Content sponsored by Old National Bank and First Merchants Bank
Top executives of First Merchants Bank and Old National Bank discuss how their institutions have responded to the crisis and what they think the future holds.
There was overwhelming interest in the Paycheck Protection Program, but first-round funds were quickly exhausted. For those who couldn’t secure a PPP loan, what options exist to help them manage this economic downturn?
MIKE RECHIN: As the impact of COVID-19 was starting, our actions were swift and reflective of a core comitment to take care of our clients. The Treasury and SBA were equaly responsive. As of this writing, there are funds from the second round remaining through the PPP for qualified borrowers.
First Merchants also offers traditional SBA financing options, as well as modifications to curent loan structures, customized to meet business and individual needs. Throughout our 125-year history, First Merchants has always been there for our clients. We start by listening.
MARK BRADFORD: There are several other resources available. The CARES Act’s Employee Retention Tax Credit provides a refundable credit against certain unemployment taxes. Also, eligible employers can defer a portion of payrol taxes into 2021 and 2022. Your tax professional can provide details.
Another SBA program, the Economic Injury Disaster Loan, provides up to $10,000 of relief to agricultural busineses that are experiencing dificulties due to COVID-19.
The Federal Reserve recently announced the Main Street Lending Program, which is designed to support credit flow to previously healthy small and medium-sized businesses.
Local resources include a Rapid Response Loan Fund, administered by the Indy Chamber’s Business Ownership Initiative. The Chamber, on whose board I serve, has partnered with the City and others to develop creative programs to assist local busineses.
The Indiana Small Business Development Center also provides counseling and advisory services, including aplication asistance, for several COVID-19 response programs.
How could the rules be changed to make distribution of any subsequent rounds of PPP funding more equitable?
MARK BRADFORD: All distribution rounds were equitable at Old National, and we granted a wide range of loan amounts. Due to the high demand, we worked primarily with Old National clients.
Old National Bank rallied the entire organization to be prepared to quickly receive, process, approve and fund PPP loans. All eligible Old National Bank customers who submitted completed application packages were secured funding through the PPP.
Additional program funding is still available to ensure that banks that were not able to process all submissions are able to work through the backlog of applications. The additional funding has given businesses more time to apply.
MIKE RECHIN: At the onset of COVID-19, most businesses were trying to understand how the “stay-at-home” situation would impact their operations. The same was true for individuals, families, and communities regarding how COVID-19 would affect their lives. The government worked hard to react quickly and decisively in meaningful ways to provide support.
Is now a good time to consider re-financing to take advantage of low interest rates or should consumers and business owners wait for rates to drop further?
MIKE RECHIN: Each refinancing decision is unique to the situation, and no one has a crystal ball on where rates will go from here. But rates are the lowest we have seen in decades. With interest rates at historical lows, many businesses and consumers are taking advantage of this great borrowing-rate environment.
MARK BRADFORD: Future rates are nearly impossible to predict, so businesses or individuals interested in re-financing should contact their Old National banker or mortgage officer about taking advantage of today’s low rates. Our professionals can walk through the potential benefits and availability of refinancing options.
How has the COVID-19 pandemic changed your operating model? Has the crisis forever changed the way you interact with clients?
MARK BRADFORD: Old National Bank’s model has changed significantly in the short-term. To ensure the safety of everyone, our physical banking centers have limited operations to drive-thru banking, or by appointment for in-person service. Like other businesses, many of our employees are set up to work from home while continuing to provide the excellent service that our clients expect.
The crisis highlighted the importance of our various remote banking options, including digital banking, bank by phone, online account opening, and our ATM network. While we look forward to the time that we can safely resume business as usual with face-to-face interactions, Old National Bank is committed to deliver personalized service via telephone, e-mail, video conferencing, and in-person appointments if necessary.
MIKE RECHIN: Our operating model has only changed for our employees, as nearly 50% are working remotely. Our service model has shifted a bit as banking centers currently provide support by appointment only. Even with the shift, we continue to provide exceptional and efficient service to support customer needs.
Our bankers have continued to serve customers and our communities every day. Governor Holcomb deemed banks essential, so we were never required to close physical locations. We quickly adjusted to ensure our employees and customers could conduct business in a safe manner, adjusting for recommended social distancing.
Some long-term changes are likely, but we would consider it more of an acceleration of previous trends, including adoption of digital banking tools and contactless payments. We will continue to support our customers how they want to be served, from one-on-one interaction, to a full digital experience.
In 2008 we saw banks fail. How will the economic impact of the COVID-19 pandemic test the resilience of banks and the wider financial system?
MIKE RECHIN: Some institutions may face difficulties, but the impact is likely to be much less than the 2008 financial crisis. Bank reserves and capital levels are nearly twice what they were in 2008. The industry’s ability to absorb loan problems is dramatically stronger. In addition, massive Federal Reserve and Treasury assistance is providing liquidity to several segments of the economy. I have great confidence in the banking system to support a recovery.
MARK BRADFORD: Banks entered the COVID-19 pandemic more financially sound and better reserved than in 2008. The rapid government response through the CARES Act and stimulus programs provided short-term relief to businesses and individual bank clients. The lasting economic impact to the economy and to banks will be directly related to the speed and extent to which the economy can safely reopen. Old National Bank was founded in 1834 and has operated through multiple recessions, depressions, and pandemics. We expect to continue working as a key resource for our clients now and in the future.
In what ways do you expect consumers to change their financial behaviors after the crisis is over?
MARK BRADFORD: We are paying attention to several behaviors for an indication of how consumers might change after the crisis. While it is too early to tell how these behaviors may change in the long-term, the economic impact of the pandemic serves as a reminder to manage liquidity and leverage in good times to prepare for unexpected hardships.
More than ever, it is critical that businesses and individuals have a personal relationship with a banker who understands their business or personal financial situation. These relationships form the foundation of Old National Bank and allow us to respond to client needs quickly and with flexibility.
MIKE RECHIN: As consumers retain or regain employment, resume spending and rebuild savings, the economy will strengthen. Typically, during times of uncertainty, consumers tend to become more conservative and focus on preserving liquidity.
After the 2008 financial crisis, we saw a slow but steady rise in personal savings and a subsequent deleveraging of debt. Consumers have always been the driver of GDP, and I expect that to continue as a collective confidence is restored.
How are you helping clients through these challenging times?
MIKE RECHIN: First Merchants mobilized quickly to address the needs of our customers. We helped thousands of companies and organizations obtain several hundred million dollars in funding through PPP, benefitting tens of thousands of employees during a very volatile time. We continue to work with businesses who may not have qualified for PPP to provide other solutions, because that’s what we do.
Our Treasury Management Group provided remote deposit and wire capabilities to companies who had not yet adopted these technologies. Our Consumer Group quickly developed loan payment deferral programs for personal, auto, home equity, and mortgage loans. We’ve offered credit modifications and emergency personal loans with zero percent interest and delayed payments for 90 days.
MARK BRADFORD: By maintaining personal relationships and leveraging a deep understanding of our clients’ businesses and personal financial situations, Old National’s bankers have been able to provide customized, flexible financial solutions. We are also available to simply lend an ear to our clients and friends.
As additional support for our clients and communities, Old National is donating $1.2 million for COVID-19 relief, including $600,000 to communities to address immediate needs and $600,000 in grants with a focus on long-term restorative or transformational needs.
Good news is in short supply these days. Do you have any silver linings to share as our country moves forward?
MARK BRADFORD: Old National Bank mobilized its entire workforce to manage the overwhelming influx of PPP requests, with many employees working around the clock. We are forging new bonds and deepening lasting relationships. I have never seen such clarity of alignment and mission between a bank, its employees, and its clients.
As the country moves forward, we have a clear reminder of the role that community banks play within the economy. We exist to not only serve as partners for our clients and communities, but to lead the rebuilding efforts. Regardless of what happens next, we are in this together.
MIKE RECHIN: These difficult times have served as a reminder that trust and respect can never be underestimated as the foundation for meaningful relationships.
As CEO, it’s humbling to lead an organization that has such a positive impact on our communities. The resiliency of our employees is matched only by our customers’ resiliency and is testament to the strength of the human spirit. Whatever is thrown at us, we dig in and solve the problem today, and then we wake up tomorrow ready to face new challenges.