CEO Roundtable: Banking

Springfield Business Journal Editor Eric Olson discusses changes in banking April 10 with Guaranty Bank President and CEO Shaun Burke, Arvest Bank Springfield President Kyle Hubbard, Commerce Bank Chairman and CEO Doug Neff and Great Southern Bank President and CEO Joe Turner.

Eric Olson: We are in a new normal with the coronavirus pandemic affecting all sorts of business activity. What does work and the staffing environment look like at your banks? How are each of you handling the remote workforce?
Joe Turner: The first thing we, and all banks, needed to do is protect our associate base. Generally, the banking industry has tried to limit direct customer contact. Most banks have their drive-thrus open, but their lobbies are closed. Out of 1,200 people, we probably have 250 that are working from home. Our retail staff is still in the banking centers. Everybody, regardless of whether they’re working the same number of hours that they were before, is being paid the same way. We gave all our full-time associates a $1,000 bonus and part-time associates $600 just to help with the things that are going on right now. They’re getting paid from Great Southern, but they may have a spouse that’s been furloughed. We also are doing everything we can to take care of our customers. The (Paycheck Protection Program) is something that we’re actively involved in. We also understand the needs in our community, so we’ve committed $300,000 primarily to fight hunger and food insecurities in our communities.
Doug Neff: Our staff, the administrative and office-type staff, probably 70% of them are distributed mostly at home. Our retail staff, we went to drive-thru only right at the beginning. We’ve actually divided into two teams. We have an A team and a B team and one of those teams literally stays home a week at a time, kind of as a backup plan in case one of the facilities would, for whatever reason, have some kind of an incident where there could be a possible infection. Those staffs take turns coming in every other week. I’ve had plenty for everybody to do at home. We instituted some premium pay, so if you’re an on-site employee and you’re nonexempt, so hourly, you’re going to get a 20% premium pay for all your hours worked when you are on-site.
Shaun Burke: We went to closing our lobbies on March 18. We continued to deliver all products and services through our drive-in and other various channels of feedback that we’ve got from our customers. We’re obviously looking out for the health and welfare of our team members first and foremost, so one of the things that we had done for those that potentially, either through travel or family members traveling, have to be home in quarantine, we’ve instituted a mandatory time off category as part of our (paid time off). We don’t want them to have to burn all of their time off just to be self-quarantined. That’s been well received with our team. We’ve got about 30% of our workforce, we have 230 people on staff, working remotely.
Kyle Hubbard: Very similar. Pretty quickly there was a massive effort within Arvest, within four states, to go to a drive-thru only and shut down lobbies. It was just a completely different way of delivering some of our services. We have quite a few that are still in the branch observing physical distancing guidelines that need to be in the facilities. And then, obviously, quite a few at home working remote, mainly lending, wealth management, mortgage, those folks. We’ve seen much less volume, fewer transactions and so they’re proactively calling our customers, checking on them, seeing if there’s any help that we can provide. It’s been completely different.

Industry strength
Olson: No one mentioned layoffs or furloughed staff, just reducing those hours and even compensating extra. Has that been something that you’ve had to enact or consider?
Turner: We haven’t even thought about those kinds of things. The banking industry is in a very strong position now, and it’s something that we have focused on really since the early part of the last recession. We want to be in a position of strength when the next one rolls around. I’m sure the economic instability that we’re seeing right now will flow through somewhat to Great Southern and banks in general. I don’t think it’s in any way incapacitating, and I expect to be able to continue to serve our customers’ needs just as we have and continue to employ a full team of associates just as we have.
Neff: The industry was really strong going into this. We’re all in a position where we’re liquid and are able to withstand a few hiccups here and there. We haven’t discussed any kind of furlough or layoffs and the premium pay was actually an opposite kind of decision. I would suggest to you that our company is busier than it’s ever been. We still have open positions, and we recruit during times like this.
Olson: With the federal Paycheck Protection Program, I assume that activity is up. There have been some late nights and weekend hours even put in by your staff. What’s been the business community’s response to the CARES Act, and how many applications have you worked on so far?
Burke: The business community has really embraced the stimulus package, specifically the PPP program. It stands as of (April 9) that 4,000 banks have collected over 400,000 applications and about $100 billion has already been approved. [Editor’s note: By April 16, the $349 billion allotted to the program had been exhausted, and talks about another round of PPP funding were initiated.] We are busier now than we’ve ever been, not only because of the volume of the PPP, but our entire commercial portfolio, they are looking at how they’re going to see their way forward. We’re working with a lot of customers to modify payment terms, give them some relief other than additional credit through the next six months or so. We’re probably busier now in certain areas of the bank than we were prior to the crisis. We’re finding out very quickly why financial institutions are essential businesses. We’ve looked at about $45 million in applications. (In the program’s first week) we’ve approved about $40 million of that. That’s impacting, on our stats, about 5,500 jobs in the community.

Distributing funds
Olson: What are those numbers at the other banks?
Hubbard: It’s been a very heavy volume. You’re delivering a government loan program with few formal guidelines. We all were quickly trying to put this together on (April 3), through the weekend (and into the next) week. I think the banks have all been getting better at it. When you look at the number of (Small Business Administration) loans that are going through right now and you think about what was going through this past year, you’re overloading their system with applications. Overall for Arvest, it’s about 15,000 applications. As of (April 9), we were about 4,000 loans approved, $730 million. That’s a four-state area. We have quite a pipeline.
Neff: I’ve been in this industry 30 years and I’ve never seen anything like this. We’re busier now than I’ve ever seen. It’s taken an army of folks in our organization, all which are working literally 24/7 for the last few weeks, to handle the amount of volume that we’ve seen. Our organization is big and it’s multistate, so a lot like Arvest, the amount of volume and just the sheer kind of capacity to push paper through the system. You think about just the operational side of this, it’s a monumental task. The business lessons we’re learning right now are going to carry our industry, and many other industries, into kind of a new era. If you think back to other catastrophes that have happened over several decades, the reason that we have electronic checks is because of 9/11. There’ll be a lot of lessons learned out of this and the technology that we’re using, remote workforce, the way we interact with our clients, all those things will be things that we’ll use in the future. This program is essential to our communities.
Turner: I think we’ve all probably been critical of our Congress and political leadership in Washington. They’ve seemed dysfunctional at times – not just with the PPP program but with stimulus in general. When the chips were down, they saw a need and enacted $2 trillion of stimulus when the economy badly needs it. And small business badly needs this program. The SBA has to be commended, too; the program is still sort of evolving. The SBA approved $30 billion or so of 7(a) loans in any given year, and they’ve being asked to approve $350 billion in a 12-week period. It’s a massive undertaking. While we do have a guarantee, we do have a responsibility to take a customer’s application and check it against payroll documentation and do what I think the SBA has called a good faith review of that. It does require some back and forth with customers.
Olson: What is your expectation of that timeline from when you receive an application to when the funds deposit into the commercial account?
Turner: From the time you get your approval from the SBA, on (April 7) they said you have to close within five days. (April 9) or the day before, they amended that and said you have to close within 10 days. The application, it depends on how complete it is. At least half the time they’re having to go back to the customer and get better supporting payroll data and those conversations take time.

Government support
Olson: Is this the right response by the federal government, in your opinion, the stimulus package of $2.2 trillion? And then increasing that potentially as we move forward? Does this pandemic require such an economic investment?
Neff: There’s about $5 trillion per quarter of economic spending in our country. We feel like maybe there’s a quarter or maybe two quarters here where we’re going to be shut down. If the economy has been affected by 30%-40%, $2 trillion a quarter is about what that costs. The numbers are mathematically sound. I think the question has to do more about are we going to deploy the money the right way? I’m glad the banks are a part of that. The way this is working with payroll, to keep people paid is super important for the economy moving forward. There’s a lot of other monies that are part of the $2 trillion, and we’ll see if they have the same oversight on them. The Federal Reserve is also building a loan program called the Main Street [Lending] Program, which is going to be for companies (under) 10,000 employees. There’s about, I think, $600 billion in that. That’s going to be for companies that have south of $2.5 billion in revenues. That’s yet to be defined exactly how that’s going to happen. Keeping the companies going and keeping people employed is exactly where the government ought to be focused right now.
Turner: I don’t have a macroeconomic background. I watched Neel Kashkari on “60 Minutes” a couple of weeks ago. He was sort of involved in the latter parts of the 2008 crisis, and he’s the president of the Minneapolis Federal Reserve Bank. He said the key with stimulus is when you think you’re being too generous, be even more generous. The government was right to sort of flood the economy with programs. Small business is so critical and employs like half the people. You just think about a lot of them are closed, and the key to us sort of taking up and moving on once the virus is behind us is for those small businesses to come together again. Specifically with the PPP program, that’s what it’s all about.

Test of security
Olson: On security, I saw a report that a single data breach can cost in excess of $8 million to recover. Your banks have been working in the digital space for banking services. Is this a time where you’re able to focus on security to ramp that up, as the expectations that those systems will be tested right now? Are there any new security functions?
Neff: Quite honestly, it’s a big risk for our industry. We’re all big banks and we all have to take this stuff seriously. This is an incredible opportunity for businesses to start thinking about automation. A lot of our clients are working remotely, too, which has put a different kind of working environment in their shops where automation and technology become a very important part of them running their business. And building fraud support and those mitigations around that to keep the bad guys from getting into the loop are incredibly important and will only become more important.
Olson: Could this be the thing that propels us into that fully cashless society?
Turner: They’ve been talking about that for a long time, and we still don’t see it. It’s not so much anymore, but you saw customers wanting to have a little bit of extra cash at home. It seems to make people feel comfortable. I would say that this sort of takes us in the opposite direction a little bit because people think, “If I have cash at home, I’m always going to be able to spend it if I need to.”
Neff: None of us is going to see a cashless society, but I think the growth of the electronic transactions continues to grow and cash kind of just stays where it’s at. We really believe that the future is around automation and electronic payment. That’s another part of our bank right now that’s incredibly busy; I just call it a payment automation business. A lot of these big companies have found themselves in a spot where they were a very manual process and now everybody’s distributed in their homes and all over and their manual process doesn’t work very well.
Burke: The banking system has been undergoing a technology revolution really since the last crisis. The various payment rails that we have, the electronic delivery of goods and services, it’s really provided us the opportunity to respond quickly to this crisis. We were originally fearful about fintech and them getting into the banking space, and now we’re finding ways to partner with them to make payments quicker, easier, to satisfy the increasing consumer demands. That technology and that evolution that we’ve undergone in the last 10 years has provided the platform for us to handle a crisis like this. If we didn’t have the electronic delivery, we wouldn’t be able to get these applications from our customers and respond quickly.

Excerpts by Features Editor 
Christine Temple, ctemple@sbj.net.