12/16/24 Reimagining Banking: AI, Crypto, and Loans with AJ Antongiovanni from Mission Bank

The Moneywise Radio Show and Podcast Monday, December 16th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement Guest: A. J. Antongiovanni, President/CEO of Mission Bank website: www.missionbank.bank/

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

• 0:09Speaker 01

  I need the dollar, dollar, dollar, that's what I need. Hey, hey. Well, I need the dollar, dollar, dollar, that's what I need. Hey, hey. Said I need the dollar, dollar, dollar, that's what I need. And if I share with you my story, would you share your dollar with me?

• 0:29Speaker 02

  Securities offered through SEF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SEF Investment Advisors, Inc. SEF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:39Speaker 00

  Now, let's start the Money Wise Show.

• 0:42Speaker 03

  Welcome, welcome to the Money Wise Show. We are live from the padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 AM, 101.1 FM, and always streaming at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. I'm Sharad Waite, and sitting here with me is...

• 1:04Speaker 04

  Sammy Abiyawi.

• 1:05Speaker 03

  Sammy, welcome back.

• 1:06Speaker 04

  Thank you.

• 1:07Speaker 03

  You were over in the motherland.

• 1:09Speaker 04

  That's right, I was.

• 1:11Speaker 03

  And you made it back safely?

• 1:12Speaker 04

  I did, it was a very good flight. Air France did really good, food was excellent.

• 1:19Speaker 03

  Nice.

• 1:20Speaker 00

  How long is a flight like that?

• 1:22Speaker 04

  So it's 11 hours between Paris and LA, and an additional three hours, almost three and a half hours between Paris and Rabat.

• 1:30Speaker 03

  Wow.

• 1:31Speaker 04

  My father lives about 20 minutes from the airport, so it's an easy drive.

• 1:35Speaker 03

  Yeah, it's crazy, we were just talking, it's, you know, what a world we live in. International flight has been around for, you know, a few generations, but, I mean, you were just in North Africa, you were in Morocco just a couple days ago, now here you are in the padded radio room on Stockdale Highway.

• 1:51Speaker 04

  Yeah, it's amazing, no, seriously, it's amazing, and you go from one world to another, living on the same planet.

• 1:58Speaker 03

  Yeah.

• 1:59Speaker 04

  Completely two different, different, I mean, completely different. And I took my wife this time, we had a great time, we celebrated our 20th anniversary, and my dad is sick, so she went and she wanted to go and check on him, and it made him really, really happy.

• 2:14Speaker 03

  Nice.

• 2:15Speaker 04

  So we had a great time, great food, great, great, great everything.

• 2:18Speaker 03

  Yeah, good weather?

• 2:19Speaker 04

  No, it was cold.

• 2:21Speaker 03

  Ah.

• 2:22Speaker 04

  It was cold, and we did not take a lot of... You know, warm clothes.

• 2:27Speaker 03

  Uh huh, uh huh.

• 2:28Speaker 04

  So I, I, I kind of squeezed into my dad's jackets. I'm an extra large, he's a medium. He wears large, so I, I was, I was looking European.

• 2:41Speaker 03

  That's nice. So glad you made it back, Sammy. Uh, we've had a really good week on the show. So much participation from our listeners. We've got a couple of messages and questions here. Why don't we get right to it?

• 2:52Speaker 04

  Sure, I'll start with the first one. Happy Monday. Uh, do they take money from your retirement if you file bankruptcy?

• 2:58Speaker 03

  Great question. So obviously we're not attorneys. We're not going to be giving out legal advice and it also depends on where you're living. But in California, retirement funds typically have very strong protections against or during bankruptcy proceedings. And this is in part because of the ERISA protections that come with retirement accounts. So again, generally speaking, most traditional pension plans, 401K plans, 403B, IRAs, those are generally protected from creditors when you go through a bankruptcy. So that's why, I mean, it's, it's not the, it's not the main reason why people like save through these instruments and through these vehicles.

• 3:42Speaker 03

  But it's one of the benefits that come with saving through a 401K is you have that, you have some added protection from creditors. If you, if you do happen to go through bankruptcy, um, so.

• 3:54Speaker 04

  Even, even though, let's say you are of the age of withdrawing and you have an RMD or a required minimum distribution. Are those also protected or, or no?

• 4:06Speaker 03

  No, that would be, that, that would be maybe something that would be calculated under the, under your income.

• 4:12Speaker 04

  Okay.

• 4:12Speaker 03

  Uh, and, and remember when you withdraw from a retirement account, every, every dollar that somebody withdraws from that account is recorded and reported to the IRS and to you. So you'll get your 1099 each year. That shows how much you withdrew from that and of. Of course, it's taxable income. So it sort of goes into your taxable income category.

• 4:42Speaker 04

  Got you.

• 4:43Speaker 03

  And so that may be a different

• 4:48Speaker 03

  regulation that is overseen by the bankruptcy court. But when you're going through bankruptcy, they're going to sort of look at what your assets are. This is true also when you go through divorce. Now divorce doesn't protect your retirement accounts because generally when you divorce, well, you built up your retirement accounts together.

• 5:09Speaker 04

  Especially in the state of California, I'm going to assume.

• 5:12Speaker 03

  Yes, and especially in the state of California where it's community property. And so the judge has the ability in divorce court to be able to divide up retirement accounts and say, okay, well, you're going to get this and you're going to get this part of, even pensions. This can happen with state retirement pension funds. It's okay, well, you know, your spouse is going to get this much and you're going to get this much, even though you may be a ways away from retirement. So there are some special protections that are given to retirement accounts. It usually falls under the ERISA Act. And so, great question.

• 5:47Speaker 04

  Yeah, very good question. Very good question. Can we go into the second one?

• 5:50Speaker 03

  Let's do it.

• 5:52Speaker 04

  What's the best advice you'd give for someone just beginning in stocks? Also, I heard the show Friday and wondered what would be a solid book to read for beginners.

• 6:01Speaker 00

  So if you missed Friday's show, we had a listener that said that they just started listening to the show at the beginning of the year, really enjoyed it, and asked us to write a book.

• 6:12Speaker 03

  Oh, yeah.

• 6:13Speaker 00

  So that was Chris. It's like, I'm a great advisor, but I don't think you want to read a book of mine.

• 6:18Speaker 03

  Yeah.

• 6:19Speaker 04

  And English is not my first language. Definitely not me.

• 6:22Speaker 03

  Yeah, it's, you know, there are so many, there are a lot of great books. So let's just address that. If you're looking at reading something and wanting to learn about investing, there's a few books that usually come up on these lists that I've read that I could recommend. There's some classics. The one that usually comes to my mind is The Intelligent Investor. This is Benjamin Graham wrote this book. This always comes to mind because this is Warren Buffett's favorite book. I think Bill Gates has also recommended this book over and over. And it's, it's, it's a really great fundamental breakdown of value investing. And I really like that because it gives investors, especially beginners, more of those timeless principles

• 7:07Speaker 03

  of the fundamental basics of a company making profit. How can you tell if a company makes profit? And how can you take advantage of that as a shareholder or as an investor? And so I really like, and of course Benjamin Graham is just one of the godfathers of modern day investing. Along with Peter Lynch, he wrote a great book called One Up on Wall Street. Benjamin Graham, Peter Lynch, a couple of great Wall Street respected investors, as well as John Vogel, which we talked about John Vogel last week on this show. He's the founder of, of value investing and index investing.

• 7:49Speaker 03

  And those, those Vanguard type investing. He wrote a book many years ago called The Little Book of Common Sense Investing by John Vogel. Really straightforward way of investing for long-term, low-stress investment approaches. You know, of course, a lot of it is founded in index investing, which we're big fans of. So there's, there's three books right there that, that I can certainly personally recommend and endorse. Several others that usually come up, I think even our listener just mentioned this is the, is the Investing for Dummies. But actually it's a personal finance for dummies. Eric Tyson is the author of that.

• 8:32Speaker 03

  Those are decent books, the, the dummies. Yeah. Books because I, you don't have to start from beginning to end. You can use it as a textbook, like a reference book. And they're, they're generally pretty comprehensive. Psychology of Money is a book that we, we've kept on, on stock here at Money Wise. I think we still have several copies here in the office that we've given. Out to clients and to people who are investors. Morgan Housel is the author of that again, The Psychology of Money. That it's a traditional investing book that it covers not just the basics of investing, but just making financial decisions, which is really crucial in today's world where investing

• 9:14Speaker 03

  is so much more of a psychological aspect than it is a technical aspect. It used to be that just investing took some challenge because you had to find a broker. This before online investing, you had to find a broker and then you had the trading fees and you had to be aware of all of these different, you know, aspects to just getting into investing. Whereas now it's more of a psychological, like you have to get your mindset into a certain way of investing if you, if you really want to get aggressive.

• 9:42Speaker 04

  Yeah, and options are just so many today, too.

• 9:46Speaker 03

  Yeah, there's so many like you, don't be afraid to use ChatGPT or whatever, you know, large language model program that you're using because they're great ways to, they're essentially like Cliff Notes.

• 9:58Speaker 04

  Yep.

• 9:58Speaker 03

  You and I have done this in our, in our research so many times, Sammy. It's like, I don't have time to read this book, but I could get, you know, a summary that I could read in 10 minutes and can break down some bullet points for me.

• 10:12Speaker 04

  I, I, I make it interactive in my car now to talk to, you know, the, the voice.

• 10:17Speaker 03

  Yeah.

• 10:18Speaker 04

  And I just ask, and if I, I have a problem or I want to repeat something, I just say, repeat. And by the time I get to work, it gives me about 20 to 25 minutes of basically a conversation, like if you're having a conversation with somebody about a specific subject, it's amazing.

• 10:33Speaker 03

  Have you tried the, the new update on your Apple, on your iPhone?

• 10:36Speaker 04

  Not yet.

• 10:37Speaker 03

  So it now Siri is incorporated with the latest 18.2 iOS update. Siri is incorporated into ChatGPT or OpenAI is incorporated to Siri. So Siri's much smarter than she used to be, where you could talk to, talk to Siri like you can ChatGPT and have, you know, access to the, the, that information and your phone, which is kind of creepy.

• 11:00Speaker 04

  I have an older phone, so I need, I'm going to upgrade soon.

• 11:03Speaker 03

  Yeah, it's, it's worth it, that's for sure. So thank you for our listeners. Those are really great questions. Yes, keep them coming. 661-396-1000 is the number. If you have any questions or comments, you can send them 24 hours a day. We're going to take our first break of the day. We come back, there's several headlines that we're going to get to. Plus, we're going to have our guest coming up soon. A.J. Anton Giovanni from Mission Bank, CEO over there. We're going to talk about what's going on with banking and interest rates and much more. You won't want to miss it. We're Money Wise.

• 11:33Speaker 00

  Have you been putting off your finances? Seize the day. Call the Money Wise office at 661-847-1000.

• 11:46Speaker 03

  Welcome back. We're Money Wise. I'm Sherid Wait. I am here with Sammy Abiyawi. We are joined right now by our guest, A.J. Anton Giovanni. He is CEO at Mission Bank, our local business bank here in Bakersfield. So excited to have A.J. back on the show. Hey.

• 12:02Speaker 05

  Thanks, guys. Always great to be here. Good to see you. Haven't seen you in a while.

• 12:05Speaker 03

  I know. It has been a while. Congratulations, by the way. I was just reading the third quarter financial highlights for Mission Bank. Things seem to be going really well over there.

• 12:17Speaker 05

  Yeah, things are going well. We're having a good year. Knock on wood. We work really hard, but you know, it even surprised me because our biggest thing this year and for most banks has been to grow our deposits. Most banks are not growing or even shrinking.

• 12:30Speaker 03

  Right.

• 12:31Speaker 05

  And we had, we ended up with double-digit growth from January 1st to 9:30. That's astronomical. It's like, we set a big goal. Sammy knows about this. A goal that freaked everybody out. We didn't think we could, we could get to this goal and we beat it by $50 million. We set $100 million goal and we were over $150 million in deposit growth through the first nine months of the year.

• 12:54Speaker 03

  That's unbelievable, unbelievable, because it's in a year where you have people still feeling the high interest rates.

• 13:01Speaker 05

  Absolutely. Yeah, our biggest competitor for deposits has been the US Treasury, right? People can, you know, just put their money in a Treasury bond and with this inverted yield curve, which it's starting, you know, we could talk about that. It's starting to un-invert. But when you have the inverted yield curve at a time when technology has made it easy, all of us can just transfer not very large sums of money and go directly to the Treasury. It's almost impossible for a bank to compete with. And so that's been a challenge. You know, so we'll see. So far, so good.

• 13:37Speaker 03

  Yeah, I mean, it's good. Is it? Well, how much of this, the fact that deposits are up for the bank, is the reflection on the local economy? Is it just the fact that the, because, you know, not all banks are doing this, like you said. So what's going on with?

• 13:53Speaker 05

  Uh, yeah, that's a, that's a good, that's a good point. I think it's, it's local economy, but it also just local competition. So as banks get bought out, which you know, and it's happened here fairly recently with our only other local bank that was bought out a couple of years ago, right? Normally, there was a cycle of new banks, investors would start new banks, but that's not happening very much, even at all. So we're just in a very good spot in our markets, and not just Bakersfield, but Visalia, Ventura, San Luis Obispo, Lancaster, where we're really the only local business bank, and customers value that. And so we're growing new customers. But also, I think something to your alluding to, our economies

• 14:37Speaker 05

  have been good in all of those markets, have been pretty resilient. And so that's great for us.

• 14:44Speaker 03

  Yeah, I think, Sam, you were going to ask about the markets, because so much of the banking is a few different sectors.

• 14:52Speaker 04

  That's true. I was going to ask AJ about just here locally, the challenges that we have with ag, especially water, and just the prices of almonds, and how it's been affecting prices of

• 15:03Speaker 05

  All the good things.

• 15:04Speaker 04

  of land, and also oil, and the challenges that the state is imposing on the local oil production, and not just local, but the state of California in general.

• 15:13Speaker 05

  Yeah.

• 15:13Speaker 04

  And are you seeing an impact on the clients, on, I mean, I'm hearing you growing deposits?

• 15:21Speaker 05

  Yes.

• 15:22Speaker 04

  Where are those coming from?

• 15:24Speaker 05

  Yeah, well, so first of all, like I said, over half of our business is outside of Kern County.

• 15:29Speaker 04

  Yeah.

• 15:30Speaker 05

  And I think that's beneficial to us, our shareholders. It's a more diversified customer base, whether it's deposits or loans, all the different risk profiles. We're in other areas where they have more other economic drivers. Here in Bakersfield, absolutely, farming has not been good. Actually, one area I would say has been pretty good or really good, actually, and that's citrus. So citrus farmers have been growing, profits growing, all those kinds of things. Almonds, terrible.

• 15:58Speaker 04

  Terrible.

• 15:58Speaker 05

  Grapes, not good. Kind of more your row crops, cotton, alfalfa, wheat, not really great at all. So yeah, our farmers are challenged. I was just with a customer today that's a service, well, it's a potential customer, I think we'll get him. But a very good company, you would know this company, very reputable service company, and primarily, you know, you go back 10 years, they were servicing the oil fields, right? And now that's a much smaller percentage of their revenue, but they don't, they do something that they could transfer into other industries and adapt, and they've done that. So I think that that's happening. And we just, we have other

• 16:36Speaker 05

  industries happening here, a lot of distribution, other manufacturing. So definitely, the oil, you know, oil industry and ag, not great. But I think our customers, a lot of them, not so much ag, because if you're a farmer, you're pretty much a farmer, but a lot of those service companies are finding other industries and moving towards those.

• 16:58Speaker 03

  You mentioned that Mission Bank is the only, now our only, local bank, true, you know, local bank. So, and it did seem like, you know, 15, 20 years ago, there was, there were a lot more banks that were coming up, or at least starting.

• 17:15Speaker 05

  Yeah.

• 17:16Speaker 03

  So where is, you know, are we, are we going to continue to see a consolidation in banking? Do you see?

• 17:22Speaker 05

  Yeah.

• 17:23Speaker 03

  Yeah?

• 17:23Speaker 05

  Yeah, absolutely.

• 17:24Speaker 03

  I think we talked about this last time you were on the show, too.

• 17:26Speaker 05

  Yeah, it's, it's a trend that's been happening for years, just within my career, which is 20 years. I mean, not, not the longest, but it's been a while now. We went from about 10,000 banks to 4,000. And that was down from at a peak, you know, probably somewhere in the seventies or eighties of like 25,000 banks. So I think yes, that trend will continue. And like I said earlier, it's just very difficult to start a new bank right now. The capital requirements and the requirements on the management team are are just a lot stricter. Higher capital requirements, a lot more sophisticated knowledge that's needed to run a bank. And so you just don't have the people that have done it before and qualified to do it.

• 18:10Speaker 03

  We're joined by AJ Anton Giovanni. He is CEO at Mission Bank. We're talking about, well, last year, last time you were on AJ, we, I believe it was last year. We were on the heels of Silicon Valley Bank, Signature Bank.

• 18:24Speaker 05

  Yeah.

• 18:24Speaker 03

  In 2003, going out of business. There was, they were basically disappearing. And there was some, a little bit of hysteria on the street.

• 18:32Speaker 05

  Yeah.

• 18:32Speaker 03

  In terms of depositors.

• 18:34Speaker 05

  Yeah.

• 18:35Speaker 03

  It now feels like, that was like five years ago.

• 18:38Speaker 05

  I know, doesn't it?

• 18:39Speaker 03

  It does.

• 18:39Speaker 05

  Yeah.

• 18:40Speaker 03

  But one of the things that I learned from that experience was it seemed as though our federal government isn't about to let anybody, any depositors ever lose a dime.

• 18:50Speaker 05

  Yeah.

• 18:51Speaker 03

  No matter what.

• 18:51Speaker 05

  Yeah.

• 18:52Speaker 03

  Like no matter what, how much money they have deposited. Now shareholders might be different.

• 18:56Speaker 05

  Right.

• 18:57Speaker 03

  But what can we learn maybe from the bank failures that we, the slew of bank failures we saw last year?

• 19:05Speaker 05

  Yeah, well, first of all, yeah, there was a Warren Buffett said this famously. He said, I'll bet anybody a million dollars. And this is right at the peak of the frenzy. Right after Silicon Valley and a couple of the others. He said, I'll bet anybody a million dollars that, and his bet was no depositor will lose a cent. Banks will fail, shareholders will be wiped out. You will lose your investment if you're an owner in the bank, which is what should happen. But we should not penalize depositors for kind of the sins of that bank's board, management team and those kinds of things, right? And really, without saying it, the government behaves that way. So I wish they would just say that.

• 19:41Speaker 03

  Right.

• 19:41Speaker 05

  That's a political issue and I get it. There's some reasons not to do that. But yeah, the idea that a depositor is going to lose. Lose their money in a bank failure is just, I don't think it's gonna happen. I would not take Warren Buffett's bet. I'd take the other side of it if anybody wanted to bet, but.

• 19:56Speaker 03

  And I think we did some research last year. I couldn't find a case in the history, at least since FDIC has been created, that a depositor has lost money.

• 20:06Speaker 05

  No, I haven't done that. You know, you could fact check that, but that's what I believe too. I don't think anybody's ever lost one. And definitely during the financial crisis, oh eight through whatever, 10, nobody lost money. Last or two, almost two years ago now with SoCon Valley and a couple of the others, nobody lost money. There was one tiny little bank in Oklahoma that failed. Did you guys read about that?

• 20:26Speaker 03

  No.

• 20:26Speaker 04

  No.

• 20:27Speaker 05

  Well, they said they had some, I don't think anybody lost money, but they were not really excited to say that because it was insider fraud. So this bank had some major issues going on. I mean, people are gonna go to prison and things like that. So I think, and it was a tiny little hundred million dollar bank.

• 20:43Speaker 03

  Like a community bank, yeah.

• 20:44Speaker 05

  Like a very tiny little bank in this small little town where, you know, one person was basically stealing money. And so I think they wanted to send a message because there's a number of those, not really in the West, but you go to the Midwest, the South, there's a ton of these little family owned banks that have been around in some cases for two, three generations. And they, they have one branch in one little town and.

• 21:05Speaker 03

  Right.

• 21:05Speaker 05

  And they do a great job and they're a hundred million dollars, you know, a blip on the radar in terms of deposit insurance coverage and all those things, right? So there'd be no reason that that would ever be any issue other than, you know, we want to let people know if you're a bad actor, that's not gonna.

• 21:20Speaker 04

  Yeah.

• 21:20Speaker 05

  I don't know, but.

• 21:22Speaker 03

  Oh, part of.

• 21:22Speaker 05

  Yeah, read, Google that one. That was kind of fun to read.

• 21:24Speaker 03

  I have a vague memory of that.

• 21:26Speaker 05

  Yeah.

• 21:27Speaker 03

  Part of also the third quarter earnings report highlighted the credit losses or allowances for credit losses, which is the percentage of, I guess, gross loans that have.

• 21:41Speaker 03

  Had problems or issues like how does somebody like basically somebody would look at a bank last this year and go, wow, there's gonna gotta be some losses from loans because interest rates are higher. And so people are going to start defaulting on their on their loans.

• 21:55Speaker 05

  Right.

• 21:55Speaker 03

  But this is incredibly low and it's probably always historically been low.

• 21:59Speaker 05

  Yeah. Yeah. Knock on wood. We have not had really very many loan losses, almost zero through the life of the bank and our credit quality is still really good. Most of the banks are. So what we have to do is we have to set aside a reserve for some future potential loss. So to your point, if the economy becomes uncertain, if unemployment spikes up, if we're just seeing stress from our borrowers in any specific area, if they're paying late, then we should, if we're doing our job correctly, we should be increasing the amount of that reserve. And then if things are more positive, we can, we can decrease and they're always kind of increasing or decreasing around a certain range. We've been at one and a half percent of our loans

• 22:42Speaker 05

  pretty consistently over the last year or so. We did start increasing it like a year and a half ago.

• 22:51Speaker 04

  But you increase it because you're doing more loans, right? I mean, you're successful in.

• 22:55Speaker 05

  As a percentage, we're increasing it though.

• 22:57Speaker 04

  Right.

• 22:58Speaker 05

  But yes, absolutely. As a dollar amount, we're also increasing it. No, we just thought that there was gonna be some.

• 23:03Speaker 04

  Adjustment.

• 23:04Speaker 05

  Adjustment. Yeah. I don't know. I guess we're having a soft landing. I don't know. But we just thought that there was gonna be more issues that really haven't materialized.

• 23:11Speaker 03

  You weren't alone. Every, we were all thinking it. You know, like when you, when you, when you jack up interest rates so quickly to combat an already big problem of inflation, you think, well, how, how is, how are we gonna treat inflation with an even bigger problem?

• 23:25Speaker 05

  Right.

• 23:25Speaker 03

  But that's how you treat inflation. That banks would get hit the hardest, you would think.

• 23:29Speaker 05

  And that's what we were anticipating. And so in most of the banks, JP Morgan, those, you know, you read the Wall Street Journal, those kinds of things, they were doing something similar. But it just hasn't materialized. So we're not going down. We're just basically being consistent at this point.

• 23:45Speaker 03

  I'd like to just say it's because Bakersfield and Kern County is awesome, but like you said, you're doing a lot of loans outside of Kern County.

• 23:52Speaker 04

  Here's an interesting question. I think, I think, Sherrod, you will be interested in hearing about it from AJ. Now, when you reserve for the loan losses AJ and you don't use them because your, your portfolio is performing well, can you reverse those?

• 24:05Speaker 03

  Yes, you can. Some banks will do that.

• 24:08Speaker 04

  So Mission Bank hasn't, historic hasn't done that, but other banks have. That's how sometimes they show profit.

• 24:13Speaker 03

  Right. Yeah. So you can create revenue by reversing your previously, you know, expense. So if you, yeah, it's like you said, same way. We have not done that. But yes, it was about two and a half years ago, a lot of banks were doing that. So they would report earnings growth. But if you backed out that reversal, their earnings were actually shrinking.

• 24:31Speaker 04

  Which affects their stock price. That's true.

• 24:33Speaker 03

  Yeah. Yeah. We're going to take a break now. When we come back, we're joined by AJ Anton Giovanni. He is CEO of Mission Bank. I'd like to get your opinion on crypto. You've got to get this question because we get it all the time. But you know, what's a bank's take on the cryptocurrencies? Yeah. What this, what the future might mean for them. We're Money Wise. We'll be right back.

• 24:55Speaker 00

  If you're a business owner who provides a retirement plan for your employees, contact Money Wise Wealth Management to see if you're maximizing your options and minimizing your liabilities. Money Wise 401k plans are customized to you and your company's needs. 661-847-1000. That's 661-847-1000.

• 25:22Speaker 03

  Welcome to the Money Wise Show. Appreciate you tuning in. I'm Sharad Waite here with Sammy Abiyawi and our guest AJ Anton Giovanni from Mission Bank. AJ, thanks so much for sticking around. Appreciate it. Do you get questions about crypto? And if so, what, what, what do you say?

• 25:42Speaker 05

  Yes, we do get questions about crypto and I'm probably in the minority, but I don't, I would not advise investing in crypto. Obviously, especially in the last couple of weeks, it's, it's shot through the roof.

• 25:55Speaker 03

  Yeah.

• 25:57Speaker 05

  But I, I don't, it has no utility, right? So the idea that somebody's going to buy it in the future for a higher price is the only reason it's worth more.

• 26:05Speaker 03

  Yeah.

• 26:06Speaker 05

  And to me, that sounds, I don't want to call it a Ponzi scheme, but it doesn't sound like an investment, right? I like to analyze a business, understand their position in their market. They have a real cash. From a need that is being satisfied, they have a competitive advantage, they're producing cash flow, that's intrinsic value.

• 26:21Speaker 03

  Right.

• 26:21Speaker 05

  That's where I would invest. And so, like I said, I'm kind of in the minority there, but.

• 26:27Speaker 03

  Well, you're in our majority. We feel the same way, too. Essentially, what it is, it is the definition of a Ponzi scheme. Like when you're handing off one investment to another investor and the only value is whatever that person thinks it's worth. It's like you're playing this game of hot potato. It feels like investors would be playing this. At the end of the day, it's like, who's left holding this thing that still has whatever value you think, just you think is there.

• 26:53Speaker 05

  Right. A hundred percent. And so there's other assets that that kind of correlates to, like art, right? Art as an investment, right? Which I don't understand and I don't, I don't do it. But at least in art, I see a painting and I know there's only one.

• 27:06Speaker 03

  Yeah.

• 27:07Speaker 05

  And I know that that is good. People think it's good. So in the future, somebody might. But with crypto, there's this whole other element that I just don't trust.

• 27:14Speaker 03

  Yeah.

• 27:14Speaker 05

  I can't validate anything anybody's telling me about this.

• 27:17Speaker 03

  Right.

• 27:17Speaker 05

  Right? Who holds it? Why can't somebody steal it?

• 27:22Speaker 05

  And so that is another level of just not trusting the whole system that it's created on.

• 27:27Speaker 03

  Yeah. Yeah. There are, it is sort of separating the investment from the technology. Cause the technology itself seems very fascinating and hopeful.

• 27:34Speaker 05

  Yes. Oh, a hundred percent. I believe in the technology. And I think AI has dominated all the discussion on technology and, you know, for a good reason. I think that's powerful, but I think the blockchain technology and what that could do for us in security, in all kinds of applications, I think is huge.

• 27:52Speaker 03

  Banks still have a reputation, even local banks have a reputation of being a little bit slow in terms of the technologies and the ease of use. For example, you still have to deal with banking hours when you're waiting for a check to clear. Or, you know, you still have the weekends. You don't have some of the benefits that we're starting to see in some of these fintech companies. They're not banks, but they're acting as banks, right? They're, they're out there trying to reach the retail. Consumer, ease of use all on your phone to be able to, you know, transfer stuff. But it's not a, you don't have like the, the, the traditional safety net of the, of a bank. You know, FDIC and all the other things that come with actually working with a bank.

• 28:36Speaker 05

  Right.

• 28:37Speaker 03

  But you still have a problem with the banks, at least in terms of the perception of not, not really tech forward.

• 28:43Speaker 05

  Right, right.

• 28:45Speaker 03

  So, um, do you see that changing?

• 28:49Speaker 05

  Um, I think that, well, I think it's real. So the fintechs are creating customer applications that are really convenient and useful. So people go, oh, that's great. I want to do it. And it feels like you're dealing with a bank, right?

• 29:01Speaker 03

  Right.

• 29:02Speaker 05

  It's a similar level of transaction and things like that. Um, so that's cool. I think banks do innovate. I don't think they're leading in that. Um, it's just not in their DNA. I mean, I'm, I'm not a, you know, I'm not an engineer. I didn't go to MIT or wherever these guys, they're freaking smart people out there, right? You know, and developing these things in a garage, all the stories you know of, right? So yes, banks don't do that, right? But what usually happens is when all that gets weeded out, the ones that are really going to stick, because most of them will not stick, right? There's literally dozens, if not hundreds of these products essentially out there. Each product is a company. There'll be one or two or three of them, long-term, that will survive.

• 29:41Speaker 05

  The other ones will merge together and then eventually the banks will offer the same or very, very similar product.

• 29:49Speaker 03

  Right.

• 29:50Speaker 05

  So think of, um, uh, Venmo, right? Well, Zelle was created by banks.

• 29:56Speaker 03

  Right.

• 29:56Speaker 05

  It's owned by the top 30 banks in the United States or something, right? So that's just an example. Okay. Now the bank is really doing it. They branded it Zelle and all those kinds of things.

• 30:04Speaker 03

  Yeah.

• 30:04Speaker 05

  Um, the, the biggest issue is, and this is, I've, I've talked to a few of the people that, uh, the fintech people. One guy bought a bank up in Northern California and he was at our, our CBA, the California Bank Association last year. But the issue is the Federal Reserve controls the system for transferring money and they control the hours, right? So the, the Fed is only open Monday through Friday. They're closed on certain holidays. So no money is transferring anywhere. So on those days or off hours. That fintech company is creating a side ledger, right? So they're still to you as a customer, you think you paid somebody, but you really didn't.

• 30:38Speaker 03

  Right.

• 30:39Speaker 05

  That money did not go from your bank account to the other person's bank account. Only within the Fed hours. So they still ultimately have to be hooked up to a bank. And what they're starting to realize is there's regulation and that restricts a lot of the things. So they just didn't know what they didn't know. And now they're starting to figure it out and they go, oh, this product doesn't work as well. This is we can't do this anymore because now we're hitting that edge of regulation.

• 31:04Speaker 03

  Yes.

• 31:04Speaker 05

  And in the beginning, it it works or did work because they were partnering with pretty small banks.

• 31:10Speaker 03

  Right.

• 31:10Speaker 05

  Like these fintechs weren't going to JP Morgan. I mean, I have friends that I kind of stayed away from it, but friends that were running like 300, 400 million dollar banks, billion dollar banks. Really, these are not big banks. And they say, oh yeah, we'll be your bank. And then 18 months later, that bank is in trouble with their examiner.

• 31:27Speaker 03

  Right.

• 31:27Speaker 05

  Because of the risks that was created by doing, you know, partnering with this fintech. And then all of a sudden they go, oh, wait a minute, this wasn't what we thought. And they start rethinking it and and kind of conforming to something that does meet the regulatory expectation.

• 31:41Speaker 03

  That's super fascinating because it's the same in the investment world. You had fintech like Robin Hood that was essentially doing the same thing. They're not your traditional broker. They're floating investors' money off on the side. And then when investors started buying meme stocks that were worthless. And all of a sudden, well, who's backing this up? You saw all these problems and they're like, oh yeah, we have to regulate you like we regulate the other broker dealers.

• 32:06Speaker 05

  Right.

• 32:06Speaker 03

  So banks are running into the same thing where, yeah, you're right. Perfect examples of what you said was Venmo, is it Venmo?

• 32:12Speaker 05

  Venmo.

• 32:13Speaker 03

  Yeah, yeah, it's just owned by, it's L, yeah, just owned by banks. Okay, we'll figure that out.

• 32:18Speaker 05

  Yeah.

• 32:18Speaker 03

  But there's still, because banks are tied to the Fed, there's still that that that slowness. Like, it's still insane to me to think that, like, it's all on computers anyways. Like, why is it closed over the weekends? Why is it closed at five, after five?

• 32:33Speaker 05

  Yeah.

• 32:33Speaker 03

  You know, is there any talk of that being overhauled or changed? Like, I said, now I'm talking about like. International banking system and how banks wire money back and forth.

• 32:43Speaker 05

  Yeah, no, there is. The Fed's talking about something called Fed Now. You can Google that. That's a thing now.

• 32:48Speaker 03

  Yeah.

• 32:49Speaker 05

  And so they're doing like what they call real time payments and things like that. I don't know. I mean, at some level, there's people doing all these things. They want to take the weekend off, right?

• 33:00Speaker 03

  Right.

• 33:00Speaker 05

  It's that basic. You know, we're not necessarily, you know, meant to just be alert and awake 24 hours a day. And the technology can do it, but then there's people behind that and

• 33:10Speaker 03

  Yeah.

• 33:10Speaker 05

  systems. But yeah, I think the idea that the Fed is just clearing constantly. And, you know, there's really no such thing as like a weekend or, I don't know. Yeah, I think that could happen. Like for us, one of the issues is we have returned items, right? So if you have a bounced check, what do you do with it? Well, we have to decide by 11 a.m. Right? So for our customers, and our customers know this, sometimes, you know, they have money. They just forgot to transfer it or whatever, right? So we rarely bounce a check. What do we do? We call you.

• 33:42Speaker 03

  Right.

• 33:42Speaker 05

  Right?

• 33:43Speaker 03

  Yeah.

• 33:43Speaker 05

  We don't want to say yes, and then you're out, we're out, and somebody, we actually lose money. It could be fraud or something like that. So our person calls and says, hey, Sammy, you know, you're short. Do you want us to cover this? You go, oh, yeah, thank you. Okay, we'll cover you. You know, make the transfer, get in here. Well, now somebody's got to be doing that 24 hours a day.

• 34:01Speaker 03

  Right.

• 34:01Speaker 05

  Or they have to change the timeframes for when you have to notice. Like, there's just these kind of basic rules of operation that could be changed. Technology is there, but, you know, will they? Probably, I would say probably over some period of time. I don't think it's in the near future.

• 34:17Speaker 03

  Yeah, eventually we'll get there.

• 34:19Speaker 05

  Eventually we'll get there. Those issues will be solved some other way.

• 34:21Speaker 03

  And then your challenge, at least as a CEO of a bank, will be hiring people that have to work 24/7. No more banking hours, right?

• 34:28Speaker 05

  There was a bank, they were kind of famous because they, you know, people went to like after hours and then they went to Saturday. Remember when that was a thing, right?

• 34:35Speaker 03

  Oh, yeah, yeah.

• 34:36Speaker 05

  We're open on Saturdays.

• 34:36Speaker 03

  Wow, banks are on Saturdays.

• 34:38Speaker 05

  Yeah, then there was a bank, I remember this bank reading about it. It was during my career. It wasn't that long ago. And they were open on Sundays. I'm like, why are you doing that to us, right? If nobody's open on Sunday, no. So

• 34:49Speaker 03

  Yeah, right.

• 34:50Speaker 05

  It's being done. That one didn't take off very well. I don't know. I don't know of a bank out here anyways that is open on Sundays. And even, yeah, anyways, so we'll see.

• 35:00Speaker 04

  You have an ATM. To me, I think it's an overkill.

• 35:04Speaker 05

  Well, that's the thing. Now, okay, so you have ATMs, you can go get cash, you can deposit on your phone, just take a picture, you can, you can create a bill pay, right? What do you need to do on Sunday, right? Well, for us, it's the advice. That's what we're really selling. It's that advisory, right? Transactions are commodities, and we've got all the bells and whistles on, on all that. But if you want to come in and say, well, I'm thinking about setting this up. What is the pros and cons of the different structures within my, because we're dealing with businesses, right? They have multiple entities and different things. So, yeah, do you need that advice on Sunday? Most of our customers want to be doing something else on Sunday, too.

• 35:40Speaker 03

  Yeah. Okay, we're joined by A.J. Anton Giovanni. He is CEO at Mission Bank. Here's a question for you, A.J., from a listener. It says, I know a lot of big banks are using AI for a lot of things, but how are local banks using AI?

• 35:54Speaker 05

  Yeah. Are you? Chat GPT, everything now?

• 35:58Speaker 03

  We were just talking.

• 35:58Speaker 05

  I told everybody, I said, hey, use Chat GPT, it's awesome, but you own that, right? You know, when you send this email and it was generated by AI, don't blame AI. That was your email.

• 36:07Speaker 03

  That's right.

• 36:08Speaker 05

  Right? So you still have to own that. So, I mean, we're, I'm kind of joking, but yeah, we're doing that. We're developing it in fraud risk detection and things, and we've been doing that actually for years. So we have software for fraud detection that's monitoring for unusual activity. And then it's kicking it out and it's, it's telling a human, hey, this is an area to go investigate. Because we literally, we have thousands and thousands, even as a small bank, of checks and different payments processing. So at one time, years, years and years ago, a human was kind of doing all that. So that level of technology and AI, we've been doing, it's just getting a lot more robust. And so, yeah, we're definitely looking into, another, you know, kind of small thing, but it's huge, is that we have procedure manuals for everything, right?

• 36:52Speaker 05

  We have all these rules, right? So somewhere, somebody has to look that up. But now you just ask the chatbot because we've downloaded. Our specific procedure manual to this, it's like chat GPT, but it's not public. Yeah. And then you create the interface. So the employee just asks the question, it tells you. Yeah. And that shortcuts the amount of time it takes to go research and get that answer through through the what we were doing previously where you had to go to a document, do a find or however else you searched it. So we're doing stuff like that.

• 37:21Speaker 04

  Any plans of using it for underwriting? I know from a labor standpoint and having the expertise in underwriting, that's not a problem, but could be a challenge for banks to find talent.

• 37:32Speaker 05

  Yeah. Oh, it's a huge challenge. You know, we're, we're training a lot of people and I do, I do all the training. We just had our call today and this came up because we were analyzing tax returns, right? And for customers, that's what we're, you know, your revenues, expenses, cash flow, right? So what do people do their tax return? What's the purpose? Minimize your taxes. That's what I do. That's what our customer are doing, right? So there's legal things, but they're doing things that aren't necessarily truly effective of their performance like it would for a public company, right? We can't really do that. Right? And so we were discussing those differences and that's, and I told them, I said, hey, guys, AI can't figure this out, right? At least I, not right now in a way that I can trust it, right? So that's why you guys have job security. That's why

• 38:15Speaker 05

  we're paying you guys the big bucks. We're training you this because that's how you make a good decision. Yeah. We could go buy their systems now. You could buy, download the tax return, spit out an answer. But then we may make a loan to somebody that really doesn't deserve it or more what the risk is, we would turn somebody down that's really qualified.

• 38:33Speaker 04

  Yeah. That's true. Cause both ways, you're right.

• 38:35Speaker 05

  You know, because of that issue, right? And so, I mean, that's just one example. But in the underwriting side for what we do, AI will help, like AI could do the spreading, right? Just dump it in there, have it, you know, kick out the spreads and different things like that. So there's certain parts of the process, but we really feel like that our value add is that we have a trained expert that can think through these issues that aren't easily digested even by AI at this point.

• 39:04Speaker 04

  Yeah.

• 39:04Speaker 05

  Cause they're too nuanced. There's no, there's not enough. Use cases that you can load up into chat GPT to get answers that I would rely on at least so far.

• 39:12Speaker 03

  So no, no Optimus Prime bot coming soon to your Mission Bank lobby?

• 39:17Speaker 05

  No, no. Unfortunately, when you come here, you have to talk to a human. Hopefully you like them.

• 39:23Speaker 03

  Yeah.

• 39:24Speaker 05

  That's our strategy.

• 39:25Speaker 04

  That's a huge difference in my opinion. The example you gave earlier about people calling you not to return a check. That does not exist with, with, with big banks. Your check is definitely returned.

• 39:35Speaker 05

  Oh, no.

• 39:36Speaker 04

  Regardless if it's an IRS check or a state tax check, it's returned if you don't have funds.

• 39:41Speaker 05

  Yeah.

• 39:42Speaker 03

  Or, or what about the other way? What if you notice, because you have, you have online banking, having you try and call somebody? Like try and get to the number of a specific person at one of these places. It doesn't exist, right?

• 39:51Speaker 04

  We were just talking about it just, just this morning, um, just with Justin Leland here. We have a client that might need a, a trust account. And we're like, well, send them to Tyler, send them to Glenda and tell them exactly what, what we need. So we can open that account and get it done because at his bank, it was giving him the run, the runaround.

• 40:09Speaker 05

  Yeah. Yeah. So as, as in, we're going to use technology and we, we don't want to, we call it, we don't want to be on the bleeding edge. We kind of want to be on the leading edge. So we want to be out there and utilizing AI and other, you know, product facing, customer facing product stuff on technology. And we think we do a pretty good job about, of that. But specifically, our model is we want you to interact with us because we think we're providing a level of advice and service and expertise that isn't available by technology, at least yet, right? And so, yeah, the more we hear of banks that are going in, in, in almost, well, they're creating strategies to force customers or get most of their customers going to technology and away from humans. So that's beneficial for us.

• 40:53Speaker 03

  Well, thanks so much AJ for coming on the show. We really appreciate it. It's always great talking to you about what's going on in the bank, banking world and especially our local bank. We have a special place in our heart for, for, for Mission Bank. I see Sammy gave his life to Mission Bank for many years. And we still, you know, are, are glad and appreciative that we have a local. Founded and run bank and that you're doing some good stuff out there. So thanks so much, AJ.

• 41:22Speaker 05

  We appreciate it. We just celebrated our 25th anniversary and we just came out with our new logo, which is for the next 25 years. So we're going to be here for a while and we really appreciate MoneyWise and everything you guys do for, you know, not just obviously your main business, but the radio show and everything you do in the community. So, thank you.

• 41:38Speaker 04

  So my mission, Van Gia, the old one, is now going to be worth more money.

• 41:42Speaker 05

  It could be worth more money in very small circles somewhere. I don't know. The vintage.

• 41:48Speaker 04

  The vintage.

• 41:49Speaker 05

  Logo.

• 41:49Speaker 04

  Vintage mission logo.

• 41:50Speaker 05

  We talked about that because there's this whole strategy around like forcing everybody to like burn it. Yes. Or actually, you know, if you were part of the original crew and now you have this shirt to prove it, like when the LA Rams went to Yes. San Luis. Yeah. The first time. I have my old LA Rams hat to prove I wasn't on the bandwagon. There you go. Because I was terrible my whole life until they moved to St. Louis. Yeah. So, yeah, absolutely.

• 42:14Speaker 03

  I like it. I like the brand refresh is nice. The new logo looks good.

• 42:17Speaker 05

  Thank you.

• 42:18Speaker 03

  Real clean.

• 42:18Speaker 04

  Congrats on that.

• 42:19Speaker 03

  Yeah. Congrats, AJ. All right. We're going to take our final break of the day. We're MoneyWise. We'll be back.

• 42:24Speaker 00

  Don't forget, MoneyWise is more than a radio show. We're an independently owned local wealth management firm with 60-plus years of collective experience. Our financial advisors are here to help you, Kern County. Together, let's be smart, be safe, be money wise.

• 42:44Speaker 03

  We're MoneyWise. I'm Sharad Waite. Here is Sammy Abiawi. Thanks for tuning in. 661-396-1000 is the number. Got some messages here, Sammy.

• 42:55Speaker 04

  Yeah.

• 42:55Speaker 03

  You want to read the latest one?

• 42:57Speaker 04

  Sure. Good reminder. I meant to ask you guys last week when you had the CPA on, but do I have to pay taxes if I get paid through Venmo or Cash App? Thought the IRS rule got pushed back, but not sure. Thank you, Money Wise.

• 43:10Speaker 03

  Yeah, so, great question. Yes, the rule did change for the tax reporting in terms of if you get paid through PayPal or Venmo, it was pushed back, I believe, a year where people were going to be forced, or actually, what was going to happen, and what will happen, is PayPal, Venmo, Zelle, and those other digital platforms will need to report their transactions to the IRS. And those platforms are going to have to issue a 1099K, which is the form that they

• 43:49Speaker 03

  will send, for anything that was received, any purchases over $600 in commercial transactions. So this was introduced in 2022, but then was later pushed back and moved the requirements. So, that's why, here a couple of years ago, you may have noticed, if you ever paid through Venmo or PayPal, it sort of started to ask you, is this for business or personal? Everybody's putting "personal," obviously, because the business would then trigger those...

• 44:22Speaker 04

  1099...

• 44:23Speaker 03

  Yeah, 1099Ks, so...

• 44:26Speaker 04

  Good question, though.

• 44:27Speaker 03

  Yeah, very, very good question. I think there's another one, too. Yeah, a little off-topic, it says.

• 44:34Speaker 04

  Oh yeah, a little off-topic, but I don't miss any shows if you don't get it to, you don't get to it today, but, um, is there any truth that Cali is giving $150,000 for first-time homebuyers?

• 44:47Speaker 03

  So, the question is, is California giving $150,000 for first-time homebuyers? So, you know, doing a quick search, this is new to me, I haven't seen, I don't, I don't see anything that's legitimate. What this sounds like, though, to me, Sammy, is the same thing that I'm getting in terms of spam mail or spam messages.

• 45:06Speaker 03

  Which says something to the effect of, have you applied for this stimulus? Some sort of government stimulus or some sort of government program? Here a couple of years ago was the Obama phone. Did you get your free Obama phone? You know, it's anytime there's a regulatory change. You know, there's an advertising campaign towards people to try to grab some new grant money essentially.

• 45:29Speaker 04

  We had Alan Maderos, I don't know how long ago it was, but we talked about this. And there is a program called the California Dream for All Shared Appreciation Loan, which basically provides you 20% of your home purchase if you're a first time home buyer capped at $150,000. You have to be eligible, you have to apply, but also you have to apply before the pool gets exhausted. Meaning the funds that are allocated to that are either depleted. If they are depleted, then there is no help that you can get.

• 45:59Speaker 03

  I see.

• 46:00Speaker 04

  But, but there was a program that came out, especially during the COVID years when home

• 46:07Speaker 04

  affordability was very, very low. People could not qualify for loans in homes anymore because of the prices. So the state of California, to help with that, came up with this program. I don't know how long ago. I think during the last part of the COVID years, 22, 23.

• 46:25Speaker 03

  In this program, it says up to 20% for your, for the purchase of like basically the down payment.

• 46:31Speaker 04

  That's right.

• 46:31Speaker 03

  Up to 150,000. That means it'd have to be a really big, big house for somebody to get 150,000.

• 46:37Speaker 04

  Up to 150 and it's a forgivable loan.

• 46:39Speaker 03

  Yeah.

• 46:40Speaker 04

  And that, that, and eventually when you do sell the house, that money gets back into the state.

• 46:45Speaker 03

  I see, I see. So they wait for them to recover the money in case you sell the home. But that's one of many, many programs that are available in this, through the state and through the federal government that can help first time home buyers with that down payment. So there are legitimate programs out there.

• 47:00Speaker 04

  That's right.

• 47:01Speaker 03

  Remember that. I guess apparently some of them, you can't get up to 150,000, but those are going to be a rare, like what?

• 47:07Speaker 04

  LA Homes, LA Homes, it's a million dollars.

• 47:10Speaker 03

  Well, there you go. It's kind of interesting, like you need that financing help to buy a million dollar home. Why are you buying a million dollar home? All right, want to thank all the listeners for tuning in. Remember these three things as we leave. Be smart, be safe and always be money wise.

• 47:26Speaker 02

  Securities offered through SCF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors, Inc., SCF Securities, Inc. and MoneyWise Wealth Management are independently owned and operated.