For more than a millennium, WaFd Bank has been serving communities throughout the West. That’s ample time to observe waves upon waves of economic and banking trends. From being in business during the Great Depression and Great Recession to the recent global pandemic, who better to speak to the 2022 banking industry outlook than the current experts at WaFd? To help forecast what’s to come after the pandemic, assessing exponential growth in local business sectors and witnessing increased cybersecurity activity (among other banking industry trends), we turn to WaFd Bank Arizona Regional President Mike Brown, Commercial Real Estate Division Manager Daniel Nillen and Vice President and Northwest Arizona Retail Division Manager Brian Larsen to discuss.
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Az Business Leaders: What do you see in terms of a global outlook in banking as we approach 2022?
Mike Brown: As the recovery period post-quarantine gained momentum last year, we anticipated 2021 as a year of pent-up demand being released. And that’s exactly what we saw. Many consumers used savings built up over the past year to spend on goods and services, especially travel, leisure and other experiences curtailed during the pandemic.
We expect this to accelerate as we enter 2022. Businesses should benefit from higher-than-expected growth, revenues and profits. Many will likely use excess cash for capital expenditures and productivity improvements to meet elevated demand and to help them overcome challenges such as worker shortages. This creates a positive environment for stock investors, despite potential risks, including rising prices. Banks are positioned to expand and meet consumer demand for business and home loans as the public continues to invest in personal financial goals.
ABL: Are there any Arizona-specific banking trends you see on the horizon going into a new year?
Daniel Nillen: Financial institutions are going to need to focus on the net migration of more than 250 individuals a day relocating to Arizona, which will result in tremendous growth across multiple business sectors. Banks will need to be equipped to support an influx of opportunity and deposits with new business expansions and commercial properties developed. Arizona is going to continue to be a direct beneficiary in this post-COVID world and will continue to see a level of growth not experienced in most markets around the country. Phoenix is welcoming national corporations that are identifying the Southwest as a leader in technology, manufacturing and a more robust job candidate pool.
National and regional banks have taken a keen eye to the Arizona market and have made strategic investments in the state to expand their footprint. This could continue to the point where you may see acquisition or consolidation of smaller community and/or regional banks either headquartered or prescience in Arizona.
The residential real estate market will remain strong as a result of historically low rates and supply imbalance. The commercial real estate market continues to be strong across all asset classes; in large part due to the migration growth in 2020, which placed Arizona fifth in the nation. This should continue to make Arizona an in-demand growth market, not only for transplants but also for new and growing businesses.
As we move into post-pandemic life, real estate predictions show a clear surge in working Americans moving out of dense areas, particularly in the Midwest and California, and into more affordable inland cities. With all the activity in this hot real estate market, we have been able to lend on newly acquired assets, as many commercial real estate investors continue to expand their real estate holdings. The influx of companies wanting to locate in Phoenix is becoming increasingly evident as we transition into post-pandemic life. The development of Taiwan Semiconductor Manufacturing Company’s new facility in North Phoenix and Intel’s expansion of its Chandler campus are just two examples of this demand.
ABL: What banking industry challenges and victories can you share coming out of the pandemic?
Brian Larsen: The pandemic was nondiscretionary and impacted everyone. As a society, we collectively looked around and searched for ways to help those facing hardship. It is difficult, but in a crisis, it is not only important but also more effective for your business in the end to rise above self-interest.
While big and regional banks are centralizing services for mid-size commercial customers, WaFd Bank is going against the trend and providing more localized services and bankers to commercial customers. Using a relationship-based business model, we have found a solution that is built for business and produces the best results for customers across a range of industries. While we offer a variety of products and services, our commitment to personal service is unmatched in the industry.
At the start of COVID-19, WaFd Bank implemented a variety of payment relief assistance programs to help clients meet their financial needs. The Small Business Lifeline program, in which up to $100 million dollars was allocated, was designed to help affected clients and nonclients by providing liquidity through business lines of credit up to $200,000 (with 90 days of 0% interest). WaFd Bank also recognized that small businesses were in immediate need of the Paycheck Protection Program loans, so it established the WaFd Bank PPP contact reservation list that allowed them to notify customers as soon as the PPP loans were made available. In Arizona alone, WaFd Bank provided 912 PPP loans totaling
$88 million during the first months of the pandemic.
ABL: As the nation works toward rebounding and fiscally healing in the wake of the pandemic, what particular changes will we see in banking?
DN: Responding to existing and new client needs became particularly crucial in the wake of the COVID-19. A year later, the world is slowly returning to offline operations, but digital payments, insurance technology and online loans are not about to lose their appeal. Customers and younger generations prefer handling finances through their phones, so creating a secure mobile banking app can be a profitable venture — with the right strategy.
As we all embraced technology during the pandemic, we were also reminded of the cyber threats present across multiple avenues. At WaFd Bank, we work with organizations of all sizes and see smaller businesses are often the targets for cyberattacks. We offer systems that help business owners navigate these challenges, and our team of bankers use a personalized approach for each business request. In today’s uncertain times, fraudsters capitalize on fear while indiscriminately targeting companies and individuals alike. There will be a steady increase in cyber security education and tactics developed to prevent malicious threats.
We will also continue to see an increase in demand for small business loans that many small business owners explored during the pandemic. As business owners assess their goals for growth in a post pandemic landscape, we will be equipped to provide a personal and analytical approach to their lending needs.
ABL: Are there any areas particular events, stories or situations that
WaFd Bank is particularly proud of that occurred in 2021?
MB: The dedication and passion of the team has strengthened the company and resulted in a steady increase in business over the last three years. As of June 30, 2021, the company reported $19.6 billion in assets, $15.2 billion in deposits and $2.2 billion in stockholders’ equity. We have grown the commercial real estate division to an unprecedented level by bringing in top talent in the industry and providing them with the tools to perform, leading to a 27% increase in revenue from 2019 to 2020 and a 43% year to date increase as of June 2021.
We have seen great success in Southern Arizona and exceptional growth in Tucson. Since the opening of the commercial banking center in 2020, the team has grown to five commercial bankers who originated more than $100 million dollars in the last nine months with Tucson businesses.
Our investments in customer service, usability, and technology are translating into top-tier customer satisfaction levels as our Net Promoter Score (NPS) is 51, and far above our competitors. I am very proud of the diversity at our company, as well as the senior leadership in Arizona — 67% of whom are women. With the results of the last year, it is evident that having the right people who are passionate about what they do will lead to exceptional outcomes for a business.
ABL: On a macro scale, what type of trends will emerge in banking over the next five to ten years?
BL: Banking leaders must ensure their institutions are equipped to serve customers across all platforms. Access to services, products, support and information must be readily available in all channels to cater to a customer’s digital preferences.
The ability to satisfy modern customers and strategically reshape your branch footprint all have substantial returns. There will be a restructuring of branch sizes and employee roles as we reevaluate the traditional bank model and build a system that works for the modern consumer who may never set foot inside of a branch.
To support the growing demand for digital self-service banking, banking institutions should be designing processes and platforms for a revamped native mobile application, video banking and interactive teller machines — customer service content that can be served across digital channels and automation for processes such as applying for a loan or speaking with an advisor.
The banks that succeed in the next five to 10 years will be those that rethink digital opportunities and position themselves for the customer of tomorrow.
ABL: How has mentorship played a part in shaping your career (both as a mentor and mentee)?
MB: The opportunity to teach someone a new skill every day motivated me to become a leader. Through education and mentorship, I can convey my knowledge and experience to a new generation of professionals and help them build a successful and impactful career. This approach stems from my years as a ski instructor at Copper Mountain in Colorado. My passion for the slopes and teaching classes to new skiers taught me the great reward achieved in sharing your knowledge and watching someone else succeed.
Early into my current position, I launched a mentorship initiative that would shine a spotlight on ambitious team members. I worked closely with these members to provide advice regarding any issue or question, and together, they built career paths that propelled many of them to promotions and excellence within the company.
