Here are the banking industry trends to watch in the wake of COVID-19

Business News | 12 Jan |

Looking forward into 2021, Az Business Leaders sat down with Mike Brown, president of WaFd Bank Arizona, as well as his Arizona executive team to discuss what banking trends await amidst uncharted territory that will come in the wake of the COVID-19 pandemic.

Despite a hurricane of unexpected changes and challenges that have sprung from COVID-19, Brown and his colleagues see hope on the horizon. And, this highly collaborative team shares how their all-hands-on-deck approach during uncertain times championed notable victories within WaFd, and beyond.

Az Business Leaders: What do you see in terms of a global outlook in banking as we approach 2021? 

WaFd: Looking into 2021, it is a challenge for banks for two reasons:

 1. Economic uncertainty related to COVID-19 and all of the unknowns (will there be a vaccine, will we have more shutdowns, can there be large gatherings, will the unprecedented level of government assistance continue).

 2. The near zero interest rate environment makes it very hard for banks to generate normal returns.

Acknowledging the challenges, overall we are bullish on banking looking at 2021 and forward because:

1. Banks learned valuable lessons in the great recession that are benefiting all of us today (banks are very well capitalized and it is much better to work with your clients by providing flexibility than moving quickly to foreclosure) .

2. This crisis is not centered in real estate, in fact real estate has actually strengthened which will be a source of strength for both banks and consumers.

3. We have empowered our workforces to work when, where and how they want which will drive increased productivity and connection with our clients.

Mike Brown, center, president of WaFd Bank Arizona, and his Arizona executive team.

ABL: How will the residential and CRE markets continue to navigate challenges prompted by the pandemic?

WaFd: Given the current supply imbalance, historically low interest rates and the economic/growth dynamics Arizona has to offer, the residential market has remained strong during the pandemic and should continue into the future. There remains a significant amount of demand and appears some buyers may be returning to market seeking a change to their current quality of life. Evidence of this was a June that saw sales of newly built homes rise faster than any month since 2005.

Multifamily has remained strong in both occupancies and collections, though as the government assistance may subside, there could be some effect. The single family rental market is one asset class that has been seen as COVID friendly and thus a number of institutional investors/developers are entering the space. Going forward, we will continue to focus on the migration trends that will effect the momentum of all the aforementioned residential components.

As it relates to Arizona commercial real estate, the market was extremely strong across all asset classes prior to COVID.  At this point, it would be premature to draw any type of conclusions about the virus’s impact on the local commercial real estate market. So far, the most severely impacted have been hospitality and retail and will likely spill over into the office and potentially even the industrial markets (i.e. Nike announcing they are not coming to Goodyear). Though, Arizona is better positioned than many other states across the country and thus will hopefully see the turnaround much faster than others.

ABL: How does industry move forward as we reach closure with COVID? 

WaFd: This is a very difficult question to answer because the pandemic keeps changing and the idea of “closure” is still something we would all like to know, personally and professionally.

When the pandemic had intensity, starting in March 2020, it clearly impacted many industries. In many ways, it touched us all. Those who saw the immediate impact were hospitality and tourism, oil and gas, and retail, of course. Certainly all small businesses were touched as well, to put it mildly.

The government lifelines like the CARES Act and the PPP loans were able to “stem” the bleeding but the virus is still raging throughout the country and it is difficult to understand the trends going forward.

I also sit answering these questions in August 2020; meaning before the election. I think predicting anything without more data on the global pandemic and the election outcome would be premature.

ABL: How has the pandemic affected the banking industry? 

WaFd: The banking industry continues to move forward albeit in a new and different manner. Our retail branches have had to deal with restricted lobbies, sneeze guards in front of the teller lines, dots to tell them where to stand, masks for the employees and customers, etc. The commercial side of the bank continues to grow but we are not only focused on the overall creditworthiness of the borrower and the underlying collateral but we now discuss possible COVID-19 impacts on that specific project or that specific industry.  Consequently, our stress testing has expanded and we continue to monitor and adapt as the pandemic continues.

ABL: How will the aftermath of COVID-19  alter the banking industry? 

WaFd: I think it depends on the bank itself. In relation to WaFd Bank, we are the 10th best capitalized bank of the 100 largest in the country and recently named among the top 25 banks in the country by Forbes Magazine. WaFd Bank has been around for 103 years, and longevity like that doesn’t just happen by accident. We are big enough to matter, yet small enough to care. We are nimble. We are strong. We are poised for growth. And we are poised to help Arizona businesses recover, recalibrate and grow in this new decade.

The aftermath of COVID-19 will have some philosophical discussions that will be discussed in great detail and they include things like working from home, what should our branches look like in the future?, will branch visits be made on an appointment basis, etc.

ABL: What victories has WaFd Bank Arizona experienced in 2020? 

WaFd: One of the most memorable experiences for our bank in 2020 was our involvement in the PPP loan program whereby WaFd was able to provide 6,700 loans totaling $490 million throughout our eight-state footprint and 912 in Arizona totaling $88 million. These loans were focused on the lifeblood of those companies…their employees. Our WaFd team here in Arizona and throughout our eight-state footprint worked on these loans for countless hours and even on weekends because they felt so elated when they were able to tell these clients that they were approved and the monies would be in their accounts shortly. We have thousands of very happy customers and many times there were tears associated with those discussions. One of our Senior Relationship Managers said “This is ‘emotional money’ like I have never seen before!!” It was a very happy experience for our bank and our customers in a very difficult time in the history of our state and our country.

We also spent significant time in 2020 determining how to best maximize our current branches for our team members and customers. This led us to a series of renovations and refreshes brand-wide. In June 2020, we finalized a full remodel nearly from the ground up at our Safford branch. In August 2020, we formally moved our bustling Camelback branch to a new location next door, which provides far better access, parking and other amenities. And by December 2020, we will also complete two more sweeping renovations: one to our Paradise Valley branch that will modernize the space as well as give us a partner in Black Rock Coffee in the building; and one to our Yuma 4th Avenue branch as well.

2020 also marked a time when our team members stepped up efforts in the community in a big way. As a small sampling: I served as vice chair of The Care Fund throughout 2020, and in November 2020 became its chair. Lisa Davey, who serves as vice president and northeast Arizona retail division manager for WaFd Bank Arizona, was appointed to the board of directors at Chrysalis, which offers a comprehensive array of trauma-informed programs for individuals and families impacted by domestic abuse. Jim Orrey, who serves as WaFd Bank Arizona’s assistant vice president as well as the Prescott Valley branch manager, was elected a board member for the United Way of Yavapai County, which identifies unmet needs across the community and addresses them by funding programs and networking with its agencies. Dan Nillen, WaFd Bank Arizona’s managing director of commercial real estate, continued his dedicated service to The Scottsdale Charros. Jill Malick, WaFd Bank Arizona’s vice president and senior relationship manager at WaFd Bank Arizona, serves on the Tucson Metro Chamber’s executive board, where she is past-secretary and the current treasurer. She is also a member of United Way of Tucson and Southern Arizona’s board of directors.

ABL: How did the bank assist the community amid COVID-19?

WaFd: Banks – and bank leaders – are in a unique position in times of crisis. Many times a crisis can or will have a financial impact. Bankers are financial professionals and they can provide help to a customer whether it is retail or commercial insight or navigation help relative to the crisis. WaFd Bank, by virtue of our strong capitalization and market strength, was uniquely positioned to help our clients and our communities in this time of uncertainty.

We were privileged to have the capital to provide liquidity to the markets we serve and provide stability in uncertain times. First, we implemented a Small Business Lifeline program through our Community Banking Group. This Lifeline program, in which we allocated up to $100 million, was designed to help affected clients and non-clients by providing liquidity through business lines of credit up to $200,000 with 90 days of 0 percent interest.

In addition to the Small Business Lifeline program, we implemented other payment relief assistance programs to help our clients that were not eligible for the small business program. This includes those that have consumer mortgages with WaFd, as well as our commercial banking clients.

We also recognized that many small businesses were in immediate need of the Paycheck Protection Program (PPP) loans, so we established the WaFd Bank PPP Contact Reservation List that allowed us to notify customers as soon as the PPP loans are made available.

Our technology was a win as it relates to COVID-19 as well. In March 2020, we went live with our nCino platform for commercial loan origination, so we were able to work quickly with their very nimble platform to process our PPP loans. But they at the time did not have, at least available for us, API integration with E-Tran. So we utilized bots—basically computer programs to emulate human beings entering data. I think it took on average about three minutes per loan when you could get through.

When we had the downtime between the first and second rounds of PPP, we implemented two different APIs from two different vendors, and the bots—and also human interaction for the most difficult, challenging loans. With the interfaces, it takes just a few seconds.

Beyond this, locally we donated over $80,000 in grants immediately and in addition to our regular WaFd Foundation grants.

WaFd Bank also created a COVID-19 Mortgage Payment Deferral Program, a homeowner assistance program allowing monthly mortgage payments to be deferred for three months.

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