From the early, uncertain times of the pandemic to the hectic days of the Payroll Protection Program (PPP), Nevada bankers have seen massive shifts in the market and in their industry over the past few years. These shifts have made bankers agile and adaptable to their client’s needs. Recently, bankers met in a roundtable sponsored by City National Bank to discuss their industry and what the future holds.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly roundtables bring together different industries to discuss issues and solutions.
How has COVID changed banking?
Bruce Ford: [COVID] helped us utilize technology a lot better. Our clients are now so used to technology, that was a real improvement for us. I feel much more efficient when I can do a lot of things by Zoom or Teams and still compliment that with going out live to clients.
David Navarro: It changed the way we work. The idea of remote work had been surfacing pre-pandemic but the force to work remotely, especially initially those first couple of months, we’re still dealing with lingering impacts. Many employees were able to be very productive working remotely, others didn’t have the circumstances to be as productive. Some want to remain at their home working and some want to come to the office. It’s a balancing act now, trying to figure out what works best for the bank. Is it some type of hybrid model? Do we go fully remote? That’s something banks, and many industries, are still navigating.
Stacy Watkins: How do you handle that with HR policies and handbooks? How do we help provide resources for our businesses? Are we connecting them with HR providers? On cybersecurity, are we connecting them with brokers for insurance for their systems being hacked? It is on the rise. We’re seeing client [and] personal emails being hacked, wires being sent on behalf of the client and significant losses being taken. We’re referring them to the Nevada Bankers Association and there’s a lot of resources locally. We need to make sure we’re collaborating and providing resources to our clients.
Gretchen Lin: JPMorgan Chase spends $2 billion a year on technology, and it forced us to fast track a large number of things we would not have ever gotten to if COVID hadn’t happened. We might have gotten there, but it would have been like a five or 10-year plan. We were forced in a very real way to make those things be live and available, as well as to reconsider some of the ways that we look at risk. We’re also connecting people to our cyber experts to meet with our clients and to have conversations. Our community manager is doing a series of presentations with different community partners and we brought in a speaker to the Henderson Chamber. That education piece is huge.
Denette Suddeth: There was a 158 percent increase in North America in ransomware. For the financial services industry, it is critical we educate our clients and provide fraud mitigation services with real time activity information. Coincidentally $2 billion was the same number PNC spent on technology and trying to drive client education and awareness around cybercrime
Ryan Sullivan: If there’s one area we’re all on the same team, I think it’s cyber. That’s not a banking issue, that’s a public issue. We have done an incredible amount of work as an industry to really harden the payment and banking system in general. It’s become such a huge need for our state that we’ve actually rewrote the charter for the Nevada Bakers Association to include cybersecurity, education and awareness as part of the key components of our directive there.
What advice do you have for companies to keep their finances secure?
Navarro: Pick up the phone and call a number that you know.
James York: Look at your bank accounts on a daily basis. CFOs and Controllers can go in and look all the time for things that are suspicious. [That is] besides not opening the emails and things that you should be sending to your IT guys. Just be aware. It’s amazing how you have these businesses run and for weeks, sometimes months, don’t look at their statements. Technology is wonderful because you can look at it on your phones. The business owners ought to have that on their phones and just monitor it all the time. There’s no reason not to catch cyber [issues] early.
Phyllis Gurgevich: Stay vigilant.
Sandy O’Laughlin: Consistent testing is huge. There’s a reason federal agencies, the OCC (Office of the Comptroller of the Currency) and the FDIC (Federal Deposit Insurance Corporation), put that 36 Hours rule in place. The rule was effective four, five months ago from the OCC and FDIC that if a bank identifies any kind of cyberattack, they have to notify the OCC. It lets them know so they can quickly get on it and get it out on the wire what is going on. It drills down so far to the third-party providers and it’s so deep that they can’t get their arms around it fast enough, which is why they want to be notified within 36 hours so that they can jump on it, get it out to the rest of the industry and let them know this is a problem.
Sullivan: It’s about adding layers because it’s become such a sophisticated issue and threat. When we talk about cybersecurity with our consumers and businesses, you can’t just do one thing and think you’re going to be okay. The public has had the perception if they just keep information locked in a box, it’s all going to be okay. Your information is out of the box and the wrong people have it; you need to protect yourself.
Lin: It’s also using the tools that are available to you. All of us have tools available to clients and it can be as simple as alerts to as sophisticated as products and services that can help to lock down the account. Use those tools that are available to you and pay attention to what’s going on with your account.
How does regulation affect this industry?
Gurgevich: In general, anytime we go into a legislative session as an industry we always want the best information we can share. What we want policymakers to know about first and foremost is how collateralized lending works. “First in Time, First in Line,” is the industry saying that is the basic underlying principle in lending and providing credit in our state. Things that interrupt that add risk and increase the cost for consumers. Banks should be enabled to lend, invest in and provide products and services to legal businesses. They should also be able to not provide bank services and products. We hear a lot about ESG (environmental, social and governance) and there is some lack of clarity around that. What is clear is the financial system in the US is the envy of the world because of the free market principle. There should be a line between policy making and deploying regulations.
York: We always feel [the industry] is overregulated, but we’re grateful for it in so many ways when we need it. Retrospectively, looking back to 2008, there probably could have been more. We’ve gotten a lot smarter since then. Our banks, but also the businesses and borrowers, have all gotten smarter and kept more liquidity around them. It’s been necessary, for the most part, all the regulations that apply to all banks. [There are] larger and smaller banks but we all kind of get blanketed. That is an issue where we overregulate, at times, for a small bank.
Brian Formisano: It’s a great question to ask: are we over or under [regulated]? I think it’s appropriately regulated. I don’t think [there should be] a lowering of the standards we have. What we think tomorrow will look like, when we get there, it will be very different. So as that continued speed of change happens, we’ve got to make sure that there’s appropriate levels [of regulation] across the board.
Sullivan: Part of the challenge is the unevenness. Arguably, there’s some areas that we could say are overregulated. On the other side, there’s big emerging growth sectors that have no regulation at all, like cryptocurrencies, cannabis banking or a lot of key issues where we’re seeing massive shifts in the economy. In banking we like rules. Give us the rules and we’ll follow them. There’s some more guidance needed.
Will banking ever lose “brick and mortar” branches?
Formisano: Go back to the beginning of evolution of banking, we had banks by mail, then telephone banking and ATM, then online/mobile. At every single iteration, there was always a call of, “Gosh, now we’re transitioning, why will people ever come into the bank?” People come to the bank. There will always be a need for person-to-person connection. It’ll just depend on what that need is. The more complexity involved, the higher the likelihood for that in-person connection. But the simple service items, those are fizzling, appropriately.
Ford: Certainly, during my career, there will be branches, but part of that is the perception by clients that there’s some safety if there’s a branch. I’ve talked to people who are reluctant to go [to an online-only bank] because there’s no brick and mortar. It’s evolving, certainly, and technology is much more important. You don’t have to go to a branch if you don’t want to, but people still like to know that there’s one there if they need to [go in].
York: We’re assuming that everybody has these technology wonders in banking and they’re all using them. They’re not. They’re learning to use them. And so, people come to the bank branches for a different reason now. A lot of them are still coming to do the old-fashioned way of banking because they’re scared of the cell phone and think it’s a security threat. We have a generation that we’re going to have to train. A lot of people come to the banks to see us as advisors now. You walk in and see somebody with a screen up and INDUSTRY FOCUS they’re talking about products. While you’re waiting in line or talking to somebody, you can say, “Oh, I always wondered how you did that.” They need to be taught. They don’t come just to cash a check and make a deposit, they come for advice.
Watkins: There’s a lot of startup businesses coming and some of them just don’t even know how to start their action plan or how to develop a business plan. So they’re coming to us and the professional advisors to understand what to do next. It’s important for all of us to provide the services and connect them to the resources here in Las Vegas.
Formisano: There’s an information center transition for branching, it’s more of an information center as opposed to what it was.
Lin: Through the pandemic, we expanded into over 48 states. That expansion was branch openings. As a firm, we are saying that community, physical presence is super important. We retrofitted branches specifically as community centers. There’s an entire swath of the country where technology alone is not going to do it, they’re looking for advice. Meeting them where they’re at and being able to provide advice [is vital] and the brick and mortar is super important to that. More than the brick and mortar, it’s the employees that are there to provide really good advice.
Is banking experiencing staffing issues?
Robert Sandhu: That is the biggest issue in our industry and, I think, every industry in our country. We have a 3.5 percent national unemployment rate. Employees can work throughout the nation remotely. That’s presenting a problem in finding qualified candidates. There’s also a brain drain; there’s a very important segment of our population, the baby boomers, and some of them have retired since the pandemic. That negatively affects succession planning for us in development of our younger generation. We need to do a better job of recruiting, training and developing the next generation of bankers.
John Guedry: The issue of staffing is much more complex than I think we all understand. During the pandemic we had a net migration out of retirees, 3 million people from our workforce. It’s not easy to replace that overnight, not only the numbers, but the experience we lost as well. That’s a challenge for all of us. We’re in an industry that’s not too different from other industries where we have been in a growth mode and not necessarily training future employees the way we should be. The internal promotion of employees needs to change, and we need to be reinvesting in our staff. It’s not an easy fix. It’s going to take a while.
Navarro: We’re starting to do that at a national and a local level. Many different banks have their own training programs employees will go through to get the skill sets to grow within the organization. But an ounce of prevention is worth a pound of cure, and it starts with foundational skills I learned at the high school and collegiate level. Nevada Banker’s Association, and many people [at this roundtable] have teamed up to address that. We started the commercial banking program at UNLV (University of Nevada Las Vegas), which fits under the Finance Department to, in our words, “create intentional bankers.” If you ask a banker how [they got into the industry], it’s accidental. We’re trying to have these students become bankers on day one and intentionally find a bank they can call their home. There’s things being done locally which has given me confidence in the future of our industry and community to have qualified bankers.
Suddeth: PNC runs PNC University. We recruit undergraduates and interns and then we bring them back after graduation as employees. They come in the industry straight out of college. But the supply and demand [for bankers] are definitely not in bounds.
York: We’re talking about people who want banking as a career and how to train them and so forth. We are getting some programs together to help do that because there’s a shortage of that talent, but not everybody wants banking as a career. [Some may] just want to be a teller, they’re going to do it while they go to college or whatever else. The challenge for us is the front-line staff. Teller turnover has been unprecedented. It’s amazing, we just can’t find people that want to work. I’ve had over and over tellers apply and it’s gotten to the point we just have to hire somebody we know that wants to show up and work. Many of them are applying to get their unemployment or they take the job and they don’t show up to work, or they have six absences in a month and they really just want to get fired. It’s an issue.
Watkins: Competitive minimum wage is [an issue] too.
York: The minimum wage for front-line tellers has gone from $10 to $20 an hour. So we’re paying more and more for them. That means they really need to be trained and we need to get more out of them as well. It’s no longer just an easy entry level position. Our challenge has just been the operations people. You can’t hire somebody and keep them. The culture in the labor market is different, it’s changed.
Sullivan: The challenge [of remote workers] we embrace as an opportunity. As we’ve grown, we’ve leveled the playing field by leaning into a remote and hybrid work environment. We’ve been hiring people outside our market, we want to make sure we get all the talent that’s available, particularly for some of our specialty lines of business. We’ve got employees in 19 states, and we have two locations in southern Nevada.
What is going on with interest rates and inflation?
Sandhu: If you’re going to talk about interest rates, you’re going to talk about inflation. Inflation is here, there’s no question about that. You can no longer define it as transitory, the Fed came out and said that. They’ve already increased rates by about 150 or 175 basis points, they have a certain target to get to 3.5 at the end of this year. That means rates are going to continue to climb, that’s 150 basis points by the end of this year, that’s a dramatic increase.
Lin: First and foremost, it’s a macroeconomic issue; we’re all dealing with it. It’s not any different for any client. From a macroeconomic standpoint, interest rates are still, technically, at the moment are not that high. I’m old enough to remember 20 or 18 percent. Compared to 2 percent, yes, it is very different, but it’s not really that high. There is something to be said for us, as financial services leaders, helping to share that story.
York: Right before the pandemic, it was higher than this. [Consumers] have a five-minute memory, you have to remind them. The issue we’re having, especially on any loans to do with construction, is we approve and are ready to fund the loan, then they don’t need the money for 90 days or whatever. They come back and we quoted rates in the fours but since then it’s gone up and they expect you to hold that [original] rate. We’ve had to tell them now, that rate is good for 60 days and then you’re going to be subject to a rewrite on the rate. Before the Great Recession and everything else, the average prime rate was 8 percent in the US. [Rates have] been held down too low for too long. And, with interest rates, you can’t talk about them without inflation. I know they’re raising [rates to] control the money supply to fight inflation. We’re hoping that’s going to bring inflation down. I’m not so sure that it’s going to. There’s still so much liquidity in the market.
Formisano: We’re putting our focus on the future for the situation we’re in today. Last month [the government] said they were committed to battling and tackling inflation. Even that could cause a hard landing or put us into a recession. What does that mean for our clients? How are we going to help position them effectively for the future? That’s where a lot of our education is coming into play now, especially for small business owners. How do you position yourself, not just for the next twelve months, but really for the next three to five years. A lot of energy is placed on the future.
Navarro: Going back to the education piece, I find we’re having to do that consistently with our clients about interest rates. We’re sharing with our clients, “This is how we keep track of where your rate is going to be. And understand, until we close the deal, this rate is going to change in between there.” It’s been very educational on all fronts.
Suddeth: [It’s also] helping business owners look at their own businesses and what that interest rate environment means for them if they’re borrowing and where that level takes their cash flow.
Guerdry: There’s some uncertainty. There’s still a lot of unknowns on how long the inflation bubble is going to last, how big is it going to get and how is that impacting businesses in terms of being able to grow. I don’t worry as much about the interest rate that tends to be fluctuating. We’ve had such a low rate for such a long period of time and 6 percent sounds high, but it’s not. I don’t think interest rates are as much of an issue.
