Later this month our Affiliation Program fall meeting attendees will receive a detailed recap of the best and brightest concepts and reflections from the High Performance Idea Exchange, a session that encourages free flowing dialogue among the participants in each asset-based peer group. We all agree that 2020 has been a year like no other, but the unique challenges and opportunities that bankers have been experiencing sparked some interesting discussions. Here are a few highlights:
Changing Workforce Environment. Our memberbanks have been dealing with the shift to more remote employees for several months, and they were all eager to share the different strategies that they had used to adapt during shutdown and subsequent reopening of their branches. As expected, the percentage of employees that our member banks reported as still working from home varied widely depending on the region and type of market (urban vs. rural). No matter whether a bank had 90% of employees back in the office or 20%, everyone agreed that the shift to more remote workers had resulted in some positive outcomes that will outlast the pandemic. For banks in markets where it had previously been difficult to find talent for certain positions, the ability to recruit candidates from outside their region has been a real bonus, albeit some concerns were expressed about the long-term challenges of mentoring and motivating employees when face-to-face interactions are not the norm. A few banks indicated they are considering permanently reducing the number of days that employees are required to work in the office from five to three in order to gain efficiencies, and others said that the shift gave them an opportunity to streamline and reorganize their teams as they should have years ago.
Lending Outlook. The majority of our member banks offered PPP loans, and they concurred that community banks clearly had an advantage over larger institutions on this front since they were able to react more quickly to the specific needs of their communities. Some accepted customers and non-customers alike for PPP, deciding on that strategy because it gave them the ability to inject more of the much needed funds into their local economies. Aside from the positive impact on their local businesses, these banks gained some new customers through PPP that will likely prove to be loyal in the years to come. Banks in certain rural and suburban markets also indicated that they had seen an uptick in lending recently due to real estate booms in their areas, prompted by families deciding to move away from large cities severely affected by the pandemic. However, there was a general concern about loan generation challenges going forward and the low interest rate environment that will likely be in place for a long time. Well over half of the bankers in our peer groups indicated that they are actively utilizing pricing models to improve loan profitability, a practice that should serve their institutions well as we head into a season of anticipated weaker loan growth overall.
Branch Network Adaptations. Reimagining the branch network for our changing times was also widely discussed in the Idea Exchange this fall. There was a consensus that there will always be a need for the branch; some businesses will always have a certain amount of cash and checks that must be processed. However, several bankers shared that the adjustments to lobby hours implemented due to the pandemic may stay in place permanently at their institutions. One banker said their team had talked about reducing lobby hours for years but rejected the idea for fear of negative pushback from their customers. Because of the pandemic, their customers currently seem more forgiving of change, and they are strategically taking this opportunity to improve overall efficiency through reduced hours. Bankers, especially those in rural markets, shared that their drive-throughs had absolutely been a lifesaver for their banks and communities the past few months. In fact, one banker revealed that they are opening as many accounts solely via the drive-through as they were in the lobby pre-COVID. Another bank shared that they are adapting by reconstructing their branch interiors as community centers, making them a place for outreach and neighborhood involvement vs. a more traditional branch model, a positive change that has so far been a win-win for their institution and community alike.
For more information about the Affiliation Program and our future meetings, please visit us at https://affiliation.smslp.com/.