, I guess. JP: I wonder if in the past thereve been situations where the wrong margin was applied and the bank left money on the table JW: Yeah, absolutely. JP: So, I mean while its quicker and all other great efficiencies you make sure the bank gets paid for its work. JW: Yeah, I mean its a big win all over the place. Its not like theres one little point where No, its worth it in many different aspects. Theres all kinds of things that when you go and turn every stone over you usually find some interesting stuff. JP: Great point. JW: Instead of just adding on and adding on and adding on Thats whats been happening, is a lot of these policies and products have just been added onto for years and years and theyre just good for good ol audit and cleanup, so. Its always good to start fresh every once in a while. JP: Sorry, sometimes I type a little too slow. Im just catching up there. [Laughter] JP: I feel like Ive got a lot of great stuff and its coming up here on 10:30 Are you on Central? Is it 9:30 for you? JW: Im on Eastern. JP: Yeah, my client in Nashville is on Central. JW: Yeah. JP: Alright, I feel like Ive got a lot of great stuff. I appreciate your time unless theres some other stuff you want to add? My next step will be to take all of this stuff I got from you and incorporate it into your answers and get it back to you so you can look at it and make sure its right, because I dont want to get anything wrong. And then our next step after that would be to submit it to the editor. JW: Excellent. No, I dont think I have anything else to add then. JP: Great, I really appreciate your time, I got so much out of this. [Inaudible]

Mike Ingrisano: This is really helpful for us. And I know as Joe and I have talked we can take these points from this call and look to develop out further for some other media pitches and expand on what we can get coverage for you guys, and there some really great things here that we can discuss. So thank you again for your time. [Inaudible]

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