MST Serves Financial Institutions through Education, Collaboration and Innovation

It was the late 1990s and a couple of childhood friends from South Georgia were trying to figure out how they might combine their abilities – one a software developer, the other a newspaper publisher – to create a business that would accommodate their desires to do something creative, innovative and compelling. They spent several months in 1999 discussing various business opportunities where their skills and experience would be applicable and that would satisfy their entrepreneurial as well as personal ambitions. 

The opportunity they seized on was to bring technology to bear in a situation that was begging for improved functionality and efficiency, the records departments of county governments. Property records were predominantly paper-based documents, and if you wanted to trace the history of a piece of land you went, in most counties, to a building somewhere and poured through stacks of bound volumes. Technology was the duo’s solution, imaging and indexing real estate documents. They developed it and the county governments came, first in their home area of South Georgia, then throughout the state, then to counties in other states. 

The project was a starting point that demonstrated how the three principals – software engineer Michael Jones, publisher Dalton T. Sirmans, and resource manager Margie Sirmans – could play the parts necessary to start, then operate, then grow a business. It also proved the advantages technology could provide if made available to rural areas at scalable costs to deliver mission critical solutions. Technology, they observed, would be transformative for businesses as well as government on every Main Street in the USA.

The founding of MST or MainStreet Technologies in 1999 in many ways was like the start of many businesses in the late twentieth century, a union of technology and entrepreneurialism. But there was another, rarer characteristic: sound management that evidenced itself in practical, business-like operation. 

Opportunity and growth

Its initial project allowed MST to grow a remote workforce that utilized software to organize public records for online real estate searches. But another opportunity to develop software-based solutions presented itself when a community banker – she was using the system to conduct land searches in an MST client’s courthouse – contacted Mr. Sirmans saying she thought the solution appropriate for bank loan administration. Within a year, the MST Loan Administration System was completed, and soon thereafter was operating in twenty financial institutions in various locations around the U.S.Then 2007 happened, and an emerging crisis had community banks more focused on survival than adding efficiencies.

“We had just reached a handshake deal with a $2-billion community bank for our Loan Administration System,” Mr. Sirmans offered. “That was on a Friday, and a signed agreement was expected the following Monday. Instead, our banker walked in on Monday to learn her institution had been sold for pennies on the dollar. That was our introduction to the coming financial crisis.” 

But during a conversation that followed, she explained how she had also been looking for software that automated the process of estimating the allowance for loan and lease losses (ALLL), more commonly referred to as a bank’s reserves. As MST learned more about this quarterly estimation, required by auditors and regulators for all lenders, MST realized the requirements fit the company’s core competencies in terms of software development, deployment and support. Plus, MST could leverage the national brand recognition built with community banks through the MST Loan Administration System.

Pioneer and industry leader

The resulting product, the MST Loan Loss Analyzer platform (LLA) provides a reliable, repeatable, efficient process for determining the allowance for loan and lease losses, financial institutions’ most critical quarterly calculation, while satisfying accounting and regulatory requirements. Introduced in 2007, the LLA was the first and remains the leading solution for automating the ALLL, rich with capabilities that not only streamline the allowance process but also provide a wide array of options for managing portfolio risk. 

The LLA established MST first as pioneer and then as the leader in ALLL solutions. The company’s sole focus remains the development and support of allowance solutions. That includes solutions specific to Current Expected Credit Loss, or CECL, the impending allowance accounting standard that marks the most substantial and significant change in allowance accounting in decades, a new regulatory requirement that will impact institutions enterprise-wide, all the way to their bottom lines. Today the LLA serves institutions as they execute their allowance under the current incurred loss standard, supports the bank with the features and capabilities to transition to CECL smoothly and confidently, and provides the platform for estimating and calculating the allowance under CECL, regardless of the CECL-compliant methodology or methodologies the institution implements. 

Education, collaboration and innovation

The market success of the LLA and its evolution reflect the MST company strategy and philosophy: not only to develop technology that improves how financial institutions estimate their reserves, but to educate and support. Mr. Sirmans highlights the firm’s commitment in what he labels as MST’s three pillars: education, collaboration and innovation. 

“Education is a never-ending process, and our team at MST is committed to learning,” he noted. “We solidify our commitment to this pillar by sharing what we have learned in informative literature, through webinars and seminars, and at our annual National ALLL/CECL Conference, the only event of its kind.”

“Collaboration is our commitment to include clients, prospects, industry professionals and thought leaders from related disciplines into our team,” he added. “Combining the talents of others has created and will continue to fuel our outcomes.”

“Which leads to our third pillar, Innovation, stemming from education and collaboration. Our solutions and the processes we use to build, market, sell, install and support our creations are all due to learning, then sharing with and learning from others.” 

For example, Mr. Sirmans explained, banks and credit unions must consider economic conditions in determining their quarterly allowances. He pointed to a strong correlation between specific economic factors and borrowers’ performance relative to loan payments. Determining which of the many factors have the strongest correlations, the look-back periods for loan performance, the economic drivers and other relevant factors had been manual projects for financial institutions. In 2014,

MST commissioned researchers to demonstrate how a banker would approach correlation analysis of this type, where to find the data, and how to involve both individual and peer group bank data, all steps key to estimating the allowance under the new CECL standard. Findings were presented to attendees at the 2014 MST National ALLL Conference and their interest was addressed with the development of software that automates this process, the MST Virtual Economist. 

Forcing the issue – and top line growth for MST

CECL is driving financial institutions to software like the LLA for estimating the allowance. MST’s early success with the LLA was driven by institutions that understood the limitations of manual processes, in particular, Excel spreadsheets. But the expected credit loss standard, with implementation dates beginning in 2020, is forcing the issue for all banks and credit unions. 

“In 2017, the culmination of a decade’s worth of work and the advent of new accounting rules will result in top-line growth for MST above 100 percent year over year,” Sirmans reported. “Our FY18 revenue will be double that of FY17.” 

That has meant adding technical and industry expertise to the MST team, from long-time industry experts to recent college graduates, the biggest influx in new talent in the company’s history. And Sirmans expects that level of growth to continue. 

“It is challenging for MST and our team,” Sirmans offered. “But what makes it work for everyone is our empowerment management model and flat leadership hierarchy.”He pointed to the firm’s Customer and Technical Support Center, currently under construction, as an example. 

“Learning from the MST team that works with clients each day, a floor plan has been developed that combines private and open workspace, formal and informal collaborative areas, and training facilities that will expand our current support capabilities by 50 percent. Everyone – including customers – have had a hand in the design.” 

“But the best evidence that our management style works is our average employee tenure: six years. This is great for our customers who like dealing with the same people year after year, and, they report, is highly unusual.”

Meet the leadership team

Dalton T. Sirmans, CEO: Dalton leads the company’s human, financial and technological resources, including executing strategy established by the executive team. He is also intimately involved with MST’s sales and marketing initiatives. He worked at Georgia-based Community Newspapers, Inc. and was responsible for P&L, Sales, Marketing and Operations. Mr. Sirmans was an advertising director with American Lawyer Media prior to starting MST. 

Margie Sirmans, Co-founder: Margie has served as the company secretary-treasurer since the founding of the business. With the growth of the company, her role has expanded to include management of all accounting and human resource functions. Under her financial management, the company has been profitable from year one. 

Michael Jones, Co-founder: As President and the company’s chief technology executive, Michael oversees the development of MST’s software products, managing the company’s development team in the creation of leading-edge data management and documentation solutions for financial institutions. 

“We’re here to help with a software platform and years of industry leadership to support a smooth and efficient transition to the CECL- compliant model best suited to the financial institution and loan portfolio.”