As the promise of 2021 looms on the horizon, most people are anxious to close the books on what is likely the most unsettling year — from the pandemic to politics to PPP loans — we will ever experience. Strong leadership has never been more essential than it is today. To share their best leadership practices, Az Business magazine sat down with Arizona business leaders to watch in 2021, including Rob Schwister, Arizona market president for Alerus.
Rob Schwister joined Alerus in 2010 as a relationship manager and was named market president for Arizona soon thereafter. He has has more than 20 years of experience in financial services and has a deep understanding of the Phoenix market.
Here is the full transcript of the interview with Rob Schwister
Az Business: Can you tell me a little bit about the impact that COVID has had on Alerus in Arizona?
Rob Schwister: When COVID happened first, second week of March of this year, Alerus responded immediately. So we decided on March 16th to send all of our employees home in a work from home environment, at least as many as we possibly could. So within two days we had 85% of our workforce working from home. That’s nearly 800 people throughout the country. We were very well prepared to do that with technology. So everybody got to be able to go home, start working from home and we were productive right away. The reason why we were prepared so well is because Alerus has actually been through a pretty significant catastrophe. Back in the mid nineties, there was some flooding in the Red River Valley and Grand Forks and Fargo, where were some of our key markets, and our corporate center burned to the ground in downtown Grand Forks and we had to respond to that situation. All of our customers were flooded out. Our entire bank was gone. So we dealt with quite a catastrophe. So as a result of that, we were very well-prepared for the next event.
So when this pandemic hit, the bank was very well-prepared and I was really fortunate to be a part of what happened because being in the middle of it, when it first started, everybody’s very nervous. What’s going to happen. What are we going to do? And within a couple of days, we had everybody working from home and it went really smooth. So we’re fortunate.
Az Business: What is your leadership style?
Rob Schwister: My leadership style is to provide support to my employees. We have 22 people in the state of Arizona working for Alerus. My job is to make their job as easy as possible. So I’m really providing a service for them. So this pandemic situation was the perfect example of how I can do that. By putting them in a position where they can be productive from home as quickly as possible, gave them an advantage over their competitors and gave them an advantage to be able to help their clients as much as possible. So servicing my employees is what I try to do to help them be successful.
Az Business: How do you maintaining that culture when you’re not face-to-face every single day in the wake of a pandemic like this?
Rob Schwister: Working in this culture has been extremely difficult. We have weekly meetings via video conference with all of our staff, but I’ve seen a lot of things come out of it that we weren’t really anticipating. We have groups of employees who’ve created peer groups that didn’t exist before. So for example, credit underwriters, all the credit underwriters are now doing a weekly video conference with all the credit writers throughout the country. So they’re actually benefiting from what’s going on in other markets and helping each other via the technology that we have to use. So, it’s been tough working from home.
We build our business by meeting with prospects and meeting with people face-to-face and building relationships. That’s what we’re all about. With COVID and working from home, it’s been extremely difficult to do that. I’m pretty proud of my employees. So one of the things that we did when we did the PPP program that started like April 1st, because we were in such a unique position with everybody working from home, my employees were able to help a lot of non-clients. So there are a lot of business owners out there who weren’t able to get ahold of their bankers. Weren’t able to get any information on the PPP program. Weren’t able to figure out how to maneuver through that SBA process. So in the Arizona market, we picked up over 200 new customers through the PPP program because we were prepared to help them. So it really worked to our advantage to be able to be working from home and have the technology and be able to help and support those people. So we took a lot of pride in the fact that we’re able to help a lot of these business owners through that process.
Az Business: Has there been any lessons from the pandemic that you think will make Alerus stronger moving forward?
Rob Schwister: I think that people are getting better at using technology. I think going forward, I think customers and prospects are going to be more willing to meet via video conference. Yesterday I was on a video conference with a business advisor. We proposed a new commercial real estate loan for a client who’s trying to refinance his existing loan. All three of us were on video. We had the prep proposal right there, up on the screen, and we were able to walk through the entire thing together. That wouldn’t have happened before COVID. We never would have done that over a video conference. You know, we saved that client a lot of time with… He was in New York at the time. So we were able to keep him from having to travel down here. So, yeah. I think the benefits from going through this process, I think the benefits are, now that we are more comfortable using that technology.
Az Business: What is it about Alerus’ culture and work ethic that you were able to handle the PPP experience so effectively?
Rob Schwister: You know, having been through a major catastrophe in the past, Alerus was extremely well prepared going into this. And I think that’s what the advantage was for us, as we were able to help our customers and focus on them and not worry about what we were doing. We were up and running and operating and able to help them right away. So I think that was the difference. Some of the other differences for us is we are a financial services company. We don’t just do commercial loans or deposits or consumer loans. We also do retirement plans and HSA and FSA and payroll. We do mortgage products. We also do wealth management. So whatever it was that those customers needed, our existing customers or our new prospects, whatever it was that they were meeting, we were able to help them right away. So there was no delay in the business for us.
Az Business: Are there any trends or issues that you think we should be watching in the banking industry moving into 2021 and beyond?
Rob Schwister: We are all very concerned about credit quality. I think you can watch CNBC and watch the analysts talk about the big banks, whether it’s the big banks, the regionals, or the small banks, we all have the same issue. We are a reflection of our economy. When things are tough, when it’s difficult for business owners to pay back those loans, it makes things difficult for us. Interest rates are extremely low right now. It’s very difficult for us to make any margin. So it’s difficult for us to maintain, to remain profitable in this environment. So you couple the credit quality issues and the profitability issues combined make for some really tough times over the next 12 to 18 months. So we definitely have concern about that.
Alerus is extremely well-prepared. We’re a very conservative bank. We’re based out of North Dakota. We’ve been around since 1879. Been through some really tough times in the past and have been able to survive. So we have the balance sheet and we have the ability to withstand these types of downturns.
Also, we’re not heavily concentrated in commercial real estate. In the past, in the Arizona market, banks that have been heavily concentrated in the commercial real estate industry, unfortunately, they can experience pretty significant peaks and valleys. As we all know, this is a very difficult marketplace to work through in commercial real estate. So we don’t have that concentration. We’re more of a business bank. We can do commercial real estate, but it’s not a big concentration of ours. So we’re pretty well-prepared to withstand a downturn. That said, our responsibility is to make sure that our clients are taken care of and that we’re meeting their needs. We’re very open to any opportunities that our clients see about providing financing for them to expand their business or what it may be. I’m really impressed to see how many business owners in this marketplace are actually doing quite well right now. There’s some manufacturing companies in our portfolio that are doing very well. Some in the aerospace and defense industry that are doing very well. So we’re kind of excited about the future for a lot of our clients.
Az Business: Are there things that Arizona is doing right in terms of the business environment and government that makes it a good place to do business?
Rob Schwister: Alerus entered the Arizona market in 2009. Part of the reason why we came to the Arizona market was because of the willingness and openness to do business with other people. It’s a melting pot, right? There’s quite a few business owners in this marketplace that are from somewhere else. If you go to networking events and you meet people, you find that people are much more open to networking and building new relationships in this market than others. So entering this market was kind of easy for us. Our chairman, Randy Newman, has actually said that entering the Arizona market was easier for us than entering the Minneapolis market coming from Grand Forks, North Dakota to Minneapolis. Think about that. That says a lot about how open the Arizona market is to doing business and welcoming new businessmen to this market. So it’s been successful for us.
Az Business: What’s your industry outlook for 2021?
Rob Schwister: My crystal ball for 2021? The mortgage industry has done extremely well over the last six to nine months. I would suspect that that will taper off. I think interest rates will probably start to rise a little bit. So probably see a little bit of slowdown in the mortgage industry. Our industry will remain strong. The banking industry is solid. Arizona is doing very well. I think you’ll see some new players in the market and you probably will see some more consolidation in the industry. You’ll probably see some banks get acquired. That’s a continuing trend in our industry.
We’ll probably see a lot less bank branches. I think technology has really changed the world in how we do business in the banking world. Our number of transactions in some of our branches is significantly lower now than it was five years ago. And I think that trend will continue. I think people will continue to use technology. So a lot less real estate, a lot more feet on the street though. I think the way we do business, our business advisors, they help business owners with all the products and services that we have to offer. So they don’t necessarily have to be at a desk. I prefer that they’re out and about meeting with clients in their place of business. Makes us much more accessible. So I think you’ll continue to see some consolidation in the industry. I think the credit issues will probably be a challenge over the next 12 to 18 months, but we’ll definitely get through it. Arizona’s a very healthy environment. A lot of people moving here, a lot of growth. That’ll continue. So we’re excited to be here and be a part of it.
Az Business: There’s been talk about a couple of new community banks opening in Arizona. What do you think about that for the industry?
Rob Schwister: I think having new competitors in this market is fantastic. I think seeing a De Novo Bank get approval and open up in this marketplace, I think it’s welcomed. I think we need that. Just to give you an example, I’m on the board of directors for the Arizona Bankers Association. There’s 55-ish banks doing business in the state of Arizona. There’s maybe 15 of them that are actually based here. The state of Minnesota has 600 banks. So when you think about that, I mean, seems to me like there would be some opportunities here for others to come and enter this market and do some business, especially with a thriving metropolitan area like Phoenix and Tucson. And now the other smaller markets like Flagstaff are doing very well. So I welcome other banks. I think it’s great for our industry. I sure hope they join the Arizona Bankers Association and help support us because we need them.