Author: Dan St.Clair, Audit Director

Community banks have long been the backbone of cities and towns across the county. Their involvement and ongoing investment in people and businesses over the decades has helped multiple business endeavors flourish, in both good times and bad. In the current environment of the COVID-19 pandemic, it is once again time for community banks to rise above the clutter and be a beacon in the storm, providing stability and guidance in the worst of times.

This past week, the OCC, Federal Reserve Board, FDIC, and state banking regulators, issued joint guidance (OCC Bulletin 2020-21) which encouraged banks to assist their customers in these times of need and sought to ease concern about whether loan modifications will trigger Troubled Debt Restructuring guidance. The objective being to allow bankers to work with their customers and identify the assistance needed to weather the COVID-19 storm.

The banking system is a latticework of financial markets that help drive the daily activities of our communities. This system must continue to be strong, and cannot fail, during times of crisis such as the one we are currently witnessing. So what should banks be doing now to provide assistance?

    • Remain strong and provide the services you are known for. This might mean increased usage of technology, or just routing your lobby clients through the drive thru, but continuing to be available to your customers. Keeping the flow of commerce moving forward is key.
    • Know your customers and your loans. Be proactive in identifying customers and companies at risk and look to find solutions before the situation becomes dire. The recent guidance states that borrowers who were current prior to the onset of the pandemic are outside the scope of TDR reporting so making modifications in a timely manner will be key. A little planning can make a world of difference in the outcomes of these business relationships.
    • Don’t forget about your employees and families during this time of stress. The tension is high for everyone and we often focus on our customers and our business relationships and may tend to forget about the people closest around us. Use compassion, understanding, and as much flexibility as available with everyone around you.
    • Be honest with yourselves and what you are dealing with. Having a proactive plan in place will put banks in position to identify the negative trends and adjust for them quickly. Evaluation of both qualitative and quantitative factors in the allowance methodology will be stretched over the next few months. Make these adjustments to the methodology timely and with purpose. It may help save your customers business and your bank from potential losses.

This is the time for community bankers to lead with pride. Be the source of stability in your community that you have been for many years. Move with caution and with purpose, and community banking will continue to be the steady light that shines through the darkest times.

Stay strong and lead by example. You have come through tough times before and we have no doubt you will come through these as well. Our thoughts and prayers are with you all during this time of crisis.

 

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